Deutsche Post AG Annual Report 2017

FY2017 Annual Report · Deutsche Post AG

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2017 Annual Report

COM•MIT•MENT

/kəmtmənt/ noun :
The state or quality of being dedicated
to a cause, activity etc.

In this time of rapid environmental, eco
nomic and political change, there is a
growing need for credibility and certainty.
How can businesses meet this need? Not
only is everything around us changing, our
own business, our corporate culture and
the way we work are also transforming. As
a Group, we need to systematically improve
the quality of our services and invest con
tinuously in our business whilst also sharp
ening our customer centricity.

ranging experience. The management team
at Deutsche Post DHL Group is absolutely
committed to this system of values and the
company’s longterm success – and each
board member embodies this in their own
way and according to their own personal
strengths. On the following pages, we illus
trate what we stand for and how that fuels
our drive towards the future – in images
and words and with pleasing figures for the
2017 financial year.

Through all this change, we rely upon our
strengths: dependability, dedication and
continuous innovation based upon wide

Once a year he goes
mountain biking with
colleagues, gaining
new insights on the way.
DR FRANK APPEL

PERSPECTIVE

She wants to understand things
and therefore asks the right questions.
MELANIE KREIS

CURIOSITY

With his team he supports
other teams in the company.
DR THOMAS OGILVIE

TEAM SPIRIT

Always wanting to get
better, that’s his demand.
DR H. C. JÜRGEN GERDES

INNOVATION

Being fast, but never losing
control of processes, is his focus.
KEN ALLEN

EXPERIENCE

He has learnt to simplify and
thereby reduce complexity.
TIM SCHARWATH

SPEED

The strategy gives him the goal
and he doesn’t lose sight of it.
JOHN GILBERT

ENDURANCE

A GROUP MANAGEMENT
REPORT
25 — 88

B CORPORATE GOVERNANCE

89 — 100

C CONSOLIDATED FINANCIAL

STATEMENTS
101 — 176

D FURTHER INFORMATION

177 — 184

PERSPECTIVE

DR F RA NK A PP EL

Commitment

FRANK APP EL N OT ONLY E NJ OYS TH E P H Y S I CAL CH A LL EN G E O F M O U NTAIN
BIKING, TH E CE O S AY S T HE S PORT A LS O P ROV I D E S N E W O U TLO O KS A ND
PERSPECTI VES . ONCE A Y E A R, H E G O E S O N A B I KE TR IP WI TH CO LLE AG UE S
TO PEDAL MOUNTAIN TRAILS, PUSH HIMSELF AND GET A VIEW OF WHAT’S
TO CO M E .

KILOMETRE: ZERO; ELEVATION: 944 M, AchENKIRch
S A D D L E U P ! — Around three dozen Group
employees have joined Frank Appel for a mountain bike ride
near pictureperfect Lake Achensee, in the Austrian state of
Tyrol. It’s about 8.30 in the morning, and the temperature is
a pleasant 17° Celsius with light easterly winds as they hop
on their saddles and start pedalling on what is going to be a
53km tour with a total climb of 1,150m. The first stage proves
the hardest: the trail to a mountain cabin some 550m above
their starting point is a steep climb with gradients up to 14%.
It’s exactly the kind of trail that appeals to Frank Appel:
“What I love about mountain biking is that your hard work
and sweat are rewarded with panoramic views and great,
exhila rating downhills. And it’s even better when you’re riding
in a group. Everyone gives it their all – and we all share the
reward when we reach the top. It’s a pure endorphin rush.”

Gufferthütte

D R FR ANK APP EL

Frank Appel says that at 1.92m he’s actually too
tall for mountain biking. But no other sport offers
a faster way to experience so many challenging
ascents and beautiful views in such a short time.

KILOMETRE: 13.2; ELEVATION: 1,434 M, GUFFERThÜTTE
M A K I N G h E A D W A Y — “One way this mirrors

professional life is that you also have to work hard in
business if you want to achieve something. And like rolling
down a mountain on two wheels, there are also times when
everything seems to work on its own. Unfortunately, the easy
stages in which you can just coast along are shorter than the
ones in which you have to give it your all. No matter what,
we always want Deutsche Post DHL Group to make head
way. So while things are rolling along smoothly, we have to
prepare for the times when the economy and our company
face an uphill battle. Because there’s no doubt that those
times will come. That said, if you always have your hands
on the brakes, you’re going to quickly lose interest. Whether
you’re steering a bike or a company, you have to take risks if
you want to achieve ambitious goals. But they shouldn’t be
incalculable risks. Otherwise you may easily slide off the trail
at the next curve.”

1,400

1,200

1,000

800

600

Deutsche Post DHL Group — 2017 Annual Report

KILOMETRE: 33.4; ELEVATION: 822 M,
AScENT TO WALDhÄUSL
S T A Y I N G F O c U S S E D — “It’s correct to say that

we currently find ourselves speeding along in what some
consider limited visibility. No one can confidently predict
today how technologies such as big data, robotics and artificial
intelligence will transform our world tomorrow. On the other
hand, the change won’t happen overnight. In our Group, we
have solid teams that are monitoring and analysing these
trends and developments. And we’re always looking very
closely into whether and how we can improve our products
and processes. At the same time, we’re also exploring ways
to use our specialised skills and capabilities to pursue new
business opportunities. We can take a rational look at all of
these things and determine how important they are to our
business. As a leader, it helps to have the experience to dis
tinguish between what’s relevant and what’s not; to recog
nise the moment when more information is not going to lead
to deeper knowledge or better decisions – the moment when
it’s time to take action. For example, I’m not the type of
person who needs to be constantly inundated with ‘breaking
news’. What’s the point? I prefer to stay focussed on what
lies ahead – and rely on the expertise within our company.”

Kaiserhaus

“Those who have
a clear perspective
find their way.”

1,400

1,200

1,000

800

600

KILOMETRE: 28.7; ELEVATION: 710 M,
DEScENT FROM KAISERhAUS
D O I N G G O O D — “In my view, a company’s
purpose is not only to create value for shareholders. It’s also
about offering people a good job and a future. We want
to give something back to society. For example, a logistics
company like ours is naturally a major emitter of carbon
emissions. In light of global warming, we’re making efforts
to reduce these emissions. Our electric delivery vehicle,
StreetScooter, which has become a real success story, is one
example. This shows that we can do things that are both
good for the environment and good for business. After all,
when we burn less fuel and reduce our carbon footprint, of
course we also save money. What’s more, efforts to make
our business more sustainable also motivate our employees.
People would rather work for – and are more committed to –
companies that aren’t focussed solely on making money.
That boosts our image as a Group, which in turn helps
us recruit top talent. That’s another reason sustainable
projects such as StreetScooter play an important role in our
economic success.”

Commitment

DR FRANK APPEL
CEO

Global Business Services

Born in 1961
Member of the Board of
Management since November 2002
CEO since February 2008
Appointed until October 2022

Waldhäusl

NEURO bIOLOGIST

FREQUENT TRAVELLER

KILOMETRE: 44; ELEVATION: 1,080 M, WALDhÄUSL
K N O W I N G W h E R E Y O U W A N T T O G O —
“If you want to keep your eye on a goal and make progress
towards it, you obviously need to know where you want to
go – and be able to communicate that vision to your team.
The Deutsche Post DHL Group vision is clear: we want to
be the most global, customercentric and digital logistics
company in the world. When people think of logistics – no
matter where they are in the world – we want them to think
of us first.”

KILOMETRE: 51.2; ELEVATION: 902 M,
RETURN TO AchENKIRch
L O O K I N G A T W h A T L I E S A h E A D —
“As a Group, we need to systematically improve the quality
of our services, permanently invest in our business and con
tinuously improve customer satisfaction. That means some
long ascents lie ahead, including some turning points where
we will need to peek around the corner and adapt our
business models. As long as we continue to have good people
with the right abilities on board, we’ll be able to make the
adjustments necessary to deal with the new conditions and
continue to move forwards. The same is true for mountain
biking: When you come to a fork in the trail, you consult your
map, get your bearings, and take a look at where you want to
go and what lies ahead. And sometimes that means you have
to adjust your speed and head in a new direction. That’s it.”

MELANIE KREIS

CURIOSITY

Commitment

“When curiosity is directed at serious things,
we call it thirst for knowledge.”

MARIE VON EbNER-ESchENbAch

Naturally I’m a numbers person. As a physicist, I have,

however, also learnt that it’s not enough to line up individual
measurements. Instead you have to understand the laws
of nature behind them – the overall meaning, the patterns.
Physics teaches you to have a feel for numbers and patterns.
You recognise it relatively quickly when something on your
data sheet isn’t quite right. In the lab, the measurements
speak for themselves. It’s all quite clear. But in business, you
need to communicate what you see – and motivate other
people to work together for a common goal.

hOW cAN WE LEARN FROM ONE ANOThER?
As exciting as individual details are, I always ask myself:
how would I sum up the problem – and the solution – in just
a few of my own words? That’s the only way to get to the
bottom of it. Curiosity involves asking questions so that you
can explain correlations. I want to understand things, and
that’s a real challenge in today’s world because often there’s
not enough time to really delve into the subject matter.
That’s where I’m grateful for my team’s support.

It’s a privilege to meet so many interesting people who

work with stateoftheart technology. I encounter new
things all the time – at presentations and by talking to
colleagues and outside experts. What interests me is how
we can learn from one another and how can we share our
knowledge.

I’ve always been fascinated with travel – getting to
know new countries and cultures. And that’s taught me
something: to help spark good ideas, there’s no substi
tute for practical experience. That means getting out and
watching your operations, things like the way aircraft are
loaded and unloaded at our air hub. I have to do that if I
want to translate our business intelligently into numbers.

Numbers are not neutral. What’s important is how we

interpret them and what stories are behind them. That’s
what makes it all so interesting: do we recognise a trend?
Can we tell early enough whether things are going in the
right direction? Some might find this dreadfully dry, but it’s
a delightful prism through which to view the world.

CURIOSITY

Deutsche Post DHL Group — 2017 Annual Report

I’M EXcITED AbOUT ThE FUTURE
And that world is changing radically. When
people think of Deutsche Post DHL Group, many
have a more traditional picture in mind. But
if you take a closer look at how our company
has transformed in recent decades, you won’t
find many others that have gone through such
a dynamic process of change. In the 1990s, we
were a purely German company. Today, we are
more than 500,000 people, 60% of whom work
outside Germany – and we now generate 70%
of our revenue outside our home country. This
transformation will continue; we’ll keep chan
ging – because logistics is an industry driven
heavily by innovation.

I’m excited about the future; it harbours

both opportunities and risks. Take the tradi
tional letter: each year we lose two to three per
cent of our volume to electronic substitution.
By contrast, we’re witnessing an ecommerce
boom on the parcel side, where we’re very clear
beneficiaries of digitalisation. It’s been an in
credible change – and we shall continue to use
the new opportunities of ecommerce.

“Curiosity means asking
questions so that you can
explain correlations, I want
to understand things.”

ThERE ARE INcREDIbLE OPPORTUNITIES
Sometimes you have to purposefully power down for

new things. When I’m struggling with an issue, I sometimes
try to sleep on it. Then I wake up and think, I could actually
do it that way. What you have to do is free your mind and try
to organise your thoughts.

We’re faced with incredible opportunities today; it’s
comparable to the period about 40 years ago when globa
lisation began to set in on a massive scale. We can offer
customers new products and innovative services. And we
can simplify things in our operations and thereby support
customers in a way no one could have dreamt of ten years
ago. That’s a huge opportunity.

MELANIE KREIS
Finance

Born in 1971
Member of the Board of
Management since October 2014
Appointed until June 2022

FROM bONN

WITh A DEGREE
IN PhYSI cS

DR THOMAS OGILVIE
Human Resources

Born in 1976
Member of the Board of
Management since September 2017
Appointed until August 2020

TEAM MANAGER

chANGE LEADER

Commitment

DR T HO MAS OG ILVIE

TEAM SPIRIT

MR OGILVIE, EVERYONE VALUES IT, MANY ASPIRE
TO IT, bUT NOT ALL SUccEED. WhY IS TEAM SPIRIT
SO IMPORTANT?
That’s easy: we’re a service company and we wouldn’t
be able to provide our services if we didn’t work together as
a team. And that’s doubly important for my human resources
team. We have to work together to help other teams through
out the company work together.

bUT ThERE ARE ALSO OUTSTANDING INDIVIDUAL
PLAYERS WhO DON’T NEcESSARILY NEED A TEAM.
Teamwork means cherishing success. And that in turn

means looking at what’s needed to achieve success. To win,
leaders have to make sure they have the right players in
the right positions. In football for instance, sending eleven
superstars such as Neymar onto the pitch is definitely not a
good idea. A combination of players who operate more as
individuals and those who tend to be team players is likely
to yield more success. At the end of the day, a good mix of
both is what you need.

ISN’T ThAT A cONTRADIcTION? ON A TEAM, EVERYONE
IS ESSENTIALLY ON A LEVEL PLAYING FIELD – bUT
ThAT’S NOT ThE cASE IN A bUSINESS, WhIch IS A FUN-
DAMENTALLY hIERARchIcAL ORGANISATION.
No. A large corporation such as ours with nearly 520,000

employees can only function with clear hierarchies. At the
same time, we need a culture that puts good ideas above
one’s position on the corporate ladder. There’s no other way
to survive in today’s age of rapid digital transformation.

Deutsche Post DHL Group — 2017 Annual Report

“Our employees should be able
to make an impact and to stand out
when they perform well.”

We’re going to see something similar in the workplace,

because such temporary groups are much better at adapting
to market changes.

WE USED TO cALL ThIS PROjEcT WORK.
Right, but the classic example of project work has a
clear structure – a project lead, a project plan and a nice,
neat organisational chart. In the future, teamwork will be
more agile and adaptable. Teams will be autonomous clans
and squads that operate independently and are responsible
for individual components of a whole. But that will require a
meticulous master plan and equally meticulous management
components. The more clearly we map out our corporate
strategy and goals, the less precisely we’ll need to prescribe
the way to get there.

WhAT WILL ThAT MEAN FOR EMPLOYEES? WhAT SKILLS
WILL bE MORE OR LESS IN DEMAND IN ThE FUTURE?
If you exclude specialist skills, which will always be
essential, there will be a higher demand for people who are
selfreflective and proactive. Selfreflection means not simply
completing your assignments but also always asking yourself
where and how you can make a difference. And being pro
active means being helpful and putting your skills to use.

SO ARE YOU SAYING ThAT WhAT MATTERS MOST
IS WhOSE IDEA IS bETTER – REGARDLESS OF WhO
WAS ThE INITIATOR OF ThIS IDEA?
Our company is driven by the performance, dedication

and motivation of our employees. They need to be able to
make an impact and to stand out when they perform well.
Not only for their work day in and day out, but also for
coming up with ideas for entirely different areas or future
business models. After all, our people are the ones who are
right in the thick of things – they’re much more directly in
volved in developments and sometimes have a much clearer
picture of what we need to do to succeed.

WhY IS chANGE SO IMPORTANT RIGhT NOW?
First, because digitalisation has dramatically accelerated

the pace of change. Second, because things are getting more
complex and there are more potential courses of action. Our
task is twofold: on the one hand, our leaders must ensure
that stability and operational excellence are the order of the
day; on the other hand, we need to leave room for experi
ments, curiosity and tolerating mistakes. That makes us agile
and able to adapt to changing conditions and to develop
new business models.

WhAT WILL ThE WORKING cULTURE AT DEUTSchE
POST DhL GROUP LOOK LIKE IN A FEW YEARS?
Our private lives today give us a taste of the changes to

come. Most of us are involved in one selforganised social
media group or another, be it for sport, cooking or other
activities. These are networks that we as individuals can join
at any time, adopting a specific but different role depending
on the group.

DR H. C. JÜRGEN GERDES
Post eCommerce Parcel

Born in 1964
Member of the Board of
Management since July 2007
Appointed until June 2020

ENT REP RE NE UR

P IONEER

INNOVATION

THREE QUESTIONS FOR DR H. C . JÜRGEN GERDES

Commitment

“Impossible is not
an option. That’s what
drives me.”

MR GERDES, ThE GROUP’S MOST TRADITIONAL bUSINESS, POST - EcOMMERcE - PARcEL,
IS NOW ThE MOST INNOVATIVE. WhAT IS DRIVING YOU?
We’ve always been innovators. In the past, we focussed primarily on using the latest

inventions to get faster. Today we not only want to be faster, we want to use each innovation to do more
to meet our customers’ needs – to offer them better services and real added value. Our Packstations,
Parcel Boxes and incar delivery service are some examples. We’re also developing a broad portfolio of
online products and services, such as AllyouneedFresh – our online supermarket.

YOUR INNOVATIVE STREETScOOTER hAS REALLY cAPTURED ThE SPOTLIGhT.
And rightly so. After all, we’ve created a whole new market by developing this electric
delivery vehicle. It’s precisely customised to the ergonomic needs of our employees – and it’s economi
cal in every sense of the word. But above all, it’s quiet and generates zero emissions. Considering that
increasing noise and air pollution remain problems in our inner cities, the StreetScooter will play a very
important role in helping us reach our climate goals. And the more customers use it, the more we’ll be
able to do for the environment together.

WhAT ARE ThE DEFINING chARAcTERISTIcS OF A SUSTAINAbLE INNOVATOR?
Sustainable innovators can’t be administrators – they need to be driven by the desire

to change things themselves. They shouldn’t see themselves as managers, but as doers and decision
makers – as entrepreneurs. They have to constantly question their own actions. And when they recognise
the need for change, they must also have the courage to follow through. They must have and embody
a “can do” attitude, which in our company means setting an example for all employees and personifying
the very same mentality we teach them in our PeP expert seminars. Sustainable innovators object to
statements such as “That’s impossible!” – and they live and breathe the PeP expert programme motto:
always strive to be better in order to remain the best. That’s what I’m committed to – that’s what drives me.

THREE QUESTIONS FOR DR H. C . JÜRGEN GERDES

Deutsche Post DHL Group — 2017 Annual Report

SPEED

KE N ALL EN

MR ALLEN, hOW DO YOU STAY ON TOP IN A bUSINESS ThAT’S A cONSTANT RAcE
AGAINST ThE cLOcK?
The main thing is to be better and faster than anything that might get in your way.

When I visit the paddock at a racetrack, what fascinates me the most is the perfect
synchronisation of the team at work. Drivers, mechanics, engineers – everyone has a job
to do and they all have to work together to win. We’re also a perfectly coordinated
network of employees and processes in which the focus is always upon the customer.
That’s what makes us fast and that’s what makes us successful.

Commitment

“IF EVERYThING SEEMS UNDER cONTROL, YOU’RE NOT GOING FAST ENOUGh,” SAID AUTO
RAcING LEGEND MARIO ANDRETTI. TRUE OR FALSE?
In racing, true but in logistics, false. We have to be fast but we can never lose control of our
processes. That’s the secret of our success. Technology is what has changed our sector the most.
We were already fast but now we have an endtoend network to boot. Not only that – and this is
extremely important – we won’t lose our common culture in that network.

WhAT chARAcTERISES ThAT cULTURE?
DHL Express is tHE most international

company in the world. That’s something I’m
proud of. And I encourage all of our employees
to tell that to their families and everyone else
they know. Because no matter whether you’re
a courier at DHL Express or the CEO of the
company, you’re the best in the international
logistics industry.

KEN ALLEN
Express

Born in 1955
Member of the Board of
Management since February 2009
Appointed until July 2020

GLO b ETR OTTER

SPORTSMAN

“My goal is
not just to manage
but to coach.”

TIM SCHARWATH
Global Forwarding, Freight

Born in 1965
Member of the Board of
Management since June 2017
Appointed until May 2020

YE ARS IN T hE
LOGISTI cS bUSI N ES S

NOT A FA N OF TIES

Commitment

TI M S CHA RWATH

EXPERIENCE

RULES
Tim Scharwath spent much of his
first months as a new board member
visiting the division’s many facilities
and getting to know employees.
Based upon this experience, he and
his executive team have developed
ten rules to clearly define the
responsibilities and cooperation
within the network and support the
entire organisation in implementing
current priorities.

PASSION
The great passion of the
employees of Global Forwarding,
Freight and their desire for
change – that was a pleasant
surprise for Tim Scharwath
during his first months in the
Group. Outside of work,
his greatest passion is cars.
He owns four.

2017
On 1 June 2017, he officially joined
the Board of Management of
Deutsche Post DHL Group as the
new board member for the Global
Forwarding, Freight division.

2011
He became Executive Vice
President and a member of the board,
Air Logistics, Switzerland,
at Kuehne + Nagel.

2009
From 2006 to 2009, Tim Scharwath
held a number of different positions
at Kuehne + Nagel in Europe;
in 2009 he became Regional President,
Northwest Europe, London.

2004
After a variety of posts at
Kuehne + Nagel, he became Senior
Vice President Airfreight and a member
of the board in Germany.

1992
Tim Scharwath graduated
from the University of Hamburg
with a degree in business ad
ministration and began his career
at Kuehne + Nagel Germany.

“It always helps to
simplify, to reduce
complexity. I learnt
this way of thinking
at a mediumsized
company. And that’s
also the foundation
of the experience
that will benefit me
here.”

bALANcE
He always tries to find
the right balance between
work and his family.

cOMING hOME
Although he just said
goodbye to his chosen home
of Switzerland, he will
maintain contact with his
friends there. He rang in
the year 2018 together with his
wife back on the River Elbe.

JO HN G ILB ERT

ENDURANCE

JOHN GILBERT
Supply Chain

Born in 1963
Member of the Board of
Management since March 2014
Appointed until March 2022

AThLE T E

TEAM P LAYER

Commitment

“In the supply chain
business, the key to success
is perseverance.”

ThE TARGET
To reach your objective, you need to keep your eye on

the goal. The first step in any endeavour – whether in sports
or in our business – is to identify the target. Our target
comes from our strategy: we want to be the global leader in
supply chain solutions. We can only achieve this by offering
our customers the kind of added value that always puts us a
step ahead of our competitors.

ThE PhILOSOPhY
Continuous training is the only way for athletes to reach

their goals. Athletes require both endurance and strength.
They have to know their bodies and what they are capable
of. When I train, I enjoy running a familiar path as much as I
am intrigued by exploring routes off the beaten track. In the
supply chain business, we’re also constantly analysing our
processes and investing in new technologies and innovations –
always with the goal of becoming even better.

ThE TEAM
In many types of sports, you cannot succeed without
team effort. If the team does not work well together, it does
not matter how talented the individual players are. The team
will not reach its goals. I can rely on an excellent team who
are highly enthusiastic and put enormous effort into working
together to improve the business. Our team is truly better than
the sum of its parts and I am very proud of that.

PERSEVERANcE
In our business, you need endurance. Peak seasons are

followed by calmer waters. Only when you push yourself in
intervals will you succeed in marathons. We work with our
customers year after year, and we get better and better to
gether. Knowing where you want to go and how the process
works, relying on your teammates and staying on track –
that is the only way to succeed in the supply chain business.

41 floors or 828 steps
and 147 metres – for the
Deutsche Post Tower
Run you need stamina.
John Gilbert took on the
challenge in 2015.

Deutsche Post DHL Group — 2017 Annual Report

SELECTED KEY FIGURES

EBIT 2017
Profit from operating activities.
€ m

3,741

2016

3,491

Change

+ 7.2 %

CONSOLIDATED NET PROFIT FOR THE PERIOD
After deduction of noncontrolling interests.
€ m

2,713
2,639

2017

2016

Change

+ 2.8 %

REVENUE 2017
€ m

60,444

Change

+ 5.4 %

2016

57,334

Revenue

Profit from operating activities (EBIt)

Return on sales 1

EBIt after asset charge (EAC)

Consolidated net profit for the period 2

Free cash flow

Net debt 3

Return on equity before taxes

Earnings per share 4

Dividend per share

Number of employees 6

1 EBIt / revenue.
2 After deduction of noncontrolling interests.
3 Calculation
4 Basic earnings per share.
5 Proposal.
6 Headcount at the end of the year, including trainees.

Group Management Report, page 62.

EMPLOYEES 2017
Headcount at the end of the year, including trainees.

519,544

2016

508,036

Change

+ 2.3 %

RETURN ON SALES 2017
%

6.2

2016

6.1

EARNINGS PER SHARE
Basic earnings per share.
€

2.24
2.19

2017

2016

Change

+ 2.3 %

TOTAL DIVIDEND AND DIVIDEND
PER NOPAR VALUE SHARE
€ m

846

0.70

968

0.80

1,409

1.15

1,270

1.05

1,030

1,027

0.85

17 1

Dividend per nopar value share (€)

1 Proposal.

€m

€

2016

57,334

3,491

6.1

1,963

2,639

444

2,261

27.7

2.19

1.05

2017

60,444

3,741

6.2

2,175

2,713

1,432

1,938

27.5

2.24

1.15 5

508,036

519,544

+ / – %

5.4

7.2

–

10.8

2.8

> 100

–14.3

–

2.3

9.5

2.3

Q 4 2016

15,410

1,111

7.2

733

841

1,201

–

0.70

–

Q 4 2017

16,109

1,181

7.3

796

837

975

–

0.69

–

+ / – %

4.5

6.3

–

8.6

– 0.5

–18.8

–

–1.4

–

G
R
O
U
P
M
A
N
A
G
E
M
E
N
T

R
E
P
O
R
T

GROUP MANAGEMENT REPORT
25 — 88

26 GENERAL INFORMATION
Business model and organisation
26
28
Business units and market positions
34 Objectives and strategies
36 Group management
38 Disclosures required by takeover law
39
40

Research and development
Remuneration of the Board of Management
and Supervisory Board
Annual Corporate Governance Statement
and nonfinancial report

51 REPORT ON ECONOMIC POSITION
51 Overall Board of Management assessment of the Group’s

economic position
Forecast / actual comparison
Economic parameters
Significant events
Results of operations
Financial position

51
52
54
54
56
62 Net assets
63

Business performance in the divisions

70 DEUTSCHE POST SHARES

71 NONFINANCIAL KEY PERFORMANCE

INDICATORS
71
Employees
72 Health and safety
73
74
76

Corporate responsibility
Customers and quality
Brands

78 EXPECTED DEVELOPMENTS
78 Overall Board of Management assessment of the

78
78
79
80
80

future economic position
Forecast period
Future economic parameters
Revenue and earnings forecast
Expected financial position
Performance of further indicators relevant for
internal management

81 OPPORTUNITIES AND RISKS
81 Overall Board of Management assessment of the

opportunity and risk situation
81 Opportunity and risk management
84

Categories of opportunities and risks

Deutsche Post DHL Group — 2017 Annual Report

GENERAL INFORMATION

Business model and organisation

Four operating divisions

Deutsche Post AG is a listed corporation domiciled in Bonn,
Germany. Under the Deutsche Post and DHL brands, the
Group provides an international service portfolio consisting
of letter and parcel dispatch, express delivery, freight trans-
port, supply chain management and e-commerce solutions.
It is organised into the four operating divisions of Post -

eCommerce - Parcel, Express, Supply Chain and Global
Forwarding, Freight, whose products and services we de-
scribe in the
Business units and market positions section, page 28 ff.
Each of the divisions is managed by its own divisional head-
quarters and subdivided into functions, business units and
regions for reporting purposes.

We consolidate the internal services that support the
entire Group in our Global Business Services (GBS) unit.
Group management functions are centralised in the
Corporate Center.

Organisational structure

A.01

Corporate Center

Divisions

Post -
eCommerce -
Parcel

Express

Board member
• Jürgen Gerdes

Board member
• Ken Allen

Business units
• Post
• eCommerce

Parcel

Regions
• Europe
• Americas
• Asia Pacific
• MEA (Middle
East and
Africa)

Global
Forwarding,
Freight

Board member
• Tim

Scharwath

Business units
• Global

Forwarding

• Freight

Supply Chain

Board member
• John Gilbert

Regions
• EMEA (Europe,
Middle East
and Africa)

• Americas
• Asia Pacific

Finance

Board member
• Melanie Kreis

Functions
• Corporate

Accounting &
Controlling

• Corporate Finance
• Investor Relations
• Corporate Audit &

Security

• Taxes
• Divisional Finance

Organisations
• Legal Services

Human Resources

Board member
• Thomas Ogilvie

Functions
• Corporate HR

Germany

• Corporate HR
Standards &
Programs
• Corporate HR
International
• Divisional HR
Organisations

cEO,
Global Business
Services

Board member
• Frank Appel

Functions
• Board Services
• Corporate Legal
• Corporate Office
• Corporate Develop
ment & First Choice
• Corporate Executives
• Corporate Heritage &
Industry Associations

• Corporate

Communications &
Responsibility
• Corporate Public

Policy & Regulation
Management
• Global Business

Services (Corporate
Procurement,
Corporate Real
Estate, It Services,
Insurance & Risk
Management etc.)

Group Management Report — GENERAL INFORMATION — Business model and organisation

Organisational changes

A presence that spans the globe

Effective 1 June 2017, Tim Scharwath assumed responsibil-
ity for the Global Forwarding, Freight division in his new
capacity as a member of the Group Board of Management.
Effective 1 September 2017, Thomas Ogilvie assumed
the position of Board Member for Human Resources and
Labour Director for the Group.

Responsibility for Customer Solutions & Innovation

passed to Ken Allen after the balance sheet date.

Deutsche Post DHL Group’s locations can be found in the
list of shareholdings, dpdhl.com/en/investors. Table A.02 provides
an overview of market volumes in key regions. Our market
shares are detailed in the business units and market pos-
itions section below.

Market volumes 1

Global
(2016)

51 M TEUs
Ocean freight 3

€202 BN
Contract logistics 4

(2016)

Air freight (m tonnes) 2

Ocean freight (m tEU s) 3

Contract logistics (€ bn) 4

International express market (€ bn) 5

Road transport (€ bn) 8

Germany
(2017)

21 M TONNES
Air freight 2

€4.5 BN
Mail communication 6

€24 BN
International
express market 5

A.02

€10.8 BN
Parcel 6

€27.1 BN
Advertising
market 7

Middle East /Africa

Americas

Europe

Asia Pacific

1.3

4.8

7.2

–

4.8

8.2

61.0

8.2

–

5.5

7.2

66.5

7.1

195

9.8

30.5

66.9

8.0

–

1 Regional volumes do not add up to global volumes due to rounding.
2 Data based solely upon export freight tonnes. Source: Seabury Cargo Advisory.
3 Twentyfoot equivalent units; estimated part of overall market controlled by forwarders. Data based solely upon export freight tonnes.

Source: company estimates, Seabury Cargo Advisory.

4 Based upon Transport Intelligence and company estimates.
5 Includes express product Time Definite International. Country base: Americas, Europe, Asia Pacific, AE, SA, ZA (Global);

AR, BR, CA, CL, CO, MX, PA, US (Americas); At, CZ, DE, ES, FR, It, NL, PL, RO, RU, SE, tR, UK (Europe); AU, CN, HK, IN, JP, KR, SG, tW (Asia Pacific).
Source: Market Intelligence, 2017, annual reports and desk research.

6 Germany only. Source: company estimates.
7 Includes all advertising media with external distribution costs Source: company estimate.
8 Market volume covers 25 European countries, excluding bulk and specialties transport. Source: DHL Market Intelligence Study 2017,
based upon company calculations and content supplied by IHS Markit Group, copyright © IHS Global Inc., 2017. All rights reserved.

Deutsche Post DHL Group — 2017 Annual Report

Business units and market positions

POST ECOMMERCE PARCEL DIVISION

Nationwide transport and delivery network in Germany, 2017

Around

11,000

Paketshops

Around

13,000

retail outlets

Around

110,000

post boxes

Around 59

million letters
per working day

Around
2,800
sales points

82
mail centres

A.03

4.6

million parcels
per working day

Around
800
Paketboxes

Around
3,200
Packstations

Around

108,000

letter and parcel
deliverers

34
parcel centres

The postal service for Germany

German mail communication market, business customers, 2017

We deliver around 59 million letters every working day in
Germany, making us Europe’s largest postal company. Our
products and services are targeted towards both private and
business customers and range from physical, hybrid and
electronic letters to merchandise delivery and include add-
itional services such as cash on delivery, registered mail and
insured items.

In the year under review, the German market for busi-
ness communications was around €4.5 billion (previous
year: around €4.5 billion). Here we look at the business
customer market in which we compete, including the
companies that operate as service providers in this market –
i. e., both competitors offering end-to-end services and con-
solidators providing partial services. Our market share in-
creased slightly to 61.7 % compared with the prior year
(61.3 %).

Market volume: €4.5 billion

Deutsche Post

Competition

Source: company estimates.

A.04

61.7 %

38.3 %

Targeted and cross-channel advertising

On request, our dialogue marketing unit offers end-to-end
solutions to advertisers – from address services and tools
for design and creation all the way to printing, delivery and
evaluation. This supports cross-channel, personalised and
automated customer dialogue so that digital and physical
items with inter-related content reach recipients accord-
ing to a co-ordinated timetable and without any coverage
waste. Our digital solutions allow companies to open a
cross- channel dialogue with their customers.

Group Management Report — GENERAL INFORMATION — Business units and market positions

The advertising market in Germany gained 1.3 % in 2017
to reach a volume of €27.1 billion, primarily because com-
panies increased their advertising expenditures. Our share
of the highly fragmented media market rose slightly to 8.2 %.
As a result of a more accurate enquiry method in the digital
media segment, the previous year’s total market volume
increased arithmetically by €2.4 billion to €26.8 billion. As
a result, our market share for the previous year decreased
arithmetically to 7.9 %.

German advertising market 1, 2017

Market volume: €27.1 billion

Competition

Deutsche Post

A.05

91.8 %

8.2 %

1 Includes all advertising media with external distribution costs; the placement costs are

shown as ratios to each other.

Source: company estimates.

Sending mail and merchandise internationally

We carry mail and light-weight merchandise shipments
across borders and provide international dialogue market-
ing services. For business customers in key European mail
markets, we offer international shipping services. For the
growing e-commerce sector, we develop solutions for inter-
national shipments to consumers (B2C). Our portfolio also
comprises consulting and services to meet all physical and
digital dialogue marketing needs. Furthermore, we offer
physical, hybrid and electronic written communications for
international business customers.

The global market volume for outbound international
mail amounted to around €5.9 billion in 2017 (previous
year: around €5.8 billion). Our market share was slightly
above the prior-year level at 16.4 %.

International mail market (outbound), 2017

Market volume: €5.9 billion

Competition

DHL

Source: company estimates.

A.06

83.6 %

16.4 %

Worldwide portfolio of parcel and e-commerce services

We maintain a dense network of parcel acceptance and
drop-off points in Germany. Our portfolio of products and
services allows recipients to choose whether they wish to
receive their parcels during a specific delivery window, on
the same day or as quickly as possible. They can also decide
at short notice whether their parcels should be delivered to
an alternative address, a specific retail outlet or a Paketshop.
We offer support to business customers to grow their online
retail businesses. We are able to cover the entire logistics
chain through to returns management on request.

The German parcel market had a volume of around
€10.8 billion in 2017 (previous year: around €10.1 billion).
We succeeded in increasing our market share to 45.4 % (pre-
vious year: 45.1 %).

German parcel market, 2017

Market volume: €10.8 billion

Competition

DHL

Source: company estimates.

A.07

54.6 %

45.4 %

We expanded our cross-border portfolio of e-commerce ser-
vices during the year under review. We grew our B2C net-
work in Europe thanks to our entry into the UK market
through the takeover of UK Mail at the end of 2016. At the
beginning of 2017, we added the Spanish and Portuguese
markets by reassigning companies from the Express div-
ision. Moreover, we expanded our European parcel business
to include a total of 26 countries (including the German
domestic market) via co-operation agreements in Ireland,
Romania, Croatia and Bulgaria. There are more than 60,000
acceptance and drop-off points available to our customers
in Europe.

Outside of Europe, we began operating national parcel
networks in Chile, Malaysia and Vietnam. In the United
States, we offer especially fast B2C delivery to customers in
a range of metropolitan areas. Locations in Australia and
Columbia were added to our network of fulfilment centres,
Glossary, page 181. In India, we are testing the use of electric
vehicles. We also reinforced our international parcel net-
work by adding a new distribution centre in Japan to sup-
port increased cross-border deliveries.

EXPRESS DIVISION

A global express network

In the Express division, we transport urgent documents and
goods reliably and on time from door to door. Our global
network spans more than 220 countries and territories in
which some 100,000 employees provide services to 2.7 mil-
lion customers.

Deutsche Post DHL Group — 2017 Annual Report

In the year under review, we signed another agreement with
Elbe Flugzeugwerke GmbH to convert an additional four
Airbus A330-300s from passenger aircraft to cargo planes.
Similar to the aircraft already converted, the newly con-
verted planes will be used to cover medium to high-demand
levels for cargo space capacity, which will both increase
our flexibility and improve our fuel efficiency per kilo-
gram transported.

Time-definite international shipments as our core business

Trade boosts international express business

With the main product, Time Definite International (TDI),
we provide services with a pre-defined delivery time. We
also provide industry-specific services to complement this
product. For example, our Medical Express transport solu-
tion, which is tailored specifically to customers in the Life
Sciences & Healthcare sector, offers various types of thermal
packaging for temperature-controlled, chilled and frozen
content. Collect and Return is used predominantly by cus-
tomers in high-tech industries: technical products are col-
lected from the user, taken in for repairs and then returned.

Our virtual airline

As an express service provider, we operate a global network
that includes several airlines, some of which we own 100 %.
The combination of our own and purchased capacities,
which include varied contract periods, allows us to respond
flexibly to fluctuating demand. Figure a.08 illustrates how
the available freight capacity is organised and offered on the
market. The largest buyer of the available freight capacities
is the DHL Global Forwarding business unit.

Available capacity

A.08

Air Capacity Sales, total spare
capacity – average capacity
not utilised by Block Space or
tDI Core on a planned basis.

Block Space Agreement –
guaranteed air cargo product.

Express tDI core
product – capacity
based upon average
utilisation, adjusted
on a daily basis.

BSA

CORE

ACS

The international express business is benefiting from cross-
border e-commerce and the growing importance of small
and medium-sized enterprises in international trade. In
2016, we had a market share of 38 % based upon TDI revenues.

Expanding the network in the Europe region

The European market leadership of 44 % in 2016 encourages
us to keep expanding the network in the region. In the year
under review, we took new hubs into operation at the exist-
ing sites in London and Brussels and opened Germany’s
largest (in terms of area) Express distribution centre in
Hamburg. We shall also substantially enlarge our hub at East
Midlands airport in the United Kingdom, thus significantly
increasing throughput capacity.

International express market – Europe, 2016: 1 top 4

Market volume: €7.1 billion

FedEx

tNt

UPS

DHL

A.09

10 %

11 %

24 %

44 %

1 Country base: At, CZ, DE, ES, FR, It, NL, PL, RO, RU, SE, tR, UK.

Source: Market Intelligence 2017, annual reports and desk research.

Expanding service in the Americas region

Our market share in the Americas region amounted to 20 %
in 2016. In the year under review, we opened a total of
more than 1,000 service points there, established additional
service centres in Mexico and expanded our gateway in
Mexico City.

Group Management Report — GENERAL INFORMATION — Business units and market positions

International express market – the Americas, 2016: 1 top 4

Market volume: €8.2 billion

tNt

DHL

UPS

FedEx

1 Country base: AR, BR, CA, CL, CO, MX, PA, US.

Source: Market Intelligence 2017, annual reports and desk research.

A.10

< 1 %

20 %

33 %

43 %

GLOBAL FORWARDING, FREIGHT DIVISION

The air, ocean and overland freight forwarder

Our air, ocean and overland freight forwarding services in-
clude standardised transport as well as multimodal and
sector-specific solutions, together with individualised in-
dustrial projects.

Compared with other divisions, our operating business
model is asset-light, as it is based upon brokering transport
services between customers and freight carriers. Our net-
work’s global presence allows us to offer efficient routing
and multimodal transport.

Air freight market, 2016: top 4

Thousands of tonnes 1

Panalpina

DB Schenker

Kuehne + Nagel

DHL

A.12

921

1,179

1,304

2,081

1 Data based solely upon export freight tonnes.

Source: annual reports, publications and company estimates.

Air freight market leadership solidified

According to the International Air Transport Association
(IATA), the worldwide freight tonne kilometres flown dur-
ing the year under review grew by 9.0 %. Transport capaci-
ties are increasing steadily, due mainly to new passenger
aircraft. On some routes, however, the available cargo space
was scarce. This applies in particular to routes out of Asia.
With around 2.1 million transported export freight tonnes,
we remained the air freight market leader in 2016, as shown
in table A.12.

Further investing in Asia

In the Asia Pacific region, our expanded gateway went into
operation at the New Delhi airport in India. We also began
upgrading our Hong Kong hub, incorporating additional
technical innovations. It will be expanded further in the
coming years. Our market share of 49 % in 2016 illustrates
the importance of the Asia Pacific market for us.

International express market – Asia Pacific, 2016: 1 top 4

Market volume: €8.0 billion

tNt

UPS

FedEx

DHL

A.11

4 %

11 %

19 %

49 %

1 Country base: AU, CN, HK, IN, JP, KR, SG, tW.

Source: Market Intelligence 2017, annual reports and desk research.

Reliable partner in the MEA region

In the MEA (Middle East and Africa) region, the Middle
East continued to suffer in 2017 from the sometimes un-
stable political situation. We were nonetheless able to main-
tain our operations whilst adhering to legal requirements
and ensuring the safety of our employees. Flight frequency
to Cairo was increased and capacity was doubled at the
Dubai hub.

Deutsche Post DHL Group — 2017 Annual Report

Consolidation continues in the ocean freight market

SUPPLY CHAIN DIVISION

Additional mergers and alliances of freight carriers changed
the ocean freight market landscape in 2017. The market
also experienced growth on the whole, with volume growth
driven primarily by routes between the Asia Pacific region
and Europe. The container ship market continued to be im-
pacted by surplus capacities, forcing freight carriers to at-
tempt to adapt to the situation. With around 3.1 million
transported twenty-foot equivalent units, we remained the
second-largest provider of ocean freight services in 2016, as
shown in the following table.

Ocean freight market, 2016: top 4

Thousands of TEUs 1

Panalpina

DB Schenker

DHL

Kuehne + Nagel

1 Twentyfoot equivalent units.

Source: annual reports, publications and company estimates.

A.13

1,489

2,006

3,059

4,053

European overland freight market posts moderate growth

The European road transport market saw moderate expan-
sion in the year under review, fuelled by increases in prices
and volumes in most European countries as well as a mod-
est rise in oil prices. In the middle of 2017, we launched our
premium product EURAPID in 22 European countries. DHL
remained the second-largest provider in 2016, with a mar-
ket share of 2.2 %, in what continues to be a highly competi-
tive environment.

European road transport market, 2016: top 5

Market volume: €195 billion 1

Kuehne + Nagel

DSV

Dachser

DHL

DB Schenker

A.14

1.4 %

1.8 %

2.2 %

3.3 %

1 Total market for 25 European countries, excluding bulk goods and specialties transports.

Source: DHL Market Intelligence Study 2017, based upon the company’s calculations and
content supplied by IHS Markit Group, Copyright © IHS Global Inc, 2017. All rights reserved.

Customer-centric outsourcing solutions

As the world leader in contract logistics, we offer customers
standardised warehousing, transport and value- added ser-
vices that can be combined to form customised supply
chain solutions.

Our contract logistics services include planning, sourc-
ing and production activities as well as packaging, repairs
and returns. These services are rounded out by e-commerce
fulfilment services, real estate solutions and management
capabilities – one example being our assumption of ground
handling operations for easyJet at London Gatwick airport
in 2017.

Industry expertise in key sectors

We have in-depth knowledge and experience across all sec-
tors, along with a strategic growth focus upon Automotive,
Technology and Life Sciences & Healthcare. The acquisition
of Olimpo Holding,
Results of operations, page 54, has given us
expanded service coverage in the Brazilian Life Sciences
industry and has strengthened our market position.

In the Automotive sector, production is increasingly
shifting towards emerging markets in eastern Europe and
Asia, particularly given the growth of auto manufacturers in
India and China. Integrated solutions such as Lead Logistics
Partner (LLP),
Glossary, page 181, and Inbound to Manufac-
turing,
Glossary, page 181, services offer growth opportunities
in this highly competitive outsourcing sector.

Companies in the fast-paced Technology sector require
an agile supply chain to handle fast-moving products with
short life cycles quickly and cost-effectively. Flexible solu-
tions that allow customers to respond to market demand,
particularly in telecommunications, are creating business
opportunities in this sector.

Companies in the Life Sciences & Healthcare sector are
increasingly outsourcing parts of their supply chains to pro-
viders that can ensure compliance with stringent regulatory
requirements and through labelling (serialisation) offer
solutions to combat product counterfeiting. Rising demand
for packaging services, temperature-controlled transport,
Glossary,
warehousing and direct-to-market solutions,
page 181, is driving growth in this sector.

Group Management Report — GENERAL INFORMATION — Business units and market positions

Logistics and value-added services along the supply chain

Return
Bringing it back for repair
or when it’s not needed

Plan
Laying the foundation
for an efficient supply chain

Returns

Raw materials

Distribution

Inbound
transport

Deliver
Getting it where it needs to be

Source
Getting the materials
at the time required

Warehousing

Production
flows

Value-added services

Store & Customise
Getting it ready to sell

Make
Supporting product manufacturing

Endtoend supply chain

Supply Chain services

Leading position in a fragmented market

In the fragmented market DHL remains the global leader in
contract logistics with a market share of 6.2 % (2016) and
operations in more than 50 countries. Our market share
declined compared with 2015 due to the change in revenue
recognition in connection with the UK National Health Ser-
vice (NHS) as a result of revised contract terms. The contract
logistics market is estimated at around €202 billion, with
the top ten players only accounting for around 20 % of the
total volume. We lead the market in mature regions such as
North America and Europe and are well positioned in rap-
idly growing markets throughout the Asia Pacific region
and Latin America.

Contract logistics market, 2016: top 10

Market volume: around €202 billion

DHL

XPO Logistics

Kuehne + Nagel

Hitachi Transport System

CEVA

SNCF Geodis

Neovia

DB Schenker

UPS SCS

Ryder

Source: company estimates; Transport Intelligence. Revenue figures are estimates
based upon gross revenue from external customers; exchange rates as at 2016.

A.15

A.16

6.2 %

2.4 %

2.1 %

1.8 %

1.6 %

1.4 %

1.3 %

1.2 %

0.7 %

Deutsche Post DHL Group — 2017 Annual Report

Objectives and strategies

CORPORATE STRATEGY

Proactively shaping the Group’s digital future

With our “Strategy 2020: Focus.Connect.Grow.” Deutsche
Post DHL Group underscores its global leadership in the
logistics industry. Since increasing digitalisation, acceler-
ated e-commerce growth and momentum in the developing
markets and emerging economies offer us significant oppor-
tunities, we have set the following priorities for our invest-
ments and actions:

Focus: We are focussing on our core mail and logistics
business. In addition to our three goals of being the provider,
employer and investment of choice, we are working to
become a benchmark for responsible business. In order to
deliver consistent, first-class service to our customers, we
conduct frequent surveys to determine their needs and
align our offer accordingly. We see ourselves as a family of
different divisions, each focused upon defined markets and
goals.

Connect: We are working to improve cross-divisionally
on a continuous basis. In doing so, we are concentrating
upon initiatives that are of interest to various parts of our
Group, for example, environmentally friendly solutions and
an optimised IT landscape. “Certified” is our Group-wide
initiative that enables our employees to gain specific skills
and knowledge relevant to their roles. Around 80 % of the
employees in the Group are to be certified internally by
2020. The motivation and customer-centric culture this
fosters – not to mention the improved, holistic understand-
ing of operational processes – help to differentiate our ser-
vices in the market internationally. During the year under
review, we developed new programme modules and cer-
tified additional employees.

Grow: We intend to benefit from growth in the e-com-
merce segment and in the developing and emerging markets.
For instance, we invested in the domestic and cross-border
parcel business in Europe as well as in our already compre-
hensive Express network. We also entered additional mar-
kets in Malaysia, Vietnam and Chile through our DHL
eCommerce business. Our general objective is to increase
our presence where the long-term growth potential is great-
est. Indeed, we aim to generate a minimum of 30 % of Group
revenue in emerging markets by the year 2020.

We are proactively shaping the digital future of the
Group. Key building blocks include the “Saloodo!” freight
platform and our StreetScooter electric vehicles. We also
introduced an internal incubator programme and entered
into a strategic partnership with Plug and Play, a global
start-up ecosystem and venture capital fund. As a corporate
partner in Plug and Play’s accelerator programme, we aim
to work with young start-ups to develop and implement
new solutions in the areas of mobility, supply chain and
logistics.

Our strategy is designed to establish a unique market
presence by the year 2020 – both geographically and in
terms of our portfolio’s performance. Our aim is to be inter-
nationally renowned not only as a highly customer-centric
company but also as quality leaders. When people think
logistics, we want them to think Deutsche Post DHL Group.

STRATEGY AND GOALS OF THE DIVISIONS

Post - eCommerce - Parcel division

Our goal is to offer our customers the best service at all
times, at the highest level of quality and at reasonable prices.
Therefore, we extend our offering in the Post business unit
based on market demand, continuously expand our range
of services in the German parcel business and develop digi-
tal service offerings.

As part of our Group-wide “Certified” initiative, we aim
to certify our employees as PeP Experts by 2020, because
for us dedicated and satisfied employees are the key to
high-quality performance. In addition, we are systemat-
ically driving forwards the networking of our division by
co-operating with institutions outside of the Group as well
as with other Group divisions.

To benefit from growing e-commerce, we are expanding
into new markets and segments. We are also expanding our
networks and product offerings in our existing markets.
Furthermore, we are engaged in growth areas such as elec-
tric mobility and food logistics.

In order to continue to grow profitably, we are design-
ing a market-based cost structure by adapting our networks
to the dynamic market conditions and shipment structures.
We also cut costs wherever possible and sensible, whilst
investing in technologies, automation, innovation and
growth areas.

Group Management Report — GENERAL INFORMATION — Objectives and strategies

EXPRESS division

Our return on sales improves when growing volumes lead
to economies of scale in the network, innovation and auto-
mation enhance productivity, and costs are strictly man-
aged. We optimise indirect costs by standardising processes.
For example, we are gradually streamlining our IT systems
architecture and are ensuring adherence to global standards
and quality requirements, especially as regards facilities and
operating resources.

We concentrate upon shipments whose size and weight
make them a match for our network, thereby using it as well
as possible. In terms of our pricing policy, we encourage
global co-ordination and discipline. At the same time, we
continuously improve our customer approach. Using global
campaigns, we specifically target small and medium-sized
businesses, which could often benefit from increasing
exports.

The majority of our costs are attributable to our air and
ground network. Old aeroplanes are replaced with newer,
more efficient and thus more cost-effective aircraft. We sell
available cargo space to freight and forwarding companies –
especially to DHL Global Forwarding – improving our net-
work utilisation and reducing costs. On the ground, pro-
cesses are automated and standardised.

Our Certified International Specialist (CIS) training
programme ensures that our employees have the requisite
knowledge of the international express business at their dis-
posal. Training is carried out by our own employees, both
within their departments and at a cross-functional level.
This enhances mutual understanding whilst reinforcing the
team atmosphere and loyalty within the division. We want
to keep our employees around the world motivated and to
systematically recognise outstanding performance.

GLObAL FORWARDING, FREIGhT division

In the Global Forwarding business unit, we intend to in-
crease the profitability of contracts. We also want to bring
costs into line with our business performance, thus improv-
ing the conversion rate from gross profit to profit from op-
erating activities. Over the medium term, we aim to reach
a conversion rate on a level with our leading competitors.

IT in the Global Forwarding business unit will be re-
newed in accordance with the IT Renewal Roadmap, with a
view to enhancing or replacing existing systems and thus
integrating industry-proven solutions. In future, we shall
focus upon improved shipment visibility, electronic docu-
ment management and a new transport management system.
In the Freight business unit, the new FREIGHT 2020
strategy includes ten individual initiatives. We aim to in-
crease quality and data transparency whilst enhancing
productivity. Our systems environment is to be harmonised,
the international network optimised and supplier relation-
ships systematically improved. We want to continue grow-
ing by means of an optimised sales organisation. At the
beginning of 2017, we launched “Saloodo!”, our digital
freight platform. We plan to expand the platform inter-
nationally in the future.

SUPPLY chAIN division

As the supply chain solutions company for the world, we
want to capitalise on market opportunities and continue
along a growth trajectory. To achieve this, we are imple-
menting our Supply Chain Strategy 2020 along the three
pillars of Focus, Connect and Grow.

With Focus, we are increasing our efficiency and quality
by standardising processes worldwide and reducing com-
plexity, thus facilitating innovative and customer-centric
solutions.

The Connect pillar is about connecting people and pro-
cesses. A lean management structure including Centres of
Excellence improves our cost base and establishes proven
and efficient routines. The Certified Supply Chain Specialist
programme empowers and motivates our employees world-
wide to perform at their best.

Finally, the Grow pillar focuses upon those market seg-
ments that offer higher profitability and stronger growth. A
clear set of global products and key sectors as well as a geo-
graphical shift towards fast-growing markets will be key
drivers to accelerate future growth. Digitalisation facilitates
the delivery of our strategy. Implementing augmented real-
ity glasses and robotic process automation yield efficiency
gains and predictive analytics are being used to optimise
processes.

Deutsche Post DHL Group — 2017 Annual Report

Group management

FINANCIAL PERFORMANCE INDICATORS

Impact on management compensation

Deutsche Post DHL Group uses both financial and non-
financial performance indicators in its management of the
Group. The monthly, quarterly and annual changes in these
indicators are compared with the prior-year data and the
forecast data to assist in making management decisions. The
year-to-year changes in financial and non-financial per-
formance metrics portrayed here are also particularly rel-
evant for calculating management remuneration. The
Group’s finan cial performance indicators are intended to
preserve a balance between profitability, an efficient use of
resources and sufficient liquidity. The performance of these
Re-
indicators in the year under review is described in the
port on economic position on page 51 ff.

Profit from operating activities measures earnings power

The profitability of the Group’s operating divisions is meas-
ured as profit from operating activities (EBIT). EBIT is cal-
culated by deducting materials expense and staff costs,
depreciation, amortisation and impairment losses, as well
as other operating expenses from revenue and other oper-
ating income, and adding net income from investments
accounted for using the equity method. Interest and other
finance costs / other financial income are shown in net finan-
cial income / net finance costs.

EbIT after asset charge promotes efficient use of resources

An additional key performance indicator for the Group is
EBIT after asset charge (EAC). EAC is calculated by subtract-
ing the cost of capital component, or asset charge, from EBIT.
Making the asset charge a part of business decisions encour-
ages the efficient use of resources and ensures that the oper-
ating business is geared towards increasing value sustain-
ably whilst generating increasing cash flow.

The asset charge is calculated on the basis of the
weighted average cost of capital, or WACC, which is defined
as the weighted average net cost of interest-bearing liabil-
ities and equity, taking into account company-specific risk
factors in accordance with the Capital Asset Pricing Model.
A standard WACC of 8.5 % is applied across the divisions,
and this figure also represents the minimum target for pro-
jects and investments within the Group. The WACC is gen-
erally reviewed once annually on the basis of the current
situation on the financial markets. To ensure better com-
parability of asset charge with previous figures, in 2017 the
WACC was maintained at a constant level compared with the
previous years.

The asset charge calculation is performed each month
so that fluctuations in the net asset base can also be taken
into account during the year. Table a.17 shows the compo-
sition of the net asset base.

Free cash flow facilitates liquidity management

Along with EBIT and EAC, cash flow is another key per-
formance metric used by Group management. This is tar-
geted at maintaining sufficient liquidity to cover all of the
Group’s financial obligations from debt repayment and div-
idends, in addition to operating payment commitments and
investments. Cash flow is calculated using the cash flow
statement. Operating cash flow (OCF) includes all items that
are related directly to operating value creation. OCF is cal-
culated by adjusting EBIT for changes in non-current assets
(depreciation, amortisation and (reversals of) impairment
losses, net income / loss from disposals), other non-cash in-
come and expense, dividends received, taxes paid, changes
in provisions and other non-current assets and liabilities.
Another key parameter of OCF is net working capital. Effec-
tive manage ment of net working capital is an important way
for the Group to improve cash flow in the short to medium
term. Free cash flow (FCF) as a management-related per-
formance indicator is calculated on the basis of OCF by
adding / subtracting the cash flows from capital expenditure,
acquisitions and divestitures as well as net interest paid.
Free cash flow is regarded as an indicator of how much cash
is available to the company at the end of a reporting period
for paying dividends or repaying debt.

Group Management Report — GENERAL INFORMATION — Group management

Calculations

Revenue

EBIt

A.17

Other operating income

Asset charge

Materials expense

Staff costs

Depreciation, amortisation

and impairment losses

Other operating expenses

Net income from investments

accounted for using the equity method

EBIT

Profit from operating
activities

Net asset base
Weighted average cost of capital

(WACC)

EAC

EbIT after asset charge

Operating assets

• Intangible assets
• Property, plant and equipment
• Goodwill
• Trade receivables

( included in net working capital) 1
• Other noncurrent operating assets 2

Operating liabilities

• Operating provisions

(not including provisions for
pensions and similar obligations)

• Trade payables

( included in net working capital) 1

• Other noncurrent operating

liabilities 2

Net asset base

Depreciation, amortisation

and impairment losses

Net income / loss from disposal

of noncurrent assets

Noncash income and expense

Change in provisions

Change in other noncurrent assets

and liabilities

Dividends received

Income taxes paid

Operating cash flow before
changes in working capital
(net working capital)

Changes in net working capital

Net cash from /used in operating

activities (operating cash flow – OcF)

Cash inflow /outflow arising from
change in property, plant and
equipment and intangible assets

Cash inflow /outflow arising from

acquisitions /divestitures

Net interest paid

FCF

Free cash flow

1 Includes EBItrelated current assets and liabilities. Not included are assets and liabilities related to taxes, financing and cash and cash equivalents, for example.
2 Includes EBItrelated other noncurrent assets and liabilities. Not included are assets and liabilities related to taxes or bonds, for example.

Deutsche Post DHL Group — 2017 Annual Report

NONFINANCIAL PERFORMANCE INDICATORS

Results of Employee Opinion Survey used as a management
indicator

Our annual worldwide Employee Opinion Survey shows us
how we are perceived as a group from the perspective of our
employees. We place particular significance on the survey’s
indication of Employee Engagement and of how employees
rate the leadership behaviour of their superiors. The Active
Leadership indicator is thus used in the calculation of
bonuses for executives. The results of the Employee Opinion
Survey carried out in the reporting year can be found in the

Employees section on page 71.

Reducing dependency upon fossil fuels

We aim to reduce our dependency upon fossil fuels, im-
prove our carbon efficiency and lower costs. The corres-
ponding target of our GoGreen environmental protection
programme is greenhouse gas efficiency, which we measure
using a carbon efficiency index (CEX). CEX is based upon
the business unit-specific emission intensity figures, which
are indexed to the base year. We quantify the greenhouse
gas emissions upon which our CEX is based in accordance
with the Greenhouse Gas Protocol Standards and DIN EN
16258; those attributable to our European air freight busi-
ness are calculated in accordance with the requirements of
the European Union Emissions Trading System (EU ETS).
Pursuant to DIN EN 16258, all gases that are harmful to the
environment must be disclosed in the form of CO2 equiv a-
lents (CO2e). This indicates the ratio of the respective emis-
sions to a matching performance indicator in the Group.
CEX is a management indicator of non-financial perform-
ance. The figures obtained for the reporting year are pro-
vided in the section on

Corporate responsibility on page 73 f.

Disclosures required by takeover law

Disclosures required under sections 289 a and 315 a of the
Handelsgesetzbuch (HGB – German Commercial Code) and
explanatory report

Composition of issued capital, voting rights and transfer
of shares

As at 31 December 2017, the company’s share capital totalled
€1,228,707,545 and was composed of the same number of
no-par value registered shares. Each share carries the same

rights and obligations stipulated by law and / or in the com-
pany’s Articles of Association and entitles the holder to one
vote at the Annual General Meeting (AGM). No individual
shareholder or group of shareholders is entitled to special
rights, particularly rights granting powers of control.

The exercise of voting rights and the transfer of shares
are based upon statutory provisions and the company’s
Articles of Association; the latter do not restrict either of
these activities.

Shareholdings exceeding 10 % of voting rights

KfW Bankengruppe (KfW), Frankfurt am Main, is our larg-
est shareholder, holding 20.7 % of the share capital. The
Federal Republic of Germany holds an indirect stake in
Deutsche Post AG via KfW.

Appointment and replacement of members of the Board
of Management

The members of the Board of Management are appointed
and replaced in accordance with the relevant statutory pro-
visions (cf. sections 84 and 85 of the Aktiengesetz (AktG –
German Stock Corporation Act) and section 31 of the Mit-
bestimmungsgesetz (MitbestG – German Co-determination
Act)). Article 6 of the Articles of Association stipulates that
the Board of Management must have at least two members.
Beyond that, the number of board members is determined
by the Supervisory Board.

Amendments to the Articles of Association

In accordance with section 119 (1), number 5 and section
179 (1), sentence 1 of the AktG, amendments to the Articles
of Association are adopted by resolution of the AGM. In ac-
cordance with article 21 (2) of the Articles of Association in
conjunction with sections 179 (2) and 133 (1) of the AktG,
such amendments generally require a simple majority of the
votes cast and a simple majority of the share capital repre-
sented on the date of the resolution. In such instances where
the law requires a greater majority for amendments to the
Articles of Association, that majority is decisive.

Board of Management authorisation, particularly regarding
issue and buy-back of shares

The Board of Management is authorised, subject to the con-
sent of the Supervisory Board, to issue up to 160,000,000
new, no-par value registered shares (Authorised Capital).
Details may be found in article 5 (2) of the Articles of
Association. The Articles of Association may be viewed on

Group Management Report — GENERAL INFORMATION — Group management — Disclosures required by takeover law — Research and development

conditions, granted the right to demand early redemption
of the respective bonds.

In the event of a change in control, any member of the
Board of Management is entitled to resign their office for
good cause within a period of six months following the
change in control after giving three months’ notice to the
end of a given month, and to terminate their Board of
Manage ment contract (right to early termination). If the
right to early termination is exercised or a Board of Manage-
ment contract is terminated by mutual consent within nine
months of the change in control, the Board of Management
member is entitled to payment to compensate the remain-
ing term of their Board of Management contract. Such pay-
ment is limited to the cap pursuant to the recommendation
of No. 4.2.3 of the German Corporate Governance Code,
subject to the specifications outlined in the remuneration
report. With regard to the Annual Bonus Plan with Share
Matching for executives, the holding period for the shares
will become invalid with immediate effect in the event of
a change in control of the company. The participating
executives will receive the total number of matching shares
corresponding to their investment in due course. In such
case, the employer will be responsible for any tax dis-
advantages resulting from a reduction of the holding period.
Exempt from this are taxes normally incurred after the
holding period.

Research and development

As a service provider, the Group does not engage in research
and development activities in the narrower sense and there-
fore has no significant expenses to report in this connection.

the company’s website or in the electronic company register.
They may also be viewed in the commercial register of the
Bonn Local Court.

The Board of Management has furthermore been au-
thorised by resolution of the Annual General Meetings of
25 May 2011 (agenda item 6), 27 May 2014 (agenda item 8)
and 28 April 2017 (agenda item 7) to issue share subscrip-
tion rights. The authorisation resolutions are included in the
notarised minutes of the AGM that can be viewed in the
commercial register of the Bonn Local Court. In order to
service both current subscription rights and those yet to be
issued, the Annual General Meeting approved conditional
capital increases. The details are stipulated in article 5 (3) to
(5) of the company’s Articles of Association. As at 31 De-
cember 2017, the subscription rights already issued con-
ferred rights to up to 37,625,184 Deutsche Post AG shares,
assuming the prerequisites are met. Under the approvals
granted, up to 82,788,141 additional subscription rights may
be issued.

The AGM of 28 April 2017 authorised the company to
buy back shares on or before 27 April 2022 up to an amount
not to exceed 10 % of the share capital existing as at the date
of adoption of the resolution. Further details may be found
in the authorisation resolution adopted by the AGM of
28 April 2017 (agenda item 8). In addition to this, the AGM
of 28 April 2017 also authorised the Board of Management,
within the scope specified in agenda item 8, to buy back
shares, including through the use of derivatives (agenda
item 9). Based on that authorisation resolution, the com-
pany had repurchased no shares as at 31 December 2017.

Significant agreements that are conditional upon a change
in control following a takeover bid and agreements with
members of the Board of Management or employees provid-
ing for compensation in the event of a change in control

Deutsche Post AG holds a syndicated credit facility with a
volume of €2 billion that it has taken out with a consortium
of banks. If a change in control within the meaning of the
contract occurs, each member of the bank consortium is
entitled under certain conditions to cancel its share of the
credit line as well as its share of outstanding loans and to
request repayment. The terms and conditions of the bonds
issued under the Debt Issuance Programme established in
March 2012 and of the convertible bonds issued in Decem-
ber 2012 and December 2017 also contain change-in- control
clauses. In the event of a change in control within the mean-
ing of the terms and conditions, creditors are, under certain

Deutsche Post DHL Group — 2017 Annual Report

Remuneration of the Board
of Management and Supervisory Board

The remuneration report describes the principles of the
remuneration systems for the members of the Board of
Manage ment and the Supervisory Board and provides in-
formation about the remuneration granted and paid to the
members of the Board of Management and the remuner-
ation of the Supervisory Board in financial year 2017. It has
been prepared in accordance with the recommendations of
the German Corporate Governance Code (DCGK) and the
requirements of the Handelsgesetzbuch (HGB – German
Commercial Code), the German Accounting Standards and
the International Financial Reporting Standards (IFRS s).

Remuneration structure of the Group Board of Manage ment
in financial year 2017

The remuneration system for the Board of Management is
aligned to the company’s strategy and is geared toward
performance-based and sustainable corporate governance.
It creates an incentive for the members of the Board of
Manage ment to work for and on behalf of the company over
the long term.

The Supervisory Board regularly examines the appro-
priateness of this remuneration. Criteria for evaluating the
appropriateness of remuneration are the tasks performed
by each individual Board of Management member, his or
her personal performance, the economic situation, the com-
pany’s success and future perspectives, and the customary
level of remuneration, taking into consideration the peer
group and the overall remuneration structure in the com-
pany. In this process the Supervisory Board takes into con-
sideration the relation thereof to the remuneration of the
senior management level and to the workforce overall, in-
cluding its development over time. In evaluating the appro-
priateness of remuneration, the Supervisory Board is sup-
ported by an independent external remuneration expert.

The remuneration of the Board of Management is com-
posed of a non-performance-related component and vari-
able – in other words performance-related – components
with a short, medium and long-term effect, as well as pen-
sion commitments and fringe benefits.

REMUNERATION cAPS
The remuneration as a whole as well as its variable compo-
nents have been capped.

For remuneration granted in financial year 2017 and
thereafter, an overall cap of €8 million for the chairman and
€5 million for the ordinary members (plus fringe benefits in
each case) was introduced in addition to the previously
existing thresholds that additionally limit the maximum
amount attainable from the target remuneration of a single
financial year (overall cap on remuneration granted).

In addition to this overall cap on remuneration granted
in a financial year, a second overall cap to apply beginning
in 2022 will ensure that remuneration paid in a single finan-
cial year does not exceed the amount of €8 million for the
chairman and €5 million for each ordinary member of the
Board of Management (overall cap on remuneration paid).
These caps also do not take into account additional fringe
benefits.

The maximum amounts applicable to the individual vari-
able remuneration components and the maximum amount
paid from remuneration granted in 2017 are broken down
in table A.23.

Example illustration of the included remuneration components

A.18

Overall cap on remuneration granted
Example: 2017

Overall cap on remuneration paid
Example: 2022

Remuneration components
included

• 2017 base salary
• Proportion of 2017 annual bonus

• 2022 base salary
• Proportion of 2022 annual bonus

for immediate payout

• Deferral from 2017 annual bonus
• LongTerm Incentive Plan

2017 tranche

• 2017 pension expense

(service cost)

for immediate payout

• Deferral from 2020 annual bonus
• LongTerm Incentive Plan
2016 / 2017 / 2018 1 tranches
• 2022 pension expense

(service cost)

1 The time the tranches are paid out depends on when they are exercised

within the twoyear exercise period.

NON-PERFORMANcE-RELATED cOMPONENTS
Non-performance-related components are the annual base
salary (fixed annual remuneration) and fringe benefits.

The annual base salary is paid in twelve equal monthly
instalments retroactively at the end of each month. Fringe
benefits comprise particularly the use of a company car,
subsidies for health and long-term care insurance in accord-
ance with the provisions of the German Social Security
Code, and special allowances and benefits for assignments
outside the members’ home country.

Group Management Report — GENERAL INFORMATION — Remuneration of the Board of Management and Supervisory Board

Terms of variable remuneration in target remuneration

Grant year

Year 2

Year 3

Year 4

Year 5

Year 6

Annual bonus

Deferral

Long-Term Incentive Plan (LTIP)

LTIP payment period

A.19

PERFORMANcE-RELATED cOMPONENTS
The variable remuneration paid to the Board of Manage-
ment is almost entirely multi-annual, in other words based
on medium- and long-term performance. More than half of
the variable target remuneration for 2017 consists of a long-
term incentive plan (LTIP) with a four-year calculation
period; the rest is made up of an annual bonus linked to the
company’s yearly profits, with 50 % of the annual bonus
flowing into a medium-term component with a three-year
calculation period (deferral). All of the variable remuner-
ation components are forward-looking.

Less than a quarter of the variable remuneration com-
ponent is granted on the basis of a one-year calculation, as
shown in the following graphic.

Weighting of one-year and multi-year variable remuneration components
(variable target remuneration)

A.20

Oneyear variable remuneration components

approx. 20 %

Multiyear variable remuneration components

approx. 80 %

ANNUAL bONUS
The members of the Board of Management receive an an-
nual bonus whose individual amount reflects the extent to
which predefined targets are achieved, missed or exceeded.

Achievement of the upper targets for the financial year that
have been agreed based upon demanding objectives is re-
warded with the maximum annual bonus. If the targets
specified for the financial year are only partially reached or
completely missed, the annual bonus will be paid on a pro-
rata basis or not at all.

The Supervisory Board assesses achievement based on
the agreed performance criteria. The maximum amount of
the annual bonus may not exceed 100 % of the annual base
salary.

The same performance criteria were used to calculate
the amount of the annual bonus for the year under review
as for the previous year. A key parameter for all Board of
Management members is the Group’s EBIT after asset charge
performance metric, including the asset charge on goodwill
before goodwill impairment (EAC). For the Board of
Manage ment members in charge of the Post - eCommerce -
Parcel, Express, Global Forwarding, Freight and Supply
Chain divisions, the EAC of their respective division is also
a key parameter. The Group’s reported free cash flow is one
of the targets applicable to all members of the Board of
Management. Target setting is based on the capital market
guidance. Furthermore, an employee-related target is agreed
with all Board of Management members based upon the
annual Employee Opinion Survey. In financial year 2017,
the employee engagement KPI was relevant for the perform-
ance assessment. As in the previous years, further targets
are additionally agreed with the members of the Board of
Management that reflect the focus of their work in the re-
spective financial year, in accordance with the Group strat-
egy. The granted variable annual bonus consists of financial
targets (75 %) and non-financial targets (25 %).

Deutsche Post DHL Group — 2017 Annual Report

DEFERRAL
Even if the agreed targets are reached, the annual bonus is
not paid out in full in a single instalment. Instead, 50 % of
the annual bonus flows into a medium-term component
with a three-year calculation period with a performance
phase of one year and a sustainability phase of two years
(deferral). That medium-term component will be paid out
after expiry of the sustainability phase subject to the condi-
tion that EAC – an indicator of sustainability – is addition-
ally reached during the sustainability phase. This is the case
when at least the cost of capital has been earned. Otherwise,
payment of the medium-term component is forfeited with-
out compensation. This demerit system puts greater em-
phasis on sustainable company development in determin-
ing Board of Management remuneration and sets long-term
incentives.

LONG-TERM INcENTIVE PLAN
Since financial year 2006, the company has granted the
Board of Management members share-price-based, long-
term cash remuneration by issuing stock appreciation rights
(SAR s) within the scope of a long-term incentive plan
(LTIP). To participate in the LTIP, the Board of Management
members have to make a personal financial investment con-
sisting of 10 % of their annual base salary on the grant date,
primarily in stock.

In financial year 2017, the Board of Management mem-
bers received SAR s with a value of one base salary on the
grant date. Beginning in financial year 2018, they will re-
ceive SAR s with a value of 50 % to 150 % of one base salary
on the grant date, depending on the attainment of one-year
strategic targets. The relevant target categories for the grant-
ing of SAR s in 2018 are the development of the share price
compared with the company’s competitors and strategic
individual targets, including a digital transformation target
in each case.

The SAR s granted can be fully or partly exercised after
the expiration of a four-year waiting period at the earliest,
provided absolute or relative performance targets have been
achieved at the end of this waiting period. SAR s lapse if they
are not exercised within two years after the waiting period
expires (exercise period).

To determine whether and how many of the SAR s
granted are exercisable, four share-price-related (absolute)
and two reference-index-based (relative) performance tar-
gets are measured. Within the scope of the absolute per-

formance targets, a sixth of the SAR s granted is earned in
each case if the closing price of Deutsche Post shares at the
end of the waiting period exceeds the issue price by at least
10, 15, 20 or 25 %. Both relative performance targets are tied
to the performance of the shares in relation to the STOXX
Europe 600 Index (SXXP; ISIN EU0009658202). They are
met if the share price equals the index performance or out-
performs it by more than 10 %.

Mechanism of the stock appreciation rights

A.21

SAR performance
targets

Thresholds

Number of
exercisable SAR s

Performance
versus STOXX
Europe 600

Absolute
increase
in share price

+ 10 %

+ 0 %

+ 25 %

+ 20 %

+ 15 %

+ 10 %

1 /6

To determine the share price performance, the average price
of Deutsche Post shares or the average index value for a
reference period is compared with that of a performance
period. The reference period comprises the last 20 con-
secutive trading days prior to the issue date. The average
price of Deutsche Post shares during the reference period
of the 2017 tranche was €34.72 and the average index value
was 375.59 points. The performance period is the last 60
trading days before the end of the waiting period. The aver-
age (closing) price is calculated as the average closing price
of Deutsche Post shares in Deutsche Börse AG’s Xetra trading
system. If absolute or relative performance targets are not
met by the end of the waiting period, the SAR s attributable
to them will expire without replacement or compensation.

Each exercised SAR entitles the Board of Management
member to receive a cash settlement equal to the difference
between the average closing price of Deutsche Post shares
for the five trading days preceding the exercise date and the
exercise price of the SAR. The proceeds from stock appreci-
ation rights are limited to a maximum amount. Table A.23

Group Management Report — GENERAL INFORMATION — Remuneration of the Board of Management and Supervisory Board

shows the individual maximum amounts for the 2017
tranche. The remuneration from stock appreciation rights
may be limited by the Supervisory Board in the event of
extraordinary circumstances.

Pension commitments (retirement and surviving dependants’
benefits)

The members of the Board of Management have been
granted contribution-based pension commitments; Frank
Appel and Jürgen Gerdes still have final-salary-based exist-
ing pension commitments. Under the contribution- based
pension plan, the company credits an annual amount of 35 %
of the annual base salary to a virtual pension account for
each Board of Management member. The maximum con-
tribution period is 15 years.

The pension capital accrues interest at an annual rate
equal to the “iBoxx Corporates AA 10+ Annual Yield” rate,
or at an annual rate of 2.25 % at minimum, and will continue
to do so until the pension benefits fall due. The pension
benefits are paid out in a lump sum in the amount of the
value accumulated in the pension account. The benefits fall
due when the Board of Management member reaches the
age of 62, or in the case of invalidity whilst in office or death.
In the event of benefits falling due, the pension benefi-
ciary may opt to receive an annuity payment in lieu of a
lump sum payment. If this option is exercised, the capital is
converted to an annuity payment, taking into account the
average “iBoxx Corporates AA 10+ Annual Yield” for the
past ten full calendar years as well as the individual data of
the surviving dependants and a future pension increase of
1 % per year.

Function of the contribution-based pension plan

Capital components

A.22

Pension account

Term (years)

Upon their initial appointment to the Board of Manage-
ment, Frank Appel and Jürgen Gerdes were granted the
final- salary- based direct pension commitments customary
in the company at the time which provide for benefits in the
case of permanent invalidity, death or retirement. After five
years of service on the Board of Management, the entitle-
ments they have acquired will vest in full; both Frank Appel
and Jürgen Gerdes have exceeded this minimum duration
of service. Frank Appel’s pension commitment provides for
retirement benefits to be granted at the earliest from the age
of 55. As he has been appointed to the Board of Manage-
ment beyond this age, he has not availed himself of this
provision. Jürgen Gerdes will not be eligible for retirement
benefits until he turns 62.

The pensions of Frank Appel and Jürgen Gerdes are
geared towards annuity payments. They also have the op-
tion of choosing a lump sum instead. The benefit amount
depends on the pensionable income and the pension level
derived from the years of service. Pensionable income con-
sists of the annual base salary (fixed annual remuneration)
computed on the basis of the average salary over the last
twelve calendar months of employment. Both Frank Appel
and Jürgen Gerdes attained the maximum pension level
(50 %) after ten years of service. Subsequent retirement
benefits increase or decrease to reflect changes in the con-
sumer price index in Germany.

Provisions to cap severance payments pursuant to the
Corporate Governance Code recommendation, change-of-
control provisions and post-contractual non-compete clauses

In accordance with the recommendation of the DCGK,
Board of Management contracts contain a provision stipu-
lating that in the event of premature termination of a Board
of Management member’s contract, the severance payment
may compensate no more than the remaining term of the
contract. The severance payment is limited to a maximum
amount of two years’ remuneration including fringe bene-
fits (severance payment cap). The severance payment cap is
calculated exclusive of any special remuneration or the
value of rights allocated from LTIP s.

In the event of a change of control, any member of the
Board of Management is entitled to resign from office for
good cause within a period of six months following the
change in control, after giving three months’ notice to the
end of a given month, and to terminate their Board of
Manage ment contract (right to early termination).

Deutsche Post DHL Group — 2017 Annual Report

The contractual provisions stipulate that a change in
control exists if a shareholder has acquired control within
the meaning of section 29 (2) of the Wertpapiererwerbs- und
Übernahmegesetz (WpÜG – German Securities Acquisition
and Takeover Act) via possession of at least 30 % of the vot-
ing rights, including the voting rights attributable to such
shareholder by virtue of acting in concert with other share-
holders as set forth in section 30 of the WpÜG or if a control
agreement has been concluded with the company as a de-
pendent entity in accordance with section 291 of the Aktien-
gesetz (AktG – German Stock Corporation Act) and such
agreement has taken effect or if the company has merged
with another legal entity outside of the Group pursuant to
section 2 of the Umwandlungsgesetz (UmwG – German
Reorganisation and Transformation Act), unless the value
of such other legal entity, as determined by the agreed con-
version rate, is less than 50 % of the value of the company.

In the event that the right to early termination is exer-
cised or a Board of Management contract is terminated by
mutual consent within nine months of the change in control,
the Board of Management member is entitled to payment
to compensate the remaining term of their Board of Manage-
ment contract. Such payment is limited to 150 % of the sev-
erance payment cap pursuant to the DCGK recommenda-
tion. The amount of the payment is reduced by 25 % if the
Board of Management member has not reached the age of
60 upon leaving the company. If the remaining term of the
Board of Management contract is less than two years and
the Board of Management member has not reached the age
of 62 upon leaving the company, the payment will cor-
respond to the severance payment cap. The same applies if
a Board of Management contract expires prior to the Board
of Management member’s reaching the age of 62 because
less than nine months remained on the term of the contract
at the time of the change in control and the contract was not
renewed.

Board of Management members are also subject to a
non-compete clause, taking effect on the cessation of their
contracts. During the one-year non-compete period, former
Board of Management members receive 100 % of their last
contractually stipulated annual base salary on a pro-rata
basis as compensation each month. Any other income
earned during the non-compete period is subtracted from
the compensation paid. The amount of the compensation
payment itself is deducted from any severance payments or
pension payments. Prior to, or concurrent with, cessation

of the Board of Management contract, the company may
declare its waiver of adherence to the non-compete clause.
In such a case, the company will be released from the obli-
gation to pay compensation due to a restraint on competi-
tion six months after receipt of such declaration.

Amount of remuneration paid to members of the Group
Board of Management in financial year 2017

The remuneration paid to members of the Board of Manage-
ment in financial year 2017 totalled €11.57 million (previous
year: €12.26 million) in accordance with the applicable ac-
counting standards. That amount comprised €7.57 million
(previous year: €6.63 million) in non-performance- related
components and €4.00 million (previous year: €5.63 mil-
lion) in performance-related components, i. e., paid-out
annual bonus amounts. The target criteria for the annual
bonus are explained on
page 41. An additional €3.06 mil-
lion of the annual bonus was transferred to the medium-
term component (deferral) and will be paid out in 2020
subject to the condition that the required EAC, an indicator
of sustainability, be reached.

The members of the Board of Management were granted
a total of 2,003,970 SAR s in financial year 2017 with a total
value of €7.19 million (previous year: €6.25 million) at the
time of issue (1 September 2017). The waiting period for the
tranche issued in 2017 ends on 31 August 2021.

The total remuneration paid to Board of Management
members is presented individually in the tables below. In
addition to the applicable accounting principles, the DCGK
recommendations were also taken into account.

In accordance with the recommendations, table A.23
“Target remuneration” (or “benefits granted” in DCGK ter-
minology) does show any actual payments of performance-
based remuneration. Instead of the payment amount, the
figures stated for the one-year variable remuneration and
the portion of the one-year variable remuneration to be de-
ferred (the deferral) reflect the target amount (i. e., the
amount when achieving 100 % of the target) that was
granted for financial year 2017 or for the previous year. In
addition, the long-term remuneration (LTIP with a four-
year waiting period) granted in the year under review or in
the previous year is reported at its fair value at the grant date.
With respect to pension commitments, the pension expense,
i. e., the service cost in accordance with IAS 19, is presented.
The presentation is supplemented by the minimum and
maximum values that can be achieved.

A.23

Group Management Report — GENERAL INFORMATION — Remuneration of the Board of Management and Supervisory Board

Target remuneration

€

a) Non-performance-related remuneration

Base salary

Fringe benefits

Total (lit. a)

b) Performance-related remuneration
Oneyear variable remuneration

Multiyear variable remuneration

LtIP with fouryear waiting period

Deferral with threeyear waiting period

Dr Frank Appel
Chairman

Ken Allen
Express

2016

2017

Min. 2017

Max. 2017

2016

2017

Min. 2017

Max. 2017

1,962,556

1,978,911

976,500

1,000,913

35,099

35,294

102,375

98,197

1,997,655

2,014,205

1,078,875

1,099,110

785,022

791,564

2,747,596

2,754,138

1,962,574

785,022

791,564

989,456

390,600

400,365

5,895,891

1,367,129

1,406,175

4,906,435

976,529

1,005,810

989,456

390,600

400,365

500,457

4,523,698

4,023,241

500,457

Total (lit. a and b)

5,530,273

5,559,907

2,014,205

8,899,552

2,836,604

2,905,650

1,099,110

6,123,265

c) Pension expense (service cost)

899,257

1,041,772

337,497

332,801

Total DcGK remuneration (lit. a to c)

6,429,530

6,601,679

3,055,977

9,941,324

3,174,101

3,238,451

1,431,911

6,456,066

Cap on the maximum payment amount (excluding
fringe benefits) from remuneration granted in 2017

d) Variable cash remuneration pursuant to DRS 17

Oneyear variable remuneration (payment amount)

Payout from mediumterm component

Total remuneration (cash components) pursuant
to DRS 17 (lit. a and d)

a) Non-performance-related remuneration

Base salary

Fringe benefits

Total (lit. a)

b) Performance-related remuneration
Oneyear variable remuneration

Multiyear variable remuneration

LtIP with fouryear waiting period

Deferral with threeyear waiting period

8,000,000

5,000,000

950,662

928,682

952,351

288,300

482,147

447,935

487,945

203,680

3,876,999

3,254,856

2,008,957

1,790,735

Dr h. c. Jürgen Gerdes
Post eCommerce Parcel

John Gilbert
Supply Chain

2016

2017

Min. 2017

Max. 2017

2016

2017

Min. 2017

Max. 2017

1,005,795

35,011

36,289

823,750

174,576

912,500

173,167

912,500

173,167

912,500

173,167

1,040,806

1,042,084

998,326

1,085,667

402,318

1,408,144

1,408,128

1,005,826

1,005,810

402,318

502,898

329,500

365,000

4,526,139

1,189,528

1,295,011

4,023,241

502,898

860,028

329,500

930,011

365,000

456,250

4,176,294

3,720,044

456,250

Total (lit. a and b)

2,851,268

2,852,530

1,042,084

6,071,121

2,517,354

2,745,678

1,085,667

5,718,211

c) Pension expense (service cost)

277,604

344,288

239,316

273,132

Total DcGK remuneration (lit. a to c)

3,128,872

3,196,818

1,386,372

6,415,409

2,756,670

3,018,810

1,358,799

5,991,343

Cap on the maximum payment amount (excluding
fringe benefits) from remuneration granted in 2017

d) Variable cash remuneration pursuant to DRS 17

Oneyear variable remuneration (payment amount)

Payout from mediumterm component

Total remuneration (cash components) pursuant
to DRS 17 (lit. a and d)

5,000,000

478,406

470,331

464,074

167,256

389,263

277,726

434,806

156,406

1,989,543

1,673,414

1,665,315

1,676,879

Deutsche Post DHL Group — 2017 Annual Report

Melanie Kreis
Finance

Dr Thomas Ogilvie
Human Resources
(since 1 September 2017)

2016

2017

Min. 2017

Max. 2017

2016

2017

Min. 2017

Max. 2017

a) Non-performance-related remuneration

Base salary

Fringe benefits

Total (lit. a)

b) Performance-related remuneration
Oneyear variable remuneration

Multiyear variable remuneration

LtIP with fouryear waiting period

Deferral with threeyear waiting period

739,167

871,667

18,990

17,029

758,157

888,696

295,667

348,667

1,010,677

1,208,673

715,010

295,667

860,006

348,667

435,834

3,875,858

3,440,024

435,834

Total (lit. a and b)

2,064,501

2,446,036

888,696

5,200,388

c) Pension expense (service cost)

241,937

276,923

Total DcGK remuneration (lit. a to c)

2,306,438

2,722,959

1,165,619

5,477,311

Cap on the maximum payment amount (excluding
fringe benefits) from remuneration granted in 2017

d) Variable cash remuneration pursuant to DRS 17

Oneyear variable remuneration (payment amount)

Payout from mediumterm component

Total remuneration (cash components) pursuant
to DRS 17 (lit. a and d)

364,964

58,056

405,892

120,656

1,181,177

1,415,244

5,000,000

–

238,333

3,159

241,492

95,333

810,353

715,020

95,333

119,167

2,979,248

2,860,081

119,167

1,147,178

241,492

3,339,907

–

1,147,178

241,492

3,339,907

n. a.

116,188

–

357,680

Tim Scharwath
Global Forwarding, Freight
(since 1 June 2017)

2016

2017

Min. 2017

Max. 2017

a) Non-performance-related remuneration

Base salary

Fringe benefits

Total (lit. a)

b) Performance-related remuneration
Oneyear variable remuneration

Multiyear variable remuneration

LtIP with fouryear waiting period

Deferral with threeyear waiting period

Total (lit. a and b)

c) Pension expense (service cost)

Total DcGK remuneration (lit. a to c)

Cap on the maximum payment amount (excluding
fringe benefits) from remuneration granted in 2017

d) Variable cash remuneration pursuant to DRS 17

Oneyear variable remuneration (payment amount)

Payout from mediumterm component

Total remuneration (cash components) pursuant
to DRS 17 (lit. a and d)

417,083

29,812

446,895

–

446,895

417,083

29,812

446,895

208,542

3,068,623

2,860,081

208,542

3,724,060

–

3,724,060

n. a.

–

417,083

29,812

446,895

166,833

881,853

715,020

166,833

1,495,581

–

1,495,581

196,780

–

1,394,339

Group Management Report — GENERAL INFORMATION — Remuneration of the Board of Management and Supervisory Board

Table A.24 “Payments” below includes the same figures for
base salary and fringe benefits as table A.23 “Target remu-
neration”. In contrast to the target remuneration table, this
payment table states the one-year variable remuneration
paid out in financial year 2017 or in the previous year (the
payment amount); therefore, the share of the annual bonus
transferred to the medium- term component in these years
is not included in this table. With regard to the medium-
term component (the deferral), the payment amount re-
ported is that of the deferral whose calculation period

ended upon expiry of the year under review or the previous
year. The table also reflects the amount paid (the payment
amount) from the tranches of the long-term components
that were exercised in financial year 2017 or in the previous
year. In addition, the pension expense (service cost in ac-
cordance with IAS 19) is stated pursuant to the DCGK rec-
ommendations. Although the pension expense does not
represent an actual payment per se, it is included in the
presentation for the purpose of illustrating the total remu-
neration.

Payments

€

Base salary

Fringe benefits

Total

Oneyear variable remuneration

Multiyear variable remuneration

Mediumterm component 2014

Mediumterm component 2015

LtIP (2011 tranche)

LtIP (2012 tranche)

LtIP (2013 tranche)

Other

Total

Pension expense (service cost)

Total

Base salary

Fringe benefits

Total

Oneyear variable remuneration

Multiyear variable remuneration

Mediumterm component 2014

Mediumterm component 2015

LtIP (2011 tranche)

LtIP (2012 tranche)

LtIP (2013 tranche)

Other

Total

Pension expense (service cost)

Total

A.24

Dr Frank Appel
Chairman

Ken Allen
Express

Dr h. c. Jürgen Gerdes
Post eCommerce Parcel

2016

2017

1,962,556

1,978,911

35,099

35,294

2016

976,500

102,375

2017

2016

2017

1,000,913

1,005,795

98,197

35,011

36,289

1,997,655

2,014,205

1,078,875

1,099,110

1,040,806

1,042,084

950,662

952,351

482,147

487,945

478,406

464,074

6,086,462

5,844,840

3,637,093

4,492,254

3,479,244

4,958,436

928,682

–

5,157,780

–

447,935

–

470,331

–

288,300

838,025

–

203,680

–

167,256

–

3,008,913

–

4,718,515

3,189,158

1,808,056

–

2,480,518

–

2,422,380

2,368,800

–

9,034,779

8,811,396

5,198,115

6,079,309

4,998,456

6,464,594

899,257

1,041,772

337,497

332,801

277,604

344,288

9,934,036

9,853,168

5,535,612

6,412,110

5,276,060

6,808,882

John Gilbert
Supply Chain

Melanie Kreis
Finance

Dr Thomas Ogilvie
Human Resources
(since 1 September 2017)

2016

823,750

174,576

2017

912,500

173,167

998,326

1,085,667

389,263

277,726

–

434,806

156,406

–

156,406

–

2016

739,167

18,990

758,157

364,964

58,056

–

2017

871,667

17,029

888,696

405,892

120,656

–

120,656

–

1,665,315

1,676,879

1,181,177

1,415,244

239,316

273,132

241,937

276,923

1,904,631

1,950,011

1,423,114

1,692,167

2016

–

2017

238,333

3,159

241,492

116,188

–

357,680

–

357,680

Deutsche Post DHL Group — 2017 Annual Report

Base salary

Fringe benefits

Total

Oneyear variable remuneration

Multiyear variable remuneration

Mediumterm component 2014

Mediumterm component 2015

LtIP (2011 tranche)

LtIP (2012 tranche)

LtIP (2013 tranche)

Other

Total

Pension expense (service cost)

Total

Tim Scharwath
Global Forwarding, Freight
(since 1 June 2017)

2016

–

2017

417,083

29,812 1

446,895

196,780

–

643,675

–

643,675

1 Mr Scharwath also received a payment of €750,664 (included in the total remuneration (cash components) pursuant to DRS 17) as compensation

for the lapsing of longterm remuneration rights granted by his previous employer.

Long-Term Incentive Plan: number of SAR s granted

A.25

Number of shares

Dr Frank Appel, Chairman

Ken Allen

Dr h. c. Jürgen Gerdes

John Gilbert

Melanie Kreis

Dr Thomas Ogilvie (since 1 September 2017)

Tim Scharwath (since 1 June 2017)

Number
of SAR s
2016 tranche

Number
of SAR s
2017 tranche

377,418

187,794

193,428

165,390

137,502

–

546,678

280,170

259,056

239,556

199,170

Contribution-based pension commitments: individual breakdown

€

Ken Allen

John Gilbert

Melanie Kreis

Dr Thomas Ogilvie (since 1 September 2017)

Tim Scharwath (since 1 June 2017)

Total

A.26

Total
contribution
for 2016

Total
contribution
for 2017

Present value
(DBO) as at
31 Dec. 2016

Present value
(DBO) as at
31 Dec. 2017

341,775

250,250

–

341,775

301,000

83,417

145,979

2,506,156

2,903,991

704,837

1,020,273

1,049,012

1,359,361

–

136,411

146,294

842,275

1,173,171

4,260,005

5,566,330

Group Management Report — GENERAL INFORMATION — Remuneration of the Board of Management and Supervisory Board

A.27

Pension commitments

Pension
level on
31 Dec. 2016
%

Pension
level on
31 Dec. 2017
%

Maximum
pension level
%

Present value
(DBO) as at
31 Dec. 2016
€

Present value
(DBO) as at
31 Dec. 2017
€

18,606,680

20,171,783

8,366,436

8,973,098

26,973,116

29,144,881

Final-salary-based existing pension commitments: individual breakdown

Dr Frank Appel, Chairman

Dr h. c. Jürgen Gerdes

Total

Benefits for former Board of Management members

Benefits paid to former members of the Board of Manage-
ment or their surviving dependants amounted to €7.0 mil-
lion in financial year 2017 (previous year: €5.4 million). The
defined benefit obligation (DBO) for current pensions cal-
culated under IFRS s was €95 million (previous year:
€97 million).

Remuneration of the Supervisory Board

Remuneration for the members of the Supervisory Board is
governed by article 17 of the Articles of Association of
Deutsche Post AG, according to which they receive only
fixed annual remuneration in the amount of €70,000 (as in
the previous year).

The Supervisory Board chairman and the Supervisory
Board committee chairs receive an additional 100 % of the
remuneration, and the Supervisory Board deputy chair and
committee members receive an additional 50 %. This does
not apply to the Mediation or Nomination Committees.
Those who only serve on the Supervisory Board or its com-
mittees, or act as chair or deputy chair, for part of the finan-
cial year are remunerated on a pro-rata basis.

As in the previous year, Supervisory Board members
receive an attendance allowance of €1,000 for each plenary
meeting of the Supervisory Board or committee meeting
that they attend. They are entitled to the reimbursement of
out-of-pocket cash expenses incurred in the exercise of their
office. Any value added tax charged on Supervisory Board
remuneration or out-of-pocket expenses is reimbursed.

The remuneration for 2017 totalled €2,641,000 (previ-
ous year: €2,622,000). Table A.28 shows both totals, bro-
ken down as the remuneration paid to each Supervisory
Board member.

Deutsche Post DHL Group — 2017 Annual Report

Remuneration paid to Supervisory Board members

€

Board members

Prof. Dr Wulf von Schimmelmann (Chair)

Andrea Kocsis (Deputy Chair)

Rolf Bauermeister

Dr Nikolaus von Bomhard

Ingrid Deltenre

Jörg von Dosky

Werner Gatzer

Prof. Dr Henning Kagermann

Thomas Koczelnik

Anke Kufalt

Ulrike LennartzPipenbacher (since 1 July 2017)

Simone Menne

Roland Oetker

Andreas Schädler

Sabine Schielmann

Dr Ulrich Schröder

Dr Stefan Schulte

Stephan Teuscher 1

Helga Thiel (until 30 June 2017)

Stefanie Weckesser

Prof. DrIng. Katja Windt

2016

2017

Fixed
component

Attendance
allowance

315,000

245,000

140,000

43,750

70,000

140,000

105,000

175,000

70,000

–

105,000

140,000

70,000

105,000

140,000

105,000

70,000

20,000

19,000

15,000

3,000

2,000

5,000

16,000

7,000

21,000

5,000

–

11,000

15,000

5,000

4,000

6,000

12,000

11,000

10,000

5,000

Total

335,000

264,000

155,000

46,750

45,750

75,000

156,000

112,000

196,000

75,000

–

116,000

155,000

75,000

74,000

111,000

152,000

117,000

116,000

115,000

75,000

Fixed
component

Attendance
allowance

315,000

245,000

140,000

72,917

70,000

140,000

105,000

175,000

70,000

35,000

105,000

140,000

70,000

102,083

140,000

105,000

52,500

122,500

70,000

21,000

17,000

7,000

6,000

16,000

10,000

21,000

6,000

4,000

11,000

15,000

6,000

13,000

6,000

15,000

6,000

A.28

Total

336,000

266,000

157,000

79,917

76,000

156,000

115,000

196,000

76,000

39,000

116,000

155,000

76,000

102,083

153,000

118,000

58,500

137,500

76,000

1 Stephan Teuscher receives €1,500 per year for his service on the Supervisory Board of DHL Hub Leipzig GmbH.

Annual Corporate Governance
Statement and nonfinancial report

dpdhl.com/en/investors and in the

The Annual Corporate Governance Statement can be found
at
Corporate Governance Report,
page 96 ff. The separate, summarised non-financial report for
Deutsche Post AG and the Group with the disclosures in
accordance with sections 289 b ff. and 315 b f. of the HGB can
Corporate Responsibility Report, dpdhl.com/cr-re-
be found in the
port2017.

Group Management Report — GENERAL INFORMATION — Remuneration of the Board of Management and Supervisory Board — Annual Corporate Governance
Statement and nonfinancial report — REPORT ON ECONOMIC POSITION — Overall Board of Management assessment of the Group’s economic position —
Forecast / actual comparison

REPORT ON ECONOMIC
POSITION

Overall Board of Management assess
ment of the Group’s economic position

In financial year 2017, Deutsche Post DHL Group increased
revenue in all divisions and consolidated EBIT was in line
with our expectations at €3.74 billion. The Post - eCom-

merce - Parcel division continues to see dynamic growth in
the German parcel business. The DHL divisions are also
performing well. Express is registering steady growth, and
the turnaround measures implemented within Global For-
warding, Freight and Supply Chain are proving effective: all
divisions increased revenue despite negative currency ef-
fects. Capital expenditure increased year-on-year and, at
€1.43 billion, free cash flow significantly exceeded the prior-
year level. All in all, the Board of Management views the
Group’s financial position as being very sound.

Forecast / actual comparison

A.29

Targets 2017
EbIT

Results 2017
EbIT

• Group: around €3.75 billion.
• PeP division: around €1.5 billion.
• DHL divisions: around €2.6 billion.
• Corporate Center / Other: €–0.35 billion.

• Group: €3.74 billion.
• PeP division: €1.50 billion.
• DHL divisions: €2.59 billion.
• Corporate Center / Other: €–0.35 billion.

Targets 2018
EbIT

• Group: around €4.15 billion.
• PeP division: around €1.50 billion.
• DHL divisions: around €3.00 billion.
• Corporate Center / Other:
around €–0.35 billion.

EAc

• Will develop in line with EBIt and

• Developed in line with EBIt and

• Will decrease due to initial application

increase.

Cash flow

increased.

Cash flow

of IFRS 16.

Cash flow

• Free cash flow of more than €1.4 billion.

• Free cash flow increased to €1.43 billion.

• Free cash flow of more than €1.5 billion.

Capital expenditure (capex)

• Increase investments to around

• Invested: €2.3 billion.

• Invest (excluding leasing) around

€2.5 billion.

€2.3 billion.

Dividend distribution

• Pay out 40 % to 60 % of net profit

• Proposal: pay out 51.9 % of net profit

• Pay out 40 % to 60 % of net profit

as dividend.

Employee Opinion Survey

• Increase approval rating of key

performance indicator Active Leadership
by one percentage point.

• Approval rating of key performance

indicator Active Leadership increased
by one percentage point to 75 %.

• Increase approval rating of key

performance indicator Active Leadership
by one percentage point.

Greenhouse gas efficiency

• CEX will increase by one index point.

• CEX increased by two index points to 32.

• CEX will increase by another index point.

Deutsche Post DHL Group — 2017 Annual Report

Economic parameters

Global economy picks up

The global economy picked up speed in 2017, mainly on the
back of broad-based economic growth. In the industrial
countries, average GDP growth came in at 2.3 %. The growth
rate for the emerging markets rose to 4.7 %. A number of the
larger threshold economies succeeded in overcoming reces-
sions, some of them quite severe. On the whole, global eco-
nomic output grew by 3.7 % (previous year: 3.2 %) after ad-
justing for purchasing power. This development pushed up
global trade even more (IMF: 4.7 %; OECD: 4.8 %) to the
strongest figures seen in several years.

Global economy: growth indicators, 2017

China

Japan

USA

Euro zone

Germany

Gross domestic
product (GDP)

6.9

1.6

2.3

2.5

2.2

Export

7.9

6.8

3.4

4.8

4.7

A.30

Domestic
demand

n. a.

1.1

2.4

2.2

Some data estimated, as at 14 February 2018.
Source: Postbank, national statistics.

The Asian threshold economies again provided the strongest
economic momentum. At 6.5 %, GDP growth slightly ex-
ceeded the prior-year figure of 6.4 %. China provided for a
pleasant surprise with a slight acceleration in growth to
6.9 % (previous year: 6.7 %). The main boost to the Chinese
economy came from the sharp rise in export activity. In
Japan, the economy witnessed a notable revival. Private con-
sumption was up moderately, and gross fixed capital forma-
tion increased significantly. Strong momentum also came
from exports, which benefitted from rising demand and a
slightly weaker yen. All in all, GDP growth rose to 1.8 % (pre-
vious year: 0.9 %).

In the United States, the economy sped up noticeably
and corporate investment shot up substantially. Private con-
sumption expanded considerably once more and remained
the key driver of growth. Foreign trade put a slight damper
on growth, despite the fact that export activity registered
a notable increase. Total GDP growth was 2.3 %, rising from
1.5 % in the previous year, whilst the unemployment rate
dropped again significantly from its already low level.

In the euro zone, the economic upswing gathered
strength in the year under review, with domestic demand

providing for strong momentum once again. Pronounced
increases continued to be seen in private consumption and
gross fixed capital formation, whilst government spending
experienced weaker growth. Foreign trade contributed
positively to economic growth, unlike in the previous year
where it had a pronounced negative effect. The growth in
foreign trade was ultimately responsible for the acceleration
in GDP growth to 2.5 % (previous year: 1.8 %). From a re-
gional perspective, economic growth was more balanced
than in previous years. The average unemployment rate
dropped significantly to 9.1 % in line with the robust upturn.
Once again, domestic demand provided for sustained
momentum in the German economy. Private consumption
increased substantially thanks to a sharp increase in in-
comes, whilst government spending expanded only moder-
ately. Investments in machinery and equipment posted
stronger growth, however. Construction spending and ex-
ports also reported impressive growth rates, resulting in an
increase in GDP growth to 2.2 % (previous year: 1.9 %). The
unemployment rate fell to 5.7 % on an annual average (pre-
vious year: 6.1 %). At the same time, the average number of
employed persons rose to 44.3 million (previous year:
43.6 million).

Rise in crude oil prices over the course of 2017

At the end of 2017, the price for one barrel of Brent Crude
was US$66.73 (previous year: US$55.21). Over the course of
the year, the price of oil fluctuated between US$44 and
US$67 per barrel, with the average price for the year increas-
ing by around 24 % on the previous year to just over US$54
per barrel. Oil prices hit bottom in June, after which the
growing global economy led to steadily increasing demand
and prices.

Stronger euro thanks to healthy euro zone economy

The European Central Bank (ECB) initiated a cautious
change in its monetary policy during 2017. In the spring,
the bank reduced the monthly volume of its bond-buying
programme by €20 billion to €60 billion. As the year pro-
gressed, the ECB decided to reduce the monthly volume
even further to €30 billion effective from the start of 2018.
Euro zone monetary policy nonetheless remained quite ex-
pansive. The ECB left its key refinancing rate at 0.00 %, and
the deposit rate for the year as a whole was –0.40 %. In the
United States, the Federal Reserve continued its gradual exit
from crisis-related monetary policy. Against the backdrop
of solid economic growth and falling unemployment rates,

Group Management Report — REPORT ON ECONOMIC POSITION — Economic parameters

the Fed raised its key interest rate in three steps of 0.25 per-
centage points each to 1.25 % to 1.50 % at year-end.

The euro made noticeable gains on the dollar in 2017,
benefitting above all from the growing euro zone economy.
At the end of the year, the euro listed at just over US$1.20,
a rise of 14.0 % year-on-year. The pound sterling was under
downwards pressure throughout much of 2017 due to the
UK’s expected exit from the EU and the ensuing negotiations,
which have proved lengthy and complicated. However, the
Bank of England then propped up the pound by raising
its key interest rate. Overall, the euro gained 4.0 % on the
pound sterling in 2017.

Significant decline in risk premiums for corporate bonds

The euro zone bond markets continued to be impacted dur-
ing 2017 by the ECB’s expansionary monetary policy, and
capital market interest rates remained at a very low level.
Towards the end of the year, favourable economic prospects
and rising expectations that the ECB would soon tighten its
monetary policy led to a slight increase in capital market
interest rates. At year-end 2017, yields on ten-year German
government bonds had risen to 0.43 % (previous year:
0.21 %). By contrast, yields on ten-year US government

bonds fell by 0.03 percentage points year-on-year to 2.41 %.
Risk premiums for corporate bonds with good ratings were
not only well below the prior-year level at the end of 2017
but also low compared with long-term levels.

Stock market prices made pronounced gains during the
course of 2017, supported by the acceleration in global GDP
growth on the back of extremely low interest rates. Many
companies were able to increase revenue and profits, which
laid the foundation for rising share prices. Not even the
political uncertainty resulting from the euro zone elections
and the Brexit negotiations was able to halt the upwards
trend more than momentarily. The DAX ended the year at
12,918 points, a year-on-year gain of 12.5 %. The EURO STOXX
50 was up just 6.5 % year-on-year, whilst in the US the
broad-market S & P 500 gained an impressive 19.4 %.

International trade makes significant gains

The global trade movements of relevance to us – air and
ocean freight sent in containers, excluding liquids and bulk
goods – grew by a total of 5.1 % in the year under review
(previous year: 1.7 %). Air freight volumes performed espe-
cially well. Ocean freight and air freight imports to Asia
evidenced the highest growth rates.

Trade volumes: compound annual growth rate, 2016 to 2017

Import

Export

Asia Pacific

Europe

Latin America

MEA (Middle East and Africa)

North America

A.31

MEA

Asia Pacific

Europe

Latin America

(Middle East and Africa)

North America

6.3

6.0

6.4

8.3

8.8

4.7

0.5

0.9

4.2

6.8

7.8

3.4

8.7

–1.1

–1.5

2.6

2.5

5.7

8.9

5.6

4.4

3.3

8.2

5.4

Source: Seabury Cargo Advisory, as at 28 November 2017; based upon all relevant ocean and air freight trading volumes in tonnes, excluding liquids and bulk goods.
Excluding shipments within the European Union free trade zone.

Legal environment

In view of our leading market position, a large number of
our services are subject to sector-specific regulation under
the Postgesetz (PostG – German Postal Act). Further infor-
mation regarding this issue and legal risks is contained in

note 46 to the consolidated financial statements.

Significant events

By way of a resolution of the Board of Management dated
21 March 2017, a capital reduction was implemented through
notes 3 and 32 to
retirement of 27.3 million treasury shares,
the consolidated financial statements.

In November 2017, Deutsche Post DHL Group and Ad-
vent International completed the sale of Williams Lea Tag

Deutsche Post DHL Group — 2017 Annual Report

Group after approval was issued by the competition author-
ities,

note 2 to the consolidated financial statements.

In December 2017, we placed two bonds in an aggregate
principal amount of €1.5 billion: a convertible bond in the
amount of €1.0 billion and a term of 7.5 years and a trad-
itional bond in the amount of €500 million and a term of
ten years,

note 40 to the consolidated financial statements.

Results of operations

Selected indicators for results of operations

Revenue

Profit from operating activities (EBIt)

Return on sales 1

EBIt after asset charge (EAC)

Consolidated net profit for the period 2

Earnings per share 3

Dividend per share

1 EBIt / revenue.
2 After deduction of noncontrolling interests.
3 Basic earnings per share.
4 Proposal.

2016

57,334

3,491

6.1

1,963

2,639

2.19

1.05

2017

60,444

3,741

6.2

2,175

2,713

2.24

1.15 4

€ m

€

A.32

Q 4 2016

Q 4 2017

15,410

1,111

7.2

733

841

0.70

–

16,109

1,181

7.3

796

837

0.69

–

Changes in the portfolio

In early July 2017, we acquired Brazil-based company
Olimpo Holding S. A. including its subsidiaries Polar Trans-
portes Ltda. and Rio Lopes Transportes Ltda. They provide
temperature-controlled transport in the Life Sciences &
Healthcare sector for the Supply Chain division.

previous year included a gain of €63 million on the disposal
of the remaining shares in King’s Cross. In the current re-
porting period, this item includes higher income from work
performed and capitalised relating to the production of
StreetScooter electric vehicles.

In the fourth quarter, we sold Williams Lea Tag Group

Materials expense markedly higher

and deconsolidated all associated assets and liabilities.

Consolidated revenue rises to €60.4 billion

Consolidated revenue in financial year 2017 increased by
€3,110 million to €60,444 million, with all divisions con-
tributing to the improvement. Currency effects reduced
the increase by €1,270 million. The proportion of revenue
generated abroad increased from 68.8 % to 69.6 %. At
€16,109 million, revenue for the fourth quarter of 2017 ex-
ceeded the comparable prior-year figure by 4.5 %. Currency
effects decreased revenue by €639 million.

Other operating income fell by €17 million to
€2,139 million in the year under review. The figure for the

Materials expense rose by €2,155 million to €32,775 million
in 2017. Higher crude oil prices and other factors lifted
transport and fuel costs, whilst currency effects served to
reduce them. The increase in headcount at the Post - eCom-
merce - Parcel and Express divisions was the main factor
behind the rise in staff costs, although currency effects par-
tially offset this. Depreciation, amortisation and impair-
ment losses rose by €94 million to €1,471 million partly
because customer relationship assets from past acquisi-
tions in the Supply Chain division were written down. At
€4,526 million, other operating expenses were up year-on-
year (2016: €4,414 million), due, amongst other things, to
higher expenses for advertising and public relations.

Group Management Report — REPORT ON ECONOMIC POSITION — Significant events — Results of operations

Changes in revenue, other operating income and operating expenses, 2017

Revenue

€ m

60,444

+ / – %

5.4 • Growth recorded in all four divisions

• Currency effects reduce amount by €1,270 million

Other operating income

2,139

– 0.8 • Contains income from work performed and capitalised

• Prioryear figure included higher income from the sale of equity interests

Materials expense

32,775

7.0 • Higher transport and fuel costs

Staff costs

Depreciation, amortisation and impairment
losses

20,072

1,471

• Currency effects reduce figure by €692 million

2.4 • Rise in headcount

6.8 • Include writedown of customer relationships in the Supply Chain division

Other operating expenses

4,526

2.5 • Higher expenses for advertising and public relations

A.33

Consolidated EbIT up 7.2 %

Total dividend and dividend per no-par value share

Profit from operating activities (EBIT) improved by 7.2 % in
the year under review, rising from €3,491 million to
€3,741 million. In the fourth quarter of 2017, it increased by
6.3 % to €1,181 million. At €411 million, net finance costs for
the year as a whole were down on the prior year (€359 mil-
lion). Profit before income taxes rose by €198 million to
€3,330 million. Income taxes increased by €126 million to
€477 million.

Consolidated net profit above prior-year level

At €2,853 million, consolidated net profit in financial year
2017 exceeded the prior-year figure of €2,781 million by
2.6 %. Of this amount, €2,713 million was attributable to
Deutsche Post AG shareholders and €140 million to non-
controlling interest holders. Basic earnings per share im-
proved from €2.19 to €2.24 and diluted earnings per share
from €2.10 to €2.15.

Dividend of €1.15 per share proposed

Our finance strategy calls for a payout of 40 % to 60 % of net
profits as dividends as a general rule. The Board of Manage-
ment and the Supervisory Board will therefore propose a
dividend of €1.15 per share for financial year 2017 to share-
holders at the Annual General Meeting on 24 April 2018
(previous year: €1.05). Expressed in terms of net profit,
which is defined as the consolidated net profit for the period
after the deduction of non-controlling interests, the distri-
bution ratio is 51.9 %. The net dividend yield based on the
year-end closing price for our shares is 2.9 %. The dividend
will be distributed on 27 April 2018 and is tax-free for share-
holders resident in Germany. It does not entitle recipients
to a tax refund or a tax credit.

€ m

846

0.70

968

0.80

1,030

1,027

0.85

A.34

1,409

1.15

1,270

1.05

17 1

Dividend per nopar value share (€)

1 Proposal.

Increase in EbIT after asset charge (EAc)

EBIT after asset charge (EAC) climbed from €1,963 million
to €2,175 million in 2017, mainly as a result of the com-
pany’s increased profitability. The imputed asset charge also
rose, due in particular to higher investments in property,
plant and equipment in the Post - eCommerce - Parcel and
Express divisions and to lower provisions.

EbIT after asset charge (EAc)

€ m

EBIt

Asset charge

EAc

2016

3,491

–1,528

1,963

2017

3,741

–1,566

2,175

A.35

+ / – %

7.2

2.5

10.8

Deutsche Post DHL Group — 2017 Annual Report

The net asset base decreased by €30 million to €17,441 mil-
lion as at the reporting date, largely as a result of negative
currency effects. Investments in IT systems, the purchase of
freight aircraft, and replacement and expansion investments
in warehouses, sorting systems and the vehicle fleet in-
creased year-on-year; by contrast, intangible assets declined,
due in particular to the sale of Williams Lea Tag Group and
negative currency effects. Net working capital remained
more or less stable.

Operating provisions declined year-on-year, whereas

other non-current assets and liabilities rose.

Net asset base (consolidated) 1

€ m

Intangible assets and property,
plant and equipment

Net working capital

Operating provisions
(excluding provisions for
pensions and similar
obligations)

Other noncurrent assets
and liabilities

Net asset base

31 Dec. 2016

31 Dec. 2017

adjusted

20,943

–1,108

20,594

–1,095

–2,313

–2,089

– 51

17,471

17,441

A.36

+ / – %

–1.7

–1.2

– 9.6

> 100

– 0.2

1 Assets and liabilities as described in the segment reporting,

note 10 to the consolidated

financial statements. In contrast to previous years, the net asset base is presented on a
consolidated basis in order to facilitate comparison with segment reporting. The priorperiod
amounts have been adjusted.

Financial position

Selected cash flow indicators

€ m

Cash and cash equivalents as at 31 December

Change in cash and cash equivalents

Net cash from operating activities

Net cash used in investing activities

Net cash used in / from financing activities

A.37

2016

3,107

– 437

2,439

–1,643

–1,233

2017

3,135

119

3,297

–2,091

–1,087

Q 4 2016

Q 4 2017

3,107

872

1,925

– 586

– 467

3,135

1,596

1,527

–1,042

1,111

Financial management is a centralised function in the Group

The Group’s financial management activities include man-
aging liquidity along with hedging against fluctuations in
interest rates, currencies and commodity prices, arranging
Group financing, issuing guarantees and letters of comfort
and liaising with rating agencies. Responsibility for these
activities rests with Corporate Finance at Group head-
quarters in Bonn, which is supported by three Regional
Treasury Centres in Bonn (Germany), Weston, Florida
(USA) and Singapore. The regional centres act as interfaces
between Group headquarters and the operating companies,
advise the companies on financial management issues and
ensure compliance with Group-wide requirements.

Corporate Finance’s main task is to minimise financial
risk and the cost of capital in addition to preserving the
Group’s financial stability and flexibility over the long term.

In order to maintain its unrestricted access to the capital
markets, the Group continues to aim for a credit rating ap-
propriate to the sector. We therefore monitor the ratio of
our operating cash flow to our adjusted debt particularly
closely. Adjusted debt refers to the Group’s net debt, allow-
ing for unfunded pension obligations and liabilities under
operating leases.

Maintaining financial flexibility and low cost of capital

The Group’s finance strategy builds upon the principles and
aims of financial management. In addition to the interests
of shareholders, the strategy also takes creditor require-
ments into account. The goal is for the Group to maintain
its financial flexibility and low cost of capital by ensuring a
high degree of continuity and predictability for investors.

Group Management Report — REPORT ON ECONOMIC POSITION — Results of operations — Financial position

A key component of this strategy is having a target rat-
ing of “BBB+”, which is managed via a dynamic perform-
ance metric known as funds from operations to debt (FFO
to debt). Our strategy additionally includes a sustained divi-

dend policy and clear priorities regarding the use of excess
liquidity, which is to be used to gradually increase plan
assets of our pension plans, to distribute special dividends
and to buy back shares.

Finance strategy

Credit rating

A.38

Investors

• Maintain “BBB+” and “Baa1” ratings, respectively.
• FFO to debt used as dynamic performance metric.

• Reliable and consistent information from the company.
• Predictability of expected returns.

Dividend policy

• Pay out 40 % to 60 % of net profit.
• Consider cash flows and continuity.

Excess liquidity

• Increase plan assets of pension plans.
• Pay out special dividends or execute share buyback programme.

Debt portfolio

• Syndicated credit facility taken out as liquidity reserve.
• Debt Issuance Programme established for issuing bonds.
• Bonds issued to cover longterm capital requirements.

Group

• Preserve financial and strategic flexibility.
• Assure low cost of capital.

FFO to debt

€ m

Operating cash flow before changes
in working capital

Interest received

Interest paid

Adjustment for operating leases

Adjustment for pensions

Funds from operations (FFO)

Reported financial liabilities

Financial liabilities at fair value through profit
or loss

Adjustment for operating leases

Adjustment for pensions

Surplus cash and nearcash investments 1

A.39

2016

2017

2,514

138

1,569

1,003

4,998

6,035

121

7,166

5,467

2,239

3,418

160

1,641

567

5,518

6,050

9,406

4,323

2,503

Debt

FFO to debt (%)

16,308

17,232

30.6

32.0

1 Reported cash and cash equivalents and investment funds callable at sight,

less cash needed for operations.

Funds from operations (FFO) represents operating cash flow
before changes in working capital plus interest received less
interest paid and adjusted for operating leases and pensions,
as shown in the calculation above. In addition to financial
liabilities and surplus cash and near-cash investments, the
figure for debt also includes operating lease liabilities as well
as unfunded pension liabilities.

Despite the higher debt, the FFO to debt performance
metric increased in the year under review compared with
the previous year due to the sharp rise in funds from oper-
ations.

Funds from operations increased by €520 million to
€5,518 million, due mainly to the significant rise in operat-
ing cash flow before changes in working capital. The adjust-
ment for pensions declined year-on-year as a result of lower
funding of pension obligations in the year under review.
The amount of interest paid went up in the reporting period
due to the initial payment of interest on the bonds issued
in April 2016.

Deutsche Post DHL Group — 2017 Annual Report

Debt rose by €924 million compared with the previous
year to €17,232 million, primarily as a result of the increase
in the adjustment for operating leases driven by the increase
in lease obligations. The adjustment for pensions declined
year-on-year as a result of further funding of pension obli-
gations in the year under review. More information on pen-
note 38 to the consolidated financial state-
sions can be found in
ments. Financial liabilities include the December bond issue
in the amount of €1.5 billion as well as a bond repayment in
the amount of €0.75 billion. This item also includes the con-
version of shares in the convertible bond in the amount of
note 40 to the consolidated financial statements, as well
€0.3 billion,
as the disposal of the obligations from the share buy-back
programme in the amount of €0.2 billion.

Cash and liquidity managed centrally

The cash and liquidity of our globally operating subsidiaries
is managed centrally by Corporate Treasury. 80 % of the
Group’s external revenue is consolidated in cash pools and
used to balance internal liquidity needs. In countries where
this practice is ruled out for legal reasons, internal and ex-
ternal borrowing and investment are managed centrally by
Corporate Treasury. In this context, we observe a balanced
banking policy in order to remain independent of indi-
vidual banks. Our subsidiaries’ intra-group revenue is also
pooled and managed by our in-house bank (inter-company
clearing) in order to avoid paying external bank charges and
margins. Payment transactions are executed in accordance
with uniform guidelines using standardised processes and
IT systems. Many Group companies pool their external
payment transactions in the intra-group Payment Factory,
which executes payments on behalf of the respective com-
panies via Deutsche Post AG’s central bank accounts.

Limiting market risk

The Group uses both primary and derivative financial in-
struments to limit market risk. Interest rate risk is managed
exclusively via swaps. Currency risk is additionally hedged
using forward transactions, cross-currency swaps and op-
tions. We pass on most of the risk arising from commodity

fluctuations to our customers and, to some extent, use com-
modity swaps to manage the remaining risk. The param eters,
responsibilities and controls governing the use of deriv a-
tives are laid down in internal guidelines.

Flexible and stable financing

The Group covers its long-term financing requirements by
means of equity and debt. This ensures our financial stabil-
ity and also provides adequate flexibility. Our most import-
ant source of funds is net cash from operating activities.

We also have a syndicated credit facility in a total vol-
ume of €2 billion that guarantees us favourable market con-
ditions and acts as a secure, long-term liquidity reserve. The
facility matures in 2020, and does not contain any cov-
enants concerning the Group’s financial indicators. In view
of our solid liquidity, the syndicated credit facility was not
drawn down during the year under review.

As part of our banking policy, we spread our business
volume widely and maintain long-term relationships with
the financial institutions we entrust with our business. In
addition to credit lines, we meet our borrowing require-
ments through other independent sources of financing,
such as bonds and operating leases. Most debt is taken out
centrally in order to leverage economies of scale and spe-
cialisation benefits and hence minimise borrowing costs.

In December 2017, we issued a bond in a volume of
€0.5 billion as part of the Debt Issuance Programme estab-
lished in 2012 with a volume of up to €8 billion. We also
issued a convertible bond in the amount of €1.0 billion in
December 2017. The cash funds received that same month
were utilised to refinance existing financial liabilities and for
the further funding of pension obligations in the United
Kingdom in the amount of €0.5 billion.

One bond was redeemed in the year under review in
the amount of €0.75 billion. A total of €0.3 billion of the
convertible bond issued in 2012 in the amount of €1 billion
was converted in 2017. Further information on current
note 40 to the consolidated financial
bond issues is contained in
statements.

Group Management Report — REPORT ON ECONOMIC POSITION — Financial position

Group issues sureties, letters of comfort and guarantees

No change in the Group’s credit rating

Deutsche Post AG provides security for the loan agreements,
leases and supplier contracts entered into by Group com-
panies, associates or joint ventures by issuing sureties, let-
ters of comfort or guarantees as needed. This practice allows
better conditions to be negotiated locally. The sureties are
provided and monitored centrally.

Agency ratings

Fitch Ratings

Longterm: BBB+
Shortterm: F2
Outlook: stable

Rating factors

The ratings of “A3” issued by Moody’s Investors Service
(Moody’s) and “BBB+” issued by Fitch Ratings (Fitch) re-
main in effect with regard to our credit quality. The stable
outlook from both rating agencies is also still applicable. We
remain well positioned in the transport and logistics sector
with these ratings. The following table shows the ratings as
at the reporting date and the underlying factors. The com-
plete and current analyses by the rating agencies and the
rating categories can be found at

dpdhl.com/en/investors.

A.40

Moody’s Investors Service

Longterm: A3
Shortterm: P–2
Outlook: stable

Rating factors

• Balanced business risk profile.
• Stable contribution of core mail products.
• Growth in internetled parcel volumes.
• Strong position in global timedefinite express services with continued

growth and margin improvement.

• Fairly stable credit metrics and adequate liquidity.

Rating factors

• Scale and global presence as the world’s largest logistics company.
• Large and robust mail business in Germany.
• Expectations of progressive improvement in profitability through

its network investments and restructuring programmes.

• Adequate financial metrics, conservative financial policy and excellent

liquidity profile.

Rating factors

• Structural mail volume decline in the Post eCommerce Parcel

division due to secular changes in the industry.

• Exposure to global market volatility and competitiveness through

the DHL divisions.

• Challenging and competitive market conditions.
• Exposure to global macroeconomic trends in the logistics businesses.
• Structural decline of traditional postal services.
• Ongoing turnaround initiatives for Global Forwarding, Freight.

Liquidity and sources of funds

Financial liabilities

€ m

Bonds

Amounts due to banks

Finance lease liabilities

Financial liabilities at fair value through profit
or loss

Other financial liabilities

As at the reporting date, the Group had cash and cash
equiva lents of €3.1 billion (previous year: €3.1 billion) at its
disposal. A large portion of that amount is held directly by
Deutsche Post AG. The cash is either invested centrally on
the money market or deposited in existing bank accounts.
These central, short-term financial investments had a vol-
ume of €1.7 billion as at the reporting date (previous year:
€1.7 billion).

In addition, €0.5 billion was invested in a money market
fund (previous year: €0.2 billion). The following table gives
a breakdown of the financial liabilities reported in our bal-
ance sheet. Further information on recognised financial
note 40 to the consolidated financial
liabilities is contained in
statements.

A.41

2017

5,350

156

181

319

2016

4,990

158

209

121

557

6,035

6,050

Deutsche Post DHL Group — 2017 Annual Report

Operating leases remain an important source of funding for
the Group. We mainly use operating leases to finance real
estate, although we also finance aircraft, vehicle fleets and
IT equipment.

Operating lease obligations by asset class 1

€ m

Land and buildings

Aircraft

Transport equipment

Technical equipment and machinery

Other equipment, operating and office
equipment, miscellaneous

1 Undiscounted.

A.42

2017

9,403

1,138

611

129

11,298

2016

6,657

909

495

8,188

Operating lease obligations increased quite significantly
year-on-year to €11.3 billion. The increase was due in part
to new, long-term leases – most of which were entered into
for real estate, although some related to aircraft. In addition,
existing real estate contracts with renewal and termination
options were reassessed.

Capital expenditure above prior-year level

Investments in property, plant and equipment and intan gible
assets (not including goodwill) amounted to €2,277 million
in the year under review, or 9.8 % above the prior year’s fig-
ure of €2,074 million. Please refer to
notes 10, 21 and 22 to the
consolidated financial statements for a breakdown of capital ex-
penditure (capex) into regions and asset classes.

Capex and depreciation, amortisation and impairment losses, full year

PeP

2017

2016
adjusted 2

Global Forwarding,
Freight

Express

Supply Chain

Corporate Center /
Other

2017

2016

2017

2016

2017

2016

2017

Capex (€ m)

592

666

900

1,049

337

356

465

525

328

277

199

214

294

319

201

200

Depreciation, amortisation
and impairment losses (€ m)

Ratio of capex to depreciation,
amortisation and impairment
losses

1.76

1.87

1.94

2.00

0.70

1.00

1.12

0.87

0.99

1.07

1 Including rounding.
2 Reassignment of companies in Spain and Portugal from the Express division to the Post eCommerce Parcel division.

Capex and depreciation, amortisation and impairment losses, Q 4

PeP

2017

2016
adjusted 2

Global Forwarding,
Freight

Express

Supply Chain

Corporate Center /
Other

2017

2016

2017

2016

2017

2016

2017

Capex (€ m)

265

320

279

605

147

132

122

–1

A.43

Consolidation 1

Group

2016
adjusted 2

2017

2016

2017

–

2,074

2,277

1,377

1,471

1.51

1.55

A.44

Consolidation 1

Group

2016
adjusted 2

2017

2016

2017

–

709

1,149

388

390

1.83

2.95

–

Depreciation, amortisation
and impairment losses (€ m)

Ratio of capex to depreciation,
amortisation and impairment
losses

2.76

3.60

1.90

4.58

0.95

0.97

0.84

1.50

2.39

1 Including rounding.
2 Reassignment of companies in Spain and Portugal from the Express division to the Post eCommerce Parcel division.

In the Post - eCommerce - Parcel division, the largest capex
portion was attributable to the expansion of our domestic
and international parcel network and production of our
StreetScooter electric vehicles.

In the Express division, investments were made in ex-
panding our hubs, especially in Brussels, East Midlands,
Leipzig, Cincinnati and Mexico City. Continuous main-
tenance and renewal of our aircraft fleet as well as the pur-

Group Management Report — REPORT ON ECONOMIC POSITION — Financial position

chase of freighter aircraft from Air Hong Kong represented
an additional focus of investment spending.

In the Global Forwarding, Freight division, we con-
tinued to invest in refurbishing our warehouses and office
buildings across all regions as well as in the IT application
infrastructure.

In the Supply Chain division, the majority of funds was
used to support new business, mostly in the EMEA and
Americas regions.

Cross-divisional capex also increased due to invest-
ments made to expand our fleet of vehicles and replace fur-
ther vehicles.

Higher operating cash flow

Net cash from operating activities in the year under review
amounted to €3,297 million, an increase of €858 million. In
the previous year, €1 billion was used to fund pension obli-
gations in Germany, significantly impacting the change in
provisions. In 2017, €495 million was used to fund pension
obligations in the United Kingdom. EBIT and non-cash
components such as depreciation, amortisation and impair-
ment losses increased. Our income tax payments amounted
to €626 million, up €98 million year-on-year.

Net cash used in investing activities increased from
€1,643 million to €2,091 million. The sale of Williams Lea
Tag Group led to a rise in proceeds from the disposal of
subsidiaries and other business units to €316 million. In the
previous year, the repayment from the state aid proceedings
increased proceeds from the disposal of other non-current
financial assets by €378 million, whereas cash payments to
acquire subsidiaries and other business units of €278 mil-
lion were made in connection with the purchase of UK Mail.
Cash paid to acquire property, plant and equipment and
intangible assets rose from €1,966 million to €2,203 million
in the year under review.

At €1,087 million, net cash used in financing activities
was below the figure for the previous year (€1,233 million).
A bond placement had resulted in a cash inflow of €1.239 bil-
lion in the previous year. In the year under review, we raised
issuing proceeds of €1.493 billion from the placement of a
traditional bond and a convertible bond. At the same time,
we repaid a bond in the amount of €750 million that fell
due. Payments to acquire treasury shares fell from €836 mil-
lion to €148 million with the ex piration of our share buy-
back programme. Once again, the dividend distributed to
our shareholders was the largest payment item; this rose by
€243 million to €1,270 million.

Cash and cash equivalents rose from €3,107 million
as at 31 December 2016 to €3,135 million as at 31 Decem-
ber 2017.

Calculation of free cash flow

€ m

Net cash from operating activities

Sale of property, plant and equipment and intangible assets

Acquisition of property, plant and equipment and intangible assets

Cash outflow arising from change in property, plant and equipment and intangible assets

Disposals of subsidiaries and other business units

Disposals of investments accounted for using the equity method and other investments

Acquisition of subsidiaries and other business units

Acquisition of investments accounted for using the equity method and other investments

Cash outflow/inflow arising from acquisitions/divestitures

Interest received

Interest paid

Net interest paid

Free cash flow

2016

2,439

265

–1,966

–1,701

–304

–19

–206

–138

– 88

444

2017

3,297

236

–2,203

–1,967

316

– 54

– 55

210

–160

–108

1,432

A.45

Q 4 2016

1,925

Q 4 2017

1,527

141

– 545

– 404

–270

–260

– 67

– 60

1,201

135

– 914

–779

316

–32

284

– 69

– 57

975

Deutsche Post DHL Group — 2017 Annual Report

Free cash flow improved significantly from €444 million to
€1,432 million, due primarily to the increase in net cash
from operating activities to €3,297 million (previous year:
€2,439 million). In addition, the purchase of UK Mail Group
led to a cash outflow in the previous year, whereas in the
reporting period the cash inflow from the sale of Williams
Lea Tag Group increased free cash flow.

Net assets

Selected indicators for net assets

A.46

Equity ratio

Net debt

Net interest cover

Net gearing

FFO to debt 1

31 Dec. 2016

31 Dec. 2017

€ m

29.6

2,261

39.7

16.6

30.6

33.4

1,938

34.6

13.1

31.9

1 For the calculation

Financial position, page 57.

Increase in consolidated total assets

The Group’s total assets amounted to €38,672 million as at
31 December 2017, €377 million higher than at 31 Decem-
ber 2016 (€38,295 million).

Intangible assets fell by €762 million to €11,792 million,
primarily as a result of exchange rate movements. The prop-
erty, plant and equipment item increased by €393 million to
€8,782 million since additions exceeded depreciation and
impairment losses, disposals and negative currency effects.
Current financial assets rose from €374 million to €652 mil-
lion. We invested €500 million of excess liquidity for the
short term on the capital market, up €300 million on the
figure as at 31 December 2016. Trade receivables rose by
€253 million to €8,218 million.

On the equity and liabilities side of the balance sheet,
equity attributable to Deutsche Post AG shareholders rose
by €1,550 million to €12,637 million: the consolidated net
profit for the period, the capital increase in connection with

the convertible bond and the remeasurement of net pension
provisions served to increase this figure, whilst the dividend
payment and negative currency effects decreased it. Provi-
sions for pensions and similar obligations fell tangibly from
€5,580 million to €4,450 million. Amongst other factors,
the funding of pension obligations in the United Kingdom
reduced this item by €495 million. At €6,050 million, finan-
cial liabilities were at the previous year’s level (€6,035 mil-
lion). We repaid a bond and terminated the share buyback
programme, whilst also issuing a new bond and placing a
convertible bond on the capital market. Current provisions
fell by €192 million to €1,131 million due, amongst other
things, to a decline in restructuring provisions. Trade pay-
ables increased by €165 million to €7,343 million.

Net debt declines to €1,938 million

Our net debt fell from €2,261 million as at 31 Decem-
ber 2016 to €1,938 million as at the reporting date, mainly
because portions of the 2012 convertible bond were exer-
cised. At 33.4 %, the equity ratio was higher than at 31 De-
cember 2016 (29.6 %). The net interest cover ratio – the
extent to which net interest obligations are covered by EBIT –
fell from 39.7 to 34.6 year-on-year. The net gearing ratio as
at 31 December was 13.1 %.

Net debt

€ m

Noncurrent financial liabilities

Current financial liabilities

Financial liabilities 1

Cash and cash equivalents

Current financial assets

Positive fair value of noncurrent financial
derivatives 2

Financial assets

Net debt

A.47

31 Dec. 2016

31 Dec. 2017

4,516

1,381

5,897

3,107

374

155

3,636

2,261

5,101

794

5,895

3,135

652

170

3,957

1,938

1 Less operating financial liabilities,
2 Recognised in noncurrent financial assets in the balance sheet.

note 32.4 to the consolidated financial statements.

Group Management Report — REPORT ON ECONOMIC POSITION — Financial position — Net assets — Business performance in the divisions

Business performance in the divisions

POST ECOMMERCE PARCEL DIVISION

Key figures of the Post - eCommerce - Parcel division

€ m

Revenue

of which Post

eCommerce Parcel

Profit from operating activities (EBIt)

of which Germany

International Parcel and eCommerce

Return on sales (%) 2

Operating cash flow

2016
adjusted 1

17,078

9,741

7,337

1,446

1,447

–1

8.5

360

2017

+/– %

Q 4 2016
adjusted 1

Q 4 2017

18,168

9,736

8,432

1,502

1,492

8.3

1,505

6.4

– 0.1

14.9

3.9

3.1

> 100

–

> 100

4,710

2,581

2,129

490

496

– 6

10.4

602

5,052

2,634

2,418

510

503

10.1

858

A.48

+/– %

7.3

2.1

13.6

4.1

1.4

> 100

–

42.5

1 Reassignment of companies in Spain and Portugal from the Express division,
2 EBIt / revenue.

note 10 to the consolidated financial statements.

Revenue increases by 6.4 %

In the year under review, revenue in the division was
€18,168 million, 6.4 % above the prior-year figure of
€17,078 million, although there were 2.9 fewer working days
in Germany. Most of the growth originated in the eCom-
merce - Parcel business unit. Negative currency effects of
€72 million were recorded in 2017; excluding these effects,
the increase in revenue was 6.8 %. In the fourth quarter of
the year, despite 1.9 fewer working days, revenue in the div-
ision increased year-on-year by 7.3 %.

Revenue in the Post business unit at prior-year level

In the Post business unit, revenue was €9,736 million in
the year under review and thus at the prior-year level

(€9,741 million). Volumes declined by 0.9 %. In the fourth
quarter of 2017, revenue was up by 2.1 % to €2,634 million
(previous year: €2,581 million).

Additional mail volumes due to special factors such as
elections were unable to offset the overall decline in Mail
Communication volumes. By contrast, revenue and vol-
umes increased in the Dialogue Marketing business, due in
part to communication ahead of elections.

In the cross-border mail business, although the trend
towards merchandise shipments by mail continued, it could
not offset volume declines in promotional mailing and
document dispatch.

Post: revenue

€ m

Mail Communication

Dialogue Marketing

Other

Total

1 Changed product allocations.

2016
adjusted 1

6,527

2,225

989

9,741

2017

+/– %

6,439

2,320

977

9,736

–1.3

4.3

–1.2

– 0.1

Q 4 2016
adjusted 1

1,739

605

237

2,581

Q 4 2017

1,726

653

255

2,634

A.49

+/– %

– 0.7

7.9

7.6

2.1

Post: volumes

Mail items (millions)

Total

of which Mail Communication

of which Dialogue Marketing

1 Changed product allocations.

Deutsche Post DHL Group — 2017 Annual Report

2016
adjusted 1

18,628

8,242

8,520

2017

+/– %

18,457

7,860

8,820

– 0.9

– 4.6

3.5

Q 4 2016
adjusted 1

4,987

2,189

2,319

Q 4 2017

4,883

2,058

2,379

A.50

+/– %

–2.1

– 6.0

2.6

eCommerce - Parcel business unit continues to grow

Revenue in the eCommerce - Parcel business unit was
€8,432 million in the year under review, exceeding the
prior- year figure of €7,337 million by 14.9 %. The fourth
quarter of 2017 also saw double-digit revenue growth.

Europe business, revenue grew by 65.4 % to €1,882 million
(previous year: €1,138 million), driven in part by the start of
business activities in the United Kingdom through the ac-
quisition of UK Mail, which generated revenue of €536 mil-
lion in 2017.

The Parcel business in Germany continues to grow due
to the strong e-commerce trend. Revenue in the Parcel Ger-
many business increased by 4.3 % to €5,022 million in 2017
(previous year: €4,814 million). Volumes rose by 7.8 % to
1,323 million parcels.

Revenue in the DHL eCommerce business was up by
10.3 % to €1,528 million in the year under review (previous
year: €1,385 million), due to strong performance in the US
domestic business as well as cross-border business in Asia.
Excluding currency effects, growth was 13.1 %.

Our domestic and cross-border parcel business in
Europe is continuing to perform dynamically. In the Parcel

eCommerce - Parcel: revenue

€ m

Parcel Germany

Parcel Europe 2

DHL eCommerce 3

Total

2016
adjusted 1

4,814

1,138

1,385

7,337

2017

+/– %

5,022

1,882

1,528

8,432

4.3

65.4

10.3

14.9

Q 4 2016
adjusted 1

1,421

311

397

2,129

Q 4 2017

1,484

519

415

2,418

1 Reassignment of companies in Spain and Portugal from the Express division,
2 Excluding Germany.
3 Outside Europe.

note 10 to the consolidated financial statements.

Parcel Germany: volumes

Parcels (millions)

Total

2016

1,227

2017

1,323

+ / – %

7.8

Q 4 2016

Q 4 2017

368

394

A.51

+/– %

4.4

66.9

4.5

13.6

A.52

+ / – %

7.1

EbIT improves

EBIT in the division improved by 3.9 % to €1,502 million in
the year under review (previous year: €1,446 million). The
increase was driven mainly by higher revenues, whilst
increased material and labour costs as well as continued
investments in the parcel network prevented a more signifi-
cant improvement in earnings. The majority of our EBIT

is still generated in Germany. Return on sales declined
slightly from 8.5 % to 8.3 % in 2017. The division’s EBIT in
the fourth quarter of the year was €510 million (previous
year: €490 million). Operating cash flow improved from
€360 million to €1,505 million. This mainly reflects a pay-
ment of €955 million made in April 2016 to further fund
pension obligations.

Group Management Report — REPORT ON ECONOMIC POSITION — Business performance in the divisions

EXPRESS DIVISION

Key figures of the EXPRESS division

€ m

Revenue

of which Europe

Americas

Asia Pacific

MEA (Middle East and Africa)

Consolidation / Other

Profit from operating activities (EBIt)

Return on sales (%) 2

Operating cash flow

2016
adjusted 1

13,748

6,035

2,741

5,194

1,054

15,049

6,696

3,010

5,556

1,110

–1,276

–1,323

1,544

11.2

1,928

1,736

11.5

2,212

2017

+/– %

Q 4 2016
adjusted 1

Q 4 2017

9.5

11.0

9.8

7.0

5.3

–3.7

12.4

–

14.7

3,759

1,645

757

1,407

274

–324

434

11.5

728

4,059

1,841

813

1,454

283

–332

499

12.3

723

A.53

+/– %

8.0

11.9

7.4

3.3

–2.5

15.0

–

– 0.7

1 Reassignment of companies in Spain and Portugal to the Post eCommerce Parcel division,
2 EBIt / revenue.

note 10 to the consolidated financial statements.

International business remains on growth path

Revenue in the division improved by 9.5 % to €15,049 mil-
lion in the year under review (previous year: €13,748 mil-
lion). This includes negative currency effects of €486 mil-
lion. Excluding these effects, the increase in revenue was
13.0 %. The revenue figure also reflects the fact that fuel
surcharges were higher in all regions as the price of crude
oil increased compared with the previous year. Excluding
foreign currency losses and higher fuel surcharges, revenue
was up by 10.8 %.

In the Time Definite International (TDI) product line,
revenues per day increased by 12.9 % and per-day shipment
volumes by 9.9 % in 2017. Revenues per day for the fourth
quarter were up by 15.1 % and per-day shipment volumes by
11.1 %.

In the Time Definite Domestic (TDD) product line, rev-
enues per day increased by 7.5 % and per-day shipment vol-
umes by 6.2 % in the year under review. Growth in the
fourth quarter amounted to 9.1 % for revenues per day and
6.4 % for per-day volumes.

EXPRESS: revenue by product

€ m per day 1

Time Definite International (tDI)

Time Definite Domestic (tDD)

2016
adjusted 2

41.9

4.0

2017

+/– %

47.3

4.3

12.9

7.5

Q 4 2016
adjusted 2

45.7

4.4

Q 4 2017

52.6

4.8

1 To improve comparability, product revenues were translated at uniform exchange rates. These revenues are also the basis for the weighted calculation of working days.
2 Reassignment of companies in Spain and Portugal to the Post eCommerce Parcel division,

note 10 to the consolidated financial statements.

EXPRESS: volumes by product

Thousands of items per day

Time Definite International (tDI)

Time Definite Domestic (tDD)

2016
adjusted 1

808

434

2017

+/– %

888

461

9.9

6.2

Q 4 2016
adjusted 1

880

481

Q 4 2017

978

512

1 Reassignment of companies in Spain and Portugal to the Post eCommerce Parcel division,

note 10 to the consolidated financial statements.

A.54

+/– %

15.1

9.1

A.55

+/– %

11.1

6.4

Deutsche Post DHL Group — 2017 Annual Report

Strong revenue and volume growth in Europe region

Higher volumes in MEA region

Revenue in the MEA region (Middle East and Africa) im-
proved by 5.3 % to €1,110 million in the year under review
(previous year: €1,054 million). This figure included nega-
tive currency effects of €70 million, most of which related
to Egypt, but also to other countries in the region. Exclud-
ing these effects, revenue increased by 12.0 %. In the TDI
product line, revenues per day were up by 11.6 % and per-day
volumes by 23.7 %. Growth in the fourth quarter amounted
to 11.8 % for revenues per day and 27.4 % for per-day volumes.

EbIT and operating cash flow considerably above
prior-year level

EBIT in the division rose by 12.4 % to €1,736 million in finan-
cial year 2017 (previous year: €1,544 million), driven by
network improvement and strong international business
growth. Return on sales increased from 11.2 % to 11.5 %. In
the fourth quarter, EBIT improved by 15.0 % to €499 million
and return on sales increased from 11.5 % to 12.3 %. Operat-
ing cash flow rose by 14.7 % to €2,212 million in 2017 (pre-
vious year: €1,928 million).

Revenue in the Europe region increased by 11.0 % to
€6,696 million in the year under review (previous year:
€6,035 million). This included negative currency effects of
€95 million, which related mainly to the United Kingdom
and Turkey. Excluding these effects, revenue growth was
12.5 %. In the TDI product line, revenues per day rose by
14.4 %; per-day TDI shipment volumes improved by 12.8 %
in 2017. International per-day shipment revenues for the
fourth quarter were up by 15.5 % and per-day shipment vol-
umes by 12.5 %.

Strong momentum in the Americas region

Revenue in the Americas region increased by 9.8 % to
€3,010 million in the year under review (previous year:
€2,741 million). This figure included negative currency ef-
fects of €164 million, which related primarily to Venezuela
and the USA. Excluding these effects, revenue growth was
15.8 % compared with the previous year. In the TDI product
line, revenues per day were up 15.4 % in 2017. Per-day ship-
ment volumes improved by 14.3 %. Revenues per day for the
fourth quarter were up by 22.7 % and per-day shipment vol-
umes by 17.6 %.

Business in the Asia Pacific region grows steadily

Revenue in the Asia Pacific region increased by 7.0 % to
€5,556 million in the year under review (previous year:
€5,194 million). This figure included negative currency ef-
fects of €151 million, most of which related to China and
Japan. Excluding these effects, the revenue increase was
9.9 % in 2017. In the TDI product line, revenues per day im-
proved by 10.4 % and per-day volumes by 3.6 %. Growth in
the fourth quarter amounted to 11.8 % for revenues per day
and 5.3 % for per-day volumes.

A.56

Group Management Report — REPORT ON ECONOMIC POSITION — Business performance in the divisions

GLOBAL FORWARDING, FREIGHT DIVISION

Key figures of the GLObAL FORWARDING, FREIGhT division

€ m

Revenue

of which Global Forwarding

Freight

Consolidation / Other

Profit from operating activities (EBIt)

Return on sales (%) 1

Operating cash flow

1 EBIt / revenue.

2016

13,737

9,626

4,274

–163

287

2.1

248

2017

14,482

10,279

4,354

–151

297

2.1

131

+ / – %

Q 4 2016

Q 4 2017

+ / – %

5.4

6.8

1.9

7.4

3.5

–

– 47.2

3,623

2,566

1,098

– 41

104

2.9

206

3,791

2,698

1,130

–37

123

3.2

119

4.6

5.1

2.9

9.8

18.3

–

– 42.2

Freight forwarding revenue performing well

Revenue in the division increased by 5.4 % to €14,482 mil-
lion in the year under review (previous year: €13,737 mil-
lion). Excluding negative currency effects of €284 million,
revenue was up year-on-year by 7.5 %. In the fourth quarter
of 2017, revenue amounted to €3,791 million, exceeding the
prior-year figure by 4.6 %.

In the Global Forwarding business unit, revenue in the
year under review increased by 6.8 % to €10,279 million
(previous year: €9,626 million). Excluding negative cur-
rency effects of €250 million, the increase was 9.4 %. Gross
profit is defined as revenue from transport or other services
less directly attributable costs. These include transport costs
for air and ocean freight, road and rail transport, expenses
for commissions, insurances, customs clearance and other
revenue-related expenses. Gross profit declined by 1.2 % to
€2,390 million (previous year: €2,419 million).

Revenue increase in air and ocean freight continues

Air and ocean freight revenues and volumes continued to
grow in financial year 2017.

In air freight, volumes rose by 8.6 % compared with the
previous year. Although increased demand raised freight
rates, higher air freight prices can only be passed on to cus-

tomers with a delay due to our contract structures. As a
result, revenue in the year under review only rose by 4.9 %
and air freight gross profit fell by 1.4 % despite increased
volumes. In the fourth quarter of 2017, we were able to pass
higher prices on to customers; air freight revenue rose by
4.0 %, whilst gross profit improved by 11.0 % amidst volume
growth of 2.3 %.

Ocean freight volumes in 2017 exceeded the prior-year
level by 6.5 %, driven mainly by growth on the trade lanes
between Asia and Europe as well as in the trans-Pacific mar-
ket. Our ocean freight revenue rose by 6.1 % in the year
under review, whilst gross profit fell by 5.8 %. The reasons
for this development were considerably higher freight rates
caused by the consolidation of the shipping company mar-
ket as well as increased demand. In the fourth quarter, vol-
umes and revenue exceeded the prior-year figures by 4.7 %
and 4.5 %, respectively.

The performance of our industrial project business (in
the following table reported as part of Other in the Global
Forwarding business unit) improved significantly compared
with the previous year. The share of revenue related to in-
dustrial project business and reported under Other in-
creased from 21.7 % in the prior year to 25.6 %. Gross profit
improved by 19.4 %.

Global Forwarding: revenue

€ m

Air freight

Ocean freight

Other

Total

Global Forwarding: volumes

Thousands

Air freight

of which exports

Ocean freight

1 Twentyfoot equivalent units.

Deutsche Post DHL Group — 2017 Annual Report

2016

4,391

3,309

1,926

9,626

2016

3,648

2,081

3,059

2017

4,608

3,512

2,159

10,279

2017

3,961

2,248

3,259

tonnes

tEUS 1

+ / – %

Q 4 2016

Q 4 2017

+ / – %

A.57

4.9

6.1

12.1

6.8

1,195

851

520

2,566

1,243

889

566

2,698

4.0

4.5

8.8

5.1

A.58

+ / – %

Q 4 2016

Q 4 2017

+ / – %

8.6

8.0

6.5

1,014

578

783

1,037

600

820

2.3

3.8

4.7

Revenue increase in European overland transport business

In the Freight business unit, revenue rose by 1.9 % to
€4,354 million in the year under review (previous year:
€4,274 million) despite negative currency effects of €36 mil-
lion. Transport volumes increased by 3.7 %, driven mainly
by e-commerce based business in Sweden as well as by busi-
ness in Denmark and Germany. Gross profit was down by
1.9 % to €1,080 million (previous year: €1,101 million) due
in part to negative currency effects.

Significant EbIT increase in fourth quarter

EBIT in the division improved by 3.5 % from €287 million to
€297 million in the year under review, despite persistent
margin pressure in the core air and ocean freight products
resulting from high freight rates. Return on sales was un-
changed at 2.1 %. In the fourth quarter of 2017, EBIT im-
proved by 18.3 % to €123 million (previous year: €104 mil-
lion) due to the improved gross profit in air freight; return
on sales rose to 3.2 %.

Net working capital increased in the year under review
due to the rise in receivables from higher transport volumes.
The increase was offset partially by higher liabilities. Oper-
ating cash flow amounted to €131 million (previous year:
€248 million).

Group Management Report — REPORT ON ECONOMIC POSITION — Business performance in the divisions

SUPPLY CHAIN DIVISION

Key figures of the SUPPLY chAIN division

€ m

Revenue

of which EMEA (Europe, Middle East and Africa)

Americas

Asia Pacific

Consolidation / Other

Profit from operating activities (EBIt)

Return on sales (%) 1

Operating cash flow

1 EBIt / revenue.

A.59

2016

13,957

7,336

4,454

2,200

–33

572

4.1

658

2017

14,152

7,245

4,551

2,389

–33

555

3.9

239

+ / – %

1.4

–1.2

2.2

8.6

–

–3.0

–

– 63.7

Q 4 2016

Q 4 2017

+ / – %

3,607

1,853

1,170

592

– 8

206

5.7

520

3,619

1,921

1,125

583

–10

184

5.1

0.3

3.7

–3.8

–1.5

–25.0

–10.7

–

– 94.6

Strong revenue growth offset by adverse currency effects

Revenue in the division increased by 1.4 % to €14,152 million
in the year under review (previous year: €13,957 million).
The increase was driven by good business performance in
the Americas and Asia Pacific regions; it was, however, off-
set partly by negative currency effects of €444 million. Ex-
cluding this effect, revenue growth was 4.6 %. The Life
Sciences & Healthcare, Automotive and Technology sectors
achieved the highest growth compared with the previous
year. In the fourth quarter, revenue increased by 0.3 % to
€3,619 million (previous year: €3,607 million); excluding
currency effects, it rose by 5.1 %.

In the EMEA region, revenue decreased due to negative

The Asia Pacific region saw strong revenue growth, driven
predominantly by the Life Sciences & Healthcare sector in
Australia and the Technology sector.

New business worth around €1,490 million secured

In 2017, the Supply Chain division concluded additional
contracts worth around €1,490 million in annualised rev-
enue (excluding Williams Lea Tag Group,
note 2 to the con-
solidated financial statements), with both new and existing cus-
tomers. The Automotive, Consumer and Retail sectors
accounted for the majority of the gains. The annualised
contract renewal rate remained at a consistently high level.

currency effects.

One-off effects inhibit EbIT growth

By contrast, strong revenue growth in the Americas
region in nearly all sectors more than offset adverse cur-
rency effects.

SUPPLY chAIN: revenue by sector and region, 2017

Total revenue: €14,152 million

of which Retail

Consumer

Automotive

Technology

Life Sciences & Healthcare

Others

Engineering & Manufacturing

Financial Services

of which Europe / Middle East / Africa / Consolidation

Americas

Asia Pacific

A.60

25 %

23 %

14 %

12 %

11 %

8 %

5 %

2 %

51 %

32 %

17 %

EBIT in the division was €555 million in the year under re-
view (previous year: €572 million). In the previous year,
EBIT was influenced by one-time factors such as income
from the sale of shares in King’s Cross in the UK, on the one
hand, and restructuring efforts, on the other. Overall, these
factors had a positive effect. In 2017, earnings were ad-
versely affected by the one-time write-down of customer
relationship assets. Excluding those effects and despite
adverse currency effects, EBIT improved due to business
growth and the impact of strategic initiatives. Due to the
one-off effects described above, return on sales was slightly
below the prior- year level at 3.9 %. EBIT for the fourth quar-
ter of 2017 decreased from €206 million to €184 million
and return on sales to 5.1 % (previous year: 5.7 %). Operating
cash flow declined in the year under review from €658 mil-
lion to €239 million. Operational improvement was dimin-
ished by a one-time cash outflow of €459 million to further
fund pension obligations.

Deutsche Post DHL Group — 2017 Annual Report

DEUTSCHE POST SHARES

Deutsche Post shares: seven-year overview

Yearend closing price

High

Low

€

Number of shares as at 31 December

Market capitalisation as at 31 December

millions

€ m

2011

11.88

13.83

9.13

1,209.0

14,363

2012

16.60

16.66

11.88

1,209.0

20,069

2013

26.50

26.71

16.51

1,209.0

32,039

2014

27.05

28.43

22.30

1,211.2

32,758

2015

25.96

31.08

23.15

1,212.8

31,483

2016

31.24

31.35

19.73

1,240.9

38,760

A.61

2017

39.75

40.99

30.60

1,228.7

48,841

Average trading volume per day 1

4,898,924

4,052,323

4,114,460

4,019,689

4,351,223

3,497,213

2,613,290

Annual performance including dividends

Annual performance excluding dividends

Beta factor 2

Earnings per share 3

Cash flow per share 4

Pricetoearnings ratio 5

Pricetocash flow ratio 4, 6

Dividend

Payout ratio

Dividend per share

Dividend yield

€

€ m

€

–1.3

– 6.5

1.19

0.96

1.96

12.4

6.1

846

72.7

0.70

5.9

45.6

39.7

0.88

1.36 7

– 0.17

12.2 7

– 97.6

846

51.6

0.70

4.2

63.9

59.6

0.86

1.73

2.47

15.3

10.7

968

46.3

0.80

3.0

5.1

2.1

0.94

1.71

2.51

15.8

10.8

1,030

49.7

0.85

3.1

– 0.9

– 4.0

0.95

1.27

2.84

20.4

9.1

1,027 8

66.7 9

0.85

3.3

23.6

20.3

0.97

2.19

2.03

14.3

15.4

1,270

48.1

1.05

3.4

30.6

27.2

0.99

2.24

2.72

17.7

14.6

1,409 10

51.9

1.15 10

2.9

1 Volumes traded via the Xetra trading venue.
to the consolidated financial statements.
7 Adjusted to reflect the application of IAS 19R.

2 Threeyear beta; source. Bloomberg.
4 Cash flow from operating activities.

3 Based upon consolidated net profit after deduction of noncontrolling interests,

note 19

5 Yearend closing price / earnings per share.

6 Yearend closing price / cash flow per share.

8 Reduction due to the share buyback.

9 Excluding oneoff effects (NFE and strikerelated effects, disposals and other oneoff effects,

some of which are based upon assumptions by management): 45.8 %.

10 Proposal.

Free float stable

The investment share of our largest investor – KfW Banken-
gruppe – is 20.7 % (previous year: 20.5 %) and the free float
is 79.3 %. Based upon our share register’s figures, the share
of outstanding stock held by private investors is 11.1 % (pre-
vious year. 10.8 %). In terms of the regional distribution of
identified institutional investors, the highest percentage of

shares (15.8 %) is held by US investors (previous year. 13.9 %),
followed by the United Kingdom with a share of 13.8 %
( previous year. 12.6 %). The share of institutional investors
in Germany decreased to 12.0 % (previous year. 12.4 %). Our
25 largest institutional investors held a total of 38.9 % of all
issued shares (previous year. 41.3 %).

Shareholder structure 1

A.62

Shareholder structure by region 1

A.63

a KfW Bankengruppe
b Free float
b 1 Institutional investors
b 2 Private investors

1 As at 31 December 2017.

20.7 %
79.3 %
68.2 %
11.1 %

a Germany
b Other
c USA
d UK

1 As at 31 December 2017.

43.8 %
26.6 %
15.8 %
13.8 %

Group Management Report — DEUTSCHE POST SHARES — NON-FINANCIAL KEY PERFORMANCE INDICATORS — Employees

NONFINANCIAL KEY
PERFORMANCE INDICATORS

Employees

Facing change in the workplace with an open mind

We support our employees in developing their potential and
offer them a respectful work environment with competitive
pay. In today’s digital world, this also entails responding
to changes in our working methods and facing new chal-
lenges open-mindedly and without bias. The task of involv-
ing employees in the change process falls, in particular, to
our executives, who are supported by systematic human
resources work.

creased due to the sale of Williams Lea Tag Group. The de-
cline compensated for the increase in employees due to new
and additional business by a narrow margin.

Staff levels were up in all regions. We saw the largest
percentage increase in the Americas, although we continue
to employ most of our personnel Germany.

As in the previous year, 18 % of all employees took the
opportunity for part-time employment. Over the course of
the year, 8.5 % of employees left the Group unplanned (pre-
vious year: 7.6 %).

Our current planning foresees another slight increase

in the number of employees in financial year 2018.

Number of employees

A.65

2016

2017

+/– %

Employee Opinion Survey

Our annual Group-wide Employee Opinion Survey com-
prises 41 questions categorised in ten key performance in-
dicators and one index. We achieved stable or improved
results in nearly all areas in 2017, with nearly all figures at
or above external benchmarks. The response rate of 76 % –
an improvement of two percentage points – underscores the
survey’s acceptance level.

Full-time equivalents
At year-end 1

of which Post eCommerce

Parcel 2

Express 2

Global Forwarding,
Freight

Supply Chain

Corporate Center / Other

Consolidation 3

459,262

472,208

177,307

82,792

41,886

146,739

10,539

–1

183,679

90,784

41,034

145,575

11,136

of which Germany

174,537

180,479

Selected results from the Employee Opinion Survey

Response rate

Positive rating of Active Leadership KPI

Positive rating of Employee Engagement KPI

2016

2017

Number of employees again rises slightly

As at 31 December 2017, we employed 472,208 full-time
equivalents, 2.8 % more than in the previous year. The head-
count at the end of the year was 519,544.

In the Post - eCommerce - Parcel division, we hired new
employees particularly with a view to supporting the con-
tinued strong growth in the eCommerce - Parcel business
unit in Germany, Europe, Asia and the USA. The number of
employees in the Express division increased compared with
the previous year. Higher shipment volumes made the in-
crease necessary in the operations area in particular. In
the Global Forwarding, Freight division, our workforce
declined slightly, mainly in the Freight business unit. The
number of employees in the Supply Chain division de-

A.64

Europe
(excluding Germany)

Americas

Asia Pacific

Other regions

113,104

114,360

79,347

73,979

18,295

82,887

76,081

18,401

Average for the year 4

453,990

468,724

Headcount
At year-end 4

Average for the year

of which hourly workers and
salaried employees

Civil servants

Trainees

508,036

498,459

519,544

513,338

459,990

477,251

32,976

5,493

30,468

5,619

1 Excluding trainees.
2 Reassignment of companies in Spain and Portugal from the Express division to the

Post eCommerce Parcel division,

note 10 to the consolidated financial statements.

3 Including rounding.
4 Including trainees.

Staff costs above prior-year level

At €20,072 million, staff costs exceeded the prior-year fig-
note 14 to the
ure of €19,592 million. Details can be found in
consolidated financial statements.

2.8

3.6

9.7

–2.0

– 0.8

5.7

–100

3.4

1.1

4.5

2.8

0.6

3.2

2.3

3.0

3.8

–7.6

2.3

Deutsche Post DHL Group — 2017 Annual Report

Adequately compensating performance

Our performance-related compensation, which is in line
with both the market and the company’s long-term require-
ments, makes us an attractive employer. We use a systematic
job grading system to ensure that our remuneration struc-
tures are reasonable and balanced.

In addition, we strengthen our employees’ loyalty and
motivation by offering additional benefits to supplement
the company’s defined benefit and defined contribution re-
tirement plans.

Age-based and secure working conditions

In Germany, we responded as early as 2011 to demographic
projections by concluding the Generations Pact between
Deutsche Post AG and the trade unions. Today, 24,401 of our
hourly workers and salaried employees maintain the re-
quired working time account and 3,886 are in partial retire-
ment. Since 2016, we have also been offering comparable
arrangements for civil servants, 3,629 of whom have estab-
lished a lifetime working account and 1,076 have entered
partial retirement.

Targeted employee development

A customer-focused culture requires a shared understand-
Ob-
ing. As part of our Group-wide “Certified” initiative,
jectives and strategies, page 34, we offer our employees a broad
range of curricula, allowing them to gain specific know-
ledge relevant to their roles and learn more about the greater
context of the Group.

An important component of our development initia-
tives for executives is the further development of their man-
agement style on the basis of newly defined leadership at-
tributes. The majority of the target group has already taken
part in our Certified Logistics Leader programme.

In Germany, Austria, Switzerland and Denmark, we
offer young people the opportunity to enrol in dual-study
apprenticeship programmes consisting of in-house training
combined with studies at state vocational schools. In Ger-
many alone, students are able to choose from more than 15
state-accredited apprenticeship schemes and twelve dual-
study programmes. In 2017, we offered 2,472 positions in
our apprenticeship and study programmes.

makes us attractive to customers and employees alike.
We promote inclusion and equal opportunity in the work-
place, as set out in our Code of Conduct and a Group
Statement.

A Group-wide monitoring system tracks diversity indi-
cators to monitor the effectiveness of the actions we take in
this regard. In the year under review, the Diversity Council
discussed a number of topics, including measures designed
to increase the number of women in executive positions. On
31 December 2017, the worldwide proportion of women in
management in the Group was 21.5 % (previous year: 21.1 %).

Health and safety

Occupational safety: always the top priority

The health and safety of our employees are the foundation
of the company’s business success. We promote both through
a supportive working environment with a special focus
upon prevention.

More detailed information on workplace safety require-
ments is provided in our Occupational Health & Safety
Policy Statement.

Workplace accidents

Accident rate (number of accidents per 200,000
hours worked) 1

Working days lost per accident 1

Number of fatalities due to workplace accidents

of which as a result of traffic accidents

1 Coverage: around 99 %.

A.66

2017

4.4

15.3

2016

4.0

14.8

The change in the accident rate is essentially the result of an
increase in the number of incidents during delivery. Our
coverage rate improved from 96 % to more than 99 %. We
report on occupational safety measures and targets and de-
scribe the changes in the accident data for the divisions
Corporate Responsibility Report, dpdhl.com/
in more detail in our
cr-report2017.

Bolstering health

Diversity promotes in-house innovation

Our organisation unites people from a wide variety of cul-
tures who possess different skills, experiences and perspec-
tives. This diversity bolsters our innovative strength and

We inform employees about health risks by offering courses
on health-related topics and carrying out initiatives at a local
level. One area of focus in the year under review was how
to manage stress and deal with mental illness.

Group Management Report — NON-FINANCIAL KEY PERFORMANCE INDICATORS — Employees — Health and safety — Corporate responsibility

Our Group-wide employee benefits programme now
offers insurance coverage to supplement statutory health
insurance plans in more than 100 countries, in some cases
enabling access to high-quality and affordable health care
in the first place.

The worldwide illness rate was 5.2 % in the reporting

period (previous year: 5.1 %).

Corporate responsibility

Commitment to shared values

An important part of our Group strategy is to become a
benchmark enterprise for responsible business. We have
codified responsibility in our Code of Conduct, which is
guided by both the principles of the Universal Declaration
of Human Rights and the United Nations Global Compact
and adheres to recognised legal standards. We also support
the United Nation’s sustainable development goals.

With responsible business practices we ensure our busi-
ness operates in compliance with applicable laws, ethical
standards and international guidelines. We co-ordinate the
main aspects and issues deemed material via our Group-

wide Responsible Business Practice network. Through on-
going dialogue with our stakeholders, we ensure that their
expectations as regards social and environmental issues are
accounted for appropriately and that our business is aligned
systematically with their interests. In the year under review,
we reviewed the matters defined two years ago as material
for continued relevance and completeness by conducting
thorough interviews. In most instances, our original classi-
fication was confirmed. We also dealt with the new non-
financial reporting requirements. The required information
Corporate Responsibility Report, dpdhl.com/
is included in our
cr- report2017.

We use our expertise as a mail and logistics services
group for the benefit of society and the environment, and
we motivate our employees to engage in volunteer work. We
provide logistical support in the wake of natural disasters,
are committed to improving the educational and profes-
sional opportunities of socially disadvantaged young people,
and support local environmental protection and aid pro-
jects. In 2017, we continued our initiative to integrate
re fugees in Germany by providing assistance with language
and job skills and we have carried out initial measures in
other countries.

cO2e emissions, 2017
Total: 28.44 million tonnes 1

A.67

12 %
Ocean transport

64 %

Air transport

21 %

Ground transport

3 %
Buildings

1 Scope 1 to Scope 3.

Deutsche Post DHL Group — 2017 Annual Report

Measures to increase carbon efficiency and environmentally
friendly GoGreen services help us to fulfil our responsibility
towards the environment and society, and to create added
value for our customers whilst strengthening our market
position. One area we focused upon in the year under re-
view was increasing the proportion of electric vehicles in
our fleet.

Efficiency target exceeded

In order to measure and manage our greenhouse-gas effi-
ciency, we make use of a carbon efficiency index (CEX),
Group management, page 38. In 2017, our direct (Scope 1) and
indirect (Scope 2) greenhouse gas emissions amounted to
6.34 million tonnes of CO2e (previous year: 6.05 million
tonnes of CO2e). The indirect greenhouse gas emissions
(Scope 3) of our transport subcontractors amounted to
22.10 million tonnes of CO2e (previous year, adjusted:
20.81 million tonnes of CO2e).

We set new environmental targets in the reporting
period. By 2025, for example, we plan to improve our CEX
by 50 % compared with the 2007 base year. We already
achieved an improvement of 32 % versus 2007 in 2017, thus
exceeding our goal of improving the CEX by one index
point compared with the prior year.

Additional information on our environmental activities
Corporate Responsibility Report,

and targets is included in our
dpdhl.com/cr-report2017.

Fuel and energy consumption in company fleet and buildings

A.68

Consumption by fleet

Air transport (jet fuel)

2016

2017

million
kilograms

1,332.5

1,406.3

Road transport (petrol, bio
diesel, diesel, bioethanol, LPG) million litres

Road transport (biogas, CNG,
LNG)

Energy for buildings and facilities
(including electric vehicles)

million
kilograms

million
kilowatt
hours

447.2

451.1

4.5

3.6

3,039 1

3,194

1 Adjusted.

Customers and quality

Facts and figures, customers and quality

93 % D + 1
Letters delivered within Germany the day after posting.

APPROXIMATELY 290
locations certified by the Transported Asset Protection Association
(tAPA).

A.69

Open 54 hours
Average weekly opening time
of around 27,000 sales points
in Germany.

MAIL AND
PARCEL BUSINESS

DHL BUSINESS
UNITS

Net Promoter Approach
Continuously turning criticism
into improvements.

93.9 % SATISFIED CUSTOMERS
According to independent market study Kundenmonitor Deutschland.

MYDHL PORTAL
Allowing business customers to easily send express items.

TÜV-certified
Certified external system for
measuring mail transit times
(endtoend) and internal
system for measuring parcel
transit times.

OVER 3,000 ELECTRIC
VEHICLES
put into operation in 2017.

Insanely Customer
Centric Culture
Keeping a constant eye
on customer requirements.

CUSTOMER IMPROVE
MENT PROJECTS
More than 80 improvement initiatives
successfully implemented in 2017.

Sending mail and parcels quickly and reliably

Customers rate the quality of our services based upon
whether the items they post reach their destinations quickly,
reliably and undamaged. According to surveys conducted
by Quotas, a quality research institute, 93% of the domestic
letters posted in Germany during our daily opening hours

or before final collection are delivered to their recipients the
next day. Around 99 % reach their recipients within two
days. This puts us well above the legally required 80 % (D+1)
and 95 % (D+2). The Quotas measurement system is audited
and certified each year by TÜV Rheinland for compliance

Group Management Report — NON-FINANCIAL KEY PERFORMANCE INDICATORS — Corporate responsibility — Customers and quality

with EN 13850 requirements. Transit times for international
letters are determined by the International Post Corpor-
ation. Here, we rank amongst the top postal companies.

In our parcel business, 84 % of items posted reach their
recipients the next working day. This figure is based upon
parcels we collected from business customers that were de-
livered the next day. Our internal system for measuring
parcel transit times has been certified by TÜV Rheinland
since 2008.

In our mail business, we achieved a high level of sorting
automation that exceeds 90 %. In our parcel network, we
have increased our sorting capacity by more than 50 % since
the launch of our Parcel Production Concept in 2012, by
increasing productivity in our existing facilities and ex-
panding our infrastructure nationwide. With 34 parcel cen-
tres in operation, we have a sorting capacity of over one
million parcels per hour. More than 75 mechanised delivery
bases support our operations.

Our approximately 27,000 sales points were open for
an average of 54 hours per week (previous year: 53 hours).
The annual survey conducted by Kundenmonitor Deutsch-
land, the largest consumer survey in Germany, showed a
high acceptance of our exclusively partner-operated retail
outlets: 93.9 % of customers were satisfied with our quality
and service (previous year: 93.8 %). In addition, impartial
mystery shoppers from TNS Infratest tested the postal out-
lets in retail stores around 30,000 times over the year. The
result showed that 94.3 % of customers were served within
three minutes (previous year: 93.7 %).

Another key quality indicator for us is environmental
Corporate Responsibility
protection, which we describe in our
Report, dpdhl.com/cr-report2017. In the area of electric mobility,
which is strategically important to us, we put over 3,000
vehicles into operation in the year under review and began
converting our delivery operations in Berlin, Munich, Han-
over, Frankfurt, Dresden, Herne and Essen to the exclusive
use of electric vehicles. In addition to deploying Street-
Scooters for our own operations, we have been offering
the vehicles to businesses and municipalities for purchase
since 2017.

Service quality and insanely customer centric culture
in the express business

As a global network operator working with standardised
processes, we are constantly optimising our services to en-
able us to keep our commitments to customers, to respond
specifically to their wishes and to deliver the best-possible
quality at all times. We therefore keep a constant eye on

our customers’ ever-changing requirements, for example
through our Insanely Customer Centric Culture (ICCC)
programme and as part of our Net Promoter Approach. Our
managers speak personally to dissatisfied customers in
order to discover the root cause of their dissatisfaction.
Customer criticism thereby translates into continuous im-
provements.

Via the MyDHL portal and the Small Business Solutions
section on our website, small and medium-sized business
customers in particular can ship their goods with ease and
obtain comprehensive shipping information.

In Europe, our European Key Account Support service
provides our global customers with a central point of con-
tact. If customers wish, shipment information can even be
updated directly in their systems.

At quality control centres, we track shipments across
the globe and adjust our processes dynamically as required.
All premium products – for example, Medical Express ship-
ments – are tracked by default until they are delivered.

As of the year under review, our On Demand Delivery
service is now already available in more than 100 countries
and 40 languages. We also expanded our Paketbox network
to around 7,000 Service Point Lockers worldwide.

We conduct regular reviews of operational safety, com-
pliance with standards and the quality of service at our
facilities in co-operation with government authorities. Ap-
proximately 290 locations, more than 100 of which are in
Asia, have been certified by the security organisation Trans-
ported Asset Protection Association (TAPA). This makes us
the leader in this area. Since 2013, our sites have been cer-
tified globally to the ISO 9001:2008 standard. In addition,
we remain certified in certain regions and countries in the
areas of environmental protection and energy management.
Corporate Responsibility Report,
We describe this in detail in our
dpdhl.com/cr-report2017.

Systematic customer feedback in the forwarding business

In the Global Forwarding business unit, we are currently
revamping our offering based upon the customer feedback
that we systematically and continuously collect using the
Net Promoter Approach. Our punctuality, reporting and
invoicing improved notably in the year under review thanks
to more than 80 Customer Improvement Projects. Operat-
ing performance is monitored and improved on an on- going
basis. Regular performance dialogues ensure that our em-
ployees focus upon the right priorities. In addition, we
trained nearly 3,000 of our employees in structured prob-
lem-solving techniques in the reporting period.

Deutsche Post DHL Group — 2017 Annual Report

Our customer satisfaction survey, which we plan to up-
date and expand in the future, also forms the basis for up-
grading the range of services in the Freight business unit.
Our continuous improvement programme will support the
FREIGHT 2020 strategy,

Objectives and strategies, page 35.

Quality leader in contract logistics

We aim to build upon quality leader in contract logistics. By
applying standardised operations and solutions supported
by supply chain champions at all of our sites, we ensure that
we meet or exceed our customers’ quality expectations.

In the year under review, we revised our survey meth-
odology for continuously measuring customer loyalty and
satisfaction. Instead of biannual telephone interviews, we
now conduct online surveys each quarter. The programme
has been rolled out to all Supply Chain countries.

As part of our operations excellence programme, a uni-
form Service Quality KPI routinely measures whether our
locations are meeting defined operating standards.

Brands

Brand architecture

Group

A.70

Divisions

Post eCommerce Parcel

Express

Global Forwarding, Freight

Supply Chain

Brands

Brand value continues to improve

We manage the Deutsche Post and DHL brands based upon
our Group strategy,
Objectives and strategies, page 34, and we
work constantly to further increase the recognition, image
and value of our brands.

According to independent studies, our efforts were suc-
cessful again in the year under review. The BrandZ study
published by market research institute Millward Brown val-
ued the DHL brand at US$15.8 billion in 2017, a 19.7 % in-
crease (previous year: US$13.2 billion) that moves the com-
pany up three places to 70th in the Top 100 Most Valuable
Global Brands ranking. Millward Brown determines brand
value based upon a company’s current financial position as

well as the contribution the brand makes to the company’s
business success. Interbrand, a brand consulting company,
uses a similar system to rank the world’s most valuable
brands each year. In the 2017 ranking, DHL moved up one
place to 76th. Interbrand valued the DHL brand at US$5.7 bil-
lion (previous year: US$5.7 billion).

Consulting company Brand Finance valued the
Deutsche Post brand at €2.9 billion in the year under review
(previous year: €2.9 billion), moving the company up one
place to 28th in the German Top 50 and affirming it in 13th
place amongst the most valuable logistics brands in the
world.

A.71

A.72

59.9 %

21.7 %

14.5 %

3.9 %

Group Management Report — NON-FINANCIAL KEY PERFORMANCE INDICATORS — Customers and quality — Brands

Value of Group brands in 2017

DHL IS AMONGST THE WORLD’S
MOST VALUABLE BRANDS1

BRAND VALUE IMPROVES AGAIN 1

+ 3

US$15.8
BILLION
(2017)

US$13.2
BILLION
(2016)

DEUTSCHE POST BRAND VALUE
STABLE 2

GERMAN TOP 50 2017 2

€2.9
BILLION
(2016)

€2.9
BILLION
(2017)

+ 1

1 Source: Millward Brown, 2017.
2 Source: Brand Finance, 2017.

DhL boosts brand with advertising and partnerships

In the year under review, DHL continued its brand campaign
“The Power of Global Trade” for the third year. Its main
theme was again how trade and logistics can improve
people’s lives. Print and online advertisements, TV commer-
cials and social media activities delivered emotional brand
experiences to target groups.

We also bolster our brand’s reputation around the world
as a partner for high-profile events. For instance, in 2017 we
continued our partnerships with Formula 1®, Formula E and
the MotoGP™ world motorcycle racing series. We also con-
tinued our proven global DHL logistics partnerships with
FC Bayern Munich, Fashion Week organisations, the World
Touring Car Championship (WTCC) and Gewandhaus-
orchester Leipzig. In August 2017, DHL entered into a new
logistics partnership with the global drone racing series DR 1
Drone Racing League.

Marketing expenditures, 2017

Volume: around €437 million

Product development and communication

Other

Public & customer relations

Corporate wear

Sports sponsorships strengthen Deutsche Post brand

Deutsche Post systematically draws attention to its brand by
sponsoring popular national sporting events. In the year
under review, the company again focused upon its strategic
partnership with the Deutscher Fußball-Bund (DFB – Ger-
man football federation). Deutsche Post was involved with
the German national football teams and the DFB tournament
as well as amateur football leagues and the FUSSBALL.DE
platform. The partnerships with the Deutsche Tourenwagen
Masters (DTM – German Touring Car Masters) racing series
and the Bob- und Schlittenverband für Deutschland (BSD –
German bobsleigh, luge and skeleton federation) were like-
wise continued.

Deutsche Post DHL Group — 2017 Annual Report

EXPECTED DEVELOPMENTS

Overall Board of Management assess
ment of the future economic position

The Board of Management expects consolidated EBIT to
reach around €4.15 billion in financial year 2018. The Post -
eCommerce - Parcel division is likely to contribute around
€1.50 billion to this figure. We also expect an additional
improvement in overall earnings to around €3.00 billion in
the DHL divisions. All of the DHL divisions are expected to
contribute to the increase. The Corporate Center / Other re-
sult is projected to remain stable at around €–0.35 billion.
Due to the changes resulting from the initial application of
IFRS 16, we expect the asset charge to increase to a greater
extent than EBIT and EBIT after asset charge (EAC) to de-
cline in 2018 as a result. Free cash flow is expected to exceed
€1.5 billion.

Forecast period

The information contained in the report on expected devel-
opments generally refers to financial year 2018.

Future economic parameters

Good outlook for the global economy

The global economy is expected to pick up slightly once
more in 2018. A pronounced upturn is currently being seen
in the industrial countries, supported by expansionary
monetary policy along with expectations of expansionary
fiscal stimulus packages. Despite the existing political risks
and a gradual decline in available production capacities, the
pace of growth seen in the previous year is expected to con-
tinue. Higher growth rates are expected in the emerging
markets, due in the main to contributions from countries
that were just recently in the midst of fighting off
recessionary tendencies. By contrast, a slightly weaker up-
wards trend is expected for those regions that have been
seeing strong growth. Risks jeopardising this outlook con-
tinue to stem from the many geopolitical hotspots. None-
theless, it is still possible that mutually reinforcing upwards
cyclical trends could give global economic growth a signifi-
cant boost.

Global economy: growth forecast

World trade volume

Real gross domestic product
World

Industrial countries

Emerging markets

Central and Eastern Europe

CIS countries

Emerging markets in Asia

Middle East and North Africa

Latin America and the Caribbean

SubSaharan Africa

A.73

2018

4.6

3.9

2.3

4.9

4.0

2.2

6.5

3.6

1.9

3.3

2017

4.7

3.7

2.3

4.7

5.2

2.2

6.5

2.5

1.3

2.7

Source: International Monetary Fund (IMF), World Economic Outlook, update January 2018.
Growth rates calculated on the basis of purchasing power parity.

The economy in China is likely to weaken further, with GDP
growth expected to soften slightly (IMF: 6.6 %; OECD: 6.6 %).
The Japanese economy is projected to record only minimal
growth, and economic output is expected to expand at a
much slower pace than in 2017 (IMF: 1.2 %; OECD: 1.2 %).

GDP in the United States is anticipated to increase more
strongly in 2018 than in the previous year (IMF: 2.7 %; OECD:
2.5 %).

In the euro zone, the economic recovery is forecast to
continue. However, GDP growth is likely to weaken slightly
(IMF: 2.2 %; ECB: 2.3 %).

Leading indicators suggest that the upswing in Ger-
many will remain intact. Growth for the year as a whole is
expected to mirror the previous year’s level in 2018 (IMF:
2.3 %; Sachverständigenrat: 2.2 %).

The most likely trend for crude oil listings is a slight

decrease from the present level.

The ECB will very likely maintain its key interest rate at
the current level in 2018. The bank is also expected to con-
tinue to reduce its bond purchases, or even discontinue the
programme entirely, should the euro zone economy remain
solid. The US Federal Reserve is expected to raise its key
interest rate further over the course of the year, which could
moderately increase capital market interest rates.

Group Management Report — ExPECTED DEVELOPMENTS — Overall Board of Management assessment of the future economic position —
Forecast period — Future economic parameters — Revenue and earnings forecast

World trade grows solidly

After a strong increase in 2017, we expect growth in the
global trade flows relevant to us (air and ocean freight
shipped in containers, excluding liquids and bulk goods) to
slow somewhat in 2018. All in all, we anticipate an increase
of 3.7 %.

Parcel market expected to see sustained growth

The market for paper-based mail communication will con-
tinue to decline, including in Germany. Physical mail vol-
umes are falling, primarily because people are communicat-
ing digitally to an increasing extent. After raising the stamp
price for a standard letter at the beginning of 2016, we shall
not make any further price adjustments to regulated ex-ante
Glossary, page 181, until after 2018, due to the
mail products,
price-cap mechanism.

The German advertising market is likely to maintain its
approximate volumes in 2018. Advertising budgets will
continue to shift towards online media. The trend towards
automated dialogue marketing campaigns is set to remain
unchanged.

The parcel market will continue to grow in Germany, the
rest of Europe and the world, as will cross-border services.

The international mail business is likely to see slight
growth overall, particularly due to increasing merchandise
shipping.

E-commerce encourages further growth in international
express market

Experience shows that growth in the international express
market is highly dependent upon the economic situation.
We believe that the steadily growing cross-border e-com-
merce sector will continue to drive growth in the inter-
national express market in 2018.

Market trends in freight forwarding business
likely to continue

In 2018, we anticipate developments in the air freight mar-
ket to follow a similar trend to that of the year under review.
Although freight carriers will further expand capacities by
adding new wide-body passenger planes and additional
cargo aircraft, this will mostly impact smaller destinations
and not the main trade lanes. We expect demand to rise on
the whole, driven in part by rapid growth in e-commerce
volumes. Freight rates are likely to increase on the main
trade lanes.

With regard to ocean freight, we anticipate solid market
growth to continue. Alliances and mergers will allow ship-
ping companies to better manage capacities and to raise
freight rates over the medium term.

For the European road transport market, we expect
market prices and volume growth to accelerate in 2018. This
will be driven by the continued expansion in the largest
European economies and the sustainable upwards trend
in manufacturing activity, accompanied by limited haulier
capacities. In a fragmented market environment, we expect
selective consolidation efforts to re-emerge in the future.

Contract logistics market continues to grow

The trend towards outsourcing warehousing and distribu-
tion as well as demand for value-added logistics services are
set to continue, although short to mid-term growth pros-
pects in some emerging markets have slowed. Projections
indicate that the market for contract logistics will continue
to experience stable growth of around 5 %. Demand for
supply chain services is expected to see a particularly strong
rise in rapidly growing economies such as south-east Asia
and India.

Revenue and earnings forecast

In addition to the overall state of the global economy –
which is expected to be robust, insofar as can be foreseen –
one of the main factors impacting our Group continues to
be structural growth arising from e-commerce transactions.
E-commerce growth is making a positive contribution in
all regions and divisions, albeit to varying extents. We there-
fore expect the Group to record another positive revenue
trend.

The IFRS 16 accounting standard will be applied for the
first time in our 2018 reports. The change in the recognition
of lease obligations will, for example, impact reported earn-
ings. EBITDA (earnings before interest, tax, depreciation
and amortisation) will be significantly higher than under
the previous method as the operating lease expense is no
longer included. By contrast, EBIT (earnings before interest
and tax) will rise only slightly due to the increase in depre-
ciation charges recognised for leased assets. Based upon the
leases as at 1 January, consolidated EBIT is expected to in-
crease by around €150 million.

Deutsche Post DHL Group — 2017 Annual Report

Capital expenditure of around €2.5 billion expected

In 2018, we plan to increase capital expenditure (excluding
leasing) to around €2.5 billion in support of our strategic
objectives and further growth. The focus of capital expend-
iture will be similar to that of previous years.

Performance of further indicators
relevant for internal management

EAc impacted by IFRS 16

Due to the changes resulting from the initial application of
IFRS 16,
note 5 to the consolidated financial statements, EAC will
decline to a fundamentally lower level, as the respective cost
of capital (asset charge) of the divisions increases dispropor-
tionately to EBIT. Without this effect, EAC tends to follow
the respective development of EBIT. Free cash flow is ex-
pected to exceed €1.5 billion.

Employee Opinion Survey results again positive

We intend to keep up the positive results that our Employee
Opinion Survey achieved in the reporting year. For 2018, we
expect to see an increase to 76 % in the approval rating for
the Active Leadership key performance indicator.

Further improve greenhouse gas efficiency

We expect the Group to further improve its carbon effi-
ciency. Our CEX score is projected to increase by one index
point during financial year 2018.

Against this backdrop, we expect consolidated EBIT to
reach around €4.15 billion in financial year 2018. The Post -
eCommerce - Parcel division is likely to contribute around
€1.50 billion to this figure. We also expect an improvement
in overall earnings to around €3.00 billion in the DHL div-
isions. All of the DHL divisions are expected to contribute
to the increase. The Corporate Center / Other result is pro-
jected to remain stable at around €–0.35 billion.

In line with our Group strategy, we plan to focus upon
organic growth and anticipate only a few very selective
acquisitions in 2018, as in the previous year.

Our finance strategy continues to call for a payout of
40 % to 60 % of net profits as dividends as a general rule. At
the Annual General Meeting on 24 April 2018, we intend to
propose to the shareholders that a dividend per share of
€1.15 be paid for financial year 2017 (previous year: €1.05).

Expected financial position

No change in the Group’s credit rating

In light of the earnings forecast for 2018, we expect the “FFO
to debt” indicator to remain stable on the whole and do not
expect the rating agencies to change our credit rating from
the present level.

Liquidity to remain solid

We anticipate a reduction in our liquidity in the first half of
2018 as a result of the annual pension prepayment due to
the Bundesanstalt für Post und Telekommunikation as well
as the dividend payment for financial year 2017 in April 2018.
However, our operating liquidity situation will improve
again significantly towards the end of the year, due to the
upturn in business that is normal in the second half.

A bond issued by Deutsche Post AG in the amount of

€0.5 billion will fall due in October 2018.

Group Management Report — ExPECTED DEVELOPMENTS — Revenue and earnings forecast — Expected financial position — Performance of further indicators
relevant for internal management — OPPORTUNITIES AND RISKS — Overall Board of Management assessment of the opportunity and risk situation —
Opportunity and risk management

OPPORTUNITIES AND
RISKS

Overall Board of Management assessment
of the opportunity and risk situation

Identifying and swiftly capitalising upon opportunities and
counteracting risks are important objectives for our Group.
We already account for the anticipated impact of potential
events and developments in our business plan. Opportun-
ities and risks are defined as potential deviations from pro-
jected earnings. In consideration of our current business
plan, the Group’s overall opportunity and risk situation has
not changed significantly compared with last year’s risk re-
port. According to current assessments, no new risks with a
potentially critical impact upon the Group’s result have been
identified. Based upon the Group’s early warning system
and in the estimation of its Board of Management, there
were no identifiable risks for the Group in the current fore-
cast period which, individually or collectively, cast doubt
upon the Group’s ability to continue as a going concern. Nor
are any such risks apparent in the foreseeable future. The
assessment of a stable to positive outlook is moreover re-
flected in the Group’s credit ratings, as found on

page 59.

Our early identification process links the Group’s op-
portunity and risk management with uniform reporting
standards. We continuously improve the IT application used
for this purpose. Furthermore, we use a Monte Carlo simu-
lation for the purpose of aggregating opportunities and
risks in standard evaluations.

The simulation is a stochastic model that takes the prob-
ability of occurrence of the underlying risks and oppor-
tunities into consideration and is based upon the law of
large numbers. One million randomly selected scenarios –
one for each opportunity and risk – are combined on the
basis of the distribution function of each individual oppor-
tunity and risk. The resulting totals are shown in a graph
of frequency of occurrence. The following graph shows an
example of such a simulation:

Monte Carlo simulation

Frequency of occurrence
in one million simulation steps (incidence density)

Bandwidth with 95 % probability

A.74

Opportunity and risk management

– aa € m

+ bb € m

+ zz € m

Deviation from planned EBIt

Planned EBIt
“Worse than expected”

“Better than expected”

Most common value in one million simulation steps (“mode”)

Opportunity and risk management process

Uniform reporting standards for opportunity and risk
management

As an internationally operating logistics company, we are
facing numerous changes. Our aim is to identify the result-
ing opportunities and risks at an early stage and take the
necessary measures in the specific areas affected in due time
to ensure that we achieve a sustained increase in enterprise
value. Our Group-wide opportunity and risk management
system facilitates this aim. Each quarter, managers estimate
the impact of future scenarios, evaluate opportunities and
risks in their departments, and present planned measures
as well as those already taken. Queries are made and approv-
als given on a hierarchical basis to ensure that different man-
a gerial levels are involved in the process. Opportunities and
risks can also be reported at any time on an ad-hoc basis.

1 Identify and assess
Assess

Define measures

Analyse

Identify

5 Control
Review results

Review
measures

Monitor early
warning indicators

Divisions
Internal auditors

Internal
auditors
review
processes

A.75

2 Aggregate and report
Review

Supplement and change

Aggregate

Report

3 Overall strategy /
risk management /
compliance
Determine

Manage

4 Operating measures
Plan

Implement

Opportunity and riskcontrolling processes

Board of Management

Deutsche Post DHL Group — 2017 Annual Report

The most important steps in our opportunity and risk man-
agement process are:
1

Identify and assess: Managers in all divisions and regions
evaluate the opportunity and risk situation on a quarter-
ly basis and document the action taken. They use scen-
arios to assess best, expected and worst cases. Each
identified risk is assigned to one or more managers who
assess and monitor the risk, specify possible procedures
for going forwards and then file a report. The same ap-
plies to opportunities. The results are compiled in a
database.

2 Aggregate and report: The controlling units collect the
results, evaluate them and review them for plausibility.
If individual financial effects overlap, they are noted in
our database and taken into account when compiling
them. After being approved by the department head, all
results are passed on to the next level in the hierarchy.
The last step is complete when Corporate Controlling
reports to the Group Board of Management on signifi-
cant opportunities and risks as well as on the potential
overall impact each division might experience. For this
purpose, opportunities and risks are aggregated for key
organisational levels. We use two methods for this. In
the first method, we calculate a possible spectrum of
results for the divisions and combine the respective
scenarios. The totals for “worst case” and “best case”
indicate the total spectrum of results for the respective
division. Within these extremes, the total “expected
cases” shows current expectations. The second method
makes use of a Monte Carlo simulation, the divisional
results of which are regularly included in the opportu-
nity and risk reports to the Board of Management.

3 Overall strategy: The Group Board of Management de-
cides on the methodology that will be used to analyse
and report on opportunities and risks. The reports cre-
ated by Corporate Controlling provide an additional,
regular source of information to the Board of Manage-
ment for the overall steering of the Group.

4 Operating measures: The measures to be used to take
advantage of opportunities and manage risks are deter-
mined within the individual organisational units. They
use cost-benefit analyses to assess whether risks can be
avoided, mitigated or transferred to third parties.
5 Control: For key opportunities and risks, early-warning
indicators have been defined that are monitored con-
stantly by those responsible. Corporate Internal Audit
has the task of ensuring that the Board of Management’s
specifications are adhered to. It also reviews the quality
of the entire opportunity and risk management oper-
ation. The control units regularly analyse all parts of the
process as well as the reports from Internal Audit and
the independent auditors, with the goal of identifying
potential for improvement and making adjustments
where necessary.

Internal accounting control and risk management system

(Disclosures required under section 315 (4) of the Handels-
gesetzbuch (HGB – German Commercial Code) and explan-
atory report)
Deutsche Post DHL Group uses an internal control system
(ICS) to ensure that Group accounting adheres to generally
accepted accounting principles. The system is intended to
make sure that statutory provisions are complied with and
that both internal and external accounting provide a valid
depiction of business processes in figures. All figures must
be entered and processed accurately and completely. Ac-
counting mistakes are to be avoided in principle and sig-
nificant assessment errors uncovered promptly.

Group Management Report — OPPORTUNITIES AND RISKS — Opportunity and risk management

The ICS design comprises organisational and technical
measures that extend to all companies in the Group. Cen-
trally standardised accounting guidelines govern the recon-
ciliation of the single-entity financial statements and ensure
that international financial reporting standards (EU IFRS s)
are applied in a uniform manner throughout the Group. All
Group companies are required to use a standard chart of
accounts. We immediately assess new developments in inter-
national accounting for relevance and announce their im-
plementation in a timely manner, in monthly newsletters,
for example. Often, accounting processes are pooled in a
shared service centre in order to centralise and standardise
them. The IFRS financial statements of the separate Group
companies are recorded in a standard, SAP-based system
and then processed at a central location where one-step
consolidation is performed. Other ICS components include
automatic plausibility reviews and system validations of the
accounting data. In addition, regular, manual checks are
carried out decentrally by those responsible at the local
level (a chief financial officer, for example), and centrally by
Corporate Accounting & Controlling, Taxes and Corporate
Finance at the Corporate Center.

Over and above ICS and risk management, Corporate
Internal Audit is an essential component of the Group’s con-

trol and monitoring system. Using risk-based auditing pro-
cedures, Corporate Internal Audit regularly examines the
processes related to financial reporting and reports its re-
sults to the Board of Management. The data reported are
checked and analysed chronologically, both upstream and
downstream. If necessary, we call in outside experts. Finally,
the Group’s standardised process for preparing financial
statements using a centrally administered financial state-
ments calendar guarantees a structured and efficient ac-
counting process.

Reporting and assessing opportunities and risks

In the following, we have reported mainly on those risks and
opportunities which, from the current standpoint, could
have a significant impact upon the Group during the fore-
cast period beyond the impact already accounted for in the
business plan. The risks and opportunities have been as-
sessed in terms of their probability of occurrence and their
impact. The assessment is used to classify the opportunities
and risks into those of low, high or medium relevance. We
characterise opportunities and risks of high or medium
relevance as significant, shown as black or grey in table A.76.
The following assessment scale is used:

Classification of risks and opportunities

Probability of occurrence (%)

Risks

Planned Group EBIt

Opportunities

A.76

> 50

> 15
to
≤ 50

≤ 15

< – 500

– 500 to – 151

– 150 to 0

0 to 150

151 to 500

> 500

Effects (€ m)

Significance for the Group:

Low

Medium

High

Deutsche Post DHL Group — 2017 Annual Report

The opportunities and risks described here are not necessar-
ily the only ones the Group faces or is exposed to. Our busi-
ness activities could also be influenced by additional factors
of which we are currently unaware or which we do not yet
consider to be material.

Opportunities and risks are identified and assessed de-
centrally at Deutsche Post DHL Group. Reporting on pos-
sible deviations from projections, including latent oppor-
tunities and risks, occurs primarily at the country or
regional level. In view of the degree of detail provided in the
internal reports, we have combined the decentrally reported
opportunities and risks into the categories shown below for
the purposes of this report. It should be noted that the fig-
ures provided in the underlying individual reports exhibit
a significant correlation with the performance of the world
economy and global economic output. Unless otherwise
specified, a low relevance is attached to the individual op-
portunities and risks within the respective categories and in
the forecast period under observation (2018). The oppor-
tunities and risks generally apply for all divisions, unless
indicated otherwise.

Categories of opportunities and risks

Opportunities and risks arising from political, regulatory
or legal conditions

A number of risks arise primarily from the fact that the
Group provides some of its services in a regulated market.
Many of the postal services rendered by Deutsche Post AG
and its subsidiaries (particularly the Post - eCommerce -
Parcel division) are subject to sector-specific regulation by
the Bundesnetzagentur (German federal network agency),
Glossary, page 181, pursuant to the Postgesetz (PostG – Ger-
man Postal Act),
Glossary, page 181. The Bundesnetzagentur
approves or reviews prices, formulates the terms of down-
stream access and has special supervisory powers to combat
market abuse.

In 2015, the Bundesnetzagentur stipulated the condi-
tions applicable to the approval of postage rates for letters
of up to 1,000 grams under the price cap procedure. These
conditions are referred to as parameters and are set to expire
on 31 December 2018. The regulator will be setting new
parameters in 2018.

In a judgement dated 14 July 2016, the General Court
of the European Union (EGC) set aside the European Com-
mission’s state aid decision dated 25 January 2012 in an
action brought by the Federal Republic of Germany. In this
decision, the European Commission had argued that the
financing of civil servant pensions in part constituted un-
lawful state aid that had to be repaid to the federal govern-
ment. We have described this in detail in the 2016 Annual
Report in note 48 to the consolidated financial statements,
dpdhl.com/en/investors. In their actions, Deutsche Post AG and
the federal government asserted that the state aid deci-
sion was unlawful. In the aforementioned judgement of
14 July 2016, the EGC allowed that argument as presented in
the action brought by the federal government. The proceed-
ings brought by Deutsche Post AG against the state aid rul-
ing of 25 January 2012 have also been brought to a close. In
an order dated 17 March 2017, the EGC declared that there
was no longer any need to adjudicate on the action brought
by Deutsche Post AG and additionally ruled that the costs
were to be borne by the European Commission. Since the
European Commission did not file an appeal against the
EGC’s judgement of 14 July 2016, that decision is now legally
binding. The state aid decision of the European Commis-
sion is therefore null and void with final effect and there
are no longer any grounds for the obligation to repay the
alleged state aid under the state aid decision. The amount of
€378 million that had been deposited in a trustee account
for the purpose of implementing the state aid decision was
released. The action brought by Deutsche Post AG against
the 2011 “extension decision” (Ausweitungsbeschluss) is still
pending. That action is based on procedural matters involv-
ing the validity of the European Commission’s 2011 decision
to extend the state aid proceedings. In the action pending,
the European Commission has advanced the legal argument
that the state aid proceedings initiated in 1999 remain partly
open and that it could therefore issue a new final decision
bringing the proceedings to a close. With regard to the pos-
sible content of this decision, the Commission did not give
any particulars. In the legal opinion of Deutsche Post AG,
however, the proceedings initiated in 1999 were resolved in
full by way of the European Commission’s state aid ruling
of 19 June 2002. The European Court of Justice expressly
confirmed that opinion in its ruling of 24 October 2013. The
European Commission’s state aid decision of 25 Janu-
ary 2012 remains null and void with final effect.

Group Management Report — OPPORTUNITIES AND RISKS — Opportunity and risk management — Categories of opportunities and risks

We describe other significant legal proceedings in
note 46 to the consolidated financial statements. However, we do not
see these proceedings posing a risk of significant deviation
from plan for the 2018 forecast period.

The flow of goods and services is becoming more and
more international, and this entails a certain level of risk. As
a globally operating logistics company, Deutsche Post DHL
Group is subject to the import, export and transit regula-
tions of more than 220 countries and territories whose
foreign trade and customs laws must also be complied with.
The number and complexity of such laws and regulations
(including their extraterritorial application) have increased
in recent years and they are also being applied more aggres-
sively by the competent authorities, with stricter penalties
imposed. In response to this risk, we have implemented a
Group-wide compliance programme. In addition to under-
taking the legally prescribed check of senders, receivers,
suppliers and employees against current embargo lists, the
programme ensures, for example, that the legally required
review of shipments is carried out for the purpose of enforc-
ing applicable export restrictions as well as country sanc-
tions and embargos. Deutsche Post DHL Group co-operates
with the authorities responsible, both in working to prevent
violations as well as in assisting in the investigation of vio-
lations to avoid and limit potential sanctions.

Macroeconomic and industry-specific opportunities and risks

Macroeconomic and sector-specific conditions are a key
factor in determining the success of our business. We there-
fore pay close attention to economic trends within the re-
gions in which we operate. We are currently watching for
both the potential impact of US economic policies as well as
the possible consequences of the United Kingdom’s exit
from the EU. Alongside other aspects, Brexit would pose a
risk to the Group’s net assets, financial position and results
of operations owing to potential changes in exchange rates,
the economy, aviation traffic rights and customs duties as
well as the impact on our customers both within and outside
of the UK. To this end, we have established topic-specific
working groups to prepare ourselves as thoroughly as pos-
sible for the effects of Brexit. Despite the volatile economic
climate, demand for logistics services rose overall in 2017,
as did the related revenues.

A variety of external factors offer us numerous oppor-
tunities; indeed we believe that the global market will con-
tinue to grow. Advancing globalisation and further world

economic growth mean that the logistics industry will con-
tinue to expand. This is especially true of Asia, where trade
flows to other regions and in particular within the continent
will continue to increase. As the market leader, the expan-
sion will benefit us with our DHL divisions to an above-
average extent. This also applies to other countries in re-
gions with strong economic growth such as South America
and the Middle East, where we are similarly well positioned
to take advantage of the market opportunities arising.

Whether and to what extent the logistics market will

grow depends on a number of factors.

The trend towards outsourcing business processes con-
tinues. Supply chains are becoming more complex and more
international, but are also more prone to disruption. Cus-
tomers are therefore calling for stable, integrated logistics
solutions, which is what we provide with our broad-based
service portfolio. We continue to see growth opportunities
in this area, in particular in the Supply Chain division and
as a result of closer co-operation between all our divisions.
The booming online marketplace represents another
opportunity for us in that it is creating demand for trans-
Glossary,
porting documents and goods. The B2C market,
page 181, is experiencing strong growth, particularly due to
the continued upward trend in digital retail trade. This has
created high growth potential for the domestic and inter-
national parcel business, which we intend to tap into by
expanding our parcel network.

We are nonetheless unable to rule out the possibility of
an economic downturn in specific regions or a stagnation
or decrease in transport quantities. However, this would not
reduce demand in all business units. Indeed, the opposite
effect could arise in the parcel business, for example, because
consumers might buy online more frequently for reasons of
cost. Companies might also be forced to outsource trans-
port services in order to lower costs. Cyclical risks can affect
our divisions differently with respect to magnitude as well
as point in time, which may mitigate the total effect. Over-
all, we consider these to be medium-level risks. Moreover,
we have taken measures in recent years to make costs more
flexible and to allow us to respond quickly to a change in
market demand.

Deutsche Post and DHL are in competition with other
providers. Such competition can significantly impact our
customer base as well as the levels of prices and margins in
our markets. In the mail and logistics business, the key fac-
tors for success are quality, customer confidence and com-

Deutsche Post DHL Group — 2017 Annual Report

petitive prices. Thanks to the high quality we offer, along
with the cost savings we have generated in recent years, we
believe that we shall be able to remain competitive and keep
any negative effects at a low level.

Financial opportunities and risks

As a global operator, we are inevitably exposed to financial
opportunities and risks. These are mainly opportunities or
risks arising from fluctuating exchange rates, interest rates
and commodity prices and the Group’s capital requirements.
We attempt to reduce the volatility of our financial perform-
ance due to financial risk by implementing both operational
and financial measures.

Opportunities and risks with respect to currencies may
result from scheduled foreign currency transactions or
those budgeted for the future. Significant currency risks
from budgeted transactions are quantified as a net position
over a rolling 24-month period. Highly correlated curren-
cies are consolidated in blocks. The most important net
surpluses are budgeted at the Group level in the “US dollar
block”, pound sterling, Japanese yen and Indian rupee. The
Czech crown is the only currency with a considerable net
deficit. As of the reporting date, there were no significant
currency hedges for planned foreign currency transactions.
A potential general devaluation of the euro presents an
opportunity for the Group’s earnings position. Based upon
current macroeconomic estimates, we consider this oppor-
tunity to be of low relevance. The main risk to the Group’s
earnings position would be a general appreciation of the
euro. The significance of this is deemed low when consid-
ering the individual risks arising from the performance of
the respective currencies.

The overall risk of all these currency effects is currently

deemed to be of low relevance for the Group.

As a logistics group, our biggest commodity price risks
result from changes in fuel prices (kerosene, diesel and mar-
ine diesel). In the DHL divisions, most of these risks are
passed on to customers via operating measures (fuel sur-
charges).

The key control parameters for liquidity manage-
ment are the centrally available liquidity reserves.
Deutsche Post DHL Group had central liquidity reserves of
€4.2 billion as at the reporting date, consisting of central
financial investments amounting to €2.2 billion plus a syn-
dicated credit line of €2 billion. The Group’s liquidity is
therefore sound in the short and medium terms. Moreover,
the Group enjoys open access to the capital markets on ac-
count of its good ratings within the industry, and is well
positioned to secure long-term capital requirements.

The Group’s net debt amounted to €1.9 billion at the end
of 2017. The share of financial liabilities with short-term
interest rate lock-ins in the total financial liabilities in the
amount of €6.1 billion was approximately 15 %.

Further information on the Group’s financial position
and finance strategy as well as on the management of finan-
cial risks can be found in the report on the economic pos-
note 43 to the consolidated financial statements. Detailed
ition and in
information on risks and risk mitigation in relation to the
Group’s defined benefit retirement plans can be found in

note 38 to the consolidated financial statements.

Opportunities and risks arising from corporate strategy

Over the past few years, the Group has ensured that its
business activities are well positioned in the world’s fastest-
growing regions and markets. We are also constantly work-
ing to create efficient structures in all areas to enable us to
flexibly adapt capacities and costs to demand – a prerequis-
ite for lasting, profitable business success. With respect to
strategic orientation, we are focusing upon our core com-
petencies in the mail and logistics businesses with an eye
towards growing organically and simplifying our processes
for the benefit of our customers. Digitalisation plays a key
role in this. Our digital transformation involves the integra-
tion of new technologies into a corporate culture that uses
the changing environment to its advantage. Opportunities
arise, for example, from new infrastructure networking pos-
sibilities as well as digital business models. Our earnings
projections regularly take account of development oppor-
tunities arising from our strategic orientation.

Group Management Report — OPPORTUNITIES AND RISKS — Categories of opportunities and risks

Risks arising from the current corporate strategy, which
extends over a long-term period, are considered to be of low
relevance for the Group in the period under review. The
divisions face the following special situations:

price of transport services as well as the duration of our
contracts. Comprehensive knowledge in the area of broker-
ing transport services helps us to capitalise on opportunities
and minimise risk.

In the Post - eCommerce - Parcel division, we are re-
sponding to the challenges presented by the structural
change from a physical to a digital business. We are counter-
acting the risk arising from changing demand by expanding
our range of services. Due to the e-commerce boom, we
expect our parcel business to continue growing robustly in
the coming years and are therefore expanding our parcel
network. We are also expanding our range of electronic
communications services, securing our standing as the
quality leader and, where possible, making our transport
and delivery costs more flexible. We follow developments
in the market very closely and take these into account in our
earnings projections. For the specified forecast period, we
do not see these developments as having significant poten-
tial to impact our business negatively.

In the Express division, our future success depends
above all upon general factors such as trends in the com-
petitive environment, costs and quantities transported. We
plan to keep growing our international business, and expect
a further increase in shipment volumes. Based upon this
assumption, we are investing in our network, our services,
our employees and the DHL brand. Against the backdrop of
the past trend and the overall outlook, we do not see any
significant strategic opportunities or risks for the Express
division beyond those reported in the section on “Oppor-
tunities and risks arising from macroeconomic and indus-
try-specific conditions”.

In the Global Forwarding, Freight division, we pur-
chase transport services from airlines, shipping companies
and freight carriers rather than providing them ourselves.
We should usually succeed in sourcing transport services
on a cost-effective basis. We thus have the opportunity of
generating higher margins. In the worst-case scenario, we
bear the risk of not being able to pass on all price increases
to our customers. The extent of the opportunities and risks
essentially depends on trends in the supply, demand and

In the Supply Chain division, our success is highly de-
pendent on our customers’ business success. Since we offer
customers a widely diversified range of products in different
sectors all over the world, we can diversify our risk portfolio
and thus counteract the incumbent risks. Moreover, our
future success also depends on our ability to continuously
improve our existing business and to grow in our most im-
portant markets and customer segments. We do not see any
significant strategic opportunities or risks for the Supply
Chain division beyond those reported in the section entitled
“Opportunities and risks arising from macroeconomic and
industry-specific conditions”.

Opportunities and risks arising from internal processes

For us to render our services, a number of internal processes
must be aligned. These include – in addition to the funda-
mental operating processes – supporting functions such as
sales and purchasing as well as the corresponding manage-
ment processes. The extent to which we succeed in aligning
our internal processes to meet customer needs whilst simul-
taneously lowering costs correlates with potential positive
deviations from the current projections. We are steadily
improving internal processes with the help of our First
Choice initiatives. This improves customer satisfaction
whilst reducing our costs. Our earnings projection already
incorporates expected cost savings.

Logistics services are generally provided in bulk and
require a complex operational infrastructure with high
quality standards. To consistently guarantee reliability and
punctual delivery, processes must be organised so as to pro-
ceed smoothly with no technical or personnel-related
glitches. Any weaknesses with regard to the tendering, sort-
ing, transport, warehousing or delivery of shipments could
seriously compromise our competitive position. To enable
us to identify possible disruptions in our workflows and
take the necessary measures at an early stage, we have de-

Deutsche Post DHL Group — 2017 Annual Report

veloped a global security management system and the
Resilience 360 global IT platform that depicts and integrates
our global supply chains and locations. Near real-time in-
formation on incidents relevant to security flows into the
system, which in cases of disruption also serves as a central
communications platform. This poses a competitive advan-
tage that has already met with a high degree of interest from
both security agencies and customers.

Opportunities and risks arising from information technology

The security of our information systems is particularly im-
portant to us. The goal is to ensure continuous IT system
operation and prevent unauthorised access to our systems
and databases. To fulfil this responsibility, the Information
Security Committee, a sub-committee of the IT Board, has
defined guidelines, standards and procedures based upon
ISO 27002, the international standard for information se-
curity management. In addition, Group Risk Management,
IT Audit, Data Protection and Corporate Security monitor
and assess IT risk on an ongoing basis. For our processes to
run smoothly at all times, the essential IT systems must be
constantly available. We ensure this by designing our sys-
tems to protect against complete system failures. In add-
ition to third-party data centres, we operate central data
centres in the Czech Republic, Malaysia and the United
States. Our systems are thus geographically separate and
can be replicated locally.

We limit access to our systems and data such that em-
ployees can only access the data they need to perform their
duties. All systems and data are backed up on a regular basis,
and critical data are replicated across data centres.

All of our software is updated regularly to address bugs,
close potential gaps in security and increase functionality.
We employ a patch management process – a defined proced-
ure for managing software upgrades – to control risks
that could arise from outdated software or from software
upgrades.

Based upon the measures described above, we estimate
the probability of experiencing a significant IT incident with
serious consequences as very low.

Opportunities and risks arising from human resources

It is essential for us to have qualified and motivated employ-
ees in order to achieve long-term success. However, demo-
graphic change could lead to a decrease in the pool of avail-
able talent in various markets. We respond to this risk with
measures designed to motivate our employees as well as
promote their development.

We use Strategic Resource Management to address the
risks arising from an ageing population and the capacity
shortages that may result from changing demographic and
social structures. The experience gained is used to continu-
ously improve strategic resource management as an analysis
and planning instrument. The Generations Pact,
page 72,
agreed upon with trade unions in Germany also contributes
to taking advantage of the career experience of employees
for as long as possible whilst, at the same time, offering
young people long-term career perspectives.

Possible increases in both chronic and acute diseases
pose another risk to sustaining our business operations. We
address this risk with health management programmes,
measures tailored to local requirements and cross- divisional
co-operation.

Any internet sites referred to in the Group Management Report do not form part of the report.

CORPORATE GOVERNANCE
89 — 100

90 REPORT OF THE SUPERVISORY BOARD

93 SUPERVISORY BOARD
93 Members of the Supervisory Board
93
94 Mandates held by the Supervisory Board

Committees of the Supervisory Board

95 BOARD OF MANAGEMENT
95 Members of the Board of Management
95 Mandates held by the Board of Management

96 CORPORATE GOVERNANCE REPORT

C
O
R
P
O
R
A
T
E

G
O
V
E
R
N
A
N
C
E

BB
90

Deutsche Post DHL Group — 2017 Annual Report

REPORT OF THE SUPERVISORY BOARD

WULF VON SCHIMMELMANN
Chairman

DEAR SHAREHOLDERS,

The year 2017 was both a good and an important financial
year for Deutsche Post DHL Group, and one in which we laid
a solid foundation for our future success.

The Supervisory Board oversaw the Board of Manage-
ment’s business activities to ensure they complied with the
law and were fit for purpose, and regularly discussed material
aspects of business strategy with the Board of Manage ment.
The Board of Management informed us on an ongoing basis
about the course of business and material transactions, and
also kept the Chairman of the Supervisory Board and the
Chairman of the Finance and Audit Committee up to date
between meetings. We were involved promptly in all deci-
sions of material importance for the company and the Group.
We thoroughly examined and discussed all key business
transactions, developments within the enterprise and re-
sults, decisions and planning, including enhancing and pre-
serving our competitive position in the medium and long
term. We discussed in detail any transactions and measures
requiring the approval of the Supervisory Board with the
Board of Management.

All members of the Supervisory Board attended more
than half of the meetings, with the exception of Ulrich
Schröder, whose absences were due to health reasons. The
overall attendance rate was around 92 %; individual attend-
ance figures can be found on page 97.

Six plenary Supervisory Board meetings and 22 com-
mittee meetings were held in the reporting period. The
members of the Board of Management took part in the
plenary meetings unless the Chairman of the Supervisory
Board decided otherwise. The CEO and the members of the
Board of Management responsible for their relevant div-
isions attended the committee meetings. Executives from
the tier immediately below the Board of Management
and / or representatives of the auditors were also invited to
attend for individual agenda items.

Key topics addressed in Supervisory Board meetings

In the plenary meeting on 7 March 2017, we reviewed in
depth and then approved, on the recommendation of the
Finance and Audit Committee, the annual and consolidated
financial statements and the management reports for finan-
cial year 2016; we concurred with the Board of Manage-

Corporate Governance — REPORT OF THE SUPERVISORY BOARD

ment’s proposed resolution on the appropriation of the
net retained profit. The auditors reported on the findings
of their audit and were available to answer questions. We
determined the performance-related remuneration to be
paid to the members of the Board of Management for the
financial year, based upon the target achievement figures
that had been established, and also adopted the Report of
the Supervisory Board, the Corporate Governance Report
and the proposed resolutions for the Annual General Meet-
ing. Additionally, we addressed the results of the efficiency
review of our activities.

In the meeting on 23 June 2017, we appointed Thomas
Ogilvie as the member of the Board of Management for
Human Resources and Labour Director, as well as dis-
cussed the status of the IT Renewal Roadmap in the Global
Forwarding business unit.

At the meeting on 26 September 2017, we resolved to
adjust the remuneration system for the Board of Manage-
ment. In the closed meeting that followed, we discussed the
progress made in implementing our Strategy 2020 as well
as future strategic challenges, particularly digitalisation, to-
gether with the Board of Management, with the support of
invited outside presenters.

At the last meeting of the Supervisory Board in 2017,
which was held on 12 December, we discussed the Express
division’s e-commerce and B2C strategy and the course of
business in Europe. We also approved the 2018 business
plan for the Group, set the Board of Management’s per-
formance targets for financial year 2018 and resolved to
issue a further unqualified Declaration of Conformity.

The extraordinary meetings held on 23 August and
28 November 2017 addressed the sale of our shares in
Williams Lea Tag.

Key topics addressed in committee meetings

The Supervisory Board’s six committees prepare decisions
by the full Supervisory Board and resolve issues that they
have been delegated to decide. The chairs of the committees
report in the plenary meetings on the work of the com-
mittees.

The Executive Committee met on five occasions. It
focused primarily on Board of Management issues and on
preparing the Supervisory Board meetings.

The Personnel Committee held four meetings. Items
discussed included the strategic human resources prior-
ities, personnel development, increasing the number of
women in executive positions, the further development of

the Group-wide “Certified” initiative, which promotes em-
ployee commitment and changes in our corporate culture,
and the annual employee opinion survey.

The Finance and Audit Committee met seven times. It
examined the annual financial statements and the manage-
ment reports for Deutsche Post AG and the Group in the
presence of the auditors. It discussed the quarterly finan-
cial reports and the interim report for the first half of the
year, which were reviewed by the auditors, before their pub-
lication with the Board of Management and the auditors.
The Audit Committee recommended to the Supervisory
Board that it propose PricewaterhouseCoopers GmbH
Wirtschafts prüfungsgesellschaft (PwC), Düsseldorf, to the
Annual General Meeting for election as the auditors of the
financial statements of Deutsche Post AG and the Group,
and as the auditors providing reviews of any interim re-
ports; in addition, it issued the audit engagement for the
auditors for the reporting period and specified the key audit
priorities. The statement of independence required from
the auditors was available to the committee. The commit-
tee also addressed the non-audit services provided by the
auditors, and the enterprise’s accounting process and risk
management system, as well as discussing the findings of
internal audits. It obtained detailed reports from the Chief
Compliance Officer on compliance and on updates to the
compliance organisation and compliance management.

The Strategy Committee met six times, primarily ad-
dressing the business units’ strategic positioning in their
respective market segments and the implementation of our
Strategy 2020. The primary focus was on cybersecurity and
on strategies and measures for digitally transforming the
enterprise.

The Nomination Committee and the Mediation Com-

mittee did not meet in the reporting period.

Changes to the Supervisory Board and Board of Management

There were no changes to the shareholder representatives
during the reporting period. With respect to the employee
representatives, Ulrike Lennartz-Pipenbacher was appointed
as a member of the Supervisory Board by the court following
the departure of Helga Thiel, effective as of 1 July.

Tim Scharwath assumed responsibility for the Global
Forwarding, Freight division with effect from 1 June. Thomas
Ogilvie was appointed as the member of the Board of
Manage ment for Human Resources and Labour Director
of Deutsche Post AG with effect from 1 September 2017.

Deutsche Post DHL Group — 2017 Annual Report

the Board of Management’s proposal on the appropriation
of the net retained profit were discussed in detail with the
Board of Management and representatives of the auditors,
who reported on the results of their audit and were avail able
to answer questions and provide additional information.
The Supervisory Board concurred with the results of the
audit and approved the annual and consolidated financial
statements for financial year 2017, as recommended by the
Finance and Audit Committee. No objections were raised
on the basis of the final outcome of the examination by the
Supervisory Board and the Finance and Audit Committee
of the annual and consolidated financial statements, the
management reports and the proposal for the appropri-
ation of the net retained profit. Similarly, no objections were
raised with regard to the examination of the (consolidated)
non-financial report. The Supervisory Board endorsed the
Board of Management’s proposal for the appropriation of
the net retained profit and the payment of a dividend of
€1.15 per share.

We would like to thank the members of the Board of
Management and the employees of Deutsche Post AG and
all Group companies for their hard work, which was instru-
mental to our success in financial year 2017.

Bonn, 6 March 2018
The Supervisory Board

Wulf von Schimmelmann
Chairman

Managing conflicts of interest

None of the Supervisory Board members hold positions on
the governing bodies of, or provide consultancy services to,
the Group’s main competitors. The Supervisory Board was
not informed of any conflicts of interest affecting individual
members during the reporting period.

Compliance with all recommendations of the German
Corporate Governance Code

In December 2017, the Board of Management and the
Super visory Board issued an unqualified Declaration of
Conformity pursuant to section 161 of the Aktiengesetz
(AktG – German Stock Corporation Act), which was also
published on the company’s website. The declarations from
previous years are also available there. Deutsche Post AG
also continued to comply with all recommendations of
the Government Commission on the German Corporate
Governance Code in the version dated 5 May 2015, which
was published in the Federal Gazette on 12 June 2015, fol-
lowing submission of the Declaration of Conformity in
December 2016. It also complied with the recommen-
dations of the Government Commission on the German
Corporate Governance Code in the version dated 7 Febru-
ary 2017, which was published in the Federal Gazette on
24 April / 19 May 2017, and aims to continue to do so in fu-
ture. We have also implemented all the suggestions made by
the Government Commission, with the exception of broad-
casting the full AGM on the internet. Further information
regarding corporate governance within the enterprise can
be found in the Corporate Governance Report (page 96 ff.).

2017 annual and consolidated financial statements examined

The auditors elected by the AGM, PricewaterhouseCoopers
GmbH Wirtschaftsprüfungsgesellschaft (PwC), Düsseldorf,
audited the annual and consolidated financial statements
for financial year 2017, including the respective manage-
ment reports, and issued unqualified audit opinions. PwC
also reviewed the quarterly financial reports and the interim
report for the first half of the year.

Following a detailed preliminary assessment by the
Finance and Audit Committee, the Supervisory Board
examined the annual and consolidated financial statements,
including the Board of Management’s proposal on the ap-
propriation of the net retained profit, and the management
reports and (consolidated) non-financial report for finan-
cial year 2017 at its meeting on 6 March 2018. The finan-
cial statement documents, the auditors’ audit reports and

Corporate Governance — REPORT OF THE SUPERVISORY BOARD — SUPERVISORY BOARD — Members of the Supervisory Board —
Committees of the Supervisory Board

SUPERVISORY BOARD

Members of the Supervisory Board

Committees of the Supervisory Board

b.01

b.02

Shareholder representatives

Employee representatives

Executive Committee

Prof. Dr Wulf von Schimmelmann (Chair)
Former CEO of Deutsche Postbank AG

Dr Nikolaus von Bomhard
Former Chair of the Board of Manage
ment, Münchener Rückversicherungs
Gesellschaft AG (Munich Re)
(since 27 April 2017)

Ingrid Deltenre
Former Director General of the European
Broadcasting Union (since 4 September 2017)

Werner Gatzer
State Secretary, Federal Ministry
of Finance (until 31 December 2017)

CEO of Deutsche Bahn Station & Service AG
(since 1 January 2018)

Prof. Dr Henning Kagermann
Former CEO of SAP AG

Simone Menne
Member of the Board of Managing
Directors, Boehringer Ingelheim GmbH
(until 31 December 2017)

Roland Oetker
Managing Partner, ROI Verwaltungs
gesellschaft mbH

Dr Ulrich Schröder (until 6 February 2018)
CEO of KfW Bankengruppe
( until 31 December 2017)

Dr Stefan Schulte
Chair of the Executive Board of Fraport AG

Prof. Dr-Ing. Katja Windt
Bernd Rogge Professorship of Global
Production Logistics

President / member of the Executive Board
of Jacobs University Bremen gGmbH
(until 14 January 2018)

SMS group GmbH, Electric & Automation
and Digital Solutions (since 15 January 2018)

Andrea Kocsis (Deputy Chair)
Deputy Chair of ver.di National Executive
Board and Head of Postal Services,
Forwarding Companies and Logistics on
the ver.di National Executive Board

Rolf Bauermeister
Head of Postal Services, Codetermination
and Youth and Head of National Postal
Services Group at ver.di National
Administration

Jörg von Dosky
Chair of the Group and Company
Executive Representation Committee,
Deutsche Post AG

Thomas Koczelnik
Chair of the Group Works Council,
Deutsche Post AG

Anke Kufalt
Chair of the Works Council, DHL Global
Forwarding GmbH, Hamburg

Ulrike Lennartz-Pipenbacher
(since 1 July 2017)
Deputy Chair of the Central Works
Council, Deutsche Post AG

Andreas Schädler
Business Division Sales Post,
Deutsche Post AG

Sabine Schielmann
Member of the Executive Board of the
Central Works Council, Deutsche Post AG

Stephan Teuscher
Head of Wage, Civil Servant and Social
Policies in the Postal Services, Forwarding
Companies and Logistics Department,
ver.di National Administration

Helga Thiel (until 30 June 2017)
Deputy Chair of the Central Works Council,
Deutsche Post AG

Stefanie Weckesser
Deputy Chair of the Works Council,
Deutsche Post AG, Mail Branch, Augsburg

Prof. Dr Wulf von Schimmelmann (Chair)

Andrea Kocsis (Deputy Chair)

Rolf Bauermeister

Dr Nikolaus von Bomhard
(since 1 December 2017)

Werner Gatzer

Roland Oetker (until 30 November 2017)

Stefanie Weckesser

Personnel Committee

Andrea Kocsis (Chair)

Prof. Dr Wulf von Schimmelmann
(Deputy Chair)

Thomas Koczelnik

Roland Oetker

Finance and Audit Committee

Dr Stefan Schulte (Chair)

Stephan Teuscher (Deputy Chair)

Werner Gatzer

Thomas Koczelnik

Simone Menne

Helga Thiel (until 30 June 2017)

Stefanie Weckesser (since 1 July 2017)

Strategy Committee

Prof. Dr Wulf von Schimmelmann (Chair)

Andrea Kocsis (Deputy Chair)

Rolf Bauermeister

Prof. Dr Henning Kagermann

Thomas Koczelnik

Dr Ulrich Schröder (until 30 November 2017)

Roland Oetker (since 1 December 2017)

Nomination Committee

Prof. Dr Wulf von Schimmelmann (Chair)

Dr Nikolaus von Bomhard
(since 1 December 2017)

Werner Gatzer

Roland Oetker (until 30 November 2017)

Mediation Committee (pursuant
to section 27 (3) of the German
Co-determination Act)

Prof. Dr Wulf von Schimmelmann (Chair)

Andrea Kocsis (Deputy Chair)

Rolf Bauermeister

Roland Oetker

Deutsche Post DHL Group — 2017 Annual Report

Mandates held by the Supervisory Board

b.03

Shareholder representatives

Employee representatives

Membership of supervisory boards
required by law

Jörg von Dosky
PSD Bank München eG

Andreas Schädler
PSD Bank Köln eG (Chair)

Stephan Teuscher
DHL Hub Leipzig GmbH (Deputy Chair)

Helga Thiel (until 30 June 2017)
PSD Bank Köln eG (Deputy Chair)

Membership of supervisory boards
required by law

Prof. Dr Wulf von Schimmelmann (Chair)
Allianz Deutschland AG

Maxingvest AG

Dr Nikolaus von Bomhard
ERGO Group AG 1 (Chair) (until 26 April 2017)

Munich Health Holding AG 1 (Chair)
( until 26 April 2017)

Werner Gatzer
Flughafen Berlin Brandenburg GmbH

PDBerater der öffentlichen Hand GmbH (Chair)

Prof. Dr Henning Kagermann
BMW AG (until 11 May 2017)

Deutsche Bank AG

Münchener RückversicherungsGesellschaft AG
(Munich Re)

KUKA AG (since 31 May 2017)

Simone Menne
BMW AG

Dr Ulrich Schröder (until 6 February 2018)
Deutsche Telekom AG

Prof. Dr-Ing. Katja Windt
Fraport AG

Membership of comparable bodies

Prof. Dr Wulf von Schimmelmann (Chair)
Accenture Corp., Ireland (Board of Directors)
(until 9 February 2017)

Thomson Reuters Corp., Canada
(Board of Directors)

Ingrid Deltenre
Givaudan SA, Switzerland (Board of Directors)

Banque Cantonale Vaudoise SA, Switzerland
(Board of Directors)

Agence France Presse, France (Board
of Directors) (since 28 September 2017)

Roland Oetker
RheinischBergische Verlagsgesellschaft mbH
(Supervisory Board)

Dr Ulrich Schröder (until 6 February 2018)
DEG – Deutsche Investitions und Entwicklungs
gesellschaft mbH (Supervisory Board)
(until 31 December 2017)

“Marguerite 2020”: European Fund for Energy,
Climate Change and Infrastructure, Luxembourg
(Supervisory Board)

Dr Stefan Schulte
Fraport Ausbau Süd GmbH
(Supervisory Board, Chair) 2

Fraport Regional Airports of Greece A S. A.
(Board of Directors, Chair) 2

Fraport Regional Airports of Greece B S. A.
(Board of Directors, Chair) 2

Fraport Regional Airports of Greece Manage
ment Company S. A. (Board of Directors, Chair) 2

Fraport Brasil S. A. Aeroporto de Porto Alegre
(Supervisory Board, Chair) 2 (since 4 December 2017)

Fraport Brasil S. A. Aeroporto de Fortaleza
(Supervisory Board, Chair) 2 (since 4 December 2017)

1 Group mandates, Münchener RückversicherungsGesellschaft AG (Munich Re).
2 Group mandates, Fraport AG.

Corporate Governance — SUPERVISORY BOARD — Mandates held by the Supervisory Board — BOARD OF MANAGEMENT — Members of the Board
of Management — Mandates held by the Board of Management

BOARD OF MANAGEMENT

Members of the Board of Management

Dr Frank Appel
Chief Executive Officer

Global Business Services (since 1 January 2017)

(Dr Frank Appel was also responsible for Global
Forwarding, Freight until 30 June 2017.)

Born in 1961
Member since November 2002
CEO since February 2008
Appointed until October 2022

Ken Allen
Express

Born in 1955
Member since February 2009
Appointed until July 2020

Dr h. c. Jürgen Gerdes
Post eCommerce Parcel

Born in 1964
Member since July 2007
Appointed until June 2020

John Gilbert
Supply Chain

Born in 1963
Member since March 2014
Appointed until March 2022

Melanie Kreis
Finance

(Melanie Kreis was also responsible for Human
Resources until 31 August 2017.)

Born in 1971
Member since October 2014
Appointed until June 2022

Dr Thomas Ogilvie
Human Resources

Born in 1976
Member since September 2017
Appointed until August 2020

Tim Scharwath
Global Forwarding, Freight

Born in 1965
Member since June 2017
Appointed until May 2020

Mandates held by the Board of Management

Membership of supervisory boards
required by law

–

Membership of comparable bodies

Ken Allen
DHLSinotrans International Air Courier Ltd, China (Board of Directors) 1

1 Group mandate.

b.04

b.05

Deutsche Post DHL Group — 2017 Annual Report

CORPORATE GOVERNANCE
REPORT

and Annual Corporate Governance Statement for
Deutsche Post AG and Deutsche Post DhL Group

Company in compliance with all recommendations of the
German Corporate Governance Code

In December 2017, the Board of Management and the
Super visory Board once again issued an unqualified Declar-
ation of Conformity pursuant to section 161 of the Aktien-
gesetz (AktG – German Stock Corporation Act):

“The Board of Management and the Supervisory Board
of Deutsche Post AG declare that the recommendations of
the Government Commission German Corporate Govern-
ance Code in the version dated 5 May 2015 and published
in the Federal Gazette on 12 June 2015 have been complied
with also after issuance of the Declaration of Conformity in
December 2016 and that all recommendations of the Code
in the version dated 7 February 2017 and published in the
Federal Gazette on 24 April / 19 May 2017 shall be complied
with in the future.”

We also intend to implement the suggestions made in
the Code, with one exception: the Annual General Meeting
will only be broadcast on the internet up to the end of the
CEO’s address. This helps ensure frank and open discussion
during the shareholders’ debate.

The current Declaration of Conformity and those for

the last five years can be viewed at

dpdhl.com/en/investorS.

Corporate governance principles

Our business relationships and activities are based on re-
sponsible business practice that complies with applicable
laws, ethical standards and international guidelines, and
this also forms part of our Group strategy. Equally, we re-
quire our suppliers to act in this way. We encourage and
facilitate long-term relationships with our stakeholders,
whose decisions to select Deutsche Post DHL Group as a
supplier, employer or investment of choice are increasingly
also based on the requirement that we comply with good
corporate governance criteria.

Our

Code of Conduct dpdhl.com/en is firmly established
within the company and is applicable in all divisions and
regions. The Code of Conduct is based on the principles
set out in the Universal Declaration of Human Rights and
the United Nations (UN) Global Compact. It is consistent
with recognised legal standards, including the applicable
anti-corruption legislation and agreements.

The Code of Conduct also defines what we mean by
diversity within the Group. Diversity and mutual respect
are core values that are preconditions for the economic
strength of the entire Group. The key criteria for the recruit-
ment and professional development of our employees are
their skills and qualifications. Our Diversity Council dis-
cusses the strategic aspects of diversity management and
divisional requirements. Its members comprise executives
from the central functions and divisions and it is chaired by
the Board member for Human Resources. Members also act
as ambassadors for, and promote, diversity in the divisions.
The members of the Board of Management and the Super-
visory Board support the Group’s diversity strategy, with
a particular focus on the goal of increasing the number of
women on the Board of Management. Further information
on the contents of the Code of Conduct and on diversity
Corporate Responsibility
management can be found in the
Report, dpdhl.com/cr-report2017.

The goal of the compliance management system (CMS)
is to ensure observance of the statutory provisions and
internal policies applicable to the Group. The compliance
programme aims to prevent breaches of the rules from oc-
curring in the first place, or to identify them at an early stage
and to take appropriate action. The effectiveness of the CMS
is reviewed on an on-going basis in order to adapt it if nec-
essary to relevant developments and new legal requirements.
An overview of the compliance organisation and the ele-
ments making up the compliance programme can be found
Corporate Responsibility Report, dpdhl.com/cr-report2017.
in the

Co-operation between the Board of Management and the
Supervisory Board

As a listed German public limited company, Deutsche Post AG
has a dual management system. The Board of Management
manages the company. The Supervisory Board appoints,
oversees and advises the Board of Management.

Corporate Governance — CORPORATE GOVERNANCE REPORT

The Board of Management comprises the Chief Ex-
ecutive Officer (CEO), the Chief Financial Officer (CFO) and
the Board member for Human Resources, plus the members
responsible for the four operating divisions: Post - eCom-
merce - Parcel; Express; Global Forwarding, Freight; and
Supply Chain. Group management functions are central-
ised in the Corporate Center. The
Corporate Strategy, page 34,
provides a framework for the whole Group. The Board of
Management’s rules of procedure set out the principles
governing its internal organisation, management and rep-
resentation, as well as co-operation between its individual
members. Within this framework, Board members man-
age their departments independently and inform the rest
of the Board about key developments at regular intervals.
The Board of Management as a whole decides on matters of
particular significance for the company or the Group, in-
cluding all decisions that have to be presented to the Super-
visory Board for approval, and all tasks that cannot be dele-
gated to individual members of the Board. The Board of
Manage ment as a whole also decides on matters presented
to it by individual members of the Board of Management for
decision. When making decisions, members of the Board
of Management may not act in their own personal interest
or exploit corporate business opportunities for their own
benefit. The Supervisory Board must be informed of any
conflicts of interest without delay. No member of the Board
of Management is a member of more than three super visory
boards of non-Group listed companies or of other super-
visory bodies with comparable requirements. The D & O
insurance for the members of the Board of Management
provides for a deductible as set out in the AktG.

The Supervisory Board appoints, advises and oversees
the Board of Management. It has established rules of pro-
cedure for itself containing the principles for its internal
organisation, a catalogue of Board of Management trans-
actions requiring its approval and the rules governing the
work of the Supervisory Board committees.

The Supervisory Board meets at least four times a year.
Extraordinary Supervisory Board meetings are held when-
ever particular developments or measures need to be dis-
cussed or approved at short notice. In financial year 2017,
the Supervisory Board held six plenary meetings, 22 com-

mittee meetings and one closed meeting, as described in the
Report of the Supervisory Board, page 90 ff. At 92 %, the attendance
rate remained very high in the reporting period, as the fol-
lowing breakdown shows. Ulrich Schröder’s absences were
due to health reasons.

Attendance at plenary and committee meetings

Supervisory Board member

Prof. Dr Wulf von Schimmelmann (Chair)

Andrea Kocsis (Deputy Chair)

Rolf Bauermeister

Dr Nikolaus von Bomhard

Ingrid Deltenre

Jörg von Dosky

Werner Gatzer

Prof. Dr Henning Kagermann

Thomas Koczelnik

Anke Kufalt

Ulrike LennartzPipenbacher (since 1 July 2017)

Simone Menne

Roland Oetker

Andreas Schädler

Sabine Schielmann

Dr Ulrich Schröder

Dr Stefan Schulte

Stephan Teuscher

Helga Thiel (until 30 June 2017)

Stefanie Weckesser

Prof. DrIng. Katja Windt

b.06

Attendance

100

The
at

Report of the Supervisory Board, page 90 ff., can also be viewed

dpdhl.com/en/investors.
The Board of Management and the Supervisory Board
regularly discuss the Group’s strategy, the divisions’ object-
ives and strategies, the financial position and performance
of the company and the Group, key business transactions,
the progress of acquisitions and investments, compliance
and compliance management, risk exposure and risk man-
agement, and all material business planning and related im-
plementation issues. The Board of Management informs the
Supervisory Board promptly and in full about all issues of
significance. The Chairman of the Supervisory Board and
the CEO maintain close contact about current issues.

Deutsche Post DHL Group — 2017 Annual Report

The Supervisory Board carries out an annual efficiency
review of its work. In the current reporting period it again
concluded that it had performed its monitoring and ad-
visory duties efficiently and effectively. Suggestions made
by individual members are also taken up and implemented
during the year. Supervisory Board decisions are prepared
and discussed in advance in separate meetings of the share-
holder representatives and the employee representatives,
and by the relevant committees. Each plenary Supervisory
Board meeting includes a detailed report on the committees’
work and the decisions taken. Supervisory Board members
are personally responsible for ensuring they receive the
training and professional development measures they need
to perform their tasks (e.g. on changes to the legal frame-
work and on issues relating to the future); the company sup-
ports them in this by arranging presentations by internal
and external speakers, among other things.

No Supervisory Board members hold positions on the
governing bodies of, or provide consultancy services to, the
Group’s main competitors.

All Supervisory Board members are independent
within the meaning of the German Corporate Governance
Code. The number of independent Supervisory Board
members therefore exceeds the target we had set ourselves
of at least 75 % of the Supervisory Board as a whole. In light
of the European Commission’s recommendation on the
independence of non-executive or supervisory directors
and the wide-ranging protection against summary dis-
missal and ban on discrimination contained in the Betriebs-
verfas sungsgesetz (BetrVG – German Works Constitution
Act) and the Mitbestimmungsgesetz (MitbestG – German
Co-determination Act), being an employee of the company
is not inconsistent with the requirement for independence
as defined by the Code. The largest shareholder in the com-
pany, KfW Bankengruppe, currently holds approximately
21 % of the shares in Deutsche Post AG. There are therefore
no controlling shareholders as defined in the Code with
whom relationships might exist that could call the Super-
visory Board’s independence into question.

With the exception of Wulf von Schimmelmann, who
was a member of the Board of Management until June 2007,
there are no former members of the Board of Management
on the Supervisory Board.

The terms of office of those members of the Supervisory
Board who are elected individually by the Annual General
Meeting comply, in all cases, with the age limit of 72 that has
been set and with the requirement that, as a general rule,
members should not serve more than three terms of office.

Executive committees and Supervisory Board committees

Three executive committees prepare the resolutions to be
passed by the full Board of Management and take deci-
sions on matters delegated to them. The duties of the ex-
ecutive committees include preparing and/or approving in-
vestments and transactions. The Deutsche Post Executive
Committee is responsible for the Post - eCommerce - Parcel
division; the DHL Executive Committee is in charge of the
DHL divisions; the CC & GBS Executive Committee covers
the Corporate Center and Global Business Services. The
CEO, the CFO and the Board member for Human Resources
have permanent representation on the committees, whilst
the Board members responsible for the divisions are rep-
resented on the committees in relation to matters affecting
their divisions. Executives from the first and second tiers
immediately below the Board of Management attend ex-
ecutive committee meetings that cover topics relevant to
their fields. The Deutsche Post Executive Committee and
the DHL Executive Committee each meet once or twice a
month, whilst the CC & GBS Executive Committee usually
meets every quarter.

Business review meetings also take place once a quar-
ter. These meetings are part of the strategic performance
dialogue between the divisions, the CEO and the CFO. The
business review meetings discuss strategic initiatives, oper-
ational matters and the budgetary situation in the divisions.
members of the Board of Management and the mandates held

The

by them are listed on page 95.

The Supervisory Board has formed six committees to
ensure its duties are discharged effectively. In particular,
these committees prepare the resolutions to be taken in the
plenary Supervisory Board meetings. The procedures ap-
plicable in the committees are governed by the rules set out
in the rules of procedure for the Supervisory Board, with
the necessary modifications.

The Executive Committee does the preparatory work
for appointing members of the Board of Management
and drawing up their contracts of service, and prepares the
resolution by the full Supervisory Board that determines
their remuneration.

The Finance and Audit Committee oversees the com-
pany’s accounts, its accounting process, the effectiveness
of the internal control system, the risk management and
internal auditing systems, and the audit of the financial
statements, and in particular the selection of the auditors
and their independence. It approves the engagement of
the auditor to perform non- audit services. It examines cor-
porate compliance issues and discusses the half-yearly and

Corporate Governance — CORPORATE GOVERNANCE REPORT

quarterly financial reports with the Board of Management
before publication. Based on its own assessment, the com-
mittee submits proposals for the approval of the annual and
consolidated financial statements by the Supervisory Board.
The Chairman of the Finance and Audit Committee, Stefan
Schulte, is an in dependent financial expert as defined in
sections 100 (5) and 107 (4) of the AktG.

An agreement has been reached with the auditors that
the Chairman of the Supervisory Board and the Chairman
of the Finance and Audit Committee shall be informed
without delay of any potential grounds for exclusion or for
impairment of the auditors’ independence that arise dur-
ing the audit, to the extent that these are not immediately
remedied. In addition, it has been agreed that the auditors
shall inform the Supervisory Board without delay of all
material findings and incidents occurring in the course of
the audit. Furthermore, the auditors must inform the Super-
visory Board if, while conducting the audit, they find any
facts leading to the Declaration of Conformity issued by
the Board of Management and Supervisory Board being
incorrect.

The Personnel Committee discusses human resources

principles for the Group.

The Mediation Committee carries out the duties as-
signed to it pursuant to the MitbestG: it makes proposals
to the Supervisory Board on the appointment of members
of the Board of Management in those cases in which the re-
quired majority of two-thirds of the votes of the Supervisory
Board members is not reached. The committee did not meet
in the past financial year.

The Nomination Committee presents the shareholder
representatives of the Supervisory Board with recommen-
dations for shareholder candidates for election to the Super-
visory Board at the Annual General Meeting.

The Strategy Committee prepares the Supervisory
Board’s strategy discussions and regularly discusses the
competitive position of the enterprise as a whole and of the
individual divisions. It addition, it does preparatory work
on corporate acquisitions and divestitures that require the
Supervisory Board’s approval.

Further information about the work of the Supervisory
Board and its committees in financial year 2017 is contained
in the
Report of the Supervisory Board, page 90 ff. Details on the
members of the Supervisory Board and the composition
of the Supervisory Board committees can be found in the
section on the

Supervisory Board, page 93 f.

Targets for the Supervisory Board’s composition and skills
profile

The Supervisory Board has set itself the following targets
for its composition; they also represent the skills profile it
has set itself:
1 When proposing candidates to the Annual General
Meeting for election as Supervisory Board members,
the Super visory Board shall act purely in the interests
of the company. Subject to this requirement, the Super-
visory Board aims to ensure that independent Super-
visory Board members as defined in number 5.4.2 of
the German Corporate Governance Code account for
at least 75 % of the Supervisory Board, and that at least
30 % of the Supervisory Board members are women.
2 The company’s international activities are already ad-
equately reflected in the composition of the Supervisory
Board. The Supervisory Board aims to maintain this
and its future proposals to the Annual General Meet-
ing will therefore consider candidates whose origins,
education or professional experience equip them with
particular international knowledge and experience.
3 The Supervisory Board should be in a position to collect-
ively provide competent advice to the Board of Manage-
ment on fundamental future issues; in its opinion this
includes, in particular, the digital transformation.
4 The Supervisory Board should collectively have suffi-
cient expertise in the areas of accounting or financial
statement audits. This includes knowledge of inter-
national developments in the field of accounting. Add-
itionally, the Supervisory Board believes that the inde-
pendence of its members helps guarantee the integrity
of the accounting process and ensure the independence
of the auditors.

5 Conflicts of interest affecting Supervisory Board mem-
bers are an obstacle to providing independent and
efficient advice to, and supervision of, the Board of
Management. The Supervisory Board will decide how
to deal with potential or actual conflicts of interest on
a case-by-case basis, in accordance with the law and
giving due consideration to the German Corporate
Governance Code.

100

Deutsche Post DHL Group — 2017 Annual Report

6 In accordance with the age limit adopted by the Super-
visory Board and laid down in the rules of procedure
for the Supervisory Board, proposals for the election
of Super visory Board members must ensure that their
term of office ends no later than the close of the next
Annual General Meeting to be held after the Super-
visory Board member reaches the age of 72. As a gen-
eral rule, Supervisory Board members should not serve
more than three full terms of office.

The current Supervisory Board meets these targets and this
skills profile.

Diversity

Diversity is an important criterion for the Supervisory
Board when it comes to appointing members of the Board
of Management. With their varied qualifications, person-
alities, skills and experience, the members of the Board of
Management play a significant role in the company’s success.
The CEO, the CFO and all other members of the Board of
Management with operational responsibility have extensive
international expertise and experience. Their different ages
help ensure a range of opinions within this body. Long-term
succession planning in all divisions aims to guarantee that
there will be an adequate pipeline of qualified successors
for appointments to the Board of Management in the future.
Particular attention is given to ensuring that women can
advance within the company; specially designed measures
support them from the start of their careers, and candidates
with potential are given opportunities for development.

The current target for the proportion of women on the
Board of Management is 1 : 7. This target is met at present.
The goal is to achieve a target of 2 : 8 by the end of the Annual
General Meeting in 2021. The Board of Management has
set target quotas for the proportion of women in the two
executive tiers below the Board of Management of 20 % for
tier 1 and 30 % for tier 2; these targets apply to the period
between 1 January 2017 and 31 December 2019. The two
executive tiers are defined on the basis of their reporting
lines: tier 1 comprises executives assigned to the N-1 report-
ing line, whilst tier 2 consists of executives from the N-2
reporting line.

The list of goals mentioned above, which the Super visory
Board expanded most recently in December 2017, provides
an overview of the key diversity issues for the Super visory
Board that it takes into account when considering its own
composition. With eight women (40 %), the Super visory
Board exceeds the statutory gender quota of 30 %.

Shareholders and General Meeting

Shareholders exercise their rights, and in particular their
right to receive information and to vote, at the General
Meeting. Each share in the company entitles the holder to
one vote. The agenda for the General Meeting, the reso-
lutions proposed by the Board of Management and Super-
visory Board to the General Meeting, and additional docu-
ments and information about the General Meeting will be
made available at
dpdhl.com/en/investors at the latest when the
General Meeting is convened. We assist our shareholders
in exercising their voting rights not only by making it pos-
sible to submit postal votes but also by appointing company
proxies, who cast their votes solely as instructed to do so by
the shareholders and who can also be reached during the
General Meeting. Additionally, shareholders can authorise
company proxies, submit postal votes and grant proxies to
banks and shareholder associations attending the General
Meeting via the company’s online service.

The Board of Management and the Supervisory Board
intend to make use of the option permitted under the AktG
at the 2018 Annual General Meeting to allow the General
Meeting to resolve on the approval of the remuneration sys-
tem for members of the Board of Management.

Remuneration of the Board of Management
and the Super visory Board

The remuneration of the Board of Management and the
Group Management
Supervisory Board can be found in the
Report, page 40 ff.

125

INCOME STATEMENT DISCLOSURES

125
125
125
126
126
127
127
127
129
129

11 – Revenue
12 – Other operating income
13 – Materials expense
14 – Staff costs / employees
15 – Depreciation, amortisation and impairment losses
16 – Other operating expenses
17 – Net finance costs
18 – Income taxes
19 – Earnings per share
20 – Dividend per share

130 BALANCE SHEET DISCLOSURES

130
132
133
133
134
134
135
135
135
135
136

136
139
139
139
139
140
141
146
147
149

21 – Intangible assets
22 – Property, plant and equipment
23 – Investment property
24 – Investments accounted for using the equity method
25 – Financial assets
26 – Other assets
27 – Deferred taxes
28 – Inventories
29 – Trade receivables
30 – Cash and cash equivalents
31 – Assets held for sale and liabilities associated with assets

held for sale

32 – Issued capital and purchase of treasury shares
33 – Capital reserves
34 – Other reserves
35 – Retained earnings
36 – Equity attributable to Deutsche Post AG shareholders
37 – Noncontrolling interests
38 – Provisions for pensions and similar obligations
39 – Other provisions
40 – Financial liabilities
41 – Other liabilities

150 CASH FLOW DISCLOSURES

150

42 – Cash flow disclosures

152 OTHER DISCLOSURES

152
162
162
162
163
166
169
169
170

43 – Risks and financial instruments of the Group
44 – Contingent liabilities
45 – Other financial obligations
46 – Litigation
47 – Sharebased payment
48 – Related party disclosures
49 – Auditor’s fees
50 – Exemptions under the HGB and local foreign legislation
51 – Declaration of Conformity with the German Corporate

Governance Code

170

52 – Significant events after the reporting date and other

disclosures

171 RESPONSIBILITY STATEMENT

172

INDEPENDENT AUDITOR’S REPORT

C
O
N
S
O
L
I

D
A
T
E
D

F
I

N
A
N
C
I

A
L

S
T
A
T
E
M
E
N
T
S

CONSOLIDATED
FINANCIAL STATEMENTS
101 — 176

102

INCOME STATEMENT

103 STATEMENT OF COMPREHENSIVE

INCOME

104 BALANCE SHEET

105 CASH FLOW STATEMENT

106 STATEMENT OF CHANGES IN EQUITY

107 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS OF
DEUTSCHE POST AG

107 BASIS OF PREPARATION

107
107
109
110
110
112
113
120
121

1 – Basis of accounting
2 – Consolidated group
3 – Significant transactions
4 – Adjustment of priorperiod amounts
5 – New developments in international accounting under IFRS s
6 – Currency translation
7 – Accounting policies
8 – Exercise of judgement in applying the accounting policies
9 – Consolidation methods

122 SEGMENT REPORTING

122

10 – Segment reporting

102

Deutsche Post DHL Group — 2017 Annual Report

INCOME STATEMENT

1 January to 31 December

€ m

Revenue

Other operating income

Total operating income

Materials expense

Staff costs

Depreciation, amortisation and impairment losses

Other operating expenses

Total operating expenses

Net income from investments accounted for using the equity method

Profit from operating activities (EbIT)

Financial income

Finance costs

Foreign currency losses

Net finance costs

Profit before income taxes

Income taxes

Consolidated net profit for the period

attributable to Deutsche Post AG shareholders

attributable to noncontrolling interests

Basic earnings per share (€)

Diluted earnings per share (€)

Note

2016

57,334

2,156

59,490

–30,620

–19,592

–1,377

– 4,414

– 56,003

3,491

–384

– 65

–359

3,132

–351

2,781

2,639

142

2.19

2.10

c.01

2017

60,444

2,139

62,583

–32,775

–20,072

–1,471

– 4,526

– 58,844

3,741

– 482

–18

– 411

3,330

– 477

2,853

2,713

140

2.24

2.15

Consolidated Financial Statements — INCOME STATEMENT — STATEMENT OF COMPREHENSIVE INCOME

STATEMENT OF COMPREHENSIVE INCOME

1 January to 31 December

€ m

Consolidated net profit for the period

Items that will not be reclassified to profit or loss
Change due to remeasurements of net pension provisions

Other changes in retained earnings

Income taxes relating to components of other comprehensive income

Share of other comprehensive income of investments accounted for using the equity method, net of tax

Total, net of tax

Items that may be reclassified subsequently to profit or loss
IAS 39 revaluation reserve
Changes from unrealised gains and losses

Changes from realised gains and losses

IAS 39 hedging reserve
Changes from unrealised gains and losses

Changes from realised gains and losses

Currency translation reserve
Changes from unrealised gains and losses

Changes from realised gains and losses

Income taxes relating to components of other comprehensive income

Share of other comprehensive income of investments accounted for using the equity method, net of tax

Total, net of tax

Other comprehensive income, net of tax

Total comprehensive income

attributable to Deutsche Post AG shareholders

attributable to noncontrolling interests

103

c.02

2017

2,853

378

–28

350

–1

–14

Note

2016

2,781

– 876

– 868

– 6

– 63

–291

–736

– 6

–300

–1,168

1,613

1,478

135

–7

– 8

–736

–386

2,467

2,344

123

104

Deutsche Post DHL Group — 2017 Annual Report

BALANCE SHEET

€ m

ASSETS
Intangible assets

Property, plant and equipment

Investment property

Investments accounted for using the equity method

Noncurrent financial assets

Other noncurrent assets

Deferred tax assets

Non-current assets

Inventories

Current financial assets

Trade receivables

Other current assets

Income tax assets

Cash and cash equivalents

Assets held for sale

Current assets

Total ASSETS

EQUITY AND LIAbILITIES
Issued capital

Capital reserves

Other reserves

Retained earnings

Equity attributable to Deutsche Post AG shareholders

Noncontrolling interests

Equity

Provisions for pensions and similar obligations

Deferred tax liabilities

Other noncurrent provisions

Noncurrent provisions

Noncurrent financial liabilities

Other noncurrent liabilities

Noncurrent liabilities

Non-current provisions and liabilities

Current provisions

Current financial liabilities

Trade payables

Other current liabilities

Income tax liabilities

Liabilities associated with assets held for sale

Current liabilities

Current provisions and liabilities

Total EQUITY AND LIAbILITIES

c.03

Note

31 Dec. 2016

31 Dec. 2017

12,554

8,389

689

222

11,792

8,782

733

231

2,192

2,272

24,166

23,916

275

374

7,965

2,176

232

3,107

327

652

8,218

2,184

236

3,135

14,129

14,756

38,295

38,672

1,211

2,932

–284

7,228

11,087

263

1,224

3,327

– 998

9,084

12,637

266

11,350

12,903

5,580

106

1,498

7,184

4,571

372

4,943

4,450

1,421

5,947

5,151

272

5,423

12,127

11,370

1,323

1,464

7,178

4,292

561

1,131

899

7,343

4,402

624

13,495

13,268

14,818

14,399

38,295

38,672

Consolidated Financial Statements — BALANCE SHEET — CASH FLOW STATEMENT

CASH FLOW STATEMENT

1 January to 31 December

€ m

Consolidated net profit for the period attributable to Deutsche Post AG shareholders

Consolidated net profit for the period attributable to noncontrolling interests

Income taxes

Net finance costs

Profit from operating activities (EbIT)

Depreciation, amortisation and impairment losses

Net income from disposal of noncurrent assets

Noncash income and expense

Change in provisions

Change in other noncurrent assets and liabilities

Dividend received

Income taxes paid

Net cash from operating activities before changes in working capital

Changes in working capital
Inventories

Receivables and other current assets

Liabilities and other items

Net cash from operating activities

Subsidiaries and other business units

Property, plant and equipment and intangible assets

Investments accounted for using the equity method and other investments

Other noncurrent financial assets

Proceeds from disposal of noncurrent assets

Subsidiaries and other business units

Property, plant and equipment and intangible assets

Investments accounted for using the equity method and other investments

Other noncurrent financial assets

Cash paid to acquire noncurrent assets

Interest received

Current financial assets

Net cash used in investing activities

Proceeds from issuance of noncurrent financial liabilities

Repayments of noncurrent financial liabilities

Change in current financial liabilities

Other financing activities

Proceeds from transactions with noncontrolling interests

Cash paid for transactions with noncontrolling interests

Dividend paid to Deutsche Post AG shareholders

Dividend paid to noncontrolling interest holders

Purchase of treasury shares

Proceeds from issuing shares or other equity instruments

Interest paid

Net cash used in financing activities

Net change in cash and cash equivalents

Effect of changes in exchange rates on cash and cash equivalents

Changes in cash and cash equivalents associated with assets held for sale

Changes in cash and cash equivalents due to changes in consolidated group

Cash and cash equivalents at beginning of reporting period

Cash and cash equivalents at end of reporting period

105

c.04

2017

2,713

140

477

411

3,741

1,471

– 82

– 40

– 940

–109

– 626

3,418

–75

–1,032

986

3,297

316

236

576

– 54

–2,203

– 55

–122

–2,434

–285

Note

2016

2,639

142

351

359

3,491

1,377

–113

– 40

–1,799

120

– 528

2,514

–377

299

2,439

265

456

838

–304

–1,966

–19

–33

–2,322

–209

–1,643

–2,091

1,263

– 95

– 58

–205

– 9

1,464

– 821

– 51

– 45

–1,027

–1,270

–128

– 836

–138

–1,233

– 437

– 66

3,608

3,107

–120

–148

–160

–1,087

119

– 91

3,107

3,135

106

Deutsche Post DHL Group — 2017 Annual Report

STATEMENT OF CHANGES IN EQUITY

1 January to 31 December

€ m

Note

Balance at 1 January 2016

Capital transactions with owner
Dividend

Transactions with noncontrolling interests

Changes in noncontrolling interests due to changes
in consolidated group

Issue / retirement of treasury shares

Purchase of treasury shares

Convertible bonds

Sharebased payment schemes (issuance)

Sharebased payment schemes (exercise)

Total comprehensive income
Consolidated net profit for the period

Currency translation differences

Change due to remeasurements of net pension
provisions

Issued
capital

1,211

Capital
reserves

2,385

–31

531

– 54

Other changes

– 56

1,211

2,932

– 4

277

– 59

Balance at 31 December 2016

Balance at 1 January 2017

Capital transactions with owner
Dividend

Transactions with noncontrolling interests

Changes in noncontrolling interests due to changes
in consolidated group

Issue / retirement of treasury shares

Purchase of treasury shares

Differences between purchase and issue prices
of treasury shares (sharebased payment schemes)

Convertible bonds

Sharebased payment schemes (issuance)

Sharebased payment schemes (exercise)

Total comprehensive income
Consolidated net profit for the period

Currency translation differences

Change due to remeasurements of net pension
provisions

Other changes

Balance at 31 December 2017

1,224

3,327

–1

Other reserves

IAS 39
revaluation
reserve

IAS 39
hedging
reserve

Currency
translation
reserve

– 41

–15

Equity
attributable
to Deutsche
Post AG
shareholders

11,034

Retained
earnings

7,427

–1,027

–1,000

–1,031

–1,425

–133

–1,558

c.05

Non
controlling
interests

Total equity

261

–129

– 4

11,295

–1,156

–1,031

559

142

– 5

–2

135

263

2,781

–288

– 868

–12

1,613

11,350

–120

–3

–1,390

–11

292

559

2,639

–283

– 866

–12

1,478

– 8

292

–794

–120

– 914

2,713

–729

345

2,344

12,637

140

–22

123

266

2,853

–751

350

2,467

12,903

–298

7,228

11,087

7,228

11,087

–1,270

2,639

– 866

–283

– 8

–27

– 5

2,713

345

–729

–1,027

9,084

Consolidated Financial Statements — STATEMENT OF CHANGES IN EQUITY — NOTES — Basis of preparation

107

NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS OF DEUTSCHE
POST AG

BASIS OF PREPARATION

Deutsche Post DHL Group is a global mail and logistics group. The
Deutsche Post and DHL corporate brands represent a portfolio of
logistics (DHL) and communication (Deutsche Post) services. The
financial year of Deutsche Post AG and its consolidated subsidiaries
is the calendar year. Deutsche Post AG, whose registered office is in
Bonn, Germany, is entered in the commercial register of the Bonn
Local Court.

Basis of accounting

1
As a listed company, Deutsche Post AG prepared its consolidated
financial statements in accordance with International Financial
Reporting Standards (IFRS s), as adopted by the European Union
(EU), and the provisions of commercial law to be additionally ap-
plied in accordance with section 315a (1) of the Handelsgesetzbuch
(HGB – German Commercial Code).

The requirements of the Standards applied have been satisfied
in full, and the consolidated financial statements therefore provide
a true and fair view of the Group’s net assets, financial position and
results of operations.

The consolidated financial statements consist of the income
statement and the statement of comprehensive income, the balance
sheet, the cash flow statement, the statement of changes in equity
and the notes. In order to improve the clarity of presentation, vari-
ous items in the balance sheet and in the income statement have
been combined. These items are disclosed and explained separately
in the notes. The income statement has been classified in accordance
with the nature of expense method.

The accounting policies and the explanations and disclosures
in the notes to the IFRS consolidated financial statements for finan-
cial year 2017 are fundamentally based on the same accounting
policies used in the 2016 consolidated financial statements. Excep-
tions to this are the changes in international financial reporting
note 5 that have been required to be
under IFRS s described in
applied by the Group since 1 January 2017. The accounting policies
are explained in

note 7.

These consolidated financial statements were authorised for
issue by a resolution of the Board of Management of Deutsche Post AG
dated 19 February 2018.

The consolidated financial statements are prepared in euros (€).
Unless otherwise stated, all amounts are given in millions of euros
(€ million, € m).

Consolidated group

2
The consolidated group includes all companies controlled by
Deutsche Post AG. Control exists if Deutsche Post AG has decision-
making powers, is exposed, and has rights, to variable returns, and
is able to use its decision-making powers to affect the amount of the
variable returns. The Group companies are consolidated from the
date on which Deutsche Post DHL Group is able to exercise control.
When Deutsche Post DHL Group holds less than the majority
of voting rights, other contractual arrangements may result in the
Group controlling the investee.

DHL Sinotrans International Air Courier Ltd. (Sinotrans),
China, is a significant company that has been consolidated despite
Deutsche Post DHL Group not having a majority of voting rights.
Sinotrans provides domestic and international express delivery and
transport services and has been assigned to the Express segment.
The company is fully integrated into the global DHL network and
operates exclusively for Deutsche Post DHL Group. Due to the ar-
rangements in the Network Agreement, DHL is able to prevail in
decisions concerning Sinotrans’ relevant activities. Sinotrans has
therefore been consolidated although Deutsche Post DHL Group
holds no more than 50 % of the company’s share capital.

The complete list of the Group’s shareholdings in accordance
with section 313 (2) nos. 1 to 5 and section 313 (3) of the HGB can be
accessed online at

dpdhl.com/en/investors.

The companies listed in the following table are consolidated in

addition to the parent company Deutsche Post AG:

Consolidated group

Number of fully consolidated companies
(subsidiaries)
German

Foreign

Number of joint operations
German

Foreign

Number of investments accounted for
using the equity method
German

Foreign

2016

2017

132

655

129

600

The reduction in the number of fully consolidated companies is
mainly attributable to the sale of Williams Lea Tag Group in the
fourth quarter of 2017. In the first quarter of 2017, 22.56 % of the
shares of Israel-based Global-E Online Ltd. were acquired. The com-
pany is accounted for in the consolidated financial statements using
the equity method.

108

Deutsche Post DHL Group — 2017 Annual Report

2.1 Acquisitions in 2017

The following company was acquired in financial year 2017:

Acquisitions in 2017

Name

Olimpo Holding S. A. (including subsidiaries)

In early 2017, Deutsche Post DHL Group acquired an 80 % interest
in Brazil-based Olimpo Holding S.A. (Olimpo), including its sub-
sidiaries Polar Transportes Ltda. and Rio Lopes Transportes Ltda.
These companies provide transport services in the Life Sciences &
Healthcare sector, specialising in temperature-controlled transport.
The acquisition enables DHL Supply Chain to extend its range of
end-to-end services and transparent supply chains. The remaining
20 % interest will be acquired in increments of 10 % over the next
two years. The purchase price for the 80 % interest totals €46 million,
€45 million of which was paid in July. The purchase price was paid
by transferring cash funds. The future results of the company will
determine the purchase price for the remaining shares and payment
will be made in several tranches.

Country

Brazil

Segment

Supply Chain

Share of
capital

Acquisition
date

10 July 2017

The final purchase price allocation resulted in tax-deductible good-
will of €35 million attributable to the controlling interest. It is
mainly attributable to the synergy and network effects expected to
be generated in the company’s Brazilian transport business. The
customer relationships of Rio Lopes and Polar are amortised over
a period of 9.5 and 10.5 years, respectively, using the straight-line
method. The brand names of Rio Lopes and Polar have a useful life
of five (Rio Lopes) and ten years (Polar). Current assets include
trade receivables of €4 million. There were no differences between
the gross amounts and the carrying amounts.

Since their consolidation, the companies have contributed
€10 million to consolidated revenue and €2 million to consolidated
EBIT. If the companies had already been consolidated as at 1 Janu-
ary 2017, they would have provided an additional €11 million in
consolidated revenue and an additional €2 million in consolidated
EBIT.

Olimpo (including subsidiaries)

€ m

10 July 2017

ASSETS
Noncurrent assets

Customer relationship

Brand name

Property, plant and equipment

Deferred taxes

Current assets

Cash and cash equivalents

Total ASSETS

EQUITY AND LIAbILITIES
Noncurrent provisions and liabilities

Deferred taxes

Provisions

Current provisions and liabilities

Total EQUITY AND LIAbILITIES

Net assets

Purchase price

Difference

Noncontrolling interests

Goodwill

Carrying
amount

–

Adjustment

Fair value

Transaction costs were below €1 million and are reported in

other operating expenses.

Preliminary purchase price allocation for UK Mail Group plc
and UK Mail Limited, United Kingdom, which were acquired in
December 2016, was disclosed in the consolidated financial state-
ments for the year ended 31 December 2016. At that time, all of the
information necessary for final purchase price allocation was not
yet available. This resulted in preliminary goodwill of €201 million.
The final purchase price allocation was completed in the first quar-
ter of 2017 and did not result in any adjustment of the preliminary
purchase price allocation disclosed initially.

–

Consolidated Financial Statements — NOTES — Basis of preparation

109

A variable purchase price was additionally agreed for an acqui-

sition in prior years:

Contingent consideration

Company

Mitsafetrans S. r. l.

Basis

EBItDA

Period for
financial years

from / to

Results range

Fair value
of total obligation

from / to

at the acquisition date

Remaining
payment obligation
at 31 Dec. 2016

Remaining
payment obligation
at 31 Dec. 2017

2016 to 2018

€0 to 19 million

€15 million

€10 million

In financial year 2017, €45 million was paid for companies acquired
in the financial year and €9 million for companies acquired in pre-
vious years. The purchase price for the companies acquired was paid
by transferring cash funds.

Deutsche Post DHL Group additionally acquired 16.9 % of the owner-
ship structure newly established by the buyer (WERTHEIMER
PARENTCO UK LIMITED) and extended it a loan.

2.2 Disposal and deconsolidation effects in 2017

Gains are shown in other operating income; losses are reported in
other operating expenses.

Williams Lea Tag Group – SUPPLY chAIN segment

In November 2017, Deutsche Post DHL Group completed the sale
of Williams Lea Tag Group to Advent International after approval
was issued by the relevant competition authorities. Williams Lea
Tag specialises in marketing and communication solutions. The
assets and liabilities of the companies in question had previously
been reclassified as assets held for sale and liabilities associated with
assets held for sale. The most recent measurement of the assets and
the disposal group did not indicate any impairment.

Disposal and deconsolidation effects

€ m

1 January to 31 December 2017

ASSETS
Noncurrent assets

of which goodwill

Current assets

Cash and cash equivalents

Total ASSETS

EQUITY AND LIAbILITIES
Noncurrent provisions and liabilities

Current provisions and liabilities

Total EQUITY AND LIAbILITIES

Net assets

Total consideration received

Initial recognition of minority interest

Gains from the currency translation reserve

Losses from the currency translation reserve Goodwill

Deconsolidation effect

Gains from currency hedge of purchase price

Total effect

Williams Lea
Tag Group

311

252

625

310

346

279

275

– 6

–15

– 4

2.3

Joint operations

Joint operations are consolidated in accordance with IFRS 11, based
on the interest held.

Aerologic GmbH (Aerologic), Germany, a cargo airline domi-
ciled in Leipzig, is the only joint operation in this regard. It was
jointly established by Lufthansa Cargo AG and Deutsche Post
Beteiligungen Holding GmbH, which each hold 50 % of its capital
and voting rights. Aero logic has been assigned to the Express seg-
ment. Aerologic’s shareholders are simultaneously its customers, giv-
ing them access to its freight aircraft capacity. Aerologic serves the
DHL Express network from Monday to Friday, whilst it mostly flies
for the Lufthansa Cargo network at weekends. In contrast to its cap-
ital and voting rights, the company’s assets and liabilities, as well as
its income and expenses, are allocated based on this user relationship.

Significant transactions

3
In addition to the sale of Williams Lea Tag Group, the significant
transactions in financial year 2017 were as follows:

By way of a resolution of the Board of Management dated
21 March 2017, a capital reduction was implemented in the first
quarter of 2017 through retirement of 27.3 million treasury shares,

note 32.

Various holders of the convertible bond issued on 6 Decem-
ber 2012 exercised their conversion right in financial year 2017,

notes 32 and 40.

In December 2017, Deutsche Post DHL Group placed two
bonds in the aggregate principal amount of €1.5 billion with Ger-
man and international investors. One was a convertible bond in the
aggregate principal amount of €1 billion that will mature in 7.5
years; the other was a traditional bond with a volume of €500 mil-
note 40. The proceeds were used
lion that will mature in 10 years,
to refinance existing financial liabilities and increase the funding of
the Group’s pension obligations in the United Kingdom. For the
effects on pension provisions, reference is made to

note 38.

110

Deutsche Post DHL Group — 2017 Annual Report

4 Adjustment of prior-period amounts
No prior-period amounts were adjusted in financial year 2017, except
for the reallocations in segment reporting,

note 10.

5 New developments in international accounting under IFRS s

New Standards required to be applied in financial year 2017

The following Standards, changes to Standards and Interpretations
must be applied from 1 January 2017:

Standard

Subject matter and significance

Amendments to IAS 12,
Income Taxes – Recognition
of Deferred Tax Assets for
Unrealised Losses

This amendment clarifies that (1) unrealised losses on debt instruments measured at fair value result in deductible temporary differences and (2) an
assessment must be made in the aggregate for all deductible temporary differences as to whether it is probable that sufficient taxable income will
be available in future to allow the temporary differences to be used and recognised. Requirements and examples explain how future taxable income
is to be determined for the accounting for deferred tax assets. The amendment will have no material effect on the consolidated financial statements.

Amendments to IAS 7,
Statement of Cash Flows –
Disclosure Initiative

Annual Improvements
to IFRS s (2014 – 2016 Cycle)

The amendments provide clarifications regarding an entity’s financing activities. Their objective is to make it easier for users of financial statements to
note 42.
assess an entity’s financial liabilities. The disclosures are generally relevant and were incorporated into the consolidated financial statements,

The improvements relate to IFRS 12. The amendment will not have a material influence on the consolidated financial statements.

New accounting pronouncements adopted by the EU but only required
to be applied in future periods

The following Standards, changes to Standards and Interpretations
have already been endorsed by the EU. However, they will only be
required to be applied in future periods.

Effective
for financial years
beginning on

or after Subject matter and significance

1 January 2018

Standard
(issue date)

IFRS 15, Revenue from
Contracts with Customers
(28 May 2014) including
the amendment to IFRS 15
(11 September 2015) and
the Clarifications to IFRS 15
(12 April 2016)

IFRS 9, Financial Instruments
(24 July 2014)

1 January 2018

This Standard will in future replace the existing requirements governing revenue recognition under IAS 18, Revenue, and IAS 11,
Construction Contracts, and related interpretations. The new Standard establishes uniform requirements regarding the
amount, timing and time period of revenue recognition. It provides a principlebased fivestep model that must be applied to all
categories of contracts with customers. Revenue will be recognised when the customer obtains control of the goods or services
provided. The Group will introduce IFRS 15 based on the modified retrospective method. As a result, the effects of the transition
as at 1 January 2018 will be recognised cumulatively in retained earnings. The prioryear figures will not be adjusted. The analysis
conducted during the Groupwide project to introduce IFRS 15 did not result in any material effects on the consolidated financial
statements. The timing of revenue from certain types of contracts will change because, in future, revenue will be recognised
over time rather than at a point in time, or because variable remuneration components will be recognised sooner. The oneoff
adjustment effects are in the low doubledigit millions. In addition, the change in classification of a company as a principal
(gross revenue) or agent (net revenue) will reduce revenue, and conversely mainly materials expense, by an amount of around
€0.2 billion from 1 January 2018 onward. There will be changes in the balance sheet due to the separate disclos ure of contract
assets and liabilities, as well as in the notes due to expanded quantitative and qualitative disclosures.

IFRS 9 introduces new requirements governing the recognition and measurement of financial instruments and impairment losses
on financial assets. The standard also includes new guidelines on hedge accounting. It thus replaces the previously applicable
IAS 39. The effects of initial application as at 1 January 2018 are recognised cumulatively in retained earnings; the priorperiod
figures will not be adjusted as provided for in the transitional provisions of IFRS 9. According to the review conducted during
the Groupwide project to introduce the new rules, it currently appears that there will be no material effect on the financial
statements. In future, financial assets must be classified on the basis of the business model in which they are held and their cash
flow characteristics. Equity instruments currently reported as availableforsale financial assets may be recognised at fair value
through other comprehensive income. The reclassification of financial assets will only have a minimal effect on the consolidated
financial statements and will be presented in a reconciliation. The change in recognition of the impairment of financial assets
from the incurred loss model (in which anticipated losses are not recognised until a credit loss event actually occurs) to the
expected loss model will result in the earlier recognition of expected losses in the statement of profit or loss. Following the
introduction of the Standard, the loss allowances to be recognised on trade receivables will be determined using the full lifetime
expected loss model (simplified approach). The default rates will be based on historical and forwardlooking data. The oneoff
effect of the change in accounting for the impairment of financial assets, which is to be recognised in other comprehensive
income, will be in the low doubledigit millions. The requirements concerning financial liabilities remain mostly unchanged.
The Group will exercise the option under IFRS 9 of continuing to apply the requirements of IAS 39 governing hedge accounting.

Consolidated Financial Statements — NOTES — Basis of preparation

111

Effective
for financial years
beginning on

or after Subject matter and significance

1 January 2018

Standard
(issue date)

Amendments to IFRS 4,
Insurance Contracts –
Applying IFRS 9, Financial
Instruments, with IFRS 4,
Insurance Contracts
(12 September 2016)

IFRS 16, Leases
(13 January 2016)

1 January 2019

The objective of the amendments to IFRS 4 is to minimise the accounting impact of different effective dates for IFRS 9 and the
future new Standard on accounting for insurance contracts (IFRS 17). Entities can choose from two options: The deferral approach
allows entities whose primary activity is issuing insurance contracts to delay the initial application of IFRS 9. Alternatively, the
overlay approach is available to entities that apply IFRS 4 to existing insurance contracts and enables them to reclassify, from
profit or loss to other comprehensive income, an amount equal to the difference between the amount reported in profit or loss
for designated financial assets applying IFRS 9 and the amount that would have been reported in profit or loss under IAS 39.
Both approaches are optional. The amendments will have no effect on the Group.

IFRS 16, Leases, replaces the existing standard on accounting for leases, IAS 17, and the related interpretations. The Group will
apply the Standard early as at 1 January 2018. The Group will transition to IFRS 16 in accordance with the modified retrospective
approach; the prioryear figures will not be adjusted. The analysis conducted as part of the Groupwide project on initial
application indicated that IFRS 16 will have a material effect on components of the consolidated financial statements and the
presentation of the net assets, financial position and results of operations of Deutsche Post DHL Group:
Balance sheet: IFRS 16 requires lessees to adopt a uniform approach to the presentation of leases. In future, assets must be
recognised for the right of use received and liabilities must be recognised for the payment obligations entered into for all leases.
The Group will make use of the relief options provided for leases of lowvalue assets and shortterm leases (shorter than twelve
months). In contrast, the accounting requirements for lessors remain largely unchanged, particularly with regard to the con
tinued requirement to classify leases according to IAS 17. For leases that have been classified to date as operating leases in
accordance with IAS 17, the lease liability will be recognised at the present value of the remaining lease payments, discounted
using the lessee’s incremental borrowing rate at the time the standard is first applied. The rightofuse asset will generally
be measured at the amount of the lease liability plus initial direct costs. Advance payments and liabilities from the previous
financial year will also be accounted for. The analysis conducted as part of the Groupwide project on initial application
indicated the probable recognition of lease liabilities in the balance sheet totalling around €9.2 billion (1 January 2018) as a result
of the transition. Retained earnings will decline only slightly on initial application. As a result of this increase in total assets and
liabilities, the Group’s equity ratio will decline by around six percentage points. Net debt will rise accordingly due to the material
increase in lease liabilities.
Income statement: In contrast to the presentation to date of operating lease expenses, in future depreciation charges on right of
use assets and the interest expense from unwinding of the discount on the lease liabilities will be recognised. IFRS 16 also
provides new guidance on the treatment of saleandleaseback transactions. The seller / lessee recognises a rightofuse asset in
the amount of the proportional original carrying amount that relates to the right of use retained. Accordingly, only the propor
tional amount of gain or loss from the sale must be recognised. These changes will improve the profit from operating activities
(EBIt). Based on the Group’s leases as at 1 January 2018 (including the change in the recognition of saleandleaseback trans
actions), consolidated EBIt is expected to increase by around €150 million in 2018.
Cash flow statement: The change in presentation of operating lease expenses will result in a corresponding improvement in cash
flows from operating activities and a decline in cash flows from financing activities.

Annual Improvements
to IFRS s (2014 – 2016 Cycle)
(8 December 2016)

1 January 2018

The improvements relate to IFRS 1 and IAS 28. The amendments will have no effect on the consolidated financial statements.

112

Deutsche Post DHL Group — 2017 Annual Report

New accounting requirements not yet adopted by the EU
( endorsement procedure)

The IASB and the IFRIC issued further Standards, amendments to
Standards and Interpretations in financial year 2017 and in previous

years whose application is not yet mandatory for financial year 2017.
The application of these IFRS s is dependent on their adoption by
the EU.

Standard
(issue date)

Amendments to IFRS 2,
Sharebased Payment –
Clarifications of Classification
and Measurement of Share
based Payment Transactions
(20 June 2016)

IFRIC 22, Foreign Currency
Transactions and Advance
Consideration
(8 December 2016)

Amendments to IAS 40,
Investment Property
(8 December 2016)

IFRS 17, Insurance Contracts
(18 May 2017)

IFRIC 23, Uncertainty over
Income Tax Treatments
(7 June 2017)

Amendments to IFRS 9,
Financial Instruments:
Prepayment Features with
Negative Compensation
(12 October 2017)

Amendments to IAS 28,
Investments in Associates
and Joint Ventures: Long
term Interests in Associates
and Joint Ventures
(12 October 2017)

Annual Improvements
to IFRS s (2015–2017 Cycle)
(12 December 2017)

Effective
for financial years
beginning on

or after Subject matter and significance

1 January 2018

The amendments clarify the accounting for cashsettled sharebased payment transactions that include a performance condition.
The measurement rules follow the same approach as when accounting for equitysettled awards. An exception was also in
cluded for the classification of sharebased payment transactions with net settlement features for withholding tax obligations.
Such commitments are required to be classified in their entirety as equitysettled sharebased payment transactions if they
would have been classified in this way in the absence of the net settlement feature. The amendments further include clarifica
tions regarding modifications of the terms and conditions of sharebased payment arrangements that change their classification
from cashsettled to equitysettled. Early application is permitted. The amendments will not have any effect on the Group.

1 January 2018

IFRIC 22 clarifies the date to be used to determine the exchange rate for transactions that include the receipt or payment
of advance consideration in a foreign currency. Early application is permitted. The interpretation will have no effect on the
consolidated financial statements.

1 January 2018

The amendment provides clarity on the classification of property under construction or development. The consolidated financial
statements will not be affected.

1 January 2021

IFRS 17 outlines the principles governing the recognition, measurement, presentation and disclosure of insurance contracts. The
objective of the Standard is to ensure that the reporting entity provides relevant information that faithfully represents those
insurance contracts. This information gives users of financial statements better insights into the effects that insurance contracts
have on an entity’s net assets, financial position, results of operations and cash flows. The effects on the Group are currently
being assessed.

1 January 2019

IFRIC 23 clarifies the requirements for measuring and recognising uncertain income tax items. The Interpretation must be applied
to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates when there is
uncertainty over income tax treatments under IAS 12. Voluntary early application is permitted. The Group is currently evaluating
the possible effects on its financial statements.

1 January 2019

The amendment clarifies how certain financial instruments with prepayment features are classified according to IFRS 9.

1 January 2019

The amendments to IAS 28 clarify that IFRS 9 must be applied to longterm interests that, in substance, form part of the net
investment in an associate or joint venture to which the equity method is applied.

1 January 2019

The improvements relate to IFRS 3, Business Combinations, and IFRS 11, Joint Arrangements, as well as IAS 12, Income Taxes,
and IAS 23, Borrowing Costs.

6 Currency translation
The financial statements of consolidated companies prepared in
foreign currencies are translated into euros (€) in accordance with
IAS 21 using the functional currency method. The functional cur-
rency of foreign companies is determined by the primary economic
environment in which they mainly generate and use cash. Within
the Group, the functional currency is predominantly the local cur-
rency. In the consolidated financial statements, assets and liabilities

are therefore translated at the closing rates, whilst periodic income
and expenses are generally translated at the monthly closing rates.
The resulting currency translation differences are recognised
in other comprehensive income. In financial year 2017, currency
translation differences amounting to €–751 million (previous year:
€–288 million) were recognised in other comprehensive income
(see the statement of comprehensive income).

Consolidated Financial Statements — NOTES — Basis of preparation

113

Goodwill arising from business combinations after 1 Janu-
ary 2005 is treated as an asset of the acquired company and there-
fore carried in the functional currency of the acquired company.

The exchange rates for the currencies that are significant for the

Group were as follows:

Closing rates

Average rates

2016

2017

2016

2017

EUR 1 =

1.4602

7.3534

0.8560

8.1809

1.5352

7.8161

0.8880

9.3752

1.4849

7.3493

0.8229

8.5646

1.4791

7.6501

0.8763

8.8649

71.6633

76.6308

74.2234

73.7957

123.4555

135.0382

120.4342

127.3132

9.5601

1.0550

9.8332

1.1997

9.4723

1.1035

9.6447

1.1372

Country

Australia

China

United Kingdom

Hong Kong

India

Japan

Sweden

USA

Currency

AUD

CNY

GBP

HKD

INR

JPY

SEK

USD

The carrying amounts of non-monetary assets recognised at sig-
nificant consolidated companies operating in hyperinflationary
economies are generally indexed in accordance with IAS 29 and
thus reflect the current purchasing power at the reporting date.

In accordance with IAS 21, receivables and liabilities in the
finan cial statements of consolidated companies that have been pre-
pared in local currencies are translated at the closing rate as at the
reporting date. Currency translation differences are recognised in
other operating income and expenses in the income statement. In
financial year 2017, income of €174 million (previous year: €222 mil-
lion) and expenses of €181 million (previous year: €222 million)
resulted from currency translation differences. In contrast, currency
translation differences relating to net investments in a foreign
operation are recognised in other comprehensive income.

7 Accounting policies
Uniform accounting policies are applied to the annual financial
statements of the entities that have been included in the consoli-
dated financial statements. The consolidated financial statements
are prepared under the historical cost convention, except where
items are required to be recognised at their fair value.

Revenue and expense recognition

Deutsche Post DHL Group’s normal business operations consist of
the provision of logistics services. All income relating to normal
business operations is recognised as revenue in the income state-
ment. All other income is reported as other operating income. Rev-
enue and other operating income are generally recognised when
services are rendered, the amount of revenue and income can be
reliably measured and, in all probability, the economic benefits from
the transactions will flow to the Group. Operating expenses are rec-
ognised in income when the service is utilised or when the expenses
are incurred.

Intangible assets

Intangible assets, which comprise internally generated and pur-
chased intangible assets and purchased goodwill, are measured at
amortised cost.

Internally generated intangible assets are capitalised at cost if
it is probable that their production will generate an inflow of future
economic benefits and the costs can be reliably measured. In the
Group, this concerns internally developed software. If the criteria
for capitalisation are not met, the expenses are recognised immedi-
ately in income in the year in which they are incurred. In addition
to direct costs, the production cost of internally developed software
includes an appropriate share of allocable production overhead
costs. Any borrowing costs incurred for qualifying assets are in-
cluded in the production cost. Value added tax arising in conjunc-
tion with the acquisition or production of intangible assets is in-
cluded in the cost if it cannot be deducted as input tax. Capitalised
software is amortised over its useful life.

Intangible assets are amortised using the straight-line method
over their useful lives. Impairment losses are recognised in accord-
ance with the principles described in the section headed Impair-
ment. The useful lives of significant intangible assets are presented
in the table below:

Useful lives

Internally developed software

Purchased software

Licences

Customer relationships

Years 1

up to 10

up to 5

term of agreement

up to 20

1 The useful lives indicated represent maximum amounts specified by the Group.
The actual useful lives may be shorter due to contractual arrangements or other
special factors such as time and location.

114

Deutsche Post DHL Group — 2017 Annual Report

The useful life of customer relationships from past acquisitions in
the Supply Chain segment was reduced to zero, resulting in a one-
time increase of €32 million in amortisation for financial year 2017.
This adjustment to the useful life was made prospectively to change
an accounting- related estimate. Prior- period figures were not ad-
justed retroactively.

Intangible assets that are not affected by legal, economic, con-
tractual or other factors that might restrict their useful lives are
considered to have indefinite useful lives. They are not amortised
but are tested for impairment annually or whenever there are in-
dications of impairment. Intangible assets generally include brand
names from business combinations and goodwill, for example. Im-
pairment testing is carried out in accordance with the principles
described in the section headed Impairment.

Property, plant and equipment

Property, plant and equipment is carried at cost, reduced by accu-
mulated depreciation and valuation allowances. In addition to dir-
ect costs, production cost includes an appropriate share of allocable
production overhead costs. Borrowing costs that can be allocated
directly to the purchase, construction or manufacture of property,
plant and equipment are capitalised. Value added tax arising in con-
junction with the acquisition or production of items of property,
plant or equipment is included in the cost if it cannot be deducted
as input tax. Depreciation is charged using the straight-line method.
The estimated useful lives applied to the major asset classes are pre-
sented in the table below:

Useful lives

Buildings

Technical equipment and machinery

Aircraft

It systems

Transport equipment and vehicle fleet

Other operating and office equipment

Years 1

20 to 50

10 to 20

15 to 20

4 to 5

4 to 18

8 to 10

If there are indications of impairment, an impairment test must be
carried out; see section headed Impairment.

Impairment

At each reporting date, the carrying amounts of intangible assets,
property, plant and equipment and investment property are re-
viewed for indications of impairment. If there are any such indica-
tions, an impairment test is carried out. This is done by determining
the recoverable amount of the relevant asset and comparing it with
the carrying amount.

In accordance with IAS 36, the recoverable amount is the asset’s
fair value less costs to sell or its value in use (present value of the
pre-tax free cash flows expected to be derived from the asset in
future), whichever is higher. The discount rate used for the value in
use is a pre-tax rate of interest reflecting current market conditions.
If the recoverable amount cannot be determined for an individual
asset, the recoverable amount is determined for the smallest iden-
tifiable group of assets to which the asset in question can be allo-
cated and which generates independent cash flows (cash generating
unit – CGU). If the recoverable amount of an asset is lower than its
carrying amount, an impairment loss is recognised immediately in
respect of the asset. If, after an impairment loss has been recognised,
a higher recoverable amount is determined for the asset or the CGU
at a later date, the impairment loss is reversed up to a carrying
amount that does not exceed the recoverable amount. The increased
carrying amount attributable to the reversal of the impairment loss
is limited to the carrying amount that would have been determined
(net of amortisation or depreciation) if no impairment loss had been
recognised in the past. The reversal of the impairment loss is recog-
nised in the income statement. Impairment losses recognised in
respect of goodwill may not be reversed.

Since January 2005, goodwill has been accounted for using the
impairment-only approach in accordance with IFRS 3. This stipu-
lates that goodwill must be subsequently measured at cost, less any
cumulative adjustments from impairment losses. Purchased good-
will is therefore no longer amortised and instead is tested for im-
pairment annually in accordance with IAS 36, regardless of whether
any indication of possible impairment exists, as in the case of intan-
gible assets with an indefinite useful life. In addition, the obligation
remains to conduct an impairment test if there is any indication of
impairment. Goodwill resulting from company acquisitions is allo-
cated to the identifiable groups of assets (CGU s or groups of CGU s)
that are expected to benefit from the synergies of the acquisition.
These groups represent the lowest reporting level at which the good-
will is monitored for internal management purposes. The carrying
amount of a CGU to which goodwill has been allocated is tested for
impairment annually and whenever there is an indication that the
unit may be impaired. Where impairment losses are recognised in
connection with a CGU to which goodwill has been allocated, the
existing carrying amount of the goodwill is reduced first. If the
amount of the impairment loss exceeds the carrying amount of the
goodwill, the difference is allocated to the remaining non-current
assets in the CGU.

Consolidated Financial Statements — NOTES — Basis of preparation

115

Finance leases

Financial instruments

A lease is an agreement in which the lessor conveys to the lessee the
right to use an asset for a specified period in return for a payment
or a number of payments. In accordance with IAS 17, beneficial own-
ership of leased assets is attributed to the lessee if the lessee substan-
tially bears all risks and rewards incidental to ownership of the
leased asset. To the extent that beneficial ownership is attributable
to the Group as the lessee, the asset is capitalised at the date on
which use starts, either at fair value or at the present value of the
minimum lease payments if this is less than the fair value. A lease
liability in the same amount is recognised under non-current liabil-
ities. The lease is subsequently measured at amortised cost using the
effective interest method. The depreciation methods and estimated
useful lives correspond to those of comparable purchased assets.

Operating leases

For operating leases, the Group reports the leased asset at amortised
cost as an asset under property, plant and equipment where it is the
lessor. The lease payments received in the period are shown under
other operating income. Where the Group is the lessee, the lease
payments made are recognised as lease expenses under materials
expense. Lease expenses and income are recognised using the
straight-line method.

Investments accounted for using the equity method

Investments accounted for using the equity method cover associates
and joint ventures. These are recognised using the equity method
in accordance with IAS 28, Investments in Associates and Joint Ven-
tures. Based on the cost of acquisition at the time of purchase of the
investments, the carrying amount of the investment is increased or
reduced annually to reflect the share of earnings, dividends distrib-
uted and other changes in the equity of the associates and joint
ventures attributable to the investments of Deutsche Post AG or its
consolidated subsidiaries. An impairment loss is recognised on in-
vestments accounted for using the equity method, including the
goodwill in the carrying amount of the investment, if the recover-
able amount falls below the carrying amount. Gains and losses from
the disposal of investments accounted for using the equity method,
as well as impairment losses and their reversals, are recognised in
other operating income or other operating expenses.

A financial instrument is any contract that gives rise to a financial
asset of one entity and a financial liability or equity instrument of
another entity. Financial assets include in particular cash and cash
equivalents, trade receivables, originated loans and receivables, and
derivative financial assets held for trading. Financial liabilities in-
clude contractual obligations to deliver cash or another financial
asset to another entity. These mainly comprise trade payables, li-
abilities to banks, liabilities arising from bonds and finance leases,
and derivative financial liabilities.

Fair value option

Under the fair value option, financial assets or financial liabilities
may be measured at fair value through profit or loss on initial rec-
ognition if this eliminates or significantly reduces a measurement
or recognition inconsistency (accounting mismatch). The Group
makes use of the option in order to avoid accounting mismatches.

Financial assets

Financial assets are accounted for in accordance with the provisions
of IAS 39, which distinguishes between four categories of financial
instruments.

AVAILAbLE-FOR-SALE FINANcIAL ASSETS

These financial instruments are non-derivative financial assets and
are carried at their fair value, where this can be measured reliably.
If a fair value cannot be determined, they are carried at cost. Changes
in fair value between reporting dates are generally recognised in
other comprehensive income (revaluation reserve). The reserve is
reversed to income either upon disposal or if the fair value falls
below cost more than temporarily, i.e., the drop is significant or
prolonged. If, at a subsequent reporting date, the fair value of a debt
instrument has increased objectively as a result of events occurring
after the impairment loss was recognised, the impairment loss is
reversed in the appropriate amount. Impairment losses recognised
on equity instruments may not be reversed to income. If equity
instruments are recognised at fair value, any reversals must be rec-
ognised in other comprehensive income. No reversals may be made
in the case of equity instruments that were recognised at cost. Avail-
able-for-sale financial instruments are allocated to non-current
assets unless the intention is to dispose of them within twelve
months of the reporting date. In particular, investments in uncon-
solidated subsidiaries, marketable securities and other equity invest-
ments are reported in this category.

116

Deutsche Post DHL Group — 2017 Annual Report

hELD-TO-MATURITY FINANcIAL ASSETS

Financial instruments are assigned to this category if there is an
intention to hold the instrument to maturity and the economic
conditions for doing so are met. These financial instruments are
non-derivative financial assets that are measured at amortised cost
using the effective interest method.

LOANS AND REcEIVAbLES

These are non-derivative financial assets with fixed or determinable
payments that are not quoted on an active market. Unless held for
trading, they are recognised at cost or amortised cost at the report-
ing date. The carrying amounts of money market receivables cor-
respond approximately to their fair values due to their short maturity.
Loans and receivables are considered current assets if they mature
not more than twelve months after the reporting date; otherwise,
they are recognised as non-current assets. If the recoverability of
receivables is in doubt, they are recognised at amortised cost, less
appropriate specific or collective valuation allowances. A write-
down on trade receivables is recognised if there are objective indi-
cations that the amount of the outstanding receivable cannot be
collected in full. The write-down is recognised in the income state-
ment via a valuation account.

FINANcIAL ASSETS AT FAIR VALUE ThROUGh PROFIT OR LOSS

All financial instruments held for trading and derivatives that do
not satisfy the criteria for hedge accounting are assigned to this
category. They are generally measured at fair value. All changes in
fair value are recognised in income. All financial instruments in this
category are accounted for at the trade date. Assets in this category
are recognised as current assets if they are either held for trading or
will likely be realised within twelve months of the reporting date.

To avoid variations in earnings resulting from changes in the
fair value of derivative financial instruments, hedge accounting is
applied where possible and economically useful. Gains and losses
from the derivative and the related hedged item are recognised in
income simultaneously. Depending on the hedged item and the risk
to be hedged, the Group uses fair value hedges and cash flow hedges.
The carrying amounts of financial assets not carried at fair
value through profit or loss are tested for impairment at each report-
ing date and whenever there are indications of impairment. The
amount of any impairment loss is determined by comparing the
carrying amount and the fair value. If there are objective indications
of impairment, an impairment loss is recognised in the income

statement under other operating expenses or net financial income /
net finance costs. Impairment losses are reversed if there are object-
ive reasons arising after the reporting date indicating that the rea-
sons for impairment no longer exist. The increased carrying amount
resulting from the reversal of the impairment loss may not exceed
the carrying amount that would have been determined (net of
amortisation or depreciation) if the impairment loss had not been
recognised. Impairment losses are recognised within the Group if
the debtor is experiencing significant financial difficulties, it is
highly probable that the debtor will be the subject of bankruptcy
proceedings, there are material changes in the issuer’s technological,
economic, legal or market environment, or the fair value of a finan-
cial instrument falls below its amortised cost for a prolonged period.
A fair value hedge hedges the fair value of recognised assets and
liabilities. Changes in the fair value of both the derivatives and the
hedged item are recognised in income simultaneously.

A cash flow hedge hedges the fluctuations in future cash flows
from recognised assets and liabilities (in the case of interest rate
risks), highly probable forecast transactions as well as unrecognised
firm commitments that entail a currency risk. The effective portion
of a cash flow hedge is recognised in the hedging reserve in equity.
Ineffective portions resulting from changes in the fair value of the
hedging instrument are recognised directly in income. The gains
and losses generated by the hedging transactions are initially rec-
ognised in equity and are then reclassified to profit or loss in the
period in which the asset acquired or liability assumed affects profit
or loss. If a hedge of a firm commitment subsequently results in the
recognition of a non-financial asset, the gains and losses recognised
directly in equity are included in the initial carrying amount of the
asset (basis adjustment).

Net investment hedges in foreign entities are treated in the
same way as cash flow hedges. The gain or loss from the effective
portion of the hedge is recognised in other comprehensive income,
whilst the gain or loss attributable to the ineffective portion is rec-
ognised directly in income. The gains or losses recognised in other
comprehensive income remain there until the disposal or partial
disposal of the net investment. Detailed information on hedging
transactions can be found in

note 43.3.
Regular way purchases and sales of financial assets are recog-
nised at the settlement date, with the exception of held-for-trading
instruments, particularly derivatives. A financial asset is derecog-
nised if the rights to receive the cash flows from the asset have ex-
pired. Upon transfer of a financial asset, a review is made under the

Consolidated Financial Statements — NOTES — Basis of preparation

117

requirements of IAS 39 governing disposal as to whether the asset
should be derecognised. A disposal gain / loss arises upon disposal.
The remeasurement gains / losses recognised in other comprehen-
sive income in prior periods must be reversed as at the disposal date.
Financial liabilities are derecognised if the payment obligations
arising from them have expired.

Investment property

In accordance with IAS 40, investment property is property held to
earn rentals or for capital appreciation or both, rather than for use
in the supply of services, for administrative purposes or for sale
in the normal course of the company’s business. It is measured in
accordance with the cost model. Depreciable investment property
is depreciated over a period of between 20 and 50 years using the
straight-line method. The fair value is determined on the basis of
expert opinions. Impairment losses are recognised in accordance
with the principles described in the section headed Impairment.

Inventories

Inventories are assets that are held for sale in the ordinary course of
business, are in the process of production, or are consumed in the
production process or in the rendering of services. They are meas-
ured at the lower of cost or net realisable value. Valuation allow-
ances are charged for obsolete inventories and slow-moving goods.

Government grants

In accordance with IAS 20, government grants are recognised at
their fair value only when there is reasonable assurance that the
conditions attaching to them will be complied with and that the
grants will be received. The grants are reported in the income state-
ment and are generally recognised as income over the periods in
which the costs they are intended to compensate are incurred.
Where the grants relate to the purchase or production of assets, they
are reported as deferred income and recognised in the income state-
ment over the useful lives of the assets.

Assets held for sale and liabilities associated with assets held for sale

Assets held for sale are assets available for sale in their present con-
dition and whose sale is highly probable. The sale must be expected
to qualify for recognition as a completed sale within one year of the
date of classification. Assets held for sale may consist of individual
non-current assets, groups of assets (disposal groups), components
of an entity or a subsidiary acquired exclusively for resale (discon-

tinued operations). Liabilities intended to be disposed of together
with the assets in a single transaction form part of the disposal
group or discontinued operation and are also reported separately
as liabilities associated with assets held for sale. Assets held for sale
are no longer depreciated or amortised, but are recognised at the
lower of their fair value less costs to sell and the carrying amount.
Gains and losses arising from the remeasurement of individual
non-current assets or disposal groups classified as held for sale are
reported in profit or loss from continuing operations until the final
date of disposal. Gains and losses arising from the measurement at
fair value less costs to sell of discontinued operations classified as
held for sale are reported in profit or loss from discontinued oper-
ations. This also applies to the profit or loss from operations and the
gain or loss on disposal of these components of an entity.

Cash and cash equivalents

Cash and cash equivalents comprise cash, demand deposits and
other short-term liquid financial assets with an original maturity of
up to three months; they are carried at their principal amount.
Overdraft facilities used are recognised in the balance sheet as
amounts due to banks.

Non-controlling interests

Non-controlling interests are the proportionate minority interests
in the equity of subsidiaries and are recognised at their carrying
amount. If an interest is acquired from, or sold to, other share-
holders without this impacting the existing control relationship, this
is presented as an equity transaction. The difference between the
proportionate net assets acquired from, or sold to, another share-
holder / other shareholders and the purchase price is recognised in
other comprehensive income. If non-controlling interests are in-
creased by the proportionate net assets, no goodwill is allocated to
the proportionate net assets.

Share-based payments to executives

Equity-settled share-based payment transactions are measured at
fair value at the grant date. The fair value of the obligation is recog-
nised in staff costs over the vesting period. The fair value of equity-
settled share-based payment transactions is determined using inter-
nationally recognised valuation techniques.

Stock appreciation rights are measured on the basis of an op-
tion pricing model in accordance with IFRS 2. The stock appreci-
ation rights are measured on each reporting date and on the settle-

118

Deutsche Post DHL Group — 2017 Annual Report

ment date. The amount determined for stock appreciation rights
that will probably be exercised is recognised pro rata in income
under staff costs to reflect the services rendered as consideration
during the vesting period (lock-up period). A provision is recog-
nised for the same amount. Changes in the value of the stock appre-
ciation rights (SAR s) due to share price movements occurring after
the date the SAR s were granted are no longer included in staff costs
starting on 1 January 2017. They are instead recognised as other
finance costs in net finance costs. No adjustment was made to the
prior-period amounts, because the effects were not material for the
consolidated financial statements.

Retirement plans

There are arrangements (plans) in many countries under which the
Group grants post-employment benefits to its hourly workers and
salaried employees. These benefits include pensions, lump-sum
payments on retirement and other post-employment benefits and
are referred to in these disclosures as retirement benefits, pensions
and similar benefits, or pensions. A distinction must be made
between defined benefit and defined contribution plans.

ThE GROUP’S DEFINED bENEFIT RETIREMENT PLANS

Defined benefit obligations are measured using the projected unit
credit method prescribed by IAS 19. This involves making certain
actuarial assumptions. Most of the defined benefit retirement plans
are at least partly funded via external plan assets. The remaining net
liabilities are funded by provisions for pensions and similar obliga-
tions; net assets are presented separately as pension assets. Where
necessary, an asset ceiling must be applied when recognising pen-
sion assets. With regard to the cost components, the service cost is
recognised in staff costs, the net interest cost in net financial income /
net finance costs and any remeasurement outside profit and loss
in other comprehensive income. Any rights to reimbursement are
reported separately in financial assets.

DEFINED cONTRIbUTION RETIREMENT PLANS FOR cIVIL SERVANT
EMPLOYEES IN GERMANY

In accordance with statutory provisions, Deutsche Post AG pays
contributions for civil servant employees in Germany to retirement
plans which are defined contribution retirement plans for the com-
pany. These contributions are recognised in staff costs.

Under the provisions of the Gesetz zum Personalrecht der Be-
schäftigten der früheren Deutschen Bundespost (PostPersRG – Former
Deutsche Bundespost Employees Act), Deutsche Post AG provides
retirement benefits and assistance benefits through the Post-
beamtenversor gungskasse (PVK – Postal civil servant pension fund)
at the Bundes anstalt für Post und Telekommunikation (BAnst PT –

German federal post and telecommunications agency) to retired
employees or their surviving dependants who are entitled to bene-
fits on the basis of a civil service appointment. The amount of
Deutsche Post AG’s payment obligations is governed by section 16
of the PostPersRG. This Act obliges Deutsche Post AG to pay into
the PVK an annual contribution of 33 % of the gross compensation
of its active civil servants and the notional gross compensation of
civil servants on leave of absence who are eligible for a pension.

Under section 16 of the PostPersRG, the federal government
makes good the difference between the current payment obligations
of the PVK on the one hand, and the funding companies’ current
contributions or other return on assets on the other, and guarantees
that the PVK is able at all times to meet the obligations it has as-
sumed in respect of its funding companies. Insofar as the federal
government makes payments to the PVK under the terms of this
guarantee, it cannot claim reimbursement from Deutsche Post AG.

DEFINED cONTRIbUTION RETIREMENT PLANS FOR ThE GROUP’S
hOURLY WORKERS AND SALARIED EMPLOYEES

Defined contribution retirement plans are in place for the Group’s
hourly workers and salaried employees, particularly in the UK, the
USA and the Netherlands. The contributions to these plans are also
reported in staff costs.

This also includes contributions to certain multi-employer
plans which are basically defined benefit plans, especially in the USA
and the Netherlands. However, the relevant institutions do not pro-
vide the participating companies with sufficient information to use
defined benefit accounting. The plans are therefore accounted for
as if they were defined contribution plans.

Regarding these multi-employer plans in the USA, contribu-
tions are made based on collective agreements between the employer
and the local union, with the involvement of the pension fund.
There is no employer liability to any of the plans beyond the normal
bargained contribution rates except in the event of a withdrawal
meeting spe ci fied criteria. Such a withdrawal could involve liability
for other entities’ obligations as governed by US federal law. The
expected employer contributions to the funds for 2018 are €42 mil-
lion (actual employer contributions in the reporting period:
€41 million, in the previous year: €36 million). Some of the plans in
which Deutsche Post DHL Group participates are underfunded
according to information provided by the funds. There is no in-
formation from the plans that would indicate any change
from the contribution rates set by current collective agreements.
Deutsche Post DHL Group does not represent a significant level
to any fund in terms of contributions, with the exception of one
fund where the Group represents the largest employer in terms of
contributions.

Consolidated Financial Statements — NOTES — Basis of preparation

119

Regarding one multi-employer plan in the Netherlands, cost
coverage-based contribution rates are set annually by the board of
the pension fund with the involvement of the Central Bank of the
Netherlands; the respective contribution rates are equal for all par-
ticipating employers and employees. There is no liability for the
employer towards the fund beyond the contributions set, even in
the case of withdrawal or obligations not met by other entities. Any
subsequent underfunding ultimately results in the rights of mem-
bers being cut and / or no indexation of their rights. The expected
employer contributions to the fund for 2018 are €21 million (actual
employer contributions in the reporting period: €21 million, in the
previous year: €21 million). As at 31 December 2017, the coverage
degree of plan funding was higher than a required minimum of
approximately 105 %, according to information provided by the
fund. Deutsche Post DHL Group does not represent a significant
portion of the fund in terms of contributions.

Other provisions

Other provisions are recognised for all legal or constructive obliga-
tions to third parties existing at the reporting date that have arisen
as a result of past events, that are expected to result in an outflow of
future economic benefits and whose amount can be measured reli-
ably. They represent uncertain obligations that are carried at the best
estimate of the expenditure required to settle the obligation. Provi-
sions with more than one year to maturity are discounted at market
rates of interest that reflect the region and time to settlement of the
obligation. The discount rates used in the financial year were be-
tween 0.0 % and 9.50 % (previous year: 0.0 % and 11.00 %). The
effects arising from changes in interest rates are recognised in net
financial income / net finance cost.

Provisions for restructurings are only established in accord-
ance with the aforementioned criteria for recognition if a detailed,
formal restructuring plan has been drawn up and communicated
to those affected.

The technical reserves (insurance) consist mainly of outstand-
ing loss reserves and IBNR (incurred but not reported claims) re-
serves. Outstanding loss reserves represent estimates of obligations
in respect of actual claims or known incidents expected to give rise
to claims, which have been reported to the company but which have
yet to be finalised and presented for payment. Outstanding loss re-
serves are based on individual claim valuations carried out by the

company or its ceding insurers. IBNR reserves represent estimates
of obligations in respect of incidents taking place on or before the
reporting date that have not been reported to the company. Such
reserves also include provisions for potential errors in settling out-
standing loss reserves. The company carries out its own assessment
of ultimate loss liabilities using actuarial methods and also commis-
sions an independent actuarial study of these each year in order
to verify the reasonableness of its estimates.

Financial liabilities

On initial recognition, financial liabilities are carried at fair value
less transaction costs. The price determined on a price-efficient and
liquid market or a fair value determined using the treasury risk
management system deployed within the Group is taken as the fair
value. In subsequent periods the financial liabilities are measured
at amortised cost. Any differences between the amount received and
the amount repayable are recognised in income over the term of the
loan using the effective interest method.

cONVERTIbLE bONDS ON DEUTSchE POST AG ShARES

The convertible bonds on Deutsche Post AG shares are split into an
equity and a debt component, in line with the contractual arrange-
ments. The debt component, less the transaction costs, is reported
under financial liabilities (bonds), with interest added up to the issue
amount over the term of the bond using the effective interest
method (unwinding of discount). The value of the call option,
which allows Deutsche Post AG to redeem the bonds early if a spe-
cified share price is reached, is attributed to the debt component in
accordance with IAS 32.31. The conversion right is classified as an
equity derivative and is reported in capital reserves. The carrying
amount is calculated by assigning to the conversion right the re-
sidual value that results from deducting the amount calculated sep-
arately for the debt component from the fair value of the instrument
as a whole. The transaction costs are deducted on a proportion-
ate basis.

Liabilities

Trade payables and other liabilities are carried at amortised cost.
Most of the trade payables have a maturity of less than one year. The
fair value of the liabilities corresponds more or less to their carrying
amount.

120

Deutsche Post DHL Group — 2017 Annual Report

Deferred taxes

In accordance with IAS 12, deferred taxes are recognised for tem-
porary differences between the carrying amounts in the IFRS finan-
cial statements and the tax accounts of the individual entities. De-
ferred tax assets also include tax reduction claims which arise from
the expected future utilisation of existing tax loss carryforwards and
which are likely to be realised. The recoverability of the tax reduc-
tion claims is assessed on the basis of each entity’s earnings projec-
tions, which are derived from the Group projections and take any
tax adjustments into account. The planning horizon is five years.

In compliance with IAS 12.24 (b) and IAS 12.15 (b), deferred tax
assets or liabilities were only recognised for temporary differences
between the carrying amounts in the IFRS financial statements and
in the tax accounts of Deutsche Post AG where the differences arose
after 1 January 1995. No deferred tax assets or liabilities are recog-
nised for temporary differences resulting from initial differences in
the opening tax accounts of Deutsche Post AG as at 1 January 1995.
Further details on deferred taxes from tax loss carryforwards can
be found in

note 27.

In accordance with IAS 12, deferred tax assets and liabilities are
calculated using the tax rates applicable in the individual countries
at the reporting date or announced for the time when the deferred
tax assets and liabilities are realised. The tax rate applied to German
Group companies is unchanged at 30.2 %. It comprises the cor-
poration tax rate plus the solidarity surcharge, as well as a municipal
trade tax rate that is calculated as the average of the different mu-
nicipal trade tax rates. Foreign Group companies use their individ-
ual income tax rates to calculate deferred tax items. The income tax
rates applied for foreign companies amount to up to 40 % (previous
year: 38 %).

Income taxes

Income tax assets and liabilities are measured at the amounts for
which repayments from, or payments to, the tax authorities are ex-
pected to be received or made. Tax-related fines are recognised in
income taxes if they are included in the calculation of income tax
liabilities, due to their inclusion in the tax base and / or tax rate. All
income tax assets and liabilities are current and have maturities of
less than one year.

Contingent liabilities

Contingent liabilities represent possible obligations whose existence
will be confirmed only by the occurrence, or non-occurrence, of
one or more uncertain future events not wholly within the control
of the enterprise. Contingent liabilities also include certain obliga-
tions that will probably not lead to an outflow of resources em-
bodying economic benefits, or where the amount of the outflow of
resources embodying economic benefits cannot be measured with
sufficient reliability. In accordance with IAS 37, contingent liabilities
are not recognised as liabilities,

note 44.

Exercise of judgement in applying the accounting policies

8
The preparation of IFRS-compliant consolidated financial state-
ments requires the exercise of judgement by management. All esti-
mates are reassessed on an ongoing basis and are based on historical
experience and expectations with regard to future events that appear
reasonable under the given circumstances. For example, this applies
to assets held for sale. In this case, it must be determined whether
the assets are available for sale in their present condition and
whether their sale is highly probable. If this is the case, the assets
and the associated liabilities are reported and measured as assets
held for sale and liabilities associated with assets held for sale.

Estimates and assessments made by management

The preparation of the consolidated financial statements in accord-
ance with IFRS s requires management to make certain assumptions
and estimates that may affect the amounts of the assets and liabil-
ities included in the balance sheet, the amounts of income and ex-
penses, and the disclosures relating to contingent liabilities. Ex-
amples of the main areas where assumptions, estimates and the
exercise of management judgement occur are the recognition of
provisions for pensions and similar obligations, the calculation of
discounted cash flows for impairment testing and purchase price
allocations, taxes and legal proceedings.

Disclosures regarding the assumptions made in connection
with the Group’s defined benefit retirement plans can be found in

note 38.

The Group has operating activities around the globe and is sub-
ject to local tax laws. Management can exercise judgement when
calculating the amounts of current and deferred taxes in the relevant
countries. Although management believes that it has made a rea-
sonable estimate relating to tax matters that are inherently uncer-
tain, there can be no guarantee that the actual outcome of these
uncertain tax matters will correspond exactly to the original esti-
mate made. Any difference between actual events and the estimate
made could have an effect on tax liabilities and deferred taxes in the
period in which the matter is finally decided. The amount recog-
nised for deferred tax assets could be reduced if the estimates of
planned taxable income or changes to current tax laws restrict the
extent to which future tax benefits can be realised.

Goodwill is regularly reported in the Group’s balance sheet as
a consequence of business combinations. When an acquisition is
initially recognised in the consolidated financial statements, all
identifiable assets, liabilities and contingent liabilities are measured
at their fair values at the date of acquisition. One of the most import-
ant estimates this requires is the determination of the fair values of
these assets and liabilities at the date of acquisition. Land, buildings
and office equipment are generally valued by independent experts,
whilst securities for which there is an active market are recognised
at the quoted exchange price. If intangible assets are identified in
the course of an acquisition, their measurement can be based on the

Consolidated Financial Statements — NOTES — Basis of preparation

121

opinion of an independent external expert valuer, depending on the
type of intangible asset and the complexity involved in determining
its fair value. The independent expert determines the fair value us-
ing appropriate valuation techniques, normally based on expected
future cash flows. In addition to the assumptions about the devel-
opment of future cash flows, these valuations are also significantly
affected by the discount rates used.

Impairment testing for goodwill is based on assumptions about
the future. The Group carries out these tests annually and also
whenever there are indications that goodwill has become impaired.
The recoverable amount of the CGU must then be calculated. This
amount is the higher of fair value less costs to sell and value in use.
Determining value in use requires assumptions and estimates to be
made with respect to forecasted future cash flows and the discount
rate applied. Although management believes that the assumptions
made for the purpose of calculating the recoverable amount are
appropriate, possible unforeseeable changes in these assumptions –
e. g., a reduction in the EBIT margin, an increase in the cost of cap-
ital or a decline in the long-term growth rate – could result in an
impairment loss that could negatively affect the Group’s net assets,
financial position and results of operations.

Pending legal proceedings in which the Group is involved are
disclosed in
note 46. The outcome of these proceedings could have
a significant effect on the net assets, financial position and results
of operations of the Group. Management regularly analyses the in-
formation currently available about these proceedings and recog-
nises provisions for probable obligations including estimated legal
costs. Internal and external legal advisers participate in making this
assessment. In deciding on the necessity for a provision, manage-
ment takes into account the probability of an unfavourable outcome
and whether the amount of the obligation can be estimated with
sufficient reliability. The fact that an action has been launched or a
claim asserted against the Group, or that a legal dispute has been
disclosed in the notes, does not necessarily mean that a provision is
recognised for the associated risk.

All assumptions and estimates are based on the circumstances
prevailing and assessments made at the reporting date. For the pur-
pose of estimating the future development of the business, a realistic
assessment was also made at that date of the economic environment
likely to apply in the future to the different sectors and regions in
which the Group operates. In the event of developments in this gen-
eral environment that diverge from the assumptions made, the ac-
tual amounts may differ from the estimated amounts. In such cases,
the assumptions made and, where necessary, the carrying amounts
of the relevant assets and liabilities are adjusted accordingly.

At the date of preparation of the consolidated financial state-
ments, there is no indication that any significant change in the as-
sumptions and estimates made will be required, so that on the
basis of the information currently available it is not expected that
there will be significant adjustments in financial year 2018 to the
carrying amounts of the assets and liabilities recognised in the
finan cial statements.

9 Consolidation methods
The consolidated financial statements are based on the IFRS finan-
cial statements of Deutsche Post AG and the subsidiaries, joint op-
erations and investments accounted for using the equity method
included in the consolidated financial statements and prepared in
accordance with uniform accounting policies as at 31 Decem-
ber 2017.

Acquisition accounting for subsidiaries included in the consoli-
dated financial statements uses the purchase method of accounting.
The cost of the acquisition corresponds to the fair value of the assets
given up, the equity instruments issued and the liabilities assumed
at the transaction date. Acquisition-related costs are recognised as
expenses. Contingent consideration is recognised at fair value at the
date of initial consolidation.

The assets and liabilities, as well as income and expenses, of
joint operations are included in the consolidated financial state-
ments in proportion to the interest held in these operations, in ac-
cordance with IFRS 11. Accounting for the joint operators’ share of
the assets and liabilities, as well as recognition and measurement
of goodwill, use the same methods as applied to the consolidation
of subsidiaries.

In accordance with IAS 28, joint ventures and companies on
which the parent can exercise significant influence (associates) are
accounted for in accordance with the equity method using the pur-
chase method of accounting. Any goodwill is recognised under
investments accounted for using the equity method.

In the case of step acquisitions, the equity portion previously
held is remeasured at the fair value applicable on the date of acqui-
sition and the resulting gain or loss recognised in profit or loss.

Intra-group revenue, other operating income, and expenses as
well as receivables, liabilities and provisions between companies
that are consolidated fully or on a proportionate basis are elim-
inated. Intercompany profits or losses from intra-group deliveries
and services not realised by sale to third parties are eliminated. Un-
realised gains and losses from business transactions with invest-
ments accounted for using the equity method are eliminated on a
proportionate basis.

122

Deutsche Post DHL Group — 2017 Annual Report

SEGMENT REPORTING

10 Segment reporting

Segments by division

€ m

PeP 1

Express 1

Global Forwarding,
Freight

Supply Chain

Corporate Center /
Other

Consolidation 1, 2

Group

1 Jan. to 31 Dec.

2016

2017

2016

2017

2016

2017

2016

2017

External revenue

16,926

18,016

13,430

14,693

13,027

13,689

13,828

13,958

Internal revenue

152

318

356

710

793

129

194

Total revenue

17,078

18,168

13,748

15,049

13,737

14,482

13,957

14,152

2016

123

1,156

1,279

2017

1,159

1,247

2016

2017

2016

2017

57,334

60,444

–2,465

–2,654

–2,465

–2,654

57,334

60,444

1,446

1,502

1,544

1,736

287

297

572

555

–359

–349

3,491

3,741

Profit / loss from
operating activities
(EBIt)

of which net
income / loss from
investments
accounted for
using the equity
method

–1

Segment assets

6,418

6,748

9,786

10,203

7,798

7,664

6,253

5,564

1,557

1,554

of which invest
ments accounted
for using the
equity method

Segment liabilities

3,087

3,066

3,528

3,604

2,930

3,046

3,290

3,037

1,486

1,524

Net segment
assets / liabilities

Capex

Depreciation
and amortisa
tion

Impairment
losses

Total depreciation,
amortisation and
impairment losses

Other noncash
income and
expenses

3,331

592

3,682

666

6,258

900

6,599

1,049

336

356

438

507

337

356

465

525

428

319

307

304

4,868

4,618

2,963

328

2,527

277

199

214

291

311

201

200

294

319

201

200

240

178

102

Employees

172,717

179,600

81,615

86,313

43,060

42,646

145,788

149,042

10,811

11,123

1 Priorperiod amounts adjusted.
2 Including rounding.

–79

– 59

–72

31,733

31,661

– 57

14,262

14,220

–20

–15

17,471

17,441

–1

2,074

2,277

1,346

1,443

1,377

1,471

1,170

925

453,990

468,724

Adjustment of prior-period amounts

Adjustments to prior-period amounts resulted from assigning com-
panies to different segments. DHL Parcel Iberia S.L. (Spain), Danzas
S. L. (Spain) and DHL Parcel Portugal (Portugal), which were for-

merly part of the Express segment, were reassigned to the Post -
eCommerce - Parcel segment effective 1 January 2017.

The employee numbers are expressed as average numbers of

FTE s.

Information about geographical regions

€ m

1 Jan. to 31 Dec.

External revenue

Noncurrent assets

Capex

Germany

(excluding Germany)

Americas

Asia Pacific

Other regions

Group

Europe

2016

2017

2016

2017

2016

2017

2016

2017

17,910

18,405

17,006

18,139

10,171

10,768

10,003

10,766

5,498

940

5,610

964

7,328

512

7,328

614

4,279

422

4,076

487

3,562

165

3,303

165

2016

2,244

377

2017

2,366

356

2016

2017

57,334

21,044

2,074

60,444

20,673

2,277

Consolidated Financial Statements — NOTES — Segment reporting

123

10.1 Segment reporting disclosures

EXPRESS

The Express division offers time-definite courier and express ser-
vices to business and private customers. The division comprises the
Europe, Americas, Asia Pacific and MEA (Middle East and Africa)
regions.

GLObAL FORWARDING, FREIGhT

The activities of the Global Forwarding, Freight division comprise
the transport of goods by road, air and sea. The division’s business
units are Global Forwarding and Freight.

SUPPLY chAIN

The Supply Chain division delivers customised supply chain solu-
tions to its customers based on globally standardised modular com-
ponents including warehousing, transport and value-added services.

In addition to the reportable segments given above, segment report-
ing comprises the following categories:

Corporate Center / Other

Corporate Center / Other comprises Global Business Services (GBS),
the Corporate Center, non-operating activities and other business
activities. The profit / loss generated by GBS is allocated to the oper-
ating segments, whilst its assets and liabilities remain with GBS
(asymmetrical allocation).

Consolidation

The data for the divisions are presented following consolidation of
interdivisional transactions. The transactions between the divisions
are eliminated in the Consolidation column.

10.3 Information about geographical regions

The main geographical regions in which the Group is active are
Germany, Europe, the Americas, Asia Pacific and Other regions.
External revenue, non-current assets and capex are disclosed for
these regions. Revenue, assets and capex are allocated to the indi-
vidual regions on the basis of the domicile of the reporting entity.
Non-current assets primarily comprise intangible assets, property,
plant and equipment and other non-current assets.

Deutsche Post DHL Group reports four operating segments; these
are managed independently by the responsible segment manage-
ment bodies in line with the products and services offered and the
brands, distribution channels and customer profiles involved. Com-
ponents of the entity are defined as a segment on the basis of the
existence of segment managers with bottom-line responsibility who
report directly to Deutsche Post DHL Group’s top management.

External revenue is the revenue generated by the divisions from
non-Group third parties. Internal revenue is revenue generated with
other divisions. If comparable external market prices exist for ser-
vices or products offered internally within the Group, these market
prices or market-oriented prices are used as transfer prices (arm’s
length principle). The transfer prices for services for which no ex-
ternal market exists are generally based on incremental costs.

The expenses for IT services provided in the IT service centres
are allocated to the divisions by their origin. The additional costs
resulting from Deutsche Post AG’s universal postal service obliga-
tion (nationwide retail outlet network, delivery every working day),
and from its obligation to assume the compensation structure as the
legal successor to Deutsche Bundespost, are allocated to the PeP
division.

As part of the central management of currency risk, Corporate
Treasury is responsible for deciding on the central absorption of
fluctuations between projected and actual exchange rates on the
basis of division-specific agreements.

In keeping with internal reporting, capital expenditure (capex)
is disclosed. Additions to intangible assets net of goodwill and to
property, plant and equipment are reported in the capex figure. De-
preciation, amortisation and impairment losses relate to the seg-
ment assets allocated to the individual divisions. Other non-cash
expenses and income relate primarily to expenses from the recog-
nition of provisions.

The profitability of the Group’s operating divisions is measured

as profit from operating activities (EBIT).

10.2 Segments by division

Reflecting the Group’s predominant organisational structure, the
primary reporting format is based on the divisions. The Group dis-
tinguishes between the following divisions:

POST - EcOMMERcE - PARcEL

The Post - eCommerce - Parcel (PeP) division handles both domes-
tic and international mail and is a specialist in dialogue marketing,
nationwide press distribution services and all the electronic services
associated with mail delivery. The division offers parcel and e-com-
merce services not only in Germany, but worldwide. It is divided
into two business units: Post, and eCommerce - Parcel.

124

Deutsche Post DHL Group — 2017 Annual Report

10.4 Reconciliation of segment amounts

Reconciliation of segment amounts to consolidated amounts

Reconciliation to the income statement

€ m

External revenue

Internal revenue

Total revenue

Other operating income

Materials expense

Staff costs

Depreciation, amortisation and impairment
losses

Other operating expenses

Net income from investments accounted for
using the equity method

Profit / loss from operating activities (EbIT)

Net finance costs

Profit before income taxes

Income taxes

Consolidated net profit for the period

of which attributable to

Deutsche Post AG shareholders

noncontrolling interests

1 Priorperiod amounts adjusted.
2 Including rounding.

Total for reportable segments 1

Corporate Center / Other

Reconciliation to Group /
Consolidation 1, 2

Consolidated amount

2016

57,211

1,309

58,520

2,098

–32,047

–18,690

–1,175

– 4,861

3,849

2017

60,356

1,495

61,851

1,899

–34,290

–19,171

–1,270

– 4,931

4,090

2016

123

1,156

1,279

1,454

–1,330

– 917

–201

– 644

–359

2017

1,159

1,247

1,554

–1,390

– 915

–200

– 645

–349

2016

–2,465

–1,396

2,757

–1

2017

–2,654

–1,314

2,905

–1

1,091

1,050

2016

57,334

2,156

–30,620

–19,592

–1,377

– 4,414

3,491

–359

3,132

–351

2,781

2,639

142

2017

60,444

2,139

–32,775

–20,072

–1,471

– 4,526

3,741

– 411

3,330

– 477

2,853

2,713

140

The following table shows the reconciliation of Deutsche Post DHL
Group’s total assets to the segment assets. Financial assets, income
tax assets, deferred taxes, cash and cash equivalents and other asset
components are deducted.

The following table shows the reconciliation of Deutsche Post DHL
Group’s total liabilities to the segment liabilities. Components of the
provisions and liabilities as well as income tax liabilities and de-
ferred taxes are deducted.

Reconciliation to segment assets

Reconciliation to segment liabilities

€ m

Total assets

Investment property

Noncurrent financial assets

Other noncurrent assets

Deferred tax assets

Income tax assets

Receivables and other current assets

Current financial assets

Cash and cash equivalents

Segment assets

of which Corporate Center / Other

total for reportable segments

consolidation 1

1 Including rounding.

2016

38,295

–23

– 488

–143

2017

38,672

–21

– 543

–153

€ m

Total equity and liabilities

Equity

Consolidated liabilities

Noncurrent provisions

–2,192

–2,272

Noncurrent liabilities

–232

–16

–361

–3,107

31,733

1,557

30,255

–79

–236

–14

– 637

–3,135

31,661

1,554

30,179

–72

Current provisions

Current liabilities

Segment liabilities

of which Corporate Center / Other

total for reportable segments 1

consolidation 1, 2

1 Priorperiod amounts adjusted.
2 Including rounding.

2016

38,295

2017

38,672

–11,350

–12,903

26,945

– 5,990

– 4,622

– 98

–1,973

14,262

1,486

12,835

– 59

25,769

– 4,836

– 5,177

–75

–1,461

14,220

1,524

12,753

– 57

Consolidated Financial Statements — NOTES — Segment reporting — Income statement disclosures

125

INCOME STATEMENT DISCLOSURES

11 Revenue
Revenue increased by €3,110 million (5.4 %) from €57,334 million to
€60,444 million. The change in revenue was due to the following
factors:

The increase in income from work performed and capitalised is
largely attributable to the expanded production of electric vehicles
by StreetScooter GmbH for Group companies.

Subsidies relate to grants for the purchase or production of
assets. The grants are reported as deferred income and recognised
in the income statement over the useful lives of the assets.

Miscellaneous other operating income includes a large number

Factors affecting revenue increase, 2017

€ m

Organic growth

Portfolio changes 1

Currency translation effects

Total

Note 2.

of smaller individual items.

13 Materials expense

3,901

479

–1,270

3,110

€ m

Cost of raw materials, consumables and supplies,
and of goods purchased and held for resale
Aircraft fuel

Fuel

Good purchased and held for resale

Packaging material

Spare parts and repair materials

Office supplies

Other expenses

Cost of purchased services
Transport costs

Cost of temporary staff and services

Expenses from noncancellable leases

It services

Commissions paid

Expenses from cancellable leases

Other lease expenses (incidental expenses)

Other purchased services

Materials expense

2016

2017

Maintenance costs

As in the prior period, there was no revenue in financial year 2017
that was generated on the basis of barter transactions.

The further classification of revenue by division and the allo-
cation of revenue to geographical regions are presented in the seg-
ment reporting.

12 Other operating income

€ m

Income from work performed and capitalised

Income from the reversal of provisions

Insurance income

Income from the disposal of assets

Income from currency translation differences

Income from fees and reimbursements

Commission income

Income from the remeasurement of liabilities

Rental and lease income

Reversals of impairment losses on receivables
and other assets

Income from derivatives

Income from priorperiod billings

Income from loss compensation

Income from the derecognition of liabilities

Subsidies

Recoveries on receivables previously written off

Miscellaneous

Other operating income

132

231

202

205

222

136

122

120

233

214

208

193

174

134

126

120

372

2,156

337

2,139

The increase in transport costs is due to factors such as higher crude
oil prices and the recognition in full of UK Mail Group, which was
acquired in the previous year.

Other expenses include a large number of individual items.

2016

2017

885

708

350

419

110

186

1,102

740

435

427

117

252

2,723

3,139

18,752

2,490

2,143

1,158

538

570

492

384

1,370

27,897

30,620

20,381

2,556

2,226

1,207

579

574

487

347

1,279

29,636

32,775

126

Deutsche Post DHL Group — 2017 Annual Report

14 Staff costs / employees

15 Depreciation, amortisation and impairment losses

€ m

Wages, salaries and compensation

Social security contributions

Retirement benefit expenses

Expenses for other employee benefits

Staff costs

2016

16,092

2,324

607

569

2017

16,192

2,419

891

570

19,592

20,072

Staff costs relate mainly to wages, salaries and compensation, as well
as all other benefits paid to employees of the Group for their ser-
vices in the financial year.

Social security contributions relate, in particular, to statutory

social security contributions paid by employers.

Retirement benefit expenses include the service cost related
to the defined benefit retirement plans. These expenses also include
contributions to defined contribution retirement plans for civil
servant employees in Germany in the amount of €461 million (pre-
vious year: €493 million), as well as for the Group’s hourly workers
and salaried employees, totalling €300 million (previous year:
€305 million),
note 7. For the changes in retirement benefit ex-
penses, see

note 38 in particular.

The average number of Group employees in the reporting

period, broken down by employee group, was as follows:

Amortisation of and impairment losses
on intangible assets, excluding impairment
of goodwill

Depreciation of and impairment losses
on property, plant and equipment

Land and buildings
(including leasehold improvements)

Technical equipment and machinery

Other equipment, operating and office equipment

Vehicle fleet, transport equipment

Aircraft

Total depreciation of and impairment losses
on property, plant and equipment

Depreciation of and impairment losses
on investment property

Impairment of goodwill

Depreciation, amortisation and impairment
losses

2016

2017

247

287

176

290

236

200

228

182

314

231

208

247

1,130

1,182

1,377

1,471

Depreciation, amortisation and impairment losses increased by
€94 million to €1,471 million due, amongst other things, to the fact
that customer relationship assets from past acquisitions were writ-
ten down in the Supply Chain division, see also

note 7.

The impairment losses are attributable to the segments as follows:

Employees

Headcount

Headcount (annual average)
Hourly workers and salaried employees

Civil servants

Trainees

Total

Full-time equivalents
As at 31 December 1

Average for the year 2

1 Excluding trainees.
2 Including trainees.

Impairment

2016

2017

€ m

459,990

32,976

5,493

498,459

459,262

453,990

477,251

30,468

5,619

513,338

472,208

468,724

Post - eCommerce - Parcel
Property, plant and equipment

Express
Property, plant and equipment

Global Forwarding, Freight
Investment property

Supply Chain
Software

Property, plant and equipment

Impairment losses

2016

2017

The employees of companies acquired or disposed of during the
financial year were included rateably. The number of full-time
equivalents at joint operations included in the consolidated finan-
cial statements as at 31 December 2017 amounted to 254 on a pro-
portionate basis (previous year: 217).

As in the previous year, €18 million of the impairment losses related
to aircraft for sale in the Express segment, for which a final impair-
ment loss was recognised, writing the aircraft down in full, prior to
their reclassification to assets held for sale.

Consolidated Financial Statements — NOTES — Income statement disclosures

127

17 Net finance costs

2016

2017

€ m

2016

2017

16 Other operating expenses

€ m

Expenses for advertising and public relations

Cost of purchased cleaning and security services

Travel and training costs

Insurance costs

Warranty expenses, refunds and compensation
payments

Other business taxes

Telecommunication costs

Writedowns of current assets

Entertainment and corporate hospitality expenses

Currency translation expenses

Office supplies

Customs clearancerelated charges

Services provided by the Bundesanstalt für Post
und Telekommunikation (German federal post
and telecommunications agency)

Consulting costs (including tax advice)

Contributions and fees

Voluntary social benefits

Commissions paid

Losses on disposal of assets

Expenses from derivatives

Legal costs

Monetary transaction costs

Audit costs

Donations

Expenses from priorperiod billings

Miscellaneous

Other operating expenses

385

360

315

331

301

267

230

223

166

222

167

115

126

134

437

378

341

328

305

279

228

211

182

181

180

163

145

144

106

483

4,414

443

4,526

Taxes other than income taxes are either recognised in the related
expense item or, if no specific allocation is possible, in other oper-
ating expenses.

Miscellaneous other operating expenses include a large number

of smaller individual items.

Financial income
Interest income

Income from other equity investments
and financial assets

Other financial income

Finance costs
Interest expenses

of which unwinding of discounts for net pension
provisions and other provisions

Other finance costs

Foreign currency losses

Net finance costs

–302

–156

– 82

–384

– 65

–359

–282

–130

–200

– 482

–18

– 411

Amongst other factors, the deterioration in net finance costs re-
sulted from changes in the value of stock appreciation rights due to
share price movements, see also
note 7, as well as write-downs of
financial assets.

Interest income and interest expenses result from financial
assets and liabilities that were not measured at fair value through
profit or loss.

Information on the unwinding of discounted net pension pro-

visions can be found in

note 38.

18 Income taxes

€ m

Current income tax expense

Current recoverable income tax

Deferred tax expense (previous year: income)
from temporary differences

Deferred tax income from tax loss carryforwards

Income taxes

2016

– 607

– 567

132

216

–351

2017

–727

– 691

–231

445

214

– 477

128

Deutsche Post DHL Group — 2017 Annual Report

The reconciliation to the effective income tax expense is shown
below, based on consolidated net profit before income taxes and
the expected income tax expense:

Reconciliation

€ m

Profit before income taxes

Expected income taxes

Deferred tax assets not recognised for initial
differences

Deferred tax assets of German Group companies
not recognised for tax loss carryforwards and
temporary differences

Deferred tax assets of foreign Group companies
not recognised for tax loss carryforwards and
temporary differences

Effect from previous years on current taxes

Taxexempt income and nondeductible expenses

Differences in tax rates at foreign companies

Income taxes

2016

3,132

– 946

2017

3,330

–1,006

569

700

168

–26

–205

–351

–33

–224

– 477

of deductible temporary differences from a prior period (and result-
ing mainly from Germany) reduced the deferred tax expense by
€857 million (previous year: €154 million). Effects from unrecog-
nised deferred tax assets amounting to €3 million (previous year:
€1 million) were due to a valuation allowance recognised for a de-
ferred tax asset. Other effects from unrecognised deferred tax assets
relate primarily to tax loss carryforwards for which no deferred
taxes were recognised.

A deferred tax asset in the amount of €5 million was recognised
in the balance sheet for companies that reported a loss in the previ-
ous year or in the current period as, based on tax planning, realisa-
tion of the tax asset is probable.

In financial year 2017, the change in the US tax rate gave rise
to a deferred tax expense of €151 million. In other tax jurisdictions
abroad, tax rate changes had no material effect; there was no effect
whatsoever at domestic Group companies.

The effective income tax expense includes prior-period tax ex-
penses from German and foreign companies in the amount of
€33 million (tax expense) (previous year: expense of €26 million).
The following table presents the tax effects on the components

of other comprehensive income:

The difference from deferred tax assets not recognised for initial
differences is due to differences between the carrying amounts in
the opening tax accounts of Deutsche Post AG and the carrying
amounts in the IFRS financial statements as at 1 January 1995 (initial
differences). In accordance with IAS 12.15 (b) and IAS 12.24 (b), the
Group did not recognise any deferred tax assets in respect of these
temporary differences, which related mainly to property, plant and
equipment as well as to provisions for pensions and similar obliga-
tions. The remaining temporary differences between the original
IFRS carrying amounts, net of accumulated depreciation or amort-
isation, and the tax base amounted to €285 million as at 31 Decem-
ber 2017 (previous year: €295 million).

The effects from deferred tax assets of German Group com-
panies not recognised for tax loss carryforwards and temporary
differences relate primarily to Deutsche Post AG and members of
its consolidated tax group. Effects from deferred tax assets of foreign
companies not recognised for tax loss carryforwards and temporary
differences relate primarily to the Americas region.

€10 million (previous year: €679 million) of the effects from
deferred tax assets not recognised for tax loss carryforwards and
temporary differences relates to the reduction of the effective in-
come tax expense due to the utilisation of tax loss carryforwards
and temporary differences, for which deferred tax assets had previ-
ously not been recognised. In addition, the recognition of deferred
tax assets previously not recognised for tax loss carryforwards and

Other comprehensive income

€ m

2017
Change due to remeasurements
of net pension provisions

IAS 39 revaluation reserve

IAS 39 hedging reserve

Currency translation reserve

Other changes in retained earnings

Share of other comprehensive
income of investments accounted
for using the equity method

Other comprehensive income

2016
Change due to remeasurements
of net pension provisions

IAS 39 revaluation reserve

IAS 39 hedging reserve

Currency translation reserve

Other changes in retained earnings

Share of other comprehensive
income of investments accounted
for using the equity method

Before taxes

Income taxes

After taxes

378

–743

– 8

–350

– 876

– 69

–291

–28

–1

–7

–36

–19

350

–1

–743

– 8

–386

– 868

– 56

–291

–1,168

Other comprehensive income

–1,170

Consolidated Financial Statements — NOTES — Income statement disclosures

129

19 Earnings per share
Basic earnings per share are computed in accordance with IAS 33,
Earnings per Share, by dividing consolidated net profit by the
weighted average number of shares outstanding. Outstanding
shares relate to issued capital less any treasury shares held. Basic
earnings per share for financial year 2017 were €2.24 (previous year:
€2.19).

Basic earnings per share

Consolidated net profit for the
period attributable to Deutsche
Post AG shareholders

Weighted average number
of shares outstanding

Basic earnings per share

2016

2017

€ m

2,639

2,713

number 1,203,092,606

1,210,097,823

€

2.19

2.24

Diluted earnings per share

Consolidated net profit for the
period attributable to Deutsche
Post AG shareholders

Plus interest expense on the
convertible bond

Less income taxes

Adjusted consolidated net profit for
the period attributable to Deutsche
Post AG shareholders

Weighted average number of
shares outstanding

2016

2017

2,639

2,713

2,644

2,715

€ m

number 1,203,092,606

1,210,097,823

Potentially dilutive shares

number

54,232,677

50,736,444

Weighted average number of
shares for diluted earnings

Diluted earnings per share

number 1,257,325,283

1,260,834,267

€

2.10

2.15

20 Dividend per share
A dividend per share of €1.15 is being proposed for financial year
2017 (previous year: €1.05). Further details on the dividend distri-
bution can be found in

note 36.

To compute diluted earnings per share, the weighted average num-
ber of shares outstanding is adjusted for the number of all poten-
tially dilutive shares. This item includes the executives’ rights to
shares under the Performance Share Plan and Share Matching
Scheme share-based payment systems (as at 31 December 2017:
13,532,321 shares; previous year: 8,045,621 shares) and the max-
imum number of ordinary shares that can be issued on exercise of
the conversion rights under the convertible bonds issued in Decem-
ber 2012 and 2017. The prior-year figure also included the shares
not yet bought back through the share buyback programme. Con-
solidated net profit for the period attributable to Deutsche Post AG
shareholders was increased by the amounts spent for the convertible
bonds.

Diluted earnings per share in the reporting period were €2.15

(previous year: €2.10).

130

Deutsche Post DHL Group — 2017 Annual Report

BALANCE SHEET DISCLOSURES

21 Intangible assets

21.1 Overview

€ m

Cost
Balance at 1 January 2016

Additions from business combinations

Additions

Reclassifications

Disposals

Currency translation differences

Balance at 31 December 2016 / 1 January 2017

Additions from business combinations

Additions

Reclassifications

Disposals

Currency translation differences

Balance at 31 December 2017

Amortisation and impairment losses
Balance at 1 January 2016

Additions from business combinations

Amortisation

Impairment losses

Reclassifications

Reversals of impairment losses

Disposals

Currency translation differences

Balance at 31 December 2016 / 1 January 2017

Additions from business combinations

Amortisation

Impairment losses

Reclassifications

Reversals of impairment losses

Disposals

Currency translation differences

Balance at 31 December 2017

Carrying amount at 31 December 2017

Carrying amount at 31 December 2016

Internally
generated
intangible
assets

Purchased
brand names

Purchased
customer lists

Other
purchased
intangible
assets

Advance
payments and
intangible
assets under
development

101

– 95

–2

–3

–76

–24

–1

Total

17,286

282

185

–101

–283

17,391

184

–1,300

– 598

15,759

4,796

247

–79

–141

4,837

287

–1,036

–121

3,967

11,792

12,554

Goodwill

12,704

236

– 4

–145

12,791

– 97

– 490

12,239

1,634

– 83

– 6

1,686

–151

–26

1,653

1,289

1,159

125

–2

–70

– 6

1,349

136

–139

–21

1,327

326

337

–26

1,133

–25

–38

1,070

11,169

11,658

1,240

579

–12

–2

1,311

– 82

– 4

1,303

1,053

– 9

–2

1,125

–2

– 66

–2

1,131

172

186

–77

506

–32

–20

455

508

–72

436

–14

425

1,039

– 50

1,006

– 914

– 57

787

–35

794

– 806

– 46

212

The additions to goodwill in the amount of €35 million relate to
the acquisition of the Brazilian companies. The disposals relate to
the sale of Williams Lea Tag Group in the amount of €72 million,

note 2.

Purchased software, concessions, industrial rights, licences and
similar rights and assets are reported under purchased intangible
assets. Internally generated intangible assets relate to development
costs for internally developed software.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

131

21.2 Allocation of goodwill to cGU s

€ m

Total goodwill

Post - eCommerce - Parcel

Express

Global Forwarding, Freight
DHL Global Forwarding

DHL Freight

Supply Chain

2016

2017

11,658

11,169

1,135

3,945

4,156

277

2,145

1,101

3,911

3,891

275

1,991

For the purposes of annual impairment testing in accordance with
IAS 36, the Group determines the recoverable amount of a CGU on
the basis of its value in use. This calculation is based on projections
of free cash flows that are initially discounted at a rate correspond-
ing to the post-tax cost of capital. Pre-tax discount rates are then
determined iteratively.

The cash flow projections are based on the detailed planning
for EBIT, depreciation / amortisation and investment planning

adopted by management, as well as changes in net working capital,
and take both internal historical data and external macroeconomic
data into account. From a methodological perspective, the detailed
planning phase covers a three-year planning horizon from 2018 to
2020. It is supplemented by a perpetual annuity representing the
value added from 2021 onwards. This is calculated using a long-
term growth rate, which is determined for each CGU separately and
which is shown in the table below. The growth rates applied are
based on long-term real growth figures for the relevant economies,
growth expectations for the relevant sectors and long-term inflation
forecasts for the countries in which the CGU s operate. The cash flow
forecasts are based both on past experience and on the effects of the
anticipated future general market trend. In addition, the forecasts
take into account growth in the respective geographical submarkets
and in global trade, and the ongoing trend towards outsourcing
logistics activities. Cost trend forecasts for the transport network
and services also have an impact on value in use. Another key plan-
ning assumption for the impairment test is the EBIT margin for the
perpetual annuity.

The pre-tax cost of capital is based on the weighted average cost
of capital. The (pre-tax) discount rates for the individual CGU s and
the growth rates assumed in each case for the perpetual annuity are
shown in the following table:

Supply Chain

Global Forwarding, Freight
DHL Freight

DHL Global Forwarding

Post - eCommerce - Parcel

Express

Discount rates

Growth rates

2016

8.2

8.4

8.1

7.5

7.6

2017

8.4

8.6

8.4

8.0

8.3

2016

2.5

2.0

2.5

0.5

2.0

2017

2.5

2.0

2.5

0.5

2.0

On the basis of these assumptions and the impairment tests carried
out for the individual CGU s to which goodwill was allocated, it was
established that the recoverable amounts for all CGU s exceed their
carrying amounts. No impairment losses were recognised on good-
will in any of the CGU s as at 31 December 2017.

When performing the impairment test, Deutsche Post DHL
Group conducted sensitivity analyses as required by IAS 36.134
for the EBIT margin, the discount rate and the growth rate. These
analyses – which included varying the essential valuation param-
eters within an appropriate range – did not reveal any risk of im-
pairment to goodwill.

132

Deutsche Post DHL Group — 2017 Annual Report

22 Property, plant and equipment

22.1 Overview

€ m

Cost
Balance at 1 January 2016

Additions from business combinations

Additions

Reclassifications

Disposals

Currency translation differences

Balance at 31 December 2016 / 1 January 2017

Additions from business combinations

Additions

Reclassifications

Disposals

Currency translation differences

Balance at 31 December 2017

Depreciation and impairment losses
Balance at 1 January 2016

Additions from business combinations

Depreciation

Impairment losses

Reclassifications

Reversals of impairment losses

Disposals

Currency translation differences

Balance at 31 December 2016 / 1 January 2017

Additions from business combinations

Depreciation

Impairment losses

Reclassifications

Reversals of impairment losses

Disposals

Currency translation differences

Balance at 31 December 2017

Carrying amount at 31 December 2017

Carrying amount at 31 December 2016

Land and
buildings

Technical
equipment and
machinery

Other
equipment,
operating
and office
equipment

Vehicle fleet
and transport
equipment

Advance
payments and
assets under
development

Aircraft

4,564

4,857

2,562

1,924

2,400

192

276

–230

–26

4,836

157

– 495

–135

4,528

126

533

–166

–12

5,390

141

372

–272

–148

5,484

2,258

3,099

175

–128

–11

2,319

182

–307

–77

2,129

2,399

2,517

287

–16

–141

–11

3,249

307

–12

–245

– 86

3,220

2,264

2,141

211

–207

– 5

2,670

187

–344

–79

2,507

1,959

236

–197

– 4

2,012

230

–322

– 58

1,866

641

658

292

–243

2,082

397

–281

– 58

2,218

880

201

–233

879

229

–273

–16

837

1,381

1,203

221

–229

–28

2,407

225

125

–203

–34

2,531

1,190

200

–187

–19

1,191

208

–172

–21

1,209

1,322

1,216

874

1,045

–1,241

–12

654

1,305

–1,145

– 8

–31

775

654

Total

17,181

147

1,889

–23

–1,087

– 68

18,039

2,093

–22

–1,603

– 485

18,043

9,386

1,099

– 886

– 41

9,650

1,156

–1,319

–258

9,261

8,782

8,389

The changes in disposals are mainly the result of property sales and
the sale of Williams Lea Tag Group.

Advance payments relate only to advance payments on items
of property, plant and equipment for which the Group has paid
advances in connection with uncompleted transactions. Assets
under development relate to items of property, plant and equip-
ment in progress at the reporting date for whose production inter-
nal or third-party costs have already been incurred.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

22.2 Finance leases

The following assets are carried as non-current assets resulting from
finance leases:

€ m

Land and buildings

Other equipment, operating and office equipment

Vehicle fleet, transport equipment

Technical equipment and machinery

Aircraft

Finance leases

2016

180

2017

153

203

169

Information on the corresponding liabilities can be found under
financial liabilities,

note 40.2.

23 Investment property
The investment property largely comprises leased property encum-
bered by heritable building rights, and developed and undeveloped
land.

Cost
At 1 January

Additions

Reclassifications

Disposals

Currency translation differences

At 31 December

Depreciation and impairment losses
At 1 January

Additions

Impairment losses

Disposals

Reclassifications

Currency translation differences

At 31 December

Carrying amount at 31 December

133

2016

2017

–7

–2

–1

Rental income for investment property amounted to €2 million
(previous year: €1 million), whilst the related expenses were €1 mil-
lion (previous year: €0 million). The fair value amounted to
€54 million (previous year: €58 million).

24 Investments accounted for using the equity method
Investments accounted for using the equity method changed as
follows:

€ m

Balance at 1 January

Additions

Disposals

Impairment losses

Changes in the Group’s share of equity
Changes recognised in profit or loss

Profit distributions

Changes recognised in other comprehensive income

Balance at 31 December

Associates

Joint ventures

2016

–3

–2

2017

–26

–2

– 8

2016

2017

2016

–3

–2

Total

2017

–26

–2

– 8

The additions relate to the acquisition in the first quarter of 2017 of
22.56 % of the shares of Israel-based Global-E Online Ltd. The dis-
posals relate exclusively to the reclassification of AHK Air Hong
Kong Limited, China, to assets held for sale and liabilities associated
with assets held for sale,

note 31.

134

Deutsche Post DHL Group — 2017 Annual Report

24.1 Aggregate financial data

The following table gives an aggregated overview of the carrying
amount in the consolidated financial statements and selected finan-
cial data for those companies which, both individually and in the
aggregate, are not of material significance for the Group.

Aggregate financial data for associates and joint ventures

€ m

Carrying amount in the consolidated financial statements 1

Profit before income taxes

Profit after income taxes

Other comprehensive income

Total comprehensive income

1 Based on the interest held.

25 Financial assets

€ m

Availableforsale financial assets

of which measured at fair value

Loans and receivables

Assets at fair value through profit or loss

Lease receivables

Financial assets

The increase in financial assets resulted primarily from investments
in money market funds, which are recognised in available- for-sale
financial assets.

Write-downs of non-current financial assets at fair value
through profit or loss amounting to €1 million (previous year:
€12 million) were recognised in the income statement, whilst a
write-up in the same amount was recognised for liabilities.

Compared with the market rates of interest prevailing at 31 De-
cember 2017 for comparable non-current financial assets, most of
the housing promotion loans are low-interest or interest-free loans.
They are recognised in the balance sheet at a present value of €3 mil-
lion (previous year: €6 million). The principal amount of these
loans totals €3 million (previous year: €6 million).

Details on restraints on disposal are contained in

note 43.2.

Associates

Joint ventures

2017

2016

2017

– 8

–7

2016

Noncurrent

Current

2016

2017

458

155

689

466

170

733

2016

200

374

2017

500

652

26 Other assets

€ m

Prepaid expenses

Current tax receivables

Pension assets, noncurrent only

Receivables from private postal agencies

Income from cost absorption

Creditors with debit balances

Receivables from insurance business

Receivables from loss compensation (recourse claims)

Receivables from employees

Receivables from asset disposals

Receivables from cashondelivery

Other assets, of which noncurrent: 78
(previous year: 79)

Other assets

of which current

noncurrent

2016

232

221

531

249

Total

2017

– 8

– 6

Total

2017

559

545

535

246

1,063

1,385

2016

705

463

143

127

732

2,398

2,176

222

2017

604

466

153

116

113

797

2,415

2,184

231

Information on pension assets can be found in

note 38.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

135

Of the tax receivables, €356 million (previous year: €346 mil-
lion) relates to VAT, €67 million (previous year: €62 million) to cus-
toms and duties, and €43 million (previous year: €55 million) to
other tax receivables. Miscellaneous other assets include a large
number of individual items.

27 Deferred taxes

Breakdown by balance sheet item and maturity

€ m

Intangible assets

Property, plant and
equipment

Noncurrent financial
assets

Other noncurrent assets

Other current assets

Provisions

Financial liabilities

Other liabilities

Tax loss carryforwards

Gross amount

of which current

noncurrent

Netting

Carrying amount

2016

2017

Deferred
tax assets

Deferred

tax liabilities

Deferred
tax assets

Deferred

tax liabilities

140

580

143

1,337

2,424

860

1,564

–232

2,192

131

–

338

119

219

–232

106

449

104

1,755

2,488

569

1,919

–216

2,272

–

292

102

190

–216

Deferred taxes on tax loss carryforwards in the amount of
€1,486 million (previous year: €1,110 million) relate to tax loss
carry forwards in Germany and €269 million (previous year:
€227 million) to foreign tax loss carryforwards.

No deferred tax assets were recognised for tax loss carry-
forwards of around €6.4 billion (previous year: €10.1 billion) and
for temporary differences of around €2.6 billion (previous year:
€3.0 billion), as it can be assumed that the Group will probably not
be able to use these tax loss carryforwards and temporary differ-
ences in its tax planning.

Most of the tax loss carryforwards in Germany are attributable
to Deutsche Post AG. It will be possible to utilise them for an in-
definite period of time. In the case of the foreign companies, the
significant tax loss carryforwards will not lapse before 2025.

Deferred taxes have not been recognised for temporary differ-
ences of €505 million (previous year: €813 million) relating to earn-
ings of German and foreign subsidiaries because these temporary
differences will probably not reverse in the foreseeable future.

28 Inventories

€ m

Raw materials, consumables and supplies

Finished goods and goods purchased and held for
resale

Work in progress

Advance payments

Inventories

2016

150

275

2017

179

100

327

There was no requirement to charge significant valuation allowances
on these inventories.

29 Trade receivables

€ m

Trade receivables

Deferred revenue

Trade receivables

30 Cash and cash equivalents

€ m

Cash equivalents

Bank balances / cash in transit

Cash

Other cash and cash equivalents

Cash and cash equivalents

2016

7,306

659

7,965

2017

7,558

660

8,218

2016

1,198

1,837

2017

1,342

1,717

3,107

3,135

Of the €3,135 million in cash and cash equivalents, €973 million was
not available for general use by the Group as at the reporting date
(previous year: €955 million). Of this amount, €895 million (previ-
ous year: €886 million) was attributable to countries where exchange
controls or other legal restrictions apply (mostly China, India and
Thailand) and €78 million (previous year: €69 million) primarily to
companies with non-controlling interest holders.

136

Deutsche Post DHL Group — 2017 Annual Report

31 Assets held for sale and liabilities associated with assets

held for sale

The amounts reported in this item relate mainly to the following
items:

€ m

AHK Air Hong Kong Limited, China – equity interest (Express segment)

Other

Assets held for sale and liabilities associated with assets held for sale

The Group intends to sell its 40 % interest in AHK Air Hong Kong
Limited, China, to date an investment accounted for using the
equity method, to Cathay Pacific, holder of the remaining 60 %
interest and party to a joint agreement with the Group on express
freight delivery in Asia ending on 31 December 2018, as stipulated
in the contract. The most recent remeasurement prior to reclassifi-
cation to assets held for sale and liabilities associated with assets
held for sale did not result in an impairment loss.

The “other” item relates to legacy aircraft held for sale. Another
five aircraft with a carrying amount of €1.00 each were reclassified
to this balance sheet item during the financial year. The most recent
measurement prior to reclassification led to an impairment loss of
€18 million.

32 Issued capital and purchase of treasury shares
As at 31 December 2017, KfW Bankengruppe (KfW) held a
20.7 % (previous year: 20.5 %) interest in the share capital of
Deutsche Post AG. The remaining 79.3 % (previous year: 79.5 %) of
the shares were in free float. KfW holds the shares in trust for the
Federal Republic of Germany.

32.1 Changes in issued capital

The issued capital amounts to €1,229 million. It is composed of
1,228,707,545 no-par value registered shares (ordinary shares) with
a notional interest in the share capital of €1 per share and is fully
paid up.

2016

Assets

2017

Liabilities

2016

2017

Changes in issued capital and treasury shares

€

Issued capital
Balance at 1 January

2016

2017

1,212,753,687

1,240,915,883

Addition due to contingent capital increase
(convertible bond)

28,162,196

15,091,662

Capital reduction through retirement
of treasury shares

Balance at 31 December
(according to commercial register)

Treasury shares
Balance at 1 January

Purchase of treasury shares

Issue / sale of treasury shares

Capital reduction through retirement
of treasury shares

–27,300,000

1,240,915,883

1,228,707,545

–1,568,593

–29,587,229

–30,896,650

– 4,660,410

2,878,014

2,434,057

27,300,000

Balance at 31 December

–29,587,229

– 4,513,582

Total at 31 December

1,211,328,654

1,224,193,963

Consolidated Financial Statements — NOTES — Balance sheet disclosures

137

32.2 Authorised and contingent capital

Contingent Capital 2011

Authorised / contingent capital at 31 December 2017

Authorised Capital 2013

Authorised Capital 2017

Contingent Capital 2011

Contingent Capital 2013

Contingent Capital 2014

Contingent Capital 2017

Amount

€ m Purpose

–

160

Increase in share
capital against cash /
noncash contributions
(until 28 May 2018)

Increase in share
capital against cash /
noncash contributions
(until 27 April 2022)

–

Issue of options /
conversion rights
(until 24 May 2016)

Issue of options /
conversion rights
(until 28 May 2018)

Issue of subscription
rights to executives
(until 26 May 2019)

Issue of options /
conversion rights
(until 27 April 2022)

Authorised Capital 2013

As resolved by the Annual General Meeting on 29 May 2013, the
Board of Management was authorised, subject to the consent of the
Supervisory Board, to issue up to 240 million new, no-par value
registered shares until 28 May 2018 in exchange for cash and / or
non-cash contributions and thereby increase the company’s share
capital. The authorisation was exercised in part in 2014 and 2015.
The authorised capital amounted to €236 million. As resolved by the
Annual General Meeting on 28 April 2017, it was replaced by a new
authorisation (Authorised Capital 2017).

Authorised Capital 2017

As resolved by the Annual General Meeting on 28 April 2017, the
Board of Management is authorised, subject to the consent of the
Supervisory Board, to issue up to 160 million new, no-par value
registered shares until 27 April 2022 in exchange for cash and / or
non-cash contributions and thereby increase the company’s share
capital. The authorisation may be used in full or for partial amounts.
Shareholders generally have subscription rights. However, subject
to the approval of the Supervisory Board, the Board of Management
may disapply the shareholders’ subscription rights to the shares
covered by the authorisation. No use was made of the authorisation
in the reporting period.

In its resolution dated 25 May 2011, the Annual General Meeting
authorised the Board of Management, subject to the consent of the
Supervisory Board, to issue bonds with warrants, convertible bonds
and / or income bonds as well as profit participation certificates, or
a combination thereof, in an aggregate principal amount of up to
€1 billion, on one or more occasions until 24 May 2016, thereby
granting options or conversion rights for up to 75 million shares
with a proportionate interest in the share capital not to exceed
€75 million.

Full use was made of the authorisation in December 2012
by issuing a €1 billion convertible bond. The share capital was in-
creased on a contingent basis by up to €75 million. Contingent cap-
ital was reduced through the issue of new shares, by €4,832 in 2015,
by €28,162,196 in 2016 and by €15,091,662 in 2017.

Contingent Capital 2013

In its resolution dated 29 May 2013, the Annual General Meeting
authorised the Board of Management, subject to the consent of the
Supervisory Board, to issue bonds with warrants, convertible bonds
and / or income bonds as well as profit participation certificates, or
a combination thereof, in an aggregate principal amount of up to
€1.5 billion, on one or more occasions until 28 May 2018, thereby
granting options or conversion rights for up to 75 million shares
with a proportionate interest in the share capital not to exceed
€75 million. The share capital was increased on a contingent basis
by up to €75 million. No use was made of the authorisation. As
resolved by the Annual General Meeting on 28 April 2017, it was
replaced by a new authorisation (Contingent Capital 2017).

Contingent Capital 2014

In its resolution dated 27 May 2014, the Annual General Meeting
authorised the Board of Management to contingently increase the
share capital by up to €40 million through the issue of up to 40 mil-
lion new no-par value registered shares. The contingent capital in-
crease serves to grant subscription rights to selected Group execu-
tives. The subscription rights may only be issued based on the
aforementioned Annual General Meeting resolution of 27 May 2014.
The contingent capital increase will only be implemented to the
extent that shares are issued based on the subscription rights
granted and the company does not settle the subscription rights by
cash payment or delivery of treasury shares. The new shares par-
ticipate in profit from the beginning of the financial year in which
they are issued. The share capital was increased on a contingent
basis by up to €40 million. No use was made of the authorisation in
the reporting period.

138

Deutsche Post DHL Group — 2017 Annual Report

Contingent Capital 2017

In its resolution dated 28 April 2017, the Annual General Meeting
authorised the Board of Management, subject to the consent of the
Supervisory Board, to issue bonds with warrants, convertible bonds
and / or income bonds as well as profit participation certificates, or
a combination thereof, in an aggregate principal amount of up to
€1.5 billion, on one or more occasions until 27 April 2022, thereby
granting options or conversion rights for up to 75 million shares
with a proportionate interest in the share capital not to exceed
€75 million. The new shares participate in profit from the beginning
of the financial year in which they are issued. The authorisation was
exercised in part in December 2017 by issuing a convertible bond
in an aggregate principal amount of €1 billion. The share capital was
increased on a contingent basis by up to €75 million.

32.3 Authorisation to acquire treasury shares

By way of a resolution adopted by the Annual General Meeting on
28 April 2017, the company is authorised to acquire treasury shares
in the period to 27 April 2022 of up to 10 % of the share capital ex-
isting when the resolution was adopted. The authorisation permits
the Board of Management to exercise it for every purpose permitted
by law, and in particular to pursue the goals mentioned in the
resolution by the Annual General Meeting.

Treasury shares acquired on the basis of the authorisation, with
shareholders’ subscription rights disapplied, may continue to be
used for the purposes of listing on a stock exchange outside Ger-
many. In addition, the Board of Management remains authorised
to acquire treasury shares using derivatives.

Share buyback programme

The share buyback programme begun on 1 April 2016 ended on
6 March 2017. The repurchased shares were intended to either be
retired, used to service long-term executive remuneration plans
or used to meet potential obligations if rights accruing under the
2012 / 2019 convertible bond are exercised.

In the first quarter of 2017, another 3.3 million shares were acquired
for tranche III at an average price of €31.65 for a total of €106 mil-
lion. A total of 32.9 million shares were acquired for €911 million
through the share buyback programme. By way of a resolution of
the Board of Management dated 21 March 2017, 27.3 million treas-
ury shares held were retired in the course of a capital reduction.

Share Matching Scheme

To settle the 2016 tranche of the Share Matching Scheme, 1,297,200
shares were purchased at an average price of €31.60 per share for a
total of €41 million in March 2017. Another 23,037 shares were pur-
chased for an average price of €31.67 per share and issued to the
executives concerned in April. In April 2017, the rights to matching
shares under the 2012 tranche were settled and 1,113,820 shares
were issued to executives.

As at 31 December 2017, Deutsche Post AG held 4,513,582 treas-

ury shares (previous year: 29,587,229 treasury shares).

32.4 Disclosures on corporate capital

In financial year 2017, the equity ratio was 33.4 % (previous year:
29.6 %). The company’s capital is monitored using the net gearing
ratio, which is defined as net debt divided by the total of equity and
net debt.

Corporate capital

€ m

Financial liabilities

Less operating financial liabilities 1

Less cash and cash equivalents

Less current financial assets

Less noncurrent derivative financial instruments

Net debt

Plus total equity

Total capital

Net gearing ratio (%)

2016

6,035

–138

2017

6,050

–155

–3,107

–3,135

–374

–155

2,261

11,350

13,611

16.6

– 652

–170

1,938

12,903

14,841

13.1

Share buyback programme tranches

1 Relates to, e. g., liabilities from leases, overpayments.

Tranche

III

Period

1 April 2016 to 3 May 2016

30 May 2016 to 26 August 2016

29 August 2016 to 6 March 2017

Volume

€ m

100

250

650

Consolidated Financial Statements — NOTES — Balance sheet disclosures

139

33 Capital reserves

€ m

Balance at 1 January

Share Matching Scheme

Addition

Exercise

Total for Share Matching Scheme

Performance Share Plan

Addition

Total for Performance Share Plan

Capital reduction through retirement of treasury
shares

Differences between purchase and issue prices
of treasury shares

Capital increase through exercise of conversion
rights under convertible bond

Conversion right under convertible bond 2017 / 2025

Deferred taxes on conversion right under
convertible bond 2017 / 2025

Balance at 31 December

2016

2,385

– 54

–1

531

2,932

2017

2,932

– 59

286

– 9

3,327

The rights to matching shares under the 2012 tranche were settled,
and the rights to deferred incentive and investment shares under
the 2016 tranche were granted in April 2017.

34 Other reserves

IAS 39 hedging reserve

In the financial year, realised losses of €77 million and realised gains
of €91 million were recognised in other comprehensive income
(previous year: realised losses of €86 million and realised gains of
€69 million).

35 Retained earnings
In addition to the items reported in the statement of changes in
equity, retained earnings also include changes due to the purchase
of treasury shares:

€ m

Purchase of treasury shares

of which share buyback under tranches I to III

obligation to repurchase shares
under tranche III

purchase / sale of treasury shares
Share Matching Scheme

2016

–1,000

–775

–195

–30

2017

–103

195

– 41

As at 31 December 2016, the obligation to repurchase shares as part
of tranche III of the share buyback programme was recognised in
the amount of €195 million for the buyback transactions yet to be
carried out. By March 2017, the buyback transactions undertaken
had decreased the obligation. The remaining obligation of €89 mil-
lion was derecognised directly in equity when the share buyback
programme ended.

The changes in transactions with non-controlling interests are
chiefly attributable to the purchase price liability relating to the ac-
quisition of the remaining shares of Olimpo Holding S. A.

36 Equity attributable to Deutsche Post AG shareholders
The equity attributable to Deutsche Post AG shareholders in financial
year 2017 amounted to €12,637 million (previous year: €11,087 mil-
lion).

Dividends

Dividends paid to the shareholders of Deutsche Post AG are
based on the net retained profit of €6,103 million reported in
Deutsche Post AG’s annual financial statements in accordance with
the HGB. The Board of Management is proposing a dividend of €1.15
per no-par value share carrying dividend rights. This corresponds
to a total dividend of €1,409 million. The amount of €4,694 million
remaining after deduction of the planned total dividend will be car-
ried forward to new account. The final total dividend will be based
on the number of shares carrying dividend rights at the time the
Annual General Meeting resolves upon the appropriation of the net
retained profit on the day the AGM convenes.

Dividend distributed in financial year 2017
for the year 2016

Dividend distributed in financial year 2016
for the year 2015

Total dividend

€ m

1,270

1,027

Dividend
per share
€

1.05

0.85

As the dividend is paid in full from the tax-specific capital contri-
bution account (steuerliches Einlagekonto as defined by section 27
of the Körperschaftssteuergesetz (KStG – German Corporation Tax
Act)) (contributions not made to subscribed capital), payment will
be made without the deduction of capital gains tax or the solidarity
surcharge. The dividend is tax exempt for shareholders resident in
Germany. It does not entitle recipients to a tax refund or a tax credit.
In terms of taxation, the dividend distribution is considered as a
repayment of contributions from the capital contribution account
and – in the opinion of the tax authorities – serves to reduce the
cost of acquiring the shares.

140

Deutsche Post DHL Group — 2017 Annual Report

37 Non-controlling interests
This balance sheet item includes adjustments for the interests of
non-Group shareholders in the consolidated equity from acquisi-
tion accounting, as well as their interests in profit or loss.

The following table shows the companies to which the material

non-controlling interests relate:

€ m

DHL Sinotrans International Air Courier Ltd., China

Blue Dart Express Limited, India

Pt. Birotika Semesta, Indonesia

DHL Global Forwarding Abu Dhabi LLC,
United Arab Emirates

Exel Saudia LLC, Saudi Arabia

Other companies

Non-controlling interests

2016

162

2017

164

263

266

Financial data for material non-controlling interests

€ m

Balance sheet
ASSETS
Noncurrent assets

Current assets

Total ASSETS

EQUITY AND LIAbILITIES
Noncurrent provisions and liabilities

Current provisions and liabilities

Total EQUITY AND LIAbILITIES

Net assets

Noncontrolling interests

Income statement
Revenue

Profit before income taxes

Income taxes

Profit after income taxes

Other comprehensive income

Total comprehensive income

attributable to noncontrolling interests

Dividend distributed to noncontrolling interests

Consolidated net profit attributable to noncontrolling interests

Cash flow statement
Net cash from operating activities

Net cash used in / from investing activities

Net cash used in financing activities

Net change in cash and cash equivalents

Cash and cash equivalents at 1 January

Effect of changes in exchange rates on cash and cash equivalents

Cash and cash equivalents at 31 December

Material non-controlling interests exist in the following two com-
panies:

DHL Sinotrans International Air Courier Ltd., China, which
has been assigned to the Express segment, provides domestic
and international express delivery and transport services.
Deutsche Post DHL Group holds a 50 % share in the company. Blue
Dart Express Limited (Blue Dart), India, has been assigned to the
PeP segment. Deutsche Post AG holds a share of 75 % in Blue Dart,
which is a courier service provider.

The following table gives an overview of the aggregated finan-

cial data of significant companies with non-controlling interests:

Sinotrans

Blue Dart

2016

2017

2016

2017

115

433

548

216

224

324

162

447

544

207

215

329

164

1,335

1,461

293

219

–15

204

102

116

109

262

–12

–231

204

– 9

214

316

236

–24

212

106

104

118

250

– 6

–207

214

–16

235

103

183

106

354

–23

163

371

– 4

–32

–3

–1

Consolidated Financial Statements — NOTES — Balance sheet disclosures

141

The portion of other comprehensive income attributable to non-con-
trolling interests largely relates to the currency translation reserve.
The changes are shown in the following table:

€ m

Balance at 1 January

Transaction with noncontrolling interests

Total comprehensive income

Changes from unrealised gains and losses

Changes from realised gains and losses

Currency translation reserve at 31 December

2016

– 5

2017

–22

–12

38 Provisions for pensions and similar obligations
The Group’s most significant defined benefit retirement plans are in
Germany and the UK. A wide variety of other defined benefit retire-
ment plans in the Group are to be found in the Netherlands,
Switzerland, the USA and a large number of other countries. There
are specific risks associated with these plans along with measures
to mitigate them.

38.1 Plan features

Germany

In Germany, Deutsche Post AG has an occupational retirement ar-
rangement based on a collective agreement, which is open to new
hourly workers and salaried employees. This system was redesigned
in the previous year by entering into a new collective agreement. As
from 1 January 2016, depending on the weekly working hours and
wage / salary group, retirement benefit components are calculated
annually for each hourly worker and salaried employee, and credited
to an individual pension account. A 2.5 % increase on the previous
year is included in every newly allocated component. When the
statutory pension falls due, the hourly workers and salaried employ-
ees can choose whether to receive payment as a lump sum or in
instalments, or life-long monthly benefit payments that increase by
1 % each year. Employees already on the payroll as at 31 Decem-
ber 2015 received an initial benefit component for the entitlements
accrued by that date, which was credited to the pension account on
a one-time basis. The large majority of Deutsche Post AG’s obliga-
tions relates to older vested entitlements of hourly workers and
salaried employees, and to legacy pension commitments towards
former hourly workers and salaried employees who have left or re-
tired from the company. In addition, retirement arrangements are
available to executives below the Board of Management level and
to specific employee groups through deferred compensation in
particular. Details on the retirement benefit arrangements for the
Board of Management can be found in the Group Management
Report,

page 43.

The prime source of external funding for Deutsche Post AG’s
respective retirement benefit obligations is a contractual trust ar-
rangement, which also includes a pension fund. A support fund that
was previously also included was liquidated in 2016 and its assets
were transferred to the trust. The trust is funded on a case-by-case
basis in line with the Group’s finance strategy. In the case of the
pension fund, the regulatory funding requirements can, in principle,
be met without additional employer contributions. Part of the plan
assets consists of real estate that is leased out to the Group on a
long-term basis. In addition, the Versorgungsanstalt der Deutschen
Bundespost (VAP – Deutsche Bundespost institution for supplemen-
tary retirement pensions), a shared pension fund for successor com-
panies to Deutsche Bundespost, is used for some of the legacy pen-
sion commitments.

Individual subsidiaries in Germany have retirement plans that
were acquired in the context of acquisitions and transfers of oper-
ations and that are closed to new entrants. Since the previous year,
contractual trust arrangements have been available for three sub-
sidiaries with a view to external financing.

United Kingdom

In the UK, the Group’s defined benefit pension arrangements are
largely closed to new entrants and for further service accrual. One
exceptional arrangement exists which is open to further service ac-
crual and a limited number of existing employees who have not yet
joined this arrangement. It provides for monthly payments from
retirement, depending on length of service and final salary. In
addition, a pension commencement lump-sum payment must be
made. Annual increases in pension payments are linked to inflation.
The Group’s defined benefit pension arrangements in the UK
have mainly been consolidated into a group plan with different sec-
tions for the participating divisions. These are funded mainly via a
group trust. The amount of the employer contributions must be
negotiated with the trustee in the course of funding valuations.
Employee beneficiaries make their own funding contributions in
the case of the single open defined benefit arrangement.

Other

In the Netherlands, collective agreements require that those em-
ployees who are not covered by a sector-specific plan participate in
a dedicated defined benefit retirement plan. The dedicated plan
provides for annual accruals which are subject to a pensionable
salary cap. Furthermore, the plan provides for monthly pension
payments that are indexed to the agreed wage and salary increases,
on the one hand, and the funds available for such indexation, on the
other. In Switzerland, employees receive an occupational pension
in line with statutory requirements, where pension payments de-
pend on the contributions paid, an interest rate that is fixed each
year, certain annuity factors and any pension increases specified. A
separate plan providing for lump-sum payments instead of life-long
pension payments exists for specific higher wage components. In
the USA, the companies’ defined benefit retirement plans have been
closed to new entrants and accrued entitlements have been frozen.

142

Deutsche Post DHL Group — 2017 Annual Report

The Group companies primarily fund their dedicated defined
benefit retirement plans in these three countries by using the re-
spective joint funding institutions. In the Netherlands and in Switz-
erland, both employers and employees contribute to plan funding.
In the USA no contributions are currently made in this regard.

38.2 Financial performance of the plans and determination of balance

sheet items

The present value of defined benefit obligations, the fair value of
plan assets and net pension provisions changed as follows:

€ m

At 1 January

Current service cost, excluding employee contributions

Past service cost

Settlement gains (–) / losses (+)

Other administration costs in accordance with IAS 19.130

Service cost 1

Interest cost on defined benefit obligations

Interest income on plan assets

Net interest cost

Income and expenses recognised in the income statement

Actuarial gains (–) / losses (+) – changes in demographic assumptions

Actuarial gains (–) / losses (+) – changes in financial assumptions

Actuarial gains (–) / losses (+) – experience adjustments

Return on plan assets excluding interest income

Remeasurements recognised in the statement of comprehensive income

Employer contributions

Employee contributions

Benefit payments

Settlement payments

Transfers

Acquisitions / divestitures

Currency translation effects

At 31 December

Present value

of defined benefit obligations

Fair value of plan assets

Net pension provisions

2016

17,272

162

–356

–7

–

–201

483

–

483

282

–16

1,754

– 65

–

1,673

–

–747

–71

–2

–716

17,723

2017

17,723

2016

11,202

2017

12,286

187

– 8

– 60

–

119

414

–

414

533

– 95

338

–

278

–

–736

–139

–7

–303

17,381

–

–10

–

346

336

–

797

1,162

– 481

–71

–12

–1

– 664

12,286

–

–11

–

291

280

–

656

701

– 465

–139

–254

13,084

2016

6,070

162

–356

–7

–191

483

–346

137

– 54

–16

1,754

– 65

–797

876

–1,162

–266

–1

– 52

5,437

2017

5,437

187

– 8

– 60

130

414

–291

123

253

– 95

338

– 656

–378

–701

–271

– 8

– 49

4,297

1 Including other administration costs in accordance with IAS 19.130 which are expensed out of plan assets.

As at 31 December 2017, the effects of asset ceilings amounted to
€3 million; an expedient was applied to their recognition by deduct-
ing this amount from the fair value of plan assets (1 January 2017 /
31 December 2016: €2 million; 1 January 2016: €0 million).

reduced the expected future employer contributions significantly.
The tempor ary investment was made in short-term fixed income
securities as at 31 December 2017. Secondly, real estate was contrib-
uted to the trust in Germany.

In the reporting period a lump-sum settlement programme
was executed for retirees in Germany, leading to settlement pay-
ments and the discontinuation of pension obligations. In addition,
employer contributions were impacted by two special measures.
Firstly, a special contribution was made to increase the funding of
the Group’s pension obligations in the United Kingdom. This also

Total payments amounting to €384 million are expected with
regard to net pension provisions in 2018. Of this amount, €335 mil-
lion is attributable to the Group’s expected direct benefit payments
and €49 million to expected employer contributions to pension
funds.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

143

The disaggregation of the present value of defined benefit
obligations, fair value of plan assets and net pension provisions as
well as the determination of the balance sheet items are as follows:

€ m

2017
Present value of defined benefit obligations at 31 December

Fair value of plan assets at 31 December

Net pension provisions at 31 December

Reported separately

Pension assets at 31 December

Provisions for pensions and similar obligations at 31 December

2016
Present value of defined benefit obligations at 31 December

Fair value of plan assets at 31 December

Net pension provisions at 31 December

Reported separately

Pension assets at 31 December

Provisions for pensions and similar obligations at 31 December

In the Other area, the Netherlands, Switzerland and the USA ac-
count for a share in the corresponding present value of the defined
benefit obligations of 44 %, 20 % and 13 %, respectively (previous
year: 40 %, 24 % and 13 %).

Additionally, rights to reimbursement from former Group
companies existed in the Group in Germany in the amount of
around €19 million (previous year: €20 million) which are reported
separately. Corresponding benefit payments are being made directly
by the former Group companies.

38.3 Additional information on the present value of defined benefit

obligations

The significant financial assumptions are as follows:

31 December 2017
Discount rate (defined benefit obligations)

Expected annual rate of future salary increase

Expected annual rate of future pension increase

31 December 2016
Discount rate (defined benefit obligations)

Expected annual rate of future salary increase

Expected annual rate of future pension increase

Germany

Other

Total

9,554

– 5,748

3,806

9,866

– 5,518

4,348

5,240

– 5,112

128

174

5,270

– 4,590

680

681

2,587

–2,224

363

17,381

–13,084

4,297

107

470

153

4,450

2,587

–2,178

409

17,723

–12,286

5,437

142

551

143

5,580

Germany

Other

Total

2.25

2.50

2.00

2.25

2.50

2.00

2.50

3.25

2.85

2.75

3.25

2.85

2.23

2.05

1.26

2.19

2.02

0.93

2.32

2.43

2.18

2.39

2.43

2.15

144

Deutsche Post DHL Group — 2017 Annual Report

The discount rates for defined benefit obligations in the euro zone
and the UK were each derived from a yield curve comprising the
yields of AA-rated corporate bonds and taking membership com-
position as well as duration into account in each case. For other
countries, the discount rate for defined benefit obligations was de-
termined in a similar way, provided there was a deep market for
AA-rated (or, in some cases, AA and AAA-rated) corporate bonds. By
contrast, government bond yields were used for countries without
a deep market for such corporate bonds.

For the annual pension increase in Germany, fixed rates in par-
ticular must be taken into account in addition to the assumptions
shown. The effective weighted average therefore amounts to 1.00 %
(previous year: 1.00 %).

The most significant demographic assumptions made relate to
life expectancy and / or mortality. For the German Group companies,
they were based on the Richttafeln 2005 G mortality tables pub-
lished by Klaus Heubeck. Life expectancy for the retirement plans
in the UK was based on the S1PMA / S1PFA tables of the Continuous
Mortality Investigation of the Institute and Faculty of Actuaries
adjusted to reflect plan-specific mortality according to the current
funding valuation. In the reporting period, current projections of
future mortality improvements that were published after year-end
2016 were taken into account by applying a long-term rate of 1.5 %.
Country-specific current standard mortality tables were used for
other countries.

If one of the significant financial assumptions were to change,
the present value of the defined benefit obligations would change as
follows:

31 December 2017
Discount rate (defined benefit obligations)

Expected annual rate of future salary increase

Expected annual rate of future pension increase

31 December 2016
Discount rate (defined benefit obligations)

Expected annual rate of future salary increase

Expected annual rate of future pension increase

Change in
assumption
Percentage
points

1.00
–1.00

0.50
– 0.50

1.00
–1.00

0.50
– 0.50

Change in present value of defined benefit obligations
%

Germany

Other

Total

–12.52
15.81

0.18
– 0.17

0.42
– 0.38

–12.58
15.91

0.18
– 0.17

0.42
– 0.38

–14.92
19.39

0.08
– 0.08

5.63
– 5.53

–15.02
19.62

0.08
– 0.08

5.94
– 5.41

–14.51
19.02

0.95
– 0.90

6.39
– 4.71

–14.48
18.67

1.08
–1.01

6.23
– 4.29

–13.53
17.36

0.26
– 0.25

2.87
–2.57

–13.58
17.41

0.28
– 0.26

2.90
–2.44

These are effective weighted changes in the respective present value
of the defined benefit obligations, e. g., taking into account the
largely fixed nature of the pension increase for Germany.

A one-year increase in life expectancy for a 65-year-old bene-
ficiary would increase the present value of the defined benefit obli-
gations by 4.55 % in Germany (previous year: 4.56 %) and by 4.25 %
in the UK (previous year: 4.06 %). The corresponding increase for
other countries would be 2.93 % (previous year: 2.56 %) and the
total increase 4.22 % (previous year: 4.12 %).

When determining the sensitivity disclosures, the present
values were calculated using the same methodology used to calcu-
late the present values at the reporting date. The presentation does

not take into account interdependencies between the assumptions;
rather, it supposes that the assumptions change in isolation. This
would be unusual in practice, since assumptions are often correlated.
The weighted average duration of the Group’s defined bene-
fit obligations at 31 December 2017 was 14.3 years in Germany
( previous year: 14.4 years) and 18.0 years in the UK (previous year:
18.0 years). In the other countries it was 17.6 years (previous year:
17.5 years), and in total it was 15.9 years (previous year: 15.9 years).
A total of 30.0 % (previous year: 29.2 %) of the present value
of the defined benefit obligations was attributable to active benefi-
ciaries, 17.2 % (previous year: 16.8 %) to terminated beneficiaries and
52.8 % (previous year: 54.0 %) to retirees.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

145

38.4 Additional information on the fair value of plan assets

The fair value of the plan assets can be disaggregated as follows:

€ m

31 December 2017
Equities

Fixed income securities

Real estate

Alternatives 1

Insurances

Cash

Other

Fair value of plan assets

31 December 2016
Equities

Fixed income securities

Real estate

Alternatives 1

Insurances

Cash

Other

Germany

Other

Total

1,044

1,956

1,609

415

554

163

765

3,685

187

432

819

826

273

127

2,628

6,467

2,069

878

681

246

115

5,748

5,112

2,224

13,084

1,053

1,986

1,377

434

562

662

3,173

183

457

103

742

910

262

119

2,457

6,069

1,822

924

681

222

111

Fair value of plan assets

5,518

4,590

2,178

12,286

1 Primarily includes absolute return products.

Quoted market prices in an active market exist for around 79 % (pre-
vious year: 80 %) of the total fair values of plan assets. The remaining
assets for which no such quoted market prices exist are mainly at-
tributable as follows: 14 % (previous year: 13 %) to real estate, 5 %
(previous year: 6 %) to insurances, 1 % (previous year: 1 %) to alter-
natives and 1 % (previous year: 0 %) to fixed income securities.
The majority of the investments on the active markets are globally
diversified, with certain country-specific focus areas.

Real estate in Germany with a fair value of €1,590 million
(which can be offset as plan assets) (previous year: €1,358 million)
is occupied by Deutsche Post AG.

Asset-liability studies are performed at regular intervals in Ger-
many, the UK and, for example, also in the Netherlands, Switzerland
and the USA, to examine the match between assets and liabil ities;
the strategic allocation of plan assets is adjusted in line with this.

38.5 Risk

Specific risks are associated with the defined benefit retirement
plans. This can result in a (negative or positive) change in
Deutsche Post DHL Group’s equity through other comprehensive
income, whose overall relevance is classed as medium to high. In
contrast, a low relevance is attached to the short-term effects on staff
costs and net finance costs. Potential risk mitigation is applied de-
pending on the specifics of the plans.

INTEREST RATE RISK

A decrease (increase) in the respective discount rate would lead to
an increase (decrease) in the present value of the total obligation
and would in principle be accompanied by an increase (decrease)
in the fair value of the fixed income securities contained in the plan
assets. Further hedging measures are applied, in some cases using
derivatives.

INFLATION RISK

Pension obligations – especially relating to final salary schemes or
schemes involving increases during the pension payment phase –
can be linked directly or indirectly to inflation. The risk of increas-
ing inflation rates with regard to the present value of the defined
benefit obligations has been mitigated in the case of Germany, for
example, by switching to a system of retirement benefit components
and, in the case of the UK, by largely closing the defined benefit
arrangements. In addition, fixed rates of increase have been set and
increases partially capped and / or lump-sum payments provided for
in each case. There is also a positive correlation with interest rates.

INVESTMENT RISK

The investment is in principle subject to a large number of risks; in
particular, it is exposed to the risk that market prices may change.
This is managed primarily by ensuring broad diversification and the
use of hedging instruments.

146

Deutsche Post DHL Group — 2017 Annual Report

LONGEVITY RISK

Longevity risk may arise in connection with the benefits payable in
the future due to a future increase in life expectancy. This is miti-
gated in particular by using current standard mortality tables when
calculating the present value of the defined benefit obligations. The
mortality tables used in Germany and the UK, for example, already

include an allowance for an expected future increase in life expec-
tancy.

39 Other provisions
Other provisions break down into the following main types of pro-
vision:

€ m

Other employee benefits

Restructuring provisions

Technical reserves (insurance)

Postage stamps

Tax provisions

Miscellaneous provisions

Other provisions

39.1 Changes in other provisions

€ m

Balance at 1 January 2017

Changes in consolidated group

Utilisation

Currency translation differences

Reversal

Unwinding of discount / changes in discount rate

Reclassification

Addition

Balance at 31 December 2017

Noncurrent

2017

521

411

435

1,421

2016

541

435

450

1,498

Current

2017

141

231

173

163

374

2016

230

181

235

242

113

322

2016

771

253

670

242

113

772

Total

2017

662

103

642

173

163

809

1,323

1,131

2,821

2,552

Other
employee
benefits

Restructuring
provisions

Technical
reserves
(insurance)

771

– 6

– 424

– 49

–12

–1

383

662

253

– 87

–16

– 81

–1

103

670

– 48

–14

–33

642

Postage
stamps

242

–242

173

Tax provisions

Miscellaneous
provisions

113

–34

– 5

–25

104

163

772

– 4

–189

–31

– 63

– 9

328

809

Total

2,821

–10

–1,024

–115

–214

1,089

2,552

The provision for other employee benefits primarily covers work-
force reduction expenses (severance payments, transitional benefits,
partial retirement, etc.), stock appreciation rights (SAR s) and jubilee
payments.

The restructuring provisions comprise all expenses resulting
from the restructuring measures within the US Express business as
well as in other areas of the Group. These measures relate primarily
to rentals for idle plant, litigation risks and expenses from the
closure of terminals, for example. The decline was attributable pri-
marily to courts handing down decisions in legal disputes involving
the US Express business.

Technical reserves (insurance) consist mainly of outstanding
loss reserves and IBNR reserves; further details can be found in

note 7.

The provision for postage stamps covers outstanding obliga-
tions to customers for letter and parcel deliveries from postage
stamps sold but still unused by customers. It is based on external
expert reports and extrapolations made on the basis of internal data.
The provision is measured at the nominal value of the stamps issued.
Of the tax provisions, €57 million (previous year: €47 million)
relates to VAT, €62 million (previous year: €22 million) to customs
and duties and €44 million (previous year: €44 million) to other tax
provisions.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

147

39.2 Miscellaneous provisions

Miscellaneous provisions, which include a large number of individ-
ual items, break down as follows:

€ m

Aircraft maintenance,
of which noncurrent: 155 (previous year: 144)

Litigation costs,
of which noncurrent: 71 (previous year: 78)

Risks from business activities,
of which noncurrent: 10 (previous year: 12)

Miscellaneous other provisions,
of which noncurrent: 199 (previous year: 216)

Miscellaneous provisions

2016

2017

149

127

454

772

190

117

460

809

39.3 Maturity structure

The maturity structure of the provisions recognised in financial year
2017 is as follows:

€ m

2017
Other employee benefits

Restructuring provisions

Technical reserves (insurance)

Postage stamps

Tax provisions

Miscellaneous provisions

Total

40 Financial liabilities

€ m

Bonds

Amounts due to banks

Finance lease liabilities

Financial liabilities at fair value through profit or loss

Other financial liabilities

Financial liabilities

More than
1 year

to 2 years

More than
2 years

to 3 years

More than
3 years

to 4 years

More than
4 years

to 5 years

More than
5 years

Up to 1 year

141

231

173

163

374

1,131

127

186

170

492

237

Noncurrent

2017

4,835

159

109

2016

4,217

181

130

4,571

5,151

127

2016

773

138

427

1,464

124

Current

2017

515

117

210

899

274

441

2016

4,990

158

209

121

557

6,035

6,050

Total

662

103

642

173

163

809

2,552

Total

2017

5,350

156

181

319

The amounts due to banks mainly comprise current overdraft facil-
ities due to various banks.

The amounts reported under financial liabilities at fair value
through profit or loss relate to the negative fair values of derivative
financial instruments.

148

40.1 Bonds

The following table contains further details on the company’s most
significant bonds. The bond issued by Deutsche Post Finance B. V. is
fully guaranteed by Deutsche Post AG.

Deutsche Post DHL Group — 2017 Annual Report

Significant bonds

Bond 2012 / 2017

Bond 2012 / 2022

Bond 2012 / 2020

Bond 2012 / 2024

Bond 2013 / 2018

Bond 2013 / 2023

Bond 2016 / 2021

Bond 2016 / 2026

Bond 2017 / 2027

Convertible bond 2012 / 2019 1

Convertible bond 2017 / 2025 2

Nominal
coupon
%

Issue
volume

€ m Issuer

1.875

2.950

1.875

2.875

1.500

2.750

0.375

1.250

1.000

0.600

0.050

750 Deutsche Post Finance B. V.

500 Deutsche Post Finance B. V.

300 Deutsche Post AG

700 Deutsche Post AG

500 Deutsche Post AG

750 Deutsche Post AG

500 Deutsche Post AG

1,000 Deutsche Post AG

2016

2017

Carrying
amount
€ m

Fair value
€ m

Carrying
amount
€ m

Fair value
€ m

749

497

298

697

498

496

744

496

–

405

–

758

572

322

819

514

575

760

515

–

428

–

498

299

698

503

497

746

497

494

108

946

–

561

317

806

507

566

757

517

494

112

940

1 Debt component of the convertible bond; the fair value of the convertible bond is €215 million (previous year: €629 million).
2 Debt component of the convertible bond; the fair value of the convertible bond is €1,057 million.

The bond 2012 / 2017 was repaid in the financial year. A traditional
bond (2017 / 2027) and a convertible bond (2017 / 2025) were placed
in December 2017.

Convertible bonds

The convertible bonds issued have a conversion right which allows
holders to convert the bond into a predetermined number of
Deutsche Post AG shares.

In addition, Deutsche Post AG was granted call options allow-
ing it to repay the bonds early at face value plus accrued interest if
Deutsche Post AG’s share price more than temporarily exceeds 130 %
of the conversion price applicable at that time.

The convertible bonds have a debt component and an equity
component. In subsequent years, interest will be added to the
carrying amount of the bonds, up to the issue amount, using the
eff ective interest method and recognised in profit or loss.

Issue date

Issue volume

Outstanding volume

Exercise period, conversion right

Exercise period, call option

Value of debt component
at issue date 2

Value of equity component
at issue date 3

Transaction costs
(debt / equity component)

Conversion price at issue

Conversion price after adjustment 4

in 2014

in 2015

in 2016

in 2017

Conversions to date
(number of new shares) 5

in 2015

in 2016

in 2017

2012 / 2019

6 Dec. 2012

€1 billion

€110.8 million

16 Jan. 2013
to 22 Nov. 2019

6 Dec. 2017
to 16 Nov. 2019

2017 / 2025

13 Dec. 2017

€1 billion

13 Dec. 2020
to 13 June 2025 1

2 Jan. 2023
to 10 June 2025

€920 million

€946 million

€74 million

€53 million

€5.8 / 0.5 million

€4.7 / 0.3 million

€20.74

€20.69

€20.63

€20.60

€20.47

5 thousand

28 million

15 million

€55.69

–

1 Excluding possible contingent conversion periods according to the bond terms.
2 Including transaction costs and call option granted.
3 Recognised in capital reserves.
4 After dividend payment.
5 Carrying dividend rights for the respective financial year.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

149

40.2 Finance lease liabilities

Finance lease liabilities relate mainly to the following items:

Leasing partner

Interest rate
%

End of term Asset

Deutsche Post Immobilien GmbH, Germany

Various leasing partners

5.09 / 5.23

2023 / 2028 Real estate

DHL Aviation NV / SA, Brussels

DHL International (UK) Limited, UK

Deutsche Post AG, Germany

Cercis Parc

Howard Lewisham Limited;
SEGRO Airport Property Partnership

tSystems International GmbH

4.25

5.00

4.25

2031 Real estate

2030 / 2031 Real estate

2019 It systems

2016
€ m

2017
€ m

Leased assets are recognised in property, plant and equipment at a
carrying amount of €169 million (previous year: €203 million). The
notional amount of the minimum lease payments totals €237 mil-
lion (previous year: €259 million).

Maturity structure

€ m

Up to 1 year

More than 1 year
to 5 years

More than 5 years

Total

Present value

(finance lease liabilities)

Minimum lease payments
(notional amount)

2016

107

209

2017

181

2016

102

127

259

2017

124

237

41 Other liabilities

€ m

Tax liabilities

Incentive bonuses

Wages, salaries, severance payments

Deferred income, of which noncurrent: 100
(previous year: 116)

Compensated absences

Payables to employees and members of executive
bodies

Social security liabilities

Debtors with credit balances

Overtime claims

Liabilities from the sale of residential building
loans, of which noncurrent: 86 (previous year: 123)

COD liabilities

Accrued rentals

Liabilities from cheques issued

Insurance liabilities

Other compensated absences

40.3 Other financial liabilities

€ m

Purchase price liability related to the acquisition
of the remaining interest in Olimpo

Loan notes related to the early termination
of a finance lease

Obligation from tranche III of the share buyback
programme

Put option related to the acquisition
of the remaining interest in Giorgio Gori Group

Miscellaneous financial liabilities

Other financial liabilities

2016

2017

Liabilities from loss compensation

Accrued insurance premiums for damages
and similar liabilities

Miscellaneous other liabilities,
of which noncurrent: 86 (previous year: 133)

Other liabilities

of which current

noncurrent

195

307

557

301

319

2016

1,109

2017

1,123

679

374

398

335

203

174

159

125

688

389

356

352

199

172

124

115

105

810

4,664

4,292

372

823

4,674

4,402

272

Of the tax liabilities, €590 million (previous year: €603 million)
relates to VAT, €371 million (previous year: €330 million) to customs
and duties, and €162 million (previous year: €176 million) to other
tax liabilities.

150

Deutsche Post DHL Group — 2017 Annual Report

The liabilities from the sale of residential building loans relate
to obligations of Deutsche Post AG to pay interest subsidies to bor-
rowers to offset the deterioration in borrowing terms in conjunction
with the assignment of receivables in previous years, as well as pass-
through obligations from repayments of principal and interest for
residential building loans sold.

Miscellaneous other liabilities include a large number of indi-

vidual items.

41.1 Maturity structure

€ m

Up to 1 year

More than 1 year to 2 years

More than 2 years to 3 years

More than 3 years to 4 years

More than 4 years to 5 years

More than 5 years

Other liabilities

2016

4,292

131

147

4,664

2017

4,402

122

4,674

There is no significant difference between the carrying amounts and
the fair values of the other liabilities due to their short maturities or
market interest rates. There is no significant interest rate risk be-
cause most of these instruments bear floating rates of interest at
market rates.

CASH FLOW DISCLOSURES

42 Cash flow disclosures
The following table shows the reconciliation of changes in liabilities
arising from financing activities in accordance with the new IFRS
requirements:

€ m

Bonds

Amounts due to banks

Finance lease liabilities

Other financial liabilities 2

Liabilities arising from financing activities

Noncash changes 1

Cash
changes

Addition,
finance
leases

Currency
translation

Fair value
adjustment

668

–26

–37

654

– 5

–23

–2

– 8

–38

–27

– 8

–35

31 Dec.
2016

4,990

158

209

418

5,775

Other
changes

–303

–1

–7

–200

– 511

Total

–308

– 51

–2

–216

– 577

31 Dec.
2017

5,350

156

181

165

5,852

1 Includes reclassifications of cash to other cash flow items.
2 Differences from financial liabilities,

note 40, are due to cashrelated factors presented in other cash flow items, e. g., changes in cash and cash equivalents resulting from earnouts

or derivatives.

Consolidated Financial Statements — NOTES — Balance sheet disclosures — Cash flow disclosures

151

The other non-cash changes relate primarily to the share buyback
programme in the amount of €–195 million and the non-cash exer-
cise of the convertible bond 2012 / 2019 totalling €–301 million.

As at the reporting date, there were no hedges attributable
solely to the liabilities arising from financing activities. The effects
on the cash flows from portfolio hedges and from net investment
hedges are presented in the other financing activities cash flow item
in the amount of €–51 million in the reporting period.

In financial year 2017, non-cash transactions were entered into
which were not included in the cash flow statement in accordance
with IAS 7.43 and 7.44. They related to 18 properties that were con-
tributed to Deutsche Post Pensions-Treuhand GmbH & Co. KG. Al-
though income was recognised as a result of the contribution, no
cash or cash equivalents were received.

42.1 Net cash from operating activities

In addition to improved EBIT, the increase in net cash from operat-
ing activities is chiefly the result of the change in provisions. In the
previous year, funding of pension obligations in Germany amounted
to €1 billion, whilst in the 2017 financial year, €495 million was used
to fund pension obligations in the United Kingdom.
Non-cash income and expenses are as follows:

42.2 Net cash used in investing activities

Net cash used in investing activities rose from €1,643 million to
€2,091 million. In the previous year, the state aid repayment added
€378 million to other non-current financial assets. During the same
period, €278 million was paid to acquire UK Mail Group. In the
reporting period, proceeds from the disposal of subsidiaries grew
to €316 million, due to the sale of Williams Lea Tag Group. This cash
flow comprised the cash-related component of the selling price
(€256 million), the cash inflow from the redemption of internal debt
(€114 million) and the inflow from the currency hedge (€8 million)
less the cash outflow of €62 million resulting from deconsolida-
tion. The payment of €30 million made to acquire an interest in
WERTHEIMER PARENTCO is recognised in cash paid to acquire in-
vestments accounted for using the equity method and other invest-
ments, whilst a loan extended in the amount of €110 million is
shown in cash paid to acquire other non-current financial assets,
note 2. Cash paid to acquire property, plant and equipment and
intangible assets increased from €1,966 million to €2,203 million
in the reporting period.

The assets acquired and liabilities assumed in the course of
company acquisitions undertaken in financial years 2017 and 2016
are presented below, in accordance with IAS 7.40 (d),

note 2.

Non-cash income and expenses

€ m

Expense from the remeasurement of assets

Income from the remeasurement of liabilities

Income from the disposal of assets

Staff costs relating to equitysettled sharebased
payments

Other

Non-cash income (–) and expenses (+)

2016

–141

–26

–12

– 40

2017

102

–131

– 54

– 6

– 40

€ m

Noncurrent assets

Current assets (excluding cash and cash equivalents)

Noncurrent provisions and liabilities

Current provisions and liabilities

2016

123

–15

–118

2017

–7

– 4

42.3 Net cash used in financing activities

At €1,087 million, net cash used in financing activities was €146 mil-
lion lower than in the previous year.

The placement of a bond resulted in issuing proceeds of
€1.2 billion in the previous year, whilst in the reporting period the
placement of a bond and a convertible bond produced issuing pro-
ceeds in the amount of €1.5 billion. In the reporting period, non-
current financial liabilities were also repaid through redemption of
a bond in the amount of €750 million. Expiration of the share buy-
back programme reduced cash paid to acquire treasury shares from
€836 million to €148 million.

Further details on the cash flow statement and free cash flow

can be found in the

Group Management Report, page 61 f.

152

Deutsche Post DHL Group — 2017 Annual Report

OTHER DISCLOSURES

43 Risks and financial instruments of the Group

43.1 Risk management

As a result of its operating activities, the Group is exposed to finan-
cial risks that may arise from changes in exchange rates, commodity
prices and interest rates. Deutsche Post DHL Group manages these
risks centrally through the use of non-derivative and derivative
finan cial instruments. Derivatives are used exclusively to mitigate
non-derivative financial risks, and fluctuations in their fair value
should not be assessed separately from the underlying transaction.
The Group’s internal risk guidelines govern the universe of ac-
tions, responsibilities and necessary controls regarding the use of
derivatives. Financial transactions are recorded, assessed and pro-
cessed using proven risk management software, which also regularly
documents the effectiveness of hedging relationships. Portfolios of
derivatives are regularly reconciled with the banks concerned.

To limit counterparty risk from financial transactions, the
Group may only enter into this type of contract with prime-rated
banks. The conditions for the counterparty limits individually as-
signed to the banks are reviewed on a daily basis. The Group’s Board
of Management is informed internally at regular intervals about

existing financial risks and the hedging instruments deployed to
mitigate them. Financial instruments are accounted for and meas-
ured in accordance with IAS 39.

Disclosures regarding risks associated with the Group’s
defined benefit retirement plans and their mitigation can be found
in

note 38.5.

Liquidity management

The ultimate objective of liquidity management is to secure the solv-
ency of Deutsche Post DHL Group and all Group companies. Con-
sequently, liquidity in the Group is centralised as much as possible
in cash pools and managed in the Corporate Center.

The centrally available liquidity reserves (funding availability),
consisting of central short-term financial investments and commit-
ted credit lines, are the key control parameter. The target is to have
at least €2 billion available in a central credit line.

The Group had central liquidity reserves of €4.2 billion (previ-
ous year: €3.9 billion) as at 31 December 2017, consisting of central
financial investments amounting to €2.2 billion plus a syndicated
credit line of €2 billion.

The maturity structure of non-derivative financial liabilities

within the scope of IFRS 7 based on cash flows is as follows:

Maturity structure of financial liabilities

€ m

At 31 December 2017
Noncurrent financial liabilities 1

Other noncurrent liabilities

Non-current liabilities

Current financial liabilities

Trade payables

Other current liabilities

Current liabilities

At 31 December 2016
Noncurrent financial liabilities 1

Other noncurrent liabilities

Non-current liabilities

Current financial liabilities

Trade payables

Other current liabilities

Current liabilities

More than
1 year

to 2 years

More than
2 years

to 3 years

More than
3 years

to 4 years

More than
4 years

to 5 years

More than
5 years

Up to 1 year

287

288

707

708

403

405

1,134

1,135

839

840

385

386

591

592

823

824

3,430

3,511

2,474

119

2,593

877

7,343

337

8,557

1,389

7,178

341

8,908

1 In 2016, all of the convertible bond 2012/2019 was shown in the “More than 2 years to 3 years” range. As at 31 December 2017, the liabilities from the convertible bond

amounted to €111 million and were shown in the “More than 1 year to 2 years” range. All of the convertible bond 2017 / 2025 was shown in the “More than 5 years” range.

Consolidated Financial Statements — NOTES — Other disclosures

153

The maturity structure of the derivative financial instruments based
on cash flows is as follows:

Maturity structure of derivative financial instruments

€ m

More than
1 year

to 2 years

More than
2 years

to 3 years

More than
3 years

to 4 years

More than
4 years

to 5 years

More than
5 years

Up to 1 year

At 31 December 2017
Derivative receivables – gross settlement
Cash outflows

Cash inflows

Net settlement
Cash inflows

Derivative liabilities – gross settlement
Cash outflows

Cash inflows

Net settlement
Cash outflows

At 31 December 2016
Derivative receivables – gross settlement
Cash outflows

Cash inflows

Net settlement
Cash inflows

Derivative liabilities – gross settlement
Cash outflows

Cash inflows

Net settlement
Cash outflows

–2,421

2,489

– 922

898

–17

–2,124

2,184

–312

325

– 87

– 5

–231

237

–2,675

2,602

–188

175

–22

– 5

–2

Derivative financial instruments entail both rights and obligations.
The contractual arrangement defines whether these rights and ob-
ligations can be offset against each other and therefore result in a
net settlement, or whether both parties to the contract will have to
perform their obligations in full (gross settlement).

cURRENcY RISK AND cURRENcY MANAGEMENT

The international business activities of Deutsche Post DHL Group
expose it to currency risks from recognised or planned future trans-
actions:

Accounting-related currency risks arise from the measurement
and settlement of items in foreign currencies that are recognised if
the exchange rate on the measurement or settlement date differs
from the rate on recognition. The resulting foreign exchange differ-
ences directly impact on profit or loss. In order to mitigate this
impact as far as possible, all significant accounting-related currency
risks within the Group are centralised at Deutsche Post AG through
the in-house bank function. The centralised risks are aggregated
by Corporate Treasury to calculate a net position per currency,
and hedged externally based on value-at-risk limits. The currency-
related value at risk (95 % / one-month holding period) for the port-

folio totalled €5 million (previous year: €5 million) at the reporting
date; the current limit was a maximum of €5 million.

The notional amount of the currency forwards and currency
swaps used to manage accounting-related currency risks amounted
to €1,630 million at the reporting date (previous year: €2,425 mil-
lion); the fair value was €10 million (previous year: €–20 million).
For simplification purposes, fair value hedge accounting was not
applied to the derivatives used, which are reported as trading de-
rivatives instead.

Currency risks arise from planned foreign currency transac-
tions if the future foreign currency transactions are settled at ex-
change rates that differ from the rates originally planned or calcu-
lated. These currency risks are captured and quantified centrally in
Corporate Treasury. The rule-based, rolling hedging programme in
place to date for these risks was discontinued in the course of 2017.
Most of the existing hedges for 2018 / 2019 were closed out with
reversing trades. Currency risks from planned transactions and
transactions with existing contracts will only be hedged in selected
cases in the future. The relevant hedging transactions are recognised
using cash flow hedge accounting,

note 43.3, Cash flow hedges.

154

Deutsche Post DHL Group — 2017 Annual Report

Currency risks also result from translating assets and liabilities
of foreign operations into the Group’s currency (translation risk).
However, at the end of 2017, there were no longer any hedges in
place for currency translation risks.

In total, currency forwards and currency swaps with a notional
amount of €4,321 million (previous year: €5,737 million) were out-
standing at the reporting date. The corresponding fair value was
€56 million (previous year: €1 million). As at the reporting date,
there were no currency options or cross-currency swaps.

Of the unrealised gains or losses from currency derivatives
recognised in equity as at 31 December 2017 in accordance with
IAS 39, €36 million (previous year: €–90 million) is expected to be
recognised in income in the course of 2018.

IFRS 7 requires the disclosure of quantitative risk data showing
how profit or loss and equity are affected by changes in exchange
rates at the reporting date. The impact of these changes in exchange
rates on the portfolio of foreign currency financial instruments is
assessed by means of a value-at-risk calculation (95 % confidence /
one-month holding period). It is assumed that the portfolio as at
the reporting date is representative for the full year. Effects of hypo-
thetical changes in exchange rates on translation risk do not fall
within the scope of IFRS 7. The following assumptions are used as a
basis for the sensitivity analysis:

Primary financial instruments in foreign currencies used by
Group companies are hedged by Deutsche Post AG’s in-house bank,
with Deutsche Post AG setting and guaranteeing monthly exchange
rates. Exchange rate-related changes therefore have no effect on the
profit or loss and equity of the Group companies. Where, in indi-
vidual cases, Group companies are not permitted to participate in
in-house banking for legal reasons, their currency risks from pri-
mary financial instruments are fully hedged locally through the use
of derivatives. They therefore have no impact on the Group’s risk
position.

Hypothetical changes in exchange rates have an effect on the
fair values of Deutsche Post AG’s external derivatives that is reported
in profit or loss; they also affect the foreign currency gains and
losses from remeasurement at the closing date of the in-house bank
balances, balances from external bank accounts as well as internal
and external loans extended by Deutsche Post AG. The foreign cur-
rency value at risk of the foreign currency items concerned was
€5 million at the reporting date (previous year: €5 million). In add-
ition, hypothetical changes in exchange rates affect equity and the
fair values of those derivatives used to hedge unrecognised firm
commitments and highly probable forecast currency transactions,
which are designated as cash flow hedges. The foreign currency

value at risk of this risk position was €7 million as at 31 Decem-
ber 2017 (previous year: €76 million). The total foreign currency
value at risk was €9 million at the reporting date (previous year:
€80 million). The total amount is lower than the sum of the individ-
ual amounts given above, owing to interdependencies.

INTEREST RATE RISK AND INTEREST RATE MANAGEMENT

No interest rate hedging instruments were recognised as at the re-
porting date. The proportion of financial liabilities with short-term
note 40, amounts to 14 % (previous year: 24 %) of
interest lock-ins,
the total financial liabilities as at the reporting date. The effect of
potential interest rate changes on the Group’s financial position re-
mains insignificant.

The quantitative risk data relating to interest rate risk required
by IFRS 7 is presented in the form of a sensitivity analysis. This
method determines the effects of hypothetical changes in market
interest rates on interest income, interest expense and equity as at
the reporting date. The following assumptions are used as a basis
for the sensitivity analysis:

Primary variable-rate financial instruments are subject to
interest rate risk and must therefore be included in the sensitivity
analysis. Fixed-income financial instruments measured at amort-
ised cost are not subject to interest rate risk.

If the market interest rate level as at 31 December 2017 had
been 100 basis points higher or lower, net finance costs would not
have been affected as in the previous year. All interest rate deriva-
tives had expired or been unwound at the reporting date. No inter-
est rate risk with an impact on equity was determined.

MARKET RISK

As in the previous year, most of the risks arising from commodity
price fluctuations, in particular fluctuating prices for kerosene and
marine diesel fuels, were passed on to customers via operating
measures. However, the impact of the related fuel surcharges is de-
layed by one to two months, so that earnings may be affected tem-
porarily if there are significant short-term fuel price variations.

In addition, a small number of commodity swaps for diesel
and marine diesel fuel were used to control residual risks. The no-
tional amount of these commodity swaps was €8 million (previous
year: €52 million) with a fair value of €1 million (previous year:
€–4 million).

IFRS 7 requires the disclosure of a sensitivity analysis, present-
ing the effects of hypothetical commodity price changes on profit
or loss and equity.

Consolidated Financial Statements — NOTES — Other disclosures

155

Changes in commodity prices affect the fair values of the de-
rivatives used to hedge highly probable forecast commodity pur-
chases (cash flow hedges) and the hedging reserve in equity. If, on
the reporting date, the commodity prices underlying the derivatives
had been 10 % higher than the commodity prices determined on the
market, this would not have increased fair values and equity (pre-
vious year: increase of €3 million). A corresponding decline in com-
modity prices would also have had no effect.

In the interests of simplicity, some of the commodity price
hedges are not recognised as cash flow hedges. For these derivatives,
commodity price changes affect the fair values of the derivatives and,
consequently, the income statement. As in the previous year, if the
underlying commodity prices had been 10 % higher at the reporting
date, this would have increased the fair values in question and, con-
sequently, operating profit by €1 million. A corresponding decline
in the commodity prices would have reduced the fair values of the
derivatives and operating profit by €1 million.

cREDIT RISK

The credit risk incurred by the Group is the risk that counterparties
fail to meet their obligations arising from operating activities and
from financial transactions. To minimise credit risk from financial
transactions, the Group only enters into transactions with prime-
rated counterparties. The Group’s heterogeneous customer struc-
ture means that there is no risk concentration. Each counterparty
is assigned an individual limit, the utilisation of which is regularly
monitored. A test is performed at the reporting dates to establish
whether an impairment loss needs to be charged on the positive fair
values due to the individual counterparties’ credit quality. This was
not the case for any of the counterparties as at 31 December 2017.

In 2017, factoring agreements were in place on the basis of
which the banks are obliged to purchase existing and future trade
receivables. The banks’ purchase obligations are limited to a max-
imum portfolio of receivables of €313 million. Deutsche Post DHL
Group can decide freely whether, and to what extent, the revolving
notional volume is utilised. The risks relevant to the derecognition
of the receivables include credit risk and the risk of delayed payment
(late payment risk).

Credit risk represents primarily all the risks and rewards asso-
ciated with ownership of the receivables. This risk is transferred in
full to the bank against payment of a fixed fee for doubtful accounts.
A significant late payment risk does not exist. Consequently, credit
risk is the main risk associated with the receivables, and this risk is
transferred in full to the bank against payment of a fixed fee. The
receivables are therefore derecognised in their entirety. In financial
year 2017, the Group recognised programme fees (interest, allow-

ances for doubtful accounts) of €2 million (previous year: €1 mil-
lion) as an expense in relation to its continuing exposure. The no-
tional volume of receivables factored as at 31 December 2017
amounted to €267 million.

Default risks are continuously monitored in the operating busi-
ness. The aggregate carrying amounts of financial assets represent
the maximum default risk. Trade receivables amounting to
€8,218 million (previous year: €7,965 million) are due within one
year. The following table gives an overview of receivables that are
past due:

Receivables that are past due

€ m

Carrying amount before impairment losses

Neither impaired nor due at the reporting date

Past due and not impaired at the reporting date

Up to 30 days

31 to 60 days

61 to 90 days

91 to 120 days

121 to 150 days

151 to 180 days

More than 180 days

Trade receivables changed as follows:

Receivables

€ m

Gross receivables
At 1 January

Changes

At 31 December

Valuation allowances
At 1 January

Changes

At 31 December

Carrying amount at 31 December

2016

8,133

5,517

1,027

426

187

2017

8,365

5,527

1,190

441

190

2016

2017

7,910

223

8,133

–216

–168

7,965

8,133

232

8,365

–168

–147

8,218

All other financial instruments are neither past due nor impaired.

Impairment losses of €25 million (previous year: €23 million)

were recognised for other assets.

156

43.2 Collateral

Collateral provided

€ m

Noncurrent financial assets

of which for assets for the settlement of residential

building loans

sureties paid

Current financial assets

of which for US crossborder lease (QtE lease)

transactions

sureties paid

2016

188

101

2017

169

43.3 Derivative financial instruments

FAIR VALUE hEDGES

There were no fair value hedges as at 31 December 2017, as in the
previous year. At the reporting date, the unwinding of interest rate
swaps resulted in carrying amount adjustments of €32 million (pre-
vious year: €43 million). The adjustments in the carrying amount
will be amortised using the effective interest method over the re-
maining term of the liabilities and will reduce the interest expense
in future.

Deutsche Post DHL Group — 2017 Annual Report

cASh FLOW hEDGES

The Group uses currency forwards and currency swaps to hedge the
cash flow risk from future foreign currency operating revenue and
expenses. The fair values of currency forwards and currency swaps
amounted to €46 million at the reporting date (previous year:
€28 million). The hedged items will have an impact on cash flow
by 2019.

The risks from the purchase of diesel and marine diesel fuel,
which cannot be passed on to customers, were hedged using com-
modity swaps that will affect cash flow by 2018. The fair value of
these cash flow hedges amounted to €0 million (previous year:
€–5 million).

NET INVESTMENT hEDGES

Currency risks resulting from the translation of foreign operations
were no longer hedged as at the end of 2017 (previous year: fair
value of €–7 million).

43.4 Additional disclosures on the financial instruments

used in the Group

The Group classifies financial instruments in line with the respective
balance sheet items. The following table reconciles the financial in-
struments to the categories given in IAS 39 and their respective fair
values as at the reporting date:

Consolidated Financial Statements — NOTES — Other disclosures

157

Reconciliation of carrying amounts in the balance sheet at 31 December 2017

€ m

Carrying amount
by IAS 39 measurement
category

Other financial
instruments
outside IAS 39 1

Carrying amount

Fair value

within IFRS 7

ASSETS
Noncurrent financial assets at cost

of which availableforsale financial assets 2

loans and receivables

Noncurrent financial assets at fair value

of which fair value option

availableforsale financial assets

derivatives designated as hedges

Trade receivables at cost

of which loans and receivables

Other current assets at cost

of which loans and receivables

Other current assets outside IFRS 7

Current financial assets at cost

of which loans and receivables

Current financial assets at fair value

of which trading

availableforsale financial assets

derivatives designated as hedges

Cash and cash equivalents

of which loans and receivables

TOTAL ASSETS

EQUITY AND LIAbILITIES
Noncurrent financial liabilities at cost 3

of which other financial liabilities

Noncurrent financial liabilities at fair value

of which earnout obligation

derivatives designated as hedges

Other noncurrent liabilities at cost

of which other financial liabilities

Other noncurrent liabilities outside IFRS 7

Current financial liabilities at cost

of which other financial liabilities

Current financial liabilities at fair value

of which trading

earnout obligation

derivatives designated as hedges

Trade payables at cost

of which other financial liabilities

Other current liabilities at cost

of which other financial liabilities

Other current liabilities outside IFRS 7

TOTAL EQUITY AND LIAbILITIES

518

215

8,218

370

1,814

576

3,135

14,922

5,142

186

864

7,343

4,383

18,067

480

466

215

156

8,218

370

576

500

3,135

4,983

842

7,343

159

518

215

n. a.

576

n. a.

–

5,622

n. a.

868

n. a.

–

1 Relates to lease receivables or liabilities.
2 The fair value is assumed to be equal to the carrying amount.
3 The Deutsche Post AG and Deutsche Post Finance B. V. bonds included in noncurrent financial liabilities are carried at amortised cost.

Where required, the carrying amounts of unwound interest rate swaps were adjusted. One of the Deutsche Post Finance B. V. bonds was designated
as a fair value hedge as at the reporting date. A basis adjustment was recognised for the effective portion of the hedge in accordance with IAS 39.
The bond is therefore not recognised fully at either fair value or amortised cost. The convertible bonds issued by Deutsche Post AG in December 2017
and December 2012 had a fair value of €1,057 million and €215 million as at the reporting date. The fair values of the debt components at the reporting
date were €940 million and €112 million.

158

Deutsche Post DHL Group — 2017 Annual Report

Reconciliation of carrying amounts in the balance sheet at 31 December 2016

€ m

Carrying amount
by IAS 39 measurement
category

Other financial
instruments
outside IAS 39 1

Carrying amount

Fair value

within IFRS 7

ASSETS
Noncurrent financial assets at cost

of which availableforsale financial assets

loans and receivables

Noncurrent financial assets at fair value

of which fair value option

availableforsale financial assets

derivatives designated as hedges

Trade receivables at cost

of which loans and receivables

Other current assets at cost

of which loans and receivables

Other current assets outside IFRS 7

Current financial assets at cost

of which loans and receivables

Current financial assets at fair value

of which trading

availableforsale financial assets

derivatives designated as hedges

Cash and cash equivalents

of which loans and receivables

TOTAL ASSETS

EQUITY AND LIAbILITIES
Noncurrent financial liabilities at cost 2

of which other financial liabilities

Noncurrent financial liabilities at fair value

of which earnout obligation

derivatives designated as hedges

Other noncurrent liabilities at cost

of which other financial liabilities

Other noncurrent liabilities outside IFRS 7

Current financial liabilities at cost

of which other financial liabilities

Current financial liabilities at fair value

of which trading

earnout obligation

derivatives designated as hedges

Trade payables at cost

of which other financial liabilities

Other current liabilities at cost

of which other financial liabilities

Other current liabilities outside IFRS 7

TOTAL EQUITY AND LIAbILITIES

513

176

7,965

357

1,819

294

3,107

14,311

4,548

123

249

1,366

7,178

313

3,979

17,877

469

458

176

145

7,965

357

294

200

3,107

4,367

123

1,338

7,178

313

181

513

176

n. a.

294

n. a.

–

5,102

123

n. a.

781

n. a.

–

1 Relates to lease receivables or liabilities.
2 The Deutsche Post AG and Deutsche Post Finance B. V. bonds included in noncurrent financial liabilities are carried at amortised cost.

Where required, the carrying amounts of unwound interest rate swaps were adjusted. One of the Deutsche Post Finance B. V. bonds was designated
as a fair value hedge as at the reporting date. A basis adjustment was recognised for the effective portion of the hedge in accordance with IAS 39.
The bond is therefore not recognised fully at either fair value or amortised cost. The convertible bond issued by Deutsche Post AG in December 2012
had a fair value of €629 million as at the reporting date. The fair value of the debt component at the reporting date was €428 million.

Consolidated Financial Statements — NOTES — Other disclosures

159

If there is an active market for a financial instrument (e. g., stock
exchange), the fair value is determined by reference to the market
or quoted exchange price at the reporting date. If no fair value is
available in an active market, the quoted prices in an active market
for similar instruments or recognised valuation techniques are used
to determine fair value. The valuation techniques used incorporate
the key factors determining the fair value of the financial instru-
ments using valuation parameters that are derived from the market
conditions as at the reporting date. Counterparty risk is analysed
on the basis of the current credit default swaps signed by the coun-
terparties. The fair values of other non-current receivables and
held-to-maturity financial investments with remaining maturities
of more than one year correspond to the present values of the pay-
ments related to the assets, taking into account current interest rate
parameters.

Cash and cash equivalents, trade receivables and other receiv-
ables have predominantly short remaining maturities. As a result,
their carrying amounts as at the reporting date are approximately
equivalent to their fair values. Trade payables and other liabilities
generally have short remaining maturities; the recognised amounts
approximately represent their fair values.

The financial assets classified as available for sale include shares
in partnerships and corporations for which there is no active market
in the amount of €14 million (previous year: €11 million).

As no future cash flows can be reliably determined, the fair
values cannot be determined using valuation techniques. There are
no plans to sell or derecognise significant shares classified as avail-
able-for-sale financial assets as at 31 December 2017 in the near
future.

Available-for-sale financial assets measured at fair value relate

to equity and debt instruments.

Financial assets at fair value through profit or loss include se-
curities to which the fair value option was applied, in order to avoid
accounting inconsistencies. An active market exists for the assets,
and they are recognised at fair value.

The following table presents financial instruments recognised
at fair value and financial instruments whose fair value is required
to be disclosed. Each class is presented by the level in the fair value
hierarchy to which it is assigned.

The simplification option under IFRS 7.29a was exercised for
cash and cash equivalents, trade receivables, other assets, trade pay-
ables and other liabilities with predominantly short maturities.
Their carrying amounts as at the reporting date are approximately
equivalent to their fair values. Not included are financial invest-
ments in equity instruments for which there is no quoted price in
an active market and which therefore have to be measured at cost.

Financial assets and liabilities

€ m

Class

31 December 2017
Noncurrent financial assets

Current financial assets

Financial assets

Noncurrent liabilities

Current liabilities

Financial liabilities

31 December 2016
Noncurrent financial assets

Current financial assets

Financial assets

Noncurrent liabilities

Current liabilities

Financial liabilities

1 Quoted prices for identical instruments in active markets.
2 Inputs other than quoted prices that are directly or indirectly observable for instruments.
3 Inputs not based on observable market data.

Level 1 1

Level 2 2

Level 3 3

Total

201

500

701

5,315

519

5,834

166

200

366

4,730

781

5,511

480

556

151

182

512

606

384

478

681

576

1,257

5,472

554

6,026

678

294

972

5,125

879

6,004

160

Deutsche Post DHL Group — 2017 Annual Report

Level 1 mainly comprises equity instruments measured at fair value
and debt instruments measured at amortised cost.

the Black-Scholes option pricing model. All significant inputs used
to measure derivatives are observable in the market.

In addition to financial assets and financial liabilities measured
at amortised cost, commodity, interest rate and currency derivatives
are reported under Level 2. The fair values of the derivatives are
measured on the basis of discounted expected future cash flows,
taking into account forward rates for currencies, interest rates and
commodities (market approach). For this purpose, price quotations
observable in the market (exchange rates, interest rates and com-
modity prices) are imported from standard market information
platforms into the treasury management system. The price quota-
tions reflect actual transactions involving similar instruments in an
active market. If currency options are used, they are measured using

Level 3 comprises mainly the fair values of equity investments
and subsequent payments associated with M & A transactions. They
are measured using recognised valuation models that reflect
plausible assumptions. Financial ratios strongly influence the fair
values of assets and liabilities. Increasing financial ratios lead to
higher fair values, whilst decreasing financial ratios result in lower
fair values.

No financial instruments were transferred between levels in
financial year 2017. The following table shows the effect on net gains
and losses of the financial instruments categorised within level 3 as
at the reporting date:

Unobservable inputs (Level 3)

€ m

2016

2017

Assets

Liabilities

Assets

Derivatives,

Liabilities

Derivatives,

Equity instruments

Debt instruments

of which equity derivatives

Equity instruments

Debt instruments

of which equity derivatives

– 5

The net gains and losses mainly include the effects of the fair value
measurement, impairment and disposals (disposal gains / losses) of
financial instruments. Dividends and interest are not taken into
account for the financial instruments measured at fair value through
profit or loss. Income and expenses from interest and commission
agreements of the financial instruments not measured at fair value
through profit or loss are explained in the income statement dis-
closures.

The following tables show the impact of netting agreements
based on master netting arrangements or similar agreements on
financial assets and financial liabilities as at the reporting date:

At 1 January

Gains and losses
(recognised in profit or loss) 1

Gains and losses
(recognised in OCI) 2

Additions

Disposals

Currency translation effects

At 31 December

– 80

–3

1 Fair value losses are presented in finance costs, fair value gains in financial income.
2 Unrealised gains and losses were recognised in the IAS 39 revaluation reserve.

The net gains and losses on financial instruments classified in ac-
cordance with the individual IAS 39 measurement categories are as
follows:

Net gains and losses by measurement category

€ m

Loans and receivables

Availableforsale financial assets

Net gains (+) / losses (–) recognised in OCI

Net gains (+) / losses (–) reclassified to profit
or loss

Net gains (+) / losses (–) recognised in profit
or loss

Financial assets and liabilities at fair value
through profit or loss

Trading

Fair value option

Other financial liabilities

2016

–127

2017

–147

– 4

– 8

–15

–7

–1

– 5

Consolidated Financial Statements — NOTES — Other disclosures

Offsetting – assets

€ m

At 31 December 2017
Derivative financial assets 1

Trade receivables

Funds

At 31 December 2016
Derivative financial assets 1

Trade receivables

Funds

1 Excluding derivatives from M & A transactions.

Offsetting – liabilities

€ m

At 31 December 2017
Derivative financial liabilities 1

Trade payables

Funds

At 31 December 2016
Derivative financial liabilities 1

Trade payables

Funds

1 Excluding derivatives from M & A transactions.

Gross amount

Recognised
net amount

of assets

of liabilities set off

of assets set off

Assets and liabilities

not set off in the balance sheet

Liabilities
that do not meet
offsetting criteria

Collateral
received

8,301

104

8,015

384

331

8,218

104

7,965

Gross amount
of liabilities

Gross amount

Recognised
net amount

of assets set off

of liabilities set off

Assets
that do not meet
offsetting criteria

Collateral
provided

Assets and liabilities

not set off in the balance sheet

7,426

107

7,228

331

7,343

107

7,178

161

Total

8,218

7,965

Total

7,343

7,178

Financial assets and liabilities are set off on the basis of netting
agreements (master netting arrangements) only if an enforceable
right of set-off exists and settlement on a net basis is intended as at
the reporting date.

If the right of set-off is not enforceable in the normal course of
business, the financial assets and liabilities are recognised in the
balance sheet at their gross amounts as at the reporting date. The
master netting arrangement creates a conditional right of set-off
that can only be enforced by taking legal action.

To hedge cash flow and fair value risks, Deutsche Post AG
enters into financial derivative transactions with a large number of
financial services institutions. These contracts are subject to a stand-
ardised master agreement for financial derivative transactions. This
agreement provides for a conditional right of set-off, resulting in
the recognition of the gross amount of the financial derivative trans-
actions at the reporting date. The conditional right of set-off is pre-
sented in the table.

Settlement processes arising from services related to postal
deliveries are subject to the Universal Postal Convention and the
Interconnect Remuneration Agreement – Europe (IRA-E). These
agreements, particularly the settlement conditions, are binding on
all public postal operators for the specified contractual arrange-
ments. Imports and exports between the parties to the agreement
during a calendar year are summarised in an annual statement of
account and presented on a net basis in the final annual statement.
Receivables and payables covered by the Universal Postal Conven-
tion and the IRA-E agreement are presented on a net basis at the
reporting date. In addition, funds are presented on a net basis if a
right of set-off exists in the normal course of business. The tables
show the receivables and payables before and after offsetting.

162

Deutsche Post DHL Group — 2017 Annual Report

44 Contingent liabilities
The Group’s contingent liabilities break down as follows:

Contingent liabilities

€ m

Guarantee obligations

Warranties

Liabilities from litigation risks

Other contingent liabilities

Total

2016

746

983

2017

644

927

The reduction in contingent liabilities is attributable primarily to
exchange rate movements.

Other contingent liabilities also include a potential obligation
to make settlement payments in the USA, which had arisen mainly
in 2014 as a result of a change in the estimated settlement payment
obligations assumed in the context of the restructuring measures in
the USA, and other tax-related obligations,

note 46.

45 Other financial obligations
In addition to provisions, liabilities and contingent liabilities, there
are other financial obligations amounting to €11,298 million (pre-
vious year: €8,188 million) in the context of minimum lease pay-
ments under operating leases in accordance with IAS 17.

The Group’s future payment obligations under leases are attrib-

utable to the following asset classes:

Lease obligations

€ m

Land and buildings

Aircraft

Transport equipment

Technical equipment and machinery

Other equipment, operating and office equipment

It equipment

Total

2016

6,657

909

495

2017

9,403

1,138

611

129

8,188

11,298

In addition to newly signed leases, the increase in lease obligations
by €3,110 million to €11,298 million was due chiefly to new esti-
mates for extension and termination options for certain existing
leases, particularly for real estate and aircraft.

Maturity structure of minimum lease payments

€ m

Up to 1 year

More than 1 year to 2 years

More than 2 years to 3 years

More than 3 years to 4 years

More than 4 years to 5 years

More than 5 years

Total

2016

1,853

1,410

1,027

826

597

2,475

8,188

2017

2,091

1,696

1,396

1,225

930

3,960

11,298

The present value of discounted minimum lease payments amounts
to €9,251 million (previous year: €7,082 million) based on a dis-
count factor of 4.00 % (previous year: 3.25 %). Overall, rental and
lease payments amounted to €3,060 million (previous year:
€3,019 million); €2,226 million (previous year: €2,143 million) of
this amount relates to non-cancellable leases. Future lease obliga-
tions are attributable primarily to Deutsche Post Immobilien GmbH
in the amount of €3,835 million (previous year: €2,789 million).

The purchase obligation for investments in non-current assets

amounts to €254 million (previous year: €234 million).

46 Litigation
Many of the postal services rendered by Deutsche Post AG and its
subsidiaries are subject to sector-specific regulation by the Bun-
desnetzagentur (German federal network agency) pursuant to the
Postgesetz (PostG – German Postal Act). As the regulatory authority,
the Bundesnetzagentur approves or reviews such prices, formulates
the terms of downstream access and has special supervisory powers
to combat market abuse. This general regulatory risk could lead to
a decline in revenue and earnings in the event of negative decisions.
Legal risks may arise, amongst other things, from pending ad-
ministrative court appeals by an association against the price-cap
parameter decision handed down, and the price approval granted,
by the Bundesnetzagentur under the price cap procedure for 2016
to 2018. The claimant asserts that both of the decisions by the Bun-
desnetzagentur are unlawful for various reasons. The Bundesnetz-
agentur and Deutsche Post AG do not share the claimant’s opinion.
In its decision dated 14 June 2011, the Bundesnetzagentur
concluded that First Mail Düsseldorf GmbH, a subsidiary of
Deutsche Post AG, and Deutsche Post AG had contravened the dis-
counting and discrimination prohibitions under the Postgesetz. The
companies were instructed to remedy the breaches that had been
identified. Both companies appealed against the ruling. Further-
more, First Mail Düsseldorf GmbH filed an application to suspend
the execution of the ruling until a decision was reached in the prin-
cipal proceedings. The Cologne Administrative Court and the Mün-
ster Higher Administrative Court both dismissed this application.
First Mail Düsseldorf GmbH discontinued its mail delivery oper-
ations at the end of 2011 and retracted its appeal on 19 Decem-
ber 2011. Deutsche Post AG continues to pursue its appeal against
the Bundesnetzagentur ruling.

Consolidated Financial Statements — NOTES — Other disclosures

163

In its ruling of 30 April 2012, the Bundesnetzagentur deter-
mined that Deutsche Post AG had contravened the discrimination
prohibition under the Postgesetz by charging different fees for the
transport of identical invoices and invoices containing different
amounts. Deutsche Post AG was requested to discontinue the dis-
crimination determined immediately, but no later than 31 De-
cember 2012. The ruling was implemented on 1 January 2013.
Deutsche Post AG does not share the legal opinion of the Bundesnetz-
agentur and appealed the ruling.

In its ruling of 28 June 2016, the Bundesnetzagentur deter-
mined that the prices for the Dialogpost “Impulspost” product did
not meet the pricing standards of the Postgesetz. The agency ordered
the prices to be adjusted immediately (adjustment request). Accord-
ing to the Bundesnetzagentur, the prices did not cover the cost of
efficiently providing the service and had anti-competitive effects.
On 26 July 2016, the Bundesnetzagentur barred Deutsche Post AG
from charging these prices and declared the prices invalid (prohib-
itive order), since at this time Deutsche Post AG had not yet com-
plied with the adjustment request. Deutsche Post AG does not share
the legal opinion of the Bundesnetzagentur and filed an appeal
with the Cologne Administrative Court against the orders issued
by the agency.

In a judgement dated 14 July 2016, the General Court of the
European Union (EGC) set aside the European Commission’s state
aid decision dated 25 January 2012 in an action brought by the Fed-
eral Republic of Germany. In this decision, the European Commis-
sion had argued that the financing of civil servant pensions in part
constituted unlawful state aid that had to be repaid to the federal
government; further details can be found in the 2015 and 2016
Annual Reports in the notes under Litigation. In their actions,
Deutsche Post AG and the federal government asserted that the state
aid decision was unlawful. In the aforementioned judgement of
14 July 2016, the EGC allowed that argument as presented in the
action brought by the federal government. The proceedings brought
by Deutsche Post AG against the state aid ruling have also been
brought to a close. In an order dated 17 March 2017, the EGC de-
clared that there was no longer any need to adjudicate on the action
brought by Deutsche Post AG and additionally ruled that the costs
were to be borne by the European Commission. Since the European
Commission did not file an appeal against the EGC’s judgement of
14 July 2016, that decision is now legally binding. The state aid de-
cision of the European Commission is therefore null and void with
final effect and there are no longer any grounds for the obligation
to repay the alleged state aid under the state aid decision. The
amount of €378 million that had been deposited in a trustee account
for the purpose of implementing the state aid decision was released.
The action brought by Deutsche Post AG against the 2011 “extension
decision” (Ausweitungsbeschluss) is still pending. That action is
based on procedural matters involving the validity of the European
Commission’s 2011 decision to extend the state aid proceedings. In
the action pending, the European Commission has advanced the
legal argument that the state aid proceedings initiated in 1999 re-
main partly open and that it could therefore issue a new final deci-

sion, bringing the proceedings to a close. With regard to the possi-
ble content of this decision, the European Commission did not give
any particulars. In the legal opinion of Deutsche Post AG, however,
the proceedings initiated in 1999 were resolved in full by way of the
European Commission’s state aid ruling of 19 June 2002. The Euro-
pean Court of Justice expressly confirmed that opinion in its ruling
of 24 October 2013. The European Commission’s state aid decision
of 25 January 2012 remains null and void with final effect.

Since 1 July 2010, as a result of the revision of the relevant tax
exemption provisions, the VAT exemption has only applied to those
specific universal services in Germany that are not subject to indi-
vidually negotiated agreements or provided on special terms (dis-
counts, etc.). Deutsche Post AG and the tax authorities hold different
opinions on the VAT treatment of certain products. In the inter-
est of resolving these issues, proceedings have been initiated by
Deutsche Post AG and competitors and are pending at German tax
courts and the European Court of Justice,

note 44.

On 30 June 2014, DHL Express France received a statement
of objections from the French competition authority alleging anti-
competitive conduct in the domestic express business, a business
which had been divested in June 2010. On 15 December 2015,
Deutsche Post DHL Group received the decision of the French au-
thority regarding the fuel surcharges and price fixing. The decision
has been appealed by the Group. A ruling is expected from the Paris
Court of Appeals in May 2018. Further details cannot be given at
this point in time.

In view of the ongoing or announced legal proceedings men-
tioned above, no further details are given on their presentation in
the financial statements.

47 Share-based payment
Assumptions regarding the price of Deutsche Post AG’s shares and
assumptions regarding employee fluctuation are taken into account
when measuring the value of share-based payments for executives.
All assumptions are reviewed on a quarterly basis. The staff costs are
recognised pro rata in profit or loss to reflect the services rendered
as consideration during the vesting period (lock-up period).

47.1 Share-based payment for executives (Share Matching Scheme)

Under the share-based payment system for executives (Share
Matching Scheme), certain executives receive part of their variable
remuneration for the financial year in the form of shares of
Deutsche Post AG in the following year (deferred incentive shares).
All Group executives can specify an increased equity component
individually by converting a further portion of their variable remu-
neration for the financial year (investment shares). After a four-year
lock-up period during which the executive must be employed by
the Group, they again receive the same number of Deutsche Post AG
shares (matching shares). Assumptions are made regarding the con-
version behaviour of executives with respect to their relevant bonus
portion. Share-based payment arrangements are entered into each
year, with 1 December (from financial year 2015; until 2014:
1 January) of the respective year and 1 April of the following year

164

Deutsche Post DHL Group — 2017 Annual Report

being the grant dates for each year’s tranche. Whereas incentive
shares and matching shares are classified as equity-settled share-
based payments, investment shares are compound financial instru-
ments and the debt and equity components must be measured
separately. However, in accordance with IFRS 2.37, only the debt
component is measured due to the provisions of the Share Matching
Scheme. The investment shares are therefore treated as cash-settled
share-based payments.

Share Matching Scheme

Of the expenses under the Share Matching Scheme, €30 mil-
lion (previous year: €27 million) relates to equity-settled share-
based payments and €25 million (previous year: €20 million) to the
deferral of the associated matching shares.

Additional information on granting and settlement of these

rights can be found in

notes 32 and 33.

Grant date of incentive shares and associated matching
shares

1 Jan. 2012

1 Jan. 2013

1 Jan. 2014

1 Dec. 2015

1 Dec. 2016

1 Dec. 2017

Grant date of matching shares awarded for investment shares

1 April 2013

1 April 2014

1 April 2015

1 April 2016

1 April 2017

1 April 2018

Term

End of term

months

March 2017

March 2018

March 2019

March 2020

March 2021

March 2022

2012 tranche

2013 tranche

2014 tranche

2015 tranche

2016 tranche

2017 tranche

Share price at grant date (fair value)

Incentive shares and associated matching shares

Matching shares awarded for investment shares

Number of deferred incentive shares

Number of matching shares expected

Deferred incentive shares

Investment shares

Matching shares issued

€

thousands

12.13

18.22

479

n.a.

1,114

1 Estimated provisional amount, will be determined on 1 April 2018.
2 Expected number.

17.02

27.18

337

303

567

25.91

29.12

332

299

596

27.12

23.98

366

329

848

29.04

31.77

320

288

901

39.26

41.00 1

180 2

162

495

47.2 Long-Term Incentive Plan (2006 LTIP) for members

of the Board of Management

Since financial year 2006, the company has granted members of the
Board of Management cash remuneration linked to the company’s
long-term share price performance through the issue of stock
appreciation rights (SAR s) as part of a Long-Term Incentive Plan
(LTIP). Participation in the LTIP requires Board of Management
members to make a personal investment of 10 % of their annual base
salary on the grant date, primarily in shares.

The SAR s granted can be exercised, in whole or in part, no
earlier than after a four-year waiting period, provided the absolute
or relative performance targets have been achieved at the end of that
period. After expiration of the waiting period, the SAR s must be
exercised within a period of two years (exercise period); any SAR s
not exercised expire.

How many, if any, of the SAR s granted can be exercised is de-
termined in accordance with four (absolute) performance targets
based on the share price and two (relative) performance targets
based on a benchmark index. One-sixth of the SAR s granted are
earned each time the closing price of Deutsche Post shares exceeds

the issue price by at least 10, 15, 20 or 25 % at the end of the waiting
period (absolute performance targets). Both relative performance
targets are tied to the performance of the shares in relation to the
STOXX Europe 600 Index (SXXP; ISIN EU0009658202). They are
met if the share price equals the index performance or if it outper-
forms the index by more than 10 %. Performance is determined by
comparing the average price of Deutsche Post shares or the average
index value during a reference and a performance period. The ref-
erence period comprises the last 20 consecutive trading days prior
to the issue date. The performance period is the last 60 trading days
before the end of the waiting period. The average (closing) price is
calculated as the average closing price of Deutsche Post shares in
Deutsche Börse AG’s Xetra trading system. If the absolute or relative
performance targets are not met by the end of the waiting period,
those SAR s expire without replacement or compensation. Each SAR
exercised entitles the Board of Management member to receive a
cash settlement equal to the difference between the average closing
price of Deutsche Post shares for the five trading days preceding the
exercise date and the exercise price of the SAR.

Consolidated Financial Statements — NOTES — Other disclosures

165

2006 LTIP

2012 tranche

2013 tranche

2014 tranche

2015 tranche

2016 tranche

2017 tranche

Issue date

1 July 2012

1 August 2013

1 September 2014

1 September 2015

1 September 2016

1 September 2017

Issue price

€ Waiting period expires

13.26

20.49

24.14

25.89

28.18

34.72

30 June 2016

31 July 2017

31 August 2018

31 August 2019

31 August 2020

31 August 2021

The Board of Management members were granted a total of
2,003,970 SAR s (previous year: 1,202,376 SAR s) with a total value,
at the time of issue (1 September 2017), of €7.19 million (previous
year: €6.25 million as at 1 September 2016). Further disclosures on
share-based payment for members of the Board of Management can
be found in

note 48.2.

47.3 SAR Plan for executives

From July 2006 to August 2013, selected executives received annual
tranches of SAR s under the SAR Plan. This allowed them to receive
a cash payment within a defined period in the amount of the differ-
ence between the respective price of Deutsche Post shares and the
fixed issue price if demanding performance targets are met (see
disclosures on the 2006 LTIP for members of the Board of Manage-
ment). Due to the strong share price performance since SAR s were
issued in 2013, all of the related performance targets were met on
expiry of the waiting period on 31 July 2017. All SAR s under this
tranche were therefore able to be exercised. Most executives exer-
cised them as early as 2017. Starting in 2014, SAR s were no longer
issued to executives under the SAR Plan. The Performance Share
Plan (PSP) for executives replaces the SAR Plan. More details on the
tranches still existing are shown in the following table:

SAR Plan

Issue date

Issue price

Waiting period expires

2012 tranche

2013 tranche

1 July 2012 1 August 2013

€13.26

€20.49

30 June 2016

31 July 2017

The fair value of the SAR Plan and the 2006 LTIP was determined
using a stochastic simulation model. As a result, an expense of
€73 million was recognised for financial year 2017 (previous year:
€94 million).

A provision for the 2006 LTIP and the SAR Plan was recognised
at the reporting date in the amount of €73 million (previous year:
€134 million), of which €63 million (previous year: €41 million) was
attributable to the Board of Management. Of the total provision,
€32 million (previous year: €24 million) related to rights exercisable
at the reporting date.

47.4 Performance Share Plan for executives

The Annual General Meeting on 27 May 2014 resolved to introduce
the Performance Share Plan (PSP) for executives. This plan replaces
the former share-based payment system (SAR Plan) for executives.
Whereas the SAR Plan involved cash-settled share-based payments,
under the PSP shares are issued to participants at the end of the
waiting period. Under the PSP, the granting of the shares at the end
of the waiting period is also linked to the achievement of demand-
ing performance targets. The performance targets under the PSP are
identical to the performance targets under the LTIP for members of
the Board of Management.

Performance Share Units (PSU s) were issued to selected ex-
ecutives under the PSP for the first time on 1 September 2014. It is
not planned that members of the Board of Management will par-
ticipate in the PSP. The Long-Term Incentive Plan (2006 LTIP) for
members of the Board of Management remains unchanged.

In the consolidated financial statements as at 31 December 2017,
a total of €25 million (previous year: €17 million) has been added to
capital reserves for the purposes of the plan, with an equal amount
recognised in staff costs.

The value of the PSP is measured using actuarial methods based

on option pricing models (fair value measurement).

166

Performance Share Plan

Grant date

Exercise price

Waiting period expires

Riskfree interest rate

Initial dividend yield of Deutsche Post shares

Yield volatility of Deutsche Post shares

Yield volatility of Dow Jones EURO StOXX 600 Index

Covariance of Deutsche Post shares to Dow Jones EURO StOXX 600 Index

Quantity
Rights outstanding at 1 January 2017

Rights granted

Rights lapsed

Rights outstanding at 31 December 2017

Deutsche Post DHL Group — 2017 Annual Report

2014 tranche

2015 tranche

2016 tranche

2017 tranche

1 September 2014

1 September 2015

1 September 2016

1 September 2017

€24.14

€25.89

€28.18

€34.72

31 August 2018

31 August 2019

31 August 2020

31 August 2021

0.11 %

3.52 %

23.46 %

10.81 %

1.74 %

3,992,880

212,940

3,779,940

– 0.10 %

3.28 %

24.69 %

16.40 %

2.94 %

– 0.62 %

3.73 %

23.94 %

16.83 %

2.93 %

4,032,510

3,782,778

230,100

3,802,410

163,086

3,619,692

– 0.48 %

3.31 %

23.03 %

16.34 %

2.78 %

3,068,226

15,180

3,053,046

Future dividends were taken into account, based on a moderate
increase in dividend distributions over the respective measurement
period.

The average remaining maturity of the outstanding PSU s as at

31 December 2017 was 25 months.

48 Related party disclosures

48.1 Related party disclosures (companies and Federal Republic

of Germany)

All companies classified as related parties that are controlled by the
Group or over which the Group can exercise significant influence
are recorded in the list of shareholdings, which can be accessed
online at

dpdhl.com/en/investors.

Deutsche Post AG maintains a variety of relationships with the
Federal Republic of Germany (Federal Republic) and other com-
panies controlled by the Federal Republic of Germany.

The Federal Republic is a customer of Deutsche Post AG and as
such uses the company’s services. Deutsche Post AG has direct busi-
ness relationships with the individual public authorities and other
government agencies as independent individual customers. The
services provided for these customers are insignificant in respect of
Deutsche Post AG’s overall revenue.

RELATIONShIPS WITh KFW

KfW supports the Federal Republic in continuing to privatise com-
panies such as Deutsche Post AG or Deutsche Telekom AG. In 1997,
KfW, together with the Federal Republic, developed a “placeholder
model” as a tool to privatise government-owned companies. Under
this model, the Federal Republic sells all or part of its investments
to KfW with the aim of fully privatising these state-owned com-
panies. On this basis, KfW has purchased shares of Deutsche Post AG

from the Federal Republic in several stages since 1997 and executed
various capital market transactions using these shares. KfW’s cur-
rent interest in Deutsche Post AG’s share capital is 20.7 %.
Deutsche Post AG is thus considered to be an associate of the Federal
Republic.

RELATIONShIPS WITh bUNDESANSTALT FÜR POST
UND TELEKOMMUNIKATION

The Bundesanstalt für Post und Telekommunikation (BAnst PT) is a
government agency and falls under the technical and legal super-
vision of the German Federal Ministry of Finance. The BAnst PT
continues to manage the social facilities such as the postal civil serv-
ant health insurance fund, the recreation programme, the Post-
beamtenversorgungskasse (PVK – Postal civil servant pension fund),
the Versorgungsanstalt der Deutschen Bundespost (VAP – Deutsche
Bundespost institution for supplementary retirement pensions) and
the welfare service for Deutsche Post AG, Deutsche Postbank AG
and Deutsche Telekom AG. Tasks are performed on the basis of
agency agreements. In 2017, Deutsche Post AG was invoiced for
€114 million (previous year: €103 million) in instalment payments
relating to services provided by the BAnst PT. Further disclosures
on the PVK and the VAP can be found in

notes 7 and 38.

RELATIONShIPS WITh ThE GERMAN FEDERAL MINISTRY OF FINANcE

In financial year 2001, the German Federal Ministry of Finance and
Deutsche Post AG entered into an agreement that governs the terms
and conditions of the transfer of income received by Deutsche Post AG
from the levying of the settlement payment under the Gesetze über
den Abbau der Fehlsubventionierung im Wohnungswesen (German
Acts on the Reduction of Misdirected Housing Subsidies) relating
to housing benefits granted by Deutsche Post AG. Deutsche Post AG
transfers the amounts to the Federal Republic on a monthly basis.

Consolidated Financial Statements — NOTES — Other disclosures

167

Deutsche Post AG entered into an agreement with the German
Federal Ministry of Finance dated 30 January 2004 relating to the
transfer of civil servants to German federal authorities. Under this
agreement, civil servants are seconded with the aim of transferring
them initially for six months, and are then transferred permanently
if they successfully complete their probation. Once a permanent
transfer is completed, Deutsche Post AG contributes to the cost in-
curred by the Federal Republic by paying a flat fee. In 2017, this
initiative resulted in 45 permanent transfers (previous year: 84) and
three secondments with the aim of a permanent transfer in 2018
(previous year: 29).

RELATIONShIPS WITh ThE GERMAN FEDERAL EMPLOYMENT AGENcY

Deutsche Post AG and the German Federal Employment Agency
entered into an agreement dated 12 October 2009 relating to the
transfer of Deutsche Post AG civil servants to the Federal Employ-
ment Agency. In 2017, this initiative resulted in 22 permanent trans-
fers (previous year: zero).

RELATIONShIPS WITh DEUTSchE TELEKOM AG AND ITS SUbSIDIARIES

The Federal Republic holds around 32 % of the shares of Deutsche
Telekom AG directly and indirectly (via KfW). A control relation-
ship exists between Deutsche Telekom AG and the Federal Republic
because the Federal Republic, despite its non-controlling interest,
has a secure majority at the Annual General Meeting due to its
average presence there. Deutsche Telekom AG is therefore a related
party of Deutsche Post AG. In financial year 2017, Deutsche Post DHL
Group provided goods and services (mainly transport services for
letters and parcels) for Deutsche Telekom AG and purchased goods
and services (such as IT products) from Deutsche Telekom AG.

RELATIONShIPS WITh DEUTSchE bAhN AG AND ITS SUbSIDIARIES

Deutsche Bahn AG is wholly owned by the Federal Republic. Owing
to this control relationship, Deutsche Bahn AG is a related party to
Deutsche Post AG. Deutsche Post DHL Group has various business
relationships with the Deutsche Bahn Group. These mainly consist
of transport service agreements.

Objekt Leipzig KG are the legal owners, is exclusively let to Deutsche
Post Immobilien GmbH. Rental expense for Deutsche Post Immo-
bilien GmbH amounted to €101 million in 2017 (previous year:
€109 million). The rent was always paid on time. Deutsche Post
Pensions-Treuhand GmbH & Co. KG holds all of the shares of
Deutsche Post Pensionsfonds AG. Deutsche Post Betriebs renten-
Service e.V. (DPRS) was liquidated in the previous year and
the corresponding benefits have been directly committed by
Deutsche Post AG since 1 May 2016. Further disclosures on pension
funds can be found in

notes 7 and 38.

RELATIONShIPS WITh UNcONSOLIDATED cOMPANIES, INVESTMENTS
AccOUNTED FOR USING ThE EQUITY METhOD AND jOINT OPERATIONS

In addition to the consolidated subsidiaries, the Group has direct
and indirect relationships with unconsolidated companies, invest-
ments accounted for using the equity method and joint operations
deemed to be related parties of the Group in the course of its or-
dinary business activities. As part of these activities, all transactions
for the provision of goods and services entered into with uncon-
solidated companies were conducted on an arm’s length basis at
standard market terms and conditions.

Transactions were conducted in financial year 2017 with major
related parties, resulting in the following items in the consolidated
financial statements:

€ m

Trade receivables

Loans

Receivables from
inhouse banking

Financial liabilities

Trade payables

Revenue

Expenses 1

to / from investments accounted
for using the equity method

to / from unconsolidated

companies

2016

2017

2016

2017

1 Relate to materials expense and staff costs.

RELATIONShIPS WITh PENSION FUNDS

The real estate with a fair value of €1,590 million (which can be
offset as plan assets) (previous year: €1,358 million), of which
Deutsche Post Pensions- Treuhand GmbH & Co. KG, Deutsche
Post Altersvorsorge Sicherung e.V. & Co. Objekt Gronau KG and
Deutsche Post Grundstücks- Vermietungsgesellschaft beta mbH

Deutsche Post AG issued letters of commitment in the amount of
€16 million (previous year: €53 million) for these companies. Of this
amount, €11 million (previous year: €48 million) was attributable
to investments accounted for using the equity method, €1 million
(previous year: €1 million) to joint operations and €4 million (pre-
vious year: €4 million) to unconsolidated companies.

168

Deutsche Post DHL Group — 2017 Annual Report

48.2 Related party disclosures (individuals)

48.3 Remuneration disclosures in accordance with the hGb

In accordance with IAS 24, the Group also reports on transactions
between the Group and related parties or members of their families.
Related parties are defined as the Board of Management, the Super-
visory Board and the members of their families.

There were no reportable transactions or legal transactions in-

volving related parties in financial year 2017.

The remuneration of key management personnel of the Group
requiring disclosure under IAS 24 comprises the remuneration of
the active members of the Board of Management and the Super-
visory Board.

The active members of the Board of Management and the

Super visory Board were remunerated as follows:

€ m

Shortterm employee benefits
(excluding sharebased payment)

Postemployment benefits

Termination benefits

Sharebased payment

Total

2016

2017

As well as the aforementioned benefits for their work on the Super-
visory Board, the employee representatives on the Supervisory
Board and employed by the Group also receive their normal salaries
for their work in the company. These salaries are determined at
levels that are commensurate with the salary appropriate for the
function or work performed in the company.

Post-employment benefits are recognised as the service cost
resulting from the pension provisions for active members of the
Board of Management. The corresponding liability amounted to
€35 million as at the reporting date (previous year: €35 million).

The share-based payment amount relates to the relevant ex-
pense recognised for financial years 2016 and 2017; further details
notes 47.2 and 48.3. The expense is itemised in the
can be found in
following table:

Share-based payment

Thousands of €

Dr Frank Appel, Chairman

Ken Allen

Dr h.c. Jürgen Gerdes

John Gilbert

Melanie Kreis

Dr Thomas Ogilvie (since 1 September 2017)

Tim Scharwath (since 1 June 2017)

Lawrence Rosen (until 30 September 2016)

Share-based payment

2016
SAR s

9,603

4,175

4,430

600

241

–

5,071

24,120

2017
SAR s

13,726

6,169

6,726

2,422

1,085

–

30,242

bOARD OF MANAGEMENT REMUNERATION

The total remuneration paid to the active members of the Board of
Management in financial year 2017 including the components with
a long-term incentive effect totalled €18.8 million (previous year:
€18.5 million). Of this amount, €7.6 million (previous year: €6.6 mil-
lion) is attributable to non-performance-related components (an-
nual base salary and fringe benefits), €4.0 million (previous year:
€5.6 million) to performance-related components (variable compo-
nents) and €7.2 million (previous year: €6.3 million) to components
with a long-term incentive effect (SAR s). The number of SAR s was
2,003,970 (previous year: 1,202,376).

FORMER MEMbERS OF ThE bOARD OF MANAGEMENT

Benefits paid to former members of the Board of Management or
their surviving dependants amounted to €7.0 million (previous
year: €5.4 million). The defined benefit obligation (DBO) for current
pensions calculated under IFRS s was €95 million (previous year:
€97 million).

REMUNERATION OF ThE SUPERVISORY bOARD

The total remuneration of the Supervisory Board in financial year
2017 amounted to €2.6 million; as in the prior year, €2.4 million of
this amount was attributable to a fixed component and €0.2 million
to attendance allowances.

Further information on the itemised remuneration of the
Board of Management and the Supervisory Board can be found in
the re muneration report, which forms part of the Group Manage-
ment Report.

ShAREhOLDINGS OF ThE bOARD OF MANAGEMENT AND SUPERVISORY
bOARD

As at 31 December 2017, shares held by the Board of Management
and the Supervisory Board of Deutsche Post AG amounted to less
than 1 % of the company’s share capital.

REPORTAbLE TRANSAcTIONS

The transactions of Board of Management and Supervisory Board
members involving securities of the company and notified to
Deutsche Post AG in accordance with section 15 a of the Wertpapier-
handelsgesetz (WpHG – German Securities Trading Act) can be
viewed on the company’s website at

dpdhl.com/en/investors.

Consolidated Financial Statements — NOTES — Other disclosures

169

49 Auditor’s fees
The fee for the auditor of the consolidated financial statements,
PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft,
amounted to €12 million in financial year 2017 and was recognised
as an expense.

Auditor’s fee

€ m

Audit services

Other assurance services

Tax advisory services

Other services

Total

2017

The audit services category includes the fees for auditing the con-
solidated financial statements and for auditing the annual financial
statements prepared by Deutsche Post AG and its German subsid-
iaries. The fees for reviewing the interim reports, accompanying
auditors in connection with the implementation of new accounting
requirements and the fees for voluntary audits beyond the statutory
audit engagement, such as audits of the internal control system, are
also reported in this category. The other assurance services category
particularly pertains to fees for the voluntary auditing of finan cial
information.

50 Exemptions under the hGb and local foreign legislation
For financial year 2017, the following German subsidiaries have
exercised the simplification options under section 264 (3) of the
HGB, section 264b of the HGB and section 291 of the HGB:
• Agheera GmbH
• Albert Scheid GmbH
• All you need GmbH
• CSG GmbH
• CSG.PB GmbH
• CSG.TS GmbH
• Danzas Deutschland Holding GmbH
• Deutsche Post Adress Beteiligungsgesellschaft mbH
• Deutsche Post Assekuranz Vermittlungs GmbH
• Deutsche Post Beteiligungen Holding GmbH
• Deutsche Post Customer Service Center GmbH
• Deutsche Post DHL Beteiligungen GmbH
• Deutsche Post DHL Corporate Real Estate Management GmbH
• Deutsche Post DHL Corporate Real Estate Management

GmbH & Co. Logistikzentren KG

• Deutsche Post DHL Express Holding GmbH
• Deutsche Post DHL Research and Innovation GmbH
• Deutsche Post Dialog Solutions GmbH
• Deutsche Post Direkt GmbH

• Deutsche Post E-Post Development GmbH
• Deutsche Post E-POST Solutions GmbH
• Deutsche Post Fleet GmbH
• Deutsche Post Immobilien GmbH
• Deutsche Post InHaus Services GmbH
• Deutsche Post Investments GmbH
• Deutsche Post IT BRIEF GmbH
• Deutsche Post IT Services GmbH
• Deutsche Post Mobility GmbH
• Deutsche Post Shop Essen GmbH
• Deutsche Post Shop Hannover GmbH
• Deutsche Post Shop München GmbH
• DHL Airways GmbH
• DHL Automotive GmbH
• DHL Automotive Offenau GmbH
• DHL Consulting GmbH
• DHL Delivery Augsburg GmbH
• DHL Delivery Bayreuth GmbH
• DHL Delivery Berlin GmbH
• DHL Delivery Bonn GmbH
• DHL Delivery Braunschweig GmbH
• DHL Delivery Bremen GmbH
• DHL Delivery Dortmund GmbH
• DHL Delivery Dresden GmbH
• DHL Delivery Duisburg GmbH
• DHL Delivery Düsseldorf GmbH
• DHL Delivery Erfurt GmbH
• DHL Delivery Essen GmbH
• DHL Delivery Frankfurt GmbH
• DHL Delivery Freiburg GmbH
• DHL Delivery Freising GmbH
• DHL Delivery Gießen GmbH
• DHL Delivery GmbH
• DHL Delivery Göppingen GmbH
• DHL Delivery Hagen GmbH
• DHL Delivery Halle GmbH
• DHL Delivery Hamburg GmbH
• DHL Delivery Hannover GmbH
• DHL Delivery Herford GmbH
• DHL Delivery Karlsruhe GmbH
• DHL Delivery Kassel GmbH
• DHL Delivery Kiel GmbH
• DHL Delivery Koblenz GmbH
• DHL Delivery Köln West GmbH
• DHL Delivery Leipzig GmbH
• DHL Delivery Lübeck GmbH
• DHL Delivery Magdeburg GmbH
• DHL Delivery Mainz GmbH
• DHL Delivery Mannheim GmbH
• DHL Delivery München GmbH

170

Deutsche Post DHL Group — 2017 Annual Report

The following companies in the UK make use of the audit exemption
under section 479 A of the UK Companies Act:
• DHL Exel Supply Chain Limited
• Exel Freight Management (UK) Limited
• Exel Investments Limited
• Exel Overseas Limited
• Freight Indemnity and Guarantee Company Limited
• F. X. Coughlin (U.K.) Limited
• Joint Retail Logistics Limited
• National Carriers Limited
• Ocean Group Investments Limited
• Ocean Overseas Holdings Limited
• Power Europe Development No. 3 Limited
• Power Europe Operating Limited
• Tibbett & Britten Applied Limited

51 Declaration of Conformity with the German Corporate

Governance Code

The Board of Management and the Supervisory Board of
Deutsche Post AG jointly submitted the Declaration of Conformity
with the German Corporate Governance Code for financial year
2017 required by section 161 of the AktG. This Declaration of Con-
corporate-governance-code and at
formity can be accessed online at

dpdhl.com/en/investors.

52 Significant events after the reporting date and other disclosures
There were no significant reportable events after the reporting date.

• DHL Delivery Münster GmbH
• DHL Delivery Neubrandenburg GmbH
• DHL Delivery Nürnberg GmbH
• DHL Delivery Oldenburg GmbH
• DHL Delivery Ravensburg GmbH
• DHL Delivery Reutlingen GmbH
• DHL Delivery Rosenheim GmbH
• DHL Delivery Saarbrücken GmbH
• DHL Delivery Straubing GmbH
• DHL Delivery Stuttgart GmbH
• DHL Delivery Wiesbaden GmbH
• DHL Delivery Würzburg GmbH
• DHL Delivery Zwickau GmbH
• DHL Express Customer Service GmbH
• DHL Express Germany GmbH
• DHL Express Network Management GmbH
• DHL Fashion Retail Operations GmbH
• DHL FoodLogistics GmbH
• DHL Freight Germany Holding GmbH
• DHL Freight GmbH
• DHL Global Forwarding GmbH
• DHL Global Forwarding Management GmbH
• DHL Global Management GmbH
• DHL Home Delivery GmbH
• DHL Hub Leipzig GmbH
• DHL International GmbH
• DHL Inventory Finance Services GmbH
• DHL Paket GmbH
• DHL Paketzentrum Obertshausen GmbH
• DHL Solutions Fashion GmbH
• DHL Solutions GmbH
• DHL Sorting Center GmbH
• DHL Supply Chain (Leipzig) GmbH
• DHL Supply Chain Management GmbH
• DHL Supply Chain VAS GmbH
• DHL Trade Fairs & Events GmbH
• DHL Verwaltungs GmbH
• Erste End of Runway Development Leipzig GmbH
• Erste Logistik Entwicklungsgesellschaft MG GmbH
• European Air Transport Leipzig GmbH
• Gerlach Zolldienste GmbH
• interServ Gesellschaft für Personal- und Beraterdienst-

leistungen mbH
• it4logistics GmbH
• Saloodo! GmbH
• StreetScooter GmbH

Consolidated Financial Statements — NOTES — Other disclosures — RESPONSIBILITY STATEMENT

171

RESPONSIBILITY STATEMENT

To the best of our knowledge, and in accordance with the applicable
reporting principles, the consolidated financial statements give a
true and fair view of the assets, liabilities, financial position and
profit or loss of the Group, and the management report of the Group
includes a fair review of the development and performance of the
business and the position of the Group, together with a description
of the principal opportunities and risks associated with the expected
development of the Group.

Bonn, 19 February 2018

Deutsche Post AG
The Board of Management

Dr Frank Appel

Ken Allen

Dr h. c. Jürgen Gerdes

John Gilbert

Melanie Kreis

Dr Thomas Ogilvie

Tim Scharwath

172

Deutsche Post DHL Group — 2017 Annual Report

INDEPENDENT AUDITOR’S
REPORT

To Deutsche Post AG, Bonn

REPORT ON THE AUDIT OF THE CONSOLIDATED
FINANCIAL STATEMENTS AND OF THE GROUP
MANAGEMENT REPORT

Audit Opinions

We have audited the consolidated financial statements of
Deutsche Post AG, Bonn, and its subsidiaries (the Group), which
comprise the consolidated statement of financial position as at
31 December 2017, and the consolidated statement of comprehen-
sive income, consolidated statement of profit or loss, consolidated
statement of changes in equity and consolidated statement of cash
flows for the financial year from 1 January to 31 December 2017, and
notes to the consolidated financial statements, including a summary
of significant accounting policies. In addition, we have audited the
group management report of Deutsche Post AG for the financial year
from 1 January to 31 December 2017. We have not audited the con-
tent of those parts of the group management report listed in the
“Other Information” section of our auditor's report in accordance
with the German legal requirements.

In our opinion, on the basis of the knowledge obtained in

the audit,
• the accompanying consolidated financial statements comply, in all
material respects, with the IFRS s as adopted by the EU, and the
additional requirements of German commercial law pursuant to
§ [Article] 315e Abs. [paragraph] 1 HGB [Handelsgesetzbuch: Ger-
man Commercial Code] and, in compliance with these require-
ments, give a true and fair view of the assets, liabilities, and finan-
cial position of the Group as at 31 December 2017, and of its
financial performance for the financial year from 1 January to
31 December 2017, and

• the accompanying group management report as a whole provides
an appropriate view of the Group’s position. In all material re-
spects, this group management report is consistent with the con-
solidated financial statements, complies with German legal re-
quirements and appropriately presents the opportunities and risks
of future development. Our audit opinion on the group manage-
ment report does not cover the content of those parts of the group
management report listed in the “Other Information” section of
our auditor’s report.

Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, we declare that our
audit has not led to any reservations relating to the legal compliance
of the consolidated financial statements and of the group manage-
ment report.

Basis for the Audit Opinions

We conducted our audit of the consolidated financial statements
and of the group management report in accordance with § 317 HGB
and the EU Audit Regulation (No. 537/2014, referred to sub sequently
as “EU Audit Regulation”) and in compliance with German Gener-
ally Accepted Standards for Financial Statement Audits promul-
gated by the Institut der Wirtschaftsprüfer [Institute of Public Audi-
tors in Germany] (IDW). We performed the audit of the consolidated
financial statements in supplementary compliance with the Inter-
national Standards on Auditing (ISAs). Our responsibilities under
those requirements, principles and standards are further described
in the “Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements and of the Group Management Report” sec-
tion of our auditor’s report. We are independent of the group enti-
ties in accordance with the requirements of European law and Ger-
man commercial and professional law, and we have fulfilled our
other German professional responsibilities in accordance with these
requirements. In addition, in accordance with Article 10 (2) point
(f) of the EU Audit Regulation, we declare that we have not provided
non-audit services prohibited under Article 5 (1) of the EU Audit
Regulation. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinions
on the consolidated financial statements and on the group manage-
ment report.

Key Audit Matters in the Audit of the Consolidated Financial
Statements

Key audit matters are those matters that, in our professional judg-
ment, were of most significance in our audit of the consolidated
financial statements for the financial year from 1 January to 31 De-
cember 2017. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in
forming our audit opinion thereon; we do not provide a separate
audit opinion on these matters.

In our view, the matters of most significance in our audit were as
follows:
1 Recoverability of goodwill
2 Pension obligations and plan assets
3 Deferred taxes on deductible temporary measurement

differences and loss carryforwards

Our presentation of these key audit matters has been structured
in each case as follows:
1 Matter and issue
2 Audit approach and findings
3 Reference to further information

Consolidated Financial Statements — INDEPENDENT AUDITOR’S REPORT

173

Hereinafter we present the key audit matters:
1 Recoverability of goodwill

In the consolidated financial statements of Deutsche Post AG,
goodwill amounting to EUR 11.2 billion is reported under the
balance sheet item “Intangible assets”, representing approxi-
mately 29 % of total assets and 87 % of the Group’s reported
equity. Goodwill is tested for impairment by the Company on
an annual basis as of the balance sheet date or if there are indi-
cations that goodwill may be impaired. The impairment test of
goodwill is based on the value in use, which is determined by
applying a measurement model using the discounted cash flow
method. This matter was of particular significance in our audit,
because the result of this measurement depends to a large ex-
tent on the estimation of future cash inflows by the Company’s
executive directors and the discount rate used, and is therefore
subject to considerable uncertainty.

2 We satisfied ourselves as to the appropriateness of the future
cash inflows used in the calculation by, inter alia, comparing
this data with the current budgets in the three-year plan pre-
pared by the executive directors and approved by the Company’s
supervisory board, and reconciling it against general and sec-
tor-specific market expectations. With the knowledge that even
relatively small changes in the discount rate can have a material
impact on the value in use calculated using this method, we
also focused our testing on the parameters used to determine
the discount rate applied, including the weighted average cost
of capital, and evaluated the Company’s calculation procedure.
Due to the materiality of goodwill and the fact that its meas-
urement also depends on economic conditions which are out-
side of the Company's sphere of influence, we carried out our
own additional sensitivity analyses for those cash-generating
units with low headroom (value in use compared with the car-
rying amount) and found that the respective goodwill is suffi-
ciently covered by the discounted future cash inflows. Overall,
the measurement parameters and assumptions used by the
executive directors to be reproducable.

3 The Company’s disclosures regarding goodwill are contained
in note 21 of the notes to the consolidated financial statements.

2 Pension obligations and plan assets

In the consolidated financial statements of Deutsche Post AG a
total of EUR 4.5 billion is reported under the balance sheet item
"Provisions for pensions and similar obligations". The net pen-
sion provisions of EUR 4.3 billion (after consideration of re-
ported plan assets of EUR 0.2 billion) were calculated on
the basis of the present value of the obligations amounting to
EUR 17.4 billion, netted against the plan assets of EUR 13.1 bil-
lion, which were measured at fair value. The obligations from
defined benefit pension plans were measured using the pro-
jected unit credit method in accordance with IAS 19. This re-
quires in particular that assumptions be made as to the long-
term salary and pension trend as well as average life expectancy.
Furthermore, the discount rate must be determined as of the
balance sheet date by reference to the yield on high-quality
corporate bonds with matching currencies and consistent
terms. Changes to these measurement assumptions are recog-
nized directly in equity as actuarial gains or losses. Changes in
the financial measurement parameters resulted in actuarial
losses of EUR 0.3 billion. In our view, these matters were of
particular significance, as the measurement of the pension ob-
ligations and plan assets is to a large extent based on the esti-
mates and assumptions made by the Company's executive di-
rectors.

2 With the knowledge that estimated values bear an increased
risk of accounting misstatements and that the executive direc-
tors' measurement decisions have a direct and significant effect
on the consolidated financial statements, we assessed the ap-
propriateness of the values adopted, in particular the measure-
ment parameters used in the calculation of the pension provi-
sions, inter alia on the basis of actuarial reports made available
to us and taking into account the expert knowledge of our in-
ternal specialists for pension valuations. Our evaluation of the
fair values of plan assets was in particular based on bank con-
firmations submitted to us, as well as other statements of assets
and real estate appraisals. On the basis of our audit procedures,
we were able to satisfy ourselves that the estimates and assump-
tions made by the executive directors were sufficiently docu-
mented and supported to justify the recognition and measure-
ment of the material pension provisions.

3 The Company’s disclosures relating to provisions for pensions
and similar obligations are contained in note 38 of the notes to
the consolidated financial statements.

174

Deutsche Post DHL Group — 2017 Annual Report

Deferred taxes on deductible temporary measurement differ-
ences and loss carryforwards

In the consolidated financial statements of Deutsche Post AG,
deferred tax assets of EUR 2.3 billion (of which EUR 1.8 billion
relates to tax loss carryforwards) are reported in the balance
sheet. In our view, the deferred tax assets were of particular
significance as they depend to a large extent on the estimates
and assumptions made by the executive directors and therefore
are subject to uncertainty.

2 For the purposes of our audit of these tax matters we included
internal tax accounting specialists in our audit team. With their
support, we assessed inter alia the internal processes and con-
trols implemented for the recording of tax matters. Further-
more, we evaluated the recognition and measurement of the
deferred taxes. We assessed the recoverability of the deferred
tax assets relating to deductible temporary differences and loss
carryforwards on the basis of the Company’s internal forecasts
of its future taxable income situation and evaluated the appro-
priateness of the assumptions used. In addition, we assessed
the reconciliation to the tax expense. We were able to follow
the assumptions made by the executive directors concerning
the recognition and measurement of the deferred taxes, and
agree with the estimates made by the executive directors.
3 The Company’s disclosures relating to deferred taxes are con-
tained in note 27 of the notes to the consolidated financial
statements.

Other Information

The executive directors are responsible for the other information.
The other information comprises the following non-audited parts
of the group management report:
• the statement on corporate governance pursuant to § 289 f HGB and
§ 315 d HGB included in the “Statement on Corporate Governance
and Non-Financial Report” section of the group management re-
port

• the separate non-financial report pursuant to § 289 b Abs. 3 HGB

and § 315 b Abs.1743 HGB

The other information comprises further the remaining parts of the
annual report – excluding cross-references to external information –
with the exception of the audited consolidated financial statements,
the audited group management report and our auditor's report.

Our audit opinions on the consolidated financial statements
and on the group management report do not cover the other infor-
mation, and consequently we do not express an audit opinion or any
other form of assurance conclusion thereon.

In connection with our audit, our responsibility is to read the
other information and, in so doing, to consider whether the other
information
• is materially inconsistent with the consolidated financial state-
ments, with the group management report or our knowledge ob-
tained in the audit, or

• otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.

Responsibilities of the Executive Directors and the Supervisory Board
for the Consolidated Financial Statements and the Group Manage-
ment Report

The executive directors are responsible for the preparation of the
consolidated financial statements that comply, in all material re-
spects, with IFRS s as adopted by the EU and the additional require-
ments of German commercial law pursuant to § 315 e Abs. 1 HGB and
that the consolidated financial statements, in compliance with these
requirements, give a true and fair view of the assets, liabilities, finan-
cial position, and financial performance of the Group. In addition
the executive directors are responsible for such internal control as
they have determined necessary to enable the preparation of con-
solidated financial statements that are free from material misstate-
ment, whether due to fraud or error.

In preparing the consolidated financial statements, the execu-
tive directors are responsible for assessing the Group’s ability to
continue as a going concern. They also have the responsibility for
disclosing, as applicable, matters related to going concern. In addi-
tion, they are responsible for financial reporting based on the going
concern basis of accounting unless there is an intention to liquidate
the Group or to cease operations, or there is no realistic alternative
but to do so.

Furthermore, the executive directors are responsible for the
preparation of the group management report that, as a whole, pro-
vides an appropriate view of the Group’s position and is, in all ma-
terial respects, consistent with the consolidated financial statements,
complies with German legal requirements, and appropriately pre-
sents the opportunities and risks of future development. In addition,
the executive directors are responsible for such arrangements and
measures (systems) as they have considered necessary to enable the
preparation of a group management report that is in accordance
with the applicable German legal requirements, and to be able to
provide sufficient appropriate evidence for the assertions in the
group management report.

Consolidated Financial Statements — INDEPENDENT AUDITOR’S REPORT

175

The supervisory board is responsible for overseeing the Group’s
financial reporting process for the preparation of the consolidated
financial statements and the group management report.

• Evaluate the appropriateness of accounting policies used by the
executive directors and the reasonableness of estimates made by
the executive directors and related disclosures.

Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements and of the Group Management Report

Our objectives are to obtain reasonable assurance about whether
the consolidated financial statements as a whole are free from ma-
terial misstatement, whether due to fraud or error, and whether the
group management report as a whole provides an appropriate view
of the Group’s position and, in all material respects, is consistent
with the consolidated financial statements and the knowledge ob-
tained in the audit, complies with the German legal requirements
and appropriately presents the opportunities and risks of future
development, as well as to issue an auditor’s report that includes our
audit opinions on the consolidated financial statements and on the
group management report.

Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with § 317 HGB and
the EU Audit Regulation and in compliance with German Generally
Accepted Standards for Financial Statement Audits promulgated by
the Institut der Wirtschaftsprüfer (IDW) and supplementary com-
pliance with the ISAs will always detect a material misstatement.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements and this group
management report.

We exercise professional judgment and maintain professional

skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the con-
solidated financial statements and of the group management re-
port, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our audit
opinions. The risk of not detecting a material misstatement result-
ing from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrep-
resentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit
of the consolidated financial statements and of arrangements and
measures (systems) relevant to the audit of the group management
report in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an audit
opinion on the effectiveness of these systems.

• Conclude on the appropriateness of the executive directors’ use of
the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the
Group’s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention in
the auditor’s report to the related disclosures in the consolidated
financial statements and in the group management report or, if
such disclosures are inadequate, to modify our respective audit
opinions. Our conclusions are based on the audit evidence ob-
tained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to be able to
continue as a going concern.

• Evaluate the overall presentation, structure and content of the
consolidated financial statements, including the disclosures, and
whether the consolidated financial statements present the under-
lying transactions and events in a manner that the consolidated
financial statements give a true and fair view of the assets, liabili-
ties, financial position and financial performance of the Group
in compliance with IFRS s as adopted by the EU and the addi-
tional requirements of German commercial law pursuant to § 315 e
Abs. 1 HGB.

• Obtain sufficient appropriate audit evidence regarding the finan-
cial information of the entities or business activities within the
Group to express audit opinions on the consolidated financial
statements and on the group management report. We are respon-
sible for the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinions.

• Evaluate the consistency of the group management report with the
consolidated financial statements, its conformity with German law,
and the view of the Group’s position it provides.

• Perform audit procedures on the prospective information pre-
sented by the executive directors in the group management report.
On the basis of sufficient appropriate audit evidence we evaluate,
in particular, the significant assumptions used by the executive
directors as a basis for the prospective information, and evaluate
the proper derivation of the prospective information from these
assumptions. We do not express a separate audit opinion on the
prospective information and on the assumptions used as a basis.
There is a substantial unavoidable risk that future events will differ
materially from the prospective information.

176

Deutsche Post DHL Group — 2017 Annual Report

We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.

We also provide those charged with governance with a state-
ment that we have complied with the relevant independence re-
quirements, and communicate with them all relationships and other
matters that may reasonably be thought to bear on our independ-
ence, and where applicable, the related safeguards.

From the matters communicated with those charged with gov-
ernance, we determine those matters that were of most significance
in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter.

OTHER LEGAL AND REGULATORY
REQUIREMENTS

Further Information pursuant to Article 10 of the EU Audit Regulation

We were elected as group auditor by the annual general meeting on
28 April 2017. We were engaged by the supervisory board on
27 July 2017. We have been the group auditor of Deutsche Post AG,
Bonn, without interruption since the Company first met the re-
quirements as a public-interest entity within the meaning of § 319 a
Abs. 1 Satz 1 HGB in the financial year 2000.

We declare that the audit opinions expressed in this auditor’s
report are consistent with the additional report to the audit com-
mittee pursuant to Article 11 of the EU Audit Regulation (long-form
audit report).

GERMAN PUBLIC AUDITOR RESPONSIBLE
FOR THE ENGAGEMENT

The German Public Auditor responsible for the engagement is
Verena Heineke.

Düsseldorf, February 19, 2018
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft

Gerd Eggemann
Wirtschaftsprüfer
(German Public Auditor)

Verena Heineke
Wirtschaftsprüferin
(German Public Auditor)

FURTHER INFORMATION
177 — 184

178 MULTIYEAR REVIEW

180

INDEX

181 GLOSSARY

182 GRAPHS AND TABLES

183 CONTACTS

183 ORDERING

184 FINANCIAL CALENDAR

F
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178

Deutsche Post DHL Group — 2017 Annual Report

2010

2011

2012

2013

adjusted

2014
adjusted

2015

2016
adjusted

2017

MULTIYEAR REVIEW

Key figures 2010 to 2017

€ m

Revenue
Post eCommerce Parcel (until 2013 Mail)

Express

Global Forwarding, Freight

Supply Chain

Divisions total

Corporate Center / Other

Consolidation

Total

13,913

11,111

14,341

13,061

52,426

1,302

–2,340

51,388

13,973

11,691

15,118

13,223

54,005

1,260

–2,436

52,829

Profit/loss from operating activities (EbIT)
Post eCommerce Parcel (until 2013 Mail)

1,120

1,107

Express

Global Forwarding, Freight

Supply Chain

Divisions total

Corporate Center / Other

Consolidation

Total

Consolidated net profit for the period

Cash flow / capex / depreciation, amortisation
and impairment losses
Net cash from / used in operating activities

Net cash from / used in investing activities

Net cash used in / from financing activities

Free cash flow

Capex

Depreciation, amortisation and impairment losses

Assets and capital structure
Noncurrent assets

Current assets

Equity (excluding noncontrolling interests)

Noncontrolling interests

Current and noncurrent provisions

Current and noncurrent liabilities

Total assets

497

383

231

2,231

–395

–1

1,835

2,630

1,927

–1,651

484

1,262

1,296

24,493

13,270

10,511

185

9,427

17,640

37,763

916

440

362

2,825

–389

2,436

1,266

2,371

–1,129

–1,547

749

1,716

1,274

21,225

17,183

11,009

190

9,008

18,201

38,408

13,972

12,778

15,666

14,340

56,756

1,203

–2,447

55,512

1,048

1,110

514

419

3,091

– 423

–3

2,665

1,762

–203

–1,697

1,199

–1,885

1,697

1,339

21,568

12,289

9,019

209

8,978

15,651

33,857

15,291

11,821

14,787

14,227

56,126

1,251

–2,465

54,912

1,286

1,083

478

441

3,288

– 421

–2

2,865

2,211

2,989

–1,765

–110

1,669

1,747

1,337

21,370

14,091

9,844

190

8,481

16,946

35,461

15,686

12,491

14,924

14,737

57,838

1,345

–2,553

56,630

1,298

1,260

293

465

3,316

–352

2,965

2,177

3,040

–1,087

–2,348

1,345

1,876

1,381

22,902

14,077

9,376

204

10,411

16,988

36,979

16,131

13,661

14,890

15,791

60,473

1,269

–2,512

59,230

1,103

1,391

–181

449

2,762

–351

2,411

1,719

3,444

–1,462

–1,367

1,724

2,024

1,665

23,727

14,143

11,034

261

9,361

17,214

37,870

17,078

13,748

13,737

13,957

58,520

1,279

–2,465

57,334

1,446

1,544

287

572

3,849

–359

3,491

2,781

2,439

–1,643

–1,233

444

2,074

1,377

24,166

14,129

11,087

263

8,507

18,438

38,295

18,168

15,049

14,482

14,152

61,851

1,247

–2,654

60,444

1,502

1,736

297

555

4,090

–349

3,741

2,853

3,297

–2,091

–1,087

1,432

2,277

1,471

23,916

14,756

12,637

266

7,078

18,691

38,672

Further Information — MULTI-YEAR REVIEW

179

D.01

Employees / staff costs
Number of employees 1

Fulltime equivalents 2

Average number of employees 1

Staff costs

Staff cost ratio 3

Key figures revenue / income /
assets and capital structure
Return on sales 4

Return on equity (ROE) before
taxes 5

Return on assets 6

Tax rate 7

Equity ratio 8

Net debt (+) / net liquidity (–) 9

Net gearing 10

Key stock data
Basic earnings per share 11

Diluted earnings per share 12

Cash flow per share 11, 13

Dividend distribution

Payout ratio

Dividend per share

Dividend yield

Pricetoearnings ratio 16

Pricetocash flow ratio 17

Number of shares carrying
dividend rights

Yearend closing price

2010

2011

2012

2013

2014

2015

2016

2017

adjusted

At 31 December

€ m

€

€ m

€

467,088

418,946

464,471

16,609

32.3

3.6

29.8

5.1

6.9

28.3

–1,382

–14.8

2.10

1.59

786

30.9

0.65

5.1

6.0

8.0

471,654

423,502

467,188

16,730

31.7

473,626

428,129

472,321

17,770

32.0

479,690

434,974

478,903

17,776

32.4

488,824

443,784

484,025

18,189

32.1

497,745

450,508

492,865

19,640

33.2

508,036

519,544

459,262

472,208

498,459

513,338

19,592

20,072

34.2

33.2

4.6

15.2

6.4

23.7

29.2

– 938

– 9.1

0.96

1.96

846

72.7

0.70

5.9

12.4

6.1

4.8

23.6

7.4

20.2

27.3

1,952

17.5

1.36

1.30

– 0.17

846

51.6

0.70

4.2

12.2

– 97.6

5.2

26.7

8.3

14.0

28.3

1,499

13.0

1.73

1.66

2.47

968

46.3

0.80

3.0

15.3

10.7

5.2

26.3

8.2

15.5

25.9

1,499

13.5

1.71

1.64

2.51

4.1

19.7

6.4

16.4

29.8

1,093

8.8

1.27

1.22

2.84

6.1

6.2

27.7

9.2

11.2

29.6

2,261

16.6

2.19

2.10

2.03

27.5

9.7

14.3

33.4

1,938

13.1

2.24

2.15

2.72

1,030

1,027

1,270

1,409 14, 15

49.7

0.85

3.1

15.8

10.8

66.7

0.85

3.3

20.4

9.1

48.1

1.05

3.4

14.3

15.4

51.9

1.15 14

2.9

17.7

14.6

millions

1,209.0

1,211.2

1,208.7

1,209.1

1,225.1 15

€

12.70

11.88

16.60

26.50

27.05

25.96

31.24

39.75

1 Headcount including trainees.

2 Excluding trainees.

3 Staff costs / revenue.

4 EBIt / revenue.

5 Profit before income taxes/average equity

(including noncontrolling interests).
interests) / total assets.

6 EBIt / average total assets.

7 Income taxes/profit before income taxes.

8 Equity (including noncontrolling

Group Management Report, page 62.

10 Net debt / net debt and equity (including noncontrolling interests).

11 The average weighted number of shares outstanding is used for the calculation.

12 The average weighted number of shares outstanding is adjusted

for the number of all potentially dilutive shares.
price / basic earnings per share.

17 Yearend closing price / cash flow per share.

13 Cash flow from operating activities.

14 Proposal.

15 Estimate.

16 Yearend closing

180

INDEX

Deutsche Post DHL Group — 2017 Annual Report

Air freight 27, 31, 53, 67 f., 79
Annual General Meeting 38 f., 55, 80, 91 f., 96, 98 ff.,
137 ff., 165, 167, 176
Articles of Association 38 f., 49
Auditor’s report 92, 172 ff.
Authorised capital 38, 137

Finance strategy 55, 56 f., 80, 86, 141
First Choice 26, 87
Free cash flow 24, 36 f., 41, 51, 61 f., 78, 80, 114, 131,
151, 178
Free float 70, 136
Freight 26, 32, 35, 67 f., 71, 76, 123, 131
Freight forwarding business 31 f., 67 f., 79

Parcel Germany 64
Post eCommerce Parcel 26, 28 f., 34, 41, 51, 54 f.,
60, 63 ff., 71, 76, 78 ff., 84, 87, 96, 98, 122 f., 126, 131, 178
Press products 123
Pricetoearnings ratio 70, 179
Profit from operating activities 24, 36 f., 51, 54 f.,
61 ff., 78 ff., 83, 102, 105, 108, 111, 121 ff., 131, 151, 178 f.

Balance sheet 59, 62, 79, 83, 104, 107, 110 ff., 122, 124,
128, 130 ff., 140 ff., 150 ff., 157 ff., 167, 170, 172 ff., 178
Board of Management 4 ff., 26 f., 38 ff., 51, 54 f.,
78, 81 ff., 90 ff., 95 ff., 107, 109, 137 ff., 141, 152, 164 f.,
167 f., 170 f.
Board of Management remuneration 40 ff., 98, 100,
117 f., 163 ff., 167 f.
Bonds 39, 52 ff., 57 ff., 61 f., 78, 80, 106, 109, 115, 119,
129, 136 ff., 144, 147 f., 150 f., 157 f.
Brands 26, 76 f., 107 f., 114, 123, 130

Capital expenditure 51, 60 f., 64, 80, 122 f., 151, 178
Capital increase 39, 62, 136 ff.
Cash flow statement 36, 61 f., 105, 107, 110 f., 140,
150 f., 172
Change of control 39, 43 f.
Consolidated net profit 24, 54 f., 62, 102 f., 105 f., 124,
128 f., 178
Consolidated revenue 20, 34, 36 f., 54 f., 102, 108 f.,
112 f., 121, 123 ff., 140, 167 f., 178
Contingent capital 137 f.
Contract logistics 23, 28 f., 31, 65, 72, 80, 83, 121 f.
Corporate governance 39 f., 50, 89 ff., 96 ff., 170
Cost of capital 36 f., 131
Credit lines 58, 152
Credit rating 56 f., 59, 80 f., 86, 144

Declaration of conformity 91 f., 96, 170
Dialogue marketing 28 f., 63 f., 123
Dividend 24, 36 f., 51, 54 f., 57, 61 f., 70, 80, 92, 105 f.,
115, 129, 139 f., 148, 160, 166, 179

Earnings per share 24, 54 f., 70, 102, 129, 179
EBIt after asset charge 24, 36 f., 41 f., 44, 51, 54 f.,
78, 80
eCommerce Parcel 26, 29, 34, 63 f., 71, 123
Employee Opinion Survey 38, 41, 51, 71, 80, 91
Equity ratio 62, 111, 138, 179
Express 26 f., 30 f., 35, 41, 51, 54 f., 59 f., 63, 65 f., 71,
75 f., 79, 87, 91, 96, 107, 109, 122 f., 126, 131, 136, 140, 146,
163, 178

Global Business Services 26, 95, 98, 123
Global economy 52, 78 f., 84 f.
Global Forwarding 26, 30 f., 35, 63 f., 67 f., 76, 91,
123, 131
Global Forwarding, Freight 26 f., 31 f., 35, 41, 51,
59 ff., 67 f., 71, 76, 87, 91, 95 f., 122 f., 126, 131, 178
Global trade 52 f., 78 f., 131
GoGreen 38, 74
Guarantees 56, 59, 162

IFRS s 16 51, 78 ff., 111
Illness rate 73
Income statement 102, 107, 111, 113, 116, 118 f., 121,
124 ff., 134, 140, 142, 154 f., 160
Income taxes 55, 61, 102 f., 105, 110, 112, 120, 124,
127 ff., 134, 140, 179
Investments 34, 36 f., 38, 51 f., 54 f., 55 f., 60 f., 61, 64,
80, 97 f., 104 f., 105, 109, 113, 115 f., 116, 121, 122, 127, 131,
133, 142, 145, 151, 160, 162, 166, 178

Letters of comfort 56, 59
Liquidity management 58, 86, 152 ff.

Mail communication 27, 28, 63 f., 79
Mandates 94 f.
Market shares 27 ff.

Net debt 24, 62, 86, 111, 138, 179
Net gearing 62, 138, 179
Net interest cover 62
Net working capital 36 f., 56, 58, 131

Ocean freight 27, 31 f., 53, 67 f., 79
Oil price 32, 52, 54, 65, 78, 125
Operating cash flow 37, 56 f., 61, 63, 65 ff., 69, 105,
140, 151 f., 178
Opportunities and risk management 81 f.
Outlook 51, 59, 78 ff., 83 f., 86 f.

Quality 34 f., 74 ff., 86 f.

Rating 56 f., 59, 80 f., 86, 144
Regulation 26, 53, 84 f., 162 f.
Responsibility statement 171
Retail outlets 28, 74 f.
Return on sales 24, 35, 54, 63 ff., 179
Revenue 24, 34 ff., 51, 54 f., 58, 63 ff., 79, 102, 108, 110,
113, 121 ff., 135, 140, 162, 167, 178 f.
Road transport 27, 32, 67 f., 74, 79, 123

Segment reporting 56, 110, 122 ff.
Share buyback 38, 57 f., 61 f., 129, 138 f., 149, 151
Share capital 38 f., 136 ff., 166, 168
Share price 42, 53, 70, 118, 148, 163 ff.
Shareholder structure 70
Staff costs 36 f., 54 f., 71, 102, 118 f., 124, 126, 145, 151,
163, 165, 167, 179
Strategy 34 f., 40 f., 73, 76, 80, 86 f., 90 f., 96 f., 99, 179
Supervisory Board 38, 40 ff., 49 f., 55, 90 ff., 93 f.,
96 ff., 137 f., 167 f., 170
Supervisory Board committees 49, 90 ff., 93, 97 ff.
Supervisory Board remuneration 40, 49 f., 168
Suppliers 35, 59, 85, 96
Supply Chain 26, 32 f., 35, 41, 51, 54 f., 60 f., 69, 71, 76,
79, 85, 87, 96, 108 f., 114, 122 f., 126, 131, 178

Tax rate 179
Training 34 f., 71 f., 99, 126, 179

WACC 36 f., 131
Working capital 36 f., 56, 68, 131

Further Information — INDEx — GLOSSARY

181

GLOSSARY

Dialogue marketing
Marketorientated activities that apply direct
communications to selectively reach target groups
using a personal, individualised approach.

E-POST
Secure, confidential and reliable electronic
communication platform.

Ex-ante mail products
All charges subject to approval pursuant to
section 19 of the Postgesetz with a minimum
posting quantity of 50 items.

German federal network agency
( Bundesnetzagentur)
German national regulator for electricity, gas,
telecommunications, post and railway.

German Postal Act (Postgesetz)
The purpose of the German Postal Act, which
took effect on 1 January 1998, is to promote postal
competition through regulation and ensure the
nationwide provision of appropriate and sufficient
postal services. It includes regulations on licensing,
price control and the universal service.

Packstation
Parcel machine where parcels and small packages
can be deposited and collected around the clock.

Paketbox
Parcel box for franked parcels and small packages
(maximum dimensions: 50 × 40 × 30 cm).

Price-cap procedure
Procedure whereby the German federal network
agency approves prices for certain mail products.
The agency approves prices on the basis of par
ameters it stipulates in advance, which set the
average changes in these prices within baskets of
services defined by the agency.

Standard letter
Letter measuring a maximum of 235 × 125 × 5 mm
and weighing up to 20 g.

b2c
The exchange of goods, services and information
between businesses and consumers.

Block space agreement
Freight forwarders or shippers enter into block
space agreements with airline companies which
provide them with defined freight capacities on
a regular flight against payment of a fee.

Contract logistics
Complex logistics and logisticsrelated services
along the value chain that are performed by a
contract logistics service provider. Services are
tailored to a particular industry or customer
and are generally based on longterm contracts.

DhL Customer Solutions & Innovation (cSI)
DHL’s crossdivisional commercial and innovation
unit.

Direct-to-market solutions (D2M)
Endtoend logistics solution that integrates DHL’s
warehouse management services with orderto
cash services. This enables manufacturers to bypass
traditional wholesalers and/or distributors and
build a direct trading relationship with their end
customer – either the point of dispensing, e.g.,
pharmacy or direct with the patient in an ecom
merce channel.

Fulfilment Centre
Sites providing customer services such as order
processing, warehousing, order picking, packaging
and return management.

Gateway
Collection point for goods intended for export
and for further distribution of goods upon import.

Hub
Collection point for transferring and connecting
international shipments from and to multiple
countries.

Inbound to Manufacturing (I2M)
DHL ensures the right components are delivered to
the right manufacturing point at the right time.
Our solutions provide complete endtoend logistics
management of inventories, facilities and labour
associated with the inbound flow of materials.

Lead logistics partner
A logistics service provider who assumes the
organisation of all or key logistics processes for
the customer.

Medical Express
The transport of timecritical or temperaturecritical
medical shipments such as blood and tissue samples
to medical facilities, hospitals, laboratories or
research institutes, usually related to clinical trials
of new medications.

Multimodal transport
Combines a minimum of two different means of
transport for a shipment, such as air, sea, rail and
ground.

Supply chain
A series of connected resources and processes from
sourcing materials to delivering goods to consumers.

Time Definite
Delivery of timecritical shipments by a preselected
time.

Transported Asset Protection Association (TAPA)
A forum that unites manufacturers, logistics pro
viders, freight carriers, law enforcement authorities
and other stakeholders with the common aim of
reducing losses from international supply chains.

Twenty-foot equivalent unit (TEU)
Standardised container unit, 20 feet long and 8 feet
wide (6 × 2.4 metres).

182

Deutsche Post DHL Group — 2017 Annual Report

GRAPHS AND TABLES

Selected Key Figures

Report on Economic Position

A
GROUP MANAGEMENT REPORT

General Information

A.01 Organisational structure

A.02 Market volumes

A.03 Nationwide transport and delivery

network in Germany, 2017

A.04 German mail communication market,

business customers, 2017

A.05 German advertising market, 2017

A.06

International mail market (outbound), 2017 29

A.07 German parcel market, 2017

A.08 Available capacity

A.09

A.10

A.11

International express market –
Europe, 2016: top 4

International express market –
the Americas, 2016: top 4

International express market –
Asia Pacific, 2016: top 4

A.12 Air freight market, 2016: top 4

A.13 Ocean freight market, 2016: top 4

A.14

A.15

European road transport market,
2016: top 5

Logistics and valueadded services
along the supply chain

A.16 Contract logistics market, 2016: top 10

A.17

A.18

A.19

Calculations

Example illustration of the included
remuneration components

Terms of variable remuneration in target
remuneration

A.20 Weighting of oneyear and multiyear

variable remuneration components
(variable target remuneration)

A.21 Mechanism of the stock appreciation

rights

A.22 Function of the defined contribution

pension plan

A.23 Target remuneration

A.24 Payments

A.25

LongTerm Incentive Plan:
number of SAR s granted

A.26 Contributionbased pension

commitments: individual breakdown

A.27

Finalsalarybased existing pension
commitments: individual breakdown

A.28 Remuneration paid to Supervisory Board

members

A.29 Forecast / actual comparison

A.30 Global economy: growth indicators, 2017

A.31

Trade volumes: compound annual
growth rate, 2016 to 2017

A.32 Selected indicators for results

of operations

A.33 Changes in revenue, other operating
income and operating expenses, 2017

A.34 Total dividend and dividend per nopar

value share

A.35

EBIt after asset charge (EAC)

A.36 Net asset base (consolidated)

A.37 Selected cash flow indicators

A.38 Finance strategy

A.39

FFO to debt

A.40 Agency ratings

A.41

Financial liabilities

A.42 Operating lease obligations by asset class 60

A.43 Capex and depreciation, amortisation
and impairment losses, full year

A.44 Capex and depreciation, amortisation

and impairment losses, Q 4

A.45 Calculation of free cash flow

A.46 Selected indicators for net assets

A.47 Net debt

A.48 Key figures of the Post eCommerce

Parcel division

A.49 Post: revenue

A.50 Post: volumes

A.51

eCommerce Parcel: revenue

A.52 Parcel Germany: volumes

A.53 Key figures of the EXPRESS division

A.54

EXPRESS: revenue by product

A.55

EXPRESS: volumes by product

A.56 Key figures of the GLOBAL FORWARDING,

FREIGHt division

A.57 Global Forwarding: revenue

A.58 Global Forwarding: volumes

A.59 Key figures of the SUPPLY CHAIN division

A.60

SUPPLY CHAIN: revenue by sector
and region, 2017

Deutsche Post Shares

A.61 Deutsche Post shares: sevenyear overview 70

A.62 Shareholder structure

A.63 Shareholder structure by region

Non-financial Key Performance Indicators

A.64 Selected results from the Employee

Opinion Survey

A.65 Number of employees

A.66 Workplace accidents
CO2e emissions, 2017

A.67

A.68 Fuel and energy consumption in company

fleet and buildings

A.69 Facts and figures, customers and quality

A.70 Brand architecture

A.71 Value of Group brands in 2017

A.72 Marketing expenditures, 2017

Expected Developments

A.73 Global economy: growth forecast

Opportunities and Risks

A.74 Monte Carlo simulation

A.75 Opportunity and risk management process 81

A.76 Classification of risks and opportunities

B
CORPORATE GOVERNANCE
B.01 Members of the Supervisory Board

B.02 Committees of the Supervisory Board

B.03 Mandates held by the Supervisory Board

B.04 Members of the Board of Management

B.05 Mandates held by the Board

of Management

B.06 Attendance at plenary and committee

meetings

C
CONSOLIDATED FINANCIAL
STATEMENTS
C.01

Income Statement

C.02 Statement of Comprehensive Income

C.03 Balance Sheet

C.04 Cash Flow Statement

C.05 Statement of Changes in Equity

D
FURTHER INFORMATION
D.01 Key figures 2010 to 2017

102

103

104

105

106

178

Further Information — GRAPHS AND TABLES — CONTACTS — ORDERING

183

ORDERING

External
Email: ir @ dpdhl.com
dpdhl.com/en/investors

Internal
GeT and DHL Webshop
Mat. no. 675602571

Published on 7 March 2018.

The English version of the 2017 Annual Report of
Deutsche Post DHL Group constitutes a translation
of the original German version. Only the German
version is legally binding, insofar as this does not
conflict with legal provisions in other countries.
Deutsche Post Corporate Language Services et al.

CONTACTS

Investor Relations
Tel.: + 49 (0) 228 1826 36 36
Fax: + 49 (0) 228 1826 31 99
Email: ir @ dpdhl.com

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Fax: + 49 (0) 228 18298 80
Email: pressestelle @ dpdhl.com

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This Annual Report contains forwardlooking statements that relate to the business, financial performance and results of operations of Deutsche Post AG. Forwardlooking statements
are not historical facts and may be identified by words such as “believes”, “expects”, “predicts”, “intends”, “projects”, “plans”, “estimates”, “aims”, “foresees”, “anticipates”, “targets”
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materially different from the future development, performance or results expressly or implicitly assumed in the forwardlooking statements. Readers are cautioned not to place undue
reliance on these forwardlooking statements, which apply only as at the date of this presentation. Deutsche Post AG does not intend or assume any obligation to update these
forwardlooking statements to reflect events or circumstances after the date of this Annual Report.

184

Deutsche Post DHL Group — 2017 Annual Report

FINANCIAL CALENDAR

2018

2018 ANNUAL GENERAL MEETING

DIVIDEND PAYMENT

INTERIM REPORT AS AT 31 MARCH 2018

INTERIM REPORT AS AT 30 JUNE 2018

24 APRIL 2018

27 APRIL 2018

8 MAY 2018

7 AUGUST 2018

INTERIM REPORT AS AT 30 SEPTEMBER 2018

6 NOVEMBER 2018

2019

2018 ANNUAL REPORT

INTERIM REPORT AS AT 31 MARCH 2019

2019 ANNUAL GENERAL MEETING

DIVIDEND PAYMENT

INTERIM REPORT AS AT 30 JUNE 2019

7 MARCH 2019

9 MAY 2019

15 MAY 2019

20 MAY 2019

6 AUGUST 2019

INTERIM REPORT AS AT 30 SEPTEMBER 2019

12 NOVEMBER 2019

Further dates, updates as well as information on live webcasts:

dpdhl.com/en/investors

Deutsche Post AG
Headquarters
Investor Relations
53250 Bonn
Germany

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