Deutsche Post AG Annual Report 2018

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2018 Annual Report

C T
N
G
G I

A
L E

GROUP MANAGEMENT REPORT
11 — 72

CORPORATE GOVERNANCE
73 — 86

CONSOLIDATED FINANCIAL STATEMENTS
87 — 170

FURTHER INFORMATION
171 — 178

Selected key figures

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 non-controlling interests.
3 Calculation
4 Basic earnings per share.
5 Proposal.
6 Headcount at the end of the year, including trainees.

Group Management Report, page 49.

Cross-references

Websites

€m

€

2017

60,444

3,741

6.2

2,175

2,713

1,432

1,938

27.5

2.24

1.15

2018

61,550

3,162

5.1

716

2,075

1,059

12,303

19.3

1.69

1.15 5

519,544

547,459

+/– %

5.1

– 4.0

–

–36.1

–2.9

34.1

–

+/– %

Q 4 2017

Q 4 2018

16,109

1,181

7.3

796

837

975

–

16,926

1,134

6.7

509

813

1,307

–

1.8

–15.5

–

– 67.1

–23.5

–26.0

>100

–

–24.6

–

5.4

0.69

0.66

– 4.3

–

WHAT’S NEXT,
FRANK APPEL?

Kapitel — HEADLINE — Subheadline 2

Deutsche Post DHL Group — 2018 Annual Report

Martin Ziegenbalg, Head of Investor
Relations, talks to CEO Frank Appel
about 2018 and the prospects for
Deutsche Post DHL Group.

Martin Ziegenbalg: Mr Appel, when I look back on recent
months, there was one main issue that dominated our dia
logue with investors and analysts.

Frank Appel: Developments in our Post - eCommerce -
Parcel division certainly affected the overall impression of 2018
and I don’t want to gloss over what happened. These devel-
opments definitely dominated in a year in which we had to cut
our earnings forecasts, in which many things were called into
question.

However, 2018 wasn’t just a year of challenges.

No, it also had its positive aspects for the Group. Our DHL
divisions were and are very well positioned, and they delivered
outstanding results. Express did very well, as it has in recent
years. It’s very clear that we’ve taken the right steps at Global
Forwarding, Freight and margins there are improving again,
and business is growing at Supply Chain, although that’s over-
shadowed by a variety of one-time effects.

What were the reasons for these developments?

How do you intend to get the German mail and parcel
business back on track?

The revenue shift within the division, with the mail busi-

We reorganised the company at the beginning of 2019,

ness in retreat but strong growth driven by e-commerce in
the Parcel business unit, demands a delicate balance between
cost and earnings growth, which was no longer the case in
2018. We’ve been gaining market share in the parcel business
for years, with growth topping the agenda but that affected
the bottom line. In the future, we’ll be focussing more upon
productivity gains and earnings management, even if that
means we only grow as fast as the market. At the same time,
the decline in mail volume calls for constant cost management,
especially with rising materials expenses. So here too, we
need a nuanced approach to price increases and productivity
measures.

dividing the business previously combined in the PeP division
into Post & Paket Deutschland and DHL eCommerce Solutions.
Now we can concentrate upon our strengths in the individual
markets and exploit the potential in our domestic and inter-
national businesses. We’re also aiming to make lasting improve-
ments in productivity and cost structures. That can’t be done
overnight and it can’t be done without painful cuts. At the same
time, our pricing has to ensure that the high quality of our work
and the increased materials expenses are rewarded adequately
by our customers. So far we’ve been making good progress
with these measures. I’ve temporarily taken over responsibility
for the Post & Paket Deutschland division myself. Ken Allen,

To our shareholders

“Our DHL divisions
were and are very
well positioned,
and they delivered
outstanding
results.”

who previously led the Express division very successfully, now
heads DHL eCommerce Solutions, and with John Pearson, a
proven expert has taken the helm at Express. This allows us to
set clear priorities and invest effectively.

Then it’s not only costcutting?

Not at all; we’re also making major investments in our
growth. We plan to invest around €3.7 billion in 2019 alone. That
will go mainly into expanding and further optimising our global
infrastructure, for example aircraft for our intercontinental fleet,
and we’re still building up our workforce in production, although
at a slower rate. The Group added nearly 30,000 employees last
year and we’re also training the existing workforce.

As the CEO, what is your view on the performance of the
company’s shares?

Of course I’m not happy at all about our share price perform-

ance in 2018. To some extent, I can understand the scepticism
it reflects. The fact is, we had to make some adjustments during
the year. On the other hand, the overall market – and in particular
our most important competitors in the mail and logistics
sector – also saw very volatile price swings. Besides the chal-
lenges in our traditional core business, there were also external

Deutsche Post DHL Group — 2018 Annual Report

developments that impacted the share price. We can’t influence
factors such as global economic trends, interest rate policy,
exchange rates, trade conflicts or Brexit. Instead we need to
adapt to them as effectively as possible.

Once the measures that have been introduced take effect,
especially on the cost side, there should be movement to
the upside again. In your estimation, what can we expect
from 2019?

Deutsche Post DHL Group as a whole is still in very good

It will be challenging but we can overcome the challenges

shape. We’re very diversified, which in times of growing uncer-
tainty proves to be a clear competitive advantage. Our funda-
mental growth drivers remain intact. I’m certain that the market
will acknowledge our efforts when we deliver again.

There’s another perspective: a lot of bad news is already
priced into the shares after their severe decline in 2018.

and the measures we’ve introduced are beginning to pay off.
I’m convinced that we’ll see further improvements in the coming
months. At the company I meet employees at all levels many
times every day. Without exception, not only do they accept that
we’re facing challenges but above all there’s a tremendous
desire to tackle these challenges and get our mail and parcel
business back on a successful track.

To our shareholders

“Deutsche Post DHL Group as a whole
is still in very good shape. We’re very
diversified, which in times of growing
uncertainty proves to be a clear com-
petitive advantage.”

I’ve been on the board at Deutsche Post DHL Group for

more than sixteen years now and have been CEO since 2008.
A lot has happened in that time. If we move on together, we’ll
master the challenges this time as well.

What will it take to do that?

Flexibility, dedication, guts and a willingness to change
ourselves again and again, and that’s the case not only for the
company as a whole but for every single employee. Artificial
intelligence and automation have already changed working life
and will continue to do so. Nobody has a guarantee that the job
they have now will still be exactly the same ten or fifteen years
from now. People need to be flexible, keep up their training
and never stop learning.

In the past, we at Deutsche Post DHL Group have shown

one thing: when we’re confronted with challenges, we tackle
them with determination and focus upon results. Take digital-
isation as an example. As a dedicated mail company, we would
have viewed it as a major threat but as a diverse group, we see
it as an opportunity that we’re already leveraging and that will
certainly generate healthy business for us in the future.

You could say that it’s part of our corporate DNA to react

flexibly and quickly to changes in our environment and to be
agile. That enables us to perform even better in the future and
make lasting improvements in our competitiveness. These
are the foundations that make me confident we’ll always make
the right strategic choices for achieving our ambitious goals.

FLEXIBLE. RESULTS-ORIENTATED.
CUSTOMER-CENTRIC. Working life is
changing more and more quickly. Organisations,
along with their people, structures and processes,
face new challenges increasingly often. As a global
business, how can Deutsche Post DHL Group stay
fit for the future in such an environment?

We need to be flexible in adapting to new challenges.
That means identifying and assessing oppor tunities
and risks at an early stage and dealing with them in a
results-orientated manner, and we must be willing to
review our decisions again and again and revise them
when conditions call for it.

There is no other way to ensure that we can continue
to provide top-quality services and solid profits in the
future, and in all we do, our focus is upon customers.

WE ALWAYS CONCENTR ATE UPON OUR STRENGTHS, upon our core compe-
tencies. If you know what you’re already good at, you can get even better.

WE ARE ALWAYS OPEN TO NEW IDEA S AND VISIONS so that we can exploit
opportunities. Together, we do all we can to accept, approach and implement
something new.

OUR FOCUS IS UPON CUSTOMERS. When we put their needs at the centre of
our thoughts and actions, we improve constantly – and in a results-orientated manner.

GOOD IS STILL NOT GOOD ENOUGH. We work every day at getting even better
by optimising our products, services and processes. That means always striving to
exceed our limits.

GROUP MANAGEMENT REPORT
11 — 72

12 GENERAL INFORMATION
12 Business model
14 Business units
19 Strategy
21 Management
23 Disclosures required by takeover law
24 Research and development
25 Remuneration Report
36 Annual Corporate Governance Statement and

non-financial report

37 REPORT ON ECONOMIC POSITION
37 Overall assessment of the Group’s economic position
37 Forecast / actual comparison
38 Economic parameters
40 Significant events
40 Results of operations
43
Financial position
48 Net assets
50 Business performance in the divisions

56 DEUTSCHE POST SHARES

57 NON-FINANCIAL KEY PERFORMANCE

INDICATORS

57 Employees
58 Safety and health
58 Corporate responsibility
60 Quality
62 Brands

63 EXPECTED DEVELOPMENTS
63 Overall assessment of the Group’s future

economic position
Forecast period
Future economic parameters

63
63
64 Earnings forecast
65 Expected financial position
65 Performance of further indicators relevant for

internal management

66 OPPORTUNITIES AND RISKS
66 Overall assessment of the opportunity and risk situation
66 Opportunity and risk management
69 Categories of opportunities and risks

Deutsche Post DHL Group — 2018 Annual Report

GENERAL
INFORMATION
Business model

An international service portfolio
Deutsche Post AG is a listed corporation domiciled in Bonn, Ger-
many. Under its Deutsche Post and DHL brands, the Group pro-
vides an international service portfolio consisting of letter and
parcel dispatch, express delivery, freight transport, supply chain

management and e-commerce solutions. At 31 December 2018,
the Group was organised into the four operating divisions of Post -
eCommerce - Parcel, Express, Supply Chain and Global For-
warding, Freight, whose services are described in
Business units,
page 14 ff. Each of the divisions is managed by its own divisional
head quarters and subdivided into functions, business units and
regions for reporting purposes.

The internal services that support the entire Group are con-
solidated in our Global Business Services unit. Group manage-
ment functions are centralised in Corporate Functions.

Organisational structure as at 31 December 2018

A.01

Corporate Functions

Divisions

Finance

Board member
Melanie Kreis

Functions
Corporate Accoun-
ting & Controlling
Investor Relations
Corporate Finance
Corporate Audit &
Security
Taxes
Divisional Finance
Organisations
Legal Services

Human Resources,
Corporate
Incubations

Board member
Thomas Ogilvie

Functions
Corporate HR
Germany &
Employee Relations
International
Corporate HR
Standards &
Processes
HR for Global
Functions
Divisional HR
Organisations

Business unit
Corporate
Incubations

Post -
eCommerce
Parcel

Board
member
Frank Appel

Business units
Post
eCommerce -
Parcel

Express

Board
member
Ken Allen

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

Function
Customer
Solutions &
Innovation

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

CEO,
Global Business
Services

Board member
Frank Appel

Functions
Board Services
Corporate Legal
Corporate Office
Corporate
Development &
First Choice
Corporate
Executives
Corporate
Communications &
Responsibility
Corporate Public
Policy & Regulation
Management
Global Business
Services (Corporate
Procurement,
Corporate Real
Estate, IT Services,
Insurance & Risk
Management etc.)

Organisational changes
As at 1 February 2018, responsibility on the Board of Manage-
ment for Customer Solutions & Innovation (CSI) was transferred
to Ken Allen.

Moreover, a new Corporate Incubations board department
was created in April 2018. Thomas Ogilvie heads the new depart-
ment in addition to his duties as Board Member for Human
Resources and Labour Director.

Since 4 April 2018, CEO Frank Appel has taken over respon-
sibility for the Post - eCommerce - Parcel division in addition to
his role as Chief Executive Officer.

Jürgen Gerdes resigned from his position on the Board of

Management on 12 June 2018.

Group Management Report — GENERAL INFORMATION — Business model

In September 2018, Ken Allen’s Board of Management office
and contract were renewed until July 2022. In addition, the Super-
visory Board approved the following changes effective as of
1 January 2019: the Post - eCommerce - Parcel division was sep-
arated into a German and an international division, each led by a
separate member of the Board of Management. The German
business was renamed Post & Paket Deutschland and will remain
under the interim leadership of the Group’s CEO. A new DHL
eCommerce Solutions division is also being created in order to
optimally align the Group with the global e-commerce market.

Ken Allen has assumed responsibility for the new division in ad-
dition to his role as head of CSI. John Pearson has led the Express
division since 1 January 2019.

A presence that spans the globe
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 section below.

Market volumes 1

Global
(2017)

M TEUs
Ocean freight3

215.9

€ BN
Contract logistics4

Germany
(2018)

M TONNES
Air freight2

€ BN
International
express market
(2016)5

4.3

€ BN
Mail communication6

(2017)
Air freight (m tonnes) 2

Ocean freight (m TEU s) 3

Contract logistics (€ bn) 4

International express market (€ bn) 5

Road transport (€ bn) 8

Middle East /Africa
1.4

5.5

8.0

–

Americas
5.1

8.8

64.4

8.2 (2016)

–

Europe
6.3

8.4

70.9

7.1 (2016)

197

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

Source: company estimates, Seabury Consulting.

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 estimates.
8 Market volume covers 25 European countries, excluding bulk and specialties transport. Source: DHL Market Intelligence Study 2018,
based upon company calculations and content supplied by IHS Markit Group, copyright © IHS Global Inc., 2018. All rights reserved.

A.02

11.6

€ BN
Parcel6

27.3

€ BN
Advertising
market7

Asia Pacific
11.0

32.8

72.6

8.0 (2016)

–

Deutsche Post DHL Group — 2018 Annual Report

Business units

POST - ECOMMERCE - PARCEL DIVISION

Nationwide transport and delivery network in Germany, 2018

Around

11,000

Paketshops

Around

110,000

post boxes

Around

13,000

retail outlets

Around

57million letters

per working day

Around
3,700
Packstations

Around

111,500

letter and parcel
deliverers

35
parcel centres

Around
2,500
sales points

82
mail centres

A.03

Around

5million parcels

per working day

Around

700

Paketboxes

The postal service for Germany
We deliver around 57 million letters every working day in Ger-
many, making us Europe’s largest postal company. The products
and services are targeted towards both private and business cus-
tomers and range from physical, hybrid and electronic letters to
special products for merchandise delivery, and include additional
services such as cash on delivery, registered mail and insured
items.

In the year under review, the German market for business
communications was around €4.3 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 consolidators providing partial services.
Our market share increased to 63.4 % compared with the prior
year (61.7 %).

German mail communication market,
business customers, 2018

Market volume: €4.3 billion

Deutsche Post

Competition

Source: company estimates.

A.04

63.4 %

36.6 %

Crosschannel customer dialogue
On request, our dialogue marketing unit offers end-to-end solu-
tions 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 con-
tent reach recipients according to a co-ordinated timetable and
without any coverage waste.

Group Management Report — GENERAL INFORMATION — Business units

The advertising market in Germany gained 0.6 % in 2018 to
reach a volume of €27.3 billion. Our share of this highly frag-
mented market declined to 7.6 % (previous year: 8.2 %).

German advertising market 1, 2018

Market volume: €27.3 billion

Competition

Deutsche Post

A.05

92.4 %

7.6 %

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 lightweight merchandise shipments across
borders and provide international dialogue marketing services.
For business customers in key European mail markets, we offer
international shipping services. For the growing e-commerce
sector, we develop solutions for international shipments to con-
sumers (B2C). Our portfolio also comprises consulting and ser-
vices 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 €7.9 billion in 2018 (previous year: around
€7.5 billion). Our market share was 12.3 % (previous year: 12.8 %).
Market size and share have changed compared with the previous
year’s presentation as data from external sources have been
adjusted.

International mail market (outbound), 2018

Market volume: €7.9 billion

Competition

Deutsche Post DHL

Source: company estimates.

A.06

87.7 %

12.3 %

Worldwide portfolio of parcel and ecommerce services
We maintain a dense network of parcel acceptance and drop-off
points in Germany. Our portfolio allows recipients to choose
whether they wish to receive their parcels during a specific deliv-
ery window, on the same day or as quickly as possible. They can
also decide at short notice whether their parcels should be deliv-
ered to an alternative address, a specific retail outlet or a Paket-
shop. We offer support to business customers to grow their on-
line 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 €11.6 bil-
lion in 2018 (previous year: around €10.8 billion). We were able
to maintain our 45.5 % market share in a highly competitive mar-
ket (previous year: 45.4 %).

German parcel market, 2018

Market volume: €11.6 billion

Competition

DHL

Source: company estimates.

A.07

54.5 %

45.5 %

We expanded our cross-border portfolio of e-commerce services
during the year under review. In Europe, the B2C network
amounts to a total of 27 countries, including Germany. There are
more than 65,000 acceptance and drop-off points available to
our customers in Europe. In the United States, we offer especially
fast delivery in five metropolitan areas. In India, our Blue Dart
subsidiary delivers to almost all available postcodes and has
opened an additional 970 points of sale. Our network in south-
east Asia includes more than 2,000 locations where online mer-
chants can post parcels.

As described in the chapter

Business model, page 12 f., the
German and international businesses will, in future, be managed
in independent divisions and Board departments.

Deutsche Post DHL Group — 2018 Annual Report

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 2.6 million customers.

Timedefinite international shipments as our core business
With the main product, Time Definite International (TDI), we pro-
vide services with a pre-defined delivery time. We also provide
industry-specific services to complement this product. For ex-
ample, our Medical Express transport solution, which is tailored
specifically to customers in the Life Sciences & Healthcare sector,
offers various types of thermal packaging for temperature-con-
trolled, chilled and frozen content. Collect and Return is used
predominantly by customers in high-tech industries: technical
products are collected from the user, taken in for repairs and then
returned.

Our virtual airline
Our global network consists of several airlines, some of which we
own 100 %. The combination of our own and purchased capaci-
ties, which includes 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

Block Space Agreement –
guaranteed air cargo
product.

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

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

BSA

CORE

ACS

In the year under review, we contracted with Boeing to purchase
14 new 777F aircraft as part of the rejuvenation of our intercon-
tinental fleet. These cargo aircraft have a range of 9,070km with
a 102t load, are considerably more reliable and bring significant
cost and efficiency advantages. The first four aircraft are sched-
uled for delivery in 2019.

Trade boosts international express business
The international express business is benefiting from cross-
border e-commerce and the growing importance of small and
medium-sized enterprises in this segment.

Expanding and modernising the network in the Europe region
In the Europe region, we are reinforcing our network by steadily
expanding our infrastructure and modernising our fleet. We offi-
cially opened our Brussels hub in February 2018, for instance.
With four times its previous capacity, the hub is now one of our
five largest worldwide. We also opened a new hub in Madrid,
and expect construction of the new hub buildings in Cologne and
Barcelona to be completed in 2019.

Expanding service in the Americas region
Given the strong rise in demand, especially from the retail sector,
we opened around 1,500 of our own or partner-operated service
points in 2018 in the Americas region and added two logistics
hubs to our infrastructure in Mexico.

Further investing in Asia
In the Asia Pacific region, we put one of a total of four new Airbus
A330-300s undergoing passenger-to-freighter conversion into
operation in the year under review, which increases our previous
loading capacity by around 33 %. This will enable us to supply
markets in Malaysia, Vietnam and Hong Kong, in particular. We
also established a gateway in Zhuhai at the new Macao Bridge
to make optimum use of the shorter transfer times between
China and Hong Kong. An additional flight on the Shenzhen –
Moscow – Leipzig route was also established to support busi-
ness in south China.

Reliable partner in the MEA region
In the MEA (Middle East and Africa) region, the Middle East con-
tinued to suffer in 2018 from the sometimes unstable political
situation. We were nonetheless able to maintain our operations
whilst adhering to legal requirements and ensuring the safety of
our employees.

Group Management Report — GENERAL INFORMATION — Business units

GLOBAL FORWARDING, FREIGHT DIVISION

Ocean freight market, 2017: top 4

The air, ocean and overland freight forwarder
Our air, ocean and overland freight forwarding services include
standardised transport as well as multimodal and sector-specific
solutions, together with individualised industrial projects. Our
business model is based upon brokering transport services be-
tween customers and freight carriers. Our network’s global pres-
ence allows us to offer efficient routing and multimodal transport.
Compared with other divisions, our operating business model is
asset-light.

Thousands of TEUs 1

Kuehne + Nagel

DHL

DB Schenker

Panalpina

A.10

4,355

3,259

2,169

1,521

1 Twenty-foot equivalent units.

Source: annual reports, publications and company estimates.

European overland freight market with solid growth
The road freight market showed solid growth in 2018, driven by
volume increases and an unchanged high price level despite
moderate economic growth in most European countries. In a
fragmented and competitive en vironment, DHL Freight remained
the second-largest provider in 2017, with a market share of 2.2 %.

European road transport market, 2017: top 5

Market volume: €197 billion 1

DB Schenker

DHL

DSV

Dachser

Kuehne + Nagel

A.11

3.4 %

2.2 %

1.9 %

1.7 %

1.4 %

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

transports.

Source: DHL Market Intelligence Study 2018, based upon the company’s calculations
and content supplied by IHS Markit Group, copyright © IHS Global Inc, 2018.
All rights reserved.

Air freight market, 2017: top 4

Thousands of tonnes 1

DHL

Kuehne + Nagel

DB Schenker

Panalpina

A.09

2,248

1,570

1,300

996

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 during the year
under review grew by 3.5%. As global demand for transport
capacity exceeded available supply, freight capacity remained at
a low level – especially on routes out of Asia and Europe. With
around 2.2 million transported export freight tonnes, we
remained the air freight market leader in 2017, as shown in table
A.09.

Consolidation continues in the ocean freight market
The ocean freight market continued to grow in 2018, with con-
solidation on the carrier side continuing. There was again over-
capacity in the market for container ships and this trend is ex-
pected to continue in the coming years. With around 3.3 million
transported twenty-foot equivalent units, we remained the sec-
ond-largest provider of ocean freight services in 2017, as shown
in the following table.

Deutsche Post DHL Group — 2018 Annual Report

SUPPLY CHAIN DIVISION

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

Our contract logistics services include planning, sourcing
and production activities as well as packaging, repairs and re-
turns. These services are rounded out by real estate solutions as
well as management and fulfilment services for e-commerce.

Continuing to automate the supply chain
In our customers’ interests, we ensure that our standard tools are
well embedded in all operations. As a next step on the efficiency
scale, more complex solutions, e. g., wearable devices and collab-
orative robotics, will be introduced. Overall, the aim is always to
increase efficiency along the entire supply chain through stand-
ardisation and the use of new technologies. Whilst these efforts
generally show benefits across all sectors, we see the largest
demand in Retail and Consumer, which generate approximately
half of the divisional revenue.

Automation and digitalisation of the supply chain

A.12

Yard management

Autonomous trucks

Wearables: smart watches
and smart glasses

Inventory management

Automated
picking robots

Collaborative
stationary robots

Surveillance with drones

Track & Trace

Leading position in a fragmented market
DHL remains the global leader in the fragmented contract logis-
tics market, with a market share of 6.0 % (2017) and operations
in more than 50 countries. The contract logistics market is esti-
mated at around €216 billion, with the top ten players only ac-
counting 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 rapidly growing markets throughout the Asia Pacific
region and Latin America. In Latin America, we have strength-
ened our presence with the acquisition of the Colombian Suppla
Group,
note 2 to the consolidated financial statements. Its integra-
tion is well on track and delivering the expected results.

Contract logistics market, 2017: top 10

Market volume: €215.9 billion

DHL

XPO Logistics

Kuehne + Nagel

Hitachi Transport System

CEVA

SNCF Geodis

DB Schenker

UPS SCS

Ryder

DSV

A.13

6.0 %

2.3 %

2.1 %

1.8 %

1.5 %

1.3 %

1.2 %

0.8 %

0.7 %

Source: company estimates; Transport Intelligence. Revenue figures are estimates
based upon gross revenue from external customers; exchange rates as at 2017.

Group Management Report — GENERAL INFORMATION — Business units — Strategy

Strategy

CORPORATE STRATEGY

The Group strategy's bottom lines

A.14

Provider
of Choice

Benchmark
for responsible
business conduct

Investment
of Choice

Employer
of Choice

Focus upon three bottom lines
Increasing digitalisation, the continuing boom in e-commerce
and the dynamism of emerging markets offer us considerable
growth opportunities. As described in the
Business unit chapter,
page 14 ff., we are also amongst the leading suppliers thanks
to our global presence in the markets in which we operate. More-
over, according to Gartner 2018’s Magic Quadrant Method, we
are the most advanced logistics specialist for 3PL vendors
Glos-
sary, page 176, in terms of vision and execution. We measure the
degree of implementation of our strategy against the three bot-
tom lines shown in chart A.14.

Provider of Choice: Customers are at the heart of everything
we do. We strive to create a positive experience for customers
every time we communicate with them. This customer orienta-
tion is also reflected in the value of our
Brands, page 62. Our
principle of continuous improvement is integrated firmly into our
day-to-day operations. Our First Choice methodology based upon
Six Sigma, Change Management and Lean techniques is commu-
nicated by nearly 36,000 employees trained as first-choice spe-
cialists. Regular customer satisfaction surveys allow us to meas-
ure our performance against our quality aspiration and to identify
areas for improvement,

Quality, page 60 f.

Employer of Choice: Since we consider committed and
skilled employees as the key to providing excellent service qual-
ity and achieving profitable growth, we conduct numerous ini-
tiatives designed to develop and motivate our employees, in-
cluding the Group-wide “Certified” initiative. We foster internal
Man-
dialogue through our annual Employee Opinion Survey,
agement, page 23. These measures contributed, amongst other
things, to our Express division being named the sixth best
employer in the world by Great Place to Work® and FORTUNE
in 2018.

Investment of Choice: We aim to deliver profitable growth
by taking a selective and focused approach, which includes grow-
ing the profitable core in each of our business areas. We closely
monitor operational and financial KPIs and focus upon disciplined
yield management across all divisions. We also leverage oper-
ational efficiencies and keep strict cost discipline.

Apart from these three bottom lines, we have integrated sus-
tainability and corporate responsibility firmly into our strategy,
Corporate Responsibility Report, dpdhl.com/
as described in our

crreport2018.

Deutsche Post DHL Group — 2018 Annual Report

Our emphasis is
upon customer orientation
and industry-leading
end-to-end quality.

We are constantly adding new modules to our Certified Inter-
national Forwarder training programme.

In the Global Forwarding business unit, we want to improve
the EBIT-to-gross profit margin (conversion rate) and, in the
medium term, raise it to the level of our leading competitors. To
this end, we are increasing the profitability of contracts and align-
ing costs with business development.

In the Freight business unit, the FREIGHT 2020 strategy con-
tinues to support our goals of growing profitably, becoming more
productive, working better together and increasing data trans-
parency, whilst remaining customer centric and committed to
high quality standards. The further expansion of the European
network is supporting our growth targets. The Freight business
unit responded to the systemic driver shortage in Europe by
starting a campaign to hire drivers whom we can also use in our
terminals. Our digital transport management systems will be
further standardised step by step.

Supply Chain division
We are increasing our efficiency and quality by standardising
processes worldwide and reducing complexity, thus facilitating
innovative and customer-centric solutions.

The Certified agenda has evolved into an overarching frame-
work of training content. We leverage talent analytics for tar-
geted succession planning and to support a purpose-built train-
ing agenda.

Our focus is upon those market segments that offer higher
margins and growth rates. One example of this is the service
logistics business, in which we provide sophisticated solutions
for our customers supported by a standard global operating
model, a central IT platform and value added services across
150 countries.

STRATEGIES OF THE DIVISIONS

Post eCommerce Parcel division
The German postal and parcel business is in the midst of a pro-
cess of change, in which we are currently working primarily upon
improving quality, earnings, productivity and costs.

In addition, we are extending our offering in the Post busi-
ness unit based upon market demand, continuously expanding
our range of services in the German parcel business and de-
veloping digital service offerings.

As part of our Group-wide “Certified” initiative, we aim to

certify the majority of our employees by 2020.

We are adapting our networks to the dynamic market condi-
tions and shipment structures. We also cut costs wherever pos-
sible and sensible, whilst investing in technologies, automation,
innovation and growth areas.

Express division
We concentrate upon shipments whose size and weight make
them an optimal match for our network, and in terms of our pric-
ing 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 in-
creasing exports.

Our Certified International Specialist training programme
ensures that our employees have the requisite knowledge of the
international express business at their disposal, develop mutual
understanding and remain permanently motivated.

Our return on sales improves when growing volumes lead to
economies of scale in our network, innovation and automation
enhance productivity, and costs are strictly managed. We are
gradually streamlining the IT systems architecture and are ensur-
ing adherence to global standards, especially as regards facilities
and operating resources. The majority of our costs are attribut-
able 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 com-
panies, thus improving our network utilisation and reducing
costs. On the ground, processes are automated and standardised.

Global Forwarding, Freight division
Our emphasis is upon customer orientation and industry-leading
end-to-end quality. IT systems are being improved or replaced
in the Global Forwarding business unit, thus integrating industry-
proven solutions. We are focussing upon improved shipment
visibility, electronic document management and a new transport
management system.

Group Management Report — GENERAL INFORMATION — Strategy — Management

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 performance metrics portrayed here
are also particularly relevant for calculating management re-
muneration. The Group’s financial performance indicators are
intended to preserve a balance between profitability, an efficient
use of resources and sufficient liquidity. The performance of
these indicators in the year under review is described in the

Report on economic position, page 37 ff.

Profit from operating activities measures earnings power
The profitability of the Group’s operating divisions is measured
as profit from operating activities (EBIT). EBIT is calculated by
deducting materials expense and staff costs, depreciation, amort-
isation and impairment losses, as well as other operating ex-
penses from revenue and other operating 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 financial 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 subtracting the cost
of capital component, or asset charge, from EBIT. Making the as-
set charge a part of business decisions encourages the efficient
use of resources and ensures that the operating business is
geared towards increasing value sustainably 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 liabilities 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 projects and
investments within the Group. The WACC is generally reviewed
once annually on the basis of the current situation on the financial
markets. To ensure better comparability of asset charge with pre-
vious figures, in 2018 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 ac-
count during the year. Table A.15 shows the composition of the
net asset base.

Free cash flow facilitates liquidity management
Along with EBIT and EAC, cash flow is another key performance
metric used by Group management. This is targeted at maintain-
ing sufficient liquidity to cover all of the Group’s financial obliga-
tions from debt repayment and dividends, 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 calculated by adjust-
ing EBIT for changes in non-current assets (depreciation, amort-
isation and (reversals of) impairment losses, net income/loss
from disposals), other non-cash income and expense, dividends
received, taxes paid, changes in provisions and other non-current
assets and liabilities. Another key parameter of OCF is net work-
ing capital. Effective management 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 performance
indicator is calculated on the basis of OCF by adding/subtracting
the cash flows from capital expenditure, leasing, 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.

Calculations

Deutsche Post DHL Group — 2018 Annual Report

A.15

Revenue

EBIT

Other operating income

Asset charge

Changes in inventories and work

performed and capitalised

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 non-current operating assets 2

Operating liabilities

• Operating provisions

(not including provisions for
pensions and similar obligations)

• Trade payables

( included in net working capital) 1

• Other non-current operating

liabilities 2

Net asset base

Depreciation, amortisation

and impairment losses

Net income / loss from disposal

of non-current assets

Non-cash income and expense

Change in provisions

Change in other non-current 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

Cash outflow arising from repay-

ments and interest on lease liabilities

Net interest paid

FCF

Free cash flow

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

Group Management Report — GENERAL INFORMATION — Management — Disclosures required by takeover law

NON-FINANCIAL PERFORMANCE INDICATORS

Disclosures required by takeover law

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 employ-
ees. We place particular significance on the survey’s indication of
Employee Engagement and of how employees rate the leader-
ship 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 2018 can
be found in the

Employees section, page 57.

Reducing dependency upon fossil fuels
We aim to reduce our dependency on fossil fuels, improve our
CO2 efficiency and lower costs. The corresponding 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 in-
tensity 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 equivalents (CO2e). This
indicates the ratio of the respective emissions to a matching per-
formance indicator in the Group. CEX is a management indicator
of non- financial performance. The figures obtained for the year
under review are provided in the section on
Corporate responsi-

bility, page 59.

CEX

(carbon efficiency index)
A management indicator of nonfinancial performance

Disclosures required under sections 289a (1) and 315a (1) of
the Handelsgesetzbuch (HGB – German Commercial Code) and
explanatory report

Composition of issued capital, voting rights and
transfer of shares
As at 31 December 2018, the company’s share capital totalled
€1,236,506,759 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 company’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 grant-
ing 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 largest
shareholder, holding 20.53 % 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 provisions
(cf. sections 84 and 85 of the Aktiengesetz (AktG – German Stock
Corporation Act) and section 31 of the Mitbestimmungsgesetz
(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 accordance with art-
icle 21 (2) of the Articles of Association in conjunction with sec-
tions 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 represented 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.

Deutsche Post DHL Group — 2018 Annual Report

Board of Management authorisation, particularly regarding
issue and buyback of shares
The Board of Management is authorised, subject to the consent
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 Art-
icles of Association may be viewed on the company’s website,
dpdhl.com/en/investors, and 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 authorised
by resolution of the AGMs of 27 May 2014 (agenda item 8),
28 April 2017 (agenda item 7) and 24 April 2018 (agenda items 6
and 7) to issue pre-emptive rights / Performance Share Units
(PSUs). The authorisation resolutions are included in the notarised
minutes of the AGM that can be viewed in the commercial regis-
ter of the Bonn Local Court. In order to service both current
pre-emptive rights / PSUs and those yet to be issued, the AGM
approved conditional capital increases. Details may be found in
article 5 of the Articles of Association. As at 31 December 2018,
the pre-emptive rights / PSUs already issued conferred rights to
up to 31,284,326 Deutsche Post AG shares, assuming the pre-
requisites are met. Under the authorisations granted, up to
41,680,692 additional pre-emptive rights / PSUs 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, including the possibilities of
using the treasury shares acquired on the basis of this or a
preceding authorisation, 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 upon that authorisation resolution, the
company had repurchased 1,284,619 shares in the financial
year. As at 31 December 2018, the company held 3,628,651 treas-
ury shares.

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 condi-
tions to cancel its share of the credit line as well as its share of
outstanding loans and to request repayment. The terms and con-
ditions of the bonds issued under the Debt Issuance Programme
established in March 2012 and of the convertible bond issued in
December 2017 also contain change-in-control clauses. In the
event of a change in control within the meaning of the terms and
conditions, creditors are, under certain 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 Management contract (right to early
termination). If the right to early termination is exercised or a
Board of Management contract is terminated by mutual consent
within nine months of the change in control, the Board of Man-
agement member is entitled to payment to compensate the re-
maining 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 re-
gard to the Annual Bonus Plan with Share Matching for execu-
tives, the holding period for the shares will become invalid with
immediate effect in the event of a change in control of the com-
pany. 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 disadvantages 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 therefore has
no significant expenses to report in this connection.

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

Remuneration Report

The remuneration report describes the principles of the remuner-
ation systems for the members of the Board of Management and
the Supervisory Board and provides information about the remu-
neration granted to, and paid to, the members of the Board of
Management and the Supervisory Board in financial year 2018. It
has been prepared in accordance with the recommendations of
the German Corporate Governance Code (the Code) and the
requirements of the Handelsgesetzbuch (HGB – German Com-
mercial Code), the German Accounting Standards and the Inter-
national Financial Reporting Standards (IFRS s).

BOARD OF MANAGEMENT REMUNERATION

Remuneration structure of the Group Board of Management
in financial year 2018
The remuneration system for the Board of Management is aligned
with the company’s strategy and is geared towards performance-
based and sustainable corporate governance. It creates an incen-
tive for the members of the Board of Management to work for
and on behalf of the company over the long term.

The Supervisory Board regularly examines the appropriate-
ness of this remuneration. The criteria for evaluating the appro-
priateness of remuneration are the tasks performed by each in-
dividual Board of Management member, his or her personal
performance and experience, the company’s economic situation,
success and future prospects, and the customary level of remu-
neration, taking into consideration the peer group and the overall
remuneration structure in the company. In this process, the
Super visory Board takes into consideration the relation of the
Board of Manage ment remuneration to the remuneration of the
senior management level and the workforce overall, including its

development over time. In evaluating the appropriateness of re-
muneration, the Supervisory Board is assisted by an independent
external remuneration expert. The current remuneration system
was approved at the 2018 Annual General Meeting with 88.56 %
of the votes cast.

Remuneration components
The Board of Management’s remuneration comprises the follow-
ing components, as shown in table A.17 below.

1. Base salary
The base salary is a fixed remuneration component and is paid in
twelve equal monthly instalments retroactively at the end of each
month.

2. Variable remuneration
The variable remuneration is almost entirely multi-annual, in
other words based upon medium- and long-term performance.
More than half of the variable target remuneration for 2018
consists of a long-term component with a four-year calculation
period; the rest is made up of an annual bonus, with 50 % of the
annual bonus flowing into a medium-term component with a
three-year calculation period (deferral). All of the variable remu-
neration components are forward-looking. Less than a quarter of
the variable remuneration component is granted on the basis of
a one-year calculation.

ANNUAL BONUS
The members of the Board of Management receive an annual
bonus whose individual amount reflects the extent to which their
predefined targets are achieved, missed or exceeded. The annual
bonus granted generally consists of financial targets (75 %) and
non-financial targets (25 %).

Terms of variable remuneration in target remuneration

A.16

Grant year

Year 2

Year 3

Year 4

Year 5

Year 6

Annual bonus

Deferral

LongTerm Incentive Plan (LTIP)

LTIP exercise period

Deutsche Post DHL Group — 2018 Annual Report

Remuneration components

A.17

1. Base salary

Annual amount: 1 €715,000 in the first contract year

€860,000 from the third contract year
€930,000 from the fourth contract year

Subsequent review: after three more years or upon contract extension
Payout: in equal instalments

2. Variable

remuneration

a. Annual bonus (including mediumterm component)
Annual target amount: 80 % of respective base salary
Maximum amount (cap): 100 % of respective base salary
Calculation: according to targets agreed
Payout: 50 % after determination of target achievement in subsequent year

50 % after another two years (sustainability phase) and only if the EAC 2 sustainability indicator is met

b. Longterm component
Granting of stock appreciation rights
Annual grant amount depends on achievement of strategic targets during the year prior to granting (granting corridor:
50 – 150 % of respective base salary)
Maximum amount (cap): 400 % 3 of the grant amount
Exercisability: according to degree of achievement of six share-price-based sub-targets
Payout: in the fifth or sixth year after granting, depending on the respective exercise date

3. Fringe benefits

Annual amount corresponds to the value of all non-cash benefits granted

4. Pension

commitments

Contribution-based pension commitment 4
Annual amount of 35 % of the base salary
Annual pension expense corresponds to the carrying amount of the pension entitlements acquired in the respective
financial year

5. Maximum amount

(cap)
Total remuneration

Maximum remuneration granted (cap on remuneration granted): €5 million 5
Starting in 2022: maximum remuneration paid (cap on remuneration paid): €5 million 6

1 Amounts for ordinary members of the Board of Management. The chairman of the Board of Management receives a base salary of €2,060,684.
2 EBIT after asset charge (EAC) of the Group, including the asset charge on goodwill before goodwill impairment.
3 The cap for the chairman of the Board of Management amounts to 250 % of the grant amount.
4 There is still a final-salary-based pension commitment for the chairman of the Board of Management.
5 The cap on remuneration granted amounts to €8 million for the chairman of the Board of Management.
6 The cap on remuneration paid amounts to €8 million for the chairman of the Board of Management.

The performance criteria used to calculate the amount of the
annual bonus and their weighting were the same as in the previ-
ous year.

For each target, the maximum amount that may be earned
is equal to the weighting applied to one base salary (for example,
for the free cash flow performance criterion, the maximum pay-
out is 10 % of one base salary). This means the total annual bonus
is limited to one base salary.

Performance criteria for the annual bonus

A.18

Weighting

Performance criterion

55 % 1

10 % 2

10 %

12.5 %

EBIT after asset charge (EAC) of the Group, including the
asset charge on goodwill before goodwill impairment

EAC of the respective Board of Management member’s
division

Free cash flow (FCF) of the Group

Positive rating of Employee Engagement KPI in the Group-
wide Employee Opinion Survey

Individual targets that reflect the focus of the Board of
Management member’s work in accordance with the Group
strategy

1 For Frank Appel, Melanie Kreis and Thomas Ogilvie, the weighting is 65 %.
2 Only for the Board of Management members responsible for the Post - eCommerce -

Parcel, Express, Global Forwarding, Freight and Supply Chain divisions.

Group Management Report — GENERAL INFORMATION — Remuneration Report

In measuring the degree of achievement of each of the per-
formance criteria, three thresholds are agreed with each Board
of Management member that are used to calculate the amount
of their individual annual bonus: There is no payout until the low-
est threshold is reached; when the lowest threshold is reached,
50 % of the maximum amount for this target is paid. When the
performance target is achieved, 80 % is paid, and when the upper
threshold is reached, 100 % is paid.

The targets for the Group EAC and Group free cash flow
finan cial goals correspond to the budgeted figures for the finan-
cial year. The degree to which the targets have been achieved is
announced at the end of the financial year. In financial year 2018,
target achievement was 0% for Group EAC and 50.47% for FCF.
For divisional EAC, target achievement was between 0% and
100%. The degree to which the employee target was reached was
90%. For the individual targets, the average degree of target
achievement was 59.29%. Based upon these target achievement
percentages, the average annual bonus (including deferral) was
26.57% of one base salary.

MEDIUM-TERM COMPONENT (DEFERRAL)
Even if the agreed targets are reached, the annual bonus is not
paid out in full. Instead, 50 % of the annual bonus flows into a
medium-term component with a three-year calculation period –
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 additionally
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 without compensation.
This demerit system puts greater emphasis on sustainable com-
pany development in determining Board of Management re-
muneration and provides long-term incentives.

LONG-TERM COMPONENT
Since financial year 2006, the company has granted members of
the Board of Management cash remuneration linked to the com-
pany’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 Manage-
ment members to make a personal investment of 10 % of their
annual base salary by the grant date of the respective tranche,
primarily in shares.

SAR ALLOCATION
The Supervisory Board agrees strategic goals with the members
of the Board of Management for a period of twelve months prior
to the grant date for the purpose of determining the value of the
SAR s to be granted. The relevant target categories for the grant-
ing of SAR s in 2018 were the performance of the share price
compared with that of the company’s competitors, strategic in-
dividual targets and a digital transformation target for each
member. The target categories each carry a weighting of 1/3.

For the share price performance compared with the com-
pany’s competitors, a peer group of two to three companies is
selected for each of the four operating divisions of the Group. The
digital transformation targets required defining divisional digital
transformation strategies based upon the Group strategy, begin-
ning their implementation and anchoring them in the corporate
culture.

The focus of the other individual targets set for Board of Man-
agement members was on customers and employees, in particu-
lar. Based upon the target achievement determined, Board of
Management members were granted SAR s that on average
amounted to 87.5 % of their base salary on the grant date.

SAR target achievement

Share price performance
compared with the company’s
competitors

Strategic individual targets

Digital transformation targets

A.19

SAR
allocation
2018
tranche

Target
achieve-
ment
%

Weighting

1/3

120 – 130

581,224

100 – 150

610,616

1,191,840

We comply with the requirement regarding the ability to retain
or reclaim (clawback) variable remuneration in justified cases by
making the granting of LTIP components (SAR s) dependent upon
the attainment of previously stipulated goals. Extraordinary de-
velopments can therefore already lead to a decrease in the num-
ber of SAR s at the time they are granted. Moreover, SAR s are
granted on the condition that the Supervisory Board may limit the
payment amount in the event of extraordinary developments.
The value of the SAR s granted to each Board of Management
member in financial year 2018 is presented in the "Remuneration
granted in accordance with the German Corporate Governance
Code" table. See the following table for the number of SAR s
granted.

Deutsche Post DHL Group — 2018 Annual Report

The performance is determined by comparing the average price
of Deutsche Post shares or the average index value during a ref-
erence and a performance period. The reference 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 absolute or relative performance tar-
gets are not met by the end of the waiting period, the SARs attrib-
utable to them will expire without replacement or compensation.
After expiration of the waiting period, the SAR s must be ex-
ercised within a period of two years (exercise period); any SAR s
not exercised expire.

Each SAR exercised entitles the exercising Board of Manage-
ment member to receive a cash settlement equal to the differ-
ence between the average closing price of Deutsche Post shares
for the five trading days preceding the exercise date and the ex-
ercise price of the SAR. The proceeds from stock appreciation
rights are limited to a maximum amount. Table A.24 shows the
individual maximum amounts for the 2018 tranche. Furthermore,
the remuneration from stock appreciation rights may be limited
by the Supervisory Board in the event of extraordinary circum-
stances.

3. Fringe benefits
Fringe benefits granted to Board of Management members pri-
marily include the use of a company car, subsidies for health and
long-term care insurance in accordance with the provisions of
the German Social Security Code, and special allowances and
benefits for assignments outside the members’ home countries.

4. Pension commitments (retirement and surviving

dependants’ benefits)

The members of the Board of Management have been granted
contribution-based pension commitments. There is still a leg-
acy pension commitment for the chairman of the Board of Man-
agement.

Under the contribution-based pension plan, the company
credits an annual amount of 35 % of the base salary to a virtual
pension account for each Board of Management member. The
maximum contribution period is 15 years.

LongTerm Incentive Plan: number of SAR s granted

A.20

Number

Frank Appel, Chairman

Ken Allen

Jürgen Gerdes (until 12 June 2018)

John Gilbert

Melanie Kreis

SAR s 2017
tranche

SAR s 2018
tranche 1

546,678

329,538

280,170

196,596

280,170

–

259,056

216,384

239,556

185,070

Thomas Ogilvie (since 1 September 2017)

199,170

127,044

Tim Scharwath (since 1 June 2017)

199,170

137,208

1 Grant date 1 September 2018: the average price of Deutsche Post shares during the
reference period was €31.08 and the average index value 385.02 points; grant date
1 November 2018 (John Gilbert): the average price of Deusche Post shares during the
reference period was €28.69 and the average index value was 362.23 points.

EXERCISE OF SAR s
At the earliest, SAR s granted can be exercised, in whole or in part,
after a four-year waiting period, provided the absolute or relative
targets have been achieved at the end of that period.

How many, if any, of the SAR s granted can be exercised is
determined in accordance with four (absolute) performance tar-
gets based upon the share price and two (relative) performance
targets based upon 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 outperforms the index by more than 10 %.

Mechanism of 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

Group Management Report — GENERAL INFORMATION — Remuneration Report

5. Remuneration caps
The remuneration as a whole as well as its variable components
have been capped.

The remuneration system also provides for overall caps be-
yond the individual caps for the variable remuneration compo-
nents that further limit payout: for remuneration granted in a
finan cial year, overall caps have been in place since 2017 totalling
€8 million for the chairman of the Board of Management and
€5 million for the ordinary members (excluding fringe benefits in
each case). This is the overall cap on remuneration granted.

A second overall cap to apply beginning in 2022 will ensure
that remuneration paid in a single financial 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 include fringe benefits.
The maximum amounts applicable to the individual variable
remuneration components and the maximum amount paid from
remuneration granted in 2018 are broken down in table A.24.

Example illustration of the included remuneration
components

A.23

Overall cap on remuneration
granted
Example: 2018

Overall cap on remuneration
paid
Example: 2022

Remuneration components
included
2018 base salary
Proportion of 2018 annual
bonus for immediate payout
Deferral from 2018 annual
bonus
Long-Term Incentive Plan
2018 tranche
2018 pension expense
(service cost)

Remuneration components
included
2022 base salary
Proportion of 2022 annual
bonus for immediate payout
Deferral from 2020 annual
bonus
Long-Term Incentive Plan
2016 / 2017 / 2018 tranches 1
2022 pension expense
(service cost)

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

two- year period.

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 beneficiary
may opt to receive an annuity payment in lieu of a lump-sum pay-
ment. If this option is exercised, the capital is converted to an
annuity payment, taking into account the average “iBoxx Cor-
porates 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 contributionbased pension plan

A.22

Capital components

Pension account

Term (years)

When he was first appointed, the chairman of the Board of Man-
agement was granted a final-salary-based direct pension com-
mitment then customary in the company, which provides for
benefits in the case of permanent invalidity, death or retirement.
His pension commitment provides for retirement benefits to be
granted at the earliest from the age of 55. He has not availed
himself of this provision. His pension is geared towards annuity
payments. He also has the option 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 in-
come consists of the base salary computed on the basis of the
average salary over the last twelve calendar months of employ-
ment. The chairman of the Board of Management attained the
maximum pension level (50 %) after ten years of service. Subse-
quent retirement benefits increase or decrease to reflect changes
in the consumer price index in Germany.

Deutsche Post DHL Group — 2018 Annual Report

Provisions to cap severance payments pursuant to the
Corporate Governance Code recommendation, change of
control provisions and postcontractual noncompete
clauses
In accordance with the recommendation of the Code, Board of
Management contracts contain a provision stipulating that in the
event of premature termination of a Board of Management mem-
ber’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 in-
cluding fringe benefits (severance payment cap). The severance
payment cap is calculated exclusive of any special remuneration
or the value of rights allocated, or exercised, from LTIPs.

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 Management contract (right to early
termination).

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 Übernahme-
gesetz (WpÜG – German Securities Acquisition and Takeover Act)
via possession of at least 30 % of the voting rights, including the
voting rights attributable to such shareholder by virtue of acting
in concert with other shareholders as set forth in section 30 of
the WpÜG or if a control agreement has been concluded with the
company as a dependent entity in accordance with section 291 of
the Aktiengesetz (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 en-
tity, as determined by the agreed conversion rate, is less than
50 % of the value of the company.

In the event that the right to early termination is exercised or
a Board of Management contract is terminated by mutual con-
sent within nine months of the change in control, the Board of
Manage ment member is entitled to payment to compensate the
remaining term of their Board of Management contract. Such
payment is limited to 150 % of the severance payment cap (see
above for the calculation) pursuant to the Code recommendation.
The amount of the payment is reduced by 25 % if the Board of
Manage ment member has not reached the age of 60 upon leav-
ing the company. If the remaining term of the Board of Manage-
ment contract is less than two years and the Board of Manage-
ment member has not reached the age of 62 upon leaving the
company, the payment will correspond 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 of 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
Manage ment members receive 100 % of their last contractually
stipulated 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 is deducted from any severance pay-
ments or pension payments. Prior to, or concurrent with, cessa-
tion 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 obligation to
pay compensation due to a restraint on competition six months
after receipt of such declaration.

Other
Jürgen Gerdes stepped down from his position as a member of
the company’s Board of Management as at 12 June 2018 and left
the company as at 30 June 2018.

Remuneration of the Group Board of Management
in financial year 2018
The remuneration paid to members of the Board of Management
in financial year 2018 totalled €11.37 million (previous year:
€11.57 million) in accordance with the applicable accounting
standards. Non- performance-related components accounted for
€8.12 million (previous year: €7.57 million) and €3.25 million was
attributable to the annual bonus paid as a performance-related
component (previous year: €4.00 million); the performance cri-
teria for the annual bonus are presented on
page 26. An addi-
tional €0.58 million of the annual bonus was transferred to the
medium-term component (deferral) and will be paid out in 2021
subject to the condition that the required EAC, an indicator of
sustainability, be reached.

In financial year 2018, the Board of Management members
were granted a total of 1,191,840 SAR s, which at the issue date
were valued at €5.43 million (previous year: €7.19 million).

The total remuneration paid to Board of Management mem-
bers is presented in the tables below. In addition to the applicable
accounting principles, the Code recommendations were also
taken into account.

Group Management Report — GENERAL INFORMATION — Remuneration Report

Remuneration granted in accordance with the German Corporate Governance Code

A.24

€

Base salary

Fringe benefits

Total

Frank Appel
Chairman 1

Ken Allen
Express

2017

2018 Min. 2018 Max. 2018

2017

2018 Min. 2018 Max. 2018

1,978,911

2,060,684

1,000,913

1,005,795

35,294

52,889

98,197

102,716

2,014,205

2,113,573

1,099,110

1,108,511

Annual bonus: one-year share

791,564

824,274

Multi-year variable remuneration

2,754,138

2,369,807

LTIP with four-year waiting period

1,962,574

1,545,533

Annual bonus: deferral with three-year
waiting period

791,564

824,274

1,030,342

400,365

402,318

4,894,125

1,406,175

1,324,353

3,863,783

1,005,810

922,035

1,030,342

400,365

402,318

502,898

4,190,947

3,688,049

502,898

Total

5,559,907

5,307,654

2,113,573

8,038,040

2,905,650

2,835,182

1,108,511

5,802,356

Pension expense (service cost)

1,041,772

1,121,934

332,801

345,640

Total remuneration

6,601,679

6,429,588

3,235,507

9,159,974

3,238,451

3,180,822

1,454,151

6,147,996

Cap on the maximum payment amount
(excluding fringe benefits) from
remuneration granted in 2018

8,000,000

5,000,000

Jürgen Gerdes
Corporate Incubations
(until 12 June 2018)

John Gilbert
Supply Chain

Base salary

Fringe benefits

Total

Annual bonus: one-year share

Multi-year variable remuneration

LTIP with four-year waiting period

Annual bonus: deferral with three-year
waiting period

Total

Pension expense (service cost)

2017

2018 Min. 2018 Max. 2018

2017

2018 Min. 2018 Max. 2018

1,005,795

452,608

912,500

930,000

36,289

18,053 2

18,053

173,167

264,539

1,042,084

402,318

1,408,128

1,005,810

470,661

181,043

–

402,318

181,043

2,852,530

344,288

832,747

373,407

470,661

1,085,667

1,194,539

–

226,304

365,000

372,000

226,304

1,295,011

1,224,553

–

930,011

852,553

226,304

365,000

372,000

465,000

3,875,124

3,410,124

465,000

470,661

923,269

2,745,678

2,791,092

1,194,539

5,534,663

373,407

273,132

310,989

Total remuneration

3,196,818

1,206,154

844,068

1,296,676

3,018,810

3,102,081

1,505,528

5,845,652

Cap on the maximum payment amount
(excluding fringe benefits) from remunera-
tion granted in 2018

n. a.

5,000,000

Deutsche Post DHL Group — 2018 Annual Report

Melanie Kreis
Finance

Thomas Ogilvie
Human Resources and Corporate Incubations
(since 1 September 2017) 3

2017

2018 Min. 2018 Max. 2018

2017

2018 Min. 2018 Max. 2018

871,667

930,000

238,333

715,000

17,029

17,003

3,159

14,896

Base salary

Fringe benefits

Total

Annual bonus: one-year share

Multi-year variable remuneration

1,208,673

1,239,978

LTIP with four-year waiting period

860,006

867,978

Annual bonus: deferral with three-year
waiting period

348,667

372,000

888,696

348,667

947,003

372,000

947,003

241,492

465,000

95,333

3,936,876

810,353

3,471,876

715,020

465,000

95,333

286,000

729,896

286,000

881,836

595,836

729,896

357,500

2,740,738

2,383,238

357,500

Total

2,446,036

2,558,981

947,003

5,348,879

1,147,178

1,897,732

729,896

3,828,134

Pension expense (service cost)

276,923

317,375

–

247,753

Total remuneration

2,722,959

2,876,356

1,264,378

5,666,254

1,147,178

2,145,485

977,649

4,075,887

Cap on the maximum payment amount
(excluding fringe benefits) from
remuneration granted in 2018

Base salary

Fringe benefits

Total

Annual bonus: one-year share

Multi-year variable remuneration

LTIP with four-year waiting period

Annual bonus: deferral with three-year
waiting period

Total

Pension expense (service cost)

Total remuneration

Cap on the maximum payment amount
(excluding fringe benefits) from
remuneration granted in 2018

5,000,000

n. a.

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

2017

417,083

29,812

446,895

166,833

881,853

715,020

166,833

1,495,581

–

1,495,581

2018

715,000

53,390

768,390

286,000

929,506

643,506

286,000

1,983,896

247,556

2,231,452

Min. 2018

715,000

53,390

768,390

247,556

1,015,946

Max. 2018

715,000

53,390

768,390

357,500

2,931,500

2,574,000

357,500

4,057,390

247,556

4,304,946

n. a.

1 Also responsible for Post - eCommerce - Parcel since 4 April 2018.
2 Mr Gerdes also received a payment of €4,288,805 as compensation for his rights under his employment contract.
3 Responsible for Corporate Incubations since 13 June 2018.

Group Management Report — GENERAL INFORMATION — Remuneration Report

Remuneration paid in accordance with the German Corporate Governance Code

€

Base salary

Fringe benefits

Total

Annual bonus: one-year share

Multi-year variable remuneration

Annual bonus: deferral from 2015

Annual bonus: deferral from 2016

2011 LTIP tranche

2012 LTIP tranche

2013 LTIP tranche

Other

Total

Pension expense (service cost)

Total

Base salary

Fringe benefits

Total

Annual bonus: one-year share

Multi-year variable remuneration

Annual bonus: deferral from 2015

Annual bonus: deferral from 2016

2011 LTIP tranche

2012 LTIP tranche

2013 LTIP tranche

Other

Total

Pension expense (service cost)

Total

A.25

Jürgen Gerdes
Corporate Incubations
(until 12 June 2018)

Frank Appel
Chairman 1

Ken Allen
Express

2017

2018

2017

2018

2017

2018

1,978,911

2,060,684

1,000,913

1,005,795

452,608

35,294

52,889

98,197

102,716

36,289

18,053 3

2,014,205

2,113,573

1,099,110

1,108,511

1,042,084

470,661

952,351

0 2

487,945

195,124

464,074

36,888

5,844,840

4,958,262

4,492,254

482,147

4,958,436

478,406

288,300

–

203,680

–

167,256

–

950,662

838,025

–

4,718,515

4,007,600

1,808,056

–

2,480,518

–

482,147

–

2,422,380

2,368,800

–

478,406

–

8,811,396

7,071,835

6,079,309

1,785,782

6,464,594

985,955

1,041,772

1,121,934

332,801

345,640

344,288

373,407

9,853,168

8,193,769

6,412,110

2,131,422

6,808,882

1,359,362

John Gilbert
Supply Chain

Melanie Kreis
Finance

Thomas Ogilvie
Human Resources and
Corporate Incubations
(since 1 September 2017) 5

2017

2018

2017

2018

2017

2018

912,500

930,000

871,667

930,000

238,333

715,000

173,167

264,539

17,029

17,003

3,159

14,896

1,085,667

1,194,539

888,696

947,003

241,492

729,896

434,806

122,295

405,892

0 4

116,188

96,275

156,406

389,263

120,656

364,964

156,406

–

120,656

–

389,263

–

364,964

–

1,676,879

1,706,097

1,415,244

1,311,967

357,680

826,171

273,132

310,989

276,923

317,375

–

247,753

1,950,011

2,017,086

1,692,167

1,629,342

357,680

1,073,924

Deutsche Post DHL Group — 2018 Annual Report

Base salary

Fringe benefits 6

Total

Annual bonus: one-year share

Multi-year variable remuneration

Annual bonus: deferral from 2015

Annual bonus: deferral from 2016

2011 LTIP tranche

2012 LTIP tranche

2013 LTIP tranche

Other

Total

Pension expense (service cost)

Total

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

2017

417,083

29,812

446,895

196,780

–

643,675

–

643,675

2018

715,000

53,390

768,390

129,773

–

898,163

247,556

1,145,719

1 Also responsible for Post - eCommerce - Parcel since 4 April 2018.
2 With the approval of the Supervisory Board, Frank Appel waived an annual bonus (including deferral) resulting from the determination of target achievement

for financial year 2018.

3 Mr Gerdes also received a payment of €4,288,805 as compensation for his rights under his employment contract.
4 With the approval of the Supervisory Board, Melanie Kreis waived an annual bonus (including deferral) resulting from the determination of target achievement

for financial year 2018.

5 Responsible for Corporate Incubations since 13 June 2018.
6 Mr Scharwath also received a payment of €750,664 in 2017 and a payment of €783,460 in 2018 as compensation for the lapsing of long-term remuneration

rights granted by his previous employer.

Remuneration in accordance with the HGB (DRS 17)

€

Base salary

Fringe benefits

Annual bonus: one-year share

Annual bonus: deferral from 2015

Annual bonus: deferral from 2016

2017 LTIP tranche

2018 LTIP tranche

Total

Base salary

Fringe benefits

Annual bonus: one-year share

Annual bonus: deferral from 2015

Annual bonus: deferral from 2016

2017 LTIP tranche

2018 LTIP tranche

Total

Frank Appel
Chairman 1

Ken Allen
Express

A.26

Jürgen Gerdes
Corporate Incubations
(until 12 June 2018)

2017

2018

2017

2018

2017

2018

1,978,911

2,060,684

1,000,913

1,005,795

452,608

35,294

52,889

98,197

102,716

36,289

952,351

288,300

0 2

–

487,945

195,124

464,074

203,680

–

167,256

18,053 3

36,888

–

950,662

–

482,147

–

478,406

1,962,574

–

1,005,810

–

1,005,810

–

1,545,533

–

922,035

–

5,217,430

4,609,768

2,796,545

2,707,817

2,679,224

5,274,760

John Gilbert
Supply Chain

Melanie Kreis
Finance

Thomas Ogilvie
Human Resources and
Corporate Incubations
(since 1 September 2017) 5

2017

2018

2017

2018

2017

2018

912,500

930,000

871,667

930,000

238,333

715,000

173,167

264,539

17,029

17,003

3,159

434,806

122,295

405,892

156,406

–

120,656

0 4

–

389,263

–

364,964

116,188

–

930,011

–

860,006

–

715,020

14,896

96,275

–

852,553

–

867,978

–

595,836

2,606,890

2,558,650

2,275,250

2,179,945

1,072,700

1,422,007

Group Management Report — GENERAL INFORMATION — Remuneration Report

Base salary

Fringe benefits 6

Annual bonus: one-year share

Annual bonus: deferral from 2015

Annual bonus: deferral from 2016

2017 LTIP tranche

2018 LTIP tranche

Total

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

2017

417,083

29,812

196,780

–

715,020

–

2,109,359

2018

715,000

53,390

129,773

–

643,506

2,325,129

for financial year 2018.

rights granted by his previous employer.

Contributionbased pension commitments: individual breakdown

A.27

€

Ken Allen

John Gilbert

Melanie Kreis

Thomas Ogilvie (since 1 September 2017)

Tim Scharwath (since 1 June 2017)

Total

Total contribution
for 2017

Total contribution
for 2018

Present value
(DBO) as at
31 Dec. 2017

Present value
(DBO) as at
31 Dec. 2018

341,775

301,000

83,417

145,979

352,028

325,500

250,250

2,903,991

1,020,273

1,359,361

136,411

146,294

3,364,734

1,330,176

1,719,088

392,850

404,952

1,173,171

1,503,528

5,566,330

7,211,800

Finalsalarybased legacy pension commitments: individual breakdown

Pension commitments

Pension level
on 31 Dec. 2017
%

Pension level
on 31 Dec. 2018
%

Maximum
pension level
%

Frank Appel, Chairman

Jürgen Gerdes (until 12 June 2018)

Total

A.28

Present value
(DBO) as at
31 Dec. 2018
€

21,563,074

11,895,398 1

33,458,472

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

20,171,783

8,973,098

29,144,881

1 The increase in the present value (DBO) in the case of Mr Gerdes is largely due to the reduction in the financing period for his pension commitments

as he left the company.

Benefits for former Board of Management members
Benefits paid to former members of the Board of Management
or their surviving dependants amounted to €9.6 million in finan-
cial year 2018 (previous year: €7.0 million). The defined benefit
obligation (DBO) for current pensions calculated under IFRS s
was €94 million (previous year: €95 million).

REMUNERATION OF THE SUPERVISORY BOARD

Remuneration for the members of the Supervisory Board is gov-
erned 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).

Deutsche Post DHL Group — 2018 Annual Report

The Supervisory Board chairman and the Supervisory Board
committee chairs receive an additional 100 % of the remunera-
tion, 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 committees, or act as chair or deputy
chair, for part of the financial 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

Remuneration paid to Supervisory Board members

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 2018 totalled €2,733,167 (previous
year: €2,641,000). Table A.29 shows both totals, broken down as
the remuneration paid to each Supervisory Board member.

€

Board members

Prof. Dr Wulf von Schimmelmann (Chair) (until 24 April 2018)

Dr Nikolaus von Bomhard (Chair since 24 April 2018)

Andrea Kocsis (Deputy Chair)

Rolf Bauermeister

Dr Günther Bräunig (since 17 March 2018)

Dr Mario Daberkow (since 24 April 2018)

Ingrid Deltenre

Jörg von Dosky

Werner Gatzer

Gabriele Gülzau (since 24 April 2018)

Thomas Held (since 24 April 2018)

Mario Jacubasch (since 24 April 2018)

Prof. Dr Henning Kagermann

Thomas Koczelnik

Anke Kufalt (until 24 April 2018)

Ulrike Lennartz-Pipenbacher

Simone Menne

Roland Oetker

Andreas Schädler (until 24 April 2018)

Sabine Schielmann (until 24 April 2018)

Dr Ulrich Schröder (until 6 February 2018)

Dr Stefan Schulte

Stephan Teuscher 1

Helga Thiel (until 30 June 2017)

Stefanie Weckesser

Prof. Dr-Ing. Katja Windt

2017

2018

Fixed
component

Attendance
allowance

Fixed
component

Attendance
allowance

Total

315,000

72,917

245,000

140,000

–

70,000

21,000

336,000

7,000

21,000

17,000

–

6,000

79,917

266,000

157,000

–

76,000

91,875

253,750

245,000

140,000

55,417

49,583

94,792

70,000

140,000

16,000

156,000

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

–

10,000

21,000

6,000

4,000

11,000

15,000

6,000

13,000

6,000

–

115,000

196,000

76,000

39,000

116,000

155,000

76,000

102,083

153,000

118,000

58,500

49,583

74,375

49,583

105,000

175,000

20,417

70,000

105,000

140,000

20,417

8,750

140,000

105,000

–

15,000

137,500

115,208

6,000

76,000

70,000

7,000

26,000

22,000

5,000

7,000

15,000

10,000

19,000

8,000

12,000

8,000

15,000

27,000

2,000

10,000

17,000

19,000

1,000

2,000

18,000

–

20,000

10,000

A.29

Total

98,875

279,750

271,000

162,000

60,417

56,583

109,792

80,000

159,000

57,583

86,375

57,583

120,000

202,000

22,417

80,000

122,000

159,000

21,417

22,417

8,750

158,000

123,000

–

135,208

80,000

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 non-financial report

The Annual Corporate Governance Statement can be found at
Corporate Governance Report,

dpdhl.com/en/investors and in the

page 83 ff. The summarised, separate non-financial report for

Deutsche Post AG and the Group with the disclosures in accord-
ance with sections 289b ff. and 315b f. of the HGB can be found
in the

Corporate Responsibility Report, dpdhl.com/crreport2018.

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

REPORT ON
ECONOMIC POSITION
Overall assessment of the Group’s
economic position

Deutsche Post DHL Group was able to increase consolidated rev-
enue in financial year 2018, although strong currency effects had
a significant negative impact. After we had adjusted our earnings
forecast for the full year in June 2018 for the PeP division from

around €1.50 billion to around €0.6 billion and for the Group
from around €4.15 billion to around €3.2 billion, EBIT was in line
with our adjusted expectations. In the Post - eCommerce - Parcel
division, restructuring expenses, in particular, had a significant
negative impact on earnings. Express continued to grow strongly
and Global Forwarding, Freight made visible progress in its op-
erational business. Supply Chain earnings were impacted by neg-
ative one-off effects. Capital expenditure was again higher than
in the previous year, whilst free cash flow fell below the prior-year
figure, as expected since June. All in all, the Board of Manage-
ment views the Group’s financial position as being sound.

Forecast / actual comparison

Targets 2018

EBIT

• Group: around €3.2 billion 1.
• PeP division: around €0.6 billion 1.
• DHL divisions: around €3.0 billion.
• Corporate Functions: around €–0.42
billion; of which Corporate Center/
Other: around €–0.35 billion.

Results 2018

EBIT

• Group: €3.2 billion.
• PeP division: €0.7 billion.
• DHL divisions: €2.9 billion.
• Corporate Functions: €–0.41 billion.

A.30

Targets 2019

EBIT

• Group: €3.9 billion to €4.3 billion
• Post & Paket Deutschland:
€1.0 billion to €1.3 billion

• DHL divisions: €3.4 billion to €3.5 billion
• Corporate Functions:
around €–0.5 billion

EAC

• Will decrease due to initial application

• Decreased due to initial application

• Will develop in line with EBIT and

of IFRS 16.

Cash flow

of IFRS 16.

Cash flow

increase.

Cash flow

• Free cash flow of at least €1.0 bil lion

(excluding the debt-financed renewal
of the Express intercontinental fleet) 1.

• Free cash flow of €1.2 billion

(excluding the debt-financed renewal
of the Express intercontinental fleet).

• Free cash flow to exceed €0.5 billion
(including the debt-financed renewal
of the Express intercontinental fleet).

Capital expenditure (capex)

• Increase investments (excluding

leases) to around €2.5 billion plus
around €0.2 billion for the debt-
financed renewal of the Express
intercontinental fleet. 2

• Invested (excluding leases): around
€2.5 billion plus around €0.2 billion
for the debt-financed renewal of the
Express intercontinental fleet.

• Invest (excluding leases) around

€3.7 billion (including the
debt-financed renewal of the
Express intercontinental fleet).

Dividend distribution

• Pay out 40 % to 60 % of net profit

• Proposal: pay out 55% of adjusted net

• Pay out 40 % to 60 % of net profit

as dividend.

profit as dividend.

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 76 %.

• 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 one index point to 33.

• CEX will increase by another index point.

1 Forecast lowered during the year.
2 Forecast raised during the year.

Deutsche Post DHL Group — 2018 Annual Report

Economic parameters

Global economy continues to record solid growth
The world economy posted solid growth in 2018 with economic
momentum peaking at mid-year. In the industrial countries,
average GDP growth declined to 2.3 %. Growth in the emerging
markets slowed slightly to 4.6 %. Total global economic output
was up by 3.7 %, somewhat less than in the previous year. Global
trade again experienced substantial growth in terms of the value
of goods and services, although the increase was not as strong
as in 2017 (IMF: 4.0 %; OECD 3.9 %).

Global economy: growth indicators, 2018

A.31

China

Japan

USA

Euro zone

Germany

Gross
domestic
product
(GDP)

6.6

0.7

2.9

1.8

1.5

Export

Domestic
demand

9.9

3.1

4.3

2.8

2.4

n. a.

0.7

3.1

1.7

1.8

Data estimated, as at 1 February 2019.

Source: Postbank, national statistics.

The Asian economies again provided the strongest economic
momentum. At 6.5 %, GDP growth was at the same level as in the
previous year. However, growth in China slowed to 6.6 % (previous
year: 6.9 %). Whilst Chinese exports expanded considerably, in-
dustrial production lost ground. In Japan, the upwards economic
trend lessened significantly. Private consumption and gross fixed
capital formation rose only moderately, and foreign trade sup-
plied no notable momentum despite solid growth figures in ex-
ports. All in all, GDP growth fell to 0.7 % (previous year: 1.9 %).

In the USA, the economy sped up rapidly. Businesses signifi-
cantly expanded investment activity, although private consump-
tion remained the main growth driver. Foreign trade put a slight
damper on growth, despite the fact that export activity increased.
Overall GDP growth accelerated to 2.9 % (previous year: 2.2 %),
whilst the unemployment rate dropped again significantly from
its already very low level.

In the euro zone, the economic upswing weakened in the
year under review. Domestic demand continued to provide
strong momentum, however. In particular, gross fixed capital for-
mation increased significantly. Growth in private consumption
slowed somewhat but maintained a solid level. Government
spending increased moderately. Foreign trade continued to con-
tribute to economic growth, albeit to a much lesser extent than
in the previous year. The decrease in foreign trade growth was
ultimately responsible for the decline in GDP growth to 1.8 % (pre-

vious year: 2.4 %). The average unemployment rate dropped sig-
nificantly to 8.2 % in line with the continuing upturn.

The German economy slowed in the second half of 2018. Al-
though significant momentum continued to come from gross
fixed capital formation, growth in private consumption lessened
notably despite another strong increase in income levels. In add-
ition, the rise in government spending lagged behind the figures
for 2017. However, it was exports that took the biggest hit against
the backdrop of an increasingly difficult international climate. All
in all, foreign trade was a drag on economic growth after having
made a positive contribution in the previous year. This situation
led to an overall decline in GDP growth to 1.5 % (previous year:
2.2 %). The unemployment rate nonetheless fell to 5.2 % on an
annual average (previous year: 5.7 %), with the average number
of employed persons rising to 44.8 million (previous year:
44.3 million).

Crude oil price rises on annual average
By the end of 2018, the price for one barrel of Brent Crude had
dropped to US$50.56 (previous year: US$66.73). However, the
average price of oil for the year was around 31 % higher than in
the previous year at around US$71 per barrel. Over the course of
the year, the price fluctuated between US$50 and US$86. After
peaking in October, increasing concerns about the global econ-
omy pushed crude oil prices down substantially during the rest
of the year.

Euro weakens slightly due to declining euro zone momentum
The European Central Bank (ECB) adhered to the cautious change
of direction in its monetary policy initiated in 2018. The Bank
reduced its monthly bond-buying volumes from €30 billion at the
start of the year to €15 billion starting in October before phasing
out the quantitative easing programme entirely at the end of the
year. Euro zone monetary policy nonetheless remained quite
expansionary. The ECB left its key refinancing rate at 0.00 % and
the deposit rate for the year as a whole was –0.40 %. By contrast,
the US Federal Reserve tightened its monetary policy. Against the
backdrop of strong economic growth and falling unemployment
rates, the Fed raised its key interest rate in four steps of 0.25
percentage points each to a range of 2.25 % to 2.50 % at year-end.
The euro weakened slightly against the US dollar in 2018 in
light of the increasing divergence in key interest rates and lower
economic momentum in the euro zone. At the end of the year, the
euro was trading at just under US$1.15, a year-on-year decline of
4.7 %. The pound-to-euro exchange rate fluctuated only min-
imally in 2018 despite the fraught negotiations on the United
Kingdom’s exit from the EU and uncertainty as to whether the
deal would pass the UK parliament. Overall, the euro gained 1.1 %
on the pound sterling in 2018.

Group Management Report — REPORT ON ECONOMIC POSITION — Economic parameters

Significant rise in risk premiums for corporate bonds
The euro zone bond markets were negatively impacted by polit-
ical uncertainty and changing economic expectations during
2018. Capital market interest rates initially rose at the start of the
year. However, increasing risk at an international level led to a
subsequent decrease in investor risk affinity. This effect was ex-
acerbated as the economy weakened toward the end of the year,
leading to a significant decrease in capital market interest rates.
By year-end 2018, yields on ten-year German government bonds
had fallen to 0.24 % (previous year: 0.43 %). By contrast, yields on
ten-year US government bonds were up by 0.28 percentage
points year-on-year to 2.68 % at the end of the year. Risk premi-
ums for investment grade corporate bonds were well above the
year-end 2017 level at the end of 2018.

Stock market prices saw noticeable losses during the course
of 2018. European dividend levels declined due to a variety of
political risks, particularly from mid-year onward. The downward
trend sped up in the autumn due to economic concerns. In add-
ition, corporate profit forecasts saw successive downward cor-
rections. The DAX ended the year at 10,559 points, a year-on-

year loss of 18.3 %. The EURO STOXX 50 registered a decline of
14.3 %. In the US, the broad-market S & P 500 did not come under
any significant pressure until near the end of the year and thus
fell by only 6.2 % year-on-year.

The DAX ended 2018
with a yearonyear loss of

18.3%

International trade continues to grow
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 4.8 % in the year under review (previous year:
5.1 %). Air and ocean freight volumes grew at roughly the same
pace. Imports to Latin America and Asia evidenced the highest
growth rates.

Trade volumes: compound annual growth rate, 2017 to 2018

A.32

Export

Asia Pacific

Europe

Latin America

MEA (Middle East and Africa)

North America

Import

Asia Pacific

Europe

Latin America

MEA (Middle East
and Africa)

North America

5.3

1.5

10.3

11.0

6.8

3.8

5.3

1.9

10.9

7.8

8.6

6.8

0.0

11.5

8.0

0.0

3.1

– 5.3

5.6

6.2

4.2

3.3

2.3

7.0

24.2

Source: Seabury Consulting, as at 28 November 2018; 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 Post-
gesetz (PostG – German Postal Act). Further information regard-
ing this issue and legal risks is contained in
note 46 to the con

solidated financial statements.

Deutsche Post DHL Group — 2018 Annual Report

Significant events

In order to counteract the clear negative earnings trend in the
Post - eCommerce - Parcel (PeP) division, in early June, the Board
of Management decided upon measures to secure sustainable
earnings growth in the PeP division. The measures decided upon
are designed to further improve productivity, indirect costs and
yield management in the Post and Parcel business. €400 million
was already spent during the year under review on an early re-
tirement programme for civil servants in overhead areas. In ad-
dition, as announced in June, around €100 million was invested
in further restructuring measures. In June, we also adjusted our
forecasts for EBIT, EAC and free cash flow for the current financial
year to reflect the above. How these key figures are calculated is
described in

Management, page 21 ff.

At the end of October, we decided to sell our supply chain
business in China, Hong Kong and Macao as part of a strategic
partnership with the logistics service provider S. F. Holding, China.
In return, we shall receive a non-recurring payment of around
€700 million and an annual amount linked to revenue over the
next ten years. All of the company’s assets and liabilities were
reclassified as held for sale.

Leases are presented more extensively as a result of the ini-
tial application of IFRS 16,
note 4 to the consolidated financial state-
ments. This has a significant impact upon the presentation of the
Group’s net assets, financial position and results of operations.

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 non-controlling interests.
3 Basic earnings per share.
4 Proposal.

A.33

2017

60,444

3,741

6.2

2,175

2,713

2.24

1.15

2018

Q 4 2017

Q 4 2018

61,550

3,162

5.1

716

2,075

1.69

1.15 4

16,109

1,181

16,926

1,134

7.3

796

837

0.69

–

6.7

509

813

0.66

–

€ m

€

Portfolio and reporting changed
To reflect the importance of state-of-the-art mobility solutions
such as our StreetScooter electric vehicles and other techno-
logical innovations, we have transferred these activities out of the
Post - eCommerce - Parcel division and combined them in the
new Corporate Incubations board department. The new board
department acts as an incubator for mobility solutions, digital
platforms and automation. The results of Corporate Incubations
and Corporate Center/Other are now presented together in
Corporate Functions. The prior-period amounts were adjusted
accordingly.

In the second quarter, we acquired the Colombian Suppla
Group, a specialist in transport, warehousing and packaging ser-

vices. The acquisition is intended to strengthen DHL Supply
note 2 to the consolidated finan
Chain’s presence in Latin America,

cial statements.

In the third quarter, we sold 50 % of our UK start-up Flexible
Lifestyle Employment Company. The company provides digital
solutions for staff recruitment in the logistics sector.

In the fourth quarter, we sold our 40 % interest in Air Hong
Kong to the majority shareholder Cathay Pacific and, at the same
time, agreed a 15-year partnership.

In the Post - eCommerce - Parcel division, we sold our online
supermarket business, Allyouneed Fresh, to Delticom AG, Hanover.

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

Currency effects weigh on revenue growth
Consolidated revenue rose by €1,106 million to €61,550 million
in financial year 2018, although currency effects had a consider-
able negative impact of €1,466 million. The proportion of rev-
enue generated abroad fell slightly from 69.6 % to 69.5 %. Rev-
enue for the fourth quarter of 2018 was up by €817 million to
€16,926 million. It was also reduced by currency effects of
€63 million.

Revenue, 2018
€m

61,550

2017
60,444

Change
+ 1.8 %

Other operating income dropped from €1,971 million to
€1,914 million in the year under review. Amongst other things,
this was due to higher income from the disposal of non-current
assets included in this item in the previous year.

Significant increase in depreciation, amortisation and
impairment losses
Materials expense decreased by €1,102 million to €31,673 mil-
lion. The decline is attributable mainly to currency effects of
€799 million and the elimination of lease expenses as a result of
the initial application of IFRS 16. Transport and fuel costs, on the
other hand, showed an increase. At €20,825 million, staff costs
exceeded the prior-year figure (€20,072 million), largely on ac-
count of new hires and provisions recognised for the early retire-
ment programme in the Post - eCommerce - Parcel division. Cur-
rency effects reduced the staff cost figure by €335 million. The
application of IFRS 16, in particular, caused depreciation, amort-
isation and impairment losses to rise sharply, by €1,821 million
to €3,292 million. Other operating expenses rose from €4,526 mil-
lion to €4,597 million, amongst other things because of negative
effects from customer contracts amounting to €49 million.

Changes in revenue, other operating income and operating expenses, 2018

A.34

€ m

+ / – %

Revenue

Other operating income

Materials expense

61,550

1,914

31,673

1.8 • Currency effects reduce figure by €1,466 million

–2.9 • Prior-year figure included higher income from the disposal of non-current assets

–3.4

• Currency effects reduce figure by €799 million
• Reduction due to initial application of IFRS 16
• Higher transport and fuel costs

Staff costs

20,825

3.8

• Rise in headcount
• Expense of €400 million for early retirement programme in the PeP division
• Currency effects reduce figure by €335 million

Depreciation, amortisation and
impairment losses

3,292

> 100 • Increase due to initial application of IFRS 16

Other operating expenses

4,597

1.6 • Figure includes negative effect from customer contracts amounting to €49 million

Consolidated EBIT down by 15.5 %
In the year under review, consolidated EBIT stood at €3,162 mil-
lion, 15.5 % below the previous year’s level (€3,741 million). EBIT
in the fourth quarter was down €47 million to €1,134 million. Net
finance costs widened from €–411 million to €–576 million in full-
year 2018, due primarily to interest expenses on lease liabil-
ities. Profit before income taxes declined by €744 million to
€2,586 million. Income taxes also fell, dropping by €115 million
to €362 million.

EBIT 2018
€m

3,162

2017
3,741

Change
– 15.5 %

Deutsche Post DHL Group — 2018 Annual Report

Consolidated net profit below prioryear figure
Consolidated net profit for the period fell from €2,853 million to
€2,224 million in financial year 2018. Of this amount, €2,075 mil-
lion was attributable to Deutsche Post AG shareholders and
€149 million to non-controlling interest shareholders. Basic earn-
ings per share declined from €2.24 to €1.69 and diluted earnings
per share from €2.15 to €1.66.

Dividend of €1.15 per share proposed
Our finance strategy calls for a payout of 40 % to 60 % of net prof-
its as dividends as a general rule. The Board of Management and
the Supervisory Board will therefore propose a dividend of €1.15
per share for financial year 2018 to shareholders at the Annual
General Meeting on 15 May 2019 (previous year: €1.15). The pay-
out ratio in relation to consolidated net profit attributable to the
shareholders of Deutsche Post AG amounts to 68.4%. Adjusted
for one-off effects, the payout ratio is 55.4 %. The dividend yield
based upon the year-end closing price for our shares is 4.8%. The
dividend will be distributed on 20 May 2019 and is tax-free for
shareholders resident in Germany. It does not entitle recipients
to a tax refund or a tax credit.

Total dividend and dividend per nopar value share

A.35

EBIT after asset charge (EAC) declines significantly
EAC declined from €2,175 million to €716 million in 2018. In
addition to the steep decrease in EBIT, the imputed asset charge
rose sharply due to the lease assets recognised additionally in
accordance with IFRS 16, as a result of which EAC fell at a greater
rate than EBIT.

EBIT after asset charge (EAC)

€ m

EBIT

Asset charge

EAC

2017

3,741

–1,566

2,175

2018

3,162

–2,446

716

A.36

+ / – %

–15.5

– 56.2

– 67.1

The net asset base on the reporting date rose by around €11.2 bil-
lion to €28,594 million, due mainly to the additional lease assets
recognised as property, plant and equipment. This item was in-
creased further by investments in IT systems, the purchase of
freight aircraft, and replacement and expansion investments in
warehouses, sorting systems and the vehicle fleet. Net working
capital rose year-on-year.

Operating provisions declined year-on-year, whereas other

non-current assets and liabilities rose.

€m

846

0.70

968

0.80

1,030

1,027

0.85

1,409

1,419

Net asset base (consolidated) 1

1.15

€ m

1,270

1.05

Intangible assets and property,
plant and equipment

Net working capital

Operating provisions

(excluding provisions for
pensions and similar
obligations)

Other non-current assets

and liabilities

Net asset base

31 Dec.
2017

31 Dec.
2018

A.37

+ / – %

20,594

–1,095

31,254

– 919

51.8

16.1

–2,089

–1,865

10.7

124

17,441

28,594

> 100

63.9

1 Assets and liabilities as described in the segment reporting,

note 10 to the

consolidated financial statements.

18 1

Dividend per no-par value share (€)

1 Proposal.

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

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.38

2017

3,135

119

3,297

–2,091

–1,087

2018

3,017

–20

5,796

–2,777

–3,039

Q 4 2017

Q 4 2018

3,135

1,596

1,527

–1,042

1,111

3,017

809

2,652

–1,481

–362

Financial management is a centralised function in the Group
The Group’s financial management activities include managing
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 headquarters in Bonn, which is supported by
three Regional Treasury Centres in Bonn (Germany), Weston
(Florida, USA) and Singapore. The regional centres act as inter-
faces between Group headquarters and the operating companies,
advise the companies on financial management issues and en-
sure 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 finan-
cial stability and flexibility over the long term. In order to main-
tain its unrestricted access to the capital markets, the Group
continues to aim for a credit rating appropriate to the sector.

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 share-
holders, the strategy also takes creditor requirements into ac-
count. 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.

A key component of this strategy is having a target rating of
“BBB+”, which is managed via a dynamic performance metric
known as funds from operations to debt (FFO to debt). Our strat-
egy additionally includes a long-term dividend policy and clear
priorities regarding excess liquidity, which is to be used to distrib-
ute special dividends or to buy back shares.

Finance strategy

A.39

Credit rating

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

• Pay out special dividends or implement share buyback programme.

Debt portfolio

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

Group

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

Deutsche Post DHL Group — 2018 Annual Report

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)

A.40

2017

2018

3,418

6,079

160

1,641

567

5,518

526

309

5,914

Reported financial liabilities

6,050

16,462

Financial liabilities at fair value through

profit or loss

Adjustment for operating leases

Adjustment for pensions

Surplus cash and near-cash investments 1

Debt

FFO to debt (%)

9,406

4,323

2,503

4,110

2,683

17,232

17,851

32.0

33.1

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 cal-
culation 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 pension liabilities funded by provisions.

Although the debt level rose, the FFO to debt performance
metric saw a year-on-year increase in the year under review be-
cause funds from operations increased at a faster pace than debt.
Funds from operations rose by €396 million to €5,914 mil-
lion. Operating cash flow before changes in working capital in-
creased significantly due to the further funding of pension obli-
gations in the previous year. In addition, the application of IFRS 16
increased operating cash flow and, at the same time, reduced the
adjustment for operating leases. The amount of interest paid
went up because it now includes interest paid on leases. The ad-
justment for pensions declined year-on-year as a result of lower
funding of pension obligations in the year under review.

Debt rose by €619 million to €17,851 million compared with
the previous year. Reported financial liabilities increased due to
a bond issue in December in the amount of €0.75 billion and the
issuance in September of promissory note loans in the amount
of €0.5 billion. However, they were reduced by the repayment of
a €0.5 billion bond in October and the conversion or repayment
of shares in the 2012 convertible bond in the amount of €0.1 bil-
lion. In addition, reported financial liabilities increased as they
include lease liabilities under IFRS 16 in the year under review,
which also explains the discontinuation in the adjustment for op-
erating leases,

note 41 to the consolidated financial statements.

Cash and liquidity managed centrally
The cash and liquidity of our globally operating subsidiaries is
managed centrally by Corporate Treasury. A total of 80 % of the
Group’s external revenue is consolidated in cash pools and used
to balance internal liquidity needs. In countries where this prac-
tice is ruled out for legal reasons, internal and external borrowing
and investment are managed centrally by Corporate Treasury. In
this context, we observe a balanced banking policy in order to
remain independent of individual 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 pro-
cesses and IT systems. Many Group companies pool their exter-
nal payment transactions in the intra-group Payment Factory,
which executes payments on behalf of the companies via
Deutsche Post AG’s central bank accounts.

Limiting market risk
The Group uses both primary and derivative financial instruments
to limit market risk. Interest rate risk is managed exclusively via
swaps. Currency risk is additionally hedged using forward trans-
actions, cross-currency swaps and options. We pass on most of
the risk arising from commodity fluctuations to our customers
and, to some extent, use commodity swaps to manage the re-
maining risk. The parameters, responsibilities and controls gov-
erning the use of derivatives 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 stability and also
provides adequate flexibility. Our most important source of funds
is net cash from operating activities.

We also have a syndicated credit facility in a total volume of
€2 billion that guarantees us favourable market conditions and
acts as a secure, long-term liquidity reserve. The facility was re-
negotiated in the year under review and now runs until 2023. It
includes two renewal options of one year each, and does not con-
tain any covenants concerning the Group’s financial indicators.
Thanks to our solid liquidity situation, the syndicated credit facil-
ity 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 requirements through other in-
dependent sources of financing, such as bonds, promissory note
loans and leases. Most debt is taken out centrally in order to le v-
erage economies of scale and specialisation benefits and hence
minimise borrowing costs.

Group Management Report — REPORT ON ECONOMIC POSITION — Financial position

In December 2018, we issued a bond in a volume of €0.75 bil-
lion as part of the up to €8 billion Debt Issuance Programme es-
tablished in 2012. In September, the Group also issued promis-
sory note loans for the first time in a total volume of €0.5 billion.
The cash proceeds were used to refinance existing financial li-
abilities and to purchase aircraft.

One bond in the amount of €0.5 billion was repaid in the year
under review. The outstanding €0.1 billion of the convertible
bond issued in 2012 was converted or repaid in full. Further
note 41 to the consolidated
information on bonds is contained in

No change in the Group’s credit rating
The ratings of “BBB+” issued by Fitch Ratings (Fitch) and “A3” is-
sued by Moody’s Investors Service (Moody’s) remain 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 fol-
lowing table shows the ratings as at the reporting date and the
under lying factors. The complete and current analyses by
the rating agencies and the rating categories can be found at

dpdhl.com/en/investors.

financial statements.

Sureties, letters of comfort and guarantees
Deutsche Post AG provides security for the loan agreements, leases
and supplier contracts entered into by Group companies, associates
and joint ventures by issuing sureties, letters of comfort or guaran-
tees as needed. This practice allows better conditions to be nego-
tiated locally. The sureties are provided and monitored centrally.

Agency ratings

Fitch Ratings

Long-term: BBB+
Short-term: F2
Outlook: stable

Rating factors

No change in the
Group’s credit ratings
of BBB+ and A3

A.41

Moody’s Investors Service

Long-term: A3
Short-term: P–2
Outlook: stable

Rating factors

• Balanced business risk profile.
• Growth in internet-led parcel volumes.
• Strong position in global time-definite express services with

continued growth and margin improvement.

• Solid financial metrics and good liquidity.

Rating factors

• Scale and global presence as the world’s largest logistics

company.

• Large and robust mail business in Germany.
• Solid financial metrics, conservative financial policy and excellent

liquidity profile.

Rating factors

• Structural mail volume decline in the Post - eCommerce - Parcel
division and challenges in managing the cost structure in the
division.

• Exposure to global market volatility and competitiveness through

the DHL divisions.

• Challenges in the Post - eCommerce - Parcel division.
• Exposure to highly competitive mature markets and volatile

market conditions in the logistics business.

• Structural decline of traditional postal services.
• Restructuring costs and higher capital spending.

Liquidity and sources of funds
As at the reporting date, the Group had cash and cash equivalents
of €3.0 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 de-
posited in existing bank accounts. These central, short-term
financial investments had a volume of €1.5 billion as at the report-
ing date (previous year: €1.7 billion).

In addition, €0.8 billion was invested in a money market fund
(previous year: €0.5 billion). The following table gives a break-
down of the financial liabilities reported in the balance sheet.
note 41 to the consolidated
Additional information is provided in

financial statements.

Deutsche Post DHL Group — 2018 Annual Report

Financial liabilities

€ m

Lease liabilities

Bonds

Promissory note loans

Amounts due to banks

Financial liabilities measured at fair value
through profit or loss

Other financial liabilities

A.42

2018

9,859

5,472

499

264

330

2017

181

5,350

156

319

6,050

16,462

Higher capital expenditure for assets acquired
Investments in property, plant and equipment and intangible
assets (excluding goodwill) for assets acquired amounted to
€2,648 million in the year under review (previous year: €2,268 mil-
lion). Please refer to
notes 10, 22 and 23 to the consolidated financial
statements for a breakdown of capital expenditure (capex) into
asset classes and regions.

Capex and depreciation, amortisation and impairment losses, full year

PeP
adjusted 1

Express

Global
Forwarding,
Freight

Supply Chain

Corporate
Functions
adjusted 1 Consolidation 1, 2

A.43

Group

2017

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

2018

Capex (€ m) relating to
assets acquired

Capex (€ m) relating to
leased assets

Total (€ m)

Depreciation, amortisation
and impairment losses (€ m)

Ratio of total capex to
depreciation, amortisation
and impairment losses

618

786

1,047

1,190

622

176

962

739

1,049

1,929

353

454

525

1,152

110

277

282

241

290

158

268

805

277

1,087

243

518

808

238

319

826

203

623

1.76

2.12

2.00

1.67

1.00

1.13

0.87

1.32

1.20

1.30

–

–10

2,268

2,648

2,397

– 9

2,277

5,045

–1

1,471

3,292

–

1.55

1.53

1 Reclassification of Corporate Incubations to Corporate Functions.
2 Including rounding.

Capex and depreciation, amortisation and impairment losses, Q 4

PeP
adjusted 1

Express

Global
Forwarding,
Freight

Supply Chain

Corporate
Functions
adjusted 1 Consolidation 1, 2

A.44

Group

2017

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

2018

Capex (€ m) relating to
assets acquired

Capex (€ m) relating to
leased assets

Total (€ m)

Depreciation, amortisation
and impairment losses (€ m)

Ratio of total capex to
depreciation, amortisation
and impairment losses

298

245

605

511

299

326

605

102

613

121

132

312

142

111

216

298

144

143

254

217

164

3.40

2.69

4.58

1.96

0.95

1.11

0.84

1.37

2.77

1.55

–

–39

1,146

945

581

–37

1,149

1,526

–1

390

878

–

2.95

1.74

1 Reclassification of Corporate Incubations to Corporate Functions.
2 Including rounding.

Group Management Report — REPORT ON ECONOMIC POSITION — Financial position

In the Post - eCommerce - Parcel division, the largest share of
capex was attributable to the expansion of the infrastructure for
the Post and Parcel business in Germany.

In the Express division, we invested in the expansion of our
network infrastructure, particularly in Madrid, Hong Kong, Cin-
cinnati and Leipzig. Capital spending also focussed upon con-
tinuous maintenance and renewal of our aircraft fleet, including
advance payments for the planned renewal of the Express inter-
continental aircraft fleet.

In the Global Forwarding, Freight division, we invested 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.

At Corporate Functions, investments rose and were made
increasingly in the vehicle fleet and in the expanded production
of StreetScooter electric vehicles.

Higher operating cash flow
Net cash from operating activities increased by €2,499 million to
€5,796 million in financial year 2018. All non-cash income and

expenses were eliminated based upon EBIT, which at €3,162 mil-
lion was down substantially on the prior-year figure (€3,741 mil-
lion). Depreciation, amortisation and impairment losses rose
from €1,471 million to €3,292 million due to the initial recogni-
tion of lease assets. Provisions changed from €–940 million to
€282 million due to factors including the provisions recognised
for the early retirement programme in the Post - eCommerce -
Parcel division. In the prior year, €495 million was used to finance
pension obligations in the United Kingdom. Net cash from
operating activities before changes in working capital increased
sharply, by €2,661 million to €6,079 million. The cash outflow
from changes in working capital rose by €162 million, due
primarily to a reduction in liabilities and other items.

At €2,777 million, net cash used in investing activities consid-
erably exceeded the level of the previous year (€2,091 million), a
period affected primarily by the sale of the Williams Lea Tag
Group, which generated proceeds from the disposal of subsid-
iaries and other business units totalling €316 million. The cash
outflow to acquire property, plant and equipment and intangible
assets was €446 million higher than in the previous year
(€2,203 million).

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 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 inflow/outflow from acquisitions/divestitures

Proceeds from lease receivables

Repayment of lease liabilities

Interest on lease liabilities

Cash outflow from leases

Interest received

Interest paid

Net interest paid

Free cash flow

2017

3,297

236

–2,203

–1,967

316

– 54

– 55

210

–

–160

–108

2018

5,796

151

–2,649

–2,498

– 58

–39

– 60

–1,722

–376

–2,081

–150

– 98

1,432

1,059

A.45

Q 4 2017

Q 4 2018

1,527

2,652

135

– 914

–779

316

–32

284

–

– 69

– 57

975

105

– 851

–746

– 6

– 465

– 99

– 560

–78

– 65

1,307

Deutsche Post DHL Group — 2018 Annual Report

In order to ensure the comparability of free cash flow figures after
the initial application of IFRS 16, the cash outflows from inter est
payments and the repayment of lease liabilities have been in-
cluded in addition to the depreciation of, and impairment losses
on, lease assets. Free cash flow deteriorated from €1,432 million
to €1,059 million for reasons including a €531 million increase in
the cash outflow from the change in property, plant and equip-
ment and intangible assets compared with the prior-year figure
(€1,967 million) and an increase in the cash outflow from changes
in working capital.

At €3,039 million, net cash used in financing activities was
€1,952 million higher than in the prior-year period (€1,087 mil-
lion). The reasons for this include lease payments in the year
under review. Shareholders were also paid dividends of
€1,409 million and we repaid a €500 million bond. By contrast,
we issued promissory note loans totalling €500 million and a
bond in the amount of €750 million. In the previous year, the pur-
chase of treasury shares led to a cash outflow of €148 million and
in June 2017 we repaid a bond.

Cash and cash equivalents declined from €3,135 million as

at 31 December 2017 to €3,017 million.

Net assets

Selected indicators for net assets

Equity ratio

Net debt

Net interest cover

Net gearing

31 Dec.
2017

33.4

1,938

34.6

13.1

€ m

A.46

31 Dec.
2018

27.5

12,303

6.7

47.0

Consolidated total assets up sharply
The Group’s total assets amounted to €50,470 million as at 31 De-
cember 2018, €11,798 million higher than at 31 December 2017
(€38,672 million).

Non-current assets increased substantially due to the appli-
cation of IFRS 16. The initial recognition of right-of-use assets
from leases increased property, plant and equipment by €9.1 bil-
lion. Other non-current assets rose by €122 million to €353 mil-
lion on account of the increase in pension assets. We invested
surplus funds in the capital markets, increasing current financial
assets from €652 million to €943 million. As a result of the appli-
cation of IFRS 15, other current assets were also up €185 million
note 4 to the consolidated financial statements.
to €2,369 million,
Assets held for sale climbed sharply by €422 million to €426 mil-
lion, mainly as the result of reclassification of all of the assets of
our supply chain business in China.

On the equity and liabilities side of the balance sheet, equity
attributable to Deutsche Post AG shareholders stood at
€13,590 million, well above the level as at 31 December 2017
(€12,637 million): the consolidated net profit for the period, ac-
tuarial gains from pension obligations and a capital increase in
connection with the convertible bond increased this figure, whilst
the dividend payment decreased it. Financial liabilities were up
considerably, from €6,050 million to €16,462 million, due in par-
ticular to the initial recognition of lease liabilities of €9.2 billion.
In addition, we issued a bond in the amount of €750 million.
Trade payables increased from €7,343 million to €7,422 million.
At €7,130 million, provisions were slightly above the figure as

Group Management Report — REPORT ON ECONOMIC POSITION — Financial position — Net assets

Net debt

€ m

Non-current financial liabilities

Current financial liabilities

Financial liabilities 1

Cash and cash equivalents

Current financial assets

Positive fair value of non-current financial

derivatives 2

Financial assets

Net debt

A.47

31 Dec.
2017

31 Dec.
2018

5,101

794

5,895

3,135

652

170

3,957

1,938

13,838

2,425

16,263

3,017

943

3,960

12,303

1 Less operating financial liabilities.
2 Recognised in non-current financial assets in the balance sheet.

at 31 December 2017 (€7,078 million). Whilst the provisions for
pensions declined, there was an increase in provisions for the
early retirement programme in the PeP division. The planned sale
of the supply chain business in China caused liabilities associated
with assets held for sale to rise to €228 million.

Net debt increases to €12,303 million
Our net debt rose from €1,938 million as at 31 December 2017 to
€12,303 million as at 31 December 2018, mainly on account of
the initial recognition of lease liabilities in accordance with
IFRS 16. At 27.5 %, the equity ratio was well below the figure as at
31 December 2017 (33.4 %), primarily because the application of
IFRS 16 caused total assets to rise. The net interest cover ratio
indicates the extent to which net interest obligations are covered
by EBIT. This figure declined from 34.6 to 6.7 due to interest pay-
ments on lease liabilities incurred as a result of IFRS 16. Net gear-
ing was 47.0 % as at 31 December 2018.

Balance sheet structure of the Group as at 31 December

€ m

ASSETS

38,672

30 %

23 %

21 %

26 %

50,470

23 %

38 %

16 %

23 %

Equity

Non-current provisions and liabilities

Current provisions and liabilities

Intangible assets

Property, plant and equipment

Trade receivables

Other assets

A.48

EQUITY AND LIABILITIES

50,470

27 %

40 %

33 %

38,672

33 %

30 %

37 %

2017

2018

2017

2018

Deutsche Post DHL Group — 2018 Annual Report

Business performance in the divisions

POST - ECOMMERCE - PARCEL DIVISION

Key figures of the Post eCommerce Parcel division

€m

Revenue

of which Post

eCommerce - Parcel

Other/Consolidation PeP

Profit from operating activities (EBIT)

of which Germany

International Parcel and eCommerce

Return on sales (%) 2

Operating cash flow

A.49

2017
adjusted 1

2018

+/– %

Q 4 2017
adjusted 1

Q 4 2018

+/– %

18,161

18,476

9,956

8,482

–277

1,503

1,495

8.3

9,709

9,073

–306

656

658

–2

3.6

1.7

–2.5

7.0

–10.5

– 56.4

– 56.0

< –100

–

1,559

1,263

–19.0

5,047

2,688

2,432

–73

511

505

10.1

836

5,125

2,611

2,604

– 90

366

364

7.1

648

1.5

–2.9

7.1

–23.3

–28.4

–27.9

– 66.7

–

–22.5

1 Conversion of reporting to the business unit consolidated view and reclassification of business areas.
2 EBIT/revenue.

Revenue exceeds previous year’s level
In the year under review, revenue in the division was €18,476 mil-
lion, 1.7 % above the prior-year figure of €18,161 million, although
there were 0.7 fewer working days in Germany. Most of the
growth originated in the eCommerce - Parcel business unit.
Negative currency effects of €93 million reduced revenue in
2018. Excluding these effects, the increase in revenue was 2.2 %.
Divisional revenue for the fourth quarter was up 1.5 % compared
with the prior-year period.

Post: revenue

€m

Mail Communication

Dialogue Marketing

Other/Consolidation Post

Total

Revenue declines in the Post business unit
In the Post business unit, revenue was €9,709 million in the
year under review and thus 2.5 % below the prior-year level
of €9,956 million. Volumes declined by 4.2 %. Fourth-quarter rev-
enue decreased by 2.9 % to €2,611 million (previous year:
€2,688 million).

Progressive electronic substitution and fewer special events
than in the previous year, such as elections, caused volumes in
Mail Communication to decline as expected. In Dialogue Market-
ing, the absence of special events also led to declining revenues
and volumes. Revenue in the cross-border mail business rose
significantly.

A.50

2017
adjusted 1

6,401

2,333

1,222

9,956

2018

+/– %

Q 4 2017
adjusted 1

Q 4 2018

+/– %

6,303

2,205

1,201

9,709

–1.5

– 5.5

–1.7

–2.5

1,720

1,696

656

312

602

313

2,688

2,611

–1.4

– 8.2

0.3

–2.9

1 Conversion of reporting to the business unit consolidated view and reclassification of business areas.

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

Post: volumes

Mail items (millions)

Total

of which Mail Communication

of which Dialogue Marketing

2017
adjusted 1

2018

+/– %

18,590

17,818

7,964

8,874

7,707

8,417

– 4.2

–3.2

– 5.1

Q 4 2017
adjusted 1

4,935

2,079

2,393

A.51

Q 4 2018

+/– %

4,760

2,067

2,235

–3.5

– 0.6

– 6.6

1 Conversion of reporting to the business unit consolidated view and reclassification of business areas.

eCommerce Parcel business unit continues to grow
Revenue in the eCommerce - Parcel business unit was €9,073 mil-
lion in the year under review, exceeding the prior-year figure of
€8,482 million by 7.0 %. In the fourth quarter of 2018, revenue
grew by 7.1 %.

The Parcel business in Germany continued to grow steadily
due to the strong e-commerce trend. Revenue in the Parcel Ger-
many business increased by 7.1 % to €5,556 million in 2018 (pre-
vious year: €5,190 million). Volumes rose by 7.5 % to 1,479 million
parcels.

Our domestic and cross-border parcel business in Europe is
also continuing to perform dynamically. In the Parcel Europe
business, revenue in 2018 grew by 10.6 % to €2,216 million (pre-
vious year: €2,004 million).

Revenue in the DHL eCommerce business was up by 6.9 %
to €1,650 million in the year under review (previous year:
€1,544 million) due to the US domestic business as well as busi-
ness in Asia. Excluding currency effects, growth was 12.0 %.

eCommerce Parcel: revenue

€m

Parcel Germany

Parcel Europe 2

Consolidation Parcel

Parcel total

DHL eCommerce 3

Total

1 Conversion of reporting to the business unit consolidated view and reclassification of business areas.
2 Excluding Germany.
3 Outside Europe.

Parcel Germany: volumes

Parcels (millions)

Total

1 Conversion of reporting to the business unit consolidated view.

2017
adjusted 1

2018

+/– %

Q 4 2017
adjusted 1

Q 4 2018

+/– %

A.52

5,190

2,004

–256

6,938

1,544

8,482

5,556

2,216

–349

7,423

1,650

9,073

7.1

10.6

–36.3

7.0

6.9

7.0

1,533

1,627

558

– 80

2,011

421

2,432

609

– 98

2,138

466

2,604

6.1

9.1

–22.5

6.3

10.7

7.1

A.53

2017
adjusted 1

2018

+/– %

Q 4 2017
adjusted 1

Q 4 2018

+/– %

1,376

1,479

7.5

410

432

5.4

EBIT declines significantly due to restructuring expenses
The division’s EBIT declined significantly due to the restructuring
measures resolved in the middle of the year. In 2018, EBIT was
€656 million (previous year: €1,503 million). The decrease was
due mainly to higher costs for material and labour – including
€400 million for the early retirement programme – as well as
on-going investments in the parcel network. These were partly
offset by non-recurring income from the remeasurement of pen-
sion obligations in the amount of €108 million. Return on sales

fell to 3.6 % (previous year: 8.3 %). Restructuring expenses and the
effects of collective bargaining agreements, in particular, re-
duced divisional EBIT in the fourth quarter from €511 million in
the previous year to €366 million. Operating cash flow fell from
€1,559 million to €1,263 million in the year under review. It was
influenced significantly by the decline in EBIT. In addition, it was
impacted by the conversion of bonus payments for employees
covered by collective bargaining agreements into fixed salary
under the current agreement.

Deutsche Post DHL Group — 2018 Annual Report

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 (%) 1

Operating cash flow

1 EBIT/revenue.

A.54

2017

15,049

6,696

3,010

5,556

1,110

2018

16,147

7,245

3,296

5,740

1,142

–1,323

–1,276

1,736

11.5

2,212

1,957

12.1

3,073

+ / – %

Q 4 2017

Q 4 2018

+ / – %

7.3

8.2

9.5

3.3

2.9

3.6

12.7

–

38.9

4,059

1,841

813

1,454

283

–332

499

12.3

723

4,423

1,972

913

1,585

300

–347

570

12.9

905

9.0

7.1

12.3

9.0

6.0

– 4.5

14.2

–

25.2

International business continues to grow
Revenue in the division improved by 7.3 % to €16,147 million in
the year under review (previous year: €15,049 million). This in-
cludes negative currency effects of €551 million. Excluding these
effects, the increase in revenue was 11.0 %. 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 8.0 %.

In the Time Definite International (TDI) product line, rev-
enues per day increased by 9.6 % and per-day shipment volumes
by 7.4 % in 2018. Revenues per day for the fourth quarter were up
by 8.1 % and per-day shipment volumes by 6.7 %.

In the Time Definite Domestic (TDD) product line, revenues
per day increased by 7.0 % and per-day shipment volumes by
6.7 % in 2018. Growth in the fourth quarter amounted to 8.5 % for
revenues per day and 6.6 % for per-day volumes.

Express: revenue by product

€ m per day 1

Time Definite International (TDI)

Time Definite Domestic (TDD)

2017
adjusted 1

45.9

4.3

2018

+/– %

50.3

4.6

9.6

7.0

Q 4 2017
adjusted 1

50.8

4.7

A.55

Q 4 2018

+/– %

54.9

5.1

8.1

8.5

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.

Express: volumes by product

Thousands of items per day

Time Definite International (TDI)

Time Definite Domestic (TDD)

2017

889

461

2018

955

492

+ / – %

Q 4 2017

Q 4 2018

+ / – %

7.4

6.7

978

512

1,044

546

6.7

6.6

A.56

Momentum in the Europe region remains high
Revenue in the Europe region increased by 8.2 % to €7,245 million
in the year under review (previous year: €6,696 million). This in-
cluded negative currency effects of €123 million, which related
mainly to Turkey and Russia. Excluding these effects, revenue

growth was 10.0 %. In the TDI product line, revenues per day rose
by 11.4 %; per-day TDI shipment volumes improved by 9.0 % in
2018. International per-day shipment revenues for the fourth
quarter were up by 8.6 % and per-day shipment volumes by 7.4 %.

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

Strong revenue growth in the Americas region
Revenue in the Americas region increased by 9.5 % to €3,296 mil-
lion in the year under review (previous year: €3,010 million). This
included negative currency effects of €172 million, which related
primarily to the United States. Excluding the currency effects, the
revenue increase was 15.2 %. In the TDI product line, revenues per
day were up 11.9 % in 2018. Per-day shipment volumes improved
by 8.5 %. Revenues per day for the fourth quarter were up by 7.7 %
and per-day shipment volumes by 7.3 %.

Increase in revenues and volumes in Asia Pacific region
Revenue in the Asia Pacific region increased by 3.3 % to €5,740 mil-
lion in the year under review (previous year: €5,556 million). This
included negative currency effects of €196 million, most of which
related to India, Hong Kong and China. Excluding these effects,
revenue in 2018 increased by 6.8 %. In the TDI product line, rev-
enues per day improved by 6.9 % and per-day volumes by 4.7 %.
Growth in the fourth quarter amounted to 7.9 % for revenues per
day and 6.0 % for per-day volumes.

Further improvement in international business
in the MEA region
Revenue in the MEA region (Middle East and Africa) improved by
2.9 % to €1,142 million in the year under review (previous year:
€1,110 million). This included negative currency effects of
€54 million, most of which related to the United Arab Emirates.
Excluding these effects, revenue increased by 7.7 %. In the TDI
product line, revenues per day were up by 8.6 % and per-day vol-
umes by 10.6 %. Growth in the fourth quarter amounted to 6.7 %
for revenues per day and 4.8 % for per-day volumes.

EBIT and operating cash flow show significant improvement
EBIT in the division rose by 12.7 % to €1,957 million in financial
year 2018 (previous year: €1,736 million), driven by network im-
provement and strong growth in international business. Return
on sales increased from 11.5 % to 12.1 %. In the fourth quarter,
EBIT improved by 14.2 % to €570 million and return on sales in-
creased from 12.3 % to 12.9 %. Operating cash flow improved from
€2,212 million to €3,073 million in 2018.

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.

A.57

2017

14,482

10,279

4,354

–151

297

2.1

131

2018

14,978

10,667

4,454

–143

442

3.0

523

+ / – %

Q 4 2017

Q 4 2018

+ / – %

3.4

3.8

2.3

5.3

48.8

–

>100

3,791

2,698

1,130

–37

123

3.2

119

4,002

2,883

1,156

–37

161

4.0

286

5.6

6.9

2.3

0.0

30.9

–

>100

Revenue increases despite negative currency effects
Revenue in the division increased by 3.4 % to €14,978 million in
the year under review (previous year: €14,482 million). Excluding
negative currency effects of €470 million, revenue was up by 6.7 %
year-on-year. In the fourth quarter of 2018, revenue amounted to
€4,002 million, exceeding the prior-year figure by 5.6 %.

In the Global Forwarding business unit, revenue increased
by 3.8 % to €10,667 million in 2018 (previous year: €10,279 mil-

lion). Excluding negative currency effects of €389 million, the
increase was 7.6 %. Gross profit is defined as revenue from trans-
port or other services less directly attributable costs. These in-
clude transport costs for air and ocean freight, road and rail trans-
port, expenses for commissions, insurances, customs clearance
and other revenue-related expenses. Gross profit improved by
4.1 % to €2,487 million (previous year: €2,390 million) despite
negative currency effects.

Deutsche Post DHL Group — 2018 Annual Report

Air and ocean freight with improved margins
Air freight volumes dropped by 3.9 % in the year under review, due
mainly to structural adjustments in the customer portfolio. Rev-
enue increased by 6.9 % compared with the previous year thanks
to rising freight rates worldwide. Gross profit from air freight
improved by 9.2 %. Air freight revenue rose by 10.4 % in the fourth
quarter of 2018, whilst gross profit improved by 14.6 %, despite
a volume decline of 3.6 % versus the exceptionally strong prior-
year fourth quarter for the air freight market.

Ocean freight volumes in the year under review were 1.0 %
below the level of the previous year. Here, too, we focussed in-

creasingly upon high-margin volumes. Our revenue from ocean
freight remained at the previous year’s level, whilst gross profit
improved slightly by 0.9 %. Ocean freight revenue rose by 4.5 %
and ocean freight volume by 0.5 % in the fourth quarter.

The performance of our industrial project business (in the
following table reported as part of Other in the Global Forward-
ing business unit) improved significantly compared with the pre-
vious year. The share of revenue related to industrial project busi-
ness and reported under Other increased from 25.6 % in the prior
year to 30.0 %. Gross profit improved by 9.4 %.

Global Forwarding: revenue

€m

Air freight

Ocean freight

Other

Total

Global Forwarding: volumes

Thousands

Air freight

of which exports

Ocean freight

1 Twenty-foot equivalent units.

2017

4,608

3,512

2,159

2018

4,924

3,503

2,240

10,279

10,667

+ / – %

Q 4 2017

Q 4 2018

6.9

– 0.3

3.8

1,243

1,372

889

566

929

582

2,698

2,883

tonnes

TEUs 1

2017

3,961

2,248

3,259

2018

3,806

2,150

3,225

+ / – %

Q 4 2017

Q 4 2018

–3.9

– 4.4

–1.0

1,037

1,000

600

820

571

824

A.58

+ / – %

10.4

4.5

2.8

6.9

A.59

+ / – %

–3.6

– 4.8

0.5

Revenue increase in European overland transport business
In the Freight business unit, revenue rose by 2.3 % to €4,454 mil-
lion in the year under review (previous year: €4,354 million) de-
spite negative currency effects of €84 million. The 6.5 % volume
growth was driven mainly by e-commerce based business in
Sweden and less-than-truckload business in Germany. The busi-
ness unit’s gross profit rose by 3.4 % to €1,117 million (previous
year: €1,080 million).

EBIT up sharply
Divisional EBIT increased significantly by 48.8 % in 2018, rising
from €297 million to €442 million. The increase was due mainly
to improved gross profit margins in air freight and cost measures.
Return on sales rose from 2.1 % to 3.0 %. EBIT for the fourth quar-
ter of 2018 improved from €123 million to €161 million and return
on sales rose to 4.0 %. Operating cash flow amounted to €523 mil-
lion in the year under review (previous year: €131 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.

2017

14,152

7,245

4,551

2,389

–33

555

3.9

239

2018

13,350

6,871

4,385

2,147

– 53

520

3.9

1,322

+ / – %

Q 4 2017

Q 4 2018

– 5.7

– 5.2

–3.6

–10.1

– 60.6

– 6.3

–

>100

3,619

1,921

1,125

583

–10

184

5.1

3,743

1,824

1,352

578

–11

184

4.9

936

A.60

+ / – %

3.4

– 5.0

20.2

– 0.9

–10.0

0.0

–

>100

Sale of Williams Lea Tag and currency effects reduce revenue
Revenue in the division fell by 5.7 % to €13,350 million in the year
under review (previous year: €14,152 million). The decline was
attributable mainly to the sale of the Williams Lea Tag Group in
the fourth quarter of 2017. In addition, negative currency effects
reduced revenue by €369 million in 2018. Excluding these effects,
revenue growth was 4.3 %, due mainly to a positive business per-
formance in the Americas and EMEA regions. In the fourth quar-
ter, revenue was up by 3.4 % to €3,743 million (previous year:
€3,619 million).

In the EMEA and Americas regions, the Automotive sector
recorded the highest growth rates. In the Asia Pacific region, rev-
enues rose most strongly in the Retail and Engineering & Manu-
facturing sectors.

Supply Chain: revenue by sector and region, 2018

A.61

Total revenue: €13,350 million

of which Retail

Consumer

Automotive

Technology

Life Sciences & Healthcare

Others

Engineering & Manufacturing

of which Europe/Middle East/Africa/Consolidation

Americas

Asia Pacific

27 %

23 %

16 %

12 %

10 %

7 %

5 %

51 %

33 %

16 %

New business worth €1,282 million secured
In 2018, the division concluded additional contracts worth
€1,282 million in annualised revenue with both new and existing
customers. The Retail, Consumer and Automotive sectors ac-
counted for the majority of the new business. The annualised
contract renewal rate remained at a consistently high level.

Oneoff effects inhibit EBIT growth
EBIT in the division was €520 million in the year under review
(previous year: €555 million). The figure was impacted by nega-
tive one-off effects of €50 million from customer contracts and
€42 million from pension obligations. Excluding these effects, the
write-down of customer relationship assets in the previous year
and despite adverse currency effects, EBIT improved by 4.3 %
thanks to business growth and strategic initiatives. The return on
sales of 3.9 % matched the previous year’s level. At €184 million,
EBIT in the fourth quarter of 2018 reached the level of the prior-
year quarter. Return on sales for the fourth quarter was 4.9 %
(previous year: 5.1 %). Operating cash flow improved significantly,
rising from €239 million to €1,322 million in 2018. In the previous
year, it had been reduced by a one-time cash outflow of €459 mil-
lion to further fund pension obligations.

Deutsche Post DHL Group — 2018 Annual Report

DEUTSCHE POST SHARES

Deutsche Post shares: sevenyear overview

Year-end closing price

High

Low

€

Number of shares as at 31 December

Market capitalisation as at 31 December

millions

€m

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

2017

39.75

40.99

30.60

1,240.9

38,760

1,228.7

48,841

A.62

2018

23.91

40.96

23.72

1,236.5

29,411

Average trading volume per day 1

4,052,323

4,114,460

4,019,689

4,351,223

3,497,213

2,613,290

3,770,866

Annual performance including dividends

Annual performance excluding dividends

Beta factor 2

Earnings per share 3

Cash flow per share 4

Price-to-earnings ratio 5

Price-to-cash flow ratio 4, 6

Dividend

Payout ratio

Dividend per share

Dividend yield

€

€m

€

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

30.6

27.2

0.99

2.24

2.72

17.7

14.6

–36.9

–39.8

0.97

1.69

4.71

14.1

5.1

1,270

1,409

1,419 10

48.1

1.05

3.4

51.9

1.15

2.9

68.4 11

1.15 10

4.8

1 Volumes traded via the Xetra trading venue. 2 Three-year beta; source: Bloomberg. 3 Based upon consolidated net profit after deduction of non-controlling interests,

note 20

to the consolidated financial statements. 4 Cash flow from operating activities. 5 Year-end closing price/earnings per share. 6 Year-end closing price/cash flow per share.
7 Adjusted to reflect the application of IAS 19R. 8 Reduction due to the share buyback. 9 Excluding one-off effects: 45.8 %. 10 Proposal. 11 Excluding one-off effects: 55.4%.

Free float stable
The investment share of our largest investor – KfW Banken-
gruppe – is 20.5 % (previous year: 20.7 %) and the free float is
79.5 %. Based upon our share register’s figures, the share of out-
standing stock held by private investors is 12.7 % (previous year:
11.1 %).

In terms of the regional distribution of identified institutional
investors, the highest percentage of shares (15.8 %) is held by US
investors (previous year: 15.8 %), followed by the United Kingdom
with a share of 12.2 % (previous year: 13.8 %). The share of insti-
tutional investors in Germany decreased to 11.3 % (previous year:
12.0 %). Our 25 largest institutional investors held a total of 32.7 %
of all issued shares (previous year: 38.9 %).

Shareholder structure 1

A.63

Shareholder structure by region 1

A.64

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

1 At 31 December 2018.

20.5 %
79.5 %
66.8 %
12.7 %

a Germany
b Other
c USA
d UK

1 At 31 December 2018.

44.5 %
27.5 %
15.8 %
12.2 %

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

NON-FINANCIAL
KEY PERFORMANCE
INDICATORS

Employees

Meeting changes in the professional world
Digital transformation in the professional world is changing job
descriptions as well as creating new fields of activity. We ensure
that our employees are optimally prepared for new opportunities
and changing requirements in their working environment and
involve them in the process of change. This places particular de-
mands on our managers, who follow defined leadership prin-
ciples to give them the necessary foundation for creating a mo-
tivating working environment that fosters open communication
and in which employees feel valued.

Selected results from the Employee Opinion Survey
Our annual Group-wide Employee Opinion Survey comprises
41 questions categorised in ten key performance indicators and
one index. In the year under review, the results achieved were the
same or better than in the previous year in each survey category.
The results also surpassed external benchmarks in nearly all
cases. The stable response rate of 76 % again underscores the
survey’s high acceptance level.

Selected results from the Employee Opinion Survey

A.65

Response rate

Positive rating of Active Leadership KPI

Positive rating of Employee Engagement KPI

2017

2018

Number of employees continues to rise
As at 31 December 2018, we employed 499,018 full-time equiva-
lents, or 5.7 % more than in the previous year. The headcount at
the end of the year was 547,459. Female employees made up
34.8 % of our global workforce and hold 22.1 % of all upper and
mid-level management positions (previous year: 21.5 %).

As in the previous year, 18 % of all employees took advantage
of the opportunity for part-time employment. Another 9.2 % of
working-age employees left the Group outside any agreed plans
(previous year: 8.5 %).

In the Post - eCommerce - Parcel division, we hired new em-
ployees in particular for the eCommerce - Parcel business unit’s
rapidly growing operations in Germany, elsewhere in Europe,
Asia and the Americas. The number of employees in the Express
division increased compared with the previous year. Most of the
new hires were in the area of operations due to the increase in
shipment volumes. In the Global Forwarding, Freight division, the
bulk of our new personnel was hired for positions in our shared
service centres in Asia. In the Supply Chain division, the number
of employees increased due to the acquisition of the Suppla Group
as well as additional business with both new and existing clients.
Employee levels were up in all regions. We reported the larg-
est percentage increase in the Asia Pacific region, although we
continue to employ most of our personnel in Germany.

In Germany and some neighbouring countries, we offer an
opportunity to enrol in dual-study apprenticeship programmes
consisting of in-house training combined with programmes at
state vocational schools. In 2018, we offered 2,670 positions in
our apprenticeship and study programmes.

Our current planning foresees another slight increase in the

number of employees for financial year 2019.

Number of employees

A.66

2017

2018

+/– %

5.7

4.8

5.4

4.3

7.1

8.3

3.7

3.8

9.4

9.8

3.0

4.4

5.4

4.1

Fulltime equivalents
At year-end 1

of which Post - eCommerce -

Parcel 2

Express

Global Forwarding,
Freight

Supply Chain

472,208

499,018

183,430

192,237

90,784

95,717

41,034

42,783

145,575

155,954

Corporate Functions 2

11,385

12,327

of which Germany

180,479

187,103

Europe
(excluding Germany)

Americas

Asia Pacific

Other regions

114,360

118,745

82,887

76,081

18,401

90,648

83,561

18,961

Average for the year 3

468,724

489,571

Headcount
At year-end 3

Average for the year

of which hourly workers and
salaried employees

Civil servants

Trainees

519,544

547,459

513,338

534,370

477,251

499,943

30,468

5,619

28,718

5,709

4.8

– 5.7

1.6

1 Excluding trainees.
2 Transfers from the Post - eCommerce - Parcel division to Corporate Functions

note 10 to the consolidated financial statements.

3 Including trainees.

Deutsche Post DHL Group — 2018 Annual Report

Employees 2018
Headcount at yearend including trainees

Safety and health

547,459

Occupational safety: always the top priority
In the area of safety and health, our focus lies on systematic pre-
vention. The applicable standards are described in our Occupa-
tional Health & Safety Policy Statement.

2017
519,544

Change
+ 5.4 %

Workplace accidents

Performancebased and marketbased pay
At €20,825 million, staff costs exceeded the prior-year figure of
note 15 to the consoli-
€20,072 million. Details can be found in

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

Working days lost per accident

Number of fatalities due to workplace accidents

of which as a result of traffic accidents

A.67

2017

2018

4.4

15.3

4.3

15.8

dated financial statements.

We foster employee loyalty and motivation by offering per-
formance-based pay in line with market standards, supplemented
by, amongst other things, contributions to defined benefit and
defined contribution pension plans.

In April 2018, a collective agreement was reached for the
approximately 130,000 employees of Deutsche Post AG subject
to collective bargaining. For the first time, the agreement offered
employees the opportunity to decide if they wish to benefit from
additional time off or from a wage increase. The option was avail-
able in October 2018 and will again be available in October 2019.
The new collective agreement has a term of 28 months and runs
until 31 May 2020.

Further details on remuneration components can be found
Corporate Responsibility Report, dpdhl.com/crreport2018.

in our

Responding to demographic change
We have concluded a Generations Pact with the trade unions in
response to demographic change in Germany and for the purpose
of ensuring an ageing-friendly workplace. A total of 25,464 of our
non-civil servant employees maintain a working time account in
line with this proven model and 4,115 are in partial retirement.
The collective agreement concluded in 2018 included additional
significant improvements in partial-retirement conditions. Since
2016, we have also been offering comparable arrangements for
civil servants, 4,017 of whom have established a lifetime working
account and 1,317 have entered partial retirement.

A total of €400 million was spent in the year under review
on an early retirement programme aimed at civil servants in over-
head areas in the Post - eCommerce - Parcel division. The main
condition for taking advantage of the Engaged Retirement pro-
gramme is that the civil servant is working in an area with a sur-
plus of personnel and cannot be employed elsewhere in the com-
pany or administrative organisations. Moreover, there must be no
operational or business-related objections to placement in the
programme. The civil servant must also commit to social involve-
ment within the first three years of commencing retirement.

Most accidents occur in connection with pick-up and delivery.
The Group’s accident rate fell slightly in 2018. We report on oc-
cupational safety measures and targets and describe the changes
in the accident data for the divisions and regions in more detail
in our

Corporate Responsibility Report, dpdhl.com/crreport2018.

Bolstering health
We foster our employees’ awareness of a healthy lifestyle
through health-related projects and local initiatives. In 2018,
stress management and dealing with mental health issues were
again topics of focus. Our Group-wide employee benefits pro-
gramme also enables employees outside of Germany to enjoy
primary or supplementary health insurance benefits. The world-
wide illness rate was 5.3 % in 2018 (previous year: 5.2 %).

Corporate responsibility

Commitment to shared values
We conduct our business in accordance with applicable laws, eth-
ical and ecological standards, and international guidelines.
Through ongoing 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 sys-
tematically with these interests.

Group Management Report — NON-FINANCIAL KEY PERFORMANCE INDICATORS — Employees — Safety and health — Corporate responsibility

We use our expertise as a mail and logistics services group
for the benefit of society and the environment, for example by
providing logistical support following natural disasters, prepar-
ing airports for appropriate scenarios, helping to improve career
opportunities for socially disadvantaged young people and sup-
porting our employees’ local projects.

With measures to increase CO2 efficiency and an environ-
mentally friendly product range, we uphold our responsibility to
the environment and strengthen our own market position at the
same time. One area we focussed upon in the year under review
was further increasing the proportion of electric vehicles in our
fleet.

CO2e emissions, 2018
Total: 29.48 million tonnes 1

13%

Ocean transport

64%Air transport

21%

Ground transport

A.68

2%
Buildings

1 Scope 1 to Scope 3.

Efficiency target met
We use a carbon efficiency index (CEX) to measure and manage
our greenhouse gas efficiency,
Management, page 23. In 2018,
our direct (Scope 1) and indirect (Scope 2) greenhouse gas emis-
sions amounted to 6.57 million tonnes of CO2e (previous year:
6.34 million tonnes of CO2e). The indirect greenhouse gas emis-
sions (Scope 3) of our transport subcontractors amounted to
22.91 million tonnes of CO2e (previous year, adjusted: 22.52 mil-
lion tonnes of CO2e).

Amongst other things, we set ourselves the environmental
target of improving our CEX by 50 % by 2025 compared with the
base year of 2007. We already achieved an improvement of 33 %
versus 2007 in 2018, thus reaching our goal of improving the CEX
by one index point compared with the prior year. Efficiency im-
provements in road transport and the increased use of renewable
energy sources as well as a more efficient ocean freight business,
which this year for the first time includes a detour surcharge in
accordance with the recommendation of the Clean Cargo Work-
ing Group (CCWG), contributed to this result.

Additional information on our environmental activities and
Corporate Responsibility Report, dpdhl.

targets is included in our

com/crreport2018.

Fuel and energy consumption in company fleet
and buildings

A.69

Consumption by fleet

Air transport
(jet fuel)

Road transport
(petrol, biodiesel, diesel,
bio-ethanol, LPG)

Road transport
(biogas, CNG, LNG)

Energy for buildings and facilities
(including electric vehicles)

million
kilograms

million
litres

million
kilograms

million
kilowatt
hours

2017

2018

1,406.3

1,518.1

451.1

464.7

3.6

4.2

3,194

Deutsche Post DHL Group — 2018 Annual Report

94.3 %

satisfied customers according to

Kundenmonitor Deutschland

Another key quality indicator for us is environmental protection,
which we describe in our
Corporate Responsibility Report, dpdhl.
com/crreport2018. In the area of electric mobility, which is stra-
tegically important to us, we put around 4,000 vehicles into oper-
ation in the year under review. As a result, we expanded emission-
free delivery, particularly in Aachen, Bonn, Essen, Hamburg,
Cologne and Stuttgart. The electric StreetScooter Work XL vehicle
has also been used for parcel delivery since 2018 and the first
electric lorries are now being used for delivery to major customers.

Around

4,000

electric vehicles

put into operation in 2018

Service quality and insanely customer centric culture
in the express business
As a global network operator working with standardised pro-
cesses, we are constantly optimising our services to enable us to
keep our commitments to customers. We therefore keep an
eye on our customers’ ever-changing requirements, for example
through the Insanely Customer Centric Culture programme and
as part of our Net Promoter Approach. Our managers speak per-
sonally to customers in order to continuously translate customer
criticism into improvements.

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

Quality

Sending mail and parcels quickly and reliably
According to surveys conducted by Quotas, a quality research
institute, around 93 % of the domestic letters posted in Germany
during our daily opening hours or before final collection were
delivered to their recipients the next day in 2018. Around 99 %
reached 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.
Transit times for international letters are determined by the Inter-
national Post Corporation. Here, we rank amongst the top postal
companies.

Around

93 % D + 1

Domestic letters posted in Germany

are delivered the next day

In the parcel business, around 82 % of items reached their recipi-
ents the next working day in the year under review. This figure is
based upon parcels collected from business customers that were
delivered the next day. Our internal system for measuring parcel
transit times has been certified by TÜV since 2008.

In our mail business, the level of sorting automation exceeds
90 %. In our parcel network, we have increased our sorting cap-
acity by more than 50 % since 2012, by raising productivity in our
existing facilities and expanding our infrastructure nationwide. In
the year under review, we converted the warehouse in the Bre-
men freight transport centre into a further parcel centre with a
sorting capacity of 40,000 items per hour. With now 35 parcel
centres, we process around 5 million items per working day.
More than 80 mechanised delivery bases support our operations.
Our approximately 27,000 sales points were open for an average
of 54 hours per week (previous year: 54 hours). The annual sur-
vey conducted by Kundenmonitor Deutschland, the largest con-
sumer survey in Germany, showed a high acceptance of our ex-
clusively partner-operated retail outlets: 94.3 % of customers
were satisfied with our quality and service (previous year: 93.9 %).
In addition, impartial mystery shoppers from TNS Infratest tested
the postal outlets in retail stores around 28,000 times over the
year. The result showed that 93.5 % of customers were served
within three minutes (previous year: 94.3 %).

Group Management Report — NON-FINANCIAL KEY PERFORMANCE INDICATORS — Quality

In Europe, our European Key Account Support service pro-
vides our global customers with a central point of contact. Upon
request, 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 pre-
mium products 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 45 lan-
guages. We also expanded our Paketbox network to around
7,000 Service Point Lockers worldwide.

We conduct regular reviews of operational safety, compli-
ance with standards and the quality of service at our facilities in
co-operation with government authorities. Approximately 300
locations, more than 100 of which are in Asia, have been certified
by the security organisation Transported Asset Protection Asso-
ciation (TAPA). This makes us the leader in this area. Since 2010,
we have been certified globally to ISO 9001:2008; in the year
under review, we were even certified according to the newest
ISO 9001:2015 standard. In addition, we remain certified in cer-
tain regions and countries in the areas of environmental protec-
tion and energy management. We describe this in detail in our

Corporate Responsibility Report, dpdhl.com/crreport2018.

tions. A defined terminal classification framework structure fos-
ters the implementation of common operational performance
standards.

Quality leader in contract logistics
We aim to build upon our position as quality leader in contract
logistics. By applying standardised operations and solutions sup-
ported by supply chain champions at all of our sites, we ensure
that we meet or exceed our customers’ quality expectations. As
part of our operations excellence programme, a uniform Service
Quality KPI routinely measures whether our locations are meet-
ing defined operating standards.

Our survey methodology for continuously measuring and
increasing customer loyalty and satisfaction is based upon the
Net Promoter Score©. The programme is being rolled out glo b-
ally and covers a significant part of our business. In the year
under review, the measured values developed positively, espe-
cially amongst customers surveyed repeatedly over time. In fact,
the follow-up, which is conducted with each individual customer,
has proven to have a huge impact on satisfaction and loyalty.

In addition, we offer our customers integrated environmen-
tal solutions that help them meet their sustainability targets. One
example of this is the use of electric light commercial vehicles.

We aim to build
upon our position
as quality leader
in contract logistics.

Approximately

300

locations certified by the Transported Asset

Protection Association (TAPA)

Systematic customer feedback in the forwarding business
Our performance in the Global Forwarding business unit is con-
tinuously being improved based upon customer feedback. We
record these systematically with the help of the Net Promoter
Approach. Almost 200 Customer Improvement Projects were
initiated on the topics of quality, reporting and loss events in
2018. Operating performance is also constantly monitored and
adjusted where necessary through regular initiatives such as per-
formance dialogues.

In the Freight business unit, we expanded our customer sat-
isfaction survey to over 30 countries in 2018 and based upon this
feedback, we have implemented over 200 initiatives to continu-
ously improve our products and services. With Eurapid, we are
successfully meeting the customer demand for premium solu-

Brands

Deutsche Post DHL Group — 2018 Annual Report

Brand architecture as at 31 December 2018

A.70

Value of Group brands continues to rise
According to independent studies, the value of the Deutsche Post
and DHL brands increased again in 2018.

Partnerships and events give our brands a boost
Emotional associations with our brands are strengthened by their
presence at high-profile sporting events.

The DHL brand was valued at US$20.6 billion by the market
research institute Kantar Millward Brown (previous year:
US$15.8 billion). This moves DHL up eight places to 62nd on the
institute’s 2018 BrandZ rankings of the 100 Most Valuable Global
Brands. The study looks at financial figures as well as market and
consumer research data. In the annual Interbrand rankings, DHL
came in at 79th place (previous year: 76th) based upon an increase
in brand value to US$5.9 billion (previous year: US$5.7 billion).

For the Deutsche Post brand, the consulting company Brand
Finance calculated a value of €3.6 billion in 2018 (previous year:
€2.9 billion). The Deutsche Post brand thus moved up to 21st
place in Brand Finance’s Germany 50 report of the strongest Ger-
man brands. Kantar Millward Brown compiled a BrandZ Top 50
Most Valuable German Brands ranking for the first time in 2018.
The market research institute ranked Deutsche Post in 18th place
with a brand value of US$3.7 billion.

In the year under review, the Deutsche Post brand continued
to partner with the Deutscher Fußball-Bund (DFB – German foot-
ball federation), 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), amongst other associations.

To support our DHL brand, we continue to rely upon our trad-
itional logistics partnerships with Formula 1© and the ABB FIA
Formula E Championship in international motor sports. In
May 2018, DHL additionally began handling event logistics for
e-sport tournaments on various continents as a shipping and
logistics partner to the ESL One series.

Marketing expenditures, 2018

Volume: around €374 million

Product development and communication

Other

Public & customer relations

Corporate wear

A.71

45.3 %

33.6 %

15.5 %

5.6 %

Group Management Report — NON-FINANCIAL KEY PERFORMANCE INDICATORS — Brands — EXPECTED DEVELOPMENTS —
Overall assessment of the Group’s future economic position — Forecast period — Future economic parameters

EXPECTED
DEVELOPMENTS
Overall assessment of the Group’s future
economic position

For financial year 2019, we expect consolidated EBIT to range
between €3.9 billion and €4.3 billion after special factors from
the sale of the supply chain business in China and other effects in
the Supply Chain and eCommerce Solutions divisions. The Post &
Paket Deutschland division is expected to contribute between
€1.0 billion and €1.3 billion to Group EBIT. For the DHL divisions,
which include the new eCommerce Solutions division, we expect
EBIT to reach a total of between €3.4 billion and €3.5 billion. This
includes the special factors mentioned above. Corporate Func-
tions is anticipated to contribute around €–0.5 billion to earnings.
In line with the projected growth in EBIT, we expect that EAC will
also increase in 2019. Free cash flow is expected to exceed
€0.5 billion.

Forecast period

The information contained in the report on expected develop-
ments generally refers to financial year 2019.

Future economic parameters

Uncertain outlook for the global economy
The global economy is expected to grow more slowly in 2019
than in the year under review. Economic growth will be sup-
ported by continuing expansionary monetary policies and fiscal
stimuli, although their effects will tend to diminish. Against this
backdrop, growth in the industrial countries is projected to soften
slightly. Momentum in the emerging markets is expected to re-
main almost stable. At the same time, risk levels are unusually
high at present, with international trade conflicts constituting the
greatest uncertainty. Europe could be negatively affected by the
consequences of a UK exit from the EU without an exit deal. A
deterioration in international financing conditions – for instance
due to a sharp increase in key interest rates in the US – would
have a negative impact on the emerging markets in particular.
Should any of these risks materialise on a large scale, the global
economy could experience much weaker growth than currently
projected, which would have a disproportionate effect on inter-
national trade.

Global economy: growth forecast

World trade 1

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

Sub-Saharan Africa

A.72

2019

4.0

3.5

2.0

4.5

0.7

2.2

6.3

2.4

2.0

3.5

2018

4.0

3.7

2.3

4.6

3.8

2.4

6.5

2.4

1.1

2.9

1 In terms of the value of goods and services.

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

The Chinese economy is likely to weaken further, with GDP
growth expected to record another decline (IMF: 6.2 %; OECD:
6.3 %). Economic output in Japan is projected to grow only slightly
more than in 2018 (IMF: 1.1 %; OECD: 1.0 %).

In the United States, GDP is not likely to see another increase

as significant as in 2018 (IMF: 2.5 %; OECD: 2.7 %).

The euro zone economy is expected to continue recovering,
albeit at a slower pace. GDP growth is likely to remain somewhat
below the prior-year level (IMF: 1.6 %; ECB: 1.7 %).

Leading indicators suggest that the upswing in Germany will
continue at a slower pace. Growth for 2019 as a whole is expected
to decline (IMF: 1.3 %; Sachverständigenrat: 1.5 %).

Crude oil prices are likely to see a slight increase from their

present levels.

The ECB could raise its key interest rate slightly towards the
end of 2019 for the first time in the current cycle, although this
will depend heavily on the figures for inflation and economic
growth. The US Federal Reserve may raise its key interest rate
again during the course of the year, although not as significantly
as in 2018. Any such increase could result in a moderate increase
in capital market interest rates.

World trade grows solidly
After two strong years in succession, we expect growth in the
global trade flows relevant to us (air and ocean freight shipped
in containers (tonnes), excluding liquids and bulk goods) to slow
somewhat in 2019. All in all, we anticipate an increase of 3.6 %.

Deutsche Post DHL Group — 2018 Annual Report

German parcel market expected to see sustained growth
The German market for paper-based mail communication will
continue to decline, primarily because people are communicating
digitally to an increasing extent. For 2019, we are aiming for a
Glossary,
postage increase in the regulated ex-ante area,

page 176.

The volume of the German advertising market is likely to re-
main roughly the same in 2019. Advertising budgets will continue
to shift towards online media. The trend towards automated
dialogue marketing campaigns is set to remain unchanged.

The international mail business is likely to see slight growth

overall, particularly due to increasing merchandise shipping.

The German parcel market will continue to grow.

Ecommerce encourages further growth in international
express market
Experience shows that growth in the international express mar-
ket is highly dependent upon the economic situation. We believe
that the steadily growing cross-border e-commerce sector will
continue to drive growth in the international express market
in 2019.

Market trends in freight forwarding business likely
to continue
On the air freight market, we expect demand to rise on the whole
in 2019. Freight rates are likely to increase on the main trade
lanes.

With regard to ocean freight, we anticipate solid market
growth to continue, although overcapacity is likely to remain in
the market.

For the European road transport market, we expect slightly
lower growth levels for volume in 2019 due to slower economic
growth in most European markets. However, market prices are
likely to rise again robustly. The main reason for this remains the
systemic shortage of available transport capacities.

Contract logistics market continues to grow
The trend towards outsourcing warehousing and distribution as
well as demand for value-added logistics services are set to con-
tinue. The growing demand for e-fulfilment solutions is expected
to persist, with our customers being confronted with high order
volatility throughout the year.

Projections indicate that the market for contract logistics will
continue to experience stable growth of around 5 %. In turn, the
demand for supply chain services in the Asian market, especially
in China, is likely to rise sharply. In anticipation of this, we have
entered into a strategic partnership with local company S. F. Hold-
ing,

note 3 to the consolidated financial statements.

Growth prospects for international parcel market
The parcel market will also continue to grow in the rest of Europe
and the world, as will cross-border services.

Earnings forecast

Our expectations regarding the Group’s business trend in 2019
are based upon continued expansion of the world economy, even
though the pace of growth will slow compared with previous
years. However, above-average growth rates are likely to persist
in those areas driven by structural growth in e-commerce in par-
ticular.

We expect the Group’s earnings performance to be impacted
by a number of special factors. We are forecasting a non-recur-
ring increase in EBIT by around €400 million in the first quarter
of 2019, upon completing the sale of our Chinese supply chain
business to S. F. Holding in China. To compensate for the loss of
earnings contributed by the divested unit in the 2020 forecast,
approximately €150 million of the proceeds will be invested in
projects to improve earnings in the Supply Chain division in 2019,
meaning that the net positive effect of the transaction will amount
to around €250 million.

Approximately €60 million will be invested in DHL eCom-
merce Solutions during its first year as an independent Group
division, with the objective of increasing the division’s future
earnings power.

Group Management Report — EXPECTED DEVELOPMENTS — Future economic parameters — Earnings forecast —
Expected financial position — Performance of further indicators relevant for internal management

For financial year 2019, we expect consolidated EBIT to
range between €3.9 billion and €4.3 billion after the aforemen-
tioned special factors, which total around €200 million.

We do not envision the price cap review currently being con-
ducted to determine the extent to which prices can be increased
with respect to the Post & Paket Deutschland revenue volumes
that are subject to ex-ante regulation being completed prior to
the second quarter of 2019. The outcome of this review will
influence future earnings performance. In view of the uncertain
outcome and any measures that may also be required, we except
earnings of between €1.0 billion and €1.3 billion at the Post &
Paket Deutschland division.

For the DHL divisions including the new eCommerce Solu-
tions division we expect total earnings of between €3.4 billion
and €3.5 billion. This figure includes the above-mentioned spe-
cial factors in the amount of €200 million. The Corporate Func-
tions result is expected to be around €–0.5 billion.

Our finance strategy continues to call for a payout of 40 % to
60 % of net profits as dividends as a general rule. As part of that
strategy, we have the option of adjusting reported net income for
non-recurring items in the interests of dividend continuity. We
have made the corresponding adjustment for financial year 2018
and intend to propose a dividend payout of €1.15 per share (pre-
vious year: €1.15 per share) to the shareholders at the Annual
General Meeting on 15 May 2019. The payout ratio in relation to
adjusted net profit is thus 55%.

Expected financial position

payment for financial year 2018 in May 2019. In addition, the pay-
ments not covered by borrowed funds to renew the aircraft fleet
in the Express division will reduce liquidity. By contrast, the pro-
ceeds from the sale of the supply chain business in China will
increase liquidity in the first half of the year. Our operating liquid-
ity situation will improve again towards the end of the year due
to the upturn in business that is normal in the second half.

Capital expenditure of around €3.7 billion expected
In 2019, we plan to increase capital expenditure (excluding
leases) to around €3.7 billion in support of our strategic object-
ives and further growth. The focus of capital expenditure will be
similar to that of previous years. The total figure includes around
€1.1 billion for the largely debt-financed renewal of the Express
inter continental fleet.

Performance of further indicators
relevant for internal management

EAC and free cash flow increase
In line with the projected growth in EBIT, we expect that EAC will
also increase in 2019. Divisional EAC will be affected by the same
factors as detailed in the EBIT outlook. However, reflecting our
on-going investing activities, the rise in EBIT after asset charge
may fall slightly short of the EBIT growth. Free cash flow is
expected to exceed €0.5 billion. This already accounts for a pay-
ment of around €1.1 billion for the largely debt-financed renewal
of the Express intercontinental fleet.

No change in the Group’s credit rating
In light of the earnings forecast for 2019, 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.

Employee Opinion Survey results again positive
We intend to keep up the positive results that our Employee Opin-
ion Survey achieved in the year under review. For 2019, we expect
to see an increase to 77 % in the approval rating for the Active
Leadership key performance indicator.

Liquidity to remain solid
We anticipate a reduction in our liquidity in the first half of 2019
as a result of the annual pension-related prepayment due to the
Bundesanstalt für Post und Telekommunikation (German federal
post and telecommunications agency) as well as the dividend

Further improve greenhouse gas efficiency
We expect the Group to further improve its carbon efficiency. Our
CEX score is projected to increase by one index point during
finan cial year 2019.

Deutsche Post DHL Group — 2018 Annual Report

OPPORTUNITIES
AND RISKS
Overall assessment of the opportunity
and risk situation

Identifying and swiftly capitalising upon opportunities and coun-
teracting risks are important objectives for our Group. We already
account for the anticipated impact of potential events and devel-
opments in our business plan. Opportunities and risks are defined
as potential deviations from projected 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 report. 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 sys-
tem and in the estimation of its Board of Management, there
were no identifiable risks for the Group in the current forecast
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 reflected in the Group’s

credit ratings, as found on page 45.

The simulation is a stochastic model that takes the probabil-
ity of occurrence of the underlying risks and opportunities 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 functions
for each individual opportunity 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.73

– aa € m

+ bb € m

+ zz € m

Deviation from planned EBIT

Planned EBIT Most common value in one million simulation steps (“mode”)
“Worse than expected” “Better than expected”

Opportunity and risk management

Opportunity and risk management process

A.74

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 resulting oppor-
tunities and risks at an early stage and take the necessary meas-
ures 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 pres-
ent planned measures as well as those already taken. Queries are
made and approvals given on a hierarchical basis to ensure that
different managerial levels are involved in the process. Oppor-
tunities and risks can also be reported at any time on an ad-
hoc basis.

Our early identification process links the Group’s opportunity
and risk management with uniform reporting standards. We con-
tinuously improve the IT application used for this purpose. Fur-
thermore, we use a Monte Carlo simulation for the purpose of
aggregating opportunities and risks in standard evaluations.

1 Identify and assess
Assess

Define measures

Analyse

Identify

5 Control
Review results

Review
measures

Monitor early
warning indicators

Internal
auditors
review
processes

2 Aggregate and report
Review

Supplement and change

Aggregate

Report

3 Overall strategy /
risk management /
compliance
Determine

Manage

4 Operating measures
Plan

Implement

Divisions Opportunity and risk-controlling processes
Board of Management Internal auditors

The most important steps in our opportunity and risk management
process are:

Group Management Report — OPPORTUNITIES AND RISKS — Overall assessment of the opportunity and risk situation —
Opportunity and risk management

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

2 Aggregate and report: The controlling units collect the re-
sults, evaluate them and review them for plausibility. If in-
dividual financial effects overlap, this is noted in our data-
base and taken into account in the compilation process. 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 significant opportunities and risks
as well as on the potential overall impact each division might
experience. For this purpose, opportunities and risks are ag-
gregated for the 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 respec-
tive scenarios. The totals for “worst case” and “best case”
indicate the total spectrum of results for the respective divi-
sion. Within these extremes, the total for “expected cases”
shows current expectations. The second method makes use
of a Monte Carlo simulation, the divisional-level results of
which are regularly included in the opportunity and risk
reports to the Board of Management.

3 Overall strategy: The Group Board of Management decides
on the methodology that will be used to analyse and report
on opportunities and risks. The reports created by Corporate
Controlling provide the Board of Management with an add-
itional, regular source of information for the overall steering
of the Group.

4 Operating measures: The measures to be used to take ad-
vantage of opportunities and manage risks are determined
within the individual organisational units. They use cost-
benefit analyses to assess whether risks can be avoided, miti-
gated or transferred to third parties.

5 Control: For key opportunities and risks, early-warning indi-
cators have been defined that are monitored constantly 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 oppor-
tunity and risk management operation. 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.

Accountingrelated internal control and risk management
system
(Disclosures required under section 315(4) of the Handelsgesetz-
buch (HGB – German Commercial Code) and explanatory report)
Deutsche Post DHL Group has implemented an accounting-
related internal control system (ICS) as part of its risk manage-
ment system. The ICS aims to ensure the compliance of (Group)
accounting and financial reporting with generally accepted prin-
ciples. Specifically, it is intended to ensure that all transactions
are recorded promptly, accurately and in a uniform manner on
the basis of the applicable norms, accounting standards and in-
ternal Group regulations. Accounting errors are to be avoided in
principle and significant measurement errors detected promptly.
The ICS was designed to follow the internationally recog-
nised COSO framework for internal control systems (COSO: Com-
mittee of Sponsoring Organizations of the Treadway Commis-
sion). It is continuously updated and is a mandatory and integral
part of the accounting and financial reporting process of the
companies included in the Group.

The approach of the accounting-related ICS in summary:
• The internal control system takes a risk-based approach that is
defined in a Group guideline and takes both quantitative and
qualitative aspects into account.

• Risks that could lead to material misstatements in the financial
reports are identified and minimum requirements are formu-
lated on the basis of such risks.

• Both preventive and detective control mechanisms are used to
ensure that the minimum requirements are met along with all
division-specific and local requirements.

• The ICS is subjected to ongoing reviews using a self-assess-
ment approach, in order to maintain the system’s effectiveness
and implement continuous improvements.

• The Supervisory Board is provided with regular reports on the

results of the review of ICS effectiveness.

In addition to the ICS components already described, additional
organisational and technical procedures have been implemented
for all companies in the Group. Centrally standardised accounting
guidelines govern the reconciliation of the single-entity financial
statements and ensure that international financial reporting
standards (EU IFRS s) are applied in a uniform manner through-
out the Group. A standard chart of accounts is required to be ap-
plied by all Group companies. We immediately assess new devel-
opments in international accounting for relevance and announce
their implementation in a timely manner, for example in monthly
newsletters. 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.

Deutsche Post DHL Group — 2018 Annual Report

Other quality assurance components include automatic plausi-
bility reviews and system validations of the accounting data. In
addition, regular, manual checks are carried out centrally at the
Corporate Center by Corporate Accounting & Controlling, Taxes
and Corporate Finance. If necessary, we call in outside experts.
Finally, the Group’s standardised process for preparing financial
statements of using a centrally administered financial state-
ments calendar guarantees a structured and efficient accounting
process.

Over and above the ICS and risk management, Corporate
Internal Audit is an essential component of the Group’s control
and monitoring system. Using risk-based auditing procedures,
Corporate Internal Audit regularly examines the processes
related to financial reporting and reports its results to the Board
of Management.

It should always be taken into consideration that no ICS,
regardless of how well designed, can offer absolute certainty
that all material accounting misstatements will be avoided or
detected.

Reporting and assessing opportunities and risks
In the following, we have reported mainly on those risks and op-
portunities which, from a current standpoint, could have a signifi-
cant impact upon the Group during the forecast period beyond
the impact already accounted for in the business plan. The risks
and opportunities have been assessed in terms of their probabil-
ity 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.75. The following assessment scale is used:

Classification of risks and opportunities

Probability of occurrence (%)

Planned Group EBIT

Risks

Opportunities

A.75

> 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

The opportunities and risks described here are not necessarily
the only ones the Group faces or is exposed to. Our business
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 decen-
trally at Deutsche Post DHL Group. Reporting on possible devi-
ations from projections, including latent opportunities and risks,
occurs primarily at the country or regional level. In view of the
degree of detail provided in the internal reports, we have com-

bined the decentrally reported opportunities and risks into the
categories shown below for the purposes of this report. It should
be noted that the figures provided in the underlying individual
reports exhibit a significant correlation with the performance of
the world economy and global economic output. Unless other-
wise specified, a low relevance is attached to the individual op-
portunities and risks within the respective categories and in the
forecast period under observation (2019). The opportunities and
risks generally apply to all divisions, unless indicated otherwise.

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

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 – since
1 January 2019, Post & Paket Deutschland) are subject to sector-
specific regulation by the Bundesnetzagentur (German federal
Glossary, page 176, pursuant to the Postgesetz
network agency)
(PostG – German Postal Act),
Glossary, page 176. The Bundesnetz-
agentur approves or reviews prices, formulates the terms of
downstream access and has special supervisory powers to com-
bat market abuse.

Risks may also arise from the price-cap procedure,

Glos-
sary, page 176. In 2015, the Bundesnetzagentur stipulated the con-
ditions applicable to the approval of postage rates for letters of
up to 1,000 grams under the price cap procedure. These condi-
tions are referred to as parameters and will be revised by the
Bundesnetzagentur in 2019.

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 Federal Republic of Germany. We described this in detail in
the 2016 Annual Report in note 48 to the consolidated financial
statements,
dpdhl.com/en/investors. The EGC’s judgment is le-
gally effective. 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 deci-
sion” (Ausweitungsbeschluss) is still pending. That action is
based upon procedural matters involving the validity of the Eu-
ropean Commission’s 2011 decision to extend the state aid pro-
ceedings. In the pending action, the European Commission ad-
vanced the legal argument that the state aid proceedings initiated
in 1999 remain open on some counts and that it could therefore
issue a new final decision bringing the proceedings to a close. The
European Commission gave no particulars regarding the possible
substance of the decision. 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 con-
firmed that opinion in its ruling of 24 October 2013. The Euro-
pean Commission’s state aid decision of 25 January 2012 thus
remains null and void with final effect.

We describe other significant legal proceedings in

note 46
to the consolidated financial statements. However, we do not see
these proceedings as posing a risk of significant deviations from
the projections for the 2019 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 regulations 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 aggressively by the competent authorities, with stricter
penalties imposed. In response to this risk, we have implemented
a Group-wide compliance programme. In addition to undertaking
the legally prescribed check of senders, receivers, suppliers and
employees against current embargo lists, the programme en-
sures, for example, that the legally required review of shipments
is carried out for the purpose of enforcing applicable export
restrictions as well as country sanctions and embargos.
Deutsche Post DHL Group co-operates with the authorities re-
sponsible, both in working to prevent violations as well as in
assisting in the investigation of violations to avoid and limit
potential sanctions.

Macroeconomic and industryspecific opportunities
and risks
Macroeconomic and sector-specific conditions are a key factor in
determining the success of our business. We therefore pay close
attention to economic trends within the regions 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 pos-
ition and results of operations owing to potential changes in ex-
change rates, the economy, air 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 possible for the ef-
fects of Brexit. Despite the volatile economic climate, demand for
logistics services rose overall in 2018, as did the related revenues.
A variety of external factors offer us numerous opportunities;
indeed we believe that markets will grow all over the world. Ad-
vancing globalisation and further world economic growth mean
that the logistics industry will continue to expand. This is espe-
cially true of Asia, where trade flows to other regions and in par-
ticular within the continent will continue to increase. As the mar-
ket leader, the expansion will benefit us with our DHL divisions to
an above-average extent. This also applies to other countries in
regions with strong economic growth such as South America and

Deutsche Post DHL Group — 2018 Annual Report

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 in-
ternational, but are also more prone to disruption. Customers 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.

The booming online marketplace represents another opportunity
for us as it is creating demand for transporting documents and
Glossary, page 176, is experiencing
goods. The B2C market,
strong growth, particularly due to the continued upward trend in
digital retail trade. This has created high growth potential for the
domestic and international 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 de-
crease 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 transport services in order to
lower costs. Cyclical risks can affect our divisions differently de-
pending on their magnitude and point in time, which could miti-
gate the total effect. Overall, 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
changes in market demand.

Deutsche Post and DHL are in competition with other pro-
viders. 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 factors for success are
quality, customer confidence and competitive 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 oppor-
tunities 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 re-
duce the volatility of our financial performance 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 trans-
actions are quantified as a net position over a rolling 24-month
period. Highly correlated currencies 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
Korean won. The Czech koruna is the only currency with a consid-
erable net deficit. As of the reporting date, there were no signifi-
cant currency hedges for planned foreign currency transactions.
A potential general devaluation of the euro presents an op-
portunity for the Group’s earnings position. Based upon current
macroeconomic estimates, we consider this opportunity 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 considering 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 marine diesel).
In the DHL divisions, most of these risks are passed on to custom-
ers via operating measures (fuel surcharges).

The key control parameters for liquidity management are the
centrally available liquidity reserves. Deutsche Post DHL Group
had central liquidity reserves of €4.3 billion as at the reporting
date, consisting of central financial investments amounting to
€2.3 billion plus a syndicated credit line of €2 billion. The Group’s
liquidity is therefore sound in the short and medium terms. More-
over, the Group enjoys open access to the capital markets on ac-
count of its good ratings within the industry, and is well pos-
itioned to secure long-term capital requirements.

The Group’s net debt amounted to €12.3 billion at the end of
2018. The share of financial liabilities with short-term interest
rate lock-ins in the total financial liabilities of €16.5 billion was
approximately 17 %.

Further information on the Group’s financial position and
finance strategy as well as on the management of financial risks
can be found in the report on the economic position and in
note 44 to the consolidated financial statements. Detailed informa-
tion on risks and risk mitigation in relation to the Group’s defined
benefit retirement plans can be found in
note 39 to the consoli-

dated financial statements.

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

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 working to create
efficient structures in all areas to enable us to flexibly adapt
capacities and costs to demand – a prerequisite for lasting, prof-
itable business success. With respect to strategic orientation, we
are focussing upon our core competencies in the mail and logis-
tics businesses with an eye towards growing organically and
simplifying our processes for the benefit of our customers. Digit-
alisation plays a key role in this. Our digital transformation in-
volves the integration of new technologies into a corporate cul-
ture that uses the changing environment to its advantage.
Opportunities arise, for example, from new infrastructure net-
working possibilities as well as digital business models. Our earn-
ings projections regularly take account of development oppor-
tunities arising from our strategic orientation.

In the observation period shown, risks arising from the cur-
rent corporate strategy, which extends over a long-term period,
are considered to be of low relevance for the Group. The divisions
face the following special situations, however:

In the German mail and parcel business, we are responding
to the challenges posed by the structural shift from a physical to
a digital business. We are counteracting 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 expand-
ing our parcel network. We are also expanding our range of elec-
tronic 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 mar-
ket very closely and take these into account in our earnings pro-
jections. For the specified forecast period, we do not see these
developments as having significant potential to impact our busi-
ness negatively.

In the Express division, our future success depends above all
upon general factors such as trends in the competitive environ-
ment, costs and quantities transported. We plan to keep growing
our international business, and expect a further increase in ship-
ment 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 strategic opportunities or risks for the Express
division that go significantly beyond those reported in the section
on “Opportunities and risks arising from macroeconomic and in-
dustry-specific conditions”.

giving us an opportunity to generate 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 our oppor-
tunities and risks essentially depends on trends in the supply,
demand and pricing of transport services as well as the duration
of our contracts. Comprehensive knowledge in the area of bro-
kering transport services helps us to capitalise on opportunities
and minimise risk.

In the Supply Chain division, our success is highly dependent
on our customers’ business success. Since we offer customers a
widely diversified range of products in different sectors all over
the world, we are able to diversify our risk portfolio and thus
counteract the incumbent risks. Our future success moreover
depends on our ability to continuously improve our existing busi-
ness, seamlessly integrate new business and grow in our most
important markets and customer segments. We do not see any
strategic opportunities or risks for the Supply Chain division that
extend significantly beyond those reported in the section entitled
“Opportunities and risks arising from macroeconomic and indus-
try-specific conditions”.

In financial year 2019, we plan to redesign our cross-border
portfolio of e-commerce services and international parcel ship-
ping. We established a new eCommerce Solutions division for
this purpose effective as of 1 January 2019. Its productivity and
profitability are expected to increase over the medium term. We
counteract the fundamental risk of rising cost pressure by im-
proving workflow standardisation, network efficiency and cost
flexibility. For the new DHL division, we also do not see any stra-
tegic opportunities or risks that extend significantly beyond
those reported in the section entitled “Opportunities and risks
arising from macroeconomic and industry-specific conditions”.

We currently do not see any specific corporate strategy

opportunities or risks of material significance.

Opportunities and risks arising from internal processes
A number of internal processes must be aligned so that we can
render our services. These include – in addition to the fundamen-
tal operating processes – supporting functions such as sales and
purchasing as well as the corresponding management processes.
The extent to which we succeed in aligning our internal processes
to meet customer needs whilst simultaneously lowering costs
correlates with potential positive deviations from the current pro-
jections. We are steadily improving internal processes with the
help of our First Choice initiatives. This improves customer satis-
faction whilst reducing our costs. Our earnings projection already
incorporates expected cost savings.

In the Global Forwarding, Freight division, we purchase
transport services from airlines, shipping companies and freight
carriers rather than providing them ourselves. As a rule, out-
sourcing transport services should be more cost-effective for us,

Logistics services are generally provided in bulk and require
a complex operational infrastructure with high quality standards.
To consistently guarantee reliability and punctual delivery, pro-
cesses must be organised so as to proceed smoothly with no

Deutsche Post DHL Group — 2018 Annual Report

We are focussing upon our
core competencies.

technical or personnel-related glitches. Any weaknesses with
regard to the tendering, sorting, transport, warehousing or de-
livery of shipments could seriously compromise our competitive
position. To enable us to identify possible disruptions in our work-
flows and take the necessary countermeasures at an early stage,
we have introduced a global security management system and
developed a global IT platform known as Resilience 360 that
depicts and integrates our global supply chains and locations.
Near real-time information on incidents relevant to security flows
into the system, which in cases of disruption also serves as a
central communications platform. This offers a competitive
advantage 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 important
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 stand-
ard for information security 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
continuously available. We ensure this by designing our systems
to protect against complete system failures. In addition to out-
sourced 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 employees
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 procedure 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.

The European Union’s General Data Protection Regulation
(GDPR) prescribes a series of measures for the protection of per-
sonal data as well as immediate and extensive reactions and re-
porting obligations of data losses (unauthorised access by third
parties). We have prepared ourselves for this and established
implementation programmes for all divisions. Possible violations
could be punished with fines by the data protection supervisory
authorities.

Opportunities and risks arising from human resources
It is essential for us to have qualified and motivated employees
in order to achieve long-term success. However, demographic
change could lead to a decrease in the pool of available 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 struc-
tures. The experience gained is used to continuously improve
strategic resource management as an analysis and planning in-
page 58, agreed upon with
strument. The Generations Pact,
trade unions in Germany, also helps us to take advantage of the
career experience of employees for as long as possible whilst,
at the same time, offering young people long-term career per-
spectives.

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 websites referred to in the Group Management Report do not form part of the report.

CORPORATE GOVERNANCE
73 — 86

74 REPORT OF THE SUPERVISORY BOARD

77 SUPERVISORY BOARD
77 Members of the Supervisory Board
78 Committees of the Supervisory Board
79 Mandates held by the Supervisory Board

80 BOARD OF MANAGEMENT
82 Members of the Board of Management
82 Mandates held by the Board of Management

83 CORPORATE GOVERNANCE REPORT

Deutsche Post DHL Group — 2018 Annual Report

REPORT OF THE
SUPERVISORY BOARD
Dear Shareholders,

We faced considerable challenges in the 2018 financial year but
also set the stage for the lasting business success of the Group
in the future.

The Supervisory Board advised and oversaw the Board of
Management in the management of the company, made deci-
sions regarding Board of Management membership, consulted
with the members of the Board of Management on the strategic
direction of the company and shaping corporate policy, as well as
participating in decisions that were material for the company.

The Board of Management informed us on an ongoing basis
about the course of business and material transactions. Funda-
mental issues concerning business planning, profitability, main-
taining competitiveness and business performance were thor-
oughly deliberated after the committees had laid the groundwork
for these discussions.

Between meetings, I had discussions with the Chairman of
the Board of Management (CEO), Frank Appel, regarding Board
of Management issues and current developments. Stefan Schulte,
Audit Committee Chair, also held regular conversations outside
of scheduled meetings with Melanie Kreis, Board Member for
Finance.

Only a few members were unable to attend all meetings. In
cases where their absence was unavoidable, they generally par-
ticipated in decisions by submitting their votes in writing. The
overall attendance rate was around 95 %. An overview of the
meeting attendance records of individual members is provided
on page 84.

Ten plenary Supervisory Board meetings and 26 committee
meetings were held in the year under review. The members of
the Board of Management participated in plenary meetings –
unless decisions on Board of Management membership were
taken – and reported on the business performance in the div-
isions for which they are responsible. The chairman, and the
members of the Board of Management responsible for their rel-
evant divisions, attended the committee meetings. Executives
from the tier immediately below the Board of Management and
representatives of the auditors were also invited to attend for
individual agenda items.

Key topics addressed in plenary meetings
In our March 2018 meeting, we discussed the annual and consoli-
dated financial statements, including the management reports
and the separate combined non-financial report. Following the

report by the auditor regarding the findings of the audit, we ap-
proved the financial statements at the recommendation of the
Finance and Audit Committee. We concurred with the Board of
Management’s proposed resolution on the appropriation of the
net retained profit. Based upon the results of the audit, no objec-
tions were raised regarding the non-financial report.

We determined the annual bonus for active Board of Man-
agement members based upon the degree of target achievement
and corresponding recommendations by the Strategy and Ex-
ecutive Committees.

The proposed resolutions for the 2018 Annual General Meet-
ing, including the dividend proposal, were also approved at this
meeting.

Additionally, we addressed the results of the efficiency re-

view of our activities.

In early April, the main issue discussed was the division of
responsibilities of the Board of Management. We agreed that in-
novations such as the development of Street Scooters should be
combined in the new Corporate Incubations board department.
The new department was initially assigned to Jürgen Gerdes,
whilst Frank Appel assumed interim leadership of Post - eCom-
merce - Parcel.

After preparatory work was completed by the Finance and
Audit Committee, we agreed to the purchase of 14 Boeing 777
cargo planes in early May to further renew the Express inter-
continental fleet.

In June, we dealt with Jürgen Gerdes’ departure from the
Board of Management and transferred responsibility for the
Corporate Incubations board department to Thomas Ogilvie, who
is Board Member for Human Resources and Labour Director for
the Group.

The focus of September’s meeting was the attainment of the
strategic goals assigned to Board of Management members as
the basis for granting the long-term incentive component for
2018 and setting new ones for awarding the 2019 tranche.

In the closed meeting that followed, we discussed the pro-
gress made in implementing our Strategy 2020 as well as future
strategic challenges, particularly digitalisation, together with the
Board of Management, with the support of invited outside pre-
senters. Subsequently, the Supervisory Board held a meeting
without the members of the Board of Management.

In October, we approved the sale of the supply chain business
in China, Hong Kong and Macao to S. F. Holding in the course of
a strategic partnership.

At the last Supervisory Board meeting of the year in Decem-
ber, we approved the Group’s business plan for 2019 and the
targets for variable remuneration of the Board of Management
for 2019, and agreed to again issue an unqualified Declaration of
Conformity.

Corporate Governance — REPORT OF THE SUPERVISORY BOARD

NIKOLAUS VON BOMHARD
Chairman

Key topics addressed in committee meetings
The primary duty of the six committees of the Supervisory Board
is to prepare the decisions to be taken in the plenary meetings.
They have also been tasked with taking the final decisions regard-
ing a few matters, including approval for property transactions
and secondary activities of Board of Management members. The
committee chairs report extensively in the plenary meetings on
the work of the committees. Details on the composition of the
committees are provided on page 78.

The Executive Committee met six times and dealt mainly
with Board of Management issues and preparatory work for
Super visory Board meetings.

The Personnel Committee held four meetings. Items dis-
cussed included human resources development, promoting
women to executive positions, further developing the Group-
wide initiatives and the results of the annual employee opinion
survey.

The Finance and Audit Committee met eight times. It exam-
ined the financial statements and the management reports for
the company and the Group. It discussed the quarterly financial
reports and the half-yearly financial report, which were reviewed
by the auditors, before their publication with the Board of
Manage ment and the auditors. In addition, it issued the audit en-
gagement for the auditors elected by the Annual General Meeting
and specified the key audit priorities. The committee also
addressed the non-audit services provided by the auditors, the

accounting process and risk management, discussed the find-
ings of internal audits. It obtained detailed reports from the Chief
Compliance Officer on compliance and on updates to the compli-
ance organisation and compliance management.

The Strategy Committee met six times, primarily addressing
the business units’ strategic positioning in their respective mar-
ket segments and the implementation of our Strategy 2020. Par-
ticular areas of focus were the progress made in the digital trans-
formation of the company and regular status updates by the
divisions.

The Nomination Committee met twice. In March, it recom-
mended that the Supervisory Board propose Günther Bräunig
and Mario Daberkow to the Annual General Meeting as candi-
dates to the Supervisory Board. In December, a resolution was
passed to propose Heinrich Hiesinger to the 2019 Annual General
Meeting as a Supervisory Board candidate.

The Mediation Committee did not meet in the year under

review.

Changes to the Supervisory Board
Shareholder representatives Wulf von Schimmelmann and Ulrich
Schröder stepped down from the Supervisory Board. Wulf von
Schimmelmann, who was Chairman of the Supervisory Board for
many years, did not make himself available for re-election after
serving more than two full terms of office. Ulrich Schröder
stepped down due to a serious illness. The 2018 Annual General

Deutsche Post DHL Group — 2018 Annual Report

Meeting elected Günther Bräunig and Mario Daberkow as new
members of the Supervisory Board, both for a term of office of
five years.

Following the Annual General Meeting, the Supervisory Board

elected me as chair and Andrea Kocsis as deputy chair.

Since the term of office of the employee representatives was
close to expiring, in March 2018 the assembly of delegates (re-)
elected the employee representatives to a five-year term begin-
ning at the end of the 2018 Annual General Meeting. An overview
of current Supervisory Board members is provided on page 77.

Changes to the Board of Management
Jürgen Gerdes, who laid down the leadership of Post - eCom-
merce - Parcel and assumed initial responsibility for the new
Corporate Incubations board department in April, resigned from
the Board of Management on 12 June 2018 due to differences of
opinion regarding the company’s strategic priorities. He left the
company on 30 June 2018. After Frank Appel had assumed in-
terim leadership of the Post - eCommerce - Parcel division in
April, we transferred responsibility for Corporate Incubations to
Thomas Ogilvie. As at 1 January 2019, responsibility for the newly
created eCommerce Solutions division was assigned to Ken Allen.
His contract was extended to July 2022. John Pearson was ap-
pointed to the Board of Management as successor for the Express
board department as at 1 January 2019, initially for three years.
In today’s meeting we appointed Tobias Meyer as member of the
Board of Management effective from 1 April 2019 for an initial
period of three years and entrusted him with the management of
the Post & Paket Deutschland division.

Managing conflicts of interest
Supervisory Board members do not hold positions on the govern-
ing 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
year under review.

Compliance with all recommendations of the German
Corporate Governance Code
In December, the Board of Management and the Supervisory
Board issued an unqualified Declaration of Conformity pursuant
to section 161 of the Aktiengesetz (AktG – German Stock Cor-
poration Act), which was also published on the company’s web-
site. The declarations from previous years are also available there.
The company also continued to comply with all recommenda-
tions of the Government Commission on the German Corporate
Governance Code in the version dated 7 February 2017, which
was published in the Federal Gazette on 24 April/19 May, follow-
ing submission of the Declaration of Conformity in December
2017, and decided to continue to do so in the future. We have also

implemented all the suggestions made by the Government
Commission, with the exception of broadcasting the full AGM on
the inter net. Further information regarding corporate govern-
ance within the company can be found in the Corporate Govern-
ance Report (page 83 ff.).

2018 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
2018, including the respective management reports, and issued
unqualified audit opinions. PwC also reviewed the quarterly finan-
cial reports and the half-yearly financial report and audited the
non-financial report on behalf of the Finance and Audit Commit-
tee without issuing any objections.

Upon recommendation by the Finance and Audit Committee,
the Supervisory Board in its meeting today focussed upon the
annual and consolidated financial statements, including the
Board of Management’s proposal on the appropriation of the net
retained profit, the management reports and the combined (con-
solidated) non-financial report for financial year 2018, and dis-
cussed these in depth with the Board of Management. The audi-
tors reported on the results of their audit before the Finance and
Audit Committee and plenary meeting and were available to an-
swer questions and provide information. The Supervisory Board
concurred with the results of the audit and approved the annual
and consolidated financial statements for financial year 2018, as
recommended by the Finance and Audit Committee. No objec-
tions were raised on the basis of the final outcome of the exam-
ination by the Supervisory Board and the Finance and Audit Com-
mittee of the annual and consolidated financial statements, the
management reports and the proposal for the appropriation of
the net retained profit. Similarly, no objections were raised with
regard to the examination of the combined 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 Manage-
ment and the employees of the company for their hard work in
this challenging financial year.

Bonn, 6 March 2019
The Supervisory Board

Nikolaus von Bomhard
Chairman

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

SUPERVISORY BOARD

Members of the Supervisory Board

Shareholder representatives

Employee representatives

B.01

Prof. Dr Wulf von Schimmelmann (Chair) (until 24 April 2018)
Former CEO of Deutsche Postbank AG

Dr Nikolaus von Bomhard (Chair since 24 April 2018)
Former Chair of the Board of Management, Münchener
Rückversicherungs-Gesellschaft AG (Munich Re)

Dr Günther Bräunig (since 17 March 2018)
CEO of KfW Bankengruppe

Dr Mario Daberkow (since 24 April 2018)
Member of the Managing Board of Volkswagen Financial Services
AG

Ingrid Deltenre
Former Director General of the European Broadcasting Union

Werner Gatzer
State Secretary, Federal Ministry of Finance (since 3 April 2018)

CEO of Deutsche Bahn Station & Service AG (from 1 January to
2 April 2018)

Prof. Dr Henning Kagermann
Former CEO of SAP AG

Simone Menne
Former member of the Board of Managing Directors, Boehringer
Ingelheim GmbH

Roland Oetker
Managing Partner, ROI Verwaltungsgesellschaft mbH

Dr Ulrich Schröder (until 6 February 2018)
Former CEO of KfW Bankengruppe

Dr Stefan Schulte
Chair of the Executive Board of Fraport AG

Prof. DrIng. Katja Windt
President/member of the Executive Board of Jacobs University
Bremen gGmbH (until 14 January 2018)

SMS group GmbH (since 15 January 2018)

Member of the Managing Board of SMS group GmbH
(since 1 April 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, Co-determination 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

Gabriele Gülzau (since 24 April 2018)
Chair of the Works Council, Deutsche Post AG, Mail Branch,
Hamburg

Thomas Held (since 24 April 2018)
Chair of the Central Works Council, Deutsche Post AG
(since 27 June 2018)

Deputy Chair of the Central Works Council, Deutsche Post AG

Mario Jacubasch (since 24 April 2018)
Deputy Chair of the Group Works Council, Deutsche Post AG

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

Anke Kufalt (until 24 April 2018)
Chair of the Works Council, DHL Global Forwarding GmbH,
Hamburg

Ulrike LennartzPipenbacher
Deputy Chair of the Central Works Council, Deutsche Post AG

Andreas Schädler (until 24 April 2018)
Business Division Sales Post, Deutsche Post AG

Sabine Schielmann (until 24 April 2018)
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

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

Deutsche Post DHL Group — 2018 Annual Report

Committees of the Supervisory Board

B.02

Executive Committee

Finance and Audit Committee

Nomination Committee

Prof. Dr Wulf von Schimmelmann
(Chair) (until 24 April 2018)

Dr Nikolaus von Bomhard
(Chair since 24 April 2018)

Andrea Kocsis (Deputy Chair)

Rolf Bauermeister

Ingrid Deltenre (since 24 April 2018)

Werner Gatzer

Thomas Held (since 24 April 2018)

Stefanie Weckesser (until 24 April 2018)

Personnel Committee

Andrea Kocsis (Chair)

Prof. Dr Wulf von Schimmelmann
(Deputy Chair) (until 24 April 2018)

Dr Nikolaus von Bomhard
(Deputy Chair) (since 24 April 2018)

Thomas Koczelnik

Roland Oetker

Dr Stefan Schulte (Chair)

Stephan Teuscher (Deputy Chair)

Werner Gatzer

Thomas Koczelnik

Simone Menne

Stefanie Weckesser

Strategy Committee

Prof. Dr Wulf von Schimmelmann
(Chair) (until 24 April 2018)

Dr Nikolaus von Bomhard
(Chair) (since 24 April 2018)

Andrea Kocsis (Deputy Chair)

Rolf Bauermeister

Prof. Dr Henning Kagermann

Thomas Koczelnik

Roland Oetker

Prof. Dr Wulf von Schimmelmann
(Chair) (until 24 April 2018)

Dr Nikolaus von Bomhard
(Chair since 24 April 2018)

Ingrid Deltenre (since 24 April 2018)

Werner Gatzer

Mediation Committee
(pursuant to section 27(3) of the German
Codetermination Act)

Prof. Dr Wulf von Schimmelmann
(Chair) (until 24 April 2018)

Dr Nikolaus von Bomhard
(Chair) (since 24 April 2018)

Andrea Kocsis (Deputy Chair)

Rolf Bauermeister

Roland Oetker

B.03

Corporate Governance — SUPERVISORY BOARD — Committees of the Supervisory Board — Mandates held by the Supervisory Board

Mandates held by the Supervisory Board

Shareholder representatives

Membership of supervisory boards
required by law

Prof. Dr Wulf von Schimmelmann
(Chair) ( until 24 April 2018)
Allianz Deutschland AG ( until 2 March 2018)

Maxingvest AG

Dr Günther Bräunig (since 17 March 2018)
Deutsche Pfandbriefbank AG (Chair)

Deutsche Telekom AG (since 21 March 2018)

Membership of comparable bodies

Prof. Dr Wulf von Schimmelmann
(Chair) (until 24 April 2018)
Thomson Reuters Corp., Canada
(Board of Directors)

Dr Nikolaus von Bomhard
(Chair since 24 April 2018)
Athora Holding Ltd., Bermuda
(Board of Directors, Chair)

Werner Gatzer
DB Netz AG (from 1 January to 2 April 2018)

Flughafen Berlin Brandenburg GmbH

Dr Mario Daberkow (since 24 April 2018)
Softbridge-Projectos Tecnológicos S. A., Portugal 1
(Administrative Board) (since 18 April 2018)

PD-Berater der öffentlichen Hand GmbH
(Chair)

Volkswagen Participações Ltda., Brazil
(Supervisory Board) 1

Prof. Dr Henning Kagermann
Deutsche Bank AG (until 24 May 2018)

Münchener Rückversicherungs-
Gesellschaft AG (Munich Re)

KUKA AG

Simone Menne
BMW AG

Springer Nature KGaA (since 13 April 2018)

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

Prof. DrIng. Katja Windt
Fraport AG

Volkswagen Holding Financière S. A., France
(Supervisory Board) 1

Volkswagen Finance Luxemburg II S. A.,
Luxembourg (Supervisory Board, Chair) 1
(renamed Volkswagen Payments S.A.
on 10 October 2018)

Volkswagen S. A., Institución de Banca
Múltiple, Mexico (Supervisory Board) 1
(since 1 October 2018)

VW Credit, Inc., USA (Board of Directors) 1
(since 1 October 2018)

Ingrid Deltenre
Givaudan SA, Switzerland (Board of Directors)

Banque Cantonale Vaudoise SA, Switzerland
(Board of Directors)

Agence France Presse, France (Board of Directors)

Sunrise Communications AG, Switzerland
(Board of Directors) (since 11 April 2018)

Roland Oetker
Rheinisch-Bergische Verlagsgesellschaft mbH
(Supervisory Board)

Simone Menne
Johnson Controls International plc, Ireland
(Board of Directors) (since 7 March 2018)

Russel Reynolds Associates Inc., USA
(Board of Directors) (since 30 January 2019)

Dr Ulrich Schröder
“Marguerite 2020”: European Fund for Energy,
Climate Change and Infrastructure, Luxem-
bourg (Supervisory Board) (until 6 Febru-
ary 2018)

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

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

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

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

Fraport Brasil S. A. Aeroporto de Porto Alegre,
Brazil (Supervisory Board, Chair) 2

Fraport Brasil S. A. Aeroporto de Fortaleza,
Brazil (Supervisory Board, Chair) 2

Employee representatives

Membership of supervisory boards
required by law

Jörg von Dosky
PSD Bank München eG

Andreas Schädler (until 24 April 2018)
PSD Bank Köln eG (Chair)

Stephan Teuscher
DHL Hub Leipzig GmbH (Deputy Chair)

1 Group mandates, Volkswagen AG.
2 Group mandates, Fraport AG.

BOARD OF
MANAGEMENT

1 FRANK APPEL

2 THOMAS OGILVIE

3 MELANIE KREIS

4 TIM SCHARWATH

JOHN PEARSON

JOHN GILBERT

7 KEN ALLEN

Deutsche Post DHL Group — 2018 Annual Report

Members of the Board of Management

B.04

Dr Frank Appel
Chief Executive Officer

Global Business Services

Also responsible for Post - eCommerce -
Parcel (since 4 April 2018)

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

Ken Allen
Express (until 31 December 2018)

eCommerce Solutions (since 1 January 2019)

Born in 1955
Member since February 2009
Appointed until July 2022

John Gilbert
Supply Chain

Born in 1963
Member since March 2014
Appointed until March 2022

Melanie Kreis
Finance

Born in 1971
Member since October 2014
Appointed until June 2022

Dr Thomas Ogilvie
Human Resources

Corporate Incubations (since 12 June 2018)

Born in 1976
Member since September 2017
Appointed until August 2020

John Pearson
Express (since 1 January 2019)

Born in 1963
Member since January 2019
Appointed until December 2021

Tim Scharwath
Global Forwarding, Freight

Born in 1965
Member since June 2017
Appointed until May 2020

Left the company during the year under review

Dr h. c. Jürgen Gerdes
Post - eCommerce - Parcel (until 3 April 2018)

Corporate Incubations (from 4 April 2018 to
12 June 2018)

Born in 1964
Member from July 2007 to June 2018

Mandates held by the Board of Management

B.05

Membership of supervisory boards
required by law

Membership of comparable bodies

Dr Frank Appel
adidas AG

1 Group mandate.

Ken Allen
DHL-Sinotrans International Air Courier Ltd, China (Board of Directors) 1

Corporate Governance — BOARD OF MANAGEMENT — Members of the Board of Management — Mandates held by the Board of Management —
CORPORATE GOVERNANCE 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
The Board of Management and the Supervisory Board follow the
current initiatives and deliberations regarding the German Cor-
porate Governance Code and in December 2018 once again issued
an unqualified Declaration of Conformity pursuant to section 161
of the Aktiengesetz (AktG – German Stock Corporation Act):

“The Board of Management and the Supervisory Board of
Deutsche Post AG declare that all recommendations of the Gov-
ernment Commission German Corporate Governance Code in
the version dated 7 February 2017 and published in the Federal
Gazette on 24 April/19 May 2017 have been complied with after
issuance of the Declaration of Conformity in December 2017 and
that all recommendations of the Code in the version dated 7 Feb-
ruary 2017 and published in the Federal Gazette on 24 April /
19 May 2017 shall also be complied with in the future.”

We also implement the suggestions made in the Code; how-
ever, 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 and shared values
Our business relationships and activities are based upon respon-
sible business practice that complies with applicable laws, eth-
ical standards and international guidelines, and this also forms
part of the Group’s strategy. Equally, we require our suppliers
to act in this way. We encourage and facilitate long-term rela-
tionships with our stakeholders, whose decisions to select
Deutsche Post DHL Group as a supplier, employer or investment
of choice are increasingly also based upon 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 upon the principles set out in the Univer-
sal 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 agree-
ments.

The Code of Conduct also defines what we mean by diversity.
Diversity and mutual respect are some of the core values that
contribute to good co-operation within the Group and thus to

economic success. The key criteria for the recruitment and pro-
fessional development of our employees are their skills and qual-
ifications. Our Diversity Council discusses the strategic aspects
of diversity management and divisional requirements. Its mem-
bers 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
Supervisory Board support the Group’s diversity strategy, with a
particular focus upon the goal of increasing the number of
women in the Group.

Doing business responsibly includes using 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.

Ensuring our interactions with business partners, sharehold-
ers and the public are conducted with integrity and within the
bounds of the law is vital to maintaining our reputation. It is also
the foundation of Deutsche Post DHL Group’s lasting business
success. The goal of the compliance management system (CMS)
is to ensure observance of the statutory provisions and internal
policies applicable to the Group. Its effectiveness is reviewed on
an on-going basis in order to adapt it if necessary to relevant de-
velopments and new legal requirements. The CMS’s individual
components, the Code of Conduct, and information on diversity
management and CSR issues are outlined in detail in the

Corporate Responsibility Report, dpdhl.com/crreport2018.

Cooperation between the Board of Management
and the Super visory 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.

The Board of Management’s rules of procedure set out the
principles governing its internal organisation, management and
representation, as well as co-operation between its individual
members. Within this framework, Board members manage their
departments independently and inform the rest of the Board
about key developments at regular intervals. The Board of Manage-
ment as a whole decides on matters of particular significance for
the company or the Group, including all decisions that have to be
presented to the Supervisory Board for approval, and all tasks
that cannot be delegated to individual members of the Board.
The Board of Management as a whole also decides on matters
presented to it by individual members of the Board of Manage-
ment 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 Super visory Board must be informed of any conflicts of inter-

Deutsche Post DHL Group — 2018 Annual Report

est without delay. No member of the Board of Management is a
member of more than two supervisory boards of non-Group listed
companies or of other supervisory bodies with comparable re-
quirements. 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 procedure for
itself containing the principles for its internal organisation, a
catalogue of Board of Management transactions requiring its
approval and the rules governing the work of the Supervisory
Board committees. The chairman elected by the members from
their ranks co-ordinates the work of the Supervisory Board and
also represents the Supervisory Board publicly.

The Supervisory Board meets at least four times a year.
Extra ordinary Supervisory Board meetings are held whenever
particular developments or measures need to be discussed or
approved at short notice. In financial year 2018, Supervisory
Board members held ten plenary meetings, 26 committee meet-
ings and one closed meeting, as described in the
Report of
the Supervisory Board, page 74 ff. At 95 %, the attendance rate re-
mained very high in the year under review, as the following
breakdown shows.

Attendance at plenary and committee meetings

Board members

Dr Nikolaus von Bomhard (Chair since 24 April 2018)

Prof. Dr Wulf von Schimmelmann (Chair until 24 April 2018)

Andrea Kocsis (Deputy Chair)

Rolf Bauermeister

Dr Günther Bräunig (since 17 March 2018)

Dr Mario Daberkow (since 24 April 2018)

Ingrid Deltenre

Jörg von Dosky

Werner Gatzer

Gabriele Gülzau (since 24 April 2018)

Thomas Held (since 24 April 2018)

Mario Jacubasch (since 24 April 2018)

Prof. Dr Henning Kagermann

Thomas Koczelnik

Anke Kufalt (until 24 April 2018)

Ulrike Lennartz-Pipenbacher

Simone Menne

Roland Oetker

Andreas Schädler (until 24 April 2018)

Sabine Schielmann (until 24 April 2018)

Dr Ulrich Schröder (until 6 February 2018)

Dr Stefan Schulte

Stephan Teuscher

Stefanie Weckesser

Prof. Dr-Ing. Katja Windt

B.06

Attendance

100

Report of the Supervisory Board, page 74 ff., can also be viewed

The
at dpdhl.com/en/investors.

The Board of Management and the Supervisory Board regu-
larly discuss the Group’s strategy, the divisions’ objectives and
strategies, the financial position and performance of the com-
pany and the Group, key business transactions, the progress of
acquisitions and investments, compliance and compliance man-
agement, risk exposure and risk management, and all material
business planning and related implementation issues. The Board
of Management informs the Supervisory Board promptly and
in full about all issues of significance. The Chairman of the Super-
visory Board and the CEO maintain close contact about cur-
rent issues.

The Supervisory Board carries out an annual efficiency re-
view of its work. In the year under review it again concluded that
it had performed its monitoring and advisory 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 sep-
arate meetings of the shareholder representatives and the em-
ployee 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 framework
and on issues relating to the future); the company supports them
in this by arranging presentations by internal and external speak-
ers, among other things.

No Supervisory Board members hold positions on the gov-
erning 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 recom-
mendation on the independence of non-executive or supervisory
directors and the wide-ranging protection against summary
dismissal and ban on discrimination contained in the Betriebs-
verfassungsgesetz (BetrVG – German Works Constitution Act)
and the Mitbestimmungsgesetz (MitbestG – German Co-deter-
mination Act), being an employee of the company is not incon-
sistent with the requirement for independence as defined by the
Code. The largest shareholder in the company, KfW Banken-
gruppe, currently holds approximately 21 % of the shares in
Deutsche Post AG and therefore does not exercise control. Ac-
cordingly, Werner Gatzer and Günther Bräunig are also independ-
ent within the meaning of the Code.

Corporate Governance — CORPORATE GOVERNANCE REPORT

No former members of the Board of Management are mem-

bers of the Supervisory Board.

No Supervisory Board members exceed the maximum ser-

vice period of three terms of office or the age limit of 72.

Board of Management and Supervisory Board committees
The structure of the Board of Management committees applica-
ble in the financial year included divisional executive committees
that held meetings to prepare decisions to be taken by the full
Board of Management and to take decisions on the matters del-
egated to them. Executives from the first and second tiers imme-
diately below the Board of Management attended executive com-
mittee meetings that covered topics relevant to their fields. Since
January 2019, the executive committes have been eliminated and
the matters previously delegated to them are now being handled
by the Board of Management.

Business review meetings continue to take place once a
quarter. These meetings are part of the strategic performance
dialogue between the divisions, the CEO, the Board Member for
Finance or also the full Board of Management. The business
review meetings discuss strategic initiatives, operational matters
and the budgetary situation in the divisions. The
members of
the Board of Management and the mandates held by them are listed on

page 82.

The primary duty of the members of the Supervisory Board
committees is to prepare the resolutions to be taken in the plenary
meetings.

The Executive Committee does the preparatory work for ap-
pointing members of the Board of Management, drawing up their
contracts of service and determining their remuneration.

The Finance and Audit Committee oversees the company’s
accounts, its accounting process, the effectiveness of the internal
control system, risk management and internal auditing, and the
financial statement audit, and in particular the selection of the
auditors and their independence. In addition, the committee is
responsible for preparing the voluntary external audit of the sep-
arate non-financial report, including selecting and engaging the
external auditor. It also approves the Board of Manage ment’s
engagement of the auditor to perform non-audit services. The
committee examines corporate compliance issues and discusses
the half-yearly and quarterly financial reports with the Board of
Management before publication. Based upon its own assessment,
the committee submits proposals for the approval of the annual
and consolidated financial statements by the Super visory Board.
The Chairman of the Finance and Audit Committee, Stefan Schulte,
is an independent financial expert as defined in sections 100 (5)
and 107 (4) of the AktG. He has no relationship with the company,
its governing bodies or its shareholders that could cast doubt on
his independence.

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 during 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 with-
out delay of all material findings and incidents occurring in the
course of the audit. Furthermore, the auditors must inform the
Supervisory Board if, whilst conducting the financial statement
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 prin-

ciples for the Group.

The Mediation Committee carries out the duties assigned to
it pursuant to the MitbestG: it makes proposals to the Supervisory
Board on the appointment of members of the Board of Manage-
ment in those cases in which the required 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 repre-
sentatives of the Supervisory Board with recommendations for
shareholder candidates for election to the Supervisory 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 div isions.
It addition, it does preparatory work on corporate acqui sitions and
divestitures that require the Supervisory Board’s approval.

Further information about the work of the Supervisory Board
and its committees in financial year 2018 is contained in the
Report of the Supervisory Board, page 74 ff. Details on the members
of the Supervisory Board and the composition of the Supervisory
Supervisory
Board committees can be found in the section on the

Board, page 77 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 Supervisory
Board is guided purely by the best interests of the company.
Subject to this requirement, the Supervisory Board aims to
ensure that independent Supervisory Board members as
defined in number 5.4.2 of the German Corporate Govern-
ance Code account for at least 75 % of the Supervisory Board,
and that at least 30 % of the Supervisory Board members are
women.

Deutsche Post DHL Group — 2018 Annual Report

2 The company’s international activities are already adequately
reflected in the current composition of the Supervisory
Board. The Supervisory Board aims to maintain this and its
future proposals to the Annual General Meeting will there-
fore consider candidates whose origins, education or profes-
sional experience equip them with particular international
knowledge and experience.

3 The Supervisory Board should be in a position to collectively
provide competent advice to the Board of Management on
fundamental future issues; in its opinion this includes, in par-
ticular, the digital transformation.

4 The Supervisory Board should collectively have sufficient
expertise in the areas of accounting or financial statement
audits. This includes knowledge of international develop-
ments in the field of accounting. Additionally, the Super-
visory Board believes that the independence 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 members
are an obstacle to providing independent and efficient advice
to, and supervision of, the Board of Management. The Super-
visory 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.
In accordance with the age limit adopted by the Supervisory
Board and laid down in the rules of procedure for the Super-
visory Board, proposals for the election of Supervisory 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 Supervisory Board member reaches the age of 72.
As a general 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 important for the Supervisory Board, including when
it comes to appointing members of the Board of Management.
The company’s success depends to a considerable extent upon
the diversity of qualifications, personalities, skills and experience
of the members of the Board of Management. All Board of Manage-
ment members possess international expertise and experience.
Long-term succession planning in all divisions aims to guarantee
that there will be an adequate pipeline of quali fied successors for

appointments to the Board of Management in the future. Particu-
lar attention is given to ensuring that women can advance within
the company. They are supported when they join the company
and candidates with potential are given opportunities for devel-
opment.

The current target for the proportion of women on the Board
of Management is 2: 8, to be achieved by the date of Annual Gen-
eral Meeting in 2021. The previous target of 1:7, which was met,
applied until the Annual General Meeting in 2018. 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 exec-
utive tiers are defined on the basis of their reporting lines: tier 1
comprises executives assigned to the N-1 reporting line, whilst
tier 2 consists of executives from the N-2 reporting line. The
diversity criteria important to the Supervisory Board, including
when considering its own composition, are outlined in the list
of its goals. With seven women (35 %), the Supervisory Board
exceeds the statutory share of women 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
with the resolutions for the General Meeting and additional in-
formation 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 possible 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 prox-
ies, submit postal votes and grant proxies to banks and share-
holder associations attending the General Meeting via the com-
pany’s online service.

Remuneration of the Board of Management
and the Super visory Board
The 2018 Annual General Meeting approved the current system
of Board of Management remuneration with around 89 % of the
votes cast. An explanation of the remuneration system and infor-
mation on the remuneration of the individual members of the
Board of Management and Supervisory Board are provided in the

Remuneration Report, page 25 ff.

CONSOLIDATED FINANCIAL STATEMENTS
87 — 170

INCOME STATEMENT

89 STATEMENT OF COMPREHENSIVE INCOME

90 BALANCE SHEET

91 CASH FLOW STATEMENT

92 STATEMENT OF CHANGES IN EQUITY

93 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS OF DEUTSCHE POST AG

93 Basis of preparation
93 1 – Basis of accounting
93 2 – Consolidated group
96 3 – Significant transactions
96 4 – Adjustment of opening balances
99 5 – New developments in international accounting

under IFRS s
101 6 – Currency translation
101 7 – Accounting policies
109 8 – Exercise of judgement in applying the accounting

policies

110 9 – Consolidation methods

111 Segment reporting
111 10 – Segment reporting

114 Income statement disclosures
114 11 – Revenue by business unit
115 12 – Other operating income
115 13 – Changes in inventories and work performed

and capitalised

115 14 – Materials expense
116 15 – Staff costs / employees
116 16 – Depreciation, amortisation and impairment losses
117 17 – Other operating expenses
118 18 – Net finance costs
118 19 – Income taxes
119 20 – Earnings per share
119 21 – Dividend per share

120 Balance sheet disclosures
120 22 – Intangible assets
122 23 – Property, plant and equipment
123 24 – Investment property
124 25 – Investments accounted for using the equity method
124 26 – Financial assets
125 27 – Other assets
125 28 – Deferred taxes
126 29 – Inventories
126 30 – Trade receivables
126 31 – Cash and cash equivalents
126 32 – Assets held for sale and liabilities associated with

assets held for sale

127 33 – Issued capital and purchase of treasury shares
129 34 – Capital reserves
129 35 – Other reserves
129 36 – Retained earnings
130 37 – Equity attributable to Deutsche Post AG shareholders
130 38 – Non-controlling interests
132 39 – Provisions for pensions and similar obligations
137 40 – Other provisions
138 41 – Financial liabilities
140 42 – Other liabilities

141 Cash flow disclosures
141 43 – Cash flow disclosures

143 Other disclosures
143 44 – Risks and financial instruments of the Group
157 45 – Contingent liabilities and other financial obligations
157 46 – Litigation
158 47 – Share-based payment
161 48 – Related party disclosures
163 49 – Auditor’s fees
163 50 – Exemptions under the HGB and local foreign

legislation

165 51 – Declaration of Conformity with the German Corporate

Governance Code

165 52 – Significant events after the reporting date and other

disclosures

165 RESPONSIBILITY STATEMENT

166 INDEPENDENT AUDITOR’S REPORT

Deutsche Post DHL Group — 2018 Annual Report

INCOME STATEMENT

1 January to 31 December

€ m

Revenue

Other operating income

Changes in inventories and work performed and capitalised 1

Materials expense

Staff costs

Depreciation, amortisation and impairment losses

Other 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 non-controlling interests

Basic earnings per share (€)

Diluted earnings per share (€)

1 For reasons of transparency, changes in inventories and work performed and capitalised were transferred

out of other operating income and presented separately.

C.01

2018

61,550

1,914

–31,673

–20,825

–3,292

– 4,597

2017

60,444

1,971

168

–32,775

–20,072

–1,471

– 4,526

–2

3,741

3,162

– 482

–18

– 411

3,330

– 477

2,853

2,713

140

2.24

2.15

201

–750

–27

– 576

2,586

–362

2,224

2,075

149

1.69

1.66

Note

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

Reserve for equity instruments without recycling

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

Note

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 non-controlling interests

C.02

2018

2,224

191

– 4

–71

116

–

– 9

–31

165

2,389

2,243

146

2017

2,853

378

–

–28

350

–1

–14

–736

–7

– 8

–736

–386

2,467

2,344

123

Deutsche Post DHL Group — 2018 Annual Report

BALANCE SHEET

€ m

ASSETS
Intangible assets

Property, plant and equipment

Investment property

Investments accounted for using the equity method

Non-current financial assets

Other non-current assets

Deferred tax assets

Noncurrent 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

Non-controlling interests

Equity

Provisions for pensions and similar obligations

Deferred tax liabilities

Other non-current provisions

Non-current provisions

Non-current financial liabilities

Other non-current liabilities

Non-current liabilities

Noncurrent 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. 2017

31 Dec. 2018

11,792

8,782

733

231

11,850

19,202

119

730

353

2,272

2,532

23,916

34,804

327

652

8,218

2,184

236

3,135

454

943

8,247

2,369

210

3,017

426

14,756

15,666

38,672

50,470

1,224

3,327

– 998

9,084

12,637

266

1,233

3,469

– 947

9,835

13,590

283

12,903

13,873

4,450

1,421

5,947

5,151

272

5,423

4,348

1,655

6,057

13,869

205

14,074

11,370

20,131

1,131

899

7,343

4,402

624

1,073

2,593

7,422

4,432

718

228

13,268

15,393

14,399

16,466

38,672

50,470

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 non-controlling interests

Income taxes

Net finance costs

Profit from operating activities (EBIT)

Depreciation, amortisation and impairment losses

Net income from disposal of non-current assets

Non-cash income and expense

Change in provisions

Change in other non-current 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 non-current financial assets

Proceeds from disposal of non-current assets

Subsidiaries and other business units

Property, plant and equipment and intangible assets

Investments accounted for using the equity method and other investments

Other non-current financial assets

Cash paid to acquire non-current assets

Interest received

Current financial assets

Net cash used in investing activities

Proceeds from issuance of non-current financial liabilities

Repayments of non-current financial liabilities

Change in current financial liabilities

Other financing activities

Cash paid for transactions with non-controlling interests

Dividend paid to Deutsche Post AG shareholders

Dividend paid to non-controlling interest shareholders

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

C.04

2018

2,075

149

362

576

3,162

3,292

–18

282

–75

– 579

6,079

–116

– 559

392

5,796

151

234

– 58

–2,649

–39

–10

–2,756

–307

Note

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

–2,091

–2,777

1,464

– 821

– 51

– 45

1,314

–2,284

–1

–3

–1,270

–1,409

–120

–148

–160

–1,087

119

– 91

3,107

3,135

–124

– 44

– 526

–3,039

–20

– 65

–33

3,135

3,017

Deutsche Post DHL Group — 2018 Annual Report

STATEMENT OF CHANGES IN EQUITY

1 January to 31 December

€ m

Note

Issued
capital

Capital
reserves

Other reserves

Reserve for
equity in-
struments
without
recycling

IAS 39
hedging
reserve

IAS 39
revalu-
ation
reserve

Currency
translation
reserve

Retained
earnings

Equity
attributable
to Deutsche
Post AG
share-
holders

–

–298

7,228

11,087

C.05

Non-con-
trolling
interests

263

Total
equity

11,350

Balance at 1 January 2017

1,211

2,932

Capital transactions with owner
Dividend

Transactions with non-controlling interests

– 4

277

– 59

Changes in non-controlling 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 (share-based
payment schemes)

Convertible bonds

Share-based payment schemes (issuance)

Share-based 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

Balance at 1 January 2018

1,224

3,327

Adjustments as a result of new IFRSs

Balance at 1 January 2018, adjusted

1,224

3,327

–1

–10

Capital transactions with owner
Dividend

Transactions with non-controlling interests

Changes in non-controlling 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 (share-based
payment schemes)

Convertible bonds

Share-based payment schemes (issuance)

Share-based 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

–1

102

– 92

–1,270

–120

–1,390

– 8

–27

– 5

2,713

345

–729

–

–1,027

9,084

–1,027

–1

–1,028

9,084

– 50

9,034

– 8

292

–3

–11

292

–794

–120

– 914

2,713

–729

345

2,344

12,637

– 50

12,587

140

–22

123

266

–2

264

2,853

–751

350

2,467

12,903

– 52

12,851

–1,409

–125

–1,534

–26

–3

– 45

–7

2,075

117

– 46

107

–24

– 4

– 46

107

–24

–1,240

–127

–1,367

2,075

117

–29

2,243

13,590

149

– 4

2,224

118

–29

146

283

2,389

13,873

Balance at 31 December 2018

1,233

3,469

–

–7

– 948

9,835

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

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 vari-
able 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 arrangements in
the Network Agreement, Deutsche Post DHL Group 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

2017

2018

129

600

127

616

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 logis-
tics (DHL) and communication (Deutsche Post) services. The financial
year of Deutsche Post AG and its consolidated subsidiaries is the calen-
dar 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 finan-
cial statements in accordance with section 315e of the Handelsgesetz-
buch (HGB – German Commercial Code) (“consolidated financial state-
ments in accordance with International Financial Reporting Standards”)
in compliance with International Financial Reporting Standards (IFRS s)
and related Interpretations of the International Accounting Standards
Board (IASB) as adopted in the European Union in accordance with
Regulation (EC) No 1606/2002 of the European Parliament and of the
Council on the application of international accounting standards.

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, various 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 financial
year 2018 are fundamentally based on the same accounting policies
used in the 2017 consolidated financial statements. Exceptions to this
note 4 due to the initial application of
are the changes described in
IFRS s 9, 15 and 16 and the changes in international financial reporting
under IFRS s described in
note 5 that have been required to be applied
by the Group since 1 January 2018. The accounting policies are ex-
plained in

note 7.

These consolidated financial statements were authorised for issue
by a resolution of the Board of Management of Deutsche Post AG dated
15 February 2019.

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

Deutsche Post DHL Group — 2018 Annual Report

2.1 Acquisitions in 2018
In the reporting period, a total of €75 million was paid for companies
acquired in 2018. €5 million was paid for companies acquired in previ-
ous years. The purchase price for the companies acquired was paid by
transferring cash funds.

Acquisitions, 2018

Name

Country

Segment

Suppla Cargo S.A.S.

Colombia

Supply Chain

Share of
capital
%

99.99

Serviceuticos Ltda.

Colombia

Supply Chain

99.99

Agencia de Aduanas
Suppla S.A.S.

Colombia

Supply Chain

100

Suppla S.A.

Colombia

Supply Chain

99.99

Acquisition
date

20 April
2018

Suppla Group

€ m

20 April 2018

Non-current assets

Customer relationship

Brand name

Current assets

Cash and cash equivalents

ASSETS

Non-current provisions and liabilities

Deferred taxes

Current provisions and liabilities

EQUITY AND LIABILITIES

Net assets

Purchase price

Goodwill

Carrying
amount

Adjustment

Fair value

–

Insignificant
acquisitions

Delivered on Time
(DOT)

United
Kingdom

Transportes Alfonso
Zamorano S.L.U.

Transportes Martí
Serra, S.L.U.

Spain

Guinet Transit Service
SARL

France

Global
Forwarding,
Freight

PeP

Global
Forwarding,
Freight

100

6 March
2018

100 3 May 2018

100

1 August
2018

In the second quarter of 2018, Deutsche Post DHL Group acquired
Colombian companies Suppla Cargo S.A.S., Serviceuticos Ltda., Agencia
de Aduanas Suppla S.A.S. and Suppla S.A. (referred to in the following
as the Suppla Group). The companies provide transport, warehousing
and packaging services. The acquisition enables DHL Supply Chain to
expand its business in Latin America.

Of the total purchase price of €62 million, €12 million is variable
note 2.2. A pay-
and contingent upon the companies’ future earnings;
ment of €48 million was made in April 2018. The contingent consider-
ation was adjusted in the fourth quarter of 2018.

The final purchase price allocation resulted in non-tax-deductible
goodwill of €23 million. The figure is attributable to the synergies and
network effects expected from the Latin America transport business,
in particular. Customer relationships are amortised over a period of ten
years. The brand name has a useful life of three years. Current assets
include trade receivables of €26 million. There were no differences
between the gross amount and the carrying amount.

Since their consolidation, the companies have contributed
€58 million to consolidated revenue and €4 million to consolidated
EBIT. If the companies had already been consolidated as at 1 Janu-
ary 2018, they would have provided an additional €27 million in con-
solidated revenue and an additional €2 million in consolidated EBIT.
Transaction costs were €1 million and are reported in other operating
expenses.

Insignificant acquisitions
Entities were acquired by 31 December 2018 which neither individually
nor in the aggregate had a material effect on the net assets, financial
position and results of operations.

The UK company Delivered on Time Limited (DOT) provides motor
sports logistics solutions. Existing Formula 1 and Formula E services
will benefit from synergy effects generated by the acquisition.

The two Spanish transport companies acquired by DHL Parcel
Iberia will play an important role in the development of the Spanish
B2C market.

Guinet Transit Service SARL, a company acquired in the third quar-

ter of 2018, specialises in charter and transport services.

Consolidated Financial Statements — NOTES — Basis of preparation

Since their consolidation, the companies have contributed €6 million
to consolidated revenue and €1 million to consolidated EBIT. If the com-
panies had already been consolidated as at 1 January 2018, they would
have provided an additional €5 million in consolidated revenue and an
additional €1 million in consolidated EBIT.

Insignificant acquisitions, 2018

€ m

1 January to 31 December

Non-current assets

Current assets

Cash and cash equivalents

ASSETS

Non-current provisions and liabilities

Current provisions and liabilities

EQUITY AND LIABILITIES

Net assets

Purchase price

Goodwill

1 Corresponds to the carrying amount.

Fair value 1

2.2 Contingent consideration
Variable purchase prices were agreed for certain acquisitions:

Contingent consideration

Company

Mitsafetrans S.r.l.

Suppla Group

Basis

EBITDA

1 Adjusted during the year due to reassessments.

Period for financial
years from / to

Results range
from / to

Fair value of total
obligation at the
acquisition date

Remaining payment
obligation at
31 Dec. 2017

Remaining payment
obligation at
31 Dec. 2018

2016 to 2018

€0 to 19 million

2018 to 2019

€0 to 10 million 1

€15 million

€12 million

€10 million

–

€5 million

€10 million

Supply Chain
In September, 50 % of the interest in UK-based Flexible Lifestyle
Employment Company Limited (Flexible Lifestyle) was sold. The com-
pany is a start-up specialising in digital solutions for staff recruitment
in the logistics sector and is now being operated together with the
buyer as a joint venture.

Corporate Functions
At the end of October 2018, 48 % of the interest in the start-up company
DHL Resilience360 GmbH was sold to Columbia Capital, USA. DHL
Resilience360 GmbH specialises in cloud-based risk management solu-
tions for supply chains. Due to contractual arrangements, the remaining
interest is now included in the consolidated financial statements of
Deutsche Post DHL Group as an investment accounted for using the
equity method.

2.3 Disposal and deconsolidation effects in 2018
Gains are shown in other operating income; losses are reported in other
operating expenses.

PeP
In the fourth quarter of 2018, Deutsche Post DHL Group sold the online
supermarket business All you need GmbH to Delticom AG, Hanover.
This will enable the Group to consistently continue to focus its activities
upon the German Post and Parcel business. The assets and liabilities
had previously been reclassified as assets held for sale and liabilities
associated with assets held for sale. The most recent measurement of
assets and liabilities led to an impairment loss of €10 million.

Express
In December 2018, the 40 % interest in AHK Air Hong Kong Limited,
China, (AHK) was sold to Cathay Pacific; AHK is now a wholly owned
subsidiary of Cathay Pacific. The investment was previously reported
under assets held for sale. The most recent remeasurement prior to
reclassification did not result in an impairment loss. Furthermore, DHL
Express continued to cooperate with AHK and signed a 15-year block
space agreement. The new agreement, under which Air Hong Kong
provides DHL Express with a specified volume of transport capacity in
return for compensation, entered into force on 1 January 2019.

Deutsche Post DHL Group — 2018 Annual Report

Disposal and deconsolidation effects

€ m

1 January to 31 December 2018

Non-current assets

of which goodwill

Current assets

Cash and cash equivalents

ASSETS

Non-current provisions and liabilities

Current provisions and liabilities

EQUITY AND LIABILITIES

Net assets

Cash consideration received

Fair value of the interest retained

Deconsolidation gain

Total

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

Aerologic GmbH (Aerologic), Germany, a cargo airline domiciled
in Leipzig, is the only joint operation in this regard. It was jointly estab-
lished by Lufthansa Cargo AG and Deutsche Post Beteiligungen Holding
GmbH, which each hold 50 % of its capital and voting rights. Aerologic
has been assigned to the Express segment. Aerologic’s shareholders
are simultaneously its customers, giving them access to its freight air-
craft 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 capital 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 acquisition of Colombia-based Suppla Group de-
scribed in
note 2, the following significant transactions were carried
out in financial year 2018:

In the first quarter of 2018, Deutsche Post AG modified its occu-
pational retirement arrangement in Germany. The added payment
option of receiving one lump sum instead of lifelong monthly benefit
payments has now also been granted to certain groups of hourly work-
ers and salaried employees (e.g., former hourly workers and salaried
employees with fully vested entitlements), for whom it had previously
not been available. Past service gains of €108 million were recognised
as a result.

In early June, the Board of Management decided upon measures
to secure sustainable earnings growth in the Post - eCommerce - Parcel
division. The measures decided upon are designed to further improve
productivity, indirect costs and yield management in the Post and Par-
cel business. By 31 December 2018, an expense of €400 million had
been recognised for an early retirement programme launched in this
context. The related provisions and liabilities amounted to €352 million
and €36 million, respectively, as at the reporting date. A total of
€12 million has been paid to date.

In September 2018, Deutsche Post AG issued promissory note
loans in six tranches for a total nominal amount of €500 million,

note 41.

At the end of October 2018, Deutsche Post DHL Group entered
into an agreement with logistics provider S.F. Holding, China, to sell its
Supply Chain business in China, Hong Kong and Macao to S.F. Holding,

note 32.

On 5 December 2018, Deutsche Post AG issued a ten-year bond
with an annual coupon of 1.625 % in the amount of €750 million,

note 41.

Adjustment of opening balances

4
The adjustments to the opening balances resulted from the initial ap-
plication of IFRS 9 and IFRS 15, and of IFRS 16 which the Group decided
to apply early as at 1 January 2018. The prior-period amounts were not
adjusted. The effects of the transition were recognised directly in equity
as retained earnings.

Consolidated Financial Statements — NOTES — Basis of preparation

Adjusted opening balance at 1 Jan. 2018

€ m

ASSETS
Property, plant and equipment

Non-current financial assets

Deferred tax assets

Other non-current assets

Current financial assets

Trade receivables

Other current assets

EQUITY AND LIABILITIES
Retained earnings

Non-controlling interests

Deferred tax liabilities

Other non-current provisions

Non-current financial liabilities

Other non-current liabilities

Current provisions

Trade payables

Other current liabilities

1 Jan.
2018

17,875

784

2,278

259

656

8,176

2,165

9,034

264

1,398

14,380

259

966

7,352

4,536

Adjustment as a result of

31 Dec.
2017

IFRS 9

IFRS 15

IFRS 16

Total

8,782

733

2,272

231

652

8,218

2,184

9,084

266

1,421

5,151

272

1,131

7,343

4,402

–14

– 42

–2

–12

9,093

– 58

–13

–173

223

–23

9,229

–13

–3

– 89

9,093

– 42

–19

– 50

–2

–23

9,229

–13

–165

134

Effects of IFRS 9, Financial Instruments
The reclassification of financial instruments from the IAS 39 to the
IFRS 9 categories depending on the applicable business model and the
associated contractual cash flows did not materially affect the balance

sheet. As at 1 January 2018, impairment losses on receivables were rec-
ognised early in other comprehensive income in accordance with the
expected loss model.

IFRS 9 classification and impact on equity

€ m

ASSETS

Non-current financial assets

Available-for-sale financial assets

Loans and receivables

Assets at fair value through profit or loss

Lease receivables

Assets at fair value through other comprehensive income

Financial assets measured at cost

Other non-current assets

Current financial assets

Available-for-sale financial assets

Loans and receivables

Assets at fair value through profit or loss

Lease receivables

Financial assets measured at cost

Trade receivables

Adjusted total ASSETS

EQUITY AND LIABILITIES
Retained earnings

Non-controlling interests

Adjusted total EQUITY AND LIABILITIES

31 Dec.
2017

Reclassi-
fication

Adjustment /
impairment
losses

1. Jan.
2018

466

170

–

231

– 59

– 464

–38

476

500

– 500

–

8,218

9,834

9,084

266

9,350

– 69

500

–7

–2

– 42

– 44

– 42

–2

– 44

–

198

–

476

241

–

576

–

8,176

9,790

9,042

264

9,306

Deutsche Post DHL Group — 2018 Annual Report

The prior-year figures were not adjusted. Deutsche Post DHL Group
continues to exercise the option under IFRS 9 to apply the require-
ments of IAS 39 governing hedge accounting.

Reconciliation

€ m

Effects of IFRS 15, Revenue from Contracts with Customers
The timing of revenue and cost recognition has changed to an insignifi-
cant extent for certain types of contracts in the PeP, Express and Global
Forwarding, Freight segments due to IFRS 15, because this revenue is
now recognised over time rather than at a point in time. The Group in-
troduced IFRS 15 based upon the modified retrospective method. The
prior-year figures were not adjusted. Contract assets of €45 million,
liabilities for outstanding supplier invoices of €12 million and contract
liabilities of €50 million were recognised for the first time as at 1 Jan-
uary 2018. The effects of the transition as at 1 January 2018 in the
amount of €–13 million were recognised in retained earnings, taking
deferred taxes into account. Assuming a steady business volume, the
effects of the change in recognition of revenue and expenses at the
beginning and at the end of a financial year will almost fully offset each
other. In addition, the change in determining whether an entity acts as
a principal (gross revenue) or an agent (net revenue) reduced revenue
on the one hand and, in the main, the materials expense by around
€0.2 billion on the other.

Effects of IFRS 16, Leases
In the context of the transition to IFRS 16, right-of-use assets of €9.1 bil-
lion and lease liabilities of €9.2 billion were recognised as at 1 Janu-
ary 2018. Of these lease liabilities, €1.6 billion was due within one year.
The Group transitioned to IFRS 16 in accordance with the modified
retrospective approach. The prior-year figures were not adjusted. As
part of the initial application of IFRS 16, the Group chooses to apply the
relief option, which allows it to adjust the right-of-use asset by the
amount of any provision for onerous leases recognised in the balance
sheet immediately before the date of initial application. In addition, the
Group has decided not to apply the new guidance to leases whose term
will end within twelve months of the date of initial application. In such
cases, the leases are accounted for as short-term leases and the lease
payments associated with them are recognised as an expense from
short-term leases. The following reconciliation to the opening balance
for the lease liabilities as at 1 January 2018 is based upon the operating
lease obligations as at 31 December 2017:

Operating lease obligations at 31 December 2017

Minimum lease payments (notional amount) on finance lease
liabilities at 31 December 2017

Relief option for short-term leases

Relief option for low value asset leases

Lease-type obligations (service components)

Other

Gross lease liabilities at 1 January 2018

Discounting

Lease liabilities at 1 January 2018

Present value of finance lease liabilities at 31 December 2017

Additional lease liabilities as a result of the initial application
of IFRS 16 as at 1 January 2018

1 Jan.
2018

11,298

237

–225

–27

11,335

–1,919

9,416

–181

9,235

The lease liabilities were discounted at the incremental borrowing rate
as at 1 January 2018. The weighted average discount rate was 3.8 %. In
order to calculate the incremental borrowing rate, reference interest
rates were derived – for a period of up to 15 years – from the yields of
corporate bonds in major countries and / or currencies, provided there
was a deep market for corporate bonds. By contrast, government bond
yields were used for countries without a deep market for corporate
bonds. The reference interest rates were supplemented by a leasing
risk premium.

Leases are presented as follows in the income statement:

Leases in the income statement

€ m

Revenue/other operating income
Operating lease income

Sublease income

Income from sale and leaseback transactions

Materials expense
Expenses from short-term leases

Expenses from low-value asset leases

Expenses from variable lease payments

Other lease expenses (incidental expenses)

Depreciation and impairment losses
Depreciation of and impairment losses on right-of-use assets

Impairment losses on right-of-use assets

Net finance costs
Interest expenses on lease liabilities

Currency translation gains on lease liabilities

Currency translation losses on lease liabilities

2018

664

1,862

376

Consolidated Financial Statements — NOTES — Basis of preparation

Disclosures regarding right-of-use assets and lease liabilities and other
disclosures can be found under the relevant balance sheet items,

notes 23, 41, 43 and 44.

Note 7 contains a detailed presentation of the changes in account-

ing policies due to IFRS s 9, 15 and 16.

New developments in international accounting under IFRS s

New accounting standards required to be applied
in financial year 2018
note 4, the follow-
In addition to the newly applied Standards listed in
ing additional Standards, changes to Standards and Interpretations
must be applied from 1 January 2018:

Standard

Subject matter and significance

Amendments to IFRS 4,
Insurance Contracts –
Applying IFRS 9,
Financial Instruments,
with IFRS 4,
Insurance Contracts

Annual Improvements to
IFRS s (2014 – 2016 Cycle)

Amendments to IFRS 2,
Share-based Payment –
Clarifications of
Classi fication and
Measurement of
Share-based Payment
Transactions

IFRIC 22, Foreign Currency
Transactions and Advance
Consideration

Amendments to IAS 40,
Investment Property –
Change in Use

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). The amendments had no effect on the consolidated financial statements.

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

The amendments clarify the accounting for cash-settled share-based payment transactions that include a performance condition. The
measurement rules follow the same approach as when accounting for equity-settled awards. An exception was also included for the
classification of share-based payment transactions with net settlement features for withholding tax obligations. Such commitments are
required to be classified in their entirety as equity-settled share-based payment transactions if they would have been classified in this way in
the absence of the net settlement feature. The amendments further include clarifications regarding modifications of the terms and
conditions of share-based payment arrangements that change their classification from cash-settled to equity-settled. The amendments had
no effect on the consolidated financial statements.

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. The interpretation had no effect on the consolidated financial statements.

The Standard was amended to clarify transfers to and from investment property. Property may only be transferred when there is evidence of
a change in use of the property. The consolidated financial statements were not be affected.

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 re-
quired to be applied in future periods.

100

Deutsche Post DHL Group — 2018 Annual Report

Effective for
financial years
beginning on

or after Subject matter and significance

1 January 2019

The amendment clarifies how certain financial instruments with prepayment features are classified according to IFRS 9.
It is not expected to have significant effects on the Group.

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. The amendment will not have a material influence on the
consolidated financial statements.

1 January 2019

The amendments to IAS 28 clarify that IFRS 9 must be applied to long-term interests that, in substance, form part of the
net investment in an associate or joint venture to which the equity method is applied. The amendments are not expected
to have an effect on the Group.

Standard
(issue date)

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

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

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

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 2018 and in previous
years whose application is not yet mandatory for financial year 2018.
The application of these IFRS s is dependent on their adoption by the EU.

Standard
(issue date)

Effective for
financial years
beginning on

or after Subject matter and significance

IFRS 17, Insurance
Contracts (18 May 2017)

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.

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

Amendments to IAS 19
Employee Benefits – Plan
Amendment, Curtailment
or Settlement (7 Febru-
ary 2018)

Amendments to IFRS 3,
Business Combinations –
Definition of a Business
(22 October 2018)

Amendments to
References to the
Conceptual Framework in
IFRS Standards
(29 March 2018)

Amendments to IAS 1 and
IAS 8 – Definition of
Material (31 October 2018)

1 January 2019

The amendments relate to IFRS 3, Business Combinations, and IFRS 11, Joint Arrangements, as well as IAS 12, Income Taxes,
and IAS 23, Borrowing Costs. They are not expected to have significant effects on the Group.

1 January 2019

The amendments specify the basis for determining the current service cost and the net interest expense (or income) for the
period between a defined benefit retirement plan amendment, curtailment or settlement, and the end of the reporting period.
The effects on the Group depend on future business transactions and assumptions.

1 January 2020

The amendments relate to the definition of a business and include clearer guidelines for distinguishing between a business
and a group of assets when applying IFRS 3. According to the amendments, the future definition of a business includes
having both economic resources and at least a substantial process which together are capable of generating output. Output
is deemed to be only the provision of goods and services and the generation of capital and other income. Alternatively, there
is an option to apply a concentration test to assess whether an acquired set of activities and assets is not a business. The
effects on the Group are currently being assessed.

The IASB has published a revised Conceptual Framework for Financial Reporting that will be used to develop new
Standards and Interpretations in the future. In particular, the definitions of assets and liabilities as well as the guidance on
measurement and derecognition, presentation and disclosures were amended. This has not resulted in any technical
amendments to current Standards to date. The amendments merely update the references to the Conceptual Framework
in existing Standards. The Conceptual Framework itself is not the subject of the endorsement procedure.

1 January 2020

The amendments to IAS 1 and IAS 8 clarify the definition of “material”. Besides additional explanations, the definition
of “material” in the Conceptual Framework as well as all Standards was aligned with the central definition now anchored
in IAS 1.

Consolidated Financial Statements — NOTES — Basis of preparation

101

Currency translation

6
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 currency of foreign
companies is determined by the primary economic environment in
which they mainly generate and use cash. Within the Group, the func-
tional currency is predominantly the local currency. 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 trans-
lation differences are recognised in other comprehensive income. In
financial year 2018, currency translation differences amounting to
€76 million (previous year: €–751 million) were recognised in other
comprehensive income,

Statement of comprehensive income.

Goodwill arising from business combinations after 1 January
2005 is treated as an asset of the acquired company and therefore
carried in the functional currency of the acquired company.

The exchange rates for the currencies that are significant for the

Group were as follows:

Currency

Country

AUD

CNY

GBP

HKD

INR

JPY

SEK

USD

Australia

China

United
Kingdom

Hong Kong

India

Japan

Sweden

USA

Closing rates

Average rates

2017
EUR 1 =

2018
EUR 1 =

2017
EUR 1 =

2018
EUR 1 =

1.5352

7.8161

0.8880

9.3752

1.6224

7.8741

0.8947

8.9680

1.4791

7.6501

0.8763

8.8649

1.5834

7.8133

0.8860

9.2413

76.6308

79.8994

73.7957

80.6204

135.0382

125.8064

127.3132

129.9766

9.8332

10.2418

9.6447

10.2955

1.1997

1.1451

1.1372

1.1790

The carrying amounts of non-monetary assets recognised at significant
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 prepared 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 2018,
income of €213 million (previous year: €174 million) and expenses of
€207 million (previous year: €181 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.

Accounting policies

7
Uniform accounting policies are applied to the annual financial state-
ments of the entities that have been included in the consolidated finan-
cial 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 comprising letter and parcel dispatch,
express delivery, freight transport, supply chain management and
e-commerce solutions. All income relating to normal business oper-
ations is recognised as revenue in the income statement. All other
income is reported as other operating income.

Until 31 December 2017, revenue and other operating income were
generally recognised when services were rendered, the amount of rev-
enue and income could be reliably measured and, in all probability, the
economic benefits from the transactions would flow to the Group.

Since 1 January 2018, revenue has been recognised when control
over the goods or services transfers to the customer, i. e., when the
customer has the ability to control the use of the transferred goods or
services provided and generally derive their remaining benefits. The
requirement is that a contract with enforceable rights and obligations
exists and, amongst other things, the receipt of consideration is likely,
taking into account the customer’s credit quality. The revenue cor-
responds to the transaction price to which the Group is expected to be
entitled. Variable consideration is included in the transaction price
when it is highly probable that a significant reversal in the amount of
revenue recognised will not occur and as soon as the uncertainty asso-
ciated with the variable consideration no longer exists. The Group does
not expect to have contracts where the period between the transfer of
the promised goods and / or services to the customer and payment by
the customer exceeds one year. Accordingly, the promised consider-
ation is not adjusted for the time value of money. For each performance
obligation, revenue is either recognised at a certain time or over a
certain period of time. Revenue from the provision of transport services
is generally recognised according to the straight-line method over a
specified period. The revenue generated by providing other logistics
services is recognised in the reporting period in which the service was
rendered.

Operating expenses are recognised in income when the service

is utilised or when the expenses are incurred.

102

Deutsche Post DHL Group — 2018 Annual Report

Useful lives

Buildings

Technical equipment and machinery

Aircraft

IT equipment

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

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.

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, prop-
erty, plant and equipment and investment property are reviewed for
indications of impairment. If there are any such indications, an impair-
ment 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 identifiable group
of assets to which the asset in question can be allocated 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 im-
pairment 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 recognised in the income statement. Impairment
losses recognised in respect of goodwill may not be reversed.

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 eco-
nomic benefits and the costs can be reliably measured. In the Group,
this concerns internally developed software. If the criteria for capital-
isation are not met, the expenses are recognised immediately in income
in the year in which they are incurred. In addition to direct costs, the
production cost of internally developed software includes an appropri-
ate share of allocable production overhead costs. Any borrowing costs
incurred for qualifying assets are included in the production cost. Value
added tax arising in conjunction with the acquisition or production of
intangible assets is included in the cost if it cannot be deducted as input
tax. Capitalised software is amortised over its useful life.

Intangible assets (excluding goodwill) are amortised using the
straight-line method over their useful lives. Impairment losses are rec-
ognised in accordance with the principles described in the section
headed Impairment. The useful lives of significant intangible assets are
as follows:

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.

Intangible assets that are not affected by legal, economic, contractual
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 indications of impairment.
They generally include brand names from business combinations and
goodwill, for example. Impairment 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 accumu-
lated depreciation and valuation allowances. In addition to direct 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 equip-
ment are capitalised. Value added tax arising in conjunction 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 presented in the table below:

Consolidated Financial Statements — NOTES — Basis of preparation

103

Since January 2005, goodwill has been accounted for using the
impairment-only approach in accordance with IFRS 3. This stipulates
that goodwill must be subsequently measured at cost, less any cumu-
lative adjustments from impairment losses. Purchased goodwill is
therefore no longer amortised and instead is tested for impairment
annually in accordance with IAS 36, regardless of whether any indica-
tion of possible impairment exists, as in the case of intangible assets
with an indefinite useful life. In addition, the obligation remains to con-
duct an impairment test if there is any indication of impairment. Goodwill
resulting from company acquisitions is allocated 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 goodwill is monitored for internal manage-
ment 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.

Leases
A lease is a contract in which the right to use an asset (the leased asset)
is granted for an agreed-upon period in return for compensation.

Until 31 December 2017, a lease was defined as 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 ownership of leased assets was
attributed to the lessee if the lessee substantially bore all risks and
rewards incidental to ownership of the leased asset. To the extent that
beneficial ownership was attributable to the Group as the lessee, the
asset was capitalised at the date on which use started, either at fair
value or at the present value of the minimum lease payments if this was
less than the fair value. A lease liability in the same amount was rec-
ognised under non-current liabilities. The lease was subsequently
measured at amortised cost using the effective interest method. The
depreciation methods and estimated useful lives corresponded to
those of comparable purchased assets.

Since 1 January 2018, the Group as lessee has recognised at
present value assets for the right of use received and liabilities for the
payment obligations entered into for all leases in the balance sheet.
Lease liabilities include the following lease payments:
• fixed payments, less lease incentives offered by the lessor;
• variable payments linked to an index or interest rate;
• expected residual payments from residual value guarantees;
• the exercise price of call options when exercise is estimated to be

sufficiently likely and

• contractual penalties for the termination of a lease if the lease term

reflects the exercise of a termination option.

Lease payments are discounted at the implicit interest rate underlying
the lease to the extent that this can be determined. Otherwise, discount-
ing is at the incremental borrowing rate.

Right-of-use assets are measured at cost, which comprises the

following:
• lease liability;
• lease payments made at or prior to delivery, less lease incentives

received;

• initial direct costs and
• restoration obligations.

Right-of-use assets are subsequently measured at amortised
cost. They are depreciated over the term of the lease using the straight-
line method.

The Group will make use of the relief options provided for leases
of low-value assets and short-term leases (shorter than twelve months)
and expense the payments in the income statement according to the
straight-line method. Furthermore, the new rules are not applied to
leases on intangible assets. The Group also exercises the option avail-
able for contracts comprising lease components as well as non-lease
components not to split these components, except in the case of real
estate and aircraft leases. In addition, intra-group leases – in line with
internal management – generally are and will continue to be presented
according to IFRS 8 in segment reporting as operating leases in accord-
ance with IAS 17.

Extension and termination options exist for a number of leases,
particularly for real estate. Such contract terms offer the Group the
greatest possible flexibility in doing business. In determining lease
terms, all facts and circumstances offering economic incentives for
exercising extension options or not exercising termination options are
taken into account. Changes due to the exercise or non-exercise of such
options are considered in determining the lease term only if they are
sufficiently probable.

For operating leases, the Group reports the leased asset at amort-
ised 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 lessor in a finance lease, it recognises the
assets as lease receivables in the amount of the net investment in the
balance sheet.

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 Ventures.
Based on the cost of acquisition at the time of purchase of the invest-
ments, the carrying amount of the investment is increased or reduced
annually to reflect the share of earnings, dividends distributed and
other changes in the equity of the associates and joint ventures attrib-
utable to the investments of Deutsche Post AG or its consolidated sub-
sidiaries. An impairment loss is recognised on investments accounted

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Deutsche Post DHL Group — 2018 Annual Report

for using the equity method, including the goodwill in the carrying
amount of the investment, if the recoverable 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.

Financial instruments
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. Financial liabilities include contractual obligations to
deliver cash or another financial asset to another entity. These mainly
comprise trade payables, liabilities to banks, liabilities arising from
bonds and leases, and derivative financial liabilities.

Measurement
Until 31 December 2017, the fair value option according to IAS 39
allowed financial assets or financial liabilities to be measured irrevocably
at fair value through profit or loss on initial recognition if this eliminated
or significantly reduced a measurement or recognition inconsistency
(accounting mismatch). The Group made use of the option in order to
avoid accounting mismatches.

As of 1 January 2018, the Group measures financial assets at fair
value plus the transaction costs directly attributable to the acquisition
of these assets on initial recognition if they are not subsequently meas-
ured at fair value through profit or loss. The transaction costs of assets
measured at fair value through profit or loss are recognised as ex-
penses. For financial liabilities measured according to the fair value
option, the part of the change in fair value resulting from changes in
the Group’s own credit risk is recognised in other comprehensive in-
come rather than in the income statement.

Classification
Until 31 December 2017, financial assets were accounted for in accord-
ance with the provisions of IAS 39, which distinguished between four
categories of financial instruments:

AVAILABLE-FOR-SALE FINANCIAL ASSETS
These financial instruments were non-derivative financial assets and
were carried at their fair value, where this could be measured reliably.
If a fair value could not be determined, they were carried at cost.
Changes in fair value between reporting dates were generally recog-
nised in other comprehensive income (revaluation reserve). The reserve
was reversed to income either upon disposal or if the fair value fell
below cost more than temporarily, i.e., the drop was significant or

prolonged. If, at a subsequent reporting date, the fair value of a debt
instrument had increased objectively as a result of events occurring
after the impairment loss was recognised, the impairment loss was
reversed in the appropriate amount. Impairment losses recognised on
equity instruments were not permitted to be reversed to income. If
equity instruments were recognised at fair value, any reversals were
required to be recognised in other comprehensive income. No reversals
were permitted in the case of equity instruments that were recognised
at cost. Available-for-sale financial instruments were allocated to
non-current assets unless the intention was to dispose of them within
twelve months of the reporting date. In particular, investments in
unconsolidated subsidiaries, marketable securities and other equity
investments were reported in this category.

HELD-TO-MATURITY FINANCIAL ASSETS
Financial instruments were assigned to this category if there was an
intention to hold the instrument to maturity and the economic condi-
tions for doing so were met. These financial instruments related to
non- derivative financial assets that were measured at amortised cost
using the effective interest method.

LOANS AND RECEIVABLES
These were non-derivative financial assets with fixed or determinable
payments that were not quoted on an active market. Unless held for
trading, they were recognised at cost or amortised cost at the reporting
date. The carrying amounts of money market receivables corresponded
approximately to their fair values due to their short maturity. Loans and
receivables were considered current assets if they matured not more
than twelve months after the reporting date; otherwise, they were
recognised as non-current assets. If the recoverability of receivables
was in doubt, they were recognised at amortised cost, less appropriate
specific or aggregate specific valuation allowances. An impairment loss
was recognised on trade receivables when there were objective indi-
cations that the amount of the outstanding receivable could not be
collected in full. The impairment loss was recognised in the income
statement via a valuation account.

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
All financial instruments held for trading and derivatives that did not
satisfy the criteria for hedge accounting were assigned to this category.
They were generally measured at fair value. All changes in fair value
were recognised in income. All financial instruments in this category
were accounted for at the trade date. Assets in this category were
recognised as current assets if they were either held for trading or were
likely to be realised within twelve months of the reporting date.

Consolidated Financial Statements — NOTES — Basis of preparation

105

Since 1 January 2018, financial assets have been classified in the fol-
lowing measurement categories:
• debt instruments at amortised cost;
• debt instruments at fair value through other comprehensive

As at 1 January 2018, the Group began making a forward-looking
assessment of the expected credit losses associated with its debt
instruments. The applicable impairment method depends on whether
there is a significant increase in credit risk.

income (FVOCI), with cumulative gains and losses on derecognition
of the financial asset reclassified to profit or loss;

• debt instruments, derivatives and equity instruments at fair value

The Group applies the simplified impairment model to report the
credit losses expected over the term of trade receivables and contract
assets. Further details are presented in

note 44.

Derivatives and hedges
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.

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 instru-
ment are recognised directly in income. The gains and losses generated
by the hedging transactions are initially recognised 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 recognised 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 44.

through profit or loss (FVTPL);

• equity instruments classified as FVOCI, with gains and losses on the
sale of the financial assets reclassified from other comprehensive
income to retained earnings (no recycling).

The classification of debt instruments depends on the business model
of the Group for managing the financial assets and on the contractual
cash flows.

As a rule, debt instruments are recognised by the Group at amort-
ised cost. Interest income from these financial assets is reported in
financial income according to the effective interest method. In the case
of equity instruments, the Group decides irrevocably at initial recogni-
tion, whether they will be measured at fair value through other com-
prehensive income or at fair value through profit or loss. Most of the
equity instruments that the Group invests in for strategic reasons are
assigned to the FVOCI measurement category. The effects of a change
in the fair value of these equity instruments must be recognised in
other comprehensive income. On derecognition, these effects are not
reclassified to profit or loss. Dividends from such instruments continue
to be reported in other income in the income statement.

Impairment
Until 31 December 2017, the carrying amounts of financial assets not
carried at fair value through profit or loss were tested for impairment
at each reporting date and whenever there were indications of impair-
ment. The amount of any impairment loss was determined by comparing
the carrying amount and the fair value. If there were objective indications
of impairment, an impairment loss was recognised in other operating
expenses or net financial income / net finance costs in the income state-
ment. Impairment losses were reversed if there were objective reasons
arising after the reporting date indicating that the reasons for impair-
ment no longer existed. The increased carrying amount resulting from
the reversal of the impairment loss was not permitted to exceed the
carrying amount that would have been determined (net of amortisation
or depreciation) if the impairment loss had not been recognised.
Impairment losses were recognised within the Group if the debtor was
experiencing significant financial difficulties; it was highly probable
that the debtor would be the subject of bankruptcy proceedings; there
were material changes in the issuer’s technological, economic, legal or
market environment; or the fair value of a financial instrument fell
below its amortised cost for a prolonged period.

106

Deutsche Post DHL Group — 2018 Annual Report

Recognition and derecognition
Regular way purchases and sales of financial assets are recognised
at the settlement date, with the exception of derivatives in particular.
A financial asset is derecognised when the rights to receive the cash
flows from the asset have expired or have been transferred, and
the Group has transferred essentially all risks and opportunities of
ownership.

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.

Assets held for sale and liabilities associated with assets held for sale
Assets held for sale are assets available for sale in their present condi-
tion 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 (discontinued op-
erations). 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
operations. This also applies to the profit or loss from operations and the
gain or loss on disposal of these components of an entity.

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 pro-
duction process or in the rendering of services. They are measured at
the lower of cost or net realisable value. Valuation allowances are
charged for obsolete inventories and slow-moving goods.

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.

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 statement 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 statement over the useful lives
of the assets.

Noncontrolling 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 shareholders 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 shareholder / other shareholders and
the purchase price is recognised in other comprehensive income. If
non-controlling interests are increased by the proportionate net assets,
no goodwill is allocated to the proportionate net assets.

Consolidated Financial Statements — NOTES — Basis of preparation

107

Sharebased 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 recognised
in staff costs over the vesting period. The fair value of equity-settled
share- based payment transactions is determined using internationally
recognised valuation techniques.

Stock appreciation rights are measured on the basis of an option
pricing model in accordance with IFRS 2. The stock appreciation rights
are measured on each reporting date and on the settlement 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 recognised for the same amount.
Changes in value due to share price movements occurring after the
grant date are recognised as other finance costs in net finance costs.

Retirement plans
There are arrangements (plans) in many countries under which the
Group grants post-employment benefits to its hourly workers and sal-
aried 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 ben-
efits, 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 actu-
arial assumptions. Most of the defined benefit retirement plans are at
least partly funded via external plan assets. The remaining net liabil-
ities are funded by provisions for pensions and similar obligations; net
assets are presented separately as pension assets. Where necessary,
an asset ceiling must be applied when recognising pension 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 remeasurements outside profit and loss in other comprehensive
income. Any rights to reimbursement are reported separately in finan-
cial assets.

DEFINED CONTRIBUTION RETIREMENT PLANS FOR CIVIL SERVANT

EMPLOYEES IN GERMANY
In accordance with statutory provisions, Deutsche Post AG pays contri-
butions for civil servant employees in Germany to retirement plans
which are defined contribution retirement plans for the company.
These contributions are recognised in staff costs.

Under the provisions of the Gesetz zum Personalrecht der
Beschäftigten der früheren Deutschen Bundespost (PostPersRG – For-
mer Deutsche Bundespost Employees Act), Deutsche Post AG provides
retirement benefits and assistance benefits through the Postbeamten-
versorgungskasse (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 benefits 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 no-
tional 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 assumed
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 provide the par-
ticipating companies with sufficient information to use defined benefit
accounting. The plans are therefore accounted for as if they were defined
contribution plans.

108

Deutsche Post DHL Group — 2018 Annual Report

Regarding these multi-employer plans in the USA, contributions
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 bargained contribution
rates except in the event of a withdrawal meeting specified 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 2019 are €50 million (actual employer contributions
in the reporting period: €47 million, in the previous year: €41 million).
Some of the plans in which Deutsche Post DHL Group participates are
underfunded according to information provided by the funds. No infor-
mation is available to the Group 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.
For a 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
contribution rates are the same for all participating employers and
employees. There is no liability for the employer towards the fund
beyond the contributions set, even in the case of withdrawal or obliga-
tions not met by other entities. Any subsequent underfunding ulti-
mately results in the rights of members being cut and / or no indexation
of their rights. The expected employer contributions to the fund for
2019 are €23 million (actual employer contributions in the reporting
period: €22 million, in the previous year: €21 million). As at 31 Decem-
ber 2018, the coverage degree of plan funding was above 100%, but
below a required minimum of approximately 105%, according to infor-
mation provided by the fund. Deutsche Post DHL Group does not rep-
resent a significant portion of the fund in terms of contributions.

Other provisions
Other provisions are recognised for all legal or constructive obligations
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 eco-
nomic benefits and whose amount can be measured reliably. They
represent uncertain obligations that are carried at the best estimate of
the expenditure required to settle the obligation. Provisions 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 between 0.0 % and 11.50 % (previ-
ous year: 0.0 % and 9.50 %). The effects arising from changes in interest
rates are recognised in net financial income / net finance cost.

Provisions for restructurings are only established in accordance
with the aforementioned criteria for recognition if a detailed, formal re-
structuring plan has been drawn up and communicated to those affected.

The technical reserves (insurance) consist mainly of outstanding
loss reserves and IBNR (incurred but not reported claims) reserves.
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 reserves 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 outstanding loss reserves. The
company carries out its own assessment of ultimate loss liabilities
using actuarial methods and also commissions an independent actu-
arial 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 subse-
quent periods the financial liabilities are measured at amortised cost.
Any differences between the amount received and the amount repay-
able are recognised in income over the term of the loan using the
effective interest method.

Disclosures on financial liabilities under leases can be found in

the section headed Leases.

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 specified 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 residual value that results from
deducting the amount calculated separately for the debt component
from the fair value of the instrument as a whole. The transaction costs
are deducted on a proportionate 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.

Consolidated Financial Statements — NOTES — Basis of preparation

109

Deferred taxes
In accordance with IAS 12, deferred taxes are recognised for temporary
differences between the carrying amounts in the IFRS financial state-
ments and the tax accounts of the individual entities. Deferred 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 reduction claims is assessed
on the basis of each entity’s earnings projections, 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 recognised 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 on tax loss carryforwards can be found in

note 28.
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 was increased by 0.3 % to 30.5 % on the basis of a better
estimate with regard to trade tax in the reporting period. It comprises
the corporation tax rate plus the solidarity surcharge, as well as a
municipal trade tax rate that is calculated as the average of the different
municipal trade tax rates. Foreign Group companies use their individual
income tax rates to calculate deferred tax items. The income tax rates
applied for foreign companies amount to up to 39 % (previous year: 40 %).

Income taxes
Income tax assets and liabilities are measured at the amounts for which
repayments from, or payments to, the tax authorities are expected 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 obligations that
will probably not lead to an outflow of resources embodying 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 45.

8
Exercise of judgement in applying the accounting policies
The preparation of IFRS-compliant consolidated financial statements
requires the exercise of judgement by management. All estimates 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 that is the case, the assets and associated liabilities
must be measured and recognised as assets held for sale or liabilities
associated with assets held for sale.

Estimates and assessments made by management
The preparation of the consolidated financial statements in accordance
with IFRS s requires management to make certain assumptions and
estimates that may affect the amounts of the assets and liabilities in-
cluded in the balance sheet, the amounts of income and expenses, and
the disclosures relating to contingent liabilities. Examples 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 impair-
ment 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 39.
The Group has operating activities around the globe and is subject
to local tax laws. Management can exercise judgement when calculat-
ing the amounts of current and deferred taxes in the relevant countries.
Although management believes that it has made a reasonable estimate
relating to tax matters that are inherently uncertain, there can be no
guarantee that the actual outcome of these uncertain tax matters will
correspond exactly to the original estimate made. Any difference be-
tween 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 recognised for deferred tax assets could be re-
duced 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 important estimates this
requires is the determination of the fair values of these assets and
liabilities at the date of acquisition. Land, buildings and office equip-
ment 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 opinion of an independent
external expert valuer, depending on the type of intangible asset and

110

Deutsche Post DHL Group — 2018 Annual Report

the complexity involved in determining its fair value. The independent
expert determines the fair value using appropriate valuation tech-
niques, normally based on expected future cash flows. In addition to
the assumptions about the development 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 recover-
able 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
forecast future cash flows and the discount rate applied. Although man-
agement believes that the assumptions made for the purpose of calcu-
lating 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 capital 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
dis closed 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 information
currently available about these proceedings and recognises provisions
for probable obligations including estimated legal costs. Internal and
external legal advisers participate in making this assessment. In decid-
ing on the necessity for a provision, management 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 neces-
sarily 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. Brexit could affect the Group’s net assets, financial
position and results of operations, for example,
Group Management
Report, Opportunities and risks, page 69 f. In the event of developments in
this general environ ment that diverge from the assumptions made, the
actual 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 assump-
tions 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 2019 to the carrying amounts
of the assets and liabilities recognised in the financial statements.

Consolidation methods

9
The consolidated financial statements are based on the IFRS financial
statements of Deutsche Post AG and the subsidiaries, joint operations
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 December 2018.

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 statements in pro-
portion to the interest held in these operations, in accordance 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 purchase
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 acquisition 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 eliminated. Inter-
company profits or losses from intra-group deliveries and services not
realised by sale to third parties are eliminated. Unrealised gains and
losses from business transactions with investments accounted for
using the equity method are eliminated on a proportionate basis.

Consolidated Financial Statements — NOTES — Basis of preparation — Segment reporting

111

Segment reporting

10 Segment reporting

Segments by division

€ m

PeP 1

Express

Global Forwarding,
Freight

Supply Chain

1 Jan. to 31 Dec.

2017

2018

2017

2018

2017

2018

2017

2018

2017

External revenue

18,009

18,344

14,693

15,775

13,689

14,063

13,958

13,201

Internal revenue

152

132

356

372

793

915

194

149

Total revenue

18,161

18,476

15,049

16,147

14,482

14,978

14,152

13,350

1,292

1,387

Corporate
Functions 1

2018

167

Consolidation 1, 2

Group

2017

2018

2017

2018

60,444

61,550

1,457

–2,787

–3,025

1,624

–2,787

–3,025

60,444

61,550

1,503

656

1,736

1,957

297

442

555

520

–350

– 414

3,741

3,162

Profit / loss from
operating
activities (EBIT)

of which net
income / loss from
investments
accounted for
using the equity
method

Net segment
assets / liabilities 3

Capex (assets
acquired)

Capex (right-of-
use assets) 3, 4

Total capex 3

Depreciation
and amortisa-
tion 3

Impairment
losses

Total depreciation,
amortisation and
impairment
losses 3

Other non-cash
income (–) and
expenses (+)

–3

–1

Segment assets 3

6,571

7,326

10,203

13,766

7,664

8,728

5,564

8,248

1,732

4,935

of which
investments
accounted for
using the equity
method

Segment liabilities

3,034

2,899

3,604

3,635

3,046

3,105

3,037

3,229

1,556

1,520

–73

–2

– 95

31,661

42,908

– 57

–1

–74

119

14,220

14,314

3,537

4,427

6,599

10,131

4,618

5,623

2,527

5,019

176

3,415

–16

–21

17,441

28,594

618

786

1,047

1,190

622

176

962

739

1,049

1,929

353

444

507

1,151

110

277

282

241

290

158

268

805

277

1,087

243

518

808

238

311

821

203

623

353

454

525

1,152

238

319

826

203

623

317

556

304

273

178

204

–10

2,268

2,648

– 9

2,277

2,397

5,045

–1

1,443

3,276

–1

1,471

3,292

–7

925

1,166

0 468,724 489,571

Employees 5

179,345 188,525

86,313

93,550

42,646

43,347 149,042 151,877

11,378

12,272

1 Prior-period amounts adjusted.
2 Including rounding.
3 Not comparable with prior year due to initial application of IFRS 16 in financial year 2018.
4 Prior-year figure includes investments in finance lease assets.
5 Average FTEs.

112

Deutsche Post DHL Group — 2018 Annual Report

Adjustment of priorperiod amounts
In the second quarter of 2018, StreetScooter GmbH was transferred
from the PeP segment to the new Corporate Incubations board depart-
ment within Corporate Functions. The prior-period amounts were
adjusted accordingly.

Information about geographical regions

€ m

Germany

Europe
(excluding
Germany)

Americas

Asia Pacific

Other regions

Group

1 Jan. to 31 Dec.

External revenue

Non-current assets 1

Capex 1

2017

2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

2018

18,405

18,759

18,139

18,464

10,768

11,163

10,766

2,366

2,398

60,444

61,550

5,610

964

9,229

1,658

7,328

10,065

4,076

614

1,333

487

6,740

1,333

3,303

4,563

165

594

356

524

127

20,673

31,121

2,277

5,045

1 Not comparable with prior year due to the initial application of IFRS 16 in financial year 2018.

10.1 Segment reporting disclosures
Deutsche Post DHL Group reports four operating segments for finan-
cial year 2018; these are managed independently by the responsible
segment management bodies in line with the products and services
offered and the brands, distribution channels and customer profiles
involved. Components of the entity are defined as a segment on the
basis of the existence of segment managers with bottom-line respon-
sibility who report directly to Deutsche Post DHL Group’s top manage-
ment.

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 services
or products offered internally within the Group, these market prices or
market-oriented prices are used as transfer prices (arm’s length prin-
ciple). The transfer prices for services for which no external market
exists are generally based on incremental costs.

The expenses for 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 obligation (nation-
wide 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 fluc-
tuations 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, including right-of-use assets, are reported in the
capex figure. Depreciation, amortisation and impairment losses relate

to the segment assets allocated to the individual divisions. Other non-
cash income and expenses relate primarily to expenses from the rec-
ognition 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 distin-
guishes between the following divisions:

Post eCommerce Parcel
The Post - eCommerce - Parcel (PeP) division handles both domestic
and international mail and is a specialist in dialogue marketing, nation-
wide press distribution services and all the electronic services associ-
ated with mail delivery. The division offers parcel and e-commerce
services not only in Germany, but worldwide. It is divided into two
business units: Post, and eCommerce - Parcel.

Express
The Express division offers time-definite courier and express services
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.

Consolidated Financial Statements — NOTES — Segment reporting

113

Supply Chain
The Supply Chain division delivers customised supply chain solutions
to its customers based on globally standardised modular components
including warehousing, transport and value-added services.

was created in financial year 2018 and functions as an incubator for
mobility solutions, digital platforms, automation and other techno-
logical innovations.

In addition to the reportable segments given above, segment reporting
comprises the following categories:

Corporate Functions
Corporate Functions comprises Corporate Center / Other and Corporate
Incubations. Corporate Center / Other includes Global Business Services
(GBS), the Corporate Center, non-operating activities and other busi-
ness activities. The profit / loss generated by GBS is allocated to the
operating segments, whilst its assets and liabilities remain with GBS
(asymmetrical allocation). The Corporate Incubations board department

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 individual regions on the basis of
the domicile of the reporting entity. Non-current assets primarily com-
prise intangible assets, property, plant and equipment and other non-
current assets.

10.4 Reconciliation of segment amounts

Reconciliation of segment amounts to consolidated amounts

Reconciliation to the income statement

€ m

Total for
reportable segments 1

Corporate Functions 1

Reconciliation to Group /
Consolidation 1, 2

Consolidated amount

External revenue

Internal revenue

Total revenue

Other operating income

Changes in inventories and work performed
and capitalised

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

Non-controlling interests

1 Prior-period amounts adjusted.
2 Including rounding.

2017

60,349

1,495

61,844

1,731

–31

–34,102

–19,158

–1,267

– 4,928

4,091

2018

61,383

1,568

62,951

1,941

–175

–33,455

–19,849

–2,670

– 5,166

–2

3,575

2017

1,292

1,387

1,554

2018

167

1,457

1,624

1,553

–1,582

–1,336

– 928

–203

– 648

–350

– 986

– 623

–716

– 414

2017

–2,787

–1,314

129

2,909

–1

2018

–3,025

–1,580

192

3,118

1,050

1,285

2017

60,444

1,971

168

–32,775

–20,072

–1,471

– 4,526

3,741

– 411

3,330

– 477

2,853

2,713

140

2018

61,550

1,914

–31,673

–20,825

–3,292

– 4,597

–2

3,162

– 576

2,586

–362

2,224

2,075

149

114

Deutsche Post DHL Group — 2018 Annual Report

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.

Income statement disclosures

11 Revenue by business unit

Reconciliation to segment assets

€ m

Total equity and liabilities

Investment property

Non-current financial assets

Other non-current assets

Deferred tax assets

Income tax assets

Receivables and other current assets

Current financial assets

Cash and cash equivalents

Segment assets

of which Corporate Functions 1

Total for reportable segments 1

Consolidation 1, 2

1 Prior-period amounts adjusted.
2 Including rounding.

2017

38,672

–21

– 543

–153

2018

50,470

–18

– 582

–260

€ m

PeP 1

Post

eCommerce - Parcel

Other

Express

–2,272

–2,532

Global Forwarding, Freight

–236

–14

– 637

–3,135

31,661

1,732

30,002

–73

–210

–13

– 930

–3,017

42,908

4,935

38,068

– 95

Global Forwarding

Freight

Supply Chain

Corporate Functions 1

Total revenue

1 Prior-period amounts adjusted.

2017

18,009

9,587

8,336

14,693

13,689

10,080

3,609

13,958

2018

18,344

9,318

8,937

15,775

14,063

10,430

3,633

13,201

167

60,444

61,550

Revenue includes performance obligations in the amount of €13 million
settled in prior periods. The contract liabilities included in the opening
balance as at 1 January 2018 resulted in revenue for 2018.

The change in revenue was due to the following factors:

Factors affecting revenue increase, 2018

€ m

Organic growth

Changes in portfolio 1

Currency translation effects

Total

Note 2.

3,613

–1,041

–1,466

1,106

As in the prior-year period, there was no revenue in financial year 2018
that was generated on the basis of barter transactions.

The allocation of revenue to geographical regions is presented in

the segment reporting.

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 deferred
taxes are deducted.

Reconciliation to segment liabilities

€ m

Total equity and liabilities

Equity

Consolidated liabilities

Non-current provisions

Non-current liabilities

Current provisions

Current liabilities

Segment liabilities

of which Corporate Functions 1

Total for reportable segments 1

Consolidation 1, 2

1 Prior-period amounts adjusted.
2 Including rounding.

2017

38,672

2018

50,470

–12,903

–13,873

25,769

– 4,836

– 5,177

–75

–1,461

14,220

1,556

12,721

– 57

36,597

– 5,017

–13,892

–193

–3,181

14,314

1,520

12,868

–74

Consolidated Financial Statements — NOTES — Segment reporting — Income statement disclosures

115

The changes in inventories relate primarily to property develop-
ment projects. The increase in work performed and capitalised is
largely attributable to the expanded production of electric vehicles by
StreetScooter GmbH for Group companies.

2017

2018

12 Other operating income

€ m

Insurance income

Income from currency translation

Income from the reversal of provisions

Income from the remeasurement of liabilities

Income from fees and reimbursements

Reversals of impairment losses on receivables and
other assets

Income from the disposal of assets

Commission income

Income from derivatives

Income from prior-period billings

Operating lease income

Sublease income

Income from loss compensation

Recoveries on receivables previously written off

Subsidies

Income from the derecognition of liabilities

Miscellaneous

Total

208

174

214

120

134

193

126

219

213

200

134

127

125

101

402

1,971

419

1,914

14 Materials expense

€ m

Cost of raw materials, consumables and
supplies, and of goods purchased and held
for resale
Aircraft fuel

Fuel

Packaging material

Goods purchased and held for resale

Spare parts and repair materials

Office supplies

Other expenses

Cost of purchased services
Transport costs

Cost of temporary staff and services

Maintenance costs

Lease expenses

Non-cancellable leases

Cancellable leases

Rental agreements (incidental expenses)

Short-term leases

Leases (incidental expenses)

Low-value asset leases

Variable lease payments

Other

IT services

Commissions paid

2017

2018

1,102

1,478

740

427

435

117

252

797

435

241

113

379

3,139

3,514

20,381

21,462

2,556

1,207

2,226

487

347

–

579

574

1,279

29,636

32,775

2,347

1,277

–

664

604

590

1,080

28,159

31,673

For reasons of transparency, changes in inventories and work per-
formed and capitalised were transferred out of other operating income,
where they had previously been recognised and presented in a sepa-
note 13.
rate income statement item,

Other operating income declined year-on-year, in particular, due
to lower gains on the disposal of assets. Subsidies relate to grants for
the purchase or production of assets. The grants are reported as de-
ferred income and recognised in the income statement over the useful
lives of the assets.

Miscellaneous other operating income includes a large number

Other purchased services

of smaller individual items.

Materials expense

13 Changes in inventories and work performed and capitalised

€ m

Changes in inventories – income (+) / expense (-)

Work performed and capitalised

Total

2017

– 65

233

168

2018

–222

309

For reasons of transparency, changes in inventories and work per-
formed and capitalised were transferred out of other operating income
where they had previously been recognised and presented in a sepa-
note 12.
rate income statement item,

The reduction in materials expense was a result, on the one hand, of
positive exchange rate effects, and on the other hand, of the initial
application of IFRS 16. The former operating lease payments, to the
extent that they did not relate to payments under short-term or low-
value asset leases or variable lease payments and incidental expenses,
were replaced by depreciation and impairment losses as well as inter-
est expenses. In contrast, transport costs increased for reasons includ-
ing higher crude oil prices.

€257 million of the other expenses included in the cost of raw
materials, consumables and supplies, and of goods purchased and held
for resale, relates to the production of electric vehicles by Street-
Scooter GmbH.

The other expenses item includes a large number of individual

items.

116

Deutsche Post DHL Group — 2018 Annual Report

15 Staff costs / employees

€ m

Wages, salaries and compensation

Social security contributions

Retirement benefit expenses

Expenses for other employee benefits

Staff costs

The employees of companies acquired or disposed of during the finan-
cial year were included rateably. The number of full-time equivalents
at joint operations included in the consolidated financial statements as
at 31 December 2018 amounted to 276 on a proportionate basis (pre-
vious year: 254.)

16 Depreciation, amortisation and impairment losses

2017

16,192

2,419

891

570

2018

16,840

2,522

846

617

20,072

20,825

€ m

Staff costs relate mainly to wages, salaries and compensation, as well
as all other benefits paid to employees of the Group for their services
in the financial year. The rise was largely due to salary increases and
new hires as well as expenses for the early retirement programme in
the Post - eCommerce - Parcel division.

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 con-
tributions to defined contribution retirement plans for civil servant
employees in Germany in the amount of €449 million (previous year:
€461 million), as well as for the Group’s hourly workers and salaried
employees, totalling €307 million (previous year: €300 million),
note 39

note 7. For the changes in retirement benefit expenses, see

in particular.

The average number of Group employees in the reporting period,

broken down by employee group, was as follows:

Employees

Headcount

Headcount (annual average)
Hourly workers and salaried employees

Civil servants

Trainees

Total

Fulltime equivalents
As at 31 December 1

Average for the year 2

1 Excluding trainees.
2 Including trainees.

2017

2018

477,251

499,943

30,468

5,619

28,718

5,709

513,338

534,370

472,208

468,724

499,018

489,571

Amortisation of and impairment losses on
intangible assets, excluding impairment of
goodwill

Depreciation of and impairment losses on
property, plant and equipment acquired

Land and buildings

Technical equipment and machinery

Transport equipment

Aircraft

IT equipment

Operating and office equipment

Advance payments and assets under
development

Depreciation of and impairment losses on
right-of-use assets 1

Land and buildings

Technical equipment and machinery

Transport equipment

Aircraft

IT equipment

Operating and office equipment

Advance payments and assets under
development

Depreciation of and impairment losses on
investment property

Impairment of goodwill

Depreciation, amortisation and
impairment losses

2017

2018

287

195

168

314

207

247

138

182

319

234

266

138

1,159

1,226

1,325

195

304

1,870

1,471

3,292

1 Recognised as depreciation of and impairment losses on finance lease assets in the

previous year.

The overall increase in depreciation, amortisation and impairment
losses was mainly the result of the initial application of IFRS 16. The
decrease in amortisation of and impairment losses on intangible assets
is attributable to the reduction in the previous year of the useful lives
of customer relationships in the Supply Chain segment and the disposal
of the Williams Lea Tag Group.

Consolidated Financial Statements — NOTES — Income statement disclosures

117

The depreciation, amortisation and impairment losses item
includes impairment losses totalling €16 million as follows at seg-
ment level:

17 Other operating expenses

€ m

Impairment

€ m

Post eCommerce Parcel
Intangible assets

Property, plant and equipment acquired

Right-of-use assets

Express
Property, plant and equipment acquired

Global Forwarding, Freight
Investment property

Supply Chain
Intangible assets

Property, plant and equipment acquired

Right-of-use assets

Impairment losses

Cost of purchased cleaning and security services

Expenses for advertising and public relations

2017

2018

Travel and training costs

Warranty expenses, refunds and compensation
payments

Insurance costs

Other business taxes

Write-downs of current assets

Telecommunication costs

Currency translation expenses

Entertainment and corporate hospitality expenses

Office supplies

Services provided by the Bundesanstalt für Post
und Telekommunikation (German federal post and
telecommunications agency)

Customs clearance-related charges

Consulting costs (including tax advice)

Contributions and fees

Of the impairment losses, €10 million is attributable to the most recent
measurement of the assets and liabilities of All you need GmbH before
their reclassification as assets held for sale and liabilities associated
with assets held for sale. In the previous year, the majority of the
impairment losses (€18 million) related to aircraft for sale in the
Express segment, for which a final impairment loss was recognised,
writing the aircraft off in full, prior to their reclassification as assets
held for sale.

Voluntary social benefits

Losses on disposal of assets

Legal costs

Monetary transaction costs

Commissions paid

Audit costs

Expenses from prior-period billings

Expenses from derivatives

Donations

Miscellaneous

Other operating expenses

2017

2018

378

437

341

305

328

279

211

228

181

182

180

145

163

144

106

411

374

348

346

326

263

239

213

207

185

183

182

134

132

106

103

443

4,526

473

4,597

Other operating expenses include €49 million attributable to negative
effects from customer contracts in the Supply Chain division.

Taxes other than income taxes are either recognised in the related
expense item or, if no specific allocation is possible, in other operating
expenses.

Miscellaneous other operating expenses include a large number

of smaller individual items.

118

Deutsche Post DHL Group — 2018 Annual Report

18 Net finance costs

€ m

Financial income
Interest income

Gains on changes in fair value of financial assets

Income from other equity investments and
financial assets

Reversals of impairment losses on financial
instruments

Other financial income

Finance costs
Interest expense from the unwinding of discounts
on provisions

Interest expense on leases

Other interest expenses

Losses on changes in fair value of financial assets

Impairment losses on financial instruments

Other finance costs

Foreign currency losses

Net finance costs

2017

2018

–

–130

–

–152

–

–113

– 87

– 482

–18

– 411

–

201

– 98

–376

–155

–39

– 50

–32

–750

–27

– 576

The deterioration in net finance costs is due mainly to interest expense
on leases, an item recognised for the first time in financial year 2018
due to the initial application of IFRS 16. By contrast, financial income
improved due to the changes in value of stock appreciation rights
(SARs) as a result of fluctuations in the share price.

The expense from the unwinding of discounts on bonds resulting
from the application of the effective interest method amounted to
€12 million.

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 provi-

sions can be found in

note 39.

Income taxes

€ m

Current income tax expense

Current recoverable income tax

Deferred tax income (previous year: expense)
from temporary differences

Deferred tax income from tax loss carryforwards

Income taxes

2017

–727

– 691

–231

445

214

– 477

2018

– 697

– 683

127

194

321

–362

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

Tax-exempt income and non-deductible expenses

Differences in tax rates at foreign companies

Income taxes

2017

3,330

–1,006

2018

2,586

–789

700

337

–33

–224

– 477

171

–34

–149

–362

The difference from deferred tax assets not recognised for initial dif-
ferences 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 differ-
ences, which related mainly to property, plant and equipment as well
as to provisions for pensions and similar obligations. The remaining
temporary differences between the original IFRS carrying amounts, net
of accumulated depreciation or amortisation, and the tax base
amounted to €245 million as at 31 December 2018 (previous year:
€285 million).

The effects from deferred tax assets of German Group companies
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.

Effects from deferred tax assets not recognised for tax loss car-
ryforwards and temporary differences in the amount of €4 million
(previous year: €10 million) relate 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 previously
not been recognised. In addition, the recognition of deferred tax assets
previously not recognised for tax loss carryforwards and of deductible
temporary differences from a prior period (and resulting mainly from
Germany) reduced the deferred tax expense by €526 million (previous
year: €857 million). Effects from unrecognised deferred tax assets
amounting to €13 million (previous year: €3 million) were due to a
valuation allowance recognised for a deferred tax asset. Other effects
from unrecognised deferred tax assets relate primarily to tax loss
carry forwards for which no deferred taxes were recognised.

Consolidated Financial Statements — NOTES — Income statement disclosures

119

A deferred tax asset in the amount of €32 million was recognised
in the balance sheet for companies that reported a loss in the previous
year or in the current period as, based on tax planning, realisation of
the tax asset is probable.

In financial year 2018, a tax rate change had no material effect at
German Group companies. Tax rate changes in some tax jurisdictions
abroad also had no material effects. The effective income tax expense
includes prior-period tax expenses from German and foreign com-
panies in the amount of €34 million (tax expense) (previous year:
expense of €33 million).

The following table presents the tax effects on the components

of other comprehensive income:

Other comprehensive income

€ m

Before taxes

Income taxes

After taxes

2018
Change due to remeasurements
of net pension provisions

IAS 39 hedging reserve

Reserve for equity instruments
without recycling

Currency translation reserve

Other changes in retained earnings

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

Other comprehensive income

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

191

– 40

– 4

223

378

–743

– 8

–350

–73

– 58

–28

–1

–7

–36

118

–26

–3

165

350

–1

–743

– 8

–386

Basic earnings per share

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

Weighted average number of
shares outstanding

2017

2018

€ m

2,713

2,075

number 1,210,097,823 1,230,118,545

Basic earnings per share

€

2.24

1.69

To compute diluted earnings per share, the weighted average number
of shares outstanding is adjusted for the number of all potentially dilu-
tive 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 2018: 3,810,357 shares; previous
year: 13,532,321 shares) and the maximum number of ordinary shares
that can be issued on exercise of the conversion rights under the
convertible bond issued in December 2017. Consolidated net profit for
the period attributable to Deutsche Post AG shareholders was in-
creased by the amounts spent on the convertible bonds.

Diluted earnings per share in the reporting period were €1.66

(previous year: €2.15).

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

2017

2018

€ m

2,713

2,075

€ m

2,715

2,082

number 1,210,097,823 1,230,118,545

Potentially dilutive shares

number

50,736,444

21,791,635

Weighted average number of
shares for diluted earnings

number 1,260,834,267 1,251,910,180

Diluted earnings per share

€

2.15

1.66

20 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 2018 were €1.69 (previous year: €2.24).

21 Dividend per share
A dividend per share of €1.15 is being proposed for financial year 2018
(previous year: €1.15). Further details on the dividend distribution can
be found in

note 37.

120

Deutsche Post DHL Group — 2018 Annual Report

Balance sheet disclosures

Intangible assets

22.1 Overview

€ m

Cost
Balance at 1 January 2017

Additions from business combinations

Additions

Reclassifications

Disposals

Currency translation differences

Balance at 31 December 2017/1 January 2018

Additions from business combinations

Additions

Reclassifications

Disposals

Currency translation differences

Balance at 31 December 2018

Amortisation and impairment losses
Balance at 1 January 2017

Additions from business combinations

Amortisation

Impairment losses

Reclassifications

Reversals of impairment losses

Disposals

Currency translation differences

Balance at 31 December 2017/1 January 2018

Additions from business combinations

Amortisation

Impairment losses

Reclassifications

Reversals of impairment losses

Disposals

Currency translation differences

Balance at 31 December 2018

Carrying amount at 31 December 2018

Carrying amount at 31 December 2017

Internally
generated
intangible
assets

Purchased
brand names

Purchased
customer
lists

Other
purchased
intangible
assets

Goodwill

Advance
payments
and
intangible
assets under
development

1,311

506

1,006

1,686

12,791

– 82

– 4

1,303

–37

–1

1,335

1,125

–2

– 66

–2

1,131

–31

1,164

171

172

–32

–20

455

–3

453

436

–14

425

– 4

422

– 914

– 57

– 6

–1

794

– 806

– 46

–2

–151

–26

1,653

– 83

– 97

– 490

12,239

–127

1,699

12,236

1,349

136

–139

–21

1,327

122

–1

–74

1,133

–25

–38

1,070

–32

–1

1,381

1,037

318

326

11,199

11,169

105

–76

–24

–1

– 54

– 5

105

Total

17,391

184

–1,300

– 598

15,759

217

–258

15,872

4,837

287

–1,036

–121

3,967

193

–1

–139

–2

4,022

11,850

11,792

The additions to goodwill relate mainly to the acquisitions of the
Colombian Suppla Group (€23 million) and the transport companies in
Spain (€17 million). Goodwill disposals of €92 million are mainly attrib-
utable to the planned sale of the supply chain business in China to
S. F. Holding,

notes 2 and 32.

Purchased software, concessions, industrial rights, licences and
similar rights and assets are reported under purchased intangible as-
sets. Internally generated intangible assets relate to development costs
for internally developed software.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

121

22.2 Allocation of goodwill to CGU s

€ m

Post eCommerce Parcel 1

Express

Global Forwarding, Freight
DHL Global Forwarding

DHL Freight

Supply Chain

Corporate Incubations 1

Total goodwill

2017

1,087

3,911

3,891

275

1,991

2018

1,107

3,910

3,950

279

1,939

11,169

11,199

1 Prior-period amounts adjusted to reflect the creation of the new Corporate Incubations

board department.

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 or its fair value less costs to sell. This calculation
is based on projections of free cash flows that are initially discounted
at a rate corresponding to the post-tax cost of capital. Pre-tax discount
rates are 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 2019 to 2021. By contrast,
an extended planning phase of up to ten years is specified for the CGU
Corporate Incubations. Planning is supplemented by a perpetual annu-
ity representing the value added from 2022 onwards or the value
added after the extended planning phase. This is calculated using a
long-term growth rate, which is determined for each CGU separately
and the amount of which – for CGU s whose carrying amounts are sig-
nificant in comparison with the total carrying amount of goodwill – is
shown in the table below. The growth rates applied are based on long-
term real growth figures for the relevant economies, growth expect-
ations 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 sub-markets 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 planning assumption for the im-
pairment 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 material CGUs and the
growth rates assumed in each case for the perpetual annuity are shown
in the following table:

Post eCommerce Parcel

Express

Global Forwarding, Freight
DHL Global Forwarding

DHL Freight

Supply Chain

1 In accordance with IFRS 16.

Discount rates

Growth rates

2017

2018 1

2017

2018

8.0

8.3

8.4

8.6

8.4

8.0

8.8

7.0

7.2

7.0

0.5

2.0

2.5

2.0

2.5

0.5

2.0

2.5

2.0

2.5

On the basis of these assumptions and the impairment tests carried out
for the individual CGU s to which goodwill was allocated, it was estab-
lished that the recoverable amounts for all CGU s exceed their carrying
amounts. No impairment losses were recognised on goodwill in any of
the CGU s as at 31 December 2018.

When performing the impairment test for the significant CGUs in
accordance with IAS 36.134, Deutsche Post DHL Group conducted sen-
sitivity analyses for the EBIT margin, the discount rate and the growth
rate. These analyses – which included varying the essential valuation
parameters within an appropriate range – did not reveal any risk of
impairment to goodwill.

122

Deutsche Post DHL Group — 2018 Annual Report

23 Property, plant and equipment

23.1 Overview of property, plant and equipment, including

rightofuse assets

€ m

Cost
Balance at 1 January 2017

Additions from business combinations

Additions

Reclassifications

Disposals

Currency translation differences

Balance at 31 December 2017/1 January 2018

IFRS 16 adjustment

Balance at 1 January 2018, adjusted

Additions from business combinations 1

Additions

Reclassifications

Disposals

Currency translation differences

Balance at 31 December 2018

Depreciation and impairment losses
Balance at 1 January 2017

Additions from business combinations

Depreciation

Impairment losses

Reclassifications

Reversals of impairment losses

Disposals

Currency translation differences

Balance at 31 December 2017/1 January 2018

Additions from business combinations 1

Depreciation

Impairment losses

Reclassifications

Reversals of impairment losses

Disposals

Currency translation differences

Balance at 31 December 2018

Carrying amount at 31 December 2018

Carrying amount at 31 December 2017

1 Also includes a proportion change from joint operations.

Technical
equipment
and
machinery

IT systems,
operating
and office
equipment

Land and
buildings

Aircraft

Transport
equipment

Advance
payments
and assets
under
development

4,836

5,390

2,670

2,082

2,407

157

– 495

–135

4,528

7,418

11,946

1,959

286

– 578

–12

13,631

2,319

182

–307

–77

2,129

1,495

–3

–178

3,477

10,154

2,399

141

372

–272

–148

5,484

128

5,612

210

374

–208

6,011

3,249

307

–12

–245

– 86

3,220

363

– 6

–165

3,427

2,584

2,264

187

–344

–79

2,507

2,509

174

–291

2,489

2,012

230

–322

– 58

1,866

225

– 8

–266

1,821

668

641

397

–281

– 58

2,218

1,000

3,218

562

357

– 68

104

4,223

879

229

–273

–16

837

570

– 42

1,387

2,836

1,381

225

125

–203

–34

2,531

543

3,074

462

208

–194

3,552

1,191

208

–172

–21

1,209

429

–144

– 4

1,490

2,062

1,322

654

1,305

–1,145

– 8

–31

775

777

1,461

–1,338

–13

898

–1

898

775

Total

18,039

2,093

–22

–1,603

– 485

18,043

9,093

27,136

4,828

–22

–1,352

123

30,804

9,650

1,156

–1,319

–258

9,261

3,082

– 9

–796

11,602

19,202

8,782

The increase in property, plant and equipment was chiefly the result of
the initial application of IFRS 16. Further details on right-of-use assets
note 23.2. Disposals relate partly to the planned sale
can be found in
of the supply chain business in China and disposals of right-of-use
assets as a result of amended lease terms and terminations.

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 develop-
ment relate to items of property, plant and equipment in progress at
the reporting date for whose production internal or third-party costs
have already been incurred.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

123

23.2 Leases – rightofuse assets
The right-of-use assets carried as non-current assets resulting from
leases are presented separately in the following table:

Rightofuse assets

€ m

31 December 2018
Cost

of which additions

Depreciation and impairment losses

Carrying amount

31 December 2017 1
Cost

of which additions

Depreciation and impairment losses

Carrying amount

1 Recognised as finance lease assets in the previous year.

Technical
equipment
and
machinery

IT systems,
operating
and office
equipment

Land and
buildings

Aircraft

Transport
equipment

Advance
payments
and assets
under
development

9,003

1,801

1,311

7,692

209

153

186

132

1,476

341

334

1,142

731

201

198

533

Total

11,407

2,397

1,904

9,503

288

119

169

In the real estate area, the Group primarily leases warehouses, office
buildings and mail and parcel centres. The leased aircraft are predom-
inantly deployed in the air network of the Express segment. Leased
transport equipment also includes the leased vehicle fleet. The real
estate leases in particular are long-term leases. The Group had around
65 real estate leases with remaining lease terms of more than twenty
years as at 31 December 2018. Aircraft leases have remaining lease
terms of up to eleven years. Leases may include extension and ter-
note 7. The leases are negotiated individually and
mination options,
include a wide range of different conditions.

Information on the corresponding lease liabilities can be found

under financial liabilities,

note 41.2.

Investment property

24
The investment property largely comprises leased property encumbered
by heritable building rights, and developed and undeveloped land.

€ m

Cost
Balance at 1 January

Additions

Reclassifications

Disposals

Currency translation differences

Balance at 31 December

Depreciation and impairment losses
Balance at 1 January

Additions

Impairment losses

Disposals

Reclassifications

Currency translation differences

Balance at 31 December

Carrying amount at 31 December

2017

2018

–1

– 5

– 8

–3

–1

Rental income for investment property amounted to €3 million (previous
year: €2 million), whilst the related expenses were €1 million (previous
year: €1 million). The fair value amounted to €48 million (previous year:
€54 million).

124

Deutsche Post DHL Group — 2018 Annual Report

Investments accounted for using the equity method

25
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

2017

2018

2017

2018

2017

–26

–2

– 8

– 9

–3

–2

106

–26

–2

– 8

Total

2018

– 9

–2

119

In 2018, interests were acquired mainly in Robotic Wares Private Limited,
India, and Dunho WeiHeng (Zhuhai) Supply Chain Management Co.,
Ltd., China. The interest in Relais Colis SAS, France, which is accounted
for using the equity method, was increased by a further 8.4 %. Further
additions are the result of the change in the method of consolidation
note 2. In the previous
for Resilience360 GmbH and Flexible Lifestyle,
year, additions related to the interest in Israel-based Global-E Online
Ltd, whilst disposals related exclusively to the reclassification of AHK

Air Hong Kong Limited, China, as assets held for sale and liabilities
associated with assets held for sale,

note 32.

25.1 Aggregate financial data
The following table gives an aggregated overview of the carrying
amount in the consolidated financial statements and selected financial
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 after income taxes

Other comprehensive income

Total comprehensive income

1 Based on the interest held.

26 Financial assets

€ m

Assets measured at cost

Assets at fair value through other comprehensive income

Assets at fair value through profit or loss

Available-for-sale financial assets

Loans and receivables

Lease receivables

Financial assets

Associates

Joint ventures

2017

– 8

–7

2017

–

170

466

733

2018

106

–3

–1

Non-current

2018

499

188

–

730

2017

–

500

652

2018

Current

2018

100

843

–

2017

– 8

– 6

2017

–

246

559

535

Total

2018

119

–2

Total

2018

599

1,031

–

943

1,385

1,673

Consolidated Financial Statements — NOTES — Balance sheet disclosures

Net impairment losses amounted to €–93 million (previous year:
€–83 million).

Compared with the market rates of interest prevailing at 31 De-
cember 2018 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 million
(previous year: €3 million). The principal amount of these loans totals
€3 million (previous year: €3 million).

Details on restraints on disposal are contained in

note 44.2.

27 Other assets

€ m

Prepaid expenses

Current tax receivables

Pension assets, non-current only

Income from cost absorption

Receivables from private postal agencies

Other assets from insurance contracts 1

Contract assets 1

Creditors with debit balances

Receivables from insurance business

Recoverable start-up costs, non-current only 1

Receivables from employees

Receivables from loss compensation
(recourse claims)

Receivables from cash on delivery

Receivables from asset disposals

Other assets, of which non-current: 59
(previous year: 78)

Other assets

of which current

non-current

2017

2018

604

466

153

113

116

–

646

474

260

125

124

797

2,415

2,184

231

756

2,722

2,369

353

1 The items were presented separately as a result of the initial application of the new IFRSs,

note 4.

The increase in other assets is attributable mainly to actuarial gains on
pension assets,

note 39.

No valuation allowances were recognised on contract assets. Of
the tax receivables, €368 million (previous year: €356 million) relates
to VAT, €70 million (previous year: €67 million) to customs and duties,
and €36 million (previous year: €43 million) to other tax receivables.
Miscellaneous other assets include a large number of individual items.

125

2018

Deferred
tax
liabilities

1,723

2,034

510

1,524

28 Deferred taxes

Breakdown by balance sheet item and maturity

€ m

2017

Deferred
tax
liabilities

Deferred
tax assets

Intangible assets

Property, plant and
equipment

Non-current financial assets

Other non-current assets

Other current assets

Provisions

Financial liabilities

Other liabilities

Tax loss carryforwards

Gross amount

of which current

non-current

Netting

Carrying amount

449

104

1,755

2,488

569

1,919

–216

2,272

292

102

190

620

1,708

101

1,957

4,512

1,114

3,398

–216

–1,980

2,532

Deferred taxes on tax loss carryforwards in the amount of €1,551 mil-
lion (previous year: €1,486 million) relate to tax loss carryforwards in
Germany and €406 million (previous year: €269 million) to foreign tax
loss carryforwards.

No deferred tax assets were recognised for tax loss carryfor-
wards of around €5.0 billion (previous year: €6.4 billion) and for tem-
porary differences of around €2.2 billion (previous year: €2.6 billion),
as it can be assumed that the Group will probably not be able to use these
tax loss carryforwards and temporary differences 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 indefinite
period of time. In the case of the foreign companies, the significant tax
loss carryforwards will not lapse before 2026.

Deferred tax assets on financial liabilities and deferred tax liabil-
ities on property, plant and equipment rose significantly due to the
initial application of IFRS 16.

Deferred taxes have not been recognised for temporary differ-
ences of €510 million (previous year: €505 million) relating to earnings
of German and foreign subsidiaries, because these temporary differ-
ences will probably not reverse in the foreseeable future.

126

Inventories

€ m

Deutsche Post DHL Group — 2018 Annual Report

For information on impairment losses, default risk and maturity struc-
tures, see

note 44.

Raw materials, consumables and supplies

Finished goods and goods purchased and held
for resale

Work in progress

Advance payments

Inventories

2017

179

100

327

2018

233

150

454

Adequate valuation allowances were recognised.

31 Cash and cash equivalents

€ m

Cash equivalents

Bank balances / cash in transit

Cash

Other cash and cash equivalents

Cash and cash equivalents

2017

1,342

1,717

2018

1,116

1,801

3,135

3,017

30 Trade receivables

€ m

Trade receivables

Deferred revenue

Trade receivables

2017

7,558

660

8,218

2018

7,581

666

8,247

Of the €3,017 million in cash and cash equivalents, €977 million was
not available for general use by the Group as at the reporting date (pre-
vious year: €973 million). Of this amount, €905 million (previous year:
€895 million) was attributable to countries where exchange controls
or other legal restrictions apply (mostly China, India and Thailand) and
€72 million (previous year: €78 million) primarily to companies with
non-controlling interest shareholders.

32 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

Sale of the supply chain business in China, Macao and Hong Kong (Supply Chain segment)

DHL Freight GmbH, Germany – property sale (Global Forwarding, Freight segment)

Exel Logistics Property Limited, UK – property sale (Supply Chain segment)

AHK Air Hong Kong Limited, China – equity interest (Express segment)

Other

Assets held for sale and liabilities associated with assets held for sale

2017

Assets

2018

414

426

Liabilities

2018

228

2017

On 26 October 2018, Deutsche Post DHL Group entered into an agree-
ment with S.F. Holding, China, to sell its supply chain business in China,
Hong Kong and Macao to S.F. Holding in a strategic partnership, with a
view to growing local supply chain operations in China. Under the
agreement, Deutsche Post DHL Group will receive a purchase price of
RMB 5.5 billion (around €700 million) from S.F. Holding as a non-
recurring payment. In addition, Deutsche Post DHL Group will receive
an annual amount linked to revenue over the next ten years. The trans-
action is expected to be completed within the first quarter of 2019
following all the required regulatory approvals.

The corresponding assets and liabilities of the twelve consoli-
dated companies reclassified as assets held for sale and liabilities
associated with assets held for sale are presented in the table below. In
addition, three associates which are accounted for using the equity
method and recognised in the amount of €9 million are included in
these amounts. The most recent remeasurement did not result in an
impairment loss. An expense of €37 million is included in the currency
translation reserve in equity.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

127

Supply Chain business in China

Changes in issued capital and treasury shares

€ m

Non-current assets

of which goodwill

Current assets

Cash and cash equivalents

ASSETS

Non-current provisions and liabilities

Current provisions and liabilities

EQUITY AND LIABILITIES

€

31 Dec.
2018

200

181

414

185

228

The two Chinese companies acquired as part of a property develop-
ment project with the aim of resale and disclosed during the year were
sold in December 2018, with income of €3 million reported in gains on
the disposal of assets.

Furthermore, the 40 % interest in AHK Air Hong Kong Limited,
China, disclosed in the previous year was sold in December 2018,

note 2.

Planned property sales were reported at €12 million.
The “other” item relates to legacy aircraft held for sale from the
previous year. The aircraft with a carrying amount of €1.00 each were
reclassified to this balance sheet item. The most recent measurement
prior to reclassification led to an impairment loss of €18 million in the
Express division in the previous year.

Issued capital and purchase of treasury shares

33
As at 31 December 2018, KfW Bankengruppe (KfW) held a 20.5 % (pre-
vious year: 20.7 %) interest in the share capital of Deutsche Post AG. The
remaining 79.5 % (previous year: 79.3 %) of the shares were in free float.
KfW holds the shares in trust for the Federal Republic of Germany.

33.1 Changes in issued capital
The issued capital amounts to €1,237 million. It is composed of
1,236,506,759 no-par value registered shares (ordinary shares) with a
notional interest in the share capital of €1 per share and is fully paid up.

Issued capital
Balance at 1 January

Addition due to contingent capital increase
(convertible bond)

Addition due to contingent capital increase
(Performance Share Plan)

Capital reduction through retirement of
treasury shares

Balance at 31 December

Treasury shares
Balance at 1 January

Purchase of treasury shares

Issue / sale of treasury shares

Capital reduction through retirement of
treasury shares

Balance at 31 December

2017

2018

1,240,915,883 1,228,707,545

15,091,662

5,379,106

2,420,108

–27,300,000

1,228,707,545 1,236,506,759

–29,587,229

– 4,513,582

– 4,660,410

–1,284,619

2,434,057

2,169,550

27,300,000

– 4,513,582

–3,628,651

Total at 31 December

1,224,193,963 1,232,878,108

33.2 Authorised and contingent capital

Authorised / contingent capital at 31 December 2018

Amount

€ m Purpose

Authorised Capital 2017

160

Increase in share capital against
cash / non-cash contributions
(until 27 April 2022)

Contingent Capital 2011

– Issue of options / conversion rights

Contingent Capital 2014

(until 24 May 2016)

38 Issue of Performance Share Units
to executives (until 26 May 2019)

Contingent Capital 2017

75 Issue of options / conversion rights

Contingent Capital 2018/1

(until 27 April 2022)

12 Issue of Performance Share Units
to executives (until 23 April 2021)

Contingent Capital 2018/2

33 Issue of options / conversion rights

(until 23 April 2021)

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
pre-emptive rights. However, subject to the approval of the Supervisory
Board, the Board of Management may disapply the shareholders’
pre-emptive rights to the shares covered by the authorisation. No use
was made of the authorisation in the reporting period.

128

Deutsche Post DHL Group — 2018 Annual Report

Contingent Capital 2011
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 bil-
lion, on one or more occasions until 24 May 2016, thereby granting
options or conversion rights for up to 75 million shares with a propor-
tionate 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 increased on a contingent basis
by up to €75 million. From 2015 to 2018, 48.6 million subscription
rights were issued. The outstanding bonds with a notional volume of
€0.7 million were redeemed on 27 March 2018.

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 million
new no-par value registered shares. The contingent capital increase
serves to grant Performance Share Units (PSUs) to selected Group
executives. The contingent capital increase will only be implemented
to the extent that shares are issued based on the PSUs granted and the
company does not settle the PSUs by cash payment or delivery of treas-
ury shares. The new shares participate in profit from the beginning of
the financial year in which they are issued. The share capital was in-
creased on a contingent basis by up to €40 million. Use was made of
this authorisation in the third quarter of 2018 when the rights under
the 2014 tranche of the Performance Share Plan were settled. The con-
tingent capital increase resulted in 2.4 million new shares that were
issued to executives in September 2018. Contingent Capital 2014
amounts to €37.6 million.

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 bil-
lion, on one or more occasions until 27 April 2022, thereby granting
options or conversion rights for up to 75 million shares with a propor-
tionate 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 the convertible bond 2017/2025 in an ag-
gregate principal amount of €1 billion. The share capital was increased
on a contingent basis by up to €75 million.

Contingent Capital 2018/1
In its resolution dated 24 April 2018, the Annual General Meeting con-
tingently increased the share capital by up to €12 million through the
issue of up to 12 million no-par value registered shares. The contingent
capital increase serves to grant PSUs to selected Group executives. The
shares will be issued to beneficiaries based on the aforementioned au-
thorisation resolution. The new shares participate in profit from the
beginning of the financial year in which they are issued. No use was
made of the authorisation in the reporting period.

Contingent Capital 2018/2
The share capital was contingently increased by up to €33 million
through the issue of up to 33 million no-par value registered shares.
The contingent capital increase serves to grant options or conversion
rights or to settle conversion obligations and to grant shares in lieu of
cash payments to the holders of bonds issued by the company or its
Group companies in accordance with the authorisation resolution by
the Annual General Meeting dated 24 April 2018. The new shares par-
ticipate in profit from the beginning of the financial year in which they
are issued. No use was made of the authorisation in the reporting period.

33.3 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 existing
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’ pre-emptive rights disapplied, may
continue to be used for the purposes of listing on a stock exchange
outside Germany. In addition, the Board of Management remains
authorised to acquire treasury shares using derivatives.

Share buyback programme 2016/2017
The share buy-back programme beginning in April 2016 and ending in
March 2017 resulted in the acquisition of a total of 32.9 million treasury
shares at a cost of €911 million and, based on the Board of Management
resolution of 21 March 2017, the retirement by way of a capital reduc-
tion of 27.3 million treasury shares held.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

Purchase and issuance of treasury shares
In March 2018, 1,284,619 shares were acquired for a total amount of
€46 million (average price of €36.20 per share) in order to settle the
2017 tranche of the Share Matching Scheme. The shares were issued
to the executives concerned in April 2018. The rights to matching
shares under the 2013 tranche were also settled in April, with a further
870,551 shares issued to executives.

As at 31 December 2018, Deutsche Post AG held 3,628,651

treasury shares (previous year: 4,513,582 treasury shares).

33.4 Disclosures on corporate capital
In financial year 2018, the equity ratio was 27.5 % (previous year: 33.4 %).
The company’s capital is monitored using net gearing, which is defined
as net debt divided by the total of equity and net debt.

34 Capital reserves

€ m

Balance at 1 January

Share Matching Scheme

Addition

Exercise

Total for Share Matching Scheme

Performance Share Plan

Addition

Exercise

Total for Performance Share Plan

Retirement / issue of treasury shares

Corporate capital

€ m

Financial liabilities

Operating financial liabilities 1

Cash and cash equivalents

Current financial assets

Non-current derivative financial instruments

Net debt

Plus total equity

Total capital

Net gearing (%)

1 Relates to, e.g., liabilities from overpayments.

2017

6,050

–155

–3,135

– 652

–170

1,938

12,903

14,841

13.1

2018

16,462

–199

–3,017

– 943

12,303

13,873

26,176

47.0

The change in the two indicators is due mainly to the recognition of
lease liabilities in connection with the initial application of IFRS 16.

129

2018

3,327

– 64

–28

–2

102

3,469

2017

2,932

– 59

286

– 9

3,327

Differences between purchase and issue prices
of treasury shares

Capital increase through exercise of conversion
rights under convertible bond 2012/2019

Conversion right under convertible bond 2017/2025

Deferred taxes on conversion right under
convertible bond 2017/2025

Balance at 31 December

The rights to matching shares under the 2013 tranche were settled, and
the rights to deferred incentive and investment shares under the 2017
tranche were granted in April 2018. In addition, in the third quarter of
2018, the rights under the 2014 tranche of the Performance Share Plan
were settled.

35 Other reserves

Reserve for equity instruments without recycling
The application of IFRS 9 resulted in the recognition of a reserve for
equity instruments without recycling. This reserve includes changes in
the fair value of equity instruments that were classified at fair value
through other comprehensive income.

36 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 buy-back under tranches I to III

obligation from share buy-back
under tranche III

purchase / sale of treasury shares
Share Matching Scheme

2017

–103

195

– 41

2018

– 45

The main factors in the previous year were the obligations arising from
the share buy-back programme in addition to the Share Matching
Scheme.

130

Deutsche Post DHL Group — 2018 Annual Report

The changes in transactions with non-controlling interests relate
mainly to the step acquisition of additional interests of 10% in Brazil-
based company Olimpo Holding S.A.

37 Equity attributable to Deutsche Post AG shareholders
The equity attributable to Deutsche Post AG shareholders in financial
year 2018 amounted to €13,590 million (previous year: €12,637 million).

Dividends
Dividends paid to the shareholders of Deutsche Post AG are based on
the net retained profit of €5,653 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 €1,419
million. The amount of €4,234 million remaining after deduction of the
planned total dividend will be carried 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 appro-
priation of the net retained profit on the day the AGM convenes.

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 con-
tributions from the capital contribution account and – in the opinion of
the tax authorities – serves to reduce the cost of acquiring the shares.

38 Noncontrolling interests
This balance sheet item includes adjustments for the interests of non-
Group shareholders in the consolidated equity from acquisition ac-
counting, as well as their interests in profit or loss.

The following table shows the companies to which the non-con-

trolling interests relate:

€ m

DHL Sinotrans International Air Courier Ltd., China

Blue Dart Express Limited, India

PT. Birotika Semesta, Indonesia

Exel Saudia LLC, Saudi Arabia

DHL Global Forwarding Abu Dhabi LLC,
United Arab Emirates

2017

164

2018

173

266

283

Total
dividend
€ m

Dividend
per share
€

Other companies

Noncontrolling interests

Dividend distributed in financial year 2018
for the year 2017

Dividend distributed in financial year 2017
for the year 2016

1,409

1,270

1.15

1.05

As the dividend is paid in full from the tax-specific capital contribution
account (steuerliches Einlagekonto as defined by section 27 of the
Körperschaftssteuergesetz (KStG – German Corporation Tax Act)) (con-
tributions not made to subscribed capital), payment will be made with-
out the deduction of investment income tax or the solidarity surcharge.

Material non-controlling interests exist in the following two companies:
DHL Sinotrans International Air Courier Ltd., China, which is
assigned to the Express segment, provides domestic and international
express delivery and transport services. Deutsche Post DHL Group
holds a 50 % interest in the company. Blue Dart Express Limited (Blue
Dart), India, is assigned to the PeP segment. Deutsche Post AG holds a
75 % interest in Blue Dart, which is a courier service provider.

The following table gives an overview of the aggregated financial

data of significant companies with non-controlling interests:

Consolidated Financial Statements — NOTES — Balance sheet disclosures

131

Sinotrans

Blue Dart

2017

2018

2017

2018

447

544

207

215

329

164

131

485

616

240

271

345

173

163

1,461

1,534

371

316

236

–24

212

106

104

118

250

– 6

–207

214

–16

235

340

254

– 9

245

123

114

127

293

– 4

–239

235

– 8

277

– 4

–32

–3

–1

109

207

116

383

–3

–1

–21

Financial data for material noncontrolling interests

€ m

Balance Sheet
ASSETS
Non-current assets

Current assets

Total ASSETS

EQUITY AND LIABILITIES
Non-current provisions and liabilities

Current provisions and liabilities

Total EQUITY AND LIABILITIES

Net assets

Non-controlling interests

Income statement
Revenue

Profit before income taxes

Income taxes

Profit after income taxes

Other comprehensive income

Total comprehensive income

attributable to non-controlling interests

Dividend distributed to non-controlling interests

Consolidated net profit attributable to non-controlling 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

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 non-controlling interests

Total comprehensive income

Changes from unrealised gains and losses

Changes from realised gains and losses

Currency translation reserve at 31 December

2017

–22

–12

2018

–12

– 4

–16

132

Deutsche Post DHL Group — 2018 Annual Report

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, until 31 March 2019, to
further service accrual and a limited number of existing employees
who have not yet joined this arrangement. It will then also be closed to
new entrants and future service accrual. The relevant decision was
made in the reporting period and had no effect on pension obligations.
In October 2018, a High Court ruling took place on equalisation of guar-
anteed minimum pensions (GMP) requiring all affected plans to equal-
ise GMP between male and female plan members. This has led to an
increased allowance in pension obligations at 31 December 2018
through past service cost.

The Group’s defined benefit pension arrangements in the UK have
mainly been consolidated into a group plan with different sections 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 are
currently making their own funding contributions in the case of the
single open defined benefit arrangement.

Other
In the Netherlands, collective agreements require that those employ-
ees 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. The
plan provides for monthly benefit payments that are indexed in line
with the agreed wage and salary increases, on the one hand, and the
funds available for such indexation, on the other. In Switzerland, em-
ployees receive an occupational pension in line with statutory require-
ments, where pension payments depend 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 lifelong 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 enti-
tlements have been frozen.

The Group companies primarily fund their dedicated defined
bene fit retirement plans in these three countries by using the respective
joint funding institutions. In the Netherlands and in Switzerland, both
employers and employees contribute to plan funding. In the USA no
regular contributions are currently made in this regard.

39 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 retirement
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.

39.1 Plan features

Germany
In Germany, Deutsche Post AG has an occupational retirement arrange-
ment based on a collective agreement, which is open to new hourly
workers and salaried employees. 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 pre-
vious year is included in every newly allocated component. When the
statutory pension falls due, the hourly workers and salaried employees
can choose whether to receive payment as a lump sum or in instal-
ments, or lifelong monthly benefit payments that increase by 1 % each
year. Hourly workers and salaried employees who were already
employed as at 31 December 2015 were transferred to this system as
a rule. Since the first quarter of 2018, the added payment option of
receiving one lump sum instead of lifelong monthly benefit payments
has also been granted to certain groups of hourly workers and salaried
employees (e.g., former hourly workers and salaried employees with
fully vested entitlements), for whom it had previously not been avail-
able. The change resulted in past service gains. The large majority of
Deutsche Post AG’s obligations relates to older vested entitlements of
hourly workers and salaried employees, and to legacy pension commit-
ments towards former hourly workers and salaried employees who
have left or retired from the company. In addition, retirement arrange-
ments 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 28 f.

The prime source of external funding for Deutsche Post AG’s
respective retirement benefit obligations is a contractual trust arrange-
ment, which also includes a pension fund. 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 Bundes-
post (VAP – Deutsche Bundespost institution for supplementary retire-
ment pensions), a shared pension fund for successor companies to
Deutsche Bundespost, is used for some of the legacy pension commit-
ments.

Individual subsidiaries in Germany have retirement plans that
were acquired in the context of acquisitions and transfers of operations
and that are closed to new entrants. Contractual trust arrangements
are available for three subsidiaries with a view to external financing.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

133

39.2 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

Balance 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

Balance at 31 December

Present value of defined
benefit obligations

Fair value of plan assets

Net pension provisions

2017

17,723

187

– 8

– 60

–

119

414

–

414

533

– 95

338

–

278

–

–736

–139

–7

–303

17,381

2018

17,381

193

–113

–1

–

401

–

401

480

100

–261

–286

–

– 447

–

–737

–10

– 4

16,696

2017

12,286

2018

13,084

–

–11

–

291

280

–

656

701

– 465

–139

–254

13,084

–

–11

–

303

292

–

–256

– 585

– 8

–3

12,608

2017

5,437

187

– 8

– 60

130

414

–291

123

253

– 95

338

– 656

–378

–701

–271

– 8

– 49

4,297

2018

4,297

193

–113

–1

401

–303

188

100

–261

–286

256

–191

– 65

–152

–2

–1

4,088

1 Including other administration costs in accordance with IAS 19.130 which are expensed out of plan assets.

As at 31 December 2018, the effects of asset ceilings amounted to
€2 million; an expedient was applied to their recognition by deducting
this amount from the fair value of plan assets (1 January 2018/31 De-
cember 2017: €3 million; 1 January 2017: €2 million).

In the reporting period, the past service gains were attributable
mainly to plan amendments in Germany at Deutsche Post AG in con-
nection with the lump-sum payment option amounting to €108 million.
The past service gains were limited by opposite effects of €44 million
resulting from the court ruling in the UK. Experience adjustments were
made chiefly as a result of a new funding valuation in the UK. Employer

contributions include the contribution of a property to the trust in Ger-
many. The proportion of benefit payments paid out of plan assets in
Germany increased. In the previous year, a lump-sum settlement pro-
gramme was executed for retirees in Germany, which led to settlement
payments and the discontinuation of pension obligations. In addition,
employer contributions were impacted by two special measures.

Total payments amounting to €273 million are expected with
regard to net pension provisions in 2019. Of this amount, €233 million
is attributable to the Group’s expected direct benefit payments and
€40 million to expected employer contributions to pension funds.

134

Deutsche Post DHL Group — 2018 Annual Report

The disaggregation of the present value of defined benefit obli-
gations, fair value of plan assets and net pension provisions, as well as
the determination of the balance sheet items, are as follows:

€ m

2018
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

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

In the Other area, the Netherlands, Switzerland and the USA account
for a share in the corresponding present value of the defined benefit
obligations of 43 %, 21 % and 12 %, respectively (previous year: 44 %,
20 % and 13 %).

Additionally, rights to reimbursement from former Group com-
panies existed in the Group in Germany in the amount of around
€19 million (previous year: €19 million), which are reported separately.
Corresponding benefit payments are being made directly by the former
Group companies.

39.3 Additional information on the present value of defined

benefit obligations

The significant financial assumptions are as follows:

31 December 2018
Discount rate (defined benefit obligations)

Expected annual rate of future salary increase

Expected annual rate of future pension increase

31 December 2017
Discount rate (defined benefit obligations)

Expected annual rate of future salary increase

Expected annual rate of future pension increase

Germany

Other

Total

9,371

– 5,512

3,859

9,554

– 5,748

3,806

4,747

– 4,914

–167

167

5,240

– 5,112

128

174

2,578

–2,182

396

16,696

–12,608

4,088

489

260

4,348

2,587

–2,224

363

17,381

–13,084

4,297

107

470

153

4,450

Germany

Other

Total

2.30

2.50

2.00

2.25

2.50

2.00

2.70

3.25

2.85

2.50

3.25

2.85

2.35

2.30

1.27

2.23

2.05

1.26

2.42

2.47

2.17

2.32

2.43

2.18

Consolidated Financial Statements — NOTES — Balance sheet disclosures

135

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 composition as well
as duration into account in each case. For other countries, the discount
rate for defined benefit obligations was determined 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. As at 31 December 2018, discount rates were rounded to full
0.10 percentage points instead of the previous 0.25 percentage points.
Absent of this change, the discount rate for defined benefit obligations
as at 31 December 2018 would have been somewhat lower overall at
2.40 %.

For the annual pension increase in Germany, fixed rates in particu-
lar 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,
these were based on the HEUBECK RICHTTAFELN 2018 G mortality
tables as at 31 December 2018. Application of the Richttafeln 2018 G
tables resulted in actuarial losses of €105 million. Life expectancy for
the retirement plans in the UK as at 31 December 2018 was mainly
based on the S2PMA / S2PFA tables of the Continuous Mortality Inves-
tigation (CMI) of the Institute and Faculty of Actuaries adjusted to re-
flect plan-specific mortality according to the new funding valuation.
Current projections of future mortality improvements were taken into
account by using the CMI core projection model. Country-specific cur-
rent 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 2018
Discount rate (defined benefit obligations)

Expected annual rate of future salary increase

Expected annual rate of future pension increase

31 December 2017
Discount rate (defined benefit obligations)

Expected annual rate of future salary increase

Expected annual rate of future pension increase

Change in
assumption
Percentage
points

Change in present value
of defined benefit obligations
%

Germany

Other

Total

1.00
–1.00

0.50
– 0.50

1.00
–1.00

0.50
– 0.50

–12.37
15.70

0.18
– 0.17

0.43
– 0.39

–12.52
15.81

0.18
– 0.17

0.42
– 0.38

–14.20
18.29

0.08
– 0.08

5.44
– 5.36

–14.92
19.39

0.08
– 0.08

5.63
– 5.53

–14.01
18.25

0.95
– 0.88

6.23
– 4.52

–14.51
19.02

0.95
– 0.90

6.39
– 4.71

–13.14
16.82

0.27
– 0.25

2.74
–2.43

–13.53
17.36

0.26
– 0.25

2.87
–2.57

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.

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.

A one-year increase in life expectancy for a 65-year-old benefi-
ciary would increase the present value of the defined benefit obligations
by 4.59 % in Germany (previous year: 4.55 %) and by 3.60 % in the UK
(previous year: 4.25 %). The corresponding increase for other countries
would be 2.80 % (previous year: 2.93 %) and the total increase 4.04 %
(previous year: 4.22 %).

When determining the sensitivity disclosures, the present values
were calculated using the same methodology used to calculate the
present values at the reporting date. The presentation does not take

The weighted average duration of the Group’s defined benefit
obligations at 31 December 2018 was 14.2 years in Germany (previous
year: 14.3 years) and 16.4 years in the UK (previous year: 18.0 years).
In the other countries it was 17.0 years (previous year: 17.6 years), and
in total it was 15.3 years (previous year: 15.9 years).

A total of 30.6 % (previous year: 30.0 %) of the present value of the
defined benefit obligations was attributable to active beneficiaries,
18.4 % (previous year: 17.2 %) to terminated beneficiaries and 51.0 %
(previous year: 52.8 %) to retirees.

136

Deutsche Post DHL Group — 2018 Annual Report

39.4 Additional information on the fair value of plan assets
The fair value of the plan assets can be disaggregated as follows:

€ m

31 December 2018
Equities

Fixed income securities

Real estate

Alternatives 1

Insurances

Cash

Other

Fair value of plan assets

31 December 2017
Equities

Fixed income securities

Real estate

Alternatives 1

Insurances

Cash

Other

Fair value of plan assets

1 Primarily includes absolute return products.

Germany

Other

Total

550

1,717

1,511

372

546

806

415

3,825

255

379

668

907

298

127

106

1,633

6,449

2,064

781

673

892

116

5,512

4,914

2,182

12,608

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

Quoted market prices in an active market exist for around 73 % (previ-
ous year: 79 %) of the total fair values of plan assets. The remaining
assets for which no such quoted market prices exist are mainly attrib-
utable as follows: 14 % (previous year: 14 %) to real estate, 5 % (previous
year: 5 %) to insurances, 6% (previous year: 1%) to fixed income secur-
ities and 2% (previous year: 1%) to alternatives. The majority of the
investments on the active markets are globally diversified, with certain
country-specific focus areas.

The real estate included in plan assets in Germany with a fair
value of €1,424 million (previous year: €1,590 million) is occupied by
Deutsche Post DHL Group.

Hedging measures were taken due to developments on the cap-
ital markets. In the fourth quarter, they resulted in a decrease in the
equity holding, whilst the proportion of the cash holding increased.
Asset-liability studies are performed at regular intervals in Germany,
the UK and, amongst other places, the Netherlands, Switzerland and
the USA to examine the match between assets and liabilities; the
strategic allocation of plan assets is adjusted in line with this.

39.5 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 depending 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 final salary schemes or schemes
involv ing increases during the pension payment phase – can be linked
directly or indirectly to inflation. The risk of increasing 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
component-based retirement benefit system and, in the case of the UK,
by largely closing the defined benefit arrangements. In addition, fixed
rates of increase have been set or increases partially capped and / or
lump-sum payments provided for. There is also a positive correlation
with interest rates.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

137

INVESTMENT RISK
The investment is in principle subject to a large number of risks; in par-
ticular, 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.

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 mitigated 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, include an allowance
for expected future increases in life expectancy.

40 Other provisions
Other provisions break down into the following main types of provision:

€ m

Other employee benefits

Technical reserves (insurance)

Aircraft maintenance

Tax provisions

Restructuring provisions

Postage stamps 1

Miscellaneous provisions

Other provisions

Non-current

Current

2017

2018

2017

2018

2017

521

411

155

–

280

1,421

789

415

160

–

266

1,655

141

231

163

173

339

1,131

205

237

130

–

395

1,073

662

642

190

163

103

173

619

2,552

1 Due to the initial application of IFRS 15, the provision for postage stamps was reclassified to other liabilities as at 1 January 2018.

40.1 Changes in other provisions

€ m

Other
employee
benefits

Restruc-
turing
provisions

Technical
reserves
(insurance)

Aircraft
maintenance

Postage
stamps 1

Tax
provisions

Miscella n-
eous
provisions

Balance at 1 January 2018

Adjustments as a result of new IFRSs 2

Balance at 1 January 2018, adjusted

Changes in consolidated group

Utilisation

Currency translation differences

Reversal

Unwinding of discount / changes in discount rate

Reclassification

Addition

Balance at 31 December 2018

662

–

662

–362

–22

–2

699

994

103

–34

–33

–3

642

–

642

–33

–34

652

190

212

–22

–36

218

173

–173

–

163

–

163

– 55

–1

–34

130

619

–3

616

– 5

–196

– 5

–71

318

661

1 Due to the initial application of IFRS 15, the provision for postage stamps was reclassified to other liabilities as at 1 January 2018.
2

Note 4.

Total

2018

994

652

218

130

–

661

2,728

Total

2,552

–188

2,364

– 5

–701

–200

1,248

2,728

The provision for other employee benefits primarily covers workforce
reduction expenses (severance payments, transitional benefits, partial
retirement, etc.), stock appreciation rights (SARs) and jubilee payments.
It increased largely as a result of the addition made in respect of the
early retirement programme,

note 3.

The restructuring provisions comprise mainly costs from the clos-
ure of terminals and outstanding obligations to employees regarding
post-employment benefits.

Technical reserves (insurance) consist mainly of outstanding loss

reserves and IBNR reserves; further details can be found in

note 7.

138

Deutsche Post DHL Group — 2018 Annual Report

The provision for aircraft maintenance relates to obligations for

major aircraft and engine maintenance by third-party companies.

The provision for postage stamps was reported in other provi-
sions until 31 December 2017. Due to the application of IFRS 15, the
provision for postage stamps was reclassified to other liabilities as at
1 January 2018.

Of the tax provisions, €53 million (previous year: €57 million)
relates to VAT, €31 million (previous year: €62 million) to customs
and duties, and €46 million (previous year: €44 million) to other tax
provisions.

40.2 Miscellaneous provisions
Miscellaneous provisions, which include a large number of individual
items, break down as follows:

€ m

Litigation costs, of which non-current: 54
(previous year: 71)

Risks from business activities, of which
non-current: 6 (previous year: 10)

Miscellaneous other provisions, of which
non-current: 206 (previous year: 199)

Miscellaneous provisions

2017

2018

117

460

619

104

517

661

40.3 Maturity structure
The maturity structure of the provisions recognised in financial year
2018 is as follows:

€ m

2018
Other employee benefits

Technical reserves (insurance)

Aircraft maintenance

Tax provisions

Restructuring provisions

Miscellaneous provisions

Total

41 Financial liabilities

€ m

Bonds

Amounts due to banks

Lease liabilities

Liabilities at fair value through profit or loss

Other financial liabilities

Financial liabilities

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

205

237

130

395

1,073

205

191

117

577

119

117

299

174

145

288

460

Non-current

Current

2017

4,835

159

109

2018

5,463

7,756

565

5,151

13,869

2017

515

117

210

899

2018

180

2,103

264

2,593

2017

5,350

156

181

319

6,050

16,462

Total

994

652

218

130

661

2,728

Total

2018

5,472

264

9,859

829

The amounts due to banks mainly comprise current overdraft facilities
due to various banks.

The amounts reported under financial liabilities at fair value
through profit or loss mainly relate to the negative fair values of de-
rivative financial instruments.

41.1 Bonds
The table below contains further details on the company’s most sig-
nificant bonds. The bond issued by Deutsche Post Finance B. V. is fully
guaranteed by Deutsche Post AG.

Consolidated Financial Statements — NOTES — Balance sheet disclosures

139

Significant bonds

Bond 2012/2022

Bond 2012/2020

Bond 2012/2024

Bond 2013/2018

Bond 2013/2023

Bond 2016/2021

Bond 2016/2026

Bond 2017/2027

Bond 2018/2028

Convertible bond 2012/2019 1

Convertible bond 2017/2025 2

Nominal
coupon
%

Issue
volume

€ m Issuer

2.950

500 Deutsche Post Finance

1.875

2.875

1.500

2.750

0.375

1.250

1.000

1.625

0.600

0.050

B. V.

300 Deutsche Post AG

700 Deutsche Post AG

500 Deutsche Post AG

750 Deutsche Post AG

500 Deutsche Post AG

750 Deutsche Post AG

1,000 Deutsche Post AG

2017

2018

Carrying
amount
€ m

Fair value
€ m

Carrying
amount
€ m

Fair value
€ m

498

299

698

503

497

746

497

494

–

108

946

561

317

806

507

566

757

517

494

–

112

940

498

299

698

–

497

747

497

495

741

–

953

546

311

784

–

553

755

506

483

757

–

938

1 Fair value of the debt component; the fair value of the convertible bond 2012/2019 amounted to €215 million in the previous year.
2 Fair value of the debt component; the fair value of the convertible bond 2017/2025 is €956 million (previous year: €1,057 million).

The bond 2013/2018 was repaid in October. A traditional bond (2018/
2028) was placed in December 2018.

Convertible bonds

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 allowing
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 com-
ponent. In subsequent years, interest will be added to the carrying
amount of the bonds, up to the issue amount, using the effective inter-
est 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

in 2018

Conversions to date
(number of new shares) 5

in 2015

in 2016

in 2017

in 2018

2012/2019

6 Dec. 2012

€1 billion

–

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

€55.69

€20.69

€20.63

€20.60

€20.47

–

5 thousand

28 million

15 million

5 million

–

€55.61

–

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.

140

Deutsche Post DHL Group — 2018 Annual Report

On 7 March 2018, Deutsche Post AG exercised its right to call the out-
standing notional volume of the convertible bond 2012/2019 early. The
bonds amounting to €0.7 million still outstanding after the relevant
deadline were redeemed on 27 March 2018.

41.2 Lease liabilities
Due to the initial application of IFRS 16 as at 1 January 2018, additional
liabilities from leases were recognised. Only finance lease liabilities in
accordance with IAS 17 were recognised in the previous year.

€1,722 million in financial liabilities under leases was repaid and
€376 million in interest on leases was paid in financial year 2018,
note 43. Future cash outflows amounted to €12 billion as at the re-

porting date,

note 44.1.

Possible future cash outflows amounting to €1.3 billion were not
included in the lease liability because it is not sufficiently likely that the
leases will be extended (or not terminated).

Leases that the Group has entered into as a lessee but that have
not yet begun will possibly result in future payment outflows totalling
€0.4 billion.

Lease assets with a carrying amount of €9,503 million (previous
year: €169 million and reported as finance lease assets) are recognised
in property, plant and equipment.

41.3 Other financial liabilities
The largest item, in the amount of €499 million, relates to the promis-
sory note loans issued by Deutsche Post AG in September 2018, divided
into six tranches for a total nominal amount of €500 million. The fair
value of all of the tranches amounted to €501 million as at 31 Decem-
ber 2018.

42 Other liabilities

€ m

Tax liabilities

Incentive bonuses

Wages, salaries, severance payments

Compensated absences

Payables to employees and members of executive
bodies

Contract liabilities, of which non-current: 4

Social security liabilities

Debtors with credit balances

Postage stamps (contract liabilities)

Deferred income, of which non-current: 61
(previous year: 100)

Overtime claims

Liabilities from the sale of residential building
loans, of which non-current: 67 (previous year: 86)

COD liabilities

Insurance liabilities

Liabilities from cheques issued

Other compensated absences

Accrued rentals

Liabilities from loss compensation

Accrued insurance premiums for damages
and similar liabilities

Miscellaneous other liabilities, of which
non- current: 73 (previous year: 86)

Other liabilities

of which current

non-current

2017

1,123

2018

1,196

688

389

352

199

–

172

124

–

356

115

105

616

384

347

229

227

171

144

137

129

823

4,674

4,402

272

689

4,637

4,432

205

As a result of the initial application of IFRS 15, the postage stamp
obligation formerly reported under provisions was reclassified to other
liabilities, as this item is a contract liability for a service paid for but not
yet provided. An amount of €162 million was reclassified from current
deferred income to contract liabilities.

Of the tax liabilities, €629 million (previous year: €590 million)
relates to VAT, €399 million (previous year: €371 million) to customs
and duties, and €168 million (previous year: €162 million) to other tax
liabilities.

The liabilities from the sale of residential building loans relate to
obligations of Deutsche Post AG to pay interest subsidies to borrowers
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 individ-

ual items.

Consolidated Financial Statements — NOTES — Balance sheet disclosures — Cash flow disclosures

141

42.1 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

2017

4,402

122

2018

4,432

4,674

4,637

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 because
most of these instruments bear floating rates of interest at market rates.

Cash flow disclosures

43 Cash flow disclosures
The following table shows the reconciliation of changes in liabilities aris-
ing from financing activities in accordance with the IFRS requirements:

Liabilities arising from financing activities

€ m

Balance at 31 December 2016/1 January 2017

Cash changes

Non-cash changes 1

Leases

Currency translation

Fair value adjustment

Other changes

Balance at 31 December 2017

Adjustment as a result of new IFRSs

Adjusted at 1 January 2018

Cash changes

Non-cash changes 1

Leases

Currency translation

Fair value adjustment

Other changes

Balance at 31 December 2018

Amounts
due to banks

Lease
liabilities

Other
financial
liabilities 2

158

–23

–27

–1

156

–2

209

–26

–2

–7

181

9,235

9,416

–1,722

2,078

–2

418

–37

– 8

–200

165

432

–1

Total

5,775

654

–38

–35

– 511

5,852

9,235

15,087

– 971

2,078

– 56

264

9,859

630

16,225

Bonds

4,990

668

– 5

–303

5,350

228

–106

5,472

1 Includes reclassifications of cash to other cash flow items
2 Differences from financial liabilities,

note 41, are due to cash-related factors presented in other cash flow items, e.g., changes in cash and cash equivalents

resulting from earn-outs or derivatives.

142

Deutsche Post DHL Group — 2018 Annual Report

43.2 Net cash used in investing activities
Net cash used in investing activities increased from €2,091 million to
€2,777 million. Whereas proceeds from the disposal of subsidiaries
grew in the previous year due to the sale of Williams Lea Tag Group in
particular, cash paid to acquire property, plant and equipment and
intangible assets rose sharply, by €446 million to €2,649 million, in the
reporting period.

Details on the Group’s acquisitions can be found in

note 2.

43.3 Net cash used in financing activities
Net cash used in financing activities increased substantially year-on-
year, rising by €1,952 million to €3,039 million.

The placement of a bond and a convertible bond resulted in issu-
ing proceeds of €1.5 billion in the previous year, whilst in the reporting
period the issuance of promissory note loans and a bond produced
issuing proceeds in the amount of €1.2 billion. Cash outflows from the
repayment of financial liabilities increased by €1.5 billion, influenced
principally by the initial recognition of lease liabilities.

Further details on the cash flow statement and free cash flow can

be found in

the Group Management Report, page 47 f.

€–110 million of the other non-cash changes relate to the non-cash
exercise of the convertible bond 2012/2019.

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 €38 million.

In financial year 2018, as in the prior year, 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 mainly to a property
that was contributed to Deutsche Post Pensions-Treuhand GmbH & Co.
KG (previous year: 18 properties). Although income was recognised as
a result of the contribution, no cash or cash equivalents were received.

43.1 Net cash from operating activities
Net cash from operating activities improved, due mainly to the initial
application of IFRS 16. The former operating lease payments are now
shown in net cash used in financing activities, provided they do not
relate to payments under short-term or low-value asset leases. Whilst
the previous year was influenced by the funding of pension obligations
in the UK amounting to €495 million, the 2018 financial year saw a
year-on-year increase of €162 million in the cash outflow from changes
in working capital.

Non-cash income and expenses are as follows:

Noncash 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 equity-settled
share-based payments

Other

Noncash income (–) and expenses (+)

2017

102

–131

– 54

– 6

– 40

2018

–140

–2

Consolidated Financial Statements — NOTES — Balance sheet disclosures — Other disclosures

143

Other disclosures

44 Risks and financial instruments of the Group

44.1 Risk management
As a result of its operating activities, the Group is exposed to financial
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 financial
instruments. Derivatives are used exclusively to mitigate non-deriva-
tive 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 actions,
responsibilities and necessary controls regarding the use of derivatives.
Financial transactions are recorded, assessed and processed 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 assigned 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

Maturity structure of financial liabilities

€ m

and the hedging instruments deployed to mitigate them. Financial
instruments are accounted for and measured in accordance with IFRS 9.
The Group exercised the option to continue to apply hedge accounting
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 39.5.

Liquidity management
The ultimate objective of liquidity management is to secure the solvency
of Deutsche Post DHL Group and all Group companies. Consequently,
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 committed
credit lines, are the key control parameter. The target is to have at least
€2 billion available in a central credit line.

As at 31 December 2018, the Group had central liquidity reserves
of €4.3 billion (previous year: €4.2 billion), consisting of central finan-
cial investments amounting to €2.3 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:

At 31 December 2018
Non-current financial liabilities 1

Non-current lease liabilities

Other non-current financial liabilities

Noncurrent financial liabilities

Current financial liabilities

Current lease liabilities

Trade payables

Other current financial liabilities

Current financial liabilities

At 31 December 2017
Non-current financial liabilities 1

Other non-current financial liabilities

Noncurrent financial liabilities

Current financial liabilities

Trade payables

Other current financial liabilities

Current financial liabilities

1 All of the convertible bond 2017/2025 was shown in the “More than 5 years” range.

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

616

1,821

2,452

846

1,449

2,307

730

1,222

1,962

761

958

1,727

3,583

4,466

8,070

287

288

403

405

839

840

591

592

3,430

3,511

468

2,137

7,422

10,027

877

7,343

337

8,557

144

Deutsche Post DHL Group — 2018 Annual Report

The maturity structure of the derivative financial instruments based on
cash flows is as follows:

Maturity structure of derivative financial instruments

€ m

At 31 December 2018
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 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

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

–1,853

1,900

–1,231

1,211

–3

–1

–20

–1

–2,421

2,489

–312

325

– 922

898

– 87

–17

– 5

–11

–10

–7

Derivative financial instruments entail both rights and obligations. The
contractual arrangement defines whether these rights and obligations
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 obli-
gations 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 transactions:

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 differences directly
impact on profit or loss. In order to mitigate this impact as far as pos-
sible, all significant accounting-related currency risks within the Group
are centralised at Deutsche Post AG through the in-house bank func-
tion. 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 portfolio 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
€2,293 million at the reporting date (previous year: €1,630 million); the
fair value was €23 million (previous year: €10 million). For simplification
purposes, fair value hedge accounting was not applied to the derivatives
used, which are reported as trading derivatives instead.

Currency risks arise from planned foreign currency transactions
if the future foreign currency transactions are settled at exchange rates
that differ from the rates originally planned or calculated. These cur-
rency 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 con-
tracts will only be hedged in selected cases in the future. The relevant
hedging transactions are recognised using cash flow hedge accounting,

note 44.3.

Consolidated Financial Statements — NOTES — Other disclosures

145

The following table shows the net open hedging positions at the
reporting date in the currency pairs with the highest net positions and
their weighted hedge rate.

Notional volume of hedging instruments

€ m

Total notional volume

Remaining term

31 Dec. 2017

31 Dec. 2018

Up to 1 year

1 to 5 years

Average
hedge rate

More than
5 years

31 Dec. 2018

Hedging of currency risk
Currency forwards purchase EUR / CNY

Currency forwards sale EUR / CZK

Currency forwards purchase USD / TWD

–322

340

–177

105

340

–131

105

– 46

8.09

26.39

29.83

Currency risks also result from translating assets and liabilities of for-
eign operations into the Group’s currency (translation risk). No hedges
were in place for currency translation risks at the end of 2018.

In total, currency forwards and currency swaps in a notional
amount of €3,363 million (previous year: €4,321 million) were out-
standing at the reporting date. The corresponding fair value was
€23 million (previous year: €56 million). As at the reporting date, there
were no currency options or cross-currency swaps.

Of the unrealised gains or losses from currency derivatives recog-
nised in equity as at 31 December 2018, €2 million (previous year:
€36 million) is expected to be recognised in income in the course of 2019.
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 hypothetical 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 individual
cases, Group companies are not permitted to participate in in-house
banking for legal reasons, their currency risks from primary 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 currency value at risk
of the foreign currency items concerned was €5 million at the reporting
date (previous year: €5 million). In addition, 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
€11 million as at 31 December 2018 (previous year: €7 million). The
total foreign currency value at risk was €12 million at the reporting date
(previous year: €9 million). The total amount is lower than the sum of
the individual amounts given above, owing to interdependencies.

INTEREST RATE RISK AND INTEREST RATE MANAGEMENT
No interest rate hedging instruments were recognised as at the report-
ing date. The proportion of financial liabilities with short-term interest
lock-ins,
note 41, amounts to 17 % (previous year: 14 %) of the total
financial liabilities as at the reporting date. The effect of potential inter-
est rate changes on the Group’s financial position remains 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 amortised cost are
not subject to interest rate risk.

If the market interest rate level as at 31 December 2018 had been
100 basis points higher, net finance costs would have increased by
€2 million (previous year: €0 million). All interest rate derivatives had
expired or been unwound at the reporting date. No interest rate risk
with an impact on equity was determined.

146

Deutsche Post DHL Group — 2018 Annual Report

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 delayed by one
to two months, so that earnings may be affected temporarily 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 principal
amount of these commodity swaps totalled €14 million (previous year:
€8 million); the fair value was €–3 million (previous year: €1 million).

IFRS 7 requires the disclosure of a sensitivity analysis, presenting
the effects of hypothetical commodity price changes on profit or loss
and equity.

Changes in commodity prices affect the fair values of the deriva-
tives used to hedge highly probable forecast commodity purchases
(cash flow hedges) and the hedging reserve in equity. No cash flow
hedges for commodity prices were outstanding at the reporting date.
For this reason, commodity price movements would have had no effect
on the hedging reserve in equity, as in the previous year.

In the interests of simplicity, the commodity price hedges are not
recognised as cash flow hedges. For these derivatives, commodity
price movements affect the fair values of the derivatives and,
consequently, the income statement. As in the previous year, if the un-
derlying commodity prices had been 10 % higher at the reporting date,
this would have increased the fair values in question and, consequently,
operating profit by €1 million. A corresponding decline in the commod-
ity prices would have reduced the fair values of the derivatives and
operating profit by €1 million.

CREDIT RISK
Credit risk is incurred by the Group from operating activities and from
financial transactions. In an effort to minimise credit risk from operat-
ing activities and financial transactions, each counterparty is assigned
individual limits, the utilisation of which is regularly monitored. The
Group only enters into transactions with prime-rated counterparties.
A test is performed at the reporting dates to establish whether an im-
pairment 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 2018. The Group’s heteroge-
neous customer structure means that there is no risk concentration.
The aggregate carrying amount of financial assets represents the max-
imum default risk.

As a rule, the expected credit loss associated with financial assets
must be determined in accordance with the expected credit loss
impairment model in IFRS 9. Expected credit loss (ECL) within the
meaning of IFRS 9 is an estimate of credit loss over the expected life-
time of a financial instrument, weighted for the probability of default.
A credit loss is the difference between the contractual cash flows to
which the Group is entitled and the cash flows expected by the Group.
Since the expected credit loss takes into account the amount and
timing of payments, a credit loss may also occur if the Group expects
payment to be made in full, but later than the contractually agreed date.
The Group distinguishes between two types of financial assets
both of which are subject to the new expected credit loss model: trade
receivables and contract assets, on the one hand, and debt instruments
measured at amortised cost, on the other. Cash and cash equivalents
are also subject to the IFRS 9 impairment rules. However, the impair-
ment loss identified is not material.

ECL is generally measured at the level of individual items; in
exceptional cases, such as groups of receivables with the same credit
risk characteristics, it is measured collectively at portfolio level. The
Standard stipulates the three-stage “general approach” to determining
credit loss for this process. This does not include trade receivables and
contract assets, for which a simplified approach is applied.

In accordance with the three-stage model, debt instruments
measured at amortised cost are initially recognised in Stage 1. The
expected loss is equal to the loss that may occur due to possible default
events in the twelve months following the reporting date. Financial
assets that have experienced a significant increase in credit risk of the
counterparty since initial recognition are transferred from Stage 1 to
Stage 2. A “significant increase” includes situations in which debtors
are no longer able to meet their payment obligations at short notice or
when it appears that the debtor has experienced an actual or expected
deterioration in business performance. The credit risk can then be
measured using the probability of default (PD) over the instrument’s
lifetime (lifetime PD). The impairment loss is equivalent to the loss that
may occur due to possible default events during the remaining term of
the financial asset. Assets must be transferred from Stage 1 to Stage 2
when the contractual payments are more than 30 days past due. If
there is objective evidence that a financial asset is impaired, it must be
transferred to Stage 3. In cases where payments are more than 90 days
past due, there is reason to believe that the debtor is experiencing sig-
nificant financial difficulties. This constitutes objective evidence of a
credit loss. The financial asset must therefore be transferred to Stage 3.

Consolidated Financial Statements — NOTES — Other disclosures

147

All debt instruments measured at amortised cost are considered
to be at low risk of default. The impairment loss recognised in the
period was therefore limited to the twelve-month expected credit loss.
Management considers listed bonds to meet the criteria for a low risk
of default when they have been assigned an investment-grade rating
by at least one major rating agency. Other instruments qualify for the
low-default-risk category if the risk of non-performance is low and the
debtor is at all times in a position to meet contractual payment obliga-
tions at short notice.

At the reporting date, trade receivables from customer relation-
ships amounting to €8,247 million (previous year: €8,218 million) were
due within one year. They are held primarily with the aim of collecting
the principal amount of the receivables. These items are therefore
assigned to the “held to collect contractual cash flows” business model
and measured at amortised cost.

Trade receivables changed as follows:

Changes in receivables

2017

2018

8,133

232

8,365

–168

–147

8,218

8,365

8,453

–147

– 42

–189

–17

–206

8,247

Gross receivables
Balance at 1 January

Changes

Balance at 31 December

Loss allowances
Balance at 1 January

Loss
allowance

Net carrying
amount

Adjustment as a result of IFRS 9

Adjusted balance at 1 January

Changes

Balance at 31 December

Carrying amount at 31 December

The impairment model is applicable to non-current and current
debt instruments as well as lease receivables. Debt instruments com-
prise mainly deposits, collateral provided and loans to third parties.

€ m

The gross amounts of financial assets subject to the three-stage

model are presented in the following table:

Stage 1 – twelvemonth ECL

€ m

Balance at 1 January 2018

Newly originated financial assets

Impairment loss

Disposal

Repayment

Reversal of loss allowance

Increase in loss allowance

Currency translation differences

Reclassifications

Changes in consolidated group

Balance at 31 December 2018

Gross
carrying
amount

987

667

–17

– 572

–

– 66

– 9

991

–27

–

–16

–

–26

960

667

–17

– 572

–

–16

– 66

– 9

965

In the financial year, no cash flows from debt instruments were mod-
ified and no changes were made to the model for determining risk
parameters. As a result, the input parameters were not remeasured.

All debt instruments and lease receivables were recognised in
Stage 1 at the reporting date; they were neither past due nor impaired.
As at the reporting date, no indications pointed to poor performance of
the debt instruments and lease receivables. There was no reclassifica-
tion between the stages in the financial year.

The Group applies the simplified approach provided for in IFRS 9 to
determine the credit risk from the Group’s operating activities applic-
able to trade receivables and contract assets. Trade receivables and
contract assets are generally short-term in nature and contain no sig-
nificant financing components. According to the simplified impairment
approach, a loss allowance in an amount equal to the lifetime expected
credit losses must be recognised for all instruments, regardless of their
credit quality.

The Group calculates the expected loss using impairment tables
for the individual divisions. The loss estimate, documented by way of
loss rates, encompasses all of the available information, including his-
torical data, current economic conditions and reliable forecasts of
future economic conditions (macroeconomic factors).

148

Deutsche Post DHL Group — 2018 Annual Report

The following table provides an overview of loss rates by age
band that were used in the Group for the financial year under review:

Loss rates by age band

1 to 60 days

61 to 120 days

121 to 180 days

181 to 360 days

More than 360 days

2018

0.1 – 0.4

0.4 – 5.0

3.0 – 20.0

20.0 – 60.0

80.0 – 100.0

The following table shows the loss allowances calculated based on the
loss rates as at 1 January 2018 or 31 December 2018:

Loss allowances

€ m

1 to 60 days

61 to 120 days

121 to 180 days

181 to 360 days

More than 360 days

Total

1 January 2018

31 December 2018

Gross carrying amount

Receivables 1

Contract assets

Loss allowance

Receivables 1

Contract assets

Loss allowance

7,273

725

111

180

8,365

110

189

7,208

824

111

103

207

8,453

118

206

1 Receivables relate exclusively to trade receivables.

Contract assets relate to goods and services not yet invoiced with
essentially the same risk profile as trade receivables.

Trade receivables and contract assets are derecognised when a
reasonable assessment indicates they are no longer recoverable. The
relevant indicators include a delay in payment of more than 360 days.
The average maturity of receivables is 50 days.

Impairment losses on trade receivables and contract assets are
presented in other operating expenses. Gains on the reversal of impair-
ment losses are recognised in other operating income.

In financial year 2018, 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 €655 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 re-
ceivables include credit risk and the risk of delayed payment (late
payment risk).

Credit risk represents primarily all the risks and rewards associ-
ated 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. The receivables are there-
fore derecognised in their entirety. In financial year 2018, the Group
recognised programme fees (interest, allowances for doubtful ac-
counts) of €2 million (previous year: €2 million) as an expense in the
context of its continuing exposure. The notional volume of receivables
factored as at 31 December 2018 amounted to €420 million.

Consolidated Financial Statements — NOTES — Other disclosures

149

44.2 Collateral

Collateral provided

€ m

Non-current financial assets, of which

for assets for the settlement of residential
building loans

for sureties paid

Current financial assets, of which

for US cross-border lease (QTE lease)
transactions

for sureties paid

Cash flow hedging reserve

€ m

Balance at 1 January

Gains and losses on effective hedges

Reclassification due to the recognition
of hedged items

Reclassification to the currency translation reserve

Balance at 31 December

2017

–14

2018

–15

–30

– 6

The carrying amounts of the cash flow hedges and the changes in fair
value relevant to the determination of ineffectiveness during the period
are as follows:

2017

169

2018

187

The collateral provided mainly relates to other financial assets.

Hedging currency risk

44.3 Derivative financial instruments

FAIR VALUE HEDGES
There were no fair value hedges as at 31 December 2018, as in the pre-
vious year. At the reporting date, the unwinding of interest rate swaps
resulted in carrying amount adjustments of €21 million (previous year:
€32 million) which are included in non-current financial liabilities. The
adjustments in the carrying amount will be amortised using the ef-
fective interest method over the remaining term of the liabilities (until
2022) and will reduce the interest expense in future.

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. At the reporting date, the fair values of currency forwards
and currency swaps amounted to €0 million (previous year: €46 mil-
lion). The hedged items will have an impact on cash flow by 2023.

As in the previous year, no cash flow hedges for interest and com-

modity risks were outstanding at the reporting date.

The gains and losses on open hedging instruments recognised in
equity at the reporting date amounted to €0 million. No ineffective por-
tions of hedges were recognised. In the financial year, realised gains of
€61 million and realised losses of €26 million from cash flow hedges
on currency risks were recognised in other comprehensive income, due
to the recognition of the hedged item in profit or loss. In addition,
€5 million in realised losses was recognised in materials expense.

€ m

31 December 2018

Currency forwards
Derivative assets 1

Derivative liabilities 2

Change in
fair value for
determi n-
ation of
ineffective-
ness

Carrying
amount

Notional
volume

–14

525

546

1 Assets at fair value through profit or loss.
2 Liabilities at fair value through profit or loss.

No ineffectiveness was identified, as the changes in value of the under-
lying transactions (€10 million) and the hedging transactions (€–10
million) offset each other:

Information on hedging transactions

€ m

Change in
value of the
period of the
hedging
transaction
for determi n -
ation of
ineffective-
ness

Level of the
hedging reserve

Active
hedges

Terminated
hedges

– 6

31 December 2018

Hedging of currency risk
(cash flow hedges)
Designated components

Non-designated components

NET INVESTMENT HEDGES
Currency risks resulting from the translation of foreign operations were
no longer hedged as at the end of 2018. At the reporting date, there
was still a positive amount of €25 million from terminated net invest-
ment hedges in the currency translation reserve.

150

Deutsche Post DHL Group — 2018 Annual Report

44.4 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 instru-
ments from the IAS 39 categories as at 31 December 2017 to the IFRS 9
categories in the opening balance at 1 January 2018, as well as in the
closing balance at 31 December 2018, and their respective fair values
as at the reporting date:

Reconciliation of carrying amounts in accordance with IFRS 9

€ m

ASSETS
At cost

Loans and receivables

Non-current financial assets

Trade receivables

Current financial assets

Other current assets

Less cash and cash equivalents

Available-for-sale financial assets 2

Non-current financial assets

Assets measured at cost

Non-current financial assets

Current financial assets

Other current assets

At fair value

Available-for-sale financial assets 2

Non-current financial assets

Current financial assets

Assets at fair value through profit or loss

Non-current financial assets

Debt instruments

Equity instruments

Fair value option

Derivatives designated as hedges

Current financial assets

Debt instruments

Trading

Derivatives designated as hedges

Assets at fair value through other comprehensive income

Not IFRS 7

Other current assets

Other non-current assets

TOTAL ASSETS

1 Relates to lease receivables or liabilities.
2 The fair value is assumed to be equal to the carrying amount.

31 December 2017

Reconciliation to IFRS 9

31 December 2018

Carrying amount

IAS 39
carrying amount

Other financial
instruments
outside IAS 39 1

IFRS 7 fair value

Reclassification

Carrying amount

carrying amount

IFRS 7 fair value

Adjustment /

impairment loss

1 January 2018

Carrying amount

12,317

12,303

504

8,218

370

3,135

791

545

500

246

170

156

2,045

1,814

231

15,153

12,272

12,258

466

8,218

370

3,135

791

545

500

246

170

156

518

504

n. a.

791

545

500

246

170

156

n. a.

13,063

– 44

13,255

107

3,135

3,017

– 40

– 950

– 504

–76

–370

–14

924

478

370

– 545

– 45

– 500

528

183

–156

500

– 44

– 42

–2

12,233

11,311

8,176

922

476

370

821

774

198

183

576

500

2,055

1,814

241

15,109

12,288

11,264

8,247

1,024

499

100

425

1,074

1,031

188

187

843

800

2,297

1,944

353

15,659

Other financial

instruments

outside IFRS 9 1

107

IFRS 9

12,181

11,264

8,247

917

404

425

1,074

1,031

188

187

843

800

n. a.

493

n. a.

1,074

1,031

188

187

843

800

n. a.

Consolidated Financial Statements — NOTES — Other disclosures

151

Reconciliation of carrying amounts in accordance with IFRS 9

Reconciliation to IFRS 9

31 December 2018

Carrying amount

carrying amount

IFRS 7 fair value

Reclassification

Adjustment /
impairment loss

1 January 2018
Carrying amount

Carrying amount

IFRS 9
carrying amount

Other financial
instruments
outside IFRS 9 1

107

IFRS 7 fair value

– 40

– 950

– 504

–76

–370

–14

924

478

370

– 545

– 45

– 500

528

183

–156

500

– 44

– 42

–2

– 44

12,233

11,311

8,176

12,288

11,264

8,247

12,181

11,264

8,247

3,135

3,017

922

476

370

821

774

198

183

576

500

2,055

1,814

241

15,109

1,024

499

100

425

1,074

1,031

188

187

843

800

2,297

1,944

353

15,659

107

917

404

425

1,074

1,031

188

187

843

800

13,255

107

n. a.

493

n. a.

1,074

1,031

188

187

843

800

n. a.

€ m

ASSETS

At cost

Loans and receivables

Non-current financial assets

Trade receivables

Current financial assets

Other current assets

Less cash and cash equivalents

Available-for-sale financial assets 2

Non-current financial assets

Assets measured at cost

Non-current financial assets

Current financial assets

Other current assets

At fair value

Available-for-sale financial assets 2

Non-current financial assets

Current financial assets

Assets at fair value through profit or loss

Non-current financial assets

Debt instruments

Equity instruments

Fair value option

Current financial assets

Debt instruments

Trading

Derivatives designated as hedges

Assets at fair value through other comprehensive income

Not IFRS 7

Other current assets

Other non-current assets

TOTAL ASSETS

1 Relates to lease receivables or liabilities.

2 The fair value is assumed to be equal to the carrying amount.

31 December 2017

IAS 39

Other financial

instruments

outside IAS 39 1

12,272

12,258

466

8,218

370

3,135

791

545

500

246

170

156

13,063

12,317

12,303

504

8,218

370

3,135

791

545

500

246

170

156

2,045

1,814

231

15,153

518

504

n. a.

791

545

500

246

170

156

n. a.

152

Deutsche Post DHL Group — 2018 Annual Report

Reconciliation of carrying amounts in accordance with IFRS 9

€ m

31 December 2017

Reconciliation to IFRS 9

31 December 2018

Carrying amount

IAS 39
carrying amount

Other financial
instruments
outside IAS 39 1

IFRS 7 fair value

Reclassification

Carrying amount

carrying amount

IFRS 7 fair value

Adjustment /

impairment loss

1 January 2018

Carrying amount

EQUITY AND LIABILITIES
At cost

Other financial liabilities

Non-current financial liabilities 2

Other non-current liabilities

Current financial liabilities

Trade payables

Other current liabilities

Liabilities at fair value

Earn-out obligation

Non-current financial liabilities 2

Current financial liabilities

Trading

Non-current financial liabilities

Current financial liabilities

Derivatives designated as hedges

Non-current financial liabilities 2

Current financial liabilities

Not IFRS 7

Other non-current liabilities

Other current liabilities

TOTAL EQUITY AND LIABILITIES

13,454

5,142

864

7,343

4,569

186

4,383

18,067

181

159

13,273

4,983

842

7,343

13,317

181

6,576

5,622

868

n. a.

–

1 Relates to lease receivables or liabilities.
2 The Deutsche Post AG and Deutsche Post Finance B. V. bonds included in non-current 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 there fore
not recognised fully at either fair value or amortised cost. The convertible bond issued by Deutsche Post AG in December 2017 had a fair value of
€956 million as at the reporting date. The fair value of the debt component at the reporting date was €938 million.

If there is an active market for a financial instrument (e.g. a stock
exchange), its 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 instruments using valuation
parameters that are derived from the market conditions as at the re-
porting date. Counterparty risk is analysed on the basis of the current
credit default swaps signed by the counterparties. The fair values of
other non-current receivables correspond to the present values of the
payments 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 also have short
remaining maturities; the recognised amounts approximately repre-
sent their fair values.

The available-for-sale financial assets measured at fair value up
to 31 December 2017 related to equity and debt instruments. They
were reclassified to the new IFRS 9 categories as at 1 January 2018:
• Money market funds of €500 million that are available on a daily

basis were assigned to the hold-to-collect-and-sell business model
and thus to the category for debt instruments at fair value through
profit or loss (FVTPL), as it is uncertain whether they meet the SPPI
criterion.

• Investments in equity instruments in the amount of €48 million

were assigned to the categories for equity instruments at fair value
through profit or loss (FVTPL) and equity instruments at fair value
through other comprehensive income (FVOCI). No material equity
instruments were sold during the financial year. Further details are
presented in

note 7.

Other financial

instruments

outside IFRS 9 1

9,859

7,756

2,103

IFRS 9

14,463

6,112

453

7,422

409

14,501

9,859

6,406

6,339

n. a.

–

24,322

13,868

2,556

7,422

409

4,161

138

4,023

28,521

EQUITY AND LIABILITIES

At cost

Other financial liabilities

Non-current financial liabilities 2

Other non-current liabilities

Current financial liabilities

Trade payables

Other current liabilities

Liabilities at fair value

Earn-out obligation

Non-current financial liabilities 2

Current financial liabilities

Trading

Non-current financial liabilities

Current financial liabilities

Derivatives designated as hedges

Non-current financial liabilities 2

Current financial liabilities

Not IFRS 7

Other non-current liabilities

Other current liabilities

TOTAL EQUITY AND LIABILITIES

Other financial

instruments

outside IAS 39 1

181

159

IAS 39

13,273

4,983

842

7,343

13,454

5,142

864

7,343

4,569

186

4,383

18,067

6,576

5,622

868

n. a.

–

1 Relates to lease receivables or liabilities.

2 The Deutsche Post AG and Deutsche Post Finance B. V. bonds included in non-current 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 there fore

not recognised fully at either fair value or amortised cost. The convertible bond issued by Deutsche Post AG in December 2017 had a fair value of

€956 million as at the reporting date. The fair value of the debt component at the reporting date was €938 million.

13,317

181

Consolidated Financial Statements — NOTES — Other disclosures

153

Reconciliation of carrying amounts in accordance with IFRS 9

€ m

31 December 2017

Reconciliation to IFRS 9

31 December 2018

Carrying amount

carrying amount

IFRS 7 fair value

Reclassification

Adjustment /
impairment loss

1 January 2018
Carrying amount

Carrying amount

IFRS 9
carrying amount

Other financial
instruments
outside IFRS 9 1

IFRS 7 fair value

24,322

13,868

2,556

7,422

409

4,161

138

4,023

28,521

9,859

7,756

2,103

14,463

6,112

453

7,422

409

14,501

9,859

6,406

6,339

n. a.

–

Up to 31 December 2017, financial assets measured at fair value
through profit or loss included securities to which the fair value option
was applied, in order to avoid accounting inconsistencies. An active
market exists for the assets, and they were recognised at fair value. As
at 1 January 2018, these instruments were assigned to the IFRS 9
category for debt instruments measured at fair value through profit or
loss (FVTPL).

The table below 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 payables
and other liabilities with predominantly short maturities. Their carrying
amounts as at the reporting date are approximately equivalent to their
fair values.

154

Deutsche Post DHL Group — 2018 Annual Report

Financial assets and liabilities

€ m

Class

31 December 2018
Non-current financial assets

Current financial assets

Financial assets

Non-current financial liabilities

Current financial liabilities

Financial liabilities

31 December 2017
Non-current financial assets

Current financial assets

Financial assets

Non-current financial liabilities

Current financial liabilities

Financial liabilities

Level 1 1

Level 2 2

Level 3 3

Total

231

800

1,031

5,687

5,696

201

500

701

5,315

519

5,834

398

441

652

673

480

556

151

182

629

843

1,472

6,339

6,384

681

576

1,257

5,472

554

6,026

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 upon observable market data.

Level 1 comprises mainly equity and debt instruments measured at fair
value and debt instruments measured at amortised cost whose fair
values can be determined based on quoted market prices.

options are used, they are measured using the Black-Scholes option
pricing model. All significant inputs used to measure derivatives are
observable on 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 commodity prices) are
imported from standard market information platforms into the treas-
ury management system. The price quotations reflect actual transac-
tions involving similar instruments on an active market. If currency

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, taking plausible
assumptions into account. 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 2018. The following table shows the effect on net gains
and losses of the financial instruments categorised within level 3 as at
the reporting date:

Consolidated Financial Statements — NOTES — Other disclosures

155

Unobservable inputs (Level 3)

€ m

2017

2018

Assets

Liabilities

Assets

Liabilities

Equity
instruments

Debt
instruments

Derivatives, of which
equity derivatives

Equity
instruments

Debt
instruments

Derivatives, of which
equity derivatives

At 1 January

Gains and losses
(recognised in profit or loss)

Gains and losses (recognised in OCI)

Additions

Disposals

Currency translation effects

At 31 December

– 5

–7

The net gains and losses on financial instruments classified in accord-
ance with the individual IAS 39 measurement categories were as
follows in 2017:

From 2018, the net gains and losses on financial instruments are
presented per IFRS 9 category:

Net gains and losses by measurement category

€ m

Loans and receivables

Available-for-sale 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

2018

2017

–147

Net gains and losses on financial assets
Debt instruments at amortised cost

Net gains (+) / losses (–) recognised in profit or loss

–138

Debt instruments at fair value through
profit or loss (FVTPL)

Net gains (+) / losses (–) recognised in profit or loss

–11

Net gains / losses on financial liabilities
Debt instruments at fair value through profit or loss (FVTPL)

Net gains (+) / losses (–) recognised in profit or loss

Debt instruments at amortised cost

Net gains (+) / losses (–) recognised in profit or loss

–7

–1

– 5

156

Deutsche Post DHL Group — 2018 Annual Report

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 disclosures.

The following tables show the impact of netting agreements
based on master netting arrangements or similar agreements on finan-
cial assets and financial liabilities as at the reporting date:

Offsetting – assets

€ m

At 31 December 2018
Derivative financial assets 1

Trade receivables

Funds

At 31 December 2017
Derivative financial assets 1

Trade receivables

Funds

1 Excluding derivatives from M & A transactions.

Offsetting – liabilities

€ m

At 31 December 2018
Derivative financial liabilities 1

Trade payables

Funds

At 31 December 2017
Derivative financial liabilities 1

Trade payables

Funds

1 Excluding derivatives from M & A transactions.

Assets and liabilities not set off in
the balance sheet

Gross amount of
assets

Gross amount of
liabilities set off

Recognised net
amount of
assets set off

Liabilities that
do not meet
offsetting
criteria

Collateral
received

8,382

579

8,301

871

135

579

871

8,247

8,218

Assets and liabilities not set off in
the balance sheet

Gross amount of
liabilities

Gross amount of
assets set off

Recognised net
amount of
liabilities set off

Assets that
do not meet
offsetting
criteria

Collateral
received

7,557

588

7,426

877

135

579

871

7,422

7,343

Total

8,247

8,218

Total

7,422

7,343

Financial assets and liabilities are set off on the basis of netting agree-
ments (master netting arrangements) only if an enforceable right of
set-off exists and settlement on a net basis is intended as at the report-
ing 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 mas-
ter netting arrangement creates a conditional right of set-off that can
only be enforced by taking legal action.

Consolidated Financial Statements — NOTES — Other disclosures

157

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 standardised
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 transactions at the
reporting date. The conditional right of set-off is presented in the table.
Settlement processes arising from services related to postal
deliveries are subject to the Universal Postal Convention and the Inter-
connect Remuneration Agreement – Europe (IRA-E). These agreements,
particularly the settlement conditions, are binding on all public postal
operators for the specified contractual arrangements. 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 Convention 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.

45 Contingent liabilities and other financial obligations
In addition to provisions and liabilities, the Group has contingent liabil-
ities and other financial obligations. Operating lease obligations have
been reported in accordance with the requirements of IFRS 16 since
1 January 2018,
note 4. The contingent liabilities are broken down as
follows:

Contingent liabilities

€ m

Guarantee obligations

Warranties

Liabilities from litigation risks

Other contingent liabilities

Total

2017

2018

644

927

102

304

561

988

During the year, a tax-related obligation was reclassified from other
contingent liabilities to liabilities from litigation risks.

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.

Other financial obligations such as the purchase obligation for
investments in non-current assets amounted to €1,366 million (previ-
ous year: €254 million).

46 Litigation
Many of the postal services rendered by Deutsche Post AG and its
subsidiaries are subject to sector-specific regulation by the Bundesnetz-
agentur (German federal network agency) pursuant to the Postgesetz
(PostG – German Postal Act). As the regulatory authority, the Bundes-
netzagentur 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 admin-
istrative court appeals by an association against the price-cap param-
eter decision handed down, and the price approval granted, by the
Bundesnetzagentur under the price cap procedure for 2016 to 2018.
The complaints were dismissed by the Cologne Administrative Court,
the court of first instance, by way of rulings handed down on 4 Decem-
ber 2018. The claimant has applied to the Federal Administrative Court
for a “leapfrog appeal”, asserting that both of the decisions by the
Bundes netzagentur 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 con-
cluded that First Mail Düsseldorf GmbH, a subsidiary of Deutsche Post AG,
and Deutsche Post AG had contravened the discounting and discrimina-
tion prohibitions under the Postgesetz. The companies were instructed
to remedy the breaches that had been identified. Both companies ap-
pealed against the ruling. Furthermore, First Mail Düsseldorf GmbH
filed an application to suspend the execution of the ruling until a deci-
sion was reached in the principal proceedings. The Cologne Adminis-
trative Court and the Münster Higher Administrative Court both
dismissed this application. First Mail Düsseldorf GmbH discontinued
its mail delivery operations at the end of 2011 and retracted its appeal
on 19 December 2011. Deutsche Post AG continues to pursue its appeal
against the Bundesnetzagentur ruling; oral proceedings are scheduled
for 26 March 2019 at the Cologne Administrative Court.

In its ruling of 30 April 2012, the Bundesnetzagentur determined
that Deutsche Post AG had contravened the discrimination prohibition
under the Postgesetz by charging different fees for the transport of
identical
invoices containing different amounts.
Deutsche Post AG was requested to discontinue the discrimination de-
termined immediately, but no later than 31 December 2012. The ruling
was implemented on 1 January 2013. Deutsche Post AG does not share
the legal opinion of the Bundesnetzagentur and appealed the ruling.

invoices and

In its ruling of 28 June 2016, the Bundesnetzagentur determined
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). According to the
Bundesnetzagentur, the prices did not cover the cost of efficiently pro-
viding the service and had anti-competitive effects. On 26 July 2016,
the Bundesnetzagentur barred Deutsche Post from charging these
prices and declared the prices invalid (prohibitive order), since at this
time Deutsche Post AG had not yet complied 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.

158

Deutsche Post DHL Group — 2018 Annual Report

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 Federal
Republic of Germany; further details can be found in the 2015 and 2016
Annual Reports in the notes under Litigation. The EGC’s judgement is
legally effective. The state aid decision 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
pending action, the European Commission advanced the legal argu-
ment that the state aid proceedings initiated in 1999 remain open on
some counts and that it could therefore issue a new final decision,
bringing the proceedings to a close. The European Commission gave
no particulars regarding the possible substance of the decision. 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 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 individu-
ally negotiated agreements or provided on special terms (discounts,
etc.). Deutsche Post AG and the tax authorities hold different opinions
on the VAT treatment of certain products. In the interest 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 45.

On 30 June 2014, DHL Express France received a statement of
objections from the French competition authority alleging anti-
competitive conduct with regard to fuel surcharges and price fixing in
the domestic express business, a business which had been divested in
June 2010. The French competition authority made its decision on
15 December 2015. The decision to fine DHL was confirmed by the Paris
Court of Appeals on 19 July 2018 and DHL Express France is appealing
it before the Cour de Cassation (Supreme Court).

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 Sharebased payment
Assumptions regarding the price of Deutsche Post AG’s shares and as-
sumptions 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 rec-
ognised pro rata in profit or loss to reflect the services rendered as
consideration during the vesting period (lock-up period).

47.1 Sharebased payment for executives

(Share Matching Scheme)

Under the share-based payment system for executives (Share Match-
ing Scheme), certain executives receive part of their variable remuner-
ation 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 remuneration 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 conversion behaviour of executives with
respect to their relevant bonus portion. Share-based payment arrange-
ments 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 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
instruments 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.

Of the expenses under the Share Matching Scheme, €34 million
(previous year: €30 million) relates to equity-settled share-based
payments and €31 million (previous year: €25 million) to the deferral
of the associated matching shares.

Additional information on granting and settlement of these rights

can be found in

notes 33 and 34.

Consolidated Financial Statements — NOTES — Other disclosures

159

Share Matching Scheme

Grant date of incentive shares and associated matching shares

1 Jan. 2013

1 Jan. 2014

1 Dec. 2015

1 Dec. 2016 1 Dec. 2017

1 Dec. 2018

Grant date of matching shares awarded for investment shares

1 April 2014 1 April 2015 1 April 2016 1 April 2017 1 April 2018 1 April 2019

Term

End of term

months

March 2018 March 2019 March 2020 March 2021 March 2022 March 2023

2013
tranche

2014
tranche

2015
tranche

2016
tranche

2017
tranche

2018
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

1 Estimated provisional amount, will be determined on 1 April 2019.
2 Expected number.

€

thousands

17.02

27.18

337

n. a.

871

25.91

29.12

332

299

596

27.12

23.98

366

329

848

29.04

31.77

320

288

901

39.26

34.97

256

230

864

28.78

33.00 1

211 2

190

733

47.2 LongTerm Incentive Plan (2006 LTIP) for members of the

Board of Management

age closing price of Deutsche Post shares for the five trading days
preceding the exercise date and the exercise price of the SAR.

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 appre-
ciation 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 by the
grant date of each tranche, 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 deter-
mined 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 per-
formance 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 outperforms 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 reference period comprises the last 20 con-
secutive 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 compen-
sation. Each SAR exercised entitles the Board of Management member
to receive a cash settlement equal to the difference between the aver-

2006 LTIP

2013 tranche

2014 tranche

2015 tranche

2016 tranche

2017 tranche

2018 tranche

Issue date

1 August 2013

1 September 2014

1 September 2015

1 September 2016

1 September 2017

1 September 2018 1

Issue price
€

20.49

24.14

25.89

28.18

34.72

31.08

Waiting period
expires

31 July 2017

31 August 2018

31 August 2019

31 August 2020

31 August 2021

31 August 2022

1 On the grant date of 1 November 2018 (John Gilbert), the issue price was €28.69;

the waiting period ends on 31 October 2022.

The Board of Management members received a total of 1,191,840 SAR s
(previous year: 2,003,970 SAR s) with a total value, at the time of issue,
of €5.43 million (previous year: €7.19 million). 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 difference
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 Management). 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 exercised them as early as 2017. Start-
ing in 2014, SAR s were no longer issued to executives under the SAR
Plan. The Performance Share Plan (PSP) for executives replaces the

160

Deutsche Post DHL Group — 2018 Annual Report

SAR Plan. More details on the tranches still existing are shown in the
following table:

SAR Plan

Issue date

Issue price

Waiting period expires

Exercise period expires

2012 tranche

2013 tranche

1 July 2012

1 August 2013

€13.26

30 June 2016

30 June 2018

€20.49

31 July 2017

31 July 2019

The fair value of the SAR Plan and the 2006 LTIP was determined using
a stochastic simulation model. As a result, income of €50 million (previ-
ous year: expense of €73 million) and a provision of €8 million (previous
year: €73 million) were recognised as at the reporting date. €6 million
(previous year: €63 million) of the provision was attributable to the
Board of Management. A portion of €5 million (previous year: €32 mil-
lion) of the total provision relates to rights due to the Board of Manage-
ment that are exercisable as 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 demanding per-
formance targets. The performance targets under the PSP are iden-
tical with the performance targets under the LTIP for members of the
Board of Management.

Performance Share Units (PSUs) were issued to selected execu-
tives under the PSP for the first time on 1 September 2014. It is not
planned that members of the Board of Management will participate 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 2018,
a total of €26 million (previous year: €25 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).

Performance Share Plan

Grant date

Exercise price

Waiting period expires

Risk-free 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 2018

Rights granted

Rights lapsed

Rights settled at the end of the waiting period

Rights outstanding at 31 December 2018

2014 tranche

2015 tranche

2016 tranche

2017 tranche

2018 tranche

1 September 2014

1 September 2015

1 September 2016

1 September 2017

1 September 2018

€24.14

€25.89

€28.18

€34.72

€31.08

31 August 2018

31 August 2019

31 August 2020

31 August 2021

31 August 2022

0.11 %

3.52 %

23.46 %

10.81 %

– 0.10 %

3.28 %

24.69 %

16.40 %

– 0.62 %

3.73 %

23.94 %

16.83 %

– 0.48 %

3.31 %

23.03 %

16.34 %

– 0.39 %

3.70 %

22.39 %

16.29 %

1.74 %

2.94 %

2.93 %

2.78 %

2.66 %

3,779,940

3,802,410

3,619,692

3,053,046

1,335,404

2,444,536

196,638

–

177,384

–

117,372

–

3,344,166

24,858

–

3,605,772

3,442,308

2,935,674

3,319,308

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 PSUs as at

31 December 2018 was 25 months.

Consolidated Financial Statements — NOTES — Other disclosures

161

48 Related party disclosures

48.1 Related party disclosures (companies and Federal Republic

of Germany)

All of the companies below that are controlled by the Group or over
which the Group can exercise significant influence are recorded in the
dpdhl.com/en/
list of shareholdings, which can be accessed online at

investors.

Deutsche Post AG maintains a variety of relationships with the
Federal Republic of Germany (Federal Republic) and other companies
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 business
relationships with the individual public authorities and other govern-
ment 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 companies
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 companies. 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 current interest in
Deutsche Post AG’s share capital is 20.5 %. 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 supervision
of the German Federal Ministry of Finance. The BAnst PT continues to
manage the social facilities such as the postal civil servant health insur-
ance fund, the recreation programme, the Postbeamtenversorgungs-
kasse (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 2018,
Deutsche Post AG was invoiced for €129 million (previous year:
€114 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 39.

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. The agreement was amended
in early 2018, with retroactive effect to 1 January 2017. As a result,
monthly instalment payments are no longer made to the Federal
Republic. Instead, a lump-sum payment is made to the Federal Republic
each year after a review. The invoice for 2017 was under €100 thousand.
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 incurred by the
Federal Republic by paying a flat fee. In 2018, this initiative resulted in
22 permanent transfers (previous year: 45) and 22 secondments with
the aim of a permanent transfer in 2019 (previous year: 3).

RELATIONSHIPS WITH THE GERMAN FEDERAL EMPLOYMENT AGENCY
Deutsche Post AG and the German Federal Employment Agency en-
tered into an agreement dated 12 October 2009 relating to the transfer
of Deutsche Post AG civil servants to the Federal Employment Agency.
In 2018, this initiative resulted in 35 permanent transfers (previous
year: 22.)

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). At the end of 2017, a
control relationship existed between Deutsche Telekom AG and the
Federal Republic, because the Federal Republic, despite its non-con-
trolling interest, had a secure majority at the Annual General Meeting
due to its average presence there. This was no longer true in financial
year 2018. As a result, Deutsche Telekom AG is no longer a related party
of Deutsche Post AG that must be reported in accordance with IAS 24.

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.

RELATIONSHIPS WITH PENSION FUNDS
The real estate with a fair value of €1,424 million (which can be offset
as plan assets) (previous year: €1,590 million), of which Deutsche Post
Pensions-Treuhand GmbH & Co. KG, Deutsche Post Altersvorsorge
Sicherung e.V. & Co. Objekt Gronau KG and Deutsche Post Grund-
stücks-Vermietungsgesellschaft beta mbH Objekt Leipzig KG are the
legal owners, is let to Deutsche Post Immobilien GmbH. Rental pay-
ments for Deutsche Post Immobilien GmbH amounted to €94 million
in 2018 (previous year: €101 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. Further disclosures on
pension funds can be found in

notes 7 and 39.

162

Deutsche Post DHL Group — 2018 Annual Report

RELATIONSHIPS WITH UNCONSOLIDATED COMPANIES, INVESTMENTS

The active members of the Board of Management and the Super-

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, investments
accounted for using the equity method and joint operations deemed to
be related parties of the Group in the course of its ordinary business
activities. As part of these activities, all transactions for the provision
of goods and services entered into with unconsolidated companies
were conducted on an arm’s length basis at standard market terms and
conditions.

Transactions were conducted in financial year 2018 with major
related parties, resulting in the following items in the consolidated
financial statements:

€ m

Trade receivables

Loans

Receivables from
in-house banking

Financial liabilities

Trade payables

Income 1

Expenses 2

To / from investments
accounted for using the
equity method

To / from unconsolidated
companies

2017

2018

2017

2018

1 Relates to revenue and other operating income.
2 Relate to materials expense and staff costs.

Deutsche Post AG issued letters of commitment in the amount of
€8 million (previous year: €16 million) for these companies. Of this
amount, €3 million (previous year: €11 million) was attributable to
investments accounted for using the equity method, €1 million (previ-
ous year: €1 million) to joint operations and €4 million (previous year:
€4 million) to unconsolidated companies.

48.2 Related party disclosures (individuals)
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 report-
able transactions or legal transactions involving these related parties
in financial year 2018. In particular, the company extended no loans to
these related parties.

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 Supervisory
Board.

visory Board were remunerated as follows:

€ m

Short-term employee benefits
(excluding share-based payment)

Post-employment benefits

Termination benefits

Share-based payment 1

Total

2017

2018

–34

–13

1 Gain on the reversal of the SAR provision in financial year 2018, owing to the current

share price performance.

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 €41 million
as at the reporting date (previous year: €35 million).

The share-based payment amount relates to the relevant expense
recognised for financial years 2017 and 2018; further details can be
found in
notes 47.2 and 48.3. The expense is itemised in the following
table:

Sharebased payment

Thousands of €

Dr Frank Appel, Chairman

Ken Allen

Dr h. c. Jürgen Gerdes (until 12 June 2018)

John Gilbert

Melanie Kreis

Dr Thomas Ogilvie (since 1 September 2017)

Tim Scharwath (since 1 June 2017)

Sharebased payment 1

2017
SAR s

2018
SAR s

13,726

–18,183

6,169

6,726

2,422

1,085

– 5,769

– 6,161

–2,916

–1,271

–39

30,242

–34,378

1 Gain on the reversal of the SAR provision in financial year 2018, owing to the current

share price performance.

Consolidated Financial Statements — NOTES — Other disclosures

48.3 Remuneration disclosures in accordance with the HGB

Auditor’s fee

BOARD OF MANAGEMENT REMUNERATION
The remuneration paid to members of the Board of Management in
financial year 2018 totalled €11.4 million (previous year: €11.6 million).
Non-performance-related components accounted for €8.1 million
(previous year: €7.6 million) and €3.3 million was attributable to the
annual bonus paid as a performance-related component (previous
year: €4.0 million). An additional €0.6 million of the annual bonus was
transferred to the medium-term component (deferral). In financial year
2018, the Board of Management members received a total of
1,191,840 SARs (previous year: 2.003.970 SARs), which at the issue
date were valued at €5.4 million (previous year: €7.2 million).

FORMER MEMBERS OF THE BOARD OF MANAGEMENT
Benefits paid to former members of the Board of Management or
their surviving dependants amounted to €9.6 million (previous year:
€7.0 million). The defined benefit obligation (DBO) for current pensions
calculated under IFRS s was €94 million (previous year: €95 million).

REMUNERATION OF THE SUPERVISORY BOARD
The total remuneration of the Supervisory Board in financial year 2018
amounted to €2.7 million (previous year: €2.6 million); €2.4 million of
this amount was attributable to a fixed component, as in the prior year,
and €0.3 million to attendance allowances (previous year: €0.2 million).

Further information on the itemised remuneration of the Board of Man-
agement and the Supervisory Board can be found in the remuneration
report, which forms part of the Group Management Report.

SHAREHOLDINGS OF THE BOARD OF MANAGEMENT AND

SUPERVISORY BOARD
As at 31 December 2018, 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 Article 19 of the Market Abuse
Regulation (EU) No 596/2014 can be viewed on the company’s website
at

dpdhl.com/en/investors.

49 Auditor’s fees
The fee for the auditor of the consolidated financial statements,
PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft,
amounted to €11 million and was recognised as an expense.

163

2018

€ m

Audit services

Other assurance services 1

Tax advisory services

Other services

Total

1 Rounded below €1 million.

The audit services category includes the fees for auditing the consoli-
dated financial statements and for auditing the annual financial
statements prepared by Deutsche Post AG and its German subsidiaries.
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 engage-
ment, such as audits of the internal control system, are also reported
in this category.

Other assurance services relate to fees for the issuance of comfort

letters and of certificates for the internal control system in particular.

50 Exemptions under the HGB and local foreign legislation
For financial year 2018, the following German subsidiaries have exer-
cised the simplification options under section 264(3) of the HGB,
section 264 B of the HGB and section 291 of the HGB:
• Agheera GmbH
• Albert Scheid 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

164

Deutsche Post DHL Group — 2018 Annual Report

• 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
• 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

Beraterdienstleistungen mbH

• it4logistics GmbH
• Saloodo! GmbH
• StreetScooter GmbH
• yunexus GmbH

The following companies in the UK make use of the audit exemption
under section 479A 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
• National Carriers Limited
• Ocean Group Investments Limited
• Ocean Overseas Holdings Limited
• Power Europe Development No. 3 Limited
• Power Europe Operating Limited

• 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
• 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

Consolidated Financial Statements — NOTES — Other disclosures — RESPONSIBILITY STATEMENT

165

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 2018 re-
quired by section 161 of the AktG. This Declaration of Conformity can
be accessed online at

dpdhl.com/en/investors.

dcgk.de and at

52 Significant events after the reporting date and other

disclosures

New segment structure as of January 2019
The following changes concerning board member responsibilities and
segments were effective as of 1 January 2019: the Post - eCommerce -
Parcel division was separated into a German and an international division,
each led by a separate member of the Board of Management. The Ger-
man business was renamed Post & Paket Deutschland and will remain
under the interim leadership of the Group’s CEO. A new DHL eCommerce
Solutions division is also being created in order to optimally align the
Group with the global e-commerce market. Ken Allen has assumed
responsibility for the new division in addition to his role as head of CSI.
John Pearson has led the Express division since 1 January 2019.

There were no other significant events after the reporting date.

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, 15 February 2019

Deutsche Post AG
The Board of Management

Dr Frank Appel

Ken Allen

John Gilbert

Melanie Kreis

Dr Thomas Ogilvie

John Pearson

Tim Scharwath

166

Deutsche Post DHL Group — 2018 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 com-
prise the consolidated statement of financial position as at December
31, 2018, the consolidated statement of comprehensive income, con-
solidated statement of profit or loss, consolidated statement of changes
in equity, and consolidated statement of cash flows for the financial
year from January 1 to December 31, 2018, and notes to the consoli-
dated financial statements, including a summary of significant account-
ing policies. In addition, we have audited the group management report
of Deutsche Post AG for the financial year from January 1 to December
31, 2018. In accordance with the German legal requirements, we have
not audited the content of those parts of the group management report
listed in the “Other Information” section of our auditor’s report.

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:
German Commercial Code] and, in compliance with these require-
ments, give a true and fair view of the assets, liabilities, and financial
position of the Group as at December 31, 2018, and of its financial
performance for the financial year from January 1 to December 31,
2018, and

• the accompanying group management report as a whole provides

an appropriate view of the Group’s position. In all material respects,
this group management report is consistent with the consolidated
financial statements, complies with German legal requirements
and appropriately presents the opportunities and risks of future
development. Our audit opinion on the group management report
does not cover the content of those parts of the group manage-
ment 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 management
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 subsequently as “EU
Audit Regulation”) in compliance with German Generally Accepted
Standards for Financial Statement Audits promulgated by the Institut
der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW).
We performed the audit of the consolidated financial statements in
supplementary compliance with the International Standards on Audit-
ing (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” section of our auditor’s report. We are independ-
ent of the group entities in accordance with the requirements of Euro-
pean law and German 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 pro-
vided 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 judgment,
were of most significance in our audit of the consolidated financial
statements for the financial year from January 1 to December 31, 2018.
These matters were addressed in the context of our audit of the con-
solidated 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

Effects of the first-time application of IFRS 16 on the accounting
of leases

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

167

Hereinafter we present the key audit matters:
1 Recoverability of goodwill
1

In the consolidated financial statements of Deutsche Post AG,
goodwill amounting to EUR 11.2 billion is reported under the bal-
ance sheet item “Intangible assets”, representing approximately
22 % of total assets and 81 % of the Group’s reported equity. Good-
will is tested for impairment by the Company on an annual basis
as of the balance sheet date or if there are indications that good-
will may be impaired. The impairment test of goodwill is based
on the value in use, which is determined by applying a measure-
ment 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 extent on the estimation of
future cash inflows by the Company’s executive directors and the
discount rate used, and is therefore subject to considerable un-
certainty.

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 prepared by
the executive directors and approved by the Company’s super-
visory board, and reconciling it against general and sector- 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 eval-
uated the Company’s calculation procedure. Due to the material-
ity of goodwill and the fact that its measurement also depends on
economic conditions which are outside of the Company’s sphere
of influence, we carried out our own additional sensitivity analy-
ses for those cash-generating units with low headroom (value in
use compared with the carrying amount) and found that the re-
spective goodwill is sufficiently covered by the discounted future
cash inflows. Overall, the measurement parameters and assump-
tions used by the executive directors to be reproducable.
The Company’s disclosures regarding goodwill are contained in
note 22 of the notes to the consolidated financial statements.

2 Pension obligations and plan assets
1

In the consolidated financial statements of Deutsche Post AG a
total of EUR 4.35 billion is reported under the balance sheet item
“Provisions for pensions and similar obligations”. The net pension
provisions of EUR 4.1 billion (after consideration of reported plan
assets of EUR 0.3 billion) were calculated on the basis of the pres-
ent value of the obligations amounting to EUR 16.7 billion, netted
against the plan assets of EUR 12.6 billion, which were measured
at fair value. The obligations from defined benefit pension plans
were measured using the projected unit credit method in accord-
ance with IAS 19. This requires 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 recognized directly in equity as actuarial gains or losses.
Changes in the measurement parameters resulted in actuarial
gains of EUR 0.2 billion. In our view, these matters were of par-
ticular significance, as the measurement of the pension obligations
and plan assets is to a large extent based on the estimates and
assumptions made by the Company’s executive directors.
2 With the knowledge that estimated values bear an increased risk
of accounting misstatements and that the executive directors’
measurement decisions have a direct and significant effect on the
consolidated financial statements, we assessed the appropriate-
ness of the values adopted, in particular the measurement
param eters used in the calculation of the pension provisions, inter
alia on the basis of actuarial reports made available to us and tak-
ing into account the expert knowledge of our internal specialists
for pension valuations. Our evaluation of the fair values of plan
assets was in particular based on bank confirmations submitted
to us, as well as other statements of assets and real estate ap-
praisals. On the basis of our audit procedures, we were able to
satisfy ourselves that the estimates and assumptions made by the
executive directors were sufficiently documented and supported
to justify the recognition and measurement of the material pen-
sion provisions.
The Company’s disclosures relating to provisions for pensions
and similar obligations are contained in note 39 of the notes to
the consolidated financial statements.

168

Deutsche Post DHL Group — 2018 Annual Report

Effects of the firsttime application of IFRS 16
on the accounting of leases
In the Company’s consolidated financial statements rights of use
of € 9.5 billion and leasing liabilities of € 9.9 billion are reported
as of the balance sheet date. Thus, leasing liabilities represent
20 % of total assets. In the financial year, the first-time application
of the new accounting standard relating to leases (IFRS 16) re-
sulted in material effects on the opening balance sheet figures
and their updating throughout the financial year. The modified
retrospective approach was applied for the conversion to IFRS 16.
The comparable figures from the prior year’s periods were not
adjusted. Due to the large volume of leases and transactions re-
sulting from them, the Company has established group-wide
processes and controls for the complete and accurate recording
of the leases. Furthermore, the first-time application required a
central IT system to be implemented to report these leases. The
new IFRS 16 accounting standard necessitates that executive
directors make estimates and take discretionary decisions for
certain areas which have been assessed in the context of our
audit. In particular, this relates to assessments regarding exer-
cising options with implications for the term of the leasing ar-
rangement.

Against this background and due to the complexity of the
new requirements set forth in IFRS16, the accounting of leases
was of particular significance within the course of our audit.
2 As part of our audit and with the assistance of our internal spe-
cialists, we assessed, among other things, the appropriateness
and operating effectiveness of the processes and controls estab-
lished by the Group to record its leases. This also applies to the
implementation of the central IT system to report the leases and
to the required adjustments made to existing systems in order to
process the relevant transactions.

In addition, as part of our audit and with the assistance of
internal specialists we assessed the impact of the first-time ap-
plication of IFRS 16. Together we assessed the implementation
work and evaluated the design of the processes set up to report
the transactions in accordance with IFRS 16 and of the IT systems
in place to support the implementation of the new requirements.
In this context, we inspected, on a sample basis, lease arrange-
ments and assessed the identification of performance obligations
and whether these were recorded completely and appropriately
in the newly implemented central system in place to report the
leases. In doing so, we evaluated in particular those assessments
relating to exercising options with implications for the term of the
lease arrangement by means of inquiring Company’s employees
and examining suitable supporting documentation.

We were able to satisfy ourselves that the systems and pro-
cesses established and adjusted to IFRS 16 as well as the imple-
mented controls are appropriate. Furthermore, we were able to
assess that the estimates and assumptions made by the executive
directors are sufficiently documented and substantiated to en-
sure that leases are properly accounted for under the first-time
application of IFRS 16.

The Company’s disclosures relating to the accounting of leases and
the effects of the first-time application of IFRS 16 are contained in
note 4 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 § 289f HGB and
§ 315d HGB included in the “Declaration on Corporate Governance
and Non-financial Group Report” section of the group management
report

• the separate non-financial report pursuant to § 289b Abs. 3 HGB

and § 315b Abs. 3 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 information,
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 statements,
with the group management report or our knowledge obtained 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
Management Report
The executive directors are responsible for the preparation of the con-
solidated financial statements that comply, in all material respects, with
IFRS s as adopted by the EU and the additional requirements of German
commercial law pursuant to § 315e Abs. 1 HGB and that the consoli-
dated financial statements, in compliance with these requirements,
give a true and fair view of the assets, liabilities, financial position, and
financial performance of the Group. In addition the executive directors
are responsible for such internal control as they have determined nec-
essary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the executive
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 addition, they are re-
sponsible 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.

Consolidated Financial Statements — INDEPENDENT AUDITOR’S REPORT

169

Furthermore, the executive directors are responsible for the
preparation of the group management report that, as a whole, provides
an appropriate view of the Group’s position and is, in all material re-
spects, consistent with the consolidated financial statements, complies
with German legal requirements, and appropriately presents the op-
portunities and risks of future development. In addition, the executive
directors are responsible for such arrangements and measures (sys-
tems) as they have considered necessary to enable the preparation of
a group management re-port that is in accordance with the applicable
German legal requirements, and to be able to provide sufficient appro-
priate evidence for the assertions in the group management report.

The supervisory board is responsible for overseeing the Group’s
financial reporting process for the preparation of the consolidated
finan cial statements and of the group management report.

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 material
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 con-
solidated financial statements and the knowledge obtained in the audit,
complies with the German legal requirements and appropriately pre-
sents the opportunities and risks of future development, as well as to
issue an auditor’s report that includes our audit opinions on the con-
solidated 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 compliance
with the ISAs will always detect a material misstatement. Misstate-
ments can arise from fraud or error and are considered material if, in-
dividually 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 consol-
idated financial statements and of the group management report,
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 resulting from fraud is
higher than for one resulting from error, as fraud may involve collu-
sion, forgery, intentional omissions, misrepresentations, 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.

• Evaluate the appropriateness of accounting policies used by the ex-
ecutive directors and the reasonableness of estimates made by the
executive directors and related disclosures.

• 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 uncer-
tainty 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 inad-
equate, to modify our respective audit opinions. Our conclusions are
based on the audit evidence obtained 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 con-
solidated financial statements, including the disclosures, and whether
the consolidated financial statements present the under lying trans-
actions and events in a manner that the consolidated financial state-
ments give a true and fair view of the assets, liabilities, financial posi-
tion and financial performance of the Group in compliance with IFRS s
as adopted by the EU and the additional requirements of German
commercial law pursuant to § 315e Abs. 1 HGB.

• Obtain sufficient appropriate audit evidence regarding the financial
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 responsible for the di-
rection, 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 presented
by the executive directors in the group management report. On the
basis of sufficient appropriate audit evidence we evaluate, in particu-
lar, the significant assumptions used by the executive directors as a
basis for the prospective information, and evaluate the proper deri-
vation 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 una-
voidable risk that future events will differ materially from the pro-
spective information.

170

Deutsche Post DHL Group — 2018 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 inter-
nal control that we identify during our audit.

We also provide those charged with governance with a statement
that we have complied with the relevant independence requirements,
and communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, 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 disclo-
sure 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
April 24, 2018. We were engaged by the supervisory board on August
8, 2018. We have been the group auditor of Deutsche Post AG, Bonn
without interruption since the Company first met the requirements as
a public interest entity within the meaning of § 319a 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 committee
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 15, 2019
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft

Dietmar Prümm
Wirtschaftsprüfer
(German Public Auditor)

Verena Heineke
Wirtschaftsprüferin
(German Public Auditor)

FURTHER INFORMATION
171 — 178

172 MULTI-YEAR REVIEW

174 GRAPHS AND TABLES

175 INDEX

176 GLOSSARY

177 CONTACTS

177 ONLINE VERSION

177 ORDERING

178 FINANCIAL CALENDAR

172

Deutsche Post DHL Group — 2018 Annual Report

MULTI-YEAR REVIEW

Key figures, 2011 to 2018

€ m

Revenue
Post - eCommerce - Parcel (until 2013 Mail)

Express

Global Forwarding, Freight

Supply Chain

Total for the divisions

Corporate Functions (until 2017 Corporate Center/Other)

Consolidation

Total

Profit/loss from operating activities (EBIT)
Post - eCommerce - Parcel (until 2013 Mail)

Express

Global Forwarding, Freight

Supply Chain

Total for the divisions

Corporate Functions (until 2017 Corporate Center/Other)

Consolidation

Total

2011
adjusted

2012
adjusted

2013
adjusted

2014
adjusted

2015

2016
adjusted

2017
adjusted

2018

13,973

11,691

15,118

13,223

54,005

1,260

13,972

12,778

15,666

14,340

56,756

1,203

15,291

11,821

14,787

14,227

56,126

1,251

15,686

12,491

14,924

14,737

57,838

1,345

16,131

13,661

14,890

15,791

60,473

1,269

17,078

13,748

13,737

13,957

58,520

1,279

18,161

15,049

14,482

14,152

61,844

1,387

18,476

16,147

14,978

13,350

62,951

1,624

–2,436

–2,447

–2,465

–2,553

–2,512

–2,465

–2,787

–3,025

52,829

55,512

54,912

56,630

59,230

57,334

60,444

61,550

1,107

916

440

362

2,825

–389

1,048

1,110

514

419

3,091

– 423

–3

1,286

1,083

478

441

3,288

– 421

–2

1,298

1,260

293

465

3,316

–352

1,103

1,391

–181

449

2,762

–351

1,446

1,544

287

572

3,849

–359

1,503

1,736

297

555

4,091

–350

656

1,957

442

520

3,575

– 414

2,436

2,665

2,865

2,965

2,411

3,491

3,741

3,162

Consolidated net profit for the period

1,266

1,762

2,211

2,177

1,719

2,781

2,853

2,224

Cash flow/capex/depreciation, amortisation and
impairment losses
Net cash from/used in operating activities

Net cash used in investing activities

Net cash used in/from financing activities

2,371

–1,129

–1,547

–203

2,989

–1,697

–1,765

1,199

Free cash flow

Capex 1

Depreciation, amortisation and impairment losses

Assets and capital structure
Non-current assets

Current assets

Equity (excluding non-controlling interests)

Non-controlling interests

Current and non-current provisions

Current and non-current liabilities

Total assets

749

–1,885

1,716

1,274

1,697

1,339

21,225

17,183

11,009

190

9,008

21,568

12,289

9,019

209

8,978

–110

1,669

1,747

1,337

21,370

14,091

9,844

190

8,481

18,201

15,651

16,946

3,040

–1,087

–2,348

1,345

1,876

1,381

22,902

14,077

9,376

204

10,411

16,988

3,444

–1,462

–1,367

1,724

2,024

1,665

23,727

14,143

11,034

261

9,361

2,439

–1,643

–1,233

444

2,074

1,377

24,166

14,129

11,087

263

8,507

3,297

–2,091

–1,087

1,432

2,268

1,471

23,916

14,756

12,637

266

7,078

5,796

–2,777

–3,039

1,059

2,648

3,292

34,804

15,666

13,590

283

7,130

17,214

18,438

18,691

29,467

38,408

33,857

35,461

36,979

37,870

38,295

38,672

50,470

Further Information — MULTI-YEAR REVIEW

173

D.01

2011

2012
adjusted

2013
adjusted

2014

2015

2016

2017

2018

Employees/staff costs
Number of employees 2

Full-time equivalents 3

At 31 Dec.

471,654

473,626

479,690

488,824

497,745

508,036

519,544

547,459

At 31 Dec.

423,502

428,129

434,974

443,784

450,508

459,262

472,208

499,018

Average number of employees 2

467,188

472,321

478,903

484,025

492,865

498,459

513,338

534,370

Staff costs

Staff cost ratio 4

Key figures revenue/income/
assets and capital structure
Return on sales 5

Return on equity (ROE)
before taxes 6

Return on assets 7

Tax rate 8

Equity ratio 9

Net debt (+) / net liquidity (–) 10

Net gearing 11

Key stock data
Basic earnings per share 12

Diluted earnings per share 13

Cash flow per share 12, 14

Dividend distribution

Payout ratio 17

Dividend per share

Dividend yield

Price-to-earnings ratio 18

Price-to-cash flow ratio 19

Number of shares carrying
dividend rights

Year-end closing price

€ m

€

€ m

€

16,730

17,770

17,776

18,189

19,640

19,592

20,072

20,825

31.7

32.0

32.4

32.1

33.2

34.2

33.2

33.8

4.6

4.8

5.2

4.1

6.1

6.2

5.1

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

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

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

26.3

8.2

15.5

25.9

1,499

13.5

1.71

1.64

2.51

19.7

6.4

16.4

29.8

1,093

8.8

1.27

1.22

2.84

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

19.3

7.1

14.0

27.5

1,938

12,303

13.1

47.0

2.24

2.15

2.72

1.69

1.66

4.71

1,030

1,027

1,270

1,409

1,419 15, 16

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

2.9

17.7

14.6

68.4

1.15 15

4.8

14.1

5.1

millions

1,209.0

1,211.2

1,208.7

1,209.1

1,225.1

1,233.8 16

€

11.88

16.60

26.50

27.05

25.96

31.24

39.75

23.91

1 As of 2017: capex relating to assets acquired. 2 Headcount including trainees. 3 Excluding trainees. 4 Staff costs/revenue. 5 EBIT/revenue.
6 Profit before income taxes/average equity (including non-controlling interests). 7 EBIT/average total assets. 8 Income taxes/profit before income

taxes. 9 Equity (including non-controlling interests)/total assets. 10
(including non-controlling interests). 12 The average weighted number of shares outstanding is used for the calculation. 13 The average weighted
number of shares outstanding is adjusted for the number of all potentially dilutive shares. 14 Cash flow from operating activities. 15 Proposal.
16 Estimate. 17 Excluding one-off effects, in 2015: 45.8 %, in 2018: 55.4 %. 18 Year-end closing price/basic earnings per share. 19 Year-end closing

Group Management Report, page 49. 11 Net debt/net debt and equity

price/cash flow per share.

174

Deutsche Post DHL Group — 2018 Annual Report

GRAPHS AND TABLES

Selected key figures

Report on economic position

A.30 Forecast / actual comparison

Nonfinancial key performance indicators

A.65 Selected results from the Employee

A.31 Global economy: growth indicators, 2018 38

A.32 Trade volumes: compound annual
growth rate, 2017 to 2018

A.33 Selected indicators for results

of operations

A.34 Changes in revenue, other operating

income and operating expenses, 2018

A.35 Total dividend and dividend per

no-par value share

A.36 EBIT after asset charge (EAC)

A.37 Net asset base (consolidated)

A.38 Selected cash flow indicators

A.39 Finance strategy

A.40 FFO to debt

A.41 Agency ratings

A.42 Financial liabilities

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 Balance sheet structure

of the Group as at 31 December

A.49 Key figures of the Post -

eCommerce - Parcel division

A.50 Post: revenue

A.51 Post: volumes

A.52 eCommerce - Parcel: revenue

A.53 Parcel Germany: volumes

A.54 Key figures of the Express division

A.55 Express: revenue by product

A.56 Express: volumes by product

A.57 Key figures of the Global Forwarding,

Freight division

A.58 Global Forwarding: revenue

A.59 Global Forwarding: volumes

Opinion Survey

A.66 Number of employees

A.67 Workplace accidents
A.68 CO2e emissions, 2018
A.69 Fuel and energy consumption
in company fleet and buildings

A.70 Brand architecture as at
31 December 2018

A.71 Marketing expenditures, 2018

Expected developments

A.72 Global economy: growth forecast

Opportunities and risks

A.73 Monte Carlo simulation

A.74 Opportunity and risk management

process

A.75 Classification of risks and opportunities 68

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 79

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
Income statement
C.01

A.60 Key figures of the Supply Chain division 55

C.02 Statement of comprehensive income

A.61 Supply Chain: revenue by sector and

region, 2018

Deutsche Post shares

A.62 Deutsche Post shares: seven-year

overview

A.63 Shareholder structure

A.64 Shareholder structure by region

C.03 Balance sheet

C.04 Cash flow statement

C.05 Statement of changes in equity

D
FURTHER INFORMATION
D.01 Key figures, 2011 to 2018

172

A
GROUP MANAGEMENT
REPORT

General information

A.01 Organisational structure as at

31 December 2018

A.02 Market volumes

A.03 Nationwide transport and delivery
network in Germany, 2018

A.04 German mail communication market,

business customers, 2018

A.05 German advertising market, 2018

A.06 International mail market (outbound),

2018

A.07 German parcel market, 2018

A.08 Available capacity

A.09 Air freight market, 2017: top 4

A.10 Ocean freight market, 2017: top 4

A.11 European road transport
market, 2017: top 5

A.12 Automation and digitalisation

of the supply chain

A.13 Contract logistics market, 2017: top 10

A.14 The Group strategy’s bottom lines

A.15 Calculations

A.16 Terms of variable remuneration
in target remuneration

A.17 Remuneration components

A.18 Performance criteria for the annual

bonus

A.19 SAR target achievement

A.20 Long-Term Incentive Plan: number

of SAR s granted

A.21 Mechanism of stock appreciation rights 28

A.22 Function of the contribution-based

pension plan

A.23 Example illustration of the included
remuneration components

A.24 Remuneration granted in accordance with

the German Corporate Governance Code 31

A.25 Remuneration paid in accordance with

the German Corporate Governance Code 33

A.26 Remuneration in accordance with

the HGB (DRS 17)

A.27 Contribution-based pension

commitments: individual breakdown

A.28 Final-salary-based legacy pension

commitments: individual breakdown

A.29 Remuneration paid to Supervisory Board

members

Further Information — GRAPHS AND TABLES — INDEX

175

INDEX

Air freight 13, 17, 39, 54, 64
Annual General Meeting 23 f., 42, 65, 74 ff., 83, 85 f.,
127 f., 130, 160, 170
Articles of Association 23 f., 35
Auditor’s report 76, 166 ff.
Authorised capital 24, 127

Balance sheet 21 f., 26, 42, 45 ff., 48 f., 67, 70, 90,
93, 96 ff., 110 ff., 120 ff., 130 f., 133 ff., 138 ff., 143 ff.,
149 ff., 156 ff., 162, 165, 172
Balance sheet structure 49
Board of Management 12 f., 15, 23 ff., 37, 40, 42,
66 ff., 74 ff., 80 ff., 93, 96, 112 f., 121, 127 f., 130, 132,
143, 159 f., 162 f., 165
Board of Management remuneration 25 ff., 74, 86,
163 ff.
Bonds 24, 38 f., 43, 45 f., 92, 98, 104, 108, 118 f.,
135, 138 f., 141, 152
Brands 12, 19, 62, 93 f., 102, 112, 120
Brexit 4, 63, 69, 110

Capital expenditure 37, 46 f., 65, 111 ff., 151, 172
Capital increase 24, 48, 127 ff.
Cash flow statement 21, 47 f., 91, 93, 131, 141 f., 172
Change of control 24, 30
Consolidated net profit 40, 42, 48, 88 f., 91 f., 113,
188 f., 172
Consolidated revenue 21 f., 37, 41, 44, 69, 88, 94 f.,
98, 101, 111 ff., 131, 172
Contingent capital 127 f.
Contract logistics 13, 18, 61, 64
Corporate governance 24 f., 27, 30, 36, 76, 83 ff., 165
Corporate incubations 12, 40, 46, 74, 76, 112 f., 121
Cost of capital 21 f., 121
Credit lines 45, 143
Credit rating 43, 45, 65 f., 70, 147

Declaration of conformity 74, 76, 83, 165
Dialogue marketing 14 f., 50 f., 112
Dividend 21 f., 37, 40, 42 f., 48, 56, 65, 74, 76, 91 f.,
104 f., 119, 130 f., 139, 156, 160, 173

Earnings per share 40, 42, 56, 88, 119, 173
EBIT after asset charge 21 f., 26 f., 30, 37, 40, 42 f.,
63, 65
eCommerce - Parcel 12, 15, 50 f., 57, 112, 114
eCommerce Solutions 13, 63 ff., 71, 76, 165
Employee Opinion Survey 19, 23, 27, 37, 57, 65, 75
Equity ratio 48 f., 129, 173
Express 12 f., 16, 19 f., 37, 45 ff., 52 f., 57, 61 f., 64 f.,
71, 74, 76, 93, 95 f., 98, 101, 111 f., 114, 117, 121, 123,
126 ff., 158, 165, 172

Parcel Germany 51
Post - eCommerce - Parcel 12 ff., 20, 37, 40 f., 45 ff.,
50 f., 57 f., 62, 69, 74 f., 96, 112, 116 f., 121, 165, 172
Post & Paket Deutschland 13, 37, 63, 65, 69, 71, 165
Press products 112
Price-to-earnings ratio 56, 173
Profit from operating activities 21 f., 37, 40 ff., 47,
50 ff., 63 ff., 88, 91, 111 ff., 172

Quality 19 f., 60 f., 70 ff.

Rating 43, 45, 65 f., 70, 135, 147
Regulation 12, 39, 65, 69, 157 f.
Responsibility statement 165
Retail outlets 14, 60
Return on sales 20, 40, 50 ff., 173
Revenue 18, 20 ff., 37, 40 f., 44, 50 ff., 65, 69, 88,
94 f., 98, 101, 111 ff., 126, 131, 157, 162, 172 f.
Road transport 13, 17, 53 f., 59, 64, 113

Segment reporting 42, 103, 111 ff.
Share buy-back 24, 43, 56, 128 f.
Share capital 23 f., 127 f., 161, 163
Share price 26 ff., 39, 56, 107, 118, 139, 158 ff., 162
Shareholder structure 56
Staff costs 21 f., 41, 58, 88, 107, 113, 116, 136, 142,
158, 160, 162, 173
Strategy 19 f., 25 ff., 71, 74 f., 83 ff.
StreetScooter 40, 47, 60, 74, 112, 115
Supervisory Board 13, 23 ff., 27 f., 34 ff., 42, 67, 74 ff.,
77 ff., 83 ff., 127 f., 162 f., 165
Supervisory Board committees 36, 74 ff., 78, 84 f.
Supervisory Board remuneration 25, 35 f., 163
Suppliers 45, 69, 83
Supply Chain 12, 18, 20, 37, 40, 46 ff., 55, 57, 62 ff.,
70 f., 74, 94 ff., 101, 111, 113 f., 116 ff., 120 ff., 124,
126 f., 172

Tax rate 173
Training 19 f., 57, 84, 86, 117

WACC 21 f., 121
Working capital 21 f., 42, 47 f., 121, 142

Finance strategy 42 f., 65, 71, 132
First Choice 12, 19, 72
Free cash flow 21 f., 26 f., 37, 40, 47 f., 63, 65, 102,
121, 142, 172
Free float 56, 127
Freight 12 f., 17, 20, 53 f., 61, 64, 113 f., 121, 126
Freight forwarding business 17, 53 f., 64

Global Business Services 12, 82, 113
Global economy 38, 63 f., 68 f.
Global Forwarding 12, 16, 20, 47, 53 f., 61, 113 f.,
121, 130
Global Forwarding, Freight 12 f., 17, 20, 37, 46 f.,
53 f., 57, 61 f., 64, 71, 94, 98, 111, 113 f., 117, 121, 172
Global trade 38 f., 63 f., 121
GoGreen 23
Guarantees 43, 45, 157

IFRSs 16 37, 40 ff., 44, 48 f., 96 ff., 111 f., 115 f., 118,
121 f., 125, 129, 140, 142, 157
Illness rate 58
Income statement 88, 93, 98, 101, 103 ff., 110,
113 ff., 131, 133, 145 f., 155 f.
Income taxes 41, 88 f., 91, 100, 109, 113, 118 ff., 131,
173
Internal control system 67 f.
Investments 21 f., 23, 37 f., 40, 42, 46 f., 47, 51, 65,
84, 90 f., 91, 94 ff., 100, 101, 103 f., 104 f., 110, 111,
118, 121, 124, 133, 136, 142, 152, 154, 157, 161 ff., 172

Letters of comfort 43, 45
Liquidity management 44, 70, 143 ff.

Mail communication 13 f., 50 f., 64
Mandates 79, 82, 84
Market shares 13 ff.

Net debt 48 f., 70, 129, 173
Net gearing 48 f., 129, 173
Net interest cover 48 f.
Net working capital 21 f., 42, 121

Ocean freight 13, 17, 39, 53 f., 59, 64
Oil price 38, 52, 63, 115
Operating cash flow 22, 43 f., 47, 50, 52 f., 55, 69,
91, 131, 142, 172
Opportunities and risk management 66 f.
Outlook 37, 40, 45, 63 ff., 68 ff.

176

Deutsche Post DHL Group — 2018 Annual Report

GLOSSARY

Dialogue marketing
Market-orientated activities that apply direct
communications to selectively reach target groups
using a personal, individualised approach.

Exante 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 × 30cm).

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.

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 logistics-related 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 long-term contracts.

Medical Express
The transport of time-critical or temperature-crit-
ical 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.

DHL Customer Solutions & Innovation (CSI)
DHL’s cross-divisional commercial and innovation
unit.

Time Definite
Delivery of time-critical shipments by a
pre- selected time.

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.

Third Party Logistics Provider (3PL)
Logistics provider, which performs logistics
operations (e.g., warehousing, transport
management) on behalf of its customers.

Transported Asset Protection Association (TAPA)
A forum that unites manufacturers, logistics
providers, freight carriers, law enforcement
authorities and other stakeholders with the
common aim of reducing losses from international
supply chains.

Twentyfoot equivalent unit (TEU)
Standardised container unit, 20 feet long and
8 feet wide (6 × 2.4 metres).

This Annual Report contains forward-looking statements that relate to the business, financial performance and results of operations of Deutsche Post AG. Forward-looking
statements are not historical facts and may be identified by words such as “believes”, “expects”, “predicts”, “intends”, “projects”, “plans”, “estimates”, “aims”, “foresees”,
“anticipates”, “targets” and similar expressions. As these statements are based upon current plans, estimates and projections, they are subject to risks and uncertainties
that could cause actual results to be materially different from the future development, performance or results expressly or implicitly assumed in the forward-looking
statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as at the date of this presentation. Deutsche Post AG
does not intend or assume any obligation to update these forward-looking statements to reflect events or circumstances after the date of this Annual Report.

Further Information — GLOSSARY — CONTACTS — ONLINE VERSION — ORDERING

177

CONTACTS

Investor Relations
Tel.: + 49 (0) 228 182-6 36 36
Fax: + 49 (0) 228 182-6 31 99
E-mail: ir @ dpdhl.com

Press Office
Tel.: + 49 (0) 228 182-99 44
Fax: + 49 (0) 228 182-98 80
E-mail: pressestelle @ dpdhl.com

ORDERING

External
E-mail: ir @ dpdhl.com

dpdhl.com/en/investors

Internal
GeT and DHL Webshop
Mat. no. 675-602-579

Published on 7 March 2019.

The English version of the 2018 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.

ONLINE VERSION

An online extract and a complete PDF file
are available on the internet:

annualreport2018.dpdhl.com

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produced from 100 % recovered
fibre, which is manufactured climate
neutrally and is, amongst other things,
FSC certified, has Nordic Ecolabel
244 053 and complies with the EU
Ecolabel AT/11/002 guidelines.

178

Deutsche Post DHL Group — 2018 Annual Report

FINANCIAL CALENDAR

2019
INTERIM REPORT AS AT 31 MARCH 2019

2019 ANNUAL GENERAL MEETING

DIVIDEND PAYMENT

INTERIM REPORT AS AT 30 JUNE 2019

INTERIM REPORT AS AT 30 SEPTEMBER 2019

2020
2019 ANNUAL REPORT

INTERIM REPORT AS AT 31 MARCH 2020

2020 ANNUAL GENERAL MEETING

DIVIDEND PAYMENT

INTERIM REPORT AS AT 30 JUNE 2020

INTERIM REPORT AS AT 30 SEPTEMBER 2020

Further dates, updates as well as information on live webcasts:

dpdhl.com/en/investors

10 MAY 2019

15 MAY 2019

20 MAY 2019

6 AUGUST 2019

12 NOVEMBER 2019

10 MARCH 2020

12 MAY 2020

13 MAY 2020

18 MAY 2020

5 AUGUST 2020

10 NOVEMBER 2020

Deutsche Post AG
Headquarters
Investor Relations
53250 Bonn
Germany

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