The primary aim of financial management is to ensure the Group’s financial stability and flexibility. This is achieved through a balanced relationship between equity and liabilities. Sources of financing are combined so as to ensure that interests are optimally balanced between the return expected by shareholders and the requirements of rating agencies in their role as the creditors’ representatives. In 2006, the equity ratio amounted to 31.6% (previous year: 28.9%). In order to minimize the cost of capital and benefit from economies of scale and specialization, external financing measures, Group-wide finance and liquidity management, and the hedging of interest rate, currency and commodity price risks are all coordinated centrally.

To limit these financial risks, the Group makes use of derivative as well as primary financial instruments. Currently, this involves managing interest rate risk mostly with interest rate swaps and, to a limited extent, with interest rate options. Ordinary forward transactions, cross-currency swaps and options are used to hedge currency risks. Swaps are one of the methods used to limit risks relating to commodities. The necessary universe of actions, responsibilities and controls has been clearly established in internal guidelines.

The Group aims to cover its financial requirements with debt financing structured around a broad mix of financial instruments. We use bilateral credit lines, corporate actions, structured financing transactions and operating leases for this purpose. Operating leases are used mainly to finance aircraft and real estate, but also for vehicles and IT equipment.

By far the most important currency in which debt is denominated is the euro (40%), followed by the US dollar (27%). The Group expects interest rates in the euro zone to increase slightly but to remain below long-term average rates. The negative impact that a rise in interest rates would have on the financial position remains insubstantial.

In addition, the Group currently has unused credit lines amounting to some €4.2 billion. A Group-wide banking policy ensures that it cannot become heavily dependent on the lending policy of a single bank or banking group.

The creditworthiness of the Group is regularly reviewed by the rating agencies Standard & Poor’s, Moody’s Investors Service and Fitch IBCA. The current ratings are:

Due to Postbank’s positive share performance, Deutsche Post AG exercised the option provided for in the bond terms and conditions to call the exchangeable bond on Postbank stock prior to maturity on July 3, 2006. Bondholders were able to exchange the exchangeable bond for Postbank stock until July 24. Following this transaction, Deutsche Post’s interest in Postbank stands at 50% plus one share. Information on Deutsche Post’s other bonds is contained in the Notes.