Fiscal year 2005 was a success and it was marked by a series of major strategic decisions, namely the acquisition of Exel plc, the reorganization of the retail outlet network and the acquisition of BHW Holding AG, which was completed in the first weeks of the new year. Deutsche Post World Net is now the world’s leading logistics group.
The Group is now a market leader in almost all the areas in which it does business.
Also in the past fiscal year, the Supervisory Board concentrated in particular on the strategic focus of the Group, in line with its duty to advise the Board of Management and monitor the board’s corporate management. Every important company decision was discussed in detail with the Board of Management, which informed the Supervisory Board in a timely and comprehensive manner of all important issues concerning planning and business development. There were regular reports about risks and risk management, important business transactions and projects in each of the corporate divisions, as well as strategic measures and the strategic focus of the company. Measures that, according to the by-laws of the Supervisory Board, require our approval were focused on in detail. The members of the Board of Management presented their reports on the basis of the rules of procedure that we agreed with the Board of Management. Furthermore, the Board of Management continuously informed the Chairman of the Supervisory Board about important business transactions and forthcoming key decisions, including between Supervisory Board meetings. Before we approved business activities, each of our decisions was prepared in the relevant committees. The chairs of the committees reported regularly on the committees’ work at Supervisory Board meetings.
Supervisory Board advises and monitors the Board of Management
The Supervisory Board met twice in the first half of the year and three times in the second half of the year. As a rule the members of the Board of Management attended the meetings.
After a comprehensive discussion, we approved the 2004 annual and consolidated financial statements in the balance sheet meeting of March 17, 2005. Ahead of the meeting, the Finance and Audit Committee and the Chairman of the Supervisory Board spoke with the auditors in order to deepen their understanding. We also adopted the joint Report by the Board of Management and the Supervisory Board on Corporate Governance, as well as the agenda and proposed resolutions for the 2005 Annual General Meeting. Other topics addressed at the meeting were the efficiency review of the Supervisory Board’s work and the remuneration system for the Board of Management.
In the meeting on May 18, 2005, we turned our attention to the business development in the first months of the year, focusing in particular on the United States. In addition, we discussed the engagement of the auditors elected by the Annual General Meeting.
The subjects of the meeting on September 16, 2005, were the strategy of the LOGISTICS Corporate Division and the acquisition of Exel plc. A special meeting was held on October 24, 2005, at which the acquisition of BHW Holding AG by Postbank was discussed and approved.
In addition to the appointment of John Allan to the Board of Management, where he is responsible for the Group’s expanded logistics activities, and the creation of the new corporate division in the shape of Services, headed by Dr. Appel, the meeting on December 20, 2005, was used to discuss the international strategy of the MAIL Corporate Division and adopt resolutions concerning the future focus of the division. The reorganization of the retail outlet network was also on the agenda, a step that is designed to further boost Postbank’s growth. In this context, the Supervisory Board decided to approve the sale of 850 retail outlets to Postbank. Furthermore, the Group’s business planning for the years 2006 to 2008 was discussed in detail and adopted. The Declaration of Conformity with the German Corporate Governance Code for 2005 was also adopted.
Supervisory Board Committees are working efficiently
The Executive Committee met five times in the year under review. The main topics of these meetings were Board of Management matters and further developments to the company’s system of corporate governance. This included issuing stock options to the members of the Board of Management and setting the variable component of their remuneration for 2004. As in recent years, the recommended efficiency review of the Supervisory Board’s work was carried out on the basis of the refined questionnaire, which was completed by all members of the Supervisory Board. The results showed that it had been possible to further improve efficiency thanks to the implementation of suggestions made the previous year. New suggestions were also responded to.
The Personnel Committee met three times and focused primarily on the training pact and the Code of Conduct, which contains guidelines for the responsible, ethical and legal conduct of all employees. Partners and suppliers are also to be measured against these guidelines in future.
The Finance and Audit Committee held six meetings, headed by Dr. Lennings, and focused on the company acquisitions, each of which was also discussed by the full Supervisory Board. In addition, the Committee examined and approved the annual and consolidated financial statements and discussed the interim reports. The Committee’s balance sheet meeting was again attended by the auditors. The Committee additionally held intensive discussions about accounting, risk monitoring and cooperation with the auditors. At the regular meetings, members of the Board of Management gave presentations on the business developments in their corporate divisions. The presentations were followed by more detailed discussions.
Once again, the Mediation Committee set up in accordance with section 27 (3) of the Mitbestimmungsgesetz (German Co-determination Act) did not need to meet in the fiscal year under review.
Annual financial statements and dependent company report have been audited
The auditors elected by the Annual General Meeting, PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Düsseldorf, (PwC) issued unqualified opinions on the annual and consolidated financial statements, as well as the respective management reports, for fiscal year 2005.
After a detailed preliminary examination by the Finance and Audit Committee, the Supervisory Board reviewed the annual and consolidated financial statements for fiscal year 2005, including the management reports, at its plenary meeting on March 9, 2006. The relevant reports were made available to all the members of the Supervisory Board and were discussed in depth with the Board of Management as well as with the auditors present at the meeting. Our review included the proposal for the appropriation of the unappropriated surplus put forward by the Board of Management. The Supervisory Board concurred with the results of the audit of the annual and consolidated financial statements and the management reports conducted by the auditors and has approved the annual and consolidated financial statements for fiscal year 2005 in today’s meeting, after having discussed them in detail with the Board of Management and representatives of the auditors. Based on the final results of the examination of the annual financial statements, the consolidated financial statements, the management reports and the proposal for the appropriation of the unappropriated surplus, as conducted by the Supervisory Board and the Finance and Audit Committee, there are no objections to be raised. We endorse the Board of Management’s proposal for the appropriation of the unappropriated surplus and the payment of a dividend of €0.70 per share.
PwC also audited the Board of Management’s report on affiliated companies (dependent company report) prepared in accordance with section 312 of the Aktiengesetz (German Stock Corporation Act) and issued the following audit opinion:
“On completion of our audit in accordance with professional standards, we confirm that
1. the factual statements made in the report are correct,
2. the company’s compensation with respect to the transactions listed in the report was not inappropriately high.”
The dependent company report was examined in order to ensure that it is complete and accurate. The Board of Management has taken due care in determining the affiliated companies. It has taken the necessary precautions in recording the transactions and other measures that the company undertook or refrained from undertaking in the fiscal year under review, either with, at the request of or in the interests of the federal government as the controlling enterprise, or with these affiliated companies. According to the findings of the examination, there are no apparent grounds for believing that transactions or measures have not been recorded in full. The Supervisory Board therefore endorses the results of the audit conducted by the auditors. There are no objections to be raised to the declaration of the Board of Management at the end of the report.
New addition to the Board of Management
There were the following changes in the composition of the Board of Management: on January 1, 2005, Mr. John Mullen became a member of the Board of Management, where he is responsible for the Americas, Asia Pacific and Emerging Markets in the EXPRESS Corporate Division.
Mr. John Allan was appointed to the Board of Management with the acquisition of Exel plc on January 1, 2006, for a three-year period and will manage the Group’s expanded logistics activities, with particular responsibility for integrating Exel.
Since the start of the year, Dr. Frank Appel has been in charge of Global Business Services, a new division that brings together internal services throughout the Group. He is also responsible for Global Customer Solutions.
In fiscal year 2005, there were no changes in the composition of the Supervisory Board. Gerd Ehlers, Roland Oetker, Hans W. Reich and Dr. Jürgen Weber were confirmed as members of the Supervisory Board in elections held on an individual basis at the Annual General Meeting on May 18, 2005. They had been appointed by a court the year before in order to take the place of members who had retired prematurely.
Conflicts of interest dealt with
Potential isolated conflicts of interest were avoided by abstentions on the part of members in situations where such a conflict might have arisen. For instance, Ms. Margrit Wendt, a representative of ver.di, laid down her Supervisory Board mandate temporarily at the meeting on October 24, 2005. This was purely a precautionary step taken while the Supervisory Board was addressing the acquisition of BHW Holding AG by Postbank. A conflict of mandates was resolved with the decision by a shareholder representative, who has also been a member of the Deutsche Bahn AG Supervisory Board since the summer, not to seek re-election at this year’s Annual General Meeting of Deutsche Post AG. Until then, the persons involved will decide on the most appropriate way to handle particular information in the interests of the company and depending on the subject in question (for example, abstaining from voting or not taking part in discussions).
Company adopts all the recommendations in the Corporate Governance Code
In accordance with the German Corporate Governance Code, in December it was unanimously resolved to comply in fiscal year 2006 with all the recommendations of the German Corporate Governance Code in the version dated June 2, 2005.
Further information about the company’s system of corporate governance, in addition to the current Declaration of Conformity, is available in the Report by the Board of Management and the Supervisory Board on Corporate Governance, as well as on our website. In accordance with the recommendation in the Code, the Declarations of Conformity from previous years can also be found there.
We would like to thank the Board of Management and all Group employees for their commitment and successful efforts and their first-rate work in fiscal year 2005.
Bonn, March 9, 2006
The Supervisory Board