Deutsche Post AG
Annual Report 2021

Plain-text annual report

ON A NEW LEVEL 2021 ANNUAL REPORT Key figures Financial figures Revenue Profit from operating activities (EBIT) Return on sales 1 EBIT after asset charge (EAC) Consolidated net profit for the period 2 Net cash from operating activities Free cash flow Capex 3 Equity ratio 4 Net debt 5 Net gearing 6 Stock data Basic earnings per share 7 Diluted earnings per share 8 Cash flow per share 7, 9 Dividend per share Dividend distribution Number of shares as at 31 December Year-end closing price ESG figures GHG efficiency index (CEX) 12 GHG emissions 13 Energy consumption, company fleet Energy consumption, company buildings and facilities 14 Employee Opinion Survey, approval rate for Employee Engagement KPI Number of employees 15 Share of women in executive positions 16 Lost time injury frequency rate (LTIFR) per 200,000 working hours Share of valid compliance-relevant training certificates 16 €m €m % €m €m €m €m €m % €m % € € € € €m millions € index points million tonnes CO2e million kWh million kWh % % % 2017 2018 2019 60,444 3,741 6.2 2,175 2,713 3,297 1,432 2,268 33.4 1,938 13.1 2.24 2.15 2.72 1.15 1,409 1,228.7 39.75 32 34.88 21,733 3,194 75 61,550 3,162 5.1 716 2,075 5,796 1,059 2,648 27.5 12,303 47.0 1.69 1.66 4.71 1.15 1,419 1,236.5 23.91 33 35.63 23,243 3,194 76 63,341 4,128 6.5 1,509 2,623 6,049 867 3,617 27.6 13,367 48.2 2.13 2.09 4.90 1.15 1,422 1,236.5 34.01 35 33.20 23,100 3,099 77 2020 adjusted 66,716 4,847 7.3 2,199 2,979 7,699 2,535 2,999 25.5 12,928 47.9 2.41 2.36 6.22 1.35 1,673 1,239.1 40.50 37 33.64 24,336 3,091 83 2021 81,747 7,978 9.8 5,186 5,053 9,993 4,092 3,895 30.7 12,772 39.6 4.10 4.01 8.11 1.80 10 2,205 10, 11 1,239.1 56.54 36 39.36 27,296 3,190 84 519,544 547,459 546,924 571,974 592,263 21.5 4.4 – 22.1 4.3 – 22.2 4.2 – 23.2 3.9 – 25.1 3.9 96 1 EBIT / revenue. 2 After deduction of non-controlling interests. 3 Capex relating to assets acquired. 4 Equity (including non-controlling interests) / total equity and liabilities. 5 Calculation, Combined management report. 6 Net debt / net debt and equity (including non-controlling interests). 7 The average weighted number of shares outstanding is used for the calculation. 8 The average weighted number of shares outstanding is adjusted for the number of all potentially dilutive shares.  9 Cash flow from operating activities. 10 Proposal. 11 Estimate. 12 Tank-to-wheel. 13 Well-to-wheel. 14 Including electric vehicles. 15 Headcount at the end of the year, including trainees. 16 Middle and upper management. CONTENTS 3 CONTENTS 4 EDITORIAL 6 BOARDS AND COMMITTEES 6 Members of and mandates held by the Board of Management 7 Members of and mandates held by the Supervisory Board 9 REPORT OF THE SUPERVISORY BOARD 13 REPORTING PRACTICE 14 COMBINED MANAGEMENT REPORT 14 GENERAL INFORMATION 14 Business model 24 Strategy 25 Research and development 26 Steering metrics 28 REPORT ON ECONOMIC POSITION 28 Forecast / actual comparison 29 Overall assessment 29 Economic parameters 30 Significant events 30 Results of operations 32 Divisions 39 Financial position 44 Net assets Deutsche  Post AG as parent company 45 DEUTSCHE POST AG (HGB) 45 45 Employees 45 Results of operations 46 Net assets and financial position 47 Expected developments, opportunities and risks 82 CONSOLIDATED FINANCIAL STATEMENTS 82 INCOME STATEMENT 82 STATEMENT OF COMPREHENSIVE INCOME 48 NON-FINANCIAL STATEMENT 48 Strategic orientation 51 Environment 53 Workforce 56 Corporate citizenship 57 Corporate governance 60 EU Taxonomy 61 EXPECTED DEVELOPMENTS, OPPORTUNITIES AND RISKS Forecast period Future economic parameters 61 61 62 Expected developments 63 Opportunity and risk management 67 Opportunity and risk categories 73 Overall assessment 83 BALANCE SHEET 84 CASH FLOW STATEMENT 86 STATEMENT OF CHANGES IN EQUITY 87 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 87 Company information 87 Basis of preparation 102 Segment reporting disclosures 105 Income statement disclosures 111 Balance sheet disclosures 131 Lease disclosures 132 Cash flow disclosures 133 Other disclosures 74 GOVERNANCE 74 Annual Corporate Governance Statement 80 Disclosures required by takeover law 152 RESPONSIBILITY STATEMENT 153 INDEPENDENT AUDITOR’S REPORT 158 INDEPENDENT PRACTITIONER’S REPORT 161 FINANCIAL CALENDAR 161 CONTACTS Deutsche Post DHL Group – 2021 Annual ReportEDITORIAL 4 We demonstrated our full strength during challenging times and achieved a new record performance. Frank Appel Dear Readers, 2021 was yet another challenging year in which we demonstrated that we offer reliable delivery even in a turbulent market environment. We began the second year in the circumstances of the pandemic in excellent shape and further strengthened our market position with the right measures. In addition to the top priority of protecting our employees and customers, we responded flexibly to changing circumstances and in- vested continuously to expand our resources and secure critical supply chains. Our organisation is stronger than ever before. Although 2021 was no less challenging than 2020, we were able to considerably increase our performance and efficiency in many areas. As a market leader, we have taken on a central role in global trade and benefited from the increased de- mand for complex logistics solutions. This resulted in record performances, quarter for quarter, thanks to the collabora- tion of our divisions and the flexibility of our global network. We therefore increased earnings projections three times in 2021 and, with Group EBIT of €8.0 billion, even exceeded this target. With this result, we have achieved a new level of performance and concluded the financial year as the most successful in the history of the company. Our strategy makes us more resilient than ever. With Strategy 2025, we are setting ourselves the right goals and pursuing them with consistency and discipline. By Deutsche Post DHL Group – 2021 Annual ReportEDITORIAL 5 focusing heavily on our profitable logistics core businesses, with the acquisition of J. F. Hillebrand, for example, we will continue to expand our position in ocean freight. Through consistent investment in digital solutions, we have optimised our processes and achieved greater efficiency in day-to-day operations. Thanks to the national and international expan- sion of our parcel delivery network, we were able to ensure that the significantly higher demand and increased volumes in cross-border e-commerce could be met around the globe. Additionally, with logistics services for vaccinations, we are making an important contribution to fighting the pandemic. We will support our ambitious target of reducing the greenhouse gas emissions of the Group to below 29 mil- lion tonnes by the year 2030 with additional spending of €7 billion. In spite of the coronavirus pandemic, we did not lose sight of our plans, which correspond to the stipulations of the Science Based Targets Initiative. Additionally, for the first time, we assessed the opportunities and risks arising from climate change in accordance with the requirements of the Task Force on Climate-related Financial Disclosures (TCFD) and classified our contribution to the climate targets of the EU within the framework of the EU taxonomy. We still consider climate change to be one of the greatest threats facing humanity. We want to make the world a bet- ter place for all of us, and we are making the necessary adjustments to be able to actively take on future challenges and to create sustainable value. With our ESG Roadmap, which we introduced in March 2021, we reinforced and re- aligned our previous measures. We have implemented key performance indicators and set ourselves clear targets for environmentally friendly logistics, social responsibility and corporate governance. We are actively taking on the challenges of the future. In addition to our dedication to the climate and the envi- ronment, we are also making progress in the other areas. Our globally dedicated team is our greatest asset and a high level of satisfaction amongst our approximately 590,000 employees is the key to our success. We therefore advocate for a safe, inclusive and motivating working envi- ronment. DHL Express being honoured as the number one best workplace in Europe in 2021 by the international re- search and consulting institute Great Place to Work® is just one result of our numerous measures. As a global company, we bear an enormous responsibility, which is why respon- sible actions, ethical business practices and fair conduct form an integral part of our corporate management and our collaboration with our partners. Our globally dedicated team is our greatest asset and the key to our success. In spite of the pandemic, our profitability reached a new level in the previous year. With our Group strategy, we are more resilient than ever and we will continue to focus on our profitable core businesses, sustainability, digital solu- tions and e-commerce. At the moment, due to the current shocking situation in Ukraine, we are all working to provide support to those directly affected and to ensure the safety of our employees. The impact of the conflict in Eastern Europe on the global economy and the world’s transpor- tation markets is currently hard to assess. We will continue to closely monitor the situation. Sincerely yours, Frank Appel Chief Executive Officer Deutsche Post DHL Group – 2021 Annual ReportBOARDS AND C OMMITTEES 6 BOARDS AND COMMITTEES Members of and mandates held by the Board of Management Members Additional mandates Dr Frank Appel Chief Executive Officer Global Business Services Born in 1961, nationality German Board member since November 2002 CEO since February 2008 Appointed until May 2023 Ken Allen eCommerce Solutions Born in 1955, nationality British Board member since February 2009 Appointed until July 2022 Oscar de Bok Supply Chain Born in 1967, nationality Dutch Board member since October 2019 Appointed until September 2027 Melanie Kreis Finance Born in 1971, nationality German Board member since October 2014 Appointed until May 2027 Dr Tobias Meyer Post & Parcel Germany Born in 1975, nationality German Board member since April 2019 Appointed until March 2027 Dr Thomas Ogilvie Human Resources Born in 1976, nationality German Board member since September 2017 Appointed until August 2025 John Pearson Express Born in 1963, nationality British Board member since January 2019 Appointed until December 2026 Tim Scharwath Global Forwarding, Freight Born in 1965, nationality German Board member since June 2017 Appointed until May 2025 Membership of statutory supervisory boards Dr Frank Appel Fresenius Management SE (Supervisory Board) (since 21 May 2021) Membership of comparable bodies Ken Allen Blue Dart Express Ltd., India (Board of Directors) 1 (until 28 February 2021) You can find more information on our website. 1 Group mandate. Deutsche Post DHL Group – 2021 Annual ReportBOARDS AND C OMMITTEES 7 Members of and mandates held by the Supervisory Board Members Shareholder representatives Dr Nikolaus von Bomhard (Chair) Chair of the Supervisory Board and former Chair of the Board of Management, Münchener Rückversicherungs-Gesellschaft AG (Munich Re) Dr Günther Bräunig Chair of the Board of Management, KfW Bankengruppe ( until 31 October 2021) Lawrence Rosen Member of various supervisory boards, former member of the Board of Management, Deutsche  Post AG Mario Jacubasch Deputy Chair of the Group Works Council, Deutsche  Post AG (until 31 August 2021) Dr Stefan Schulte Chair of the Executive Board of Fraport AG Chair of the Group Works Council, Deutsche  Post AG (since 1 September 2021) Prof. Dr-Ing. Katja Windt Member of the Managing Board of SMS group GmbH Thomas Koczelnik (until 31 August 2021) Former Chair of the Board of Management, KfW Bankengruppe (since 1 November 2021) Employee representatives Dr Mario Daberkow Member of the Managing Board of Volkswagen Financial Services AG Ingrid Deltenre Member of various boards of directors, former Director General of the European Broadcasting Union Dr Heinrich Hiesinger Member of various supervisory boards, former Chair of the Board of Management, thyssenkrupp AG Dr Jörg Kukies State Secretary, Federal Ministry of Finance (until 8 December 2021) State Secretary, Federal Chancellery (since 9 December 2021) Simone Menne Member of various supervisory boards, former member of the Board of Managing Directors of Boehringer Ingelheim GmbH Andrea Kocsis (Deputy Chair) Deputy Chair of ver.di National Executive Board and Head of Postal Services, Forwarding Companies and Logistics Department on the ver.di National Executive Board Jörg von Dosky Chair of the Group and Company Executive Representation Committee, Deutsche  Post AG Gabriele Gülzau Chair of the Works Council, Deutsche  Post AG, Hamburg Operations Branch Thomas Held Chair of the Central Works Council, Deutsche  Post AG Chair of the Group Works Council, Deutsche  Post AG Thorsten Kühn Head of Postal Services, Co-determination and Youth, and Head of National Postal Services Group at ver.di National Administration Ulrike Lennartz-Pipenbacher Deputy Chair of the Central Works Council, Deutsche  Post AG Yusuf Özdemir (since 9 September 2021) Deputy Chair of the Group Works Council and Deputy Chair 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, Augsburg Operations Branch Deutsche Post DHL Group – 2021 Annual ReportBOARDS AND C OMMITTEES 8 Additional mandates Shareholder representatives Membership of comparable bodies Membership of statutory supervisory boards Dr Nikolaus von Bomhard (Chair) Münchener Rückversicherungs-Gesellschaft AG (Munich Re) (Chair) Dr Günther Bräunig Deutsche Pfandbriefbank AG (Chair) Deutsche Telekom AG Dr Heinrich Hiesinger BMW AG Fresenius Management SE ZF Friedrichshafen AG (since 1 January 2021), (Chair since 1 January 2022) Dr Jörg Kukies KfW IPEX-Bank GmbH 1 Simone Menne BMW AG (until 18 May 2021) Henkel AG & Co. KGaA Lawrence Rosen Lanxess AG Lanxess Deutschland GmbH 2 Prof. Dr-Ing. Katja Windt Fraport AG Dr Nikolaus von Bomhard (Chair) Athora Holding Ltd., Bermuda (Board of Directors, Chair) Dr Mario Daberkow Softbridge-Projectos Tecnológicos S. A., Portugal (Board of Directors) 3 Volkswagen Participações Ltda., Brazil (Supervisory Board) 3 Volkswagen Holding Financière S. A., renamed Volkswagen Financial Service France S. A. on 5 August 2021, France (Supervisory Board) 3 Volkswagen Payments S. A., Luxembourg (Supervisory Board, Chair) 3 Volkswagen S. A., Institución de Banca Múltiple, Mexico (Supervisory Board) 3 (until 7 October 2021) VW Credit, Inc., USA (Board of Directors) 3 Ingrid Deltenre Givaudan SA, Switzerland (Board of Directors) Dr Stefan Schulte Fraport Ausbau Süd GmbH (Supervisory Board, Chair) 4 Fraport Regional Airports of Greece A S. A., Greece (Board of Directors, Chair) 4 Fraport Regional Airports of Greece B S. A., Greece (Board of Directors, Chair) 4 Fraport Regional Airports of Greece Management Company S. A., Greece (Board of Directors, Chair) 4 Fraport Brasil S. A. Aeroporto de Porto Alegre, Brazil (Supervisory Board, Chair) 4 Fraport Brasil S. A. Aeroporto de Fortaleza, Brazil (Supervisory Board, Chair) 4 Employee representatives Membership of statutory supervisory boards Banque Cantonale Vaudoise SA, Switzerland (Board of Directors) Agence France Presse, France (Board of Directors) Akara Funds AG, Switzerland (Board of Directors) Dr Jörg Kukies KfW Bankengruppe (Deputy member of the Board of Directors) (until 8 December 2021) Jörg von Dosky PSD Bank München eG Stephan Teuscher DHL Hub Leipzig GmbH (Deputy Chair) Membership of comparable bodies Simone Menne Johnson Controls International plc, Ireland (Board of Directors) Andrea Kocsis KfW Bankengruppe (Board of Directors) Russell Reynolds Associates Inc., USA (Board of Directors) Lawrence Rosen Qiagen N. V., Netherlands (Supervisory Board, Chair) 1 Group mandate, KfW Bankengruppe. 2 Group mandate, Lanxess AG. 3 Group mandates, Volkswagen AG. 4 Group mandates, Fraport AG. You can find more information on our website. Deutsche Post DHL Group – 2021 Annual ReportREPORT OF THE SUPERVISORY BOARD 9 REPORT OF THE SUPERVISORY BOARD Dear Shareholders, As the world’s leading logistics company, we grew signifi- cantly in the year under review, demonstrated our resilience and strength and were optimally prepared for global trade with restricted logistics capacities. We were thus able to successfully navigate the second year of the pandemic and the various challenges it posed for the company’s cus- tomers and employees, as well as all divisions. The Board of Management kept the Supervisory Board up to date with information that allowed it to once again deal with the current developments in detail. In a spirit of trust and openness, a lively and intensive exchange of information on all important aspects of the business took place between members of the Board of Management and the Supervisory Board during regular meetings of the Supervisory Board committees and in plenary, as well as in the discussions held between meetings. Attendance at plenary and committee meetings For meetings of the plenary and the committees where they held seats, members of the Supervisory Board once again recorded a 100 % attendance rate. The members of the Board of Management par- ticipated in five plenary meetings and reported on the business performance in the divisions for which they are responsible. The Supervisory Board dealt with certain agenda items without the presence of the Board of Man- agement members. The CEO and the members of the Board of Management responsible for their relevant agenda top- ics attended the 21 committee meetings. Ex ecutives from the tier immediately below the Board of Management and representatives of the auditors were also invited to attend for individual agenda items. In the autumn, I held talks with several investors and proxies regarding issues that are the Supervisory Board’s responsibility. Key topics addressed in plenary meetings Discussions in all plenary meetings involved the compa- ny’s financial position and business performance as well as Attendance at plenary and committee meetings 2021 Supervisory Board members Dr Nikolaus von Bomhard (Chair) Andrea Kocsis (Deputy Chair) Dr Günther Bräunig Dr Mario Daberkow Ingrid Deltenre Jörg von Dosky Gabriele Gülzau Thomas Held Dr Heinrich Hiesinger Mario Jacubasch Thomas Koczelnik (until 31 August 2021) Thorsten Kühn Dr Jörg Kukies Ulrike Lennartz-Pipenbacher Simone Menne Yusuf Özdemir (since 9 September 2021) Lawrence Rosen Dr Stefan Schulte Stephan Teuscher Stefanie Weckesser Prof. Dr-Ing. Katja Windt Supervisory Board meetings Committee meetings Attendance / meetings Attendance % Attendance / meetings Attendance % 5 / 5 5 / 5 5 / 5 5 / 5 5 / 5 5 / 5 5 / 5 5 / 5 5 / 5 5 / 5 3 / 3 5 / 5 5 / 5 5 / 5 5 / 5 2 / 2 5 / 5 5 / 5 5 / 5 5 / 5 5 / 5 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 14 / 14 13 / 13 6 / 6 – 8 / 8 – – 4 / 4 6 / 6 1 / 1 10 / 10 3 / 3 11 / 11 – 7 / 7 2 / 2 – 7 / 7 13 / 13 7 / 7 – 100 100 100 – 100 – – 100 100 100 100 100 100 – 100 100 – 100 100 100 – Deutsche Post DHL Group – 2021 Annual Report REPORT OF THE SUPERVISORY BOARD 10 reports on committee meetings. The following key topics were also addressed: Group’s succession planning with a special focus on female executives. In March 2021, we discussed the annual and consol- idated financial statements, including the management report and the non-financial report. Following the report by the auditor regarding the findings of the audit, we approved 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 and the redemption of up to 30 million shares for the share buy-back planned for the reporting period. We determined the annual bonus for active Board of Management members based upon the degree of target achievement and corresponding recom- mendations by the Strategy Committee as well as Executive Committee and extended John Pearson’s mandate by five years. The proposed resolutions for the 2021 Annual Gen- eral Meeting, including the re-election of Ingrid Deltenre and me for a second four-year term and Katja Windt for a third two-year term, were also approved at this meeting. We also held in-depth discussions on the sustainability strategy of the company. In our June meeting, we appointed Melanie Kreis, the Board member responsible for Finance, and Tobias Meyer, the Board member responsible for the Post & Parcel Germany division, respectively, to further five-year terms on the company’s Board of Management. Both Board members have made major improvements to their areas of responsibility and they make an important contribution to the company’s Board of Management with their skills and experience, thereby expanding the skills profile of the Board. The meeting also included discussions of the In an extraordinary meeting held in August, we approved a strategically relevant acquisition – of the J. F. Hillebrand Group – which significantly reinforced the Deutsche  Post  DHL Group’s position in the ocean freight sector. In our September meeting, we addressed the sale of StreetScooter Engineering GmbH and our committee memberships. Without the presence of the Board of Man- agement, we discussed the efficiency of our activities in the plenary meetings and in the committees at length and concluded that we performed and continue to perform our monitoring and advisory duties effectively and efficiently. In our final Supervisory Board meeting of the year held in December, we decided that Tobias Meyer would succeed Frank Appel, and Nikola Hagleitner would succeed Tobias Meyer. We appointed Oscar de Bok, the Board member responsible for the Supply Chain division, to another five- year term on the Board of Management until 30 Septem- ber 2027. In addition, we discussed an increase to the Super visory Board member remuneration. We approved the Group’s business plan for 2022. We added sustainability topics to the responsibilities of the Strategy Committee and expanded the Supervisory Board skills profile to include these topics as well, and we defined the ESG targets for variable remuneration of Board of Management members for the 2022 financial year. Key topics addressed in committee meetings The six committees of the Supervisory Board prepare the decisions to be made in the plenary meetings. They have also been tasked with taking the final decisions regarding a few matters, including approval for property transac- tions and secondary activities of Board of Management members. The committee chairs report extensively in the plenary meetings on the work of the committees. The composition of the committees is outlined in the Annual Corporate Governance Statement. The Executive Committee met three times and dealt mainly with Board of Management issues, particularly re- viewing succession planning. The Personnel Committee held four meetings. Dis- cussions focussed on keeping employees safe during the pandemic, promoting women to executive positions, HR processes and services, the development of leadership and corporate culture, and ensuring the preservation of talents and skills. The Finance and Audit Committee met seven times. It examined the financial statements and the combined management report for the company and the Group. The committee also discussed the half-yearly financial report following the review by the auditor and the quarterly fi- nancial statements with the CEO, the Board member for finance and the auditor prior to publication. In addition, it issued the audit engagement for the audit firm elected by the Annual General Meeting and specified the key audit priorities. Also covered at the meetings were the non-audit services provided by the audit firm, the accounting process, risk management and the findings of internal audits. It ob- tained detailed reports from the Chief Compliance Officer on important aspects of compliance and on updates to the compliance organisation and compliance management. The Strategy Committee met six times, primarily ad- dressing the strategic positioning of the individual business Deutsche Post DHL Group – 2021 Annual ReportREPORT OF THE SUPERVISORY BOARD 11 units in their respective market segments and the imple- mentation of our Strategy 2025, as well as the acquisition and sale of equity investments. The particular areas of focus were the further development of the various digitalisation initiatives and the sustainability of business operations in the divisions. In December, the Supervisory Board assigned the committee the responsibility for regularly addressing sustainability- related topics (environment, social, gover- nance – ESG) from a strategic perspective. The Nomination Committee met once. It recommended that the Supervisory Board propose to the 2022 Annual General Meeting that Stefan B. Wintels, CEO of KfW Banken- gruppe, be proposed as a Supervisory Board candidate and successor to Günther Bräunig, who is stepping down at the close of the Annual General Meeting on 6 May 2022. The Mediation Committee did not meet in the year under review. Support of the members of the Supervisory Board The company supports the members of the Supervisory Board in terms of the constantly evolving requirements on their activities. Newly elected members of the Super- visory Board receive a customised introduction in the form of individual meetings with the members of the Board of Management; additional measures include the provision of informational materials, access to a digital data room spe- cially designed for the Supervisory Board and the offer of reimbursement for the cost of attending selected external training events and subscribing to industry publications. In addition, to the extent permitted by the coronavirus restric- tions, regular guided walk-throughs at operating units of the company were held in conjunction with Supervisory Board meetings with the participation of members of the Board of Management. These provided Supervisory Board mem- bers with an in-depth look at operational workflows and conditions on the ground. In June, Directors’ Day covered the topics of the tax situation and internal and external com- munications of the Deutsche  Post  DHL Group; in Septem- ber, it covered the Lieferketten gesetz (Supply Chain Act), Finanzmarktintegritäts stärkungsgesetz (Financial Market Integrity Strengthening Act) and other current develop- ments in the field of corporate governance. Changes to the Board of Management There were no changes to the Board of Management during the year under review. We initiated the change at the top of the company in December. We renewed the appointment of Frank Appel until 4 May 2023. He will thus chair the Board of Manage- ment until the 2023 Annual General Meeting. Tobias Meyer, the Board member responsible for Post & Parcel Germany up until then, will succeed him. In the course of the tran- sition, Tobias Meyer will assume the Global Business Ser- vices Group function from Frank Appel in July 2022. We appointed Nikola Hagleitner, currently head of the business department Sales, Post & Parcel Germany, to head the Post & Parcel Germany division from July 2022 as Tobias Meyer’s successor. Changes to the Supervisory Board There were no changes to the shareholder representatives during the reporting period. The employee representative Thomas Koczelnik stepped down from the Supervisory Board on 31 August 2021. The court appointed Yusuf Özdemir to replace him as a member of the Supervisory Board. An overview of current Supervisory Board members is provided in Boards and committees. Managing conflicts of interest Supervisory Board members neither hold positions on the governing bodies of, nor provide consultancy services to, the Group’s main competitors, nor do they maintain per- sonal relationships with them. No conflicts of interest were reported in the year under review. Company in compliance with all recommendations of the German Corporate Governance Code In December, the members of the Board of Management and the Supervisory Board issued a statement of compli- ance with the recommendations of the German Corporate Governance Code as amended on 16 December 2019 and their intent to continue to comply in the future – with the sole exception that, on a case-by-case basis, a Board of Management member may assume a chairmanship ap- pointment to the supervisory board of a company outside the Group in the final months of their term. We consider it appropriate for experienced members of our Board of Management to assume supervisory board chairmanship appointments outside the Group during the final months of their terms. The statements from past years can be accessed on the company’s website. Further information regarding corporate governance within the company can be found in the Annual Corporate Governance Statement. Deutsche Post DHL Group – 2021 Annual ReportREPORT OF THE SUPERVISORY BOARD 12 agement’s proposal for the appropriation of net retained profit and the payment of a dividend of €1.80 per share. We would like to thank all employees as well as the members of the Board of Management of the company for their outstanding work over the last financial year, which resulted in a correspondingly good profit for the year. Bonn, 8 March 2022 The Supervisory Board Nikolaus von Bomhard Chairman 2021 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 the 2021 financial year, including the combined man- agement report, and issued unqualified audit opinions. PwC also conducted the voluntary review of the half-yearly financial report and the voluntary substantive review of the remuneration report to be approved by the Annual General Meeting without issuing any objections. After prior examination by the Finance and Audit Com- mittee, the Supervisory Board in its meeting today discussed the annual and consolidated financial statements, including the Board of Management’s proposal on the appropriation of the net retained profit, and the combined management report including the combined non- financial statement for the 2021 financial year in depth with the Board of Manage- ment. PwC reported on the results of their audit before the Finance and Audit Committee and plenary meeting and was available to answer questions. The Supervisory Board concurred with the results of the audit and approved the annual and consolidated financial statements for the 2021 financial year, as recommended by the Finance and Audit Committee. No objections were raised on the basis of the final outcome of the examination by the Supervisory Board and the Finance and Audit Committee of the annual and con- solidated financial statements, the combined management report including the combined non-financial statement, and the proposal for the appropriation of the net retained profit. The Supervisory Board endorsed the Board of Man- Deutsche Post DHL Group – 2021 Annual ReportREPORTING PRACTICE 13 REPORTING PRACTICE This publication contains both financial and non-financial information about the results for the 2021 financial year. It was published on 9 March 2022 in German and English and is available PDF. The report sections that are subject to publication requirements are published in the Bundesanzeiger (Federal Gazette), in due consideration of the European Single Electronic Format (ESEF). online and as a Applied reporting standards As a listed company, Deutsche  Post AG has prepared its consolidated financial statements in accordance with Sec- tion 315e Handelsgesetzbuch (HGB – German Commercial Code) in compliance with International Financial Reporting Standards (IFRS s) and the corresponding Interpretations of the International Accounting Standards Board (IASB) as adopted in the European Union. The combined management report comprises the Group Management Report of Deutsche  Post  DHL Group and the Management Report of Deutsche  Post AG. Unless otherwise noted, the information presented refers to the Group. Information pertaining solely to Deutsche  Post AG is identified as such. The combined management report also includes the combined non-financial statement for Deutsche  Post AG and for the Group in accordance with Sections 289b(1) and 315b(1) HGB. The non-financial key performance indica- tors used for managing the Group were determined on the basis of their materiality in accordance with the German Commercial Code; the German Accounting Standards (GASs) were applied, Steering metrics. The Global Reporting Ini- tiative (GRI) standards are taken as the framework for deter- mining material topics, supplemented by HGB requirements. The non-financial statement also includes information aimed at facilitating sustainable investment (EU Taxonomy) in accordance with Article 8 of Regulation 2020 / 852 of the European Parliament and of the European Council. In the interest of avoiding repetition, please also refer to other sec- tions of the management report for reporting on manda- tory disclosures, provided that they already are explained in greater detail there. Information regarding employees ap- plies to all of the Group’s staff; exceptions are noted as such. Independent audit The consolidated financial statements of Deutsche  Post AG and its subsidiaries and the combined management re- port for the financial year from 1 January to 31 Decem- ber 2021 were audited by PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC) in a reasonable as- surance engagement, Auditor’s report. The combined non-financial statement was audited separately by PwC on behalf of the Supervisory Board in a limited and, for certain indicators, reasonable assurance engagement, Practitioner’s report. The contents of the Corporate governance statement pur- suant to Section 289f and 315d HGB have not been audited. Forward-looking statements This report contains forward-looking statements which are not historical facts. They also include statements con- cerning assumptions and expectations which are based upon current plans, estimates and projections, and the information available to Deutsche  Post AG at the time this report was completed. They should not be considered to be assurances of future performance and results contained therein. Instead, they depend on a number of factors and are subject to various risks and uncertainties (particularly those described in the “Expected developments, opportu- nities and risks” section) and are based on assumptions that may prove to be inaccurate. It is possible that actual performance and results may differ from the forward- looking statements made in this report. Deutsche  Post AG undertakes no obligation to update the forward-looking statements contained in this report except as required by applicable law. If Deutsche  Post AG updates one or more forward-looking statements, no assumption can be made that the statement(s) in question or other forward-looking statements will be updated regularly. Additional information Refers to information contained elsewhere in the report. Indicates a hyperlink to content available online that is not part of this report. Separate remuneration report According to Section 162 German Stock Corporation Act (AktG), listed companies are now required to separately prepare a joint remuneration report for the Board of Man- agement and Supervisory Board each year that will be pub- lished on the company’s website. Translation The English version of the 2021 Annual Report of Deutsche Post  DHL Group constitutes a translation of the original German version. Only the German version is legally bind- ing, insofar as this does not conflict with legal provisions in other countries. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT GENERAL INFORMATION 14 COMBINED MANAGEMENT REPORT GENERAL INFORMATION Business model An international service portfolio Deutsche  Post AG is a listed corporation domiciled in Bonn, Germany. Under its DHL and Deutsche  Post brands, Deutsche  Post  DHL Group provides an international service portfolio of services in the areas of express delivery, freight transport, supply chain management, e-commerce solutions and letter and parcel dispatch. The Group is organised into five operating divisions: Express; Global Forwarding, Freight; Supply Chain; eCommerce Solutions; and Post & Parcel Germany. Each of the divisions is managed by its own divi- sional headquarters and subdivided into functions, business units or regions for reporting purposes. The internal services that support the entire Group are consolidated in our Global Business Services unit. Group management functions are centralised in Group Functions. Organisational changes On 1 January 2021, the Corporate Incubations board department was discontinued and Corporate Functions renamed Group Functions. In March 2021, John Pearson’s Board of Management term was extended until December 2026. In June 2021, the Board of Management terms of Tobias Meyer and Melanie Kreis were extended to March 2027 and May 2027, respectively. Corporate structure as at 31 December 2021 Divisions Express Global Forwarding, Freight Supply Chain eCommerce Solutions Post & Parcel Germany Transport of urgent documents and goods, primarily as time- definite international shipments International forwarding services for air, ocean and overland freight Tailor-made logistics services and supply chain solutions based on globally standardised modules such as ware- housing, transport and value-added services Domestic last-mile parcel delivery in selected countries in Europe, the United States and Asia; non- TDI cross-border services to, from and within Europe Transporting, sorting and delivering docu- ments and goods in Germany and export to the rest of the world Share of consolidated revenue 1 2021: 29.0 % 26.4 % 16.8 % 7.1 % 20.7 % Group Functions Corporate Center Global Business Services Customer Solutions & Innovation CEO Finance Human Resources 1 Note 11 to the consolidated financial statements. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT GENERAL INFORMATION 15 The Supervisory Board resolved the following changes in December 2021: The Board of Management term of Oscar de Bok was extended until September 2027. Frank Appel’s term as Chairman of the Board of Management was extended until May 2023. As of 1 July 2022, Tobias Meyer will assume responsibility for Global Business Services. He will be appointed Chairman of the Board of Management on the day after the 2023 Annual General Meeting. Nikola Hagleitner will be appointed as a member of the Board of Management from 1 July 2022 to 30 June 2025. Respon- sibility for Post & Parcel Germany will be transferred to her. A presence that spans the globe Deutsche  Post  DHL Group’s locations can be found in the List of shareholdings. The following description of the divisions shows our market shares and market volumes – where available and useful – in the most important regions. EXPRESS DIVISION A global express network Around 120,000 employees 22 hubs Around 3 million customers Around 111,800 service points More than 500 airports serviced More than 320 dedicated aircraft Around 3,400 facilities More than 220 countries and territories Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT GENERAL INFORMATION 16 Time-definite international shipments In the Express division, we transport urgent documents and goods reliably and on time from door to door. International time-definite shipments are our core business. The divi- sion’s main product is Time Definite International (TDI). Our TDI services enable delivery at predefined times, and our expertise in customs clearance keeps shipments moving as a prerequisite in ensuring fast and reliable door-to-door service. We also provide industry-specific services to round out our TDI product. For example, our Medical Express transport solution, which is tailored specifically to compa- nies in the life sciences and healthcare sector, offers vari- ous types of thermal packaging for temperature -controlled, chilled and frozen contents. Our virtual airline Our global air freight network is operated by multiple air- lines, some of which are wholly owned by the Group. The combination of our own and purchased capacities allows us to respond flexibly to fluctuating demand. The follow- ing graphic illustrates how our available freight capacity is organised and offered on the market. Most of the freight capacity is used for TDI, our main product. If any cargo space remains on our own flights, we sell it to customers in the air freight sector. The largest buyer of remaining capacity is the DHL Global Forwarding business unit. Available capacity Core Express TDI core product – capacity based upon average utilisation, adjusted on a daily basis Keeping our customer service promise In order to keep our commitments to our customers as a global network operator, we monitor their ever-changing requirements, for example through our Insanely Customer Centric Culture programme and with Net Promoter Scores. At our quality control centres, we track shipments across the globe and adjust the processes dynamically as required. All premium products are tracked until they are delivered. We conduct regular reviews of operational safety, compliance with standards and quality of service at our facilities in co-operation with government authorities. Approximately 370 locations have been certified by the Transported Asset Protection Association (TAPA), making us a leader in this area. BSA Block Space Agreement – guaranteed air cargo product ACS Air Capacity Sales, average total spare capacity that is not slated to be utilised for BSA or TDI core volumes Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT GENERAL INFORMATION 17 Around 200 freight terminals GLOBAL FORWARDING, FREIGHT DIVISION Air, ocean and overland freight More than 250,000 customers More than 150 countries and territories Around 45,000 employees Air, ocean and overland freight forwarding services Air, ocean and overland freight forwarding services are our core business. They include standardised transports as well as multimodal and sector-specific solutions, together with customised industrial projects and customs services. Our business model is based upon brokering transport services between customers and freight carriers. The global reach of our network allows us to offer efficient routing and multi- modal transport options. Compared with the Group’s other divisions, our operational business model is asset-light. Air freight achieved volume growth despite uncertain market conditions Despite the pandemic in 2021, we achieved noticeable vol- ume growth with around 2.1 million tonnes (previous year: around 1.7 million tonnes) of export air freight transported. Ocean freight market also reports higher volumes With around 3.1 million 20-foot container units (previous year: around 2.9 million) transported, we managed to in- crease the ocean freight volume under the difficult circum- stances of 2021. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT GENERAL INFORMATION 18 Air and ocean freight market 2021: relevant volumes Air freight (m tonnes) 1 Ocean freight (m TEUs) 2 Asia Pacific 11.6 39.3 Americas 5.5 9.1 Middle East / Africa 1.1 5.3 Europe 6.0 8.4 Other 0.9 1.1 Global 25.1 63.2 1 Data based solely on export freight tonnes. Source: estimate by Seabury Consulting. 2 Twenty-foot container units; estimated part of overall market controlled by forwarders. Data based solely on export volumes. Source: company estimates, Seabury Consulting. We made every effort to push forward with the im- plementation of our standardised Transport Management System in the Freight business unit as well. Meanwhile, we are continually registering new user groups in our myDHLi portal, which is now available in 14 languages. We are also reaching new segments through sales channels such as Saloodo! – our digital marketplace for road freight – and our online freight portal for customers in Sweden. After considerable downturn, European road transport market once again registers strong growth Following a difficult 2020, the European road transport mar- ket once again registered strong growth in the reporting year. At the same time, a series of challenges arose; amongst those, an imbalance between supply and demand resulted in capacity constraints. However, supported primarily by strong growth in demand, DHL strengthened its position within the very fragmented European road transport market. Satisfied customers and automated processes We aim to design our services to be as user-friendly as pos- sible. To do so, we systematically record customer feedback by calculating Net Promoter Scores and conducting annual satisfaction surveys. Based upon the information received, we define initiatives and actions aimed at steadily improv- ing our products and services. Another key enabler to improve the customer expe- rience is our digitalisation roadmap. The global Transport Management System, whose introduction we concluded in the Global Forwarding business unit during the year under review, was the foundation for further scaling of global ap- plications as well as automated and standardised processes. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT GENERAL INFORMATION 19 SUPPLY CHAIN DIVISION Solutions that reduce customer supply chain complexity Around 14 million m2 warehousing and operational space1 Around 177,000 employees Around 10,000 vehicles Most innovative 3PL offering according to Gartner ranking Active in more than 50 countries 1 Includes owned and leased warehouses only and not customer owned facilities operated by DHL. Tailor-made supply chain solutions Our core business comprises tailor-made logistics services and supply chain solutions in order to reduce the complexity for our customers and to add value. We offer a broad prod- uct portfolio including warehouse operations and transport as well as value-added services such as eFulfillment and returns management, Lead Logistics Partner (LLP), Real Estate Solutions, Service Logistics and packaging solutions for strategic industry sectors. We offer modular solutions that allow our customers’ operations to be more agile and more flexible to respond to changed supply chain needs. Standardisation and use of innovative technologies We are constantly striving to increase speed and agility along the entire supply chain through modular standard- isation and the use of new technologies. State-of-the-art digital solutions are already used at more than 80 % of our locations, for example with some 2,000 collaborative robots and some 25,000 smart wearables deployed. In addition, we leverage data analytics to drive operational efficiencies and to enhance the customer experience. We are integrating physical and digital supply chain solutions. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT GENERAL INFORMATION 20 Leading position in contract logistics The global contract logistics market is estimated at around €215.4 billion for the year 2020. DHL is the global market leader in the fragmented market of contract logistics with a market share of 5.8 % (2020) and operations in more than 50 countries. The market share of the second-leading pro- vider is only half as large. Meeting or exceeding quality expectations We continuously build upon our position as a quality leader in contract logistics. With the globally consistent operat- ing standards of our “Operations Management System First Choice”, we ensure that we either meet or exceed our customers’ quality expectations and continuously improve. Thanks to our systematic follow-up on customer feed- back, our satisfaction values (Net Promoter Approach) remain on a consistent high level. Contract logistics market 2020 1 € billion Contract logistics 1 Company estimate. Asia Pacific Americas Middle East / Africa 75.9 63.4 7.8 Europe 68.3 Global 215.4 Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT GENERAL INFORMATION 21 ECOMMERCE SOLUTIONS DIVISION Domestic last-mile parcel delivery and non-TDI cross-border services More than 20 countries More than 1.1 billion parcels More than 70,000 service points Around 40,000 employees Domestic and international non-time-definite parcel delivery Our core business is domestic last-mile parcel delivery in selected countries in Europe, in Asian emerging markets, in the United States and in India and non-TDI cross-border services primarily to, from and within Europe, as well as to, from and within the United States. The domestic last-mile parcel delivery service is pro- vided via our own and partner networks, serving a mix of B2C and B2B customers across all sectors. Our non-TDI cross- border service provides worldwide shipping solutions to enable our customers to capitalise on strong growth in cross- border trade, whilst meeting their expectations for speed, transparency and quality. The DHL Parcel Connect platform is our delivery and returns solution developed es- pecially for e-commerce in Europe, catering to both B2B and B2C, which simplifies pan- European cross- border shipping with a harmonised label, common IT systems, core features and local services. Management of the business is centrally organised according to the regions in which we operate. Satisfied customers and high level of delivery reliability We focus on delivering industry-leading performance as well as quality and service excellence. Even against the background of the pandemic, operational challenges and volume increases, we succeeded in achieving an overall global delivery quality of 95 % (previous year: 94 %). Implementation of the Net Promoter Approach is also being prepared for the eCommerce division. 6 dedicated aircraft Around 22,500 vehicles Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT GENERAL INFORMATION 22 POST & PARCEL GERMANY DIVISION Nationwide post and parcel network in Germany Around 197,000 employees Around 25,500 sales points Around 8,700 Packstations 82 mail centres 37 parcel centres Around 108,600 postboxes Around 49 million letters per working day Around 6.7 million parcels per working day The postal service for Germany As Europe’s largest postal company, our core business is the transport, sorting and delivery of documents and goods. We maintain a nationwide post and parcel network in Germany as depicted in the graphic opposite, which we continually expand in consideration of digitalisation and sustainability. Our products and services in the mail communication segment are targeted towards both private and business customers and range from physical and hybrid letters to special products for the delivery of goods, and include ad- ditional services such as registered mail, cash on delivery and insured items. We expanded our range in 2021 with digital products such as stamps with data matrix codes and the introduction of Poststations as an uninterrupted access point for a variety of postal services. In the year under review, the German market for mail communication for business customers was worth around €4.2 billion (previous year: around €4.3 billion). The struc- tural decline in mail volumes was offset somewhat by the high level of mail-in ballots in the German federal and state elections. We monitor the market in which we compete, in- cluding 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 declined slightly to 61.4 % compared with the prior year (62.6 %). German mail communication market business customers, 2021 Market volume: around €4.2 billion Deutsche  Post Competition Source: company estimates. 61.4 % 38.6 % Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT GENERAL INFORMATION 23 Cross-channel dialogue On request, our Dialogue Marketing unit offers end-to-end solutions to advertisers – from address services and tools for design and creation to printing, delivery and evaluation. This supports cross-channel, personalised and automated dialogue so that digital and physical items with interrelated content are delivered according to a co-ordinated timetable and without any coverage waste. The advertising market in Germany grew by 5.9 % in 2021 to come in at €28.1 billion after the largely pandemic- related decline in the previous year. Due to an expansion of market data, primarily relating to online activities, those reported here diverge from the presentation in the previous year. Our share of the highly fragmented advertising market declined slightly to 6.0 % (previous year, adjusted: 6.4 %). German advertising market 1, 2021 Market volume 2: €28.1 billion Competition Deutsche  Post 94.0 % 6.0 % 1 Includes all advertising media with external distribution costs; the placement costs are shown as ratios. 2 Based on expanded market data, primarily relating to online activities. Source: company estimates. DHL Parcel for companies and private individuals We maintain a dense network of parcel acceptance and drop-off points in Germany, which we expanded in the re- porting year. We offer support to businesses to grow their online retail business. Along with the Supply Chain division, we are able to cover the entire logistics chain through to returns management on request. Various services enable individualised and conve- nient parcel delivery for private customers: parcels can be delivered to an alternative address, a specific retail outlet or a Paketshop at short notice. Furthermore, registered customers can now have all items sent automatically to a Packstation or selected retail outlet. The German parcel market continues to be subject to competition-driven structural changes, with established as well as new companies are offering their services. In e-commerce, the delivery of a portion of shipments is han- dled by the merchant’s own distribution networks. We will increase the number of Packstations to 15,000 by 2023 to make it even more convenient for customers all over Germany to send and receive parcels and to create an environmentally friendly, traffic-reduced parcel delivery system. Fast and reliable delivery According to surveys conducted by Quotas, a quality re- search institute, around 88 % of all domestic letters posted in Germany during daily opening hours at our retail outlets or before final collection were delivered the very next day in the year under review. Around 98 % were delivered within two days. This puts us well above the legally required levels of 80 % (D+1) and 95 % (D+2). In the parcel business, around 79 % of items were de- livered the next working day in the year under review. This reflects parcels collected from business customers that were delivered on the following day. These figures can be deemed very positive in light of the highly demanding op- erational situation caused by the pandemic and growing number of online orders. Our approximately 25,500 sales points were open for an average of 55 hours per week in the year under re- view, as was the case in the previous year. Consumers who use the products and services offered by Deutsche  Post retail outlets primarily operated mostly by retailers are surveyed annually regarding customer satisfaction by “ Kundenmonitor Deutschland”. This study attested to the high level of approval enjoyed by Deutsche  Post retail out- lets: a total of 94.5 % of the persons surveyed were satisfied with quality and service (previous year: 94.6 %). In addi- tion, customers gave our sales points an average rating of 4.31 out of 5 stars in the Deutsche  Post location finder (previous year: 4.39). The fixed-location acceptance and sales network has grown to around 34,000 sites (previous year: 32,000) thanks to the expansion of our Packstation network. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT GENERAL INFORMATION 24 Strategy Navigating safely through a volatile, fast-changing environment We announced Strategy 2025 in October 2019. It draws on the successful elements of Strategy 2015 and 2020, which established us as the world’s leading logistics company. Building on this strong foundation, Strategy 2025 helps us to cement and grow that leading position as the pace of change in the world around us accelerates. We defined our strategic goals in a comprehensive process in which we worked with relevant stakeholders in- cluding employees, customers, suppliers and investors. Our Strategy House illustrates the most important elements of our strategy and how they are connected. Strategy 2025 navigated us safely through the volatile, fast-changing environment brought about by the global pandemic. As part of a yearly assessment, we undertook a detailed review of our corporate strategy and found it not only to be fundamentally sound, but that it had also made Deutsche  Post  DHL Group more resilient in the face of the pandemic. That resilience is the result of disciplined and consistent execution of our Group strategy, with each and every element playing a key role. Strategic triad of purpose, vision and values Our purpose of “Connecting people, improving lives” has never been more important than it is today. In keeping with our vision of being THE logistics company for the world, Deutsche  Post  DHL Group strives to continue leading the industry – and doing so in an increasingly digital and sus- tainability-oriented world. Our core values “Respect and Results” are just as much a part of our strategy today as they have been in the past. Our Purpose Connecting people, improving lives Our Vision We are THE logistics company for the world Our Values Respect & Results Our Mission Excellence. Simply delivered. Along the three bottom lines in a sustainable way Enabled by Common DNA Our Business Unit focus Strengthening the profitable core Supported by Group functions Digitalisation Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT GENERAL INFORMATION 25 The triad of purpose, vision and values underpins the three building blocks of Strategy 2025 – sustained execu- tion excellence along the three bottom lines, becoming an employer, provider and investment of choice, a focus on our profitable core business and digital transformation. We have also cemented sustainability into every part of our business strategy through purpose and our own values. Respect and Results mean that we are committed to each other and together make a positive social contribution. Our purpose “Connecting people, improving lives” guides our efforts and sense of responsibility. Execution excellence along the three bottom lines Our mission “Excellence. Simply delivered.” is defined by the three bottom lines. We believe having motivated and skilled employees is the key to providing excellent service quality and achieving profitable growth. At Deutsche  Post  DHL Group, when we speak of our common DNA we mean the set of behaviours, tools and programmes that we put into practice throughout the Group. Group-wide programmes such as Certified, First Choice and Safety First play an important part in building the common DNA by influencing what we do on a day-to- day basis. Irrespective of division, geographical region or function, our common DNA is an expression of who we are and how we do things at Deutsche  Post  DHL Group. As an integral part of our strategy, sustainability is anchored along our three bottom lines. New policies and regulations across industries, increasingly changing buying habits and the growing focus on sustainable investments have motivated us to serve as a sustainability role model in our industry and to set ourselves ambitious targets. We therefore made sustainability a cornerstone of our Strategy 2025 and an essential element of our mission. With our ESG roadmap, we build on our past achieve- ments and plot a course for future success. The roadmap will serve as guidance in the three areas of environment, social responsibility and corporate governance. Clear ob- jectives were set for each of these areas. We strive for envi- ronmentally friendly logistics and aim to be a great place to work for all and a trustworthy company and partner. We set transparent, time-bound targets and KPIs that enable us to make sustainability an integral component in the yearly planning and strategic cycle, with targets inte- grated into our decision-making process. One key target is to increase the pace of our company’s planned decarbon- isation, Non-financial statement. Divisions focus on profitable core business Our divisions continue to focus relentlessly on their prof- itable core. In so doing, they ensure that our services and solutions can be provided reliably, even in unusual circum- stances. Digital transformation as a key lever Representing a significant lever for sustainable business growth, digital transformation plays a crucial role in our strategy. We therefore invest in initiatives designed to im- prove the experiences our customers and employees have with the company and to increase operational efficiency. Our digitalisation framework has two elements. We are up- grading the IT infrastructure and utilising new technologies throughout the Group. At the same time, we are scaling busi- ness models that augment our core. From 2019 to 2025, our digital transformation spending is expected to reach around €2 billion and to contribute at least €1.5 billion annually to earnings by 2025. In our divisions, we have several initiatives and pro- grammes in place to upgrade the IT backbone, ensure our future agility and increase IT efficiency. In our Centres of Excellence, we have combined technologies and expertise, e. g. in the areas of automation and robotics, data science, API, blockchain and the Internet of Things. They are allow- ing us to foster and build up in-house know-how and scale digital solutions across the divisions. Research and development As a service provider, Deutsche  Post  DHL Group does not engage in research and development activities in the nar- rower sense and therefore has no significant expenses to report in this connection. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT GENERAL INFORMATION 26 Steering metrics Financial and non-financial key performance indicators 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 prior-year data and forecast data to assist in making management decisions. The year-to- year changes in the financial and non-financial performance indicators described here also play an important role in the calculation of management remuneration. The Group’s fi- nancial performance indicators are intended to preserve a balance between profitability, the efficient use of resources and adequate liquidity. How these metrics are computed is illustrated in the Calculations graphic. Their performance in the reporting year is described in the position and in the Non-financial statement. Additional metrics that we will report beginning in 2022 Report on economic are described and forecast in the opportunities and risks section. Expected developments, EBIT and EAC (EBIT after asset charge) The profitability of the Group’s operating divisions is mea- sured as profit from operating activities (EBIT). EBIT after asset charge (EAC) is another key perfor- mance indicator used by the Group. EAC is calculated by subtracting the asset charge, a cost-of-capital component, from EBIT. Making the asset charge a part of business deci- sions encourages the efficient use of resources and ensures that our operational business is geared towards increasing value sustainably whilst improving cash flow. The asset charge is calculated on the basis of the weighted average cost of capital, or WACC, which is defined as the weighted average net cost of interest-bearing liabil- ities and equity, taking into account company- specific risk factors in accordance with the Capital Asset Pricing Model. A standard WACC of 8.5 % is applied across the divisions. That 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 the asset charge with previous figures, in 2021 the WACC used here was maintained at a constant level compared with the previous years. The asset charge is calculated each month so that fluctuations in the net asset base can also be taken into account during the year. The Calculations graphic shows the composition of the Group’s net asset base. Free cash flow facilitates liquidity management Along with EBIT and EAC, cash flow is another key perfor- mance metric used by Group management. The goal is to maintain sufficient liquidity to cover all of the Group’s fi- nancial obligations from debt repayment and dividends, in addition to meeting payment commitments arising from the Group’s operations and investments. Cash flow is cal- culated using the cash flow statement. Operating cash flow (OCF) includes all items that are related directly to operating value creation. Another key parameter impacting OCF is net working 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) is a management indicator de- rived from OCF. It is used as an indicator of how much cash is available to the company for paying out dividends or re- paying debt at the end of a reporting period. Managing greenhouse gas emissions and improving efficiency We aim to reduce the greenhouse gas (GHG) emissions produced by us and our transportation subcontractors as well as our dependency on fossil fuels in order to mitigate our impact on the global climate, improve greenhouse gas efficiency and cut costs. The Carbon Efficiency Index (CEX) was the key per- formance indicator we used to measure GHG efficiency in the reporting period. This metric is based on business- unit- specific emissions intensity figures that are indexed to the base year. The calculation methodology is based on recognised international standards such as the Greenhouse Gas Protocol, DIN EN 16258 and the Global Logistics Emis- sions Council Framework. The CEX reflects GHG emissions excluding those from the upstream chain (tank-to-wheel emissions), while we expanded GHG emissions reporting to include the upstream emissions arising from fuel pro- duction (well-to-wheel emissions) in the reporting period. Employee engagement as a factor for success Motivated and committed employees contribute to the success of the company. In the annual Group-wide survey, each employee has the opportunity to anonymously rate the company’s strategy and values as well as its working conditions. We derive the Employee Engagement key per- formance indicator from these results. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT GENERAL INFORMATION 27 Calculations 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 / loss from investments accounted for using the equity method EBIT Profit from operating activities EBIT Asset charge 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 EBIT 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) Change 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 (excluding provisions for pensions and similar obligations) Cash inflow / outflow arising from acquisitions / divestitures • Trade payables (included in net working capital) 1 • Other non-current operating liabilities 2 Net asset base Cash outflow arising from repayments 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. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 28 REPORT ON ECONOMIC POSITION Forecast / actual comparison Targets for 2021 EBIT 1 Results for 2021 EBIT • Group: more than €7.7 billion • DHL divisions: more than €6.4 billion • Post & Parcel Germany division: €1.7 billion to €1.8 billion • Group Functions: around €–0.4 billion • Group: €8.0 billion • DHL divisions: €6.6 billion • Post & Parcel Germany division: €1.7 billion • Group Functions: €–0.4 billion Targets for 2022 EBIT • Group: around €8.0 billion + / – max. of 5 % • DHL divisions: around €7.0 billion + / – max. of 4 % • Post & Parcel Germany division: around €1.5 billion + / – max. of 10 % • Group Functions: around €–0.45 billion EAC EAC EAC • Projected to develop in line with EBIT and increase • Rose in line with EBIT and increased to €5.2 billion • Slight decline if asset charge increases as forecast Cash flow 1 Cash flow Cash flow • Free cash flow amounts to more than €3.6 billion • Free cash flow amounts to €4.1 billion • Free cash flow 3 amounts to around €3.6 billion + / – max. of 5 % Capital expenditure (capex) 1 Capital expenditure (capex) Capital expenditure (capex) • Investment spending (excluding leasing): around €3.9 billion • Investment spending (excluding leases): €3.9 billion • Investment spending (excluding leases): around €4.2 billion Dividend distribution Dividend distribution Dividend distribution • Dividend payout of 40 % to 60 % of net profit • To be proposed: dividend payout of 42.9 % of adjusted net profit • Dividend payout of 40 % to 60 % of net profit Greenhouse gas efficiency Greenhouse gas efficiency Greenhouse gas emissions • CEX projected to increase by one index point • KPI and targets will be reviewed as part of the ESG roadmap 2 • CEX drops one index point to 36 index points • New metric Realised Decarbonisation Effects replaces CEX Employee Opinion Survey beginning in 2022 Employee Opinion Survey • Employee Engagement approval rate of more than 80 % • Employee Engagement approval rate at 84 % • Realised Decarbonisation Effects 4: 969 kilotonnes of CO2e Employee Engagement • Employee Engagement approval rate of more than 80 % Women in executive positions • Share of women in middle and upper management 4 rises to 25.9 % Lost time injury frequency rate (LTIFR) • LTIFR per 200,000 working hours 4 decreases to 3.7 Compliance-relevant training • Share of valid training certificates in middle and upper management 4 is at least 97 % 1 Forecast adjusted several times during the year. 2  Expected developments, opportunities and risks. Strategy. 3 Calculation does not include the purchase price payment for Hillebrand. 4 New performance indicator to be used for managing the Group, Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 29 Overall assessment In the 2021 financial year, global trade overall once again took off, resulting in increased shipments. All divisions of Deutsche  Post  DHL Group managed to increase revenue, profits and margins – considerably in some cases. In total, Group EBIT came to €8.0 billion and exceeded the most recent forecast figure of more than €7.7 billion. With in- vestments of €3.9 billion, we are continuing the expansion of our infrastructure and strengthening its future viability. Free cash flow of €4.1 billion once again underscores our solid financial foundation and our potential to continue profitable growth in the future. Economic parameters The following figures describing the economic parameters are based on information from IHS Markit. Noticeable global economic growth despite further pandemic waves In 2021, the global economy trended toward recovery from the shock of the COVID-19 pandemic, but fought off set- backs in view of further pandemic waves and the utilisation of intercontinental transport capacities. After a dive in the previous year caused by the pandemic, the gross domestic product (GDP) overall saw positive development worldwide. Average annual GDP rose approximately 5.1 % (previous year: –4.5 %) in the industrial countries and around 6.7 % (previous year: –1.5 %) in the emerging markets. This de- velopment was given additional impetus by accelerated growth in all major economic areas. GDP was up 5.7 % (previous year: –3.4 %) in the United States, saw a robust increase of 8.1 % (previous year: 2.3 %) in China and grew by 5.3 % (previous year: –6.4 %) in the eurozone. Germany’s GDP was up 2.8 % in 2021 after declining 4.9 % in the pre- vious year. Upswing receives support from revival of global commodity flow Global economic output, which is key to logistics and had been rising by an average of 3.1 % per year for the past decade, fell 3.4 % in 2020 and then gained 5.7 % in 2021. For Deutsche  Post  DHL Group, this recovery in industrial demand had a mainly positive impact on the revenue and earnings trends of the DHL divisions. The worldwide up- swing was, in fact, further supported by a revival in the global commodity flow: The IMF’s World Economic Outlook for January forecast an increase of 9.3 % in world trade vol- ume in US dollars based on an assumption of constant real effective exchange rates after –8.2 % in the previous year. Growth was held back by a lack of free market capacity for transport services. At the same time, this led to a significant rise in air, ocean and road freight rates. One of the reasons for the lack of free transport capac- ity was strong demand for all types of consumer goods in the United States. Simultaneous bottlenecks at ports meant that ocean-going fleets worldwide could no longer be de- ployed efficiently. This shortage of ocean freight capacity in turn caused an upturn in demand for air cargo space. As in the previous year, the available supply here was limited as well, because less cargo capacity was available in passenger planes on account of the pandemic. The intersection of the limited ability to expand supply due to the utilisation of intercontinental transport capacities and demand catching up – sometimes by leaps and bounds – caused inflation to rise to levels not seen in decades in some countries. The sharp rise in energy prices, particularly for natural gas and crude oil, was a major factor in this regard. Sustained growth in e-commerce Continued strong consumer spending in the United States additionally reflects the accelerated penetration of the market by e-commerce thanks to the pandemic, a trend also observed in most other markets around the globe. In 2020, initial pandemic-related social distancing measures triggered strong acceleration of structural growth in on- line purchasing. This growth rate continued to exceed the structural trend again in the first six months of 2021. In the second half of 2021, e-commerce-based volumes sta- bilised at the high level of the previous year and therefore underscored the sustained growth brought about by the pandemic. Legal environment In view of our leading market position, many of our services are subject to sector-specific regulation under the Post­ gesetz (PostG – German Postal Act). Further information regarding this issue and legal risks is contained in note 45 to the consolidated financial statements. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 30 Significant events In recognition of their achievements during the pandemic, we paid our employees a special bonus of €300 each, as in the previous year. The total amount of €165 million is contained in staff costs. In keeping with our financial strategy, we bought back shares with a total value of €1 billion during the reporting year. In August, Deutsche Post DHL Group signed an agree- ment to fully acquire J. F. Hillebrand Group AG for approx- imately €1.5 billion. This acquisition serves to accelerate expansion in the dynamic ocean freight forwarding market. Results of operations Portfolio unchanged There were no material changes in our portfolio in the reporting year. Consolidated revenue up 22.5 % In the 2021 financial year, consolidated revenue rose from €66,716 million to €81,747 million, reduced by currency effects in the amount of €301 million. The proportion of revenue generated abroad increased from 70.3 % to 73.6 %. In the fourth quarter of 2021, revenue increased by 22.4 % to €23,378 million, supported by positive currency effects in the amount of €451 million. Other operating income increased by €196 million to €2,291 million. Increase in materials expense Materials expense increased from €33,704 million to €43,897 million, driven primarily by higher transport costs in the Global Forwarding, Freight division, as well as increased fuel costs in the Express division. Staff costs increased by €1,645 million to €23,879 million, due pri- marily to the increase in the number of employees. By contrast, depreciation, amortisation and impairment losses decreased by €62 million to €3,768 million. In the previous year there were impairment losses necessary in the Supply Chain division due to, amongst other factors, lockdown measures. Amongst others, expenses for ad- vertising – for example for our global brand campaign – increased other operating expenses by €442 million to €4,896 million. Consolidated EBIT up 64.6 % Totalling €7,978 million in the year under review, profit from operating activities (EBIT) came in €3,131 million higher and thus well above the prior-year figure (€4,847 million). In the fourth quarter this figure increased from €1,966 mil- lion to €2,213 million. Net finance costs improved from €–676 million to €–619 million. Positive effects on the in- terest expense resulted from changes in the discount rate for non-current provisions. Profit before income taxes improved significantly by €3,188 million to €7,359 million. Income taxes increased by €941 million to €1,936 million also due to an increased tax rate. Sharp improvement in consolidated net profit Consolidated net profit showed a sharp improvement in the 2021 financial year, rising from €3,176 million to €5,423 mil- lion. Of this amount, €5,053 million is attributable to Deutsche  Post AG shareholders and €370 million to non-controlling interest shareholders. Basic earnings per share also rose from €2.41 to €4.10 and diluted earnings per share from €2.36 to €4.01. Selected indicators for results of operations Revenue 1 Profit from operating activities (EBIT) Return on sales 2 EBIT after asset charge (EAC) Consolidated net profit for the period 3 Earnings per share 4 Dividend per share € m € m % € m € m € € 2020 66,716 4,847 7.3 2,199 2,979 2.41 1.35 2021 81,747 7,978 9.8 5,186 5,053 4.10 1.80 5 Q 4 2020 19,093 1,966 10.3 1,310 1,302 1.05 – Q 4 2021 23,378 2,213 9.5 1,488 1,484 1.21 – 1 Adjusted prior-year figures, note 4 to the consolidated financial statements. 2 EBIT/revenue. 3 After deduction of non-controlling interests. 4 Basic earnings per share. 5 Proposal. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 31 Net asset base (consolidated) 1 € m Intangible assets and property, plant and equipment   Net working capital   Operating provisions (excluding provisions for pensions and similar obligations)   Other non-current assets and liabilities   Net asset base 31 Dec.  2020 31 Dec.  2021 + / – % 33,673 36,996 – 505 –162 9.9 67.9 –2,267 –2,472 9.0 35 131 >100 30,936 34,493 11.5 1 Assets and liabilities as described in the segment reporting, note 10 to the consolidated financial statements. Dividend of €1.80 per share proposed Our finance strategy calls for paying out 40 % to 60 % of net profits as dividends as a general rule. The Board of Management and the Supervisory Board will therefore propose to the shareholders at the Annual General Meet- ing on 6 May 2022 a dividend of €1.80 per share for the 2021 financial year (previous year: €1.35). The payout ratio in relation to the consolidated net profit attributable to Deutsche  Post AG shareholders amounts to 43.6 %. Adjusted for significant one-off effects, the payout ratio is 42.9 %. The net dividend yield based on the year-end closing price for our shares is 3.2 %. The dividend will be disbursed on 11 May 2022. Total dividend and dividend per no-par-value share € m 2,205 EBIT after asset charge (EAC) grows significantly EAC improved significantly in 2021, rising from €2,199 mil- lion to €5,186 million. Whilst EBIT was up considerably, the imputed asset charge rose only moderately. EBIT after asset charge (EAC) € m EBIT   Asset charge   EAC 2020 4,847 2021 7,978 –2,648 –2,792 2,199 5,186 + / – % 64.6 – 5.4 >100 The net asset base increased by €3,557 million to €34,493 million as at the reporting date. Intangible assets and property, plant and equipment increased, mainly on ac- count of the acquisition of freight aircraft and investments in warehouses, sorting facilities and the vehicle fleet. Net working capital also rose over the previous year. 1,673 1.80 Operating provisions were up year-on-year, as were 1,409 1,419 1,422 1.15 1.15 1.15 1.35 1,270 1.05 1,027 0.85 other non-current assets and liabilities. 15 16 17 18 19 20 21 1  Dividend per no-par-value share (€). 1 Proposal. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 32 Divisions EXPRESS Continuing to expand and modernise network and intercontinental fleet In 2018, we contracted with Boeing to purchase 14 new B777F aircraft as part of the upgrading of our intercon- tinental fleet. By the end of 2021, all of the new aircraft ordered were delivered and entered service. In 2020, we placed an order with Boeing for an additional eight new B777 freighters; four of these aircraft are scheduled for delivery during 2022. In Europe, all critical hubs have optimally utilised their capacities. Brexit and VAT22 transitions were successful. One important event was the opening of the new hub at Paris Charles de Gaulle Airport. During 2021, two Airbus A321 conversions and two A330-300 conversions entered service. We have also committed to seven B737-800 air- craft which will be delivered during 2022. Moreover, we founded the new company DHL Air Austria as our second European airline, along with European Air Transport Leipzig. Major projects in the Americas region include the ex- pansion of our hub at Miami International Airport and of our gateway at Ontario International Airport. In the US, three additional converted Boeing B737-800 aircraft entered service. In Latin America, a converted Boeing B767-300 was introduced. In addition, dedicated flights from Miami to Santiago de Chile were introduced. We are expanding our retail footprint, adding 56 new retail service points and more than 700 retail partners. In the Asia-Pacific region, we added several new in- tercontinental connections, whilst also expanding our air freight capacity to keep pace with the strong intra-Asia trade. Of the three previously acquired Airbus A330-300 aircraft for conversion, the third unit entered service in early 2021. Another two converted aircraft of this model are planned for delivery during 2022. The additional aircraft enabled the introduction of a direct flight between Hong Kong (HKG) and Penang (PEN). In October, we opened the expanded Bengaluru Gateway in India. Also in the MEA region, we are accelerating our re- gional ground and air investments, with new facilities in Qatar, Bahrain and the United Arab Emirates. Furthermore, we acquired seven B767-300 aircraft for conversion, of which six entered service in 2021. The additional delivery is planned for the start of 2022. With these extensions, daily network flights have been added between Bahrain (BAH), Hong Kong (HKG) and Bangalore (BLR). In sub-Saharan Africa, we committed to four converted ATR72-500 aircraft with the intention these will replace existing older aircraft. Impacts of the pandemic on our business The pandemic had a direct impact on demand for our net- work capacity, as it accelerated online sales growth. In al- most all regions, the shipping volumes of the B2B and B2C e-commerce sectors increased considerably and exceeded expectations. The drastic increase in shipment weights due to the recovery of B2B was also significant. At the same time, the pandemic seriously impacted the supply of air cargo capacity; particularly passenger airlines were impacted, with many flights cancelled and aircraft grounded. Our ability to purchase cargo capacity on commercial flights was curtailed – and, for some lanes, this impact has contin- ued through 2021. To address the increased demand and protect service to destinations to which commercial flight services were reduced or suspended, we have adapted our air network operations by adding more of our own dedi- cated flights. During 2021, we expanded our air network with the ad- dition of several new direct services, for example, between East Midlands (EMA) and Miami (MIA), Hong Kong (HKG) and Miami (MIA), Singapore (SIN) and Melbourne (MEL) and Shenzhen (SZX) and Los Angeles (LAX). In addition, we have introduced the first direct flight from Guangzhou (CAN) to the Americas. International business posts strong revenue growth Revenue in the division increased by 26.6 % in the year under review to €24,217 million. This includes negative currency effects of €157 million. Excluding these effects, the increase in revenue was 27.4 %. The revenue figure also reflects the fact that fuel surcharges were higher than in the previous year in all regions. Excluding currency effects and fuel surcharges, revenue was up by 22.9 %. Per-day revenues and shipment volumes were up in both our Time Definite International (TDI) and our Time Definite Domestic (TDD) product lines in the reporting year. Revenue in the Europe region increased by 25.7 % to €10,193 million in the reporting year, including negative currency effects of €10 million, without which year-on-year revenue growth was 25.8 %. In the TDI product line, per- day revenue increased by 29.8 % and per-day shipment vol- umes by 12.4 %. In the fourth quarter of 2021, international revenues per day were up by 20.1 % and per-day shipment volumes by 0.3 %. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 33 Key figures, Express € 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. Express: revenue by product € m per day 1 Time Definite International (TDI) Time Definite Domestic (TDD) 2020 19,135 8,110 3,971 7,139 1,257 2021 24,217 10,193 5,120 8,871 1,361 –1,342 –1,328 2,751 14.4 4,382 4,220 17.4 5,894 + / – % Q 4 2020 Q 4 2021 + / – % 26.6 25.7 28.9 24.3 8.3 1.0 53.4 – 34.5 5,599 2,424 1,152 2,046 348 –371 1,040 18.6 1,381 6,856 2,863 1,464 2,560 364 –395 1,111 16.2 1,331 22.5 18.1 27.1 25.1 4.6 – 6.5 6.8 – –3.6 2020 57.3 5.0 2021 73.6 5.8 + / – % Q 4 2020 Q 4 2021 28.4 16.0 68.5 6.0 83.0 6.3 + / – % 21.2 5.0 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: volume by product Items per day (thousands) Time Definite International (TDI) Time Definite Domestic (TDD) 2020 1,097 615 2021 1,210 645 + / – % Q 4 2020 Q 4 2021 10.3 4.9 1,289 716 1,281 671 + / – % – 0.6 – 6.3 Revenue in the Americas region rose by 28.9 % to €5,120 million in 2021. Excluding negative currency effects of €89 million, revenue rose by 31.2 %. Per-day TDI volumes were up 18.8 % compared with the previous year. Per-day TDI revenues grew by 38.5 %. In the fourth quarter of 2021, shipment volumes improved by 5.3 % and per-day interna- tional revenues rose 30.3 %. In the Asia Pacific region, revenue improved by 24.3 % to €8,871 million in the reporting year. The revenue figure includes foreign currency gains of €13 million. Revenue growth excluding currency effects was 24.1 %. In the TDI product line, revenue per day increased by 25.1 % and per- day volumes by 6.2 %. Changes in the fourth quarter of 2021 came to 20.9 % for revenues per day and –2.1 % for per-day volumes. Revenue in the MEA (Middle East and Africa) region improved by 8.3 % to €1,361 million in the reporting period. Excluding negative currency effects of €32 million, revenue rose by 10.8 %. Per-day TDI revenues increased by 17.4 % and per-day volumes decreased by 1.0 %. Changes in the fourth quarter of 2021 came to 6.1 % for revenues per day and –15.7 % for per-day volumes. EBIT up sharply year-on-year Division EBIT climbed 53.4 % in 2021 to €4,220 million. Return on sales increased from 14.4 % to 17.4 %. The spe- cial bonus once again paid out amounted to €37 million. Fourth-quarter EBIT was up by 6.8 % to €1,111 million. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 34 GLOBAL FORWARDING, FREIGHT Key figures, Global Forwarding, Freight € m Revenue of which Global Forwarding Freight Consolidation / Other Profit from operating activities (EBIT) Return on sales (%) 2 Operating cash flow 1 Prior-year figures adjusted due to reclassifications. 2 EBIT / revenue. Global Forwarding: revenue € m Air freight Ocean freight Other Total 1 Prior-year figures adjusted due to reclassifications. Global Forwarding: volumes Thousands Air freight exports Ocean freight 1 Prior-year figures adjusted due to reclassifications. 2 Twenty-foot equivalent units. 2020 adjusted 1 15,813 11,579 4,345 –111 592 3.7 665 2021 + / – % Q 4 2020 adjusted 1 Q 4 2021 + / – % 22,833 18,108 4,848 –123 1,303 5.7 1,008 44.4 56.4 11.6 –10.8 >100 – 51.6 4,365 3,212 1,181 –28 173 4.0 259 7,134 5,894 1,270 –30 403 5.6 622 63.4 83.5 7.5 –7.1 >100 – >100 2021 + / – % 2020 adjusted 1 6,137 3,502 1,940 8,788 7,115 2,205 11,579 18,108 Q 4 2020 adjusted 1 1,770 949 493 3,212 Q 4 2021 + / – % 2,848 2,456 590 5,894 60.9 >100 19.7 83.5 43.2 >100 13.7 56.4 2020 adjusted 1 1,667 2,891 2021 + / – % 2,096 3,142 25.7 8.7 Q 4 2020 adjusted 1 478 771 tonnes TEU 2 Q 4 2021 + / – % 561 802 17.4 4.0 Impacts of the pandemic on our business The global forwarding market was still highly affected by the COVID-19 pandemic in 2021. Strong demand for goods drove the volume recovery whilst capacity shortages and infrastructure problems in both air and ocean freight caused freight rates to increase, at times considerably. Seabury Consulting forecasts an increase in total tonnes flown worldwide of 18.4 % for 2021. The ocean freight market also registered an upturn in volumes, though to differing degrees depending on the region. Vessel capacity shortages, overstretched ports or those closed due to pandemic outbreaks, along with the blockage of the Suez Canal, resulted in congestion. Similar to air and ocean freight, the European road transport market also experienced an extraordinary and challenging year in 2021. With COVID lockdowns easing and vaccination attempts rising, economic growth recovered and demand increased significantly. Combined with signif- icantly altered market structures and shortage in important raw materials, this caused tremendous capacity constraints. Positive revenue trend Revenue in the division increased by 44.4 % in the year under review to €22,833 million. Excluding negative cur- rency effects of €84 million, revenue was up 44.9 % year- on-year. In the fourth quarter of 2021, revenue amounted to €7,134 million and exceeded the prior-year figure by 63.4 %. In the Global Forwarding business unit, revenue increased by 56.4 % to €18,108 million in the reporting year. Excluding negative currency effects of €87 million, the increase was 57.1 %. At €3,366 million, gross profit in the Global Forward- ing business unit was likewise up on the prior-year figure of €2,564 million. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 35 Higher gross profit in air and ocean freight, capacity shortages in ocean freight We registered an increase of 25.7 % in air freight volumes in 2021, due mainly to the recovery in global merchandise trade. The highest growth was attributable to the trade lanes between Asia and the United States. Air freight rev- enue exceeded the prior-year level by 43.2 %; gross profit improved by 18.5 %. In the fourth quarter of 2021, air freight revenue rose by 60.9 % whilst gross profit was up 31.9 %. Ocean freight volumes for the year under review were up 8.7 % year-on-year. Ocean freight revenue increased by 103.2 % and gross profit improved by 77.5 % – strongly im- pacted by centrally sourced freight capacity. Continued tight capacities contributed to high freight rates. In the fourth quarter of 2021, ocean freight revenue (+158.8 %) and gross profit (+93.5 %) both saw significant improvements. Revenue increase in European overland transport business Revenue in the Freight business unit increased by 11.6 % to €4,848 million in the reporting year; positive currency ef- fects amounted to €3 million. Volumes were up 7.8 % year- on-year. The gross profit of the business unit also rose by 11.0 % to €1,239 million. The fourth quarter also proved to be stronger with revenue 7.5 % above the previous year. Earnings substantially exceed prior-year figure Division EBIT rose from €592 million to €1,303 million, thus more than doubling in the year under review. With the EBIT margin at 5.7 %, EBIT amounts to 28.3 % of gross profit. At €403 million, fourth quarter division EBIT was also sig- nificantly higher than the prior-period level of €173 million. The special bonus once again paid out in the year under review amounted to €14 million. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 36 SUPPLY CHAIN Key figures, Supply Chain € m Revenue of which EMEA ( Europe, Middle East and Africa) Americas Asia Pacific Consolidation / Other Profit from operating activities (EBIT) Return on sales (%) 2 Operating cash flow 1 Prior-year amounts adjusted due to reclassifications. 2 EBIT / revenue. 2020 adjusted 1 2021 + / – % Q 4 2020 adjusted 1 Q 4 2021 + / – % 12,549 13,864 6,104 4,640 1,814 – 9 424 3.4 6,596 5,266 2,046 – 44 705 5.1 1,063 1,582 10.5 8.1 13.5 12.8 <–100 66.3 – 48.8 3,501 1,689 1,310 505 –3 174 5.0 699 3,655 1,806 1,329 534 –14 198 5.4 664 4.4 6.9 1.5 5.7 <–100 13.8 – – 5.0 Impacts of the pandemic on our business The COVID-19 pandemic once again impacted the contract logistics market in 2021. In some parts, certain sectors were confronted with local lockdown measures and eco- nomic restrictions, thus the pandemic is accounting for global shortages such as semiconductor chips. We were able to manage our customers’ supply chains well thanks to our flexibility, our standardised processes and our targeted data analyses. Strong revenue growth in the year under review Revenue in the division rose by 10.5 % to €13,864 million in the year under review. Excluding negative currency effects of €30 million, revenue exceeded the prior-year figure by 10.7 %. The strong performance registered dur- ing the course of the year extended to all regions and sectors; growing e-commerce business, new business and contract renewals provide further reinforcement. In the fourth quarter of 2021, revenue increased by 4.4 % to €3,655 million. Supply Chain: revenue by sector and region, 2021 Total revenue: €13,864 m of which Retail Consumer Auto-mobility Technology Life Sciences & Healthcare Engineering & Manufacturing Others of which Europe / Middle East / Africa / Consolidation Americas Asia Pacific 29 % 22 % 14 % 13 % 12 % 6 % 4 % 47 % 38 % 15 % New business worth €1,409 million secured The division concluded additional contracts worth €1,409 million (annualised revenue) in the reporting period, which corresponds to a contract volume of €5,104 million. This represents a further year-on-year increase of 8.7 %. The Retail including e-commerce, Consumer, and Life Sciences & Healthcare sectors accounted for the majority of the new business. Solutions based on e-commerce ac- counted for a 28 % share of new business. The annualised contract renewal rate remained at a consistently high level. Earnings performance significantly higher than previous year EBIT in the division rose significantly to €705 million in the year under review (previous year: €424 million). In the previous year, EBIT was affected by extraordinary expenses of €62 million caused by non recurring impairment losses resulting from lockdown measures and the payment of a special bonus totalling €52 million. The special bonus once again paid out in the year under review amounted to €47 million. Strong revenue growth, productivity improve- ments and digitalisation initiatives contributed significantly to the earnings growth. The EBIT margin was 5.1 % in the year under review. EBIT for the fourth quarter of 2021 rose from €174 million to €198 million. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 37 ECOMMERCE SOLUTIONS Key figures, eCommerce Solutions € m Revenue of which Americas Europe Asia Other / Consolidation Profit from operating activities (EBIT) Return on sales (%) 1 Operating cash flow 1 EBIT / revenue. Impacts of the pandemic on our business Besides the ongoing global shift from traditional retail businesses to e-commerce, the pandemic and pandemic- related factors have continued to accelerate the trend towards online shopping in 2021. Across all regions, we have seen increases in shipping volumes, especially in the B2C e-commerce sector. Revenue growth in all regions The division generated revenue of €5,928 million in the year under review, up 22.8 % on the prior-year figure. The increase in revenue in all regions is attributable to higher volumes in the B2C business. Excluding negative currency effects of €38 million, revenue was up a total of 23.5 % year- on-year. Division revenue increased by 14.4 % in the fourth quarter of 2021 to €1,664 million. 2020 4,829 1,629 2,618 593 –11 158 3.3 337 2021 5,928 2,079 3,140 719 –10 417 7.0 654 + / – % Q 4 2020 Q 4 2021 + / – % 22.8 27.6 19.9 21.2 9.1 >100 – 94.1 1,455 1,664 495 785 182 –7 75 5.2 37 617 855 195 –3 93 5.6 99 14.4 24.6 8.9 7.1 57.1 24.0 – >100 Significant year-on-year increase in EBIT EBIT in the division increased to €417 million in the year under review (previous year: €158 million). This was due mainly to higher revenues in the B2C business and strict cost management. In the previous year, nonrecurring impairment losses of €30 million were recognised in the second quarter, and the payment of a special bonus of €10 million was recognised in the third quarter. The special bonus paid once again amounted to €11 million in the re- porting period. The EBIT margin was 7.0 %. EBIT amounted to €93 million (previous year: €75 million) in the fourth quarter of 2021. POST & PARCEL GERMANY Impacts of the pandemic on our business The ongoing COVID-19 pandemic has accelerated the struc- tural transformation already underway in the mail delivery market. As conventional letter mail volumes containing documents continue to decline, volumes of goods ship- ments are growing, in some cases substantially, although the retail sector was largely open for business in the year under review. The Dialogue Marketing business unit performed well: the advertising spend in mail-order retailing grew in con- trast to the weak previous year, primarily an effect of the pandemic. The parcel market is continuing to register significant growth driven by the ongoing shift from retail sale busi- nesses to online sales across many categories of goods. Revenue surpasses prior-year level At €17,445 million, division revenue exceeded the prior-year figure by 6.0 % in the year under review. The increase was driven in particular by continued strong growth in the Ger- man parcel business. Revenue for the fourth quarter of 2021 was down slightly by 0.6 % versus the prior year. Varying business unit performance In the reporting year, Mail Communication saw revenue and volumes follow the overall sustained downward trend, as expected. This development was mitigated somewhat by the unusually high percentage of people voting by mail in Germany’s federal and state elections. After three years of price stability, the prices of some mail products subject to regulation were increased moderately as of 1 January 2022, Expected developments, opportunities and risks. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 38 In the course of 2021, Dialogue Marketing’s revenue and sales volumes outperformed their levels of the previ- ous year, which was affected by the lockdown, when adver- tising expenditure was reduced in the retail segment in particular. The German parcel business saw pandemic-related restrictions on traditional retail strongly boost growth until mid-year. Despite shops increasingly opening again, the volumes remained at a high level in the second half. Supported by rate increases, revenue generated by Parcel Germany rose by 14.7 % in the year under review. During the year under review, imports shipped as let- ter mail were significantly impacted by declining volumes of lightweight shipments of goods coming from China due to changes in European import rules. By contrast, imports shipped as parcels again recorded significant growth over the course of the year. In terms of goods and documents exported to the rest of Europe and the world, document shipments declined slightly, whereas the number of mer- chandise shipments rose again. EBIT improvement over prior year EBIT in the division improved by 9.7 % to €1,747 million in the year under review. This was due mainly to higher rev- enues in the domestic and international parcel business and strict cost management. In contrast, Mail Communication saw revenue drop slightly. The EBIT figure includes the spe- cial bonus payment to employees totalling €52 million. The special bonus amounting to €51 million was included in the previous year’s figure. Division EBIT in the fourth quarter of 2021 totalled €576 million, a decline of 14.5 %. The higher revenue in the prior-year quarter due to the pandemic as well as higher material costs to ensure high quality during the Christmas season influenced EBIT. Key figures, Post & Parcel Germany € m Revenue of which Post Germany Parcel Germany International Other / Consolidation Profit from operating activities (EBIT) Return on sales (%) 1 Operating cash flow 1 EBIT / revenue. Post & Parcel Germany: revenue € m Post Germany of which Mail Communication Dialogue Marketing Other / Consolidation (Post Germany) Parcel Germany Post & Parcel Germany: volumes Mail items (millions) Post Germany of which Mail Communication Dialogue Marketing Parcel Germany 2020 2021 + / – % Q 4 2020 Q 4 2021 + / – % 16,455 17,445 8,030 5,915 2,397 113 1,592 9.7 1,703 2020 8,030 5,525 1,804 701 5,915 7,995 6,785 2,570 95 1,747 10.0 1,811 2021 7,995 5,473 1,811 711 6,785 6.0 – 0.4 14.7 7.2 –15.9 9.7 – 6.3 4,801 2,211 1,839 726 25 674 14.0 695 4,771 2,197 1,840 714 20 576 12.1 346 + / – % Q 4 2020 Q 4 2021 – 0.4 – 0.9 0.4 1.4 14.7 2,211 1,519 507 185 2,197 1,478 530 189 1,839 1,840 – 0.6 – 0.6 0.1 –1.7 –20.0 –14.5 – – 50.2 + / – % – 0.6 –2.7 4.5 2.2 0.1 2020 2021 + / – % Q 4 2020 Q 4 2021 + / – % 14,260 14,216 6,420 6,827 1,614 6,314 6,928 1,818 – 0.3 –1.7 1.5 12.6 3,889 1,753 1,870 498 3,942 1,687 1,992 488 1.4 –3.8 6.5 –2.0 Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 39 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 financing activities 2020 4,482 1,809 7,699 –3,640 –2,250 2021 3,531 –1,055 9,993 – 4,824 – 6,224 Q 4 2020 Q 4 2021 4,482 233 2,918 –1,672 –1,013 3,531 – 444 2,616 –2,184 – 876 Financial management is a centralised function in the Group The Group’s financial management activities include man- aging liquidity along with hedging against fluctuations in interest rates, currencies and commodity prices, arranging Group financing, issuing guarantees and letters of comfort and liaising with rating agencies. Responsibility for these activities rests with Corporate Finance at Group headquar- ters in Bonn, which is supported by three Regional Trea- sury Centres in Bonn ( Germany), Weston (Florida, USA) and Singapore. The regional centres act as interfaces between Group headquarters and the operating companies, advise the companies on financial management issues and ensure compliance with Group-wide requirements. Corporate Finance’s main task is to minimise financial risk and the cost of capital in addition to preserving the Group’s financial stability and flexibility over the long term. In order to maintain its unrestricted access to the capital markets, the Group continues to aim for a credit rating ap- propriate to the sector. The Group pursued its proven finance strategy once again in the 2021 financial year, which, in addition to the interests of shareholders, also takes the creditor require- ments into account. The finance strategy will be further enhanced in 2022. FFO to debt € m Operating cash flow before changes in working capital   Interest received   Interest paid   Adjustment for pensions 2020 2021 8,103 10,423 67 556 97 91 550 102   Funds from operations, FFO 7,711 10,066 Reported financial liabilities 19,098 19,897   Financial liabilities at fair value through profit or loss   Adjustment for pensions   Surplus cash and near-cash investments 1   Debt FFO to debt (%) 54 5,826 4,350 13 3,777 4,089 20,520 19,572 37.6 51.4 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 re- ceived less interest paid and adjusted for pensions, as shown in the FFO to debt calculation. In addition to finan- cial liabilities and surplus cash and near-cash investments, the figure for debt also includes pension liabilities funded by provisions. The FFO to debt performance metric saw a significant year-on-year increase in the year under review because funds from operations rose whilst debt decreased. Funds from operations were up by €2,355 million to €10,066 million, mainly on account of a positive change in operating cash flow before changes in working capital. Debt decreased by €948 million year-on-year to €19,572 million. Reported financial liabilities increased, mainly as a result of higher lease liabilities. Conversely, a bond was repaid in the amount of €750 million in the year under review. The adjustment for pensions decreased, because pension obligations decreased whilst the plan assets increased. Surplus cash and near-cash investments dropped despite free cash flow of €4,092 million, primarily due to dividends paid out, payments for the share buy-back programme, the repayment of a bond and increased cash needed for operations. Cash and liquidity managed centrally The cash and liquidity of our globally operating subsidiaries is managed centrally by Corporate Treasury. Approximately 80 % of the Group’s external revenue is consolidated in cash pools and used to balance internal liquidity needs. In coun- tries where this practice is ruled out for legal reasons, inter- nal 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 Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 40 of individual banks. Our subsidiaries’ intra-Group revenue is also pooled and managed by our in-house bank (inter-com- pany clearing) in order to avoid paying external bank charges and margins. Payment transactions are executed in accordance with uniform guidelines using standardised processes and IT systems. Many Group companies pool their external payment transactions in the intra- Group Payment Factory, which executes payments on behalf of the respective companies via Deutsche  Post AG’s central bank accounts. Limiting market risk The Group uses both primary and derivative financial in- struments to limit market risk. Interest rate risk is man- aged exclusively via swaps. Currency risk is additionally hedged using forward transactions, cross-currency swaps and options. We pass on most of the risk arising from com- modity fluctuations to our customers and, to some extent, use commodity swaps to manage the remaining risk. The parameters, responsibilities and controls governing 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 stabil- ity and also provides adequate flexibility. Our most impor- tant source of funds is net cash from operating activities. We also have a syndicated credit facility in a total vol- ume of €2 billion that guarantees us favourable market conditions and acts as a secure, long-term liquidity reserve. The term of the syndicated credit facility is through 2025, it does not contain any further covenants concerning the Group’s financial indicators and, thanks to our solid liquid- ity situation, it 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 independent sources of financing, such as bonds, promissory note loans and leases. Most debt is taken out centrally in order to leverage economies of scale and specialisation benefits and hence minimise borrowing costs. One bond in the amount of €750 million was repaid in the year under review. Information on bonds is contained in note 39 to the consolidated financial statements. No change in the Group’s credit rating The ratings of “BBB+” issued by Fitch Ratings (Fitch) and “A3” issued by Moody’s Investors Service (Moody’s) remain in effect for our credit quality. The stable outlook from both rating agencies also still applies. We remain well positioned in the transport and logistics sector with these ratings. The following table shows the ratings as at the reporting date and the underlying factors. The complete and current anal- yses by the rating agencies and the rating categories can be found under Creditor relations. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 41 Agency ratings Fitch Long-term: BBB+ Short-term: F2 Outlook: stable  Rating factors Moody’s Long-term: A3 Short-term: P –2 Outlook: stable  Rating factors • Balanced business risk profile • Growth in parcel and express business fuelled by e-commerce • Dynamic volume growth in Time Definite International and Time Definite Domestic products • Solid credit metrics and good liquidity • Large scale and strong business profile, supported by global leadership positions in express and logistics, and by the large German mail business • Support that is built into the rating because of the German government’s indirect shareholding and the importance of the company’s services to the German economy • Solid financial profile • Good earnings momentum supported by solid e-commerce growth  Rating factors  Rating factors • Structural mail volume decline in the Post & Parcel Germany division and challenges in managing • Challenges faced in domestic letter mail business which result from the structural decrease in the cost structure in the division conventional letter mail • Exposure to global market volatility and competitiveness through the DHL divisions • Exposure to highly competitive mature markets and volatile market conditions in the logistics business • Increasing capital spending, which hampers cash generation Liquidity and sources of funds As at the reporting date, the Group had cash and cash equivalents in the amount of €3.5 billion (previous year: €4.5 billion) at its disposal. The centrally available cash is either invested on the money and capital markets in the short term or deposited in existing bank accounts. These central, short-term financial investments had a volume of €3.6 billion as at the reporting date (previous year: €3.9 billion). The following table gives a breakdown of the financial li- abilities reported in the balance sheet. Additional information is provided in note 39 to the consolidated financial statements. Financial liabilities € m Lease liabilities Bonds Amounts due to banks Promissory note loans Financial liabilities at fair value through profit or loss Other financial liabilities 2020 2021 10,459 11,805 7,410 6,669 479 150 54 546 544 150 13 716 19,098 19,897 Capital expenditure for assets acquired above prior-year level Investments in property, plant and equipment and intan- gible assets acquired (excluding goodwill) amounted to €3,895 million in the year under review (previous year: €2,999 million). Please refer to note 10, 22 and 23 to the consolidated financial statements for a breakdown of capex into asset classes and regions. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 42 Capex and depreciation, amortisation and impairment losses, full year Express 2021 1,707 1,246 2,953 2020 1,428 974 2,402 Global Forwarding, Freight Supply Chain eCommerce Solutions Post & Parcel Germany Group Functions Consolidation 1 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 104 207 311 132 215 347 351 973 483 667 1,324 1,150 141 143 284 245 178 423 590 14 604 883 14 897 385 448 833 445 760 1,205 1,383 1,511 246 245 920 756 169 179 329 334 784 744 1.74 1.95 1.26 1.42 1.44 1.52 1.68 2.36 1.84 2.69 1.06 1.62 Group 2021 3,895 3,080 6,975 2020 2,999 2,759 5,758 0 0 0 –1 3,830 3,768 – 1.50 1.85 0 0 0 –1 – Capex (€ m) relating to acquired assets Capex (€ m) relating to leased assets Total (€ m) Depreciation, amortisation and impairment losses (€ m) Ratio of total capex to depreciation, amortisation and impairment losses 1 Including rounding. Capex and depreciation, amortisation and impairment losses, Q 4 Global Forwarding, Freight Express Supply Chain eCommerce Solutions Post & Parcel Germany Group Functions Consolidation 1 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 737 259 996 758 334 1,092 41 74 115 355 400 60 37 60 97 65 99 289 388 166 155 321 79 39 118 138 90 228 2020 260 2 262 2021 403 5 408 165 151 316 136 263 399 228 117 43 51 89 90 190 190 2.81 2.73 1.92 1.49 1.70 2.74 2.74 4.47 2.94 4.53 1.66 2.10 Group 2021 1,638 906 2020 1,381 814 2,195 2,544 965 912 2.27 2.79 0 0 0 0 – 0 –1 –1 –1 – Capex (€ m) relating to acquired assets Capex (€ m) relating to leased assets Total (€ m) Depreciation, amortisation and impairment losses (€ m) Ratio of total capex to depreciation, amortisation and impairment losses 1 Including rounding. Investments in the Express division related to buildings and technical equipment. Continuous maintenance and renewal of our intercontinental air fleet represented an additional focus of investment spending. In the Global Forwarding, Freight division, we invested in warehouses, office buildings and IT. In the Supply Chain division, the majority of funds were invested to support customer implementations in all re- gions, mostly in the Americas and EMEA regions. In the eCommerce Solutions division, most of the in- vestments were attributable to network expansion in the Netherlands, the Czech Republic and the United States. In the Post & Parcel Germany division, the largest capex portion was attributable to the expansion of our infrastruc- ture. The acquisition and development of property were stepped up in the year under review. Another key focus was expanding Packstations. At Group Functions, investments in the reporting year were mainly in the vehicle fleet and IT solutions. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 43 Significantly higher operating cash flow Net cash from operating activities increased significantly from €7,699 million to €9,993 million. Based upon EBIT, which at €7,978 million was well over the prior-year figure (€4,847 million), all non-cash income and expense items were adjusted. Income tax payments rose by €569 million to €1,323 million. At €430 million, the cash outflow from changes in the working capital was €26 million higher than in the previous year. Net cash used in investing activities increased from €3,640 million to €4,824 million. Cash paid to acquire non-current assets also rose, from €2,945 million in the previous year to €3,767 million in the year under review. Most of this was for the ongoing expansion and renewal of our vehicle and air fleets. The purchase of money market funds totalling €950 million led to, amongst other effects, cash paid to acquire current financial assets amounting to €1,508 million (previous year: €933 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 outflow / inflow from acquisitions / divestitures Proceeds from lease receivables Interest from lease receivables Repayment of lease liabilities Interest on lease liabilities Free cash flow showed a sharp improvement from Cash outflow for leases €2,535 million to €4,092 million. Interest received (without leasing) Interest paid (without leasing) Net interest paid Free cash flow 2020 7,699 122 –2,922 2021 9,993 190 –3,736 Q 4 2020 2,918 38 –1,259 Q 4 2021 2,616 102 –1,456 –2,800 –3,546 –1,221 –1,354 5 0 0 –13 – 8 27 0 –1,894 –394 –2,261 67 –162 – 95 2,535 13 1 0 –2 12 143 16 –2,051 –383 –2,275 75 –167 – 92 4,092 1 0 0 0 1 10 0 – 478 – 96 – 564 16 –75 – 59 1,075 10 1 0 0 11 122 16 – 532 –100 – 494 22 – 68 – 46 733 Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION 44 Net cash used in financing activities amounted to €6,224 mil- lion and was thus well above the prior-year figure (€2,250 million) which was primarily impacted by inflows from bonds issued in the amount of €2.2 billion. In the year under review, by contrast, we paid back a bond in the amount of €750 million. The dividend paid out to our shareholders in May increased by €251 million to €1,673 million. The share buy-back programme in particular increased the acquisition of treasury shares to €1,115 million. Cash and cash equivalents fell from €4,482 million as at 31 December 2020 to €3,531 million. Net assets Selected indicators for net assets Equity ratio Net debt Net interest cover Net gearing 31 Dec. 2020 31 Dec. 2021 25.5 30.7 12,928 12,772 9.9 47.9 17.4 39.6 % € m % Consolidated total assets up sharply The Group’s total assets amounted to €63,592 million as at 31 December 2021, €8,285 million higher than at 31 De- cember 2020 (€55,307 million). Intangible assets rose from €11,658 million to €12,076 million, mainly because positive currency ef- fects led to an increase in goodwill. Property, plant and equipment grew significantly from €22,007 million to €24,903 million, as investments and positive currency ef- fects exceeded disposals and depreciation, amortisation and impairment losses. Non-current financial assets rose from €746 million to €1,190 million, primarily because lease receivables increased. Other non-current assets grew by €427 million to €587 million; actuarial gains in par- ticular increased pension assets. Current financial assets increased significantly from €1,315 million to €3,088 mil- lion also due to our investment of €950 million in money market funds. Trade receivables rose by €2,698 million to €11,683 million. Cash and cash equivalents decreased by €951 million to €3,531 million. At €19,037 million, equity attributable to Deutsche Post AG shareholders was well above the figure as at 31 December 2020 (€13,777 million). Actuarial gains from pension obligations, currency effects and consolidated net profit in particular increased this figure, whilst the dividend payment and share buy-backs decreased it. Higher interest rates resulted in a steep decrease in provisions for pensions and other obligations by €1,650 million to €4,185 million. Financial liabilities increased from €19,098 million to €19,897 million, primarily due to lease liabilities having risen on account of investments. Trade payables increased from €7,309 million to €9,556 million. Other current liabilities increased by €1,003 million to €6,138 million due also to an increase in customs and duties which we assumed for our customers. Balance sheet structure of the Group as at 31 December € m Intangible assets ASSETS 63,592 55,307 21 % 19 % Property, plant and equipment 40 % 39 % Trade receivables 16 % 18 % EQUITY AND LIABILITIES 63,592 55,307 Equity 26 % 31 % Non-current provisions and liabilities 43 % 36 % Other assets 23 % 24 % Current provisions and liabilities 31 % 33 % 2020 2021 2020 2021 Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT REPORT ON ECONOMIC POSITION – DEUTSCHE POST AG (HGB) 45 Net debt drops slightly to €12,772 million Our net debt declined slightly from €12,928 million as at 31 December 2020 to €12,772 million as at 31 Decem - ber 2021. At 30.7 %, the equity ratio was well above the prior-year figure (25.5 %). At 17.4, net interest cover was also noticeably up on the previous year’s level (9.9). Net gearing was 39.6 % as at 31 December 2021. 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 31 Dec. 2020 15,833 31 Dec. 2021 16,589 2,893 2,802 18,726 19,391 4,482 1,315 3,531 3,088 1 0 5,798 6,619 12,928 12,772 DEUTSCHE POST AG (HGB) Deutsche  Post AG as parent company In addition to the reporting on the Group, the performance of Deutsche  Post AG is outlined below. As the parent company of Deutsche  Post  DHL Group, Deutsche  Post AG prepares its consolidated financial state- ments in accordance with the principles of the Handels­ gesetzbuch (HGB – German Commercial Code) and the Ak­ tiengesetz (AktG – German Stock Corporation Act). The HGB financial statements are relevant for calculating the dividend. There are no separate performance indicators relevant for management purposes that are applicable to the parent company Deutsche  Post AG as a legal entity. For this reason, the explanations presented for Deutsche  Post  DHL Group are also applicable to Deutsche  Post AG. 1 Less operating financial liabilities. 2 Recognised in non-current financial assets in the balance sheet. Employees The number of full-time equivalents at Deutsche  Post AG at the reporting date was 165,221 (previous year: 166,143). Results of operations Revenue grew by a total of €1,025 million (6.6 %) year- on-year. Revenue from German letter mail business was €7,670 million in the year under review and thus 0.6 % below the prior-year level of €7,716 million. Of this revenue, €4,952 million (previous year: €5,085 million) was at - tributable to Mail Communication, €1,697 million (previous year: €1,693 million) to Dialogue Marketing and €1,021 mil- lion (previous year: €938 million) to other services. Rev- enue in the German parcel business in the reporting year was €6,120 million, exceeding the prior-year figure of €5,164 million by 18.5 %. This is primarily attributable to the rise in deliveries due to the pandemic as well as price increases vis-à-vis intra-Group companies. Revenue of €2,159 million (previous year: €2,079 million) was reported for our International business unit in the reporting period. Other revenue amounted to €661 million (previous year: €626 million). Income statement for Deutsche  Post AG (HGB) 1 January to 31 December € m Revenue Other own work capitalised Other operating income Materials expense Staff costs Amortisation of intangible assets and depreciation of property, plant and equipment Other operating expenses Financial result Taxes on income 2020 15,585 53 972 2021 16,610 77 1,109 16,610 17,796 – 5,207 – 8,532 – 5,756 – 8,844 –291 –2,156 –317 –2,134 –16,186 –17,051 2,765 3,616 –274 – 426 Result after tax / Net profit for the period 2,915 3,935 Retained profits brought forward from previous year Net retained profit 5,062 6,304 7,977 10,239 Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT DEUTSCHE POST AG (HGB) 46 Other operating income registered a year-on-year increase of €137 million, or 14.1 %, driven mainly by higher income from disposals of assets as a result of real estate sales. Materials expense rose by €549 million on account of an increase in the cost of transport services for letters and parcels as well as an increase for leases and rents. Staff costs rose by €312 million year-on-year, due pri- marily to a tariff increase of 3 % and the associated social insurance contributions. A special bonus of €52 million (previous year: €50 million) was paid in the financial year under review. The decrease in other operating expenses by €22 million stemmed mainly from lower currency expenses (€116 mil- lion) and higher expenses for service level agreements (€63 million) and purchased services (€32 million). The financial result in the amount of €3,616 million (previous year: €2,765 million) mainly comprises net invest- ment income of €4,085 million (previous year: €3,399 mil- lion) and a net interest expense of €460 million (previous year: €634 million). The change in net investment income is due mainly to the €668 million increase in income from profit transfer agreements attributable to Deutsche  Post Beteiligungen Holding GmbH. Deutsche  Post Beteiligun- gen Holding GmbH’s earnings were the result of higher profit transfers thanks to very good operating results generated by the subsidiaries, the reversal of impairment losses on carrying amounts of investments in subsidiaries and income from the disposal of investments as a result of a transfer within the Group. Higher income from plan assets led to the improvement in net interest expenses. After accounting for taxes on income of €–426 million (previous year: €–274 million), net profit for the period totalled €3,935 million (previous year: €2,915 million). In- cluding retained profits carried forward, net retained profit for the period amounted to €10,239 million (previous year: €7,977 million). Net assets and financial position Total assets up Total assets rose to €46,255 million as at the reporting date (previous year: €43,012 million). Fixed assets declined from €19,333 million to €17,365 million. Investments in property, plant and equip- ment totalled €700 million (previous year: €475 million) and related mainly to land and buildings (€277 million), technical equipment (€130 million) and advance pay- ments and assets under development (€237 million). In- vestments were made mainly in mail and parcel centres, conveyor and sorting systems, Packstations and real estate for network expansion. Non-current financial assets were down €2,428 million. Shares in affiliated companies were up in particular through equity measures, increasing by €5,483 million in the reporting period, mostly due to the carrying amount of Deutsche  Post Beteiligungen GmbH. Loans to affiliated companies declined by €7,910 million, because Group financing was shifted largely to short-term cash management in current assets. Balance sheet of Deutsche  Post AG (HGB) as at 31 December € m ASSETS Fixed assets Intangible assets Property, plant and equipment Non-current financial assets Current assets Inventories Receivables and other assets Securities Cash and cash equivalents Prepaid expenses TOTAL ASSETS EQUITY AND LIABILITIES Equity Subscribed capital Treasury shares Issued capital (Contingent capital: €139 million) Capital reserves Revenue reserves Net retained profit Provisions Liabilities Deferred income 2020 2021 190 3,430 15,713 19,333 232 3,848 13,285 17,365 68 79 19,251 24,795 1,208 2,767 1,745 1,861 23,294 28,480 385 410 43,012 46,255 1,239 0 1,239 4,670 4,480 7,977 18,366 5,388 1,239 –15 1,224 4,679 3,598 10,239 19,740 5,227 19,186 21,198 72 90 TOTAL EQUITY AND LIABILITIES 43,012 46,255 Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT DEUTSCHE POST AG (HGB) 47 on Deutsche  Post AG through net investment income from profit transfer agreements. As a result, the subsidiaries’ fu- ture operating results also influence the future results of Deutsche  Post AG. The HGB financial statements are rel- evant for calculating the dividend. For the 2022 financial year, we anticipate a result for Deutsche  Post AG that will enable a dividend payment compatible with our financial strategy. Current assets grew by €5,186 million, due largely to an increase of €5,624 million in receivables from affiliated companies resulting from intra-Group cash management (€4,955 million) and profit transfer agreements (€668 mil- lion). In addition, securities holdings increased by €537 mil- lion. Cash and cash equivalents decreased by €906 million. Equity was up from €18,366 million in the previous year to €19,740 million. The 2021 distribution to sharehold- ers totalling €1,673 million was more than entirely offset by the net profit for 2021 of €3,935 million. Revenue re- serves declined by €882 million, with the share buy-back programme reducing this figure by €982 million. The off- setting increase in the revenue reserves by €100 million and the increase in capital reserves by €9 million are at- tributable to the commitment and settlement of shares for executive remuneration plans. The equity ratio remained the same at 42.7 %. Provisions were down by €161 million in the report- ing period. Provisions for pensions and similar obligations decreased by €11 million, provisions for taxes by €97 mil- lion and other provisions by €53 million. The decline in provisions for taxes is due to higher advance income tax payments. Other provisions were down because of a de- crease in obligations for the early retirement programme of €67 million. Liabilities increased by €2,012 million to €21,198 mil- lion. The liabilities arising from bonds were down by €750 million. A bond with a principal amount of €750 mil- lion was repaid. Liabilities to banks rose by €31 million. The increase in liabilities to affiliated companies amounting to €3,027 million resulted largely from intra-Group cash management. Decline in cash funds Deutsche  Post AG’s cash funds declined by €906 million to €1,861 million in the 2021 financial year. This was sig- nificantly influenced by the share buy-back programme (€1,000 million), the repayment of a bond (€750 million), the increase in securities (€537 million) and the offsetting higher operating profit. Increase in debt Deutsche  Post AG’s debt (provisions and liabilities) rose by €1,851 million to €26,425 million compared with the previ- ous year. The increase was due chiefly to higher liabilities to affiliated companies (€3,027 million) and lower liabilities arising from bonds (€750 million) in the year under review. Expected developments, opportunities and risks Deutsche  Post AG is included fully in the Group’s interna- tional strategy and associated performance forecast. Since Deutsche  Post AG is interconnected, to a large degree, with the companies of Deutsche  Post  DHL Group through ar- rangements including financing and guarantee commit- ments and direct and indirect investments in its investees, Deutsche  Post AG’s opportunities and risks align closely with those of the Group. The section titled Expected developments, opportunities and risks therefore also covers expected developments, opportunities and risks with re- spect to the parent company. The Post & Parcel Germany division reflects Deutsche  Post AG’s core business in mate- rial respects. The DHL divisions have an indirect influence Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT NON-FINANCIAL STATEMENT 48 NON-FINANCIAL STATEMENT for Deutsche  Post AG and for the Deutsche  Post  DHL Group in accordance with Sections 289b(1) and 315b(1) HGB The year 2021 was again a challenging one, both for people individually and the economy in general. The continuing pan- demic and numerous natural disasters adversely affected living conditions worldwide and tested the stability of supply chains. Moreover, employees and business partners as well as the capital market are all increasing their expectations for sustainable business, and legislators are tightening up their requirements for sustainable finance and reporting. In this statement the Global Reporting Initiative (GRI) standards are taken as the framework for determining ma- terial non- financial topics, amended by German Commercial Code (HGB) requirements. The key performance indicators used for managing the Group were determined on the ba- sis of their materiality in accordance with the HGB and the German Accounting Standard 20 was applied. We conduct our business in accordance with applicable law and high ethical principles and environmental standards. As a signatory to the UN Global Compact, Deutsche  Post  DHL Group implements its ten principles in areas where we have influence. Additionally, we take guidance from the princi- ples set out in the Universal Declaration of Human Rights, the OECD Guidelines for multinational enterprises and the International Labour Organization’s (ILO) Declaration on Fundamental Principles and Rights at Work, as well as from the principle of social partnership. Our ethical and environ- mental values apply to the entire Group and are laid down in our Code of Conduct for employees and in the Supplier Code of Conduct for the business partners in our supply chain. Since respect for human rights is particularly important to us, we specify these guidelines in our Human Rights Policy Statement, Corporate governance. Moreover, we participate in numerous United Nations initiatives and support the UN Sustainable Development Goals (SDGs). Our commitment is most closely aligned with the goals of Quality Education (SDG 4), Gender Equality (SDG 5), Decent Work and Economic Growth (SDG 8), Sus- tainable Cities and Communities (SDG 11), Climate Action (SDG 13) and Partnerships for the Goals (SDG 17). Strategic orientation Realignment of material topics Our purpose of “Connecting people, improving lives” reflects our understanding of sustainability, which is embedded in our strategic bottom lines throughout the Group, Strategy. The degree to which we meet the needs of our key stake- holder groups, minimise the environmental impact of our business, increase our contributions to society and act as trustworthy business partners are also determinants of the success of our company. That is why we adhere to principles aimed at reducing our environmental footprint, creating a safe, inclusive and motivating workplace for our employees, and ensuring that our business practices are transparent and in compliance with the law. Our ESG Roadmap reinforces and realigns our climate action and environmental protection activities and under- scores and further defines our strategies towards social responsibility and corporate governance, Strategy. In addition, from 2022, all three ESG areas will be incorporated into and account for 10 % respectively, of the target port- folio for bonus calculation of the Board of Management. The details are provided in a separate statutory remuneration report that will be published on our website. We learned about the expectations of our key stake- holders through a comprehensive survey whose results were considered both in developing our ESG Roadmap and the associated initiatives and in conducting our materiality analysis. Using these, we derived six topics on which our business has a material influence or, conversely, which can affect our business. The six topics are: 1. climate pro- tection with a focus on greenhouse gas (GHG) emissions, 2. engagement of our employees, 3. diversity and inclusion, 4. occupational safety and health in the workplace, 5. com- pliance and 6. cybersecurity. Key performance indicators (KPIs) have already been defined and targets determined for five of these topics; the definition of targets is under de- velopment for the topic of cybersecurity. In the year under review, the management-relevant KPIs were Employee Engagement and greenhouse gas efficiency (CEX), Steering metrics. From 2022 onward we will introduce the following KPIs in addition to Employee Engagement: Realised Decarbonisation Effects, share of women in executive positions in middle and upper management, lost time injury frequency rate (LTIFR) per 200,000  working hours and share of valid compliance- relevant training certificates amongst managers in middle and upper management, Expected developments. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT NON-FINANCIAL STATEMENT 49 The development of actual versus planned key perfor- mance indicators is presented to the Board of Management along with financial KPIs, and discussed monthly. Deviations are analysed and solutions developed and approved. More- over, we continued integrating the ESG KPIs and targets into the financial systems, the internal control system and the opportunity and risk management process in the reporting period. New assessment of non-financial opportunities and risks Opportunity and risk management takes place in Group Controlling and also covers sustainability-related opportu- nities and risks. In the reporting period, we assessed for the first time our opportunities and risks arising from climate change using a scenario analysis according to the standards of the Task Force on Climate-related Financial Disclosures (TCFD). This involved applying scenarios including possible warming of the planet by 2.0, 2.4 or 4.3 degrees Celsius to assess physical risks which could result from a rise in ocean levels, among other factors. For transitory risks, we used the sustainable development scenarios of the International Energy Agency. In workshops, together with the Board of Manage- ment members responsible for the divisions, we analysed and evaluated the possible effects of climate change on our business models, strategy and operational business and considered them in view of our mission of striving to achieve net zero GHG emissions by 2050. This results mainly in transitory risks for the Group, particularly with regard to the development of carbon pricing, GHG emis- sions and operational limitations due to stricter regulation and the availability of sustainable fuels. This conclusion underscores the strategy behind our climate action activi- ties: reducing GHG emissions and using sustainable tech- nologies and fuels to minimise dependency on fossil fuels. Details are provided in Expected developments, opportuni- ties and risks. Responsibility for ESG issues reassigned The Board of Management is the central decision maker also on Group-wide sustainability focus, whereas the divisions are responsible for implementation. The progress achieved is regularly discussed by the Board of Manage- ment. ESG topics are also the subject of meetings of the Supervisory Board and its committees. Topics relating to sustainability have been added to the tasks of the Strategy Committee and the skills profile of the Supervisory Board, Report of the Supervisory Board. The Sustainability Advisory Council provides perspectives from stakeholders outside the company. Our ethical and environmental goals are expressed in Group policies that provide all employees and managers with principles and clear standards for contributing to our success within the scope of their jobs and responsibilities. The most important Group policies include the Code of Conduct and Supplier Code of Conduct, the guidelines on anti-corruption and standards for business ethics and on the environment and energy, as well as the Human Rights Policy Statement. Responsibility for strategic orientation, the materiality analysis, stakeholder dialogue and implementation of the strategic and operational ESG programme was transferred to Corporate Development under the leadership of the CEO, where ESG topics are also embedded in the Group strategy. ESG controlling and reporting is handled by Corporate Accounting & Controlling in the Finance Board department. This responsibility includes defining ESG metrics, meeting reporting standards, developing specifications for imple- mentation in financial systems and the reporting itself. Measures to counteract climate change and improve occupational safety are managed by the Operations Board and cybersecurity is managed by the IT Board, both of which are under the leadership of the CEO. Human resources (HR) issues such as employee matters and social standards are handled by the HR Board, which is chaired by the Board member for HR. Corporate citizenship is supported by the Board of Management and driven by corporate communi- cations. Corporate Procurement defines the standards for procurement, designs the Corporate Procurement Policy and determines the selection processes for suppliers. The Chief Procurement Officer reports directly to the head of the Global Business Services Group Function and ensures that the Group’s standardised selection processes are applied. The Chief Compliance Officer is responsible for the design of the Compliance Management System and reports to the CFO. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT NON-FINANCIAL STATEMENT 50 Contents of the combined non-financial statement Reporting in accordance with Sections 289b(1) and 315b(1) HGB Aspects (HGB) Business model Concepts Claims for 2021 Results for 2021 Environmental matters Climate and environmental protection Greenhouse gas efficiency increases by one index point Employee matters Employee engagement and motivation Employee Engagement KPI approval rate of more than 80 % CEX drops one index point to 36 1, 2 As of 2022, we will replace CEX as a perfor- mance indicator with Realised Decarbonisation Effects 2 Employee Engagement climbs to 84 % 1, 2 Promotion of diversity and inclusion Increase share of women in executive positions 3 Share of women in executive positions totals 25.1 % 2, 3 Ensure health at work Prevent accidents LTIFR amounts to 3.9 2 Report section General information Steering metrics Forecast / actual comparison Environment Expected developments Steering metrics Forecast / actual comparison Workforce Expected developments Workforce Expected developments Workforce Expected developments Social matters Corporate citizenship Employee pride in contribution to society Approval rate of 79 % for this question in annual survey of employees 2 Society Anti-corruption and -bribery matters Compliance with laws, principles and policies Participation by executives 3 in compliance training 96 % valid training certificates 2, 3 Respect for human rights Prevent human rights violations Carry out audits with regard to human rights 19 audits have been carried out 2 Corporate governance Expected developments Corporate governance Cybersecurity Guarantee IT system and data security Taxes Avoid corporate structuring only for the purpose of tax optimisation Participation by executives 3 in Information Security Awareness training Adhere to tax strategy Group-wide 98 % valid training certificates 3 Corporate governance New target definition under development Taxes and social security contributions paid in line with the tax strategy Corporate governance 1 Management-relevant in the year under review, Steering metrics. 2 Reviewed with reasonable assurance, Assurance Report. 3 In middle and upper management. Reporting on the facilitation of sustainable investments (EU Taxonomy) Regulation 2020 / 852, Article 8, of the European Parliament and of the Council EU Taxonomy Results for 2021 Report taxonomy-eligible shares of revenue, capex and opex 56 % of revenue, 64 % of capex, 62 % of opex are taxonomy-eligible Report section EU Taxonomy Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT NON-FINANCIAL STATEMENT 51 Environment Reposition climate protection Our business activities impact the climate and the envi- ronment mainly in the form of greenhouse gases (GHG). We have reviewed and largely endorsed the climate action and environmental protection measures we have taken to date as part of our ESG Roadmap. A major element is a new medium-term climate protection target striving for an absolute reduction in GHG emissions by 2030. We have therefore now switched the focus of our re- porting to the development of absolute GHG emissions. Starting with this reporting year, we report GHG emissions according to the well-to-wheel approach; that is, our cal- culation includes the entire process chain for generating and supplying energy for transport as an additional Scope 3 category. Beginning in the coming financial year, we will replace CEX as a management-relevant KPI with Realised Decarbonisation Effects. We determine these effects using the GHG emissions avoided by decarbonisation measures. We want to reduce our GHG emissions to net zero by 2050. That means we will use active reduction measures to reduce our GHG emissions (Scopes 1, 2 and 3) down to an unavoidable minimum, which is to be fully compensated for with recognised countermeasures (excluding offsetting). We have set new, ambitious targets to be achieved by 2030 that continue to include the transport services provided by our subcontractors (Scope 3). Particularly im- portant for achieving these goals by 2030 is a bundle of measures up to €7 billion to increase the use of sustain- able technologies and fuels in our fleets and buildings to be rounded out by a range of environmentally friendly prod- ucts. This approach allows us to uphold our responsibility to the climate and the environment, while strengthening our own market position. Together with our subcontractors, we also work as part of initiatives to reduce fuel consumption and lower GHG emissions. This also enables us to procure the con- sumption and emissions data necessary for subcontractor management, which is why we take part in industry-wide initiatives and collaborate closely with customers, suppliers and industry partners. GHG emissions above prior-year level Due to the positive development of business in all divisions in the year under review and the significant increase in transport volumes associated with it, absolute GHG emis- sions rose as expected to 39.36 million tonnes of CO2e, thus coming in 17.0 % higher than the prior-year figure of 33.64 million tonnes of CO2e. Realised Decarbonisation Effects already amounted to 728 kilotonnes of CO2e. More- over, a further 172 kilotonnes of CO2e were avoided through the statutory blending of biofuels. GHG emissions by mode of transportation Total: 39.36 million tonnes CO2e 1 70 %Air transport 1 % Buildings 22 % Ground transport GHG emissions (well-to-wheel) Million tonnes CO2e GHG emissions, total of which Scope 1 Scope 2 Scope 3 2020 33.64 6.59 0.19 2021 + / – % 39.36 7.30 0.20 17.0 10.8 5.3 18.6 26.86 31.86 7 % Ocean transport 1 Scopes 1 to 3. For 2022 we expect a budgeted figure of around 41 million tonnes of CO2e, primarily because the limited availability and low percentage of sustainable fuels used in blends will Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT NON-FINANCIAL STATEMENT 52 not yet significantly reduce GHG emissions in air and ocean freight. This jump in emissions at the start of our mid-term horizon to 2030 – prior to a reduction in the second half of the decade – is included in our planning. Nonetheless, we are optimistic that, through our measures, we will realise decarbonisation effects totalling 969 kilotonnes of CO2e in 2022, thereby significantly cushioning the increase in emissions from 2021 to 2022. We also hereby reiterate our medium-term target of lowering GHG emissions to below 29 million tonnes of CO2e by 2030. GHG efficiency drops We measure our GHG efficiency using the CEX, which dropped by one index point to 36 in the year under review. In spite of improved efficiency in nearly all areas, the total value worsened due to the disproportionate growth in air freight, where the decreased passenger load of the remain- ing passenger aircraft had a negative influence on the effi- ciency. Because air freight is often transported in the cargo holds of passenger aircraft, the lower utilisation of this transport option on account of the pandemic results in the noticeable decrease in GHG efficiency in goods transport. Using sustainable technologies and fuels A cornerstone of our ESG Roadmap is a bundle of measures of up to €7 billion for sustainable technologies and fuels to be implemented by 2030. Our focus here is mainly on the modes of transportation using the most fuel and gen- erating the most emissions, namely air freight and road transport, and further increasing the electrification of our fleet of pick-up and delivery vehicles. Moreover, we aim to further decarbonise purchased ocean freight capacity. We will also invest in technologies to design our own new buildings to be climate neutral. use of sustainable fuels in road transport and the building of sustainable real estate is being promoted – with this also being pursued by eCommerce Solutions. In the year under review, decarbonisation measures totalling €156 million were carried out, and Realised Decarbonisation Effects amounted to 728 kilotonnes of CO2e. At 86 %, the share of electricity from renewable sources used at our sites remained at the same high level as the previous year. In addition to our reduction measures, we offer our customers offsetting products to compensate for GHG emissions; in accordance with the GHG Protocol and for the presentation of the Realised Decarbonisation Effects, this offsetting is not taken into account for the cal- culation of our GHG footprint. Examples from the divisions: During the year under review, Express concluded de- livery contracts for sustainable aircraft fuels to the airports in San Francisco, East Midlands and Schiphol, with more locations to come. The Global Forwarding, Freight division continually strives to identify and offer the most environmentally friendly transportation solutions or to shift deliveries to more efficient transport modes. With our established Green Carrier Certification, we create transparency regarding the sustainability of our subcontractors. In the year under re- view, we were one of the first companies in our industry to offer air and ocean freight solutions that make use of sustainable fuels. Supply Chain offers our customers state-of-the-art solutions which drive the decarbonisation of their supply chains, for instance through carbon-neutral warehousing, reduced-carbon transport solutions and sustainable pack- aging solutions. Post & Parcel Germany is focusing, amongst other things, on shifting parcel volumes to rail transport and ex- panding e-vehicles in pick-up and delivery. In addition, the Decarbonisation measures Measures Results for 2021 Targets for 2030 Use sustainable fuels and technologies €156 million used Use sustainable fuels in air, ocean and road freight €28 million used for the purchase of sustainable fuels in addition to the legally required blending Share of sustainable fuels amounts to 1.3 % Use up to €7 billion for decarbonisation Share of sustainable fuels in air, ocean and road freight tops 30 % Increase electrification of the fleets €115 million used 60 % e-vehicles used in pick-ups and deliveries Climate-neutral building design Some 20,700 e-vehicles used in pick-ups and deliveries €13 million used for climate-neutral technologies All our own new buildings are climate neutral Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT NON-FINANCIAL STATEMENT 53 Group-wide energy consumption (Scopes 1 and 2) rose to 30,486 million kWh in the reporting period (previous year: 27,427 million kWh). Energy consumption in the company’s own fleet and buildings (Scopes 1 and 2) 2020 1 24,336 19,625 2021 27,296 22,660 3 4,711 128 3,091 1,711 1,464 175 4,636 150 3,190 1,736 1,497 Million kWh Fleet consumption Air transport (kerosene) of which sustainable fuel Road transport of which sustainable fuels 2 Consumption in buildings and facilities  3 of which electricity of which from renewable sources 1 Adjusted due to structural changes. 2 Includes legally required blending. 3 Also includes consumption by electric vehicles. Workforce Common DNA as a factor for success Our corporate culture makes us strong. It is underpinned by common values, convictions and behaviours and is one of the most important factors in our business success. We Strategy. It connects us across call it our common DNA, all business units and operating regions and defines who we are and how we operate. As early as 2006 we defined a Code of Conduct applicable to the whole Group. We value the diversity of our workforce and treat one another with respect, so that we may work together cooperatively and lay the foundation for our company’s financial success. Being an employer of choice Our employees are our most valuable asset. With some 590,000 employees, we are one of the world’s largest em- ployers in our sector and aim to be an employer of choice, at- tracting competent and committed employees, continuously developing them and retaining them over the long term. Only motivated employees deliver excellent service quality, meet our customers’ needs satisfactorily and therefore ensure the sustainable profitability of our busi- ness activities. For this reason, we want to strengthen and lock in their commitment at a high level. We are dedicated to the principles of diversity and inclusion to create a work environment free of discrimination where each individual is valued and to guarantee workplaces that promote health. In addition to direct dialogue with their superiors and management representatives, employees can turn to em- ployee committees, works councils, trade unions and other bodies to indirectly represent their interests. At the global level, we engage in regular, open dialogue with international trade union confederations such as UNI Global Union (UNI) and International Transport Workers’ Federation (ITF). We foster employee loyalty and motivation by offer- ing performance-based remuneration in line with market standards. It includes a base salary plus the agreed vari- Employee matters able remuneration components such as bonus payments. In many countries, we also provide employees with access to defined benefit and defined contribution retirement plans. We also use neutral job evaluations to prevent discrimina- tion on the basis of personal characteristics. These evalu- ations focus on the type of job, position in the company and responsibilities assigned. This systematic approach enables an independent and balanced remuneration structure. In Germany, wages or salaries are generally regulated through either industry-level or company-level collective wage agreements. In many of our subsidiaries throughout Germany, our wage-scale employees also receive a per- formance-based bonus in addition to their monthly wage or salary. Employees of Deutsche  Post AG covered by the collective wage agreement may opt to take additional time off in lieu of a pay increase. A total of 18.7 % of the workforce there had exercised this option as at 31 December 2021. Moreover, we offer both defined benefit and defined contribution pension plans in which approximately 70 % of the Group’s employees participate. Our main retirement benefit plans are provided in Germany, the UK, the USA, the Netherlands and Switzerland, note 37.1 to the consolidated financial statements. Topics KPI Results for 2021 Targets for 2022 Targets for 2025 Employee engagement Employee Engagement 1 Diversity and inclusion  Share of women in middle- and upper- management 1 Occupational health and safety LTIFR per 200,000 working hours 1 Employee Engagement approval rate in the annual survey increases to 84 % Share of women of 25.1 % Group approval rate of more than 80 % Maintain employee engagement at a high level Share of women rises to 25.9 % Share of women amounts to 30 % LTIFR of 3.9 LTIFR decreases to 3.7 LTIFR of less than 3.1 1 Relevant for internal management; from 2022, share of women in middle- and upper-management positions as well as LTIFR. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT NON-FINANCIAL STATEMENT 54 At €23,879 million, staff costs exceeded the prior-year figure of €22,234 million. This includes the special bonus of €300 which we paid to all employees – following a bonus payment in the same amount in 2020 – in the year under review for the additional strain they experienced due to the pandemic. Details can be found in note 15 to the consolidated financial statements. As at 31 December 2021, the Group employed 592,263 individuals. Calculated as full-time equivalents, this figure totalled 548,042, up 4.0 % from the previous year. Our current planning foresees a slight increase in the number of employees again in 2022. Added to this were another 81,939 external FTEs subject to the control and direction of the Group. Workforce development 2020 2021 + / – % Headcount At year end 1 Average for the year 1 Full-time equivalents At year end 1 of which Express Global Forwarding, Freight 2 Supply Chain 2 571,974 592,263 547,128 574,047 526,896 105,036 548,042 114,134 41,897 43,840 166,199 175,099 eCommerce Solutions 31,995 33,809 3.5 4.9 4.0 8.7 4.6 5.4 5.7 Post & Parcel Germany 169,299 168,084 – 0.7 Group Functions 12,470 13,076 Average for the year 1 Share of part-time employees (%) 502,207 18 528,079 17 Average age of Group employees (years) Share of female employees (%) Unplanned employee turnover (%) 40 34.2 8 40 34.7 12 4.9 5.2 – – – – 1 Including trainees. 2 Prior-period amounts adjusted. Employee engagement remains high Each year we measure employee satisfaction and engage- ment by conducting a Group-wide survey. This important tool helps us determine where we are in our journey toward becoming an employer of choice. In this process, we use the Employee Engagement KPI as a Group-wide manage- Steering metrics. This enables ment-relevant indicator, us to quantify our employees’ commitment to the com- pany and their motivation to help the Group succeed. We exceeded the target of more than 80 % for the reporting year with an approval score of 84 %. Selected results from the Employee Opinion Survey % Response rate Approval rate for Employee Engagement KPI 2020 75 83 1 2021 75 84 1 Prior-year figures adjusted due to changes in the survey. Our common DNA is a fundamental part of our corporate strategy. Knowing this and living it has an immediate ef- fect on employee satisfaction and engagement. We com- municate our company culture not only in our day-to-day operations but also through select training initiatives. One example is our Group-wide “Certified” employee motivation and development programme, which aims to make our em- ployees experts in their respective areas of responsibility. It also creates an atmosphere that places our customers at the heart of our activities and ensures we provide excellent service. In addition to a certified foundation module, we offer our employees a wide range of follow-up modules customised to their specific roles and areas of expertise. We place special emphasis on providing training for manage- ment and team leaders to help reinforce employees in their roles and support executives in carrying out their leader- ship duties. Such training focuses on leadership attributes that are applicable to all Group executives and serve as a be havioural compass. We also offer qualified employees a number of personal development options, such as special training for those with potential and development ambitions in self-management and in participation in interdisciplinary or international projects. Diversity is our strength Our organisation brings together people from cultures and cultural backgrounds from all over the world who possess a wide range of experiences, abilities and perspectives, with 179 nations represented at our German sites alone. The di- versity of our employees is not only an asset to the company but also one of its major strengths. Diversity, inclusion and freedom from discrimination are anchored throughout the Group as part of our Code of Conduct. We expressly reject any and all forms of discrimination. We take an equal opportunity approach to new hirings, both internally and externally, and look exclusively to a can- didate’s qualifications when deciding on their suitability. One particular focus of our activities in diversity man- agement is on increasing the share of women in executive positions. By 2025 we aim for women to occupy at least 30 % of middle and upper management positions in the Group. The company uses various approaches to specifically em- power female junior staff for the next step in their careers on the way to becoming middle- or upper-level executives, including coaching, mentoring and networks. In the year under review, we grew the share of women in middle and upper management by 1.9 percentage points from 23.2 % to 25.1 %. We are planning a share of 25.9% for 2022. Our company’s in-house RainbowNet network pro- vides space for LGBTQ+ employees to share their experi- Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT NON-FINANCIAL STATEMENT 55 ences. Its aim is to ensure that all employees, irrespective of their sexual orientation and gender identity, are able to go about their work unhindered. As a founding member of the PROUT AT WORK Foundation, we are committed to providing a collegial, discrimination-free workplace so that our employees can achieve their individual career goals regardless of their sexual orientation or gender identity. In line with our inclusive approach, we give disabled individuals professional prospects. In Germany, employ- ers are required by law to ensure that employees with disabilities make up at least 5 % of their workforce. At Deutsche  Post AG, our principal entity in Germany, 8.0 % of the total workforce represented employees with dis- abilities in the reporting year, that is 14,652 persons with disabilities, 15 of whom were trainees. This figure is signif- icantly higher than the statutory quota. In Germany, we offered a total of around 2,000 spots in our post-secondary educational training programmes during the reporting year. We provide college and univer- sity graduates with the chance to choose between various post-graduate training programmes. In response to demographic change in Germany as well as for the purpose of ensuring an ageing-friendly work- place, we have established a Generations Pact enabling employees of Deutsche  Post AG aged 55 and over to reduce their working hours. The option of early retirement for civil servants (engagierter Ruhestand) is also still in effect. Generations Pact Deutsche  Post AG 2020 2021 + / – % Number of employees with working time accounts 30,220 31,449 of which in partial retirement 5,997 6,735 Number of civil servants with working time accounts of which in partial retirement 4,104 1,234 4,201 1,149 4.1 12.3 2.4 – 6.9 Occupational health and safety The health and safety of our employees in the workplace is of particular importance to us and is therefore embed- ded in our Codes of Conduct. We comply with the Group’s existing occupational health and safety policies, statutory regulations and industry standards. The Group policy on occupational health and safety defines seven core elements implemented Group-wide in our Safety First manage- ment system. The system complies with the international ISO 45001 standards, to which various business units are also externally certified. Our Supplier Code of Conduct, which is a binding part of the Group’s contracts with sup- pliers, requires our business partners to adhere to these same high standards. Accident prevention in the workplace is the top priority of our occupational health and safety activities. Some of our biggest challenges are in our pick-up and delivery oper- ations. Bad weather, road work, complex traffic situations and dealing with animals require employees to pay atten- tion, concentrate and take responsibility for themselves. The most frequent causes of accidents are slipping, tripping and falling, as well as carrying heavy objects. Accidents are analysed to determine the cause and to introduce measures aimed at continually improving safety for our employees. Additionally, we hold regular work meetings and workplace inspections and place signage at locations with greater potential hazards to increase the awareness of employees. We measure the success of these initiatives based on the lost time injury frequency rate per 200,000 working hours (LTIFR). In the year under review, we were able to maintain the figure at the previous-year level of 3.9, as planned. Each work-related injury led to 18.3 missed work- days on average. We have set an ambitious goal for 2022: lowering the LTIFR to 3.7 despite the ongoing influence of the pandemic. Furthermore, we will step up our occupa- tional safety and communication initiatives. We anticipate lowering this indicator to below 3.1 by 2025. Workplace accident statistics LTIFR of which Express Global Forwarding, Freight Supply Chain eCommerce Solutions Post & Parcel Germany Group Functions Working days lost per accident Number of fatalities due to workplace accidents of which as a result of traffic accidents 2020 2021 3.9 2.1 0.7 0.5 1.4 11.0 0.4 17.2 5 5 3.9 1.8 0.7 0.5 1.8 11.7 0.2 18.3 5 4 Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT NON-FINANCIAL STATEMENT 56 We carry out health projects and local initiatives to create a health-promoting work environment and raise awareness of a healthy lifestyle amongst our employees. Incentives are provided to local management to offer health-promoting programmes to employees and their families. The Chief Medical Officer advises the Board of Man- agement in all matters regarding occupational health – for instance how to deal with physical and psychological dis- eases in the work environment – as well as how to deal with the circumstances of a pandemic or epidemic. During the year under review, we progressed vaccination and testing of our employees at the locations throughout the Group. Some 75,000 vaccinations were given in Germany alone. The Group’s worldwide sickness rate was 5.5 % in the year under review, nearly the same as in the prior year (5.4 %) in spite of the pandemic. Some of our employees work in countries that offer insufficient statutory health coverage, or none at all. For this reason, we offer employees and their families in nu- merous countries high-quality primary or supplementary health insurance coverage at attractive terms through our Group’s in-house employee benefits programme. Some 250,000 employees in 100 countries are covered by this programme. Corporate citizenship Contributing to economic development and social progress We contribute to the socioeconomic development of the re- gions in which we operate through our sites, our employees and our business partners, thereby making a contribution to social and individual prosperity. As part of our corporate citizenship initiatives, we are leveraging our global network and the expertise of local employees in line with our pur- pose of “Connecting people, improving lives”. Partnerships and initiatives Our initiatives enable us to use our strengths and capabil- ities to effect change locally and to work together to meet global challenges. We partner with established interna- tional organisations to ensure that our initiatives have the greatest impact possible. With GoGreen (environmental protection), GoHelp (disaster management), GoTeach (increasing employability) and GoTrade (promoting trade) we also support SDGs 4, 5, 8, 11, 13 and 17. We dignify employee engagement through our Global Volunteer Day, the “DHL’s Got Heart” initiative and the Im- proving Lives Fund. Volunteering encourages employees to participate in, and give back to, local communities. Based on the Group-wide annual survey of employees, we know that corporate citizenship is a relevant factor in determining their overall level of motivation. They want to contribute to social and environmental objectives not only in their personal lives but also at work, to help society and the environment and to enhance the Group’s reputation. We therefore measure the success of our initiatives using the approval rate for the survey question asking whether our employees are proud of Deutsche  Post  DHL Group’s contribution to society. In the reporting year, 79 % of all em- ployees responded positively (previous year: 78 %). Large numbers of employees participate in the Go  programmes Our employees volunteered locally in many capacities in the reporting year. Following natural disasters, they supported locales such as Indonesia with the GoHelp programme. After the flood disaster in parts of Germany, Luxembourg and Belgium, our workforce donated generously to our “We help each other” fund. This financial support was quickly distributed to affected employees without a lot of red tape. The GoTeach programmes were enhanced with virtual experiences, enabling us to support young people through- out the pandemic and improve their employability. Our em- ployees in numerous countries also supported local relief organisations in their fight against COVID-19. We expanded our newest programme, GoTrade, to ad- ditional countries, including in Africa via the Express and Global Forwarding, Freight divisions. Along with national governments and multinational organisations, we transfer knowledge about international trade to small and medi- um-sized companies in emerging and developing countries, thereby unlocking access to global markets. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT NON-FINANCIAL STATEMENT 57 Corporate governance Role model for responsible corporate governance We intend to serve both as a role model for responsible corporate governance in our sector and as a trustworthy company. Ensuring our interactions with business partners, employees, the capital market and the general public are conducted with integrity and within the bounds of the law is vital to maintaining our reputation and is the basis for sus- tainable business success. We take the appropriate steps to guarantee honest and transparent business practices in compliance with the law by focusing on training executives in compliance-relevant content, building cybersecurity skills, expanding sustainable and stable relationships with business partners and fully integrating ESG metrics into management processes and incentive systems. The rules for ethical conduct included in our Codes of Conduct are further specified in our Human Rights Policy Statement, our Anti-Corruption and Business Ethics Stan- dards Policy and our Corporate Procurement Policy. Our focus at all times is on preventing potential violations of statutory requirements and internal guidelines. Corporate Internal Audit evaluates the effectiveness of our risk management system, control mechanisms, and management and monitoring processes, contributing to their improvement. It does this by performing indepen- dent regular and ad hoc audits at all Group companies and at corporate headquarters with the authority of the Board of Management. The audit teams discuss the audit findings and agree on measures for improvement with the audited organisational units and their management. The Board of Management is regularly informed of the findings. The Super visory Board is provided with a summary once a year. Trusted business partner thanks to compliance We render all of our services in compliance with current legislation and in accordance with our own values. Com- pliance includes legally required disclosures relating to anti-corruption and -bribery matters. We observe all appli- cable international anti-corruption standards and statutes and are a member of the Partnering Against Corruption initiative of the World Economic Forum. Ensuring legally compliant conduct in our business activities and in our interactions with employees is an essential task of all Group management bodies. In line with Corporate governance Topic Measure Target for 2022 Compliance (including anti-corruption and -bribery matters) Participation of executives in middle- and upper-level management in compliance training Share of valid training certificates in middle and upper management 1 is at least 97 % 1 Management indicator starting in 2022. our objective, participation of executives in middle- and upper-level management in various types of compliance training is mandatory. We believe one thing: managers have to be well informed to identify potential compliance risks and ensure that such risks are mitigated appropriately. The foundation to this approach is our compliance training comprising our Core Compliance Curriculum (anti- corruption training, competitive compliance, Code of Con- duct) and data protection training. All participants who have already completed their training must update their certifi- cation every two years. Starting in the 2022 financial year we will use the share of valid training certificates amongst executives in middle- and upper-level management as a management-relevant KPI. With our compliance management system (CMS) we have implemented effective measures for the prevention of corruption and bribery throughout the Group. Responsibil- ity for designing the system lies with the Chief Compliance Officer. Uniform minimum standards are laid down in the CMS and accompanied by related activities initiated by the compliance officer in the divisions. Our Code of Conduct and Anti-Corruption Policy, along with training on these topics, help employees identify situ- a tions in which the integrity of the company could be called into question with respect to relevant third parties. Poten- tial violations can be reported around the clock, including via a special web application, among other things. Exter- nal whistle-blowers can use a form on the Group’s website. The reported tip-offs are reviewed internally for possible Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT NON-FINANCIAL STATEMENT 58 violations using a standardised process. Information on relevant violations is collected and included in the regular compliance reports made to the Board of Management and to the Supervisory Board’s Finance and Audit Committee, Report of the Super visory Board. In the interest of raising awareness of compliance amongst employees, four Compliance Weeks were carried out for the first time in the year under review. These were cross-divisional and were held in various regions. Commu- nications activities included town hall meetings with Board of Management members and round tables with executives and divisional compliance officers. In addition, campaigns were launched via in-house communication channels to increase participation, primarily virtually in view of the continuing pandemic. The compliance training certification rate was 96 % in middle and upper management in the year under review. We anticipate that at least 97 % valid training certification in mid- dle- and upper-level management will be available in 2022. In the context of its 207 audits, Corporate Internal Audit also reviewed compliance management system processes and the implementation of agreed follow-up measures. Findings from the regular audits facilitate the identifica- tion of other compliance risks and the refinement of the compliance programme. Respecting human rights Our commitment to respect for human rights includes ad- herence to the principles of the UN Global Compact and the International Labour Organization (ILO), which we have embedded in our Codes of Conduct and outlined in greater detail in our Human Rights Policy Statement. These stipu- late clear requirements and responsibilities for our employ- ees and executives as well as our business partners, and contribute to the general understanding and implementa- tion of the principles of the UN Global Compact throughout the Group. The policy statement applies to all employees and executives, and also clarifies our expectations and goals for our business partners. Our human rights activities focus on the prevention of child and forced labour, decent working conditions (remu- neration, working hours, occupational health and safety) and the right to freedom of association. Our executives play a key role when it comes to implementing our values and objectives, so we have made the Code of Conduct an integral component of their employment contracts. The Supplier Code of Conduct is a binding component of the Group’s contracts with suppliers, including subcontractors. By signing, they commit to complying with our ethical and environmental principles and implementing them in their own supply chains. The internal management system ensures that our Human Rights Policy Statement is implemented throughout the Group. A key component is training initiatives and on- site reviews conducted by specially trained and externally certified professionals from the divisions and corporate headquarters. A risk-based approach is taken to the selec- tion of countries and locations for the on-site reviews based on internal criteria, such as number of employees, as well as external criteria from Verisk Maplecroft’s Human Rights Index and Transparency International’s Corruption Percep- tions Index. Additionally, we consider suggestions from international trade union confederations. The Employee Relations Forum is tasked Group-wide with ensuring re- spect for human rights in the workforce. Under the leadership of the HR department, on-site reviews were held in ten countries in the reporting year. These were conducted virtually due to pandemic-related travel restrictions. Some cases of non-compliance with working time regulations and knowledge gaps concerning occupational safety requirements were identified and sub- sequently rectified by way of a structured action plan. Addi- tional employees were certified according to the SMETA standard, so that the annual number of on-site reviews can be increased. Moreover, we developed a training modality we aim to use to raise employee awareness of the need to respect human rights. Participation is recommended for all employees and is mandatory for executives. The initiative will be launched and communicated to the com- pany in 2022. We also participated in Human Rights Day on 10 December with internal and external communication campaigns. When selecting suppliers, Corporate Procurement generally prefers those who meet our standards. Supplier selection is based on a standardised multistep assessment process. Procurement employees are continually trained to identify potential supplier-related risks early on. In the year Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT NON-FINANCIAL STATEMENT 59 under review, Corporate Procurement improved the trans- parency of the existing due diligence process by including respect for human rights as well as diversity and inclusion. Amongst other things, the Supplier Code of Conduct and corresponding training module were made available in ad- ditional languages and the reporting process for possible violations of the code or legal requirements was opened up to third parties. In addition, we began developing a Group-wide risk management system for uniform supplier assessment. In addition, Corporate Internal Audit conducted 19  audits relating to respect for human rights and verified that the agreed follow-up measures had been implemented. Cybersecurity Our cybersecurity management activities protect the in- formation of the Group, our business partners and our employees as well as IT systems from unauthorised ac- cess or manipulation and data misuse, ensures uninter- rupted availability and enables reliable operations. Our internal guidelines and processes are closely aligned with ISO 27002 and our data centres are certified in accordance with ISO 27001. The central functions of Group Chief Information Secu- rity Officer, IT Audit, Data Protection and Corporate Security, as well as the corresponding divisional functions, monitor and assess threats and new potential risks on an ongoing basis and ensure compliance with security standards. 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. Additionally, by performing regular software updates, we can fix poten- tial security vulnerabilities and protect system functionality. Communication measures, regular phishing and IT crisis simulations and training sessions help employees and executives alike become more aware of possible cyber security risks. Participation in Information Security Awareness training is mandatory for all employees with a computer workstation. All participants who have already completed their training must update their certification every two years. In the reporting period, the share of valid training certificates amongst middle- and upper-level management was 98 %. Tax strategy as a standard adhered to worldwide Our tax strategy is aligned with our Group strategy and must be adhered to throughout the Group. The overarching ap- proach applied by the Group is that taxes are always inci- dental to and follow business needs. We do not undertake aggressive tax planning or enter into artificial arrangements with the goal of avoiding taxes. Our Group maintains loca- tions in more than 220 countries and territories, including some with lower tax rates than those in Germany. These locations are necessary for carrying out our operational business in those regions. None of our companies was es- tablished with the purpose of obtaining tax benefits or is currently used to pursue aggressive tax structuring. In interpreting and applying tax legislation, we do not merely follow the letter of the law, but also consider its spirit and intended purpose. As a globally active group of companies, our activities necessarily include operations in countries where uncertainty is high. We mitigate this uncer- tainty through continual dialogue with tax authorities and tax advisers to obtain the greatest possible degree of legal certainty. This allows us to meet tax compliance require- ments in the countries in which we operate to the best of our knowledge and belief. Our Group risk management sys- tem incorporates a tax risk management framework that enables us to monitor and avoid tax risk as far as possible. In the reporting period, we recognised taxes and social security contributions totalling €4,566 million. Taxes and social security contributions € m Income taxes paid Other business taxes of which taxes on capital, real estate and vehicles other operating taxes Employer’s social security contributions Total 2020 754 306 132 174 2,705 3,765 2021 1,323 322 133 189 2,921 4,566 Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT NON-FINANCIAL STATEMENT 60 EU Taxonomy Starting with the reporting period, we are reporting our contribution to the European Union’s environmental ob- jectives of climate change mitigation and climate change adaptation according to the guidelines laid down in the EU Taxonomy regulation for the first time. To this end, we have comprehensively analysed our economic activities and the revenue they generate, as well as our capital expenditure (capex) and operating expenditure (opex), and determined the shares that qualify as taxonomy-eligible. In the year under review, we developed a Group policy to uniformly implement calculation and documentation rules for the taxonomy-eligible shares of revenue, capex and opex in our financial and controlling systems. Prior to doing so, we conducted an extensive analysis of the report- ing processes and relevant posting accounts to enable as- signment of economic activities to the individual economic activities described in the EU Taxonomy. In doing so, we assign our transport services (Sections 6.2, 6.4, 6.5, 6.6, 6.10) including the required infrastructure (Section 6.15) to the transport sector, whilst we allocate real estate not used for transportation activities (Sections 7.1, 7.2, 7.7) to the construction and real estate sector. Some of our services comprise different taxonomy- eligible economic activities. In the cases where one-to-one allocation is not possible, we primarily use a cost-based allocation logic that reflects the different business models of the divisions. We avoid double counting by allocating revenue, capex and opex to only one economic activity respectively. During the year under review, in particular the rev enue from warehousing in the Supply Chain division as well as revenue, capex and opex from air freight in the Express and Global Forwarding, Freight divisions was classified as taxonomy non-eligible. Neither of these economic activities is currently reflected in the EU Taxonomy guidelines. The European Commission has announced further acts and clarifications for the application and interpretation of the existing guidelines, which will address additional envi- ronmental goals as well as adapt previous guidelines which, in future, could have an impact on the information to be reported. Taxonomy-eligible share of economic activities, 2021 According to Regulation (EU) 2020 / 852, Article 8 € m Revenue 1 of which taxonomy-eligible taxonomy non-eligible Capital expenditure 2 of which taxonomy-eligible taxonomy non-eligible Operating expenditure 3 of which taxonomy-eligible taxonomy non-eligible Amount Share (%) 81,747 45,653 36,094 6,979 4,467 2,512 2,337 1,441 896 100 56 44 100 64 36 100 62 38 1 Revenue according to the Income statement. 2 Includes investment properties (IAS 40) in addition to the capital expenditure reported in accordance with segment reporting, financial statements. note 10 to the consolidated 3 Investment-related operating expenditure, especially non-capitalised lease expenses, repair and maintenance costs. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT ExPECTED DEVELOPMENTS , OPPORTUNITIES AND RISKS 61 EXPECTED DEVELOPMENTS, OPPORTUNITIES AND RISKS Forecast period The information contained in the report on expected devel- opments generally refers to the 2022 financial year. Future economic parameters Further GDP increase on back of above-average, medium-term e-commerce growth Following the robust economic recovery in the reporting period, worldwide growth is expected to continue in 2022. However, as indications showed in the second half of 2021, GDP growth will slow to some 4 %, which is still approxi- mately one percentage point above the long-term trend. IHS Markit has forecast the following GDP growth for key countries and regions in 2022: China is anticipated to post growth of 5.3 %, moderate for Chinese standards, after its race to catch up in 2021. At 3.7 %, growth in the United States is likely to far outpace the prevailing trend once again for reasons including fiscal policy. A rate of 2.9 % is forecast for Japan. Growth of 3.7 % is predicted for the eurozone. IHS Markit has recently projected growth of 3.4 % for the German economy, a conservative estimate in view of the higher forecasts issued by the IMF in January 2022 (3.8 %) and even by the German Council of Economic Experts in November 2021 (4.6 %). A sustained global driver of growth will continue to be the structural shift in consumer habits towards e-commerce. The current stabilisation phase reflects the unusually high growth in the early phase of the pandemic. During 2022 e-commerce demand is projected to grow once more based on increased market volumes and to make a disproportion- ately high contribution to GDP growth in the medium term. Highly cyclical international express market Experience shows that growth in the international express market, particularly in the B2B segment, is highly depen dent upon the economic situation. We believe that the steadi ly growing cross-border e-commerce sector will continue to drive growth in the international express market in 2022. Air and ocean freight business dependent upon the easing of the capacity situation Particularly with regard to the core business of air and ocean freight, the further development will depend significantly on when and how rapidly the capacity, inclusive of vessels and aircraft, return to normal. In light of the uncertain mar- ket situation, this remains difficult to predict. Despite this, the trend is towards a gradual return to normalisation in the second half of the year. Of additional significance for the air cargo market is how quickly passenger flights resume, which is closely linked to how the pandemic develops. The acquisition of Hillebrand aligns with our long-term strategy to create a relevant footprint in the fast-growing ocean freight market. We expect volume growth in the European road trans- port market to persist at high levels in 2022 as well and prices to increase accordingly. Contract logistics market continues to grow Growth in eFulfillment and e-commerce as initially accel- erated by the pandemic will continue to increase the com- plexity of supply chains. This, together with the apparent vulnerability of tranditional supply chain set-ups, will in- crease the demand for flexible and agile solutions, driving outsourcing. Therefore the market for contract logistics is likely to continue growing, yet inflation due to scarcity of labour and capacity represents both an opportunity and a threat. Good growth prospects for eCommerce Solutions Growth of our eCommerce Solutions division is dependent on local as well as global economic trends. The ongoing pandemic and pandemic-related restrictions have contin- ued to strengthen the trend towards online shopping and again drove strong volume growth across the business in the year under review. In all regions, especially in the B2C e-commerce sectors, increases in shipping volumes exceeded expectations in 2020 and 2021. This trend sta- bilised and reached normal levels in the later part of the year under review. We expect this trend to continue after a normalisation phase during the course of the year and are confident that our product portfolio, our digitalisation ac- tivities, network and automation investments and our focus on quality and customer-centric solutions will continue to contribute to the overall growth in 2022. Pandemic reinforces trend towards online shopping The German market for paper-based mail communication will continue to decline as digital communication increases. As part of our digital transformation agenda for Post & Par- cel Germany, we will be realigning our product portfolio to reflect the rise in online communication. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT ExPECTED DEVELOPMENTS , OPPORTUNITIES AND RISKS 62 Revenue from the German advertising market will continue to grow in 2022, driven by the sustained growth in online media and the recovery of media segments par- ticularly affected by the pandemic. In the international letter mail business, rising ship- ments of goods are expected to compensate somewhat for declining volumes of small-format documents. Whether the compensatory effect is stronger or weaker will depend on developments in cross-border trade restrictions and air freight capacity. The German parcel market will continue to grow. The shift from in-store to online shopping has now become es- tablished for many types of goods. Additional categories of products and customers of various ages have joined online shopping during the pandemic. After a phase of growth normalisation, we expect further growth to be driven by e-commerce in the medium term. Expected developments Sustained earnings growth In the 2022 financial year, we expect continually increasing B2B volumes to remain a key growth driver in our networks. After rising sharply under pandemic conditions, B2C deliv- ery volumes are forecast to return to structural growth after a stabilisation phase during 2022. The recently observed imbalances in international transport markets will remain in place well into 2022. Consolidated EBIT of around €8.0 billion expected In the 2022 financial year, we anticipate consolidated EBIT of around €8.0 billion (+ / – max. 5 %). The DHL divisions are projected to generate total EBIT of approximately €7.0 billion (+ / – max. 4 %). In the Post &  Parcel Germany division, EBIT is forecast to come in at around €1.5 bil- lion (+ / – max. 10 %). The earnings contributed by Group Functions (formerly: Corporate Functions) is expected to amount to around €–0.45 billion. Proposed dividend: €1.80 per share The Board of Management and the Supervisory Board will propose a dividend of €1.80 per share for the 2021 finan- cial year (previous year: €1.35 per share) to the sharehold- ers at the Annual General Meeting on 6 May 2022. Group’s credit rating remains the same Against the backdrop of the sharp rise in free cash flow, we anticipate our FFO-to-debt performance indicator to remain stable even considering the increased dividend payment and purchase price payment for Hillebrand. We expect no change in our current credit rating by rating agencies as a result. Liquidity remains very solid Due to the dividend payment for the 2021 financial year in May 2022, the repayment of a bond in June 2022 and the expected closing of the Hillebrand acquisition, our liquidity is expected to decrease up to mid-year 2022. Due to the usually good business development in the second half of the year, the liquidity situation will improve again towards the end of the year. Capital expenditure to total around €4.2 billion In order to further support our strategic aims and further growth even at the expected higher level, we intend to in- crease capital expenditure (excluding leasing) in 2022 to around €4.2 billion with a similar focus as in prior years. Expected EAC and free cash flow In view of the expected EBIT development in combination with a predicted increase in the asset charge, we expect the EAC to be slightly down year-on-year. Free cash flow (excluding the purchase price payment for Hillebrand) is projected at around €3.6 billion (+ / – max. 5 %). GHG emissions remain at a high level Beginning in 2022, absolute GHG emissions will become the new efficiency target which we manage with the KPI Realised Decarbonisation Effects. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT ExPECTED DEVELOPMENTS , OPPORTUNITIES AND RISKS 63 On the way to reducing our GHG emissions to net zero by 2050, we still expect to see an increase in emissions in 2022 due to the planned business growth. We aim to achieve Realised Decarbonisation Effects of 969 kilotonnes of CO2e through targeted measures. By 2030, we plan to reduce our GHG emissions to less than 29 million tonnes CO2e overall. These efforts also take into consideration the GHG emissions of our subcontractors. Continued strong employee engagement With regard to the Employee Engagement key performance indicator, we anticipate an approval level of more than 80 % across the Group in 2022; this level is expected to remain steady until 2025. Increase share of female executives From the 2022 financial year, the share of women in mid- dle and upper management positions becomes a manage- ment-relevant KPI. In 2022, 25.9 % of the positions in middle and upper management will be held by women. That share should rise to at least 30 % by 2025. Reduce LTIFR We use the LTIFR per 200,000 working hours to assess the success of the measures we take towards occupational health and safety. This will become a management-related KPI beginning in 2022. We expect to reduce the LTIFR per 200,000 working hours to 3.7 throughout the Group in 2022; by 2025, the KPI should be less than 3.1. Conduct compliance-relevant training Our aspiration is to be a reliable and trustworthy partner in all business relationships. When conducting day-to-day business, our managers serve an important function as role models to the employees and business partners, which is why corresponding training is of such importance for ex- ecutives. We measure success in this area on the basis of the share of valid training certificates at the middle and upper management levels. This is yet another KPI that will be used to manage the Group in the upcoming financial year. We anticipate the share of valid training certificates to be at least 97 % in middle and upper management in 2022. Opportunity and risk management Uniform reporting standard As an internationally operating logistics company, we are facing numerous changes. Our aim is to identify the re- sulting opportunities and risks at an early stage and take the necessary measures in the specific areas affected in due time to ensure that we achieve a sustained increase in enterprise value. Our Group-wide opportunity and risk management system facilitates this aim. Each quarter, ex- ecutives estimate the impact of future scenarios, evaluate opportunities and risks in their departments and present planned measures as well as those already taken. Queries are made and approvals given on a hierarchical basis to ensure that different managerial levels are involved in the process. Opportunities and risks can also be reported at any time on an ad-hoc basis. In 2021 we launched a Group-wide project to comply with the recommendations of the Task Force on Climate- related Financial Disclosures (TCFD). This involves discuss- ing and assessing both transitory and physical risks stem- ming from climate change using various scenarios. The material risks identified during this process are explained in “Opportunity and risk categories”. Our early-identification process links the Group’s opportunity and risk management with uniform report- ing standards using a proprietary IT application that is constantly updated. Furthermore, we use a Monte Carlo simulation for the purpose of aggregating opportunities and risks in standard evaluations. The simulation is a stochastic model that takes the probability of occurrence of the underlying risks and op- portunities into consideration and is based upon the law of large numbers. Randomly selected scenarios – one for each opportunity and risk – are combined on the basis of the dis- tribution functions for each individual opportunity and risk. The most important steps in our opportunity and risk management process are: 1 Identify and assess: Managers in all divisions and regions evaluate the opportunity and risk situation on a quarterly basis and document the actions taken. They use scenarios to assess best, expected and worst cases. Each identified risk is assigned to at least one risk owner who assesses and monitors the risk, specifies possible procedures for going forward and then files a report. The same applies to opportunities. At least one management process used to measure net risk expo- sure must be reported for each opportunity or risk. In isolated cases where it is not initially possible to make Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT ExPECTED DEVELOPMENTS , OPPORTUNITIES AND RISKS 64 Opportunity and risk management process 1 Identify and assess Assess Define measures Analyse Identify 5 Control Review results Review measures Monitor early warning indicators Corporate Audit reviews 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    Corporate Audit a quantitative assessment, risks may be assessed on a qualitative basis to ensure that the full scope of all risks is captured. The results are compiled in a database. We also conduct an annual risk workshop for each division with the Divisional Boards, as supplements to the quar- terly process. Workshop discussion focuses on opportu- nities and risks of significance to the whole division. At the same time, newly identified opportunities and risks are subsequently integrated into the quarterly process. 2 Aggregate and report: The controlling units col- lect the results, evaluate them and review them for plausibility. If individual financial effects overlap, this is noted in our database and taken into account in the compil ation process. After being approved by the di- vision risk owners, 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 and the Supervisory Board on signifi- cant opportunities and risks as well as on the poten- tial overall impact each division might experience. For this purpose, opportunities and risks are aggregated 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 respective scenarios. The totals for “worst case” and “best case” indicate the total spectrum of results for the respective division. Within these extremes, the to- tal “expected cases” shows current expectations. The second method makes use of a Monte Carlo simulation, the divisional results of which are regularly included in the opportunity and risk reports to the Board of Man- agement and the Supervisory Board. 3 Overall strategy: The Group Board of Management decides on the methodology that will be used to anal- yse and report on opportunities and risks. The reports created by Corporate Controlling provide the Board of Management with an additional, regular source of information for managing the Group as a whole. The Group Board of Management defines the thresholds for risk tolerance and risk-bearing ability and uses the Monte Carlo simulation to review the necessity for strategic changes on a quarterly basis. 4 Operating measures: The measures to be used to take advantage of opportunities and manage risks are determined within the individual organisational units. They use cost–benefit analyses to assess whether risks can be avoided, mitigated or transferred to third parties. 5 Control: With respect to key opportunities and risks, early-warning indicators have been defined that are monitored constantly by the risk owners. Corporate Audit has the task of ensuring that the Board of Man- agement’s specifications are adhered to. It also reviews the quality of the entire opportunity and risk manage- ment operation. The control units regularly analyse all parts of the process as well as the reports from Corpo- rate Internal Audit and the independent auditor, with the goal of identifying potential for improvement and making adjustments to processes where necessary. Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT ExPECTED DEVELOPMENTS , OPPORTUNITIES AND RISKS 65 Accounting-related internal control and risk management system Disclosures required under Sections 289(4) and 315(4) HGB and explanatory report Deutsche  Post  DHL Group has implemented an ac- counting-related internal control system (ICS) as part of its risk management system. The ICS aims to ensure the compliance of (Group) accounting and financial re- porting with generally accepted principles. 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 inter- nal Group regulations. Accounting errors are to be avoided in principle and significant measurement errors detected promptly. The ICS was designed to follow the internationally recognised COSO framework for internal control systems (COSO: Committee of Sponsoring Organizations of the Treadway Commission). 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 quan- titative and qualitative aspects into account. • Risks that could lead to material misstatements in the fi- nancial reports are identified and minimum requirements are formulated 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. • To maintain the system’s effectiveness and implement continuous improvements, the ICS is subjected to regular reviews using the “four eyes” principle of dual control. • The Supervisory Board is provided with regular reports the Group’s standardised process of preparing financial statements by using a centrally administered financial statements calendar guarantees a structured and efficient accounting process. 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 reconcilia- tion of the single-entity financial statements and ensure that international financial reporting standards (EU IFRS s) are applied in a uniform manner throughout the Group. In addition, German generally accepted accounting principles (GAAP) have been established for Deutsche  Post AG and the other Group companies subject to HGB reporting require- ments. A standard chart of accounts is required to be ap- plied by all Group companies. We immediately assess new developments in international accounting for relevance and announce their implementation in a timely manner, for ex- ample 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 individual Group companies are recorded in a standard, SAP-based system and then processed at a central location where one-step consolidation is performed. Other quality assurance components include automatic plausibility re- views and system validations of the accounting data. In addition, regular, manual checks are carried out centrally at the Corporate Center by Corporate Accounting & Con- trolling, Taxes and Corporate Finance. If necessary, we call in outside professionals with the requisite expertise. Finally, Over and above the ICS and risk management, Corpo- rate 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, however, always be taken into consideration that no ICS, regardless of how well designed, can offer ab- solute 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 opportunities which, from a current standpoint, could have a significant impact upon the Group during the fore- cast period beyond the impact already accounted for in the business plan. In addition, we consider both long-term as well as latent opportunities and risks. The risks and oppor- tunities have been assessed in terms of their probability of occurrence and their impact. The assessment is used to classify opportunities and risks as either low, medium or high. Medium and high risks and opportunities are con- sidered significant, and are shown as black or grey in the following table. The following assessment scale is used (measured on a net basis): Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT ExPECTED DEVELOPMENTS , OPPORTUNITIES AND RISKS 66 Classification of risks and opportunities Probability of occurrence (%) Planned Group EBIT Risks Opportunities > 50 > 15 to ≤ 50 ≤ 15 figures provided in the underlying individual reports exhibit a significant correlation with the performance of the world economy and global economic output. Unless otherwise specified, a low relevance is attached to the individual opportunities and risks within the respective categories. The opportunities and risks generally apply to all divisions, unless indicated otherwise. < – 500 – 500 to – 151 – 150 to 0 0 to 150 151 to 500 > 500 Effects (€ m) Significance for the Group:    Low    Medium    High The following assessment scale applies to qualitative risk (measured on a net basis): Assessing qualitative risk Probability of occurrence (%) Risks > 50 > 15 to ≤ 50 ≤ 15 High Medium Low Effects Significance for the Group:    Low    Medium    High High-impact risks tend to affect the entire Group, whereas medium-impact risks play out at a divisional level and low-impact risks at a local level. Qualitative risk can be measured for financial risk, reputational risk, operational risk and environmental risk. The opportunities and risks described here are not nec- essarily 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 decentrally at Deutsche  Post  DHL Group. Reporting on possible deviations from projections, as well as long-term and 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 combined the decentrally reported opportunities and risks in categories for the purposes of this report. It should be noted that the Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT ExPECTED DEVELOPMENTS , OPPORTUNITIES AND RISKS 67 Opportunity and risk categories Overview of material opportunities and risks As outlined on the pages that follow and listed in the over- view below, we have assigned material opportunities and risks to the following categories: Overview of opportunities and risks Category Corporate strategy Legal and compliance-related Capital expenditure and projects Operational Human resources Information technology Financial Tax-related Real estate Market- and customer-specific Regulation Opportunity / risk Significance n. a. n. a. n. a. – – – Risk of operational restrictions due to climate change Medium n. a. IT security incident Currency effects (opportunity and risk) n. a. n. a. Inflation Availability of sustainable aviation fuels (SAF) Pricing approval action Carbon tax Restriction of GHG emissions – Medium Medium – – Medium Medium Medium Medium Medium Medium Environment, catastrophes and epidemics COVID-19 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 con- stantly working to create efficient structures in all areas to enable us to flexibly adapt capacities and costs to de- mand – a condition for lasting, profitable business success. With respect to our strategic orientation, we are focusing upon our core competencies in the logistics and letter mail businesses with an eye towards growing organically and simplifying our processes for the benefit of our cus- tomers. Our earnings projections regularly take account of development opportunities arising from our strategic orientation. We take action early to counter potential strategic risks. In so doing, it helps that our portfolio of users and supplier companies are as broad as possible and that we focus on profitable sectors and products, regularly review customer and product performance, practice strict cost management and add surcharges whenever necessary. In the Express division, our future success depends above all upon general factors such as trends in the com- petitive environment, costs and quantities transported. We plan to keep growing our international business and expect a further increase in shipment volumes. Based upon this assumption, we are investing in our network, our services, our employees and the DHL brand. In the Global Forwarding, Freight division, we purchase transport services for interested buyers from airlines, ship- ping companies and freight carriers rather than providing them ourselves. In the best case, we are able to outsource transport services at such a low rate that we can generate a margin. In the worst-case scenario, we bear the risk of not being able to pass on all price increases to our cus tomers. The extent of our opportunities and risks essentially de- pends 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 brokering trans- port services helps us to capitalise on opportunities and minimise risk. In the Supply Chain division, our success is highly de- pendent on our customers’ business performance. Since we offer companies a widely diversified range of products Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT ExPECTED DEVELOPMENTS , OPPORTUNITIES AND RISKS 68 in different sectors all over the world, we are able to diver- sify our risk portfolio and thus counteract the incumbent risks. Our future success moreover depends on our ability to continuously improve our existing business, seamlessly integrate new business and grow in our most important markets and segments. The eCommerce Solutions division is responsible for domestic and international non-time-definite standard parcel delivery services in various countries around the globe. It predominantly serves customers in the fast- growing e-commerce sector. Our goal is to leverage our international resources and services to build a cross-bor- der solutions platform that can be connected to the most cost- efficient networks for last-mile delivery. We want to grow profitably in all sectors and segments. We took measures to counteract the fundamental risk of rising cost pressure and to improve network efficiency and cost flexibility. In the German mail and parcel business, we are re- sponding to the challenges posed by the structural shift from a physical to a digital business and the continual de- cline in letter mail occurring parallel to the steady increase in volumes of parcels and merchandise mail items. 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 in the coming years and are therefore expanding our parcel network. We are also expanding our range of electronic communications services, securing our standing as a qual- ity leader and, where possible, making our transport and delivery costs more flexible. We follow developments in the market very closely and take them into account in our earnings projections. We currently do not see any specific corporate strategy opportunities or risks of material significance, either for the Group or individual divisions. Legal and compliance-related opportunities and risks Legal disputes or legal proceedings may arise or be initiated in cases of non-compliance with national or international laws, regulations or agreements. Examples are violations of antitrust and competition law or of regulatory, statutory or contractual requirements. Investigations of any such violations may cause considerable (financial) sanctions to be imposed in the context of legal proceedings or out-of- court settlements. We have established a corporate compliance unit to monitor adherence to Group-wide standards at both Group and divisional level with respect to typical compliance risks. The compliance unit monitors adherence to external laws and regulations and our corresponding internal policies to prevent risks from materialising. In addition to our compli- ance initiative aimed at fighting corruption and violations of cartel and competition law, we have introduced initiatives in all divisions intended to ensure compliance with data protection laws – for example to ensure adherence to the provisions of the European Union’s General Data Protection Regulation (GDPR). A similar, Group-wide compliance initia- tive aims to ensure adherence to international and national export controls and embargo regulations. At present, we do not see any specific legal or compli- ance-related opportunities or risks of material significance. Opportunities and risks arising from capital expenditure and projects Our Group invests in growing our network, in buildings and technical equipment, in IT solutions and in our fleet of vehi- cles and freight carriers. This can lead to risk in the event of deviations from budgets. Deviations from time frames and in implementation could impair the continuity and quality of the services we provide. Complex projects or a lack of resource availability may likewise lead to deviations from budgets or time frames. The Group is constantly on the lookout for attractive, financially advantageous investment options to firm up our divisions’ positioning. Project management and project and investment mon- itoring keep a constant watch on the status of investments and current projects in order to identify risks at an early stage so that targeted countermeasures can be taken. We report regularly to the Group Board of Management on the status of projects under monitoring in our reporting system. The Supervisory Board is additionally provided with regu- lar, comprehensive reports on the Group’s biggest projects. Moreover, the Group Board of Management is informed promptly of any critical projects. We do not currently see any specific opportunities or risks of material significance in the area of capital expen- diture and projects. Operational opportunities and risks Logistics services are generally provided in bulk and re- quire a complex, external operational infrastructure with high quality standards. Any weaknesses with regard to the tendering, sorting, transport, warehousing, customs Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT ExPECTED DEVELOPMENTS , OPPORTUNITIES AND RISKS 69 clearance or delivery of shipments could seriously com- promise our competitive position. To consistently guar- antee reliability and punctual delivery, processes must be organised so as to proceed smoothly with no technical or personnel- related glitches. We counteract potential opera- tional risks, e. g. through efficient workflows and structures and by continuously improving our fleet management. We also take out insurance policies to guard against potential losses. Most recently, the global pandemic has revealed how external factors can reduce the availability of our employ- ees and hence potentially impair our operating perfor- mance. For information on the measures we are taking to protect our employees, please refer to the category titled “Human resources” and “Environment, catastrophes and epidemics”. A large number of internal processes must be aligned so that we can render our services. These include – in addi- tion to our fundamental operating processes – supporting functions such as sales and purchasing. The extent to which we succeed in aligning our internal processes to meet cus- tomer needs whilst simultaneously lowering costs corre- lates with potential positive deviations from the current projections. Our earnings projections already incorporate the expected cost savings. Increased restrictions imposed by law to combat cli- mate change can be expected in the coming years, including limits on air transport or access to city centres. In certain cases this may also affect our business models. The re- sulting risk represents a risk of medium significance for us currently. At this time we do not see any additional specific operational opportunities or risks of material significance in this regard. the area of mental health using a new system for assessing risks associated with mental stresses. Opportunities and risks arising from human resources It is essential for us to have qualified and motivated employ- ees in order to achieve long-term success. In some mar- kets, however, demographic change may lead to a scarcity of available workers. Our work in the area of human resources aims to avoid potential risk that may arise from changing demographic and social structures. The goal is to motivate our personnel, to provide them with employee development opportunities and to foster their long-term loyalty to the company. Of particular importance in this context is training manage- ment and team leaders in our leadership attributes, which are applicable to all Group executives and serve as a be- havioural compass. We keep a constant eye on developments in the job market, communicate directly with our employees and endeavour to further enhance our attractiveness to both existing and prospective employees. Chronic disease or acute illnesses on the part of em- ployees may negatively impact their health and our ability to provide our services. We therefore place high value on occupational health and safety standards. We additionally counter the risk of disease or illness by carrying out initia- tives tailored to local requirements and by cooperating across divisions in the management of healthcare initiatives, such as app-supported exercise programmes, options to have check-ups performed on-site and the Group-wide em- ployee benefits programme. In addition, we address risk in With approximately 590,000 employees (headcount as at 31 December 2021) in over 220 countries and ter- ritories, upholding human rights is an important priority also reflected in our own Human Rights Policy Statement. If infringements are reported, we will take appropriate measures for clarification. Thanks to a targeted and coordinated approach, we were able to limit the impact of the pandemic in the year under review without generating any serious repercussions for our sickness rate. We foresee similar results for 2022. Overall, we do not currently see any specific personnel- related opportunities or risks of material significance. Opportunities and risks arising from information technology The security of our information systems is particularly im- portant to us. The goal is to ensure continuous IT system operation and prevent unauthorised access to our systems and databases. To this end, we have defined guidelines, standards and procedures based upon ISO 27001, the in- ternational standard for information security management. In addition, IT risks are monitored and assessed on an on- going basis by Group Risk Management, Internal Audit, Data Protection and Corporate Security. We estimate the latent risk of third parties gaining unauthorised access to our systems and jeopardising the availability of our data as medium. For our business processes to run smoothly at all times, the essential IT systems must be continuously available. We Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT ExPECTED DEVELOPMENTS , OPPORTUNITIES AND RISKS 70 have therefore designed our systems to protect against complete system failure. 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 up- grades – to control risks that could arise from outdated software or from software upgrades. 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. In addition to outsourced 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. Overall, a possible IT security in- cident represents a risk of medium importance. We also take continuous action to minimise risk, such as holding regular training courses for our employees and monitoring all of our networks and IT systems globally via our Cyber Defence Centre, along with regular information security incident simulations. We currently do not see any other specific IT-related opportunities or risks of material significance. Financial opportunities and risks As a global operator, we are exposed to financial opportu- nities and risks arising from fluctuating foreign exchange rates, interest rates and commodities prices, as well as the general risk inherent in the use of financial instruments. Changes in pension obligations also impact our business. We attempt to reduce the volatility of our financial perfor- mance due to financial risk by implementing both opera- tional and financial management measures. With respect to currencies, opportunities and risks re- sult from scheduled foreign currency transactions as well as those budgeted for the future. Any significant currency risks arising from budgeted transactions are quantified as a net position over a rolling 24-month period. Highly cor- related currencies are consolidated in blocks. At the Group level, the most important net surpluses are budgeted for the US dollar block as well as for the pound sterling, the Japanese yen and the Australian dollar. The Czech koruna is the only currency with a considerable net deficit. As at the reporting date, there were no significant currency hedges for scheduled foreign currency transactions. Any general depreciation of the euro presents an op- portunity as regards the Group’s earnings position. The main risk to the Group’s earnings position would be a gen- eral appreciation of the euro. We currently assess the aggregate effect of all foreign currency gains and losses both as an opportunity and a risk of medium 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 customers via operating measures (fuel surcharges). The key control parameters for liquidity management are the centrally available liquidity reserves. The Group’s liq uidity is secured over the short and medium terms. Moreover, the Group enjoys open access to the capital markets on account of its good ratings within the industry and is well positioned to ensure that long-term capital requirements are fulfilled. We therefore see no significant risk to the Group at present in the area of liquidity. Further information on the Group’s financial posi- tion and finance strategy as well as on the management of financial risks can be found in the Report on economic note 43 to the consolidated financial statements. position and in Detailed information on risks in relation to the Group’s de- fined benefit retirement plans can be found in note 37 to the consolidated financial statements. Risk may also arise from our financial and managerial accounting processes and our budgetary processes. We monitor those processes continuously to prevent such risk from materialising. We do not currently see any other significant financial opportunities or risks. Tax-related opportunities and risks Due to the international scope of our operations, we are subject to a variety of tax regimes. Opportunities and risks arise from the introduction of new types of taxes, legislative changes and judicial rulings. We mitigate this risk through continual dialogue with taxation authorities and tax advisors to obtain the greatest possible degree of legal certainty. This allows us to meet tax compliance requirements in the countries in which we operate to the best of our knowledge and belief. Our Group risk management system incorporates a tax risk manage- ment framework that enables us to monitor and avoid tax risk as far as possible. Currently, we have not identified any significant tax- related opportunities or risks. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT ExPECTED DEVELOPMENTS , OPPORTUNITIES AND RISKS 71 Opportunities and risks related to real estate transactions Deutsche  Post  DHL Group is one of the world’s largest cor- porate users of industrial properties. A large portion of the Group’s industrial real estate portfolio consists of leased properties. Ownership solutions have additionally been im- plemented for a number of especially strategic properties. Our business may be impacted by opportunities and risks arising from the lease, purchase, sale, construction or use of real estate. A global team of real estate professionals manages the Group portfolio and ensures that any opportu- nities or risks are identified at an early stage and a suitable response is selected. We negotiate suitable solutions early with our lessors, analyse real estate markets and identify suitable properties for expanding or optimising the current portfolio based on our divisions’ business strategies and operational location planning. The main objective is to secure the availability of properties needed for our core business. We do not currently see any specific opportunities or risks of significance in the area of real estate. Market- and customer-specific opportunities and risks Macroeconomic and sector-specific conditions are a key factor in determining the success of our business. Along with the global economic cycle, of particular importance here is the evolution of the logistics market in the interplay between our company and our stakeholders, and including our customers, suppliers and competitors. Changes in de- mand present both opportunities and risks. As a provider of choice, our business is based on our customers’ needs. Our customers are likewise exposed to macroeconomic trends that impact growth in their re- spective sectors. We monitor market developments on an ongoing basis and review the potential financial effects of relationships with business partners and suppliers at regular intervals to enable us to avert any risk that could arise from potential insolvencies, for example, at an early stage. Our Customer Solutions & Innovation unit uses a risk dashboard for this purpose. We expect the positive development of our business to carry over into 2022. Growth opportunities will arise in all areas of business as the world economy gradually recovers and structural growth continues in the area of e-commerce. Although the consequences of the pandemic have weakened world trade, our DHL divisions are benefitting from rising demand for complex logistics solutions, amongst other things, thanks to our position as the global market leader. In addition, our strong position in all the regions in which we operate allows us to compensate for declines in certain trade lanes based on growth in others. Whether and to what extent the logistics market will grow depends on a number of factors. The trend towards outsourcing business processes continues. Supply chains are becoming more complex and more international, due in part to an increasing desire on the part of many businesses for supplier diversity as a re- sult of the global pandemic. However, the added complexity also makes supply chains more prone to disruption. The need for stable, integrated logistics solutions is therefore growing – and this is precisely what we provide with our broad-based service portfolio. We are unable to generally rule out the possibility of an economic downturn in specific regions or a stagnation or decrease in transport quantities. However, we assume that this would not reduce demand in all business units. For example – as we have just learned during the pandemic – the opposite effect has occurred in our parcel business as online sales have resulted in higher demand. Cyclical risks can affect our divisions differently depending on their magnitude and point in time, which could mitigate the total effect. Moreover, we have taken measures in re- cent years to make costs more flexible and to allow us to respond quickly to changes in market demand. For instance, our Coronavirus Task Force was able to respond swiftly and flexibly to changes caused by the pandemic. This enabled us to keep our supply chain intact and provide the best pos- sible service. Deutsche  Post and DHL are in competition with other providers and new competitors entering the market. Such competition can significantly impact our customer base as well as the levels of prices and margins in our markets. In the logistics and letter mail business, the key factors for success are quality, confidence and competitive prices. Thanks to the high quality we offer, along with the cost sav- ings 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. As a logistics concern, we are additionally exposed to the effects of fluctuations in market prices on Group profit. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT ExPECTED DEVELOPMENTS , OPPORTUNITIES AND RISKS 72 The current rise in inflation represents a risk of medium significance. In line with our ESG Roadmap, we aim to have more than 30 % of the total fuel we use for air freight come from sustainable sources (sustainable aviation fuel – SAF) by 2030. The possibility that the market supply of SAF may not be sufficient therefore represents a risk of medium significance. In addition, no significant opportunities or risks are seen at present in this risk category. Opportunities and risks arising from political, regulatory or legal conditions Our business is fundamentally intertwined with the politi- cal and legal environment in which we operate. The stabil- ity and security of international transport routes represent the first line in this framework, and they could be critically disrupted by events ranging from geopolitical develop- ments to military conflicts. In addition, the international transport of goods is subject to the import, export and transit regulations of more than 220 countries and territo- ries as well as their applicable foreign trade laws. In recent years, not only has the number but also complexity of such laws and regulations increased significantly (including their extraterritorial application). Violations are also being pursued more aggressively by the competent authorities, with stricter penalties imposed. We have implemented a Group-wide compliance programme in response to this de- velopment. In addition to the legally prescribed checking of all senders, recipients, suppliers and employees against current embargo lists, this specifically includes the legally required review of shipments for the purpose of enforcing applicable export restrictions as well as country sanctions and embargos. Deutsche  Post  DHL Group also co-operates with the responsible authorities, both in working to pre- vent violations as well as in assisting in the investigation of any infringements in order to avoid or limit potential sanctions. A number of risks arise primarily from the fact that the Group provides some of its services in regulated markets. Many of the postal services rendered by Deutsche  Post AG and its subsidiaries (particularly the Post & Parcel Germany division) are subject to sector-specific regulation by the German federal network agency (Bundesnetzagentur). The German federal network agency approves or reviews prices, formulates the terms of downstream access, has special supervisory powers to combat market abuse and guarantees the provision of universal postal services. This general regulatory risk could lead to a decline in revenue and earnings in the event of negative decisions. Revenue and earnings risk can arise in particular from the price cap procedure used to determine the rates for individual pieces of letter mail. Provisional approval of the rates for the period from 1 January 2022 to 31 De - cember 2024 was issued by the German federal network agency on 10 December 2021. In its capacity as a consumer of postal services, a Ger- man courier, express and parcel (CEP) association together with other customers and providers of postal services filed an action with the Cologne Administrative Court against the old pricing approval granted on 12 December 2019. On 4 January 2021, the Cologne Administrative Court ruled that the CEP association’s action suspends the effect of the German federal network agency’s decision to raise prices for standard, compact, large format (Großbrief) and extra-large format (Maxibrief) letters within Germany. The ruling only applies to the CEP association. The proceedings in the main action are still pending. Moreover, the same CEP association had previously (on 4 December 2015) filed an action against the pricing approvals granted for the years from 2016 to 2018. The German Federal Administrative Court ruled on that action brought by the CEP association on 27 May 2020. The only one of the approvals that the court deemed unlawful con- cerned the increase in the price of a standard domestic letter to €0.70 for the period from 2016 to 2018. The rul- ing is only directly applicable to the plaintiff. The amount in dispute was set by the German Federal Administrative Court at a mid-range, four-digit euro amount. To date, the plaintiff had not asserted any claims for a refund of postal charges for the period from 2016 to 2018. In the grounds for its decision, the court stated that the pricing approval in question was unlawful because the method used to calculate the allowable profit margin under the amended provisions of the 2015 Post­Entgelt­ re gulierungsverordnung (PEntgV  – Postal Rate Regula- tion Act) was not in compliance with the provisions of the Post gesetz (PostG – German Postal Act) regarding the au- thority to issue statutory instruments. The German gov- ernment eliminated this formal deficiency disputed by the German Federal Administrative Court by way of an amend- ment to the Postgesetz (German Postal Act) entering into force in March 2021 in addition to other amendments. As Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT ExPECTED DEVELOPMENTS , OPPORTUNITIES AND RISKS 73 a result, previous regulatory practice can continue by and large. It cannot currently be ruled out that the effects on ex- isting pricing approvals, or on future price cap procedures, of the court’s decisions, the change in the regulatory frame- work or the actions currently pending could be negative for Deutsche  Post. According to current assessments, this represents a medium risk. The German federal government agreed in the coalition agreement that the Postal Act would again be amended. The aim is to further enhance social and environmental stan- dards and strengthen fair competition. Depending upon the structure of the new regulatory framework, opportunities and risks may arise for the company’s regulated areas. We describe other significant legal proceedings in note 45 to the consolidated financial statements. However, we do not see any of these other proceedings as posing a risk of significant deviations from the projections for the 2022 forecast period. The fight against climate change could result in in- creased regulatory and legal changes in the coming years. An increase in, or stepped up introduction of, carbon taxes represents a risk of medium importance for us, similar to increased restrictions on GHG emissions. We have not identified any other significant opportu- nities or risks associated with the political, regulatory or statutory environment. Opportunities and risks arising from the environment, catastrophes and epidemics Our business operations can be both positively and negatively impacted by natural disasters, epidemics and ecological factors, also including physical risks arising from climate change such as floods and storms. The year 2021 was again crucially shaped by the COVID-19 pandemic, which presented us with challenges posing both opportunities and risks. Our focus at all times was, and continues to be, on safeguarding the health of our employees. At the same time, we succeeded in significantly increasing our revenues due to volume increases in both the German parcel business and in express deliveries. At the same time, measures aimed at containing the pandemic led to economic restrictions and uncertainty about how the global economy as a whole and our business will fare going forward. We are making a collective effort to contain the virus and adapt our business to the current situation by taking suitable measures such as improving hygiene protocols, requiring masks to be worn, enabling remote working where possible and holding virtual meetings. The further course of the virus cannot be predicted at present. We are therefore examining the impact of the pandemic on our operations in the individual regions at regular intervals. We believe that the overall effect of the risks described will be of medium relevance for the Group in the coming years. We deal with additional potential effects of the pandemic in the report on expected developments. We have not identified any significant opportunities or risks in this area other than the effects of the pandemic. Overall assessment In the 2022 financial year, we anticipate consolidated EBIT of around €8.0 billion (+ / – max. 5 %). The DHL divisions are expected to generate a total of around €7.0 billion (+ / – max. 4 %). In the Post & Parcel Germany division, EBIT is projected to amount to around €1.5 billion (+ / – max. 10 %). The earnings contributed by Group Functions are expected to amount to around €–0.45 billion. In view of the expected EBIT development in combination with a predicted increase in the asset charge, we expect the EAC to be slightly down year-on-year. Free cash flow (excluding the purchase price payment for Hillebrand) is expected to come in at around €3.6 billion (+ / – max. 5 %). The current business planning has not identified any significant changes in the Group’s overall opportunity and risk situation compared with last year’s risk report. No new risks with a potentially critical impact upon the Group’s result have been identified according to current assess- ments. Based upon the Group’s early warning system and in the estimation of its Board of Management, there were no identifiable risks for the Group in the current 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 stable to positive outlook projected for the Group is more- over reflected in our Credit rating. Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT GOVERNANCE 74 GOVERNANCE Annual Corporate Governance Statement pursuant to Sections 289f and 315d HGB with respect to Deutsche  Post AG and Deutsche  Post  DHL Group. Declaration of Conformity with the German Corporate Governance Code Deutsche  Post AG once again complied with the sugges- tions and recommendations of the German Corporate Governance Code in the year under review. The Board of Management and Supervisory Board will continue to do so in the future – with the exception that, on a case-by- case basis, a Board of Management member may assume a chairmanship appointment to the supervisory board of another company in the final months of their term. In De- cember 2021, the Board of Management and Supervisory Board of Deutsche  Post AG issued the following declaration of conformity: “The Board of Management and the Supervisory Board of Deutsche  Post AG hereby declare that, since the is suance of the Declaration of Conformity in December 2020, all rec- ommendations of the Government Commission German Corporate Governance Code (DCGK) as amended on 16 December 2019 and published in the Federal Gazette on 20 March 2020 have been complied with and that all recommendations of the code shall be complied with in the future. With a view to recommendation C.5, this does not apply to a Board member who assumes a chairmanship role in the supervisory board of a listed company during the final 12 to 15 months of his or her term.” Particularly when a Board of Management member steps down after a long term of service, the transition of that seat is generally known well before the member de- parts. In some situations, chairmanships of the supervisory boards of other companies are planned before completion of the Board of Management member’s regular term. The Supervisory Board considers it proper for an experienced Board member to assume a supervisory board chairman- ship appointment during the final months of his or her term and would like to allow this on a case-by-case basis. The current Declaration of Conformity and the Annual Corporate Governance Statement along with the Declara- tions of Conformity for the past five years are available on the company’s website. Corporate governance principles and shared values Our business relationships and activities are based upon responsible business practices that comply with applicable laws, ethical 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 re- lationships with our shareholders, our employees and other stakeholders, whose decisions to select Deutsche  Post  DHL Group as a supplier, employer or investment are increas- ingly also based upon the requirement that we apply good corporate governance criteria. As a Group-wide framework of policies and regula- tions, the Code of Conduct is firmly established within the company and is applicable across all divisions and regions. It takes into account the principles set out in the United Nations (UN) Global Compact and is based upon the Uni- versal Declaration of Human Rights. It is consistent with recognised legal standards, including the applicable anti- corruption legislation and agreements. We adhere to the International Labour Organization (ILO) Declaration on Fundamental Principles and Rights at Work and the OECD Guidelines for Multinational Enterprises. As a long -standing partner of the United Nations, we also support the UN’s Sustainable Development Goals (SDGs). The Code of Conduct also defines what is meant 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 professional development of our employees are their skills and qualifications. The members of the Board of Management and the Supervisory Board support the Group’s diversity strategy, with a particular focus on the goal of increasing the number of women in management. Doing business includes using our expertise as a ser- vice provider in the mail and logistics sector for the benefit of society and the environment, and we motivate our em- ployees to engage personally. Ensuring that our interactions with business partners, shareholders and the public are conducted with integrity and within the bounds of the law is vital to maintaining our reputation. This is also the foundation of Deutsche  Post  DHL Group’s lasting business success. Our compliance manage- ment system (CMS) focuses on preventing corruption and anti-competitive conduct. Insights gained from compli- ance audits and reported violations are also used to con- tinually improve and upgrade the CMS system, Corporate Governance. Co-operation between the Board of Management and the Supervisory Board, remuneration, retirement ages Deutsche  Post AG is subject to German stock corporation law and has a two-tier board structure comprising the Board of Management and the Supervisory Board. Members of the Board of Management are respon- sible for the management of the company. The Board of Management’s rules of procedure set out the principles Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT GOVERNANCE 75 governing its internal organisation, management and rep- resentation, as well as co-operation between its individ- ual members. The members of the Board of Management manage their board departments independently, except where decisions of particular significance and conse- quence for the company or the Group must be made by the members of the Board of Management as a whole. They are required to subordinate the interests of their individual board departments to the collective interests of the company and to inform the full Board of Manage- ment about significant developments in their spheres of responsibility. The CEO conducts Board of Management business, aligns board department activities with the company’s overall goals and plans, and ensures that corporate pol- icy is implemented. When making decisions, members of the Board of Management may not act in their own per- sonal interest or exploit corporate business opportunities for their own benefit. Any conflicts of interest must be disclosed to the chairs of the Supervisory Board and the Board of Management without delay; the other Board of Management members must also be informed. The Supervisory Board appoints, advises and oversees the Board of Management. It proposes the remuneration system for Board of Management members to the Annual General Meeting, and – together with the Board of Manage- ment – is jointly responsible for the long-term succession planning for the Board of Management. The current remuneration system for the company’s Board of Management was adapted prior to the Annual General Meeting in May 2021 on the basis of new provi- sions under stock corporation law, new regulations of the German Corporate Governance Code and deliberations with investors, and was approved by the Annual General Meet- ing with a majority of 93.39 % of votes cast. No member of the Board of Management is a member of a supervisory board of a non-Group listed company or exercises a comparable function. The CEO, Dr Frank Appel, is a member of the supervisory board of Fresenius Manage- ment SE. Additionally, he is to be nominated to the annual general meeting of Deutsche Telekom AG for election to its supervisory board; the intention is for him to assume the chairmanship of that body. The retirement age for Board of Management members defined by the Supervisory Board is generally the year in which the Board of Management member reaches the age of 65. The Supervisory Board defined the retirement age for members of the Supervisory Board in such a way that, for nominations for the election of members of the Supervisory Board, attention shall be paid to the fact that the term of office shall end no later than the close of the Annual General Meeting after the Supervisory Board member reaches the age of 72. As a general rule, Supervisory Board members should not serve more than three terms of office. The company’s D & O insurance for the members of the Board of Management provides for a deductible as set out in the AktG. The principles governing the Supervisory Board’s internal organisation, a catalogue of Board of Manage- ment transactions requiring approval and the work of the Supervisory Board committees are governed by the rules of procedure. The Chair elected by the members of the Supervisory Board from their ranks co-ordinates the work of the Supervisory Board and represents the Super- visory Board publicly. The Supervisory Board represents the company in respect of the Board of Management mem- bers. Members of the Supervisory Board receive a fixed annual remuneration of €70,000 from the Annual General Meeting, an amount which was last increased in 2014. At this year’s Annual General Meeting, we will recommend increasing this base remuneration to €100,000 annually. The increase is intended to account for greater demands placed on the Supervisory Board in terms of time and workload and remuneration trends at comparable com- panies. As previously, the remuneration for the Chair of the Supervisory Board increases by 100 %, for the Deputy Chair by 50 %, for the Chair of a committee by 100 % and for committee members by 50 %. The contents of the report on remuneration of Board of Management and Supervi- sory Board members have been audited, and the report company’s website. There are no can be accessed at the contracts between the company and Supervisory Board members apart from those governing their Supervisory Board activities and the employment contracts with the employee representatives. The Supervisory Board meets at least twice each half- year, at least once without the Board of Management pre- sent. Extraordinary Supervisory Board meetings are held whenever decisions need to be made at short notice or particular issues require discussion. In the 2021 financial year, Supervisory Board members held five plenary meet- ings, 21 committee meetings and one closed meeting, as Report of the Supervisory Board. Some of described in the those meetings were held as conference calls due to pan- demic-related restrictions. The members of the Super- visory Board without exception attended all meetings of the plenary and the committees where they held seats this year. The attendance rate of 100 % is broken down by member in the Report of the Supervisory Board. The Board of Management and the Supervisory Board regularly discuss the Group’s strategy, the divisions’ objec- tives and strategies, the financial position and performance of the company and the Group, key business transactions, the progress of acquisitions and investments, compliance and compliance management, risk exposure and risk man- Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT GOVERNANCE 76 agement, and all material business planning and related implementation issues. after discussing this list of candidates, submits it to the Supervisory Board. The Board of Management informs the Supervisory Board promptly and in full about all issues of significance. The Chair of the Supervisory Board and the CEO maintain close contact about current issues; the Chair of the Finance and Audit Committee regularly discusses important mat- ters with the Board member responsible for Finance, even outside of meetings. Supervisory Board decisions are prepared in advance in separate meetings of the shareholder representatives and the employee representatives, and by the relevant committees. Each plenary Supervisory Board meeting in- cludes a detailed report regarding the committees’ work and the decisions made. Supervisory Board members are personally responsible for ensuring they receive the train- ing and professional development measures they need to perform their tasks. They receive appropriate support from the company in the process. Directors’ Day is the core element of this support. In June, Directors’ Day covered the topics of the tax situation and internal and external com- munications of the Deutsche  Post  DHL Group; in Septem- ber, it covered the Lieferkettengesetz (Supply Chain Act), Finanz markt integritätsstärkungsgesetz (Financial Market Integrity Strengthening Act) and other current develop- ments in the field of corporate governance. Succession planning for the Board of Management Planning for the appointments of the members of the Board of Management is an ongoing process mainly in the remit of the Executive Committee. In the event of an up- coming vacancy, the Executive Committee selects suit able candidates for personal interviews, taking into account specific requirements for experience and qualifications to be met by the members of the Board of Management and, Possible successors from within the Group are gener- ally given the opportunity to give a presentation on topics from their own areas of responsibility before the Super- visory Board. This provides the Super visory Board with a good overview of the capabilities and talents avail able within the Group. When appointing new members to the Board of Management, the Supervisory Board ensures that the different personalities and skills of the members supple- ments the Board of Management and that its membership is as diverse as possible. In addition to industry experience and international diversity, gender diversity is also one of the key selection criteria. The initial term of service for members of the Board of Management generally runs for three years. Independence of shareholder representatives on the Supervisory Board All Supervisory Board members are independent within the meaning of the German Corporate Governance Code. This exceeds the target of filling the shareholder side with at least 60 % independent members. The largest shareholder in the company, KfW Ban- ken gruppe, currently holds 20.49 % of the shares in Deutsche  Post AG and therefore does not exercise control. Accordingly, Dr Jörg Kukies and Dr Günther Bräunig are also independent. The same applies for the successor of Dr Günther Bräunig proposed for election to the Super- visory Board, Stefan B. Wintels. The term of Dr Stefan Schulte, who has been a mem- ber of the board for over twelve years, does not affect his independence; it also falls within the framework of the aforementioned maximum of three terms. When deter- mining independence, the assessment must also include consideration of the term length, along with an overall view of the personality and the duties of the Supervisory Board member, and the conclusion may be reached that other as- pects balance out a comparatively longer term of office. A determining factor for the Supervisory Board in consider- ing this overall view is how Dr Schulte confidently asserts his expertise as a financial expert and, particularly as the Chairman of the Financial and Audit Committee, engages the Board of Management in open discussions and critically examines their presentations. Lawrence Rosen’s duties as a member of the com pany’s Board of Management ended on 30 September 2016 and thus do not affect his independence. Rather, it is his knowl- edge of the company and business operations that make it possible for him to support the Board of Management as a critical advisor and to fully perform the monitoring duties of the Supervisory Board. No Supervisory Board member exceeds the max- imum age limit of 72, holds seats on governing bodies of the Group’s main competitors or provides consultancy services to, or maintains personal relationships with, such competitors. Effectiveness of the Supervisory Board’s advisory and monitoring duties The Supervisory Board carries out an annual review to de- termine how effectively it discharges its duties. This review is carried out in a Supervisory Board meeting, without the Board of Management, and is based upon a questionnaire at least once every three years. Suggestions made by indi- vidual members of the Supervisory Board are also taken up and implemented during the year. In the year under re- view, the Supervisory Board reviewed the efficiency of its activities in its September meeting. The board concluded that it had performed its monitoring and advisory duties effectively and efficiently. Constructive collaboration within Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT GOVERNANCE 77 the Supervisory Board and with Board of Management members in an atmosphere of trust enables duties to be performed in a proper and professional manner. Targets for the composition of the Supervisory Board (skills profile) In addition to legal requirements (notably Sections 100 and 107 AktG), the composition of the Supervisory Board is guided by recommendation C.6 of the German Corpo- rate Governance Code (DCGK). The Supervisory Board last updated the targets for its composition in December 2021, when it added competent advising on the topic of sustain- ability issues. Overall, the Supervisory Board set the follow- ing targets for its composition which also reflect the skills profile it aspires to have: 1 When proposing candidates to the Annual General Meet- ing for election as Supervisory Board members, the Super visory Board is guided purely by the best interests of the company. Subject to this requirement, the Super- visory Board aims to ensure that the independent group of shareholder representatives as defined in C.6 of the German Corporate Governance Code accounts for at least 60 % of the Supervisory Board, and that at least 30 % of Supervisory Board members are women. 2 The Supervisory Board’s future proposals to the An- nual General Meeting will continue to consider can- didates whose origins, education or professional ex- perience equip them with international knowledge and experience. 3 The Supervisory Board should collectively serve as a competent advisor to the Board of Management on future issues, in particular digital transformation and sustainability issues. 4 The Supervisory Board should collectively have suffi- cient expertise in the areas of accounting and financial statement audits. This includes knowledge of inter- national developments in the field of accounting. Ad- ditionally, the Supervisory Board believes that the independence of its members helps guarantee the integrity of the accounting process and ensure the independence of the auditors. 6 5 Conflicts of interest affecting Supervisory Board mem- bers are an obstacle to providing independent advice to, and supervision of, the Board of Management. The Supervisory Board will decide how to deal with poten- tial or actual conflicts of interest on a case-by-case basis, in accordance with the law and giving due con- sideration to the German Corporate Governance Code. In accordance with the age limit adopted by the Super- visory Board and laid down in the rules of procedure for the Supervisory Board, proposals for the election of 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 Super- visory 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 fulfils this skills profile. The Supervisory Board took such targets and the skills profile into account in the election proposals it made to the 2021 Annual General Meeting. It will do the same with respect to the election proposal to be made to this year’s Annual General Meeting. Board of Management and Supervisory Board committees Business review meetings are held on a quarterly basis for each division, attended by representatives of management from the respective division, once with the entire Board of Management and the other three times with the CEO and CFO. Additionally, quarterly review meetings are held for the cross-divisional functions with the CEO and CFO as well as representatives of management. The review meetings involve discussions of strategic initiatives, operational matters and the budgetary situation in the divisions. In addition, all of the Board of Management departments have Board committees where decisions are made on the fundamental strategic orientation of the respective department and prominent topics. Finally, the responsible Board departments resolve on investment, real estate and M & A plans within certain threshold limits using defined decision- making and approval processes. The members of the Supervisory Board’s committees prepare the resolutions to be taken in the plenary meetings and fulfil the duties assigned to them by the law, the com- pany’s Articles of Association and the rules of procedure for the Supervisory Board. The Executive Committee prepares the resolutions to be taken in the plenary meetings regarding the appoint- ment of members to the Board of Management, prepara- tion of their service agreements (including remuneration), the system for remunerating Board of Management mem- bers, the establishment of variable remuneration targets, the establishment of variable remuneration according to degrees of target achievement and the review of the appro- priateness of Board of Management remuneration. In addi- tion, it regularly focuses on long-term succession planning for the Board of Management. The Finance and Audit Committee reviews the com- pany’s accounts and oversees its accounting process and the effectiveness of the internal control system, the risk management system and the internal audit system, as well as the audit of the annual financial statements, in particu- lar with respect to audit quality and the independence of the auditors. It prepares the proposals of the Supervisory Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT GOVERNANCE 78 Board to be made to the Annual General Meeting concern- ing the appointment of the audit firm and is responsible for carrying out the selection process. The Finance and Audit Committee, moreover, deals with the audit of the non-financial statement. If the auditor is to be engaged to perform non- audit services, the committee must also ap- prove any such engagement. It examines corporate com- pliance and discusses the half-yearly financial reports and the quarterly statements with the Board of Management prior to their publication. Based upon its own assessment, the committee submits proposals for the approval of the annual and consolidated financial statements to the Super- visory Board. As required, the Finance and Audit Commit- tee is also responsible for issuing findings on the required Supervisory Board approvals of significant transactions between the company and related parties. As previously described, the Chair of the Finance and Audit Committee, Dr Stefan Schulte, is independent and an expert both in the accounting area as well as in the auditing of financial statements as defined in Sections 100(5) and 107(4) AktG and in D.4 of the German Corpo- rate Governance Code. Besides Dr Stefan Schulte, Simone Menne – also a member of the Finance and Audit Com- mittee – and Lawrence Rosen are also independent and possess expertise in the areas of accounting and auditing of financial statements. An agreement has been reached with the auditor that the Chair of the Supervisory Board and the Chair of the Finance and Audit Committee will be informed without delay of any potential grounds for exclusion or for impair- ment of the auditors’ independence that arise during the audit, to the extent that any such grounds for exclusion or impairment are not immediately remedied. In addition, it has been agreed that the auditor will inform the Super- visory Board without delay of all material findings and in- Committees of the Supervisory Board Executive Committee Dr Nikolaus von Bomhard (Chair) Andrea Kocsis (Deputy Chair) Ingrid Deltenre Thomas Held Thorsten Kühn Dr Jörg Kukies Personnel Committee Andrea Kocsis (Chair) Dr Nikolaus von Bomhard (Deputy Chair) Ingrid Deltenre Mario Jacubasch (since 15 September 2021) Thomas Koczelnik (until 31 August 2021) Finance and Audit Committee Dr Stefan Schulte (Chair, independent and expert in the areas of accounting and auditing of financial statements as defined in Sections 100(5) and 107(4) AktG and D.4 German Corporate Governance Code) Stephan Teuscher (Deputy Chair) Thomas Koczelnik (until 31 August 2021) Dr Jörg Kukies Simone Menne (independent and expert in the areas of accounting and auditing of financial statements as defined in Sections 100(5) and 107(4) AktG and D.4 of the German Corporate Governance Code) Yusuf Özdemir (since 15 September 2021) Stefanie Weckesser Strategy and Sustainability Committee Dr Nikolaus von Bomhard (Chair) Andrea Kocsis (Deputy Chair) Dr Günther Bräunig Thomas Held (since 15 September 2021) Dr Heinrich Hiesinger Thomas Koczelnik (until 31 August 2021) Stephan Teuscher Nomination Committee Dr Nikolaus von Bomhard (Chair) Ingrid Deltenre Dr Jörg Kukies Mediation Committee (pursuant to Section 27(3) German Co-determination Act) Dr Nikolaus von Bomhard (Chair) Andrea Kocsis (Deputy Chair) Dr Heinrich Hiesinger Thorsten Kühn cidents occurring in the course of the audit. Furthermore, the auditor must inform the Supervisory Board if, whilst conducting the financial statement audit, any facts are found leading to the Declaration of Conformity issued by the Board of Management and Supervisory Board being incorrect. The Chair of the Finance and Audit Commit- tee and the auditor regularly exchange information both at meetings and at other times. The Finance and Audit Deutsche Post DHL Group – 2021 Annual Report COMBINED MANAGEMENT REPORT GOVERNANCE 79 Committee regularly reviews the quality of the finan- cial statement audit. Both in the meeting of the Finance and Audit Committee held in preparation for the finan- cial statements meeting as well as in the meeting of the plenary where the company and consolidated financial statements are approved, the members of the Supervisory Board closely examine the contents and the processes of the financial statement audit. The duties of the Strategy Committee were expanded by resolution of the Supervisory Board in December 2021 to include regularly addressing sustainability-related topics (environment, social, governance – ESG). The committee was renamed the Strategy and Sustainability Committee. In addition to dealing with ESG topics, the Strategy and Sus- tainability Committee prepares the Supervisory Board’s strategy discussions and regularly discusses implemen- tation of the strategy and the competitive position of the enterprise as a whole and of the divisions. In addition, it does preparatory work on corporate acquisitions and di- vesti tures that require the Supervisory Board’s approval. In the year under review, this was the acquisition of the J. F. Hillebrand Group stock corporation. The Nomination Committee presents the shareholder representatives of the Supervisory Board with recommen- dations for shareholder candidates for election to the Super- visory Board at the Annual General Meeting. The Personnel Committee discusses human resources principles for the Group. The Mediation Committee carries out the duties as- signed to it pursuant to the MitbestG: it makes proposals to the Supervisory Board on the appointment of members of the Board of Management in those cases in which the required majority of two-thirds of the votes of the Super- visory Board members is not reached. The committee did not meet in the past financial year. Further information about the work of the Supervisory Board and its committees in the 2021 financial year is con- tained in the Report of the Supervisory Board. The members of the Supervisory Board and all additional offices held by them as well as the members of the Board of Management and all additional offices held by them can be found in Boards and Committees. Board members’ curricu lum vitae, information about their qualifications and the terms of their current appointments are also published on our website. The website also has current curriculum vitae of the share- holder representatives on the Supervisory Board along with information on their professional occupation, the length of their membership on the Supervisory Board and the dura- tion of their current term of office. Diversity During succession planning and the selection of members for the Board of Management, the Supervisory Board pays close attention to ensuring that they contribute to the pro- file of the Board of Management as a whole in terms of their qualifications, abilities and experience. Long-term succession planning in all divisions guarantees that there will be sufficient qualified internal candidates to fill Board of Management positions in future. The early promo- tion of women in the company also plays a key role. The Second Leadership Positions Act stipulates that, from 1 August 2022, listed companies to which the German Co- determination Act applies and with more than three board of management members are subject to a par- ticipation requirement of at least one woman and at least one man. Deutsche  Post AG already complies with this participation requirement. Additionally, the Supervisory Board had approved a target for the proportion of women on the Board of Management of 2 : 8 by the 2021 Annual General Meeting. The Supervisory Board confirmed this target – initially not yet met – and approved a percentage of women on the Board of Management of 25 %, exceeding the statutory participation requirement, to be reached by the end of 2024. With the appointment of Nikola Hagleitner as the Board member for the Post & Parcel Germany divi- sion, a second woman will be on the Board of Management beginning in July 2022 along with Melanie Kreis. For the target period beginning 1 January 2020, the Board of Management set a target of 30 % for the percent- age of women at Deutsche  Post AG at both executive tiers below the Board of Management. We aim to meet these targets by 31 December 2024. The two executive tiers are defined on the basis of their reporting lines: tier 1 comprises executives assigned to the N-1 reporting line; the share of women here was 27.5 % as at 31 December 2021. Tier 2 con- sists of ex ecutives from the N-2 reporting line; the share of women here was 28 % as at 31 December 2021. The com- pany intends to increase the share of women in management globally and has therefore set itself the goal of increasing the percentage of women in middle and upper management to 30 % by 2025. This figure has risen continually in recent years and stood at 25.1 % as at 31 December 2021. The diversity criteria important to the Supervisory Board when considering its own composition are outlined in the list of its goals. With a proportion of women of 35 %, the Supervisory Board has exceeded its own target of 30 %, which also reflects the minimum statutory requirement. Shareholders and Annual General Meeting Shareholders exercise their rights, and in particular their right to receive information and to vote, at the Annual Gen- eral Meeting. Each share in the company entitles the holder to one vote. The agenda with the proposed resolutions for the Annual General Meeting and additional information will be made available on the company website at the latest Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT GOVERNANCE 80 when the Annual General Meeting is convened. A detailed CV is published for each Supervisory Board candidate put forth for election. 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 by the shareholders. Additionally, shareholders can authorise company proxies and submit postal votes via the online service offered by the company. Due to the pandemic, the 2021 Annual General Meeting was also held online in line with the applicable statutory provisions. Shareholders were able to submit their questions online up to one day prior to the AGM. They were able to vote either by absentee ballot or by authorising a company proxy to vote in their place. In light of the steadily high numbers of infections, the plan is for the 2022 Annual General Meeting to once again be held as a virtual event. The remuneration system applied to Board of Man- agement members must be presented to the Annual Gen- eral Meeting for approval whenever there are significant changes, or at least every four years; the four-year inter- val also applies to the remuneration of the Supervisory Board members. The 2021 Annual General Meeting ap- proved the Board of Management remuneration system with 93.39 % and the Supervisory Board remuneration with 99.46 % of the votes cast in favour. The Board of Manage- ment remuneration system and the resolution of the An- nual General Meeting on the remuneration of Supervisory Board members can also be accessed on the company’s website. Information regarding the remuneration of the individual members of the Board of Management and the Super visory Board can be found in the remuneration re- port, which is a part of the convocation to the 2022 Annual General Meeting. In accordance with Section 162 AktG, the remuneration report and the auditor report will also be available on our website. Disclosures required by takeover law Disclosures required under Sections 289a and 315a HGB and explanatory report. Composition of issued capital, voting rights and transfer of shares As at 31 December 2021, the company’s share capital totalled €1,239,059,409 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 en titles the holder to one vote at the Annual General Meeting (AGM). There are no shares with special rights conveying 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, which place no restrictions on the exercise of voting rights or transfer of shares. Under the Employee Share Plan share-based remuneration programme, stocks are subject to time-related trading restrictions during the two-year holding period. As at 31 December 2021, Deutsche  Post AG held a total of 15,247,431 treasury shares, which are excluded from rights for the company in accor dance with Section 71b of AktG. Shareholdings exceeding 10 % of voting rights KfW Bankengruppe (KfW), Frankfurt am Main, is our largest shareholder, holding 20.49 % 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 AktG and Section 31 Mitbestimmungsgesetz (MitbestG  – German Co-Deter- mination Act)). Article 6 of the Articles of Association stipu- lates 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 6, and Sec- tion 179 (1), Sentence 1 AktG, amendments to the Articles of Association are adopted by resolution of the AGM. In accordance with Article 21 (2) of the Articles of Associa- tion in conjunction with Sections 179 (2) and 133 (1) 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. Board of Management authorisation, particularly regarding the issue and buy-back of shares The Board of Management is authorised, subject to the con- sent of the Supervisory Board, to issue up to 130,000,000 new no-par-value registered shares (2021 Authorised Cap- ital). Details may be found in Article 5(2) of the Articles of Association. The Articles of Association are available on the company’s website 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 au- thorised by resolution of the AGMs of 28 April 2017 (agenda Deutsche Post DHL Group – 2021 Annual ReportCOMBINED MANAGEMENT REPORT GOVERNANCE 81 item 7), 24 April 2018 (agenda item 6) and 27 August 2020 (agenda items 7 and 8) to issue Performance Share Units (PSUs). The authorisation resolutions are included in the notarised minutes of the AGM, which can be viewed in the commercial register of the Bonn Local Court. In order to service both current PSUs and those yet to be issued, the AGM approved contingent capital increases. Details may be found in Article 5 of the Articles of Association. As at 31 December 2021, the PSUs already issued conferred rights to up to 28,613,021 Deutsche  Post AG shares, as- suming the conditions are met. Under the authorisations granted, up to 47,575,636 additional PSUs may still be issued. The AGM of 6 May 2021 authorised the company to buy back shares on or before 5 May 2026 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 option of using the treasury shares acquired on that basis or on the basis of a preceding authorisation, may be found in the authorisation resolution adopted by the AGM of 6 May 2021 (agenda item 8). In addition, the AGM of 6 May 2021 authorised the Board of Management to buy back shares within the scope specified in agenda item 8, including through the use of derivatives (agenda item 9). The company repurchased 17,694,910 shares in the fi- nancial year based upon that authorisation resolution and, together with the shares repurchased on the basis of the previous authorisation of 28 April 2017, repurchased a total of 20,314,969. Significant agreements that are conditional upon a change of control following a takeover bid and agree- ments with members of the Board of Management or employees providing for compensation in the event of a change of control Deutsche  Post AG holds a syndicated credit facility with a volume of €2 billion under an agreement entered into with a consortium of banks. If a change of control within the meaning of the agreement occurs, each member of the bank consortium is entitled, under certain conditions, to cancel its share of the credit facility as well as its share of any outstanding loans and to request repayment. The terms and conditions of the bonds issued under the Debt Issuance Programme established in March 2012 and those of the convertible bond issued in December 2017 also con- tain change-of-control clauses. In the event of a change of control within the meaning of those terms and conditions, creditors are, under certain conditions, granted the right to demand early redemption of the respective bonds. Finally, Deutsche  Post AG has concluded a factoring agreement pro- viding for a maximum volume of €70 million in connection with distribution partnerships. The factoring agreement can be terminated without notice in the event of a change of con- trol as defined in the agreement. The factoring agreement expires during the first quarter of 2022. In the event of a change of 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 of control after giving three months’ notice to the end of a given month, and to terminate their Board of Man- agement contract (right to early termination). The former severance payment claim previously provided for in the event of the exercise of the right to early termination no longer applies from the 2021 financial year. With regard 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 of control of the company. The participating executives will receive the total number of matching shares corresponding to their investment (or a cash equivalent) in due course. In such a case, the employer will be responsible for any tax disad- vantages resulting from a reduction of the holding period. Taxes normally incurred after the holding period are exempt from this provision. Under the Employee Share Plan, if a change of control occurs, any amounts that have already been invested and for which shares have yet to be delivered are reimbursed. Effective immediately, the holding period is waived for shares that have already been granted. Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS INCOME STATEMENT – STATEMENT OF C OMPREHENSIVE INCOME 82 CONSOLIDATED FINANCIAL STATEMENTS INCOME STATEMENT STATEMENT OF COMPREHENSIVE INCOME 1 January to 31 December € m Revenue 1 Other operating income Changes in inventories and work performed and capitalised Materials expense 1 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 result 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 Prior-period amounts adjusted due to reclassifications, note 4. Note 11 12 13 14 15 16 17 25 18 19 20 20 2020 66,716 2,095 292 –33,704 –22,234 –3,830 – 4,454 –34 4,847 220 – 838 – 58 – 676 4,171 – 995 3,176 2,979 197 2.41 2.36 2021 81,747 2,291 348 – 43,897 –23,879 –3,768 – 4,896 32 7,978 191 –746 – 64 – 619 7,359 –1,936 5,423 5,053 370 4.10 4.01 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 Income taxes relating to components of other compre- hensive 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 subsequently reclassified to profit or loss Hedging reserves 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 compre- hensive 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 Note 37 19 19 2020 3,176 –1,087 – 5 80 0 –1,012 11 –29 – 954 0 7 – 8 – 973 –1,985 1,191 1,009 182 2021 5,423 2,005 16 –79 0 1,942 27 2 925 0 – 6 6 954 2,896 8,319 7,915 404 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS BALANCE SHEET 83 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 Non-current assets Inventories Current financial assets Trade receivables Other current assets Income tax assets Cash and cash equivalents Assets held for sale Current assets TOTAL ASSETS Note 31 Dec. 2020 31 Dec. 2021 Note 31 Dec. 2020 31 Dec. 2021 22 23 24 25 26 27 28 29 26 30 27 31 32 11,658 22,007 12 73 746 160 2,390 37,046 439 1,315 8,985 2,815 209 4,482 16 18,261 55,307 12,076 24,903 48 111 1,190 587 1,943 40,858 593 3,088 11,683 3,588 230 3,531 21 22,734 63,592 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 financial liabilities Other non-current liabilities Non-current provisions and liabilities Current provisions Current financial liabilities Trade payables Other current liabilities Income tax liabilities Liabilities associated with assets held for sale Current provisions and liabilities TOTAL EQUITY AND LIABILITIES 33 34 34 35 36 37 28 38 39 40 38 39 40 32 1,239 3,519 –1,666 10,685 13,777 301 14,078 5,835 36 1,790 15,851 328 23,840 1,080 3,247 7,309 5,135 611 7 17,389 55,307 1,224 3,533 –733 15,013 19,037 462 19,499 4,185 137 1,946 16,614 304 23,186 1,208 3,283 9,556 6,138 717 5 20,907 63,592 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS CASH FLOW S TATEMENT 84 CASH FLOW STATEMENT 1 January to 31 December € m Consolidated net profit for the period Income taxes Net finance costs Profit from operating activities (EBIT) Depreciation, amortisation and impairment losses Net cost / 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 Note 42 42 2020 3,176 995 676 4,847 3,830 29 132 73 – 56 2 –754 8,103 – 44 –1,305 945 7,699 5 122 0 44 171 0 2021 5,423 1,936 619 7,978 3,768 –20 22 31 –37 4 –1,323 10,423 –137 –3,317 3,024 9,993 13 190 1 156 360 0 –2,922 –3,736 –13 –10 –2,945 67 – 933 –3,640 –2 –29 –3,767 91 –1,508 – 4,824 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS CASH FLOW S TATEMENT 85 Proceeds from issuance of non-current financial liabilities Repayments of non-current financial liabilities Change in current financial liabilities Other financing activities Proceeds from / cash paid for transactions with non-controlling interests Dividend paid to Deutsche  Post AG shareholders Dividend paid to non-controlling interest holders Purchase of treasury shares 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 due to changes in consolidated group Cash and cash equivalents at beginning of reporting period Cash and cash equivalents at end of reporting period Note 2020 2,488 –2,488 23 – 88 – 5 –1,422 –157 – 45 – 556 42 –2,250 1,809 –192 3 2,862 4,482 31 2021 131 –2,903 16 111 –16 –1,673 –225 –1,115 – 550 – 6,224 –1,055 104 0 4,482 3,531 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS STATEMENT OF CHANGES IN EQUITY 86 STATEMENT OF CHANGES IN EQUITY 1 January to 31 December € m Note Balance at 1 January 2020 Dividend Transactions with non-controlling interests Changes in non-controlling interests due to changes in consolidated group Issued capital Capital reserves 33 1,236 34 3,482 Capital increase / decrease 3 37 Total comprehensive income Consolidated net profit for the period Currency translation differences Change due to remeasurements of net pension provisions Other changes Total Balance at 31 December 2020 1,239 3,519 Balance at 1 January 2021 Dividend Transactions with non-controlling interests Capital increase / decrease Total comprehensive income Consolidated net profit for the period Currency translation differences Change due to remeasurements of net pension provisions Other changes Total 1,239 3,519 –15 14 Balance at 31 December 2021 1,224 3,533 Other reserves Reserve for equity instruments without recycling –22 0 – 5 –27 –27 0 15 –12 Hedging reserves – 5 0 –12 –17 –17 0 23 6 Currency translation reserve – 673 –3 – 946 Retained earnings 34 10,099 –1,422 8 28 2,979 –1,007 0 –1,622 10,685 –1,622 1 894 10,685 –1,673 –1 – 981 5,053 1,930 0 –727 15,013 Equity attributable to  Deutsche Post AG shareholders Non-controlling interests Total equity 35 14,117 –1,422 5 0 68 2,979 – 946 –1,007 –17 1,009 13,777 13,777 –1,673 0 – 982 5,053 894 1,930 38 7,915 19,037 36 275 –165 –11 20 0 197 –15 0 0 182 301 301 –219 –24 0 370 37 –3 0 404 462 14,392 –1,587 – 6 20 68 3,176 – 961 –1,007 –17 1,191 14,078 14,078 –1,892 –24 – 982 5,423 931 1,927 38 8,319 19,499 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE P OST AG 87 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG Company information Deutsche  Post  DHL Group is a global mail and logistics group. The Deutsche  Post and DHL corporate brands represent a portfolio of logistics (DHL) and communication ( Deutsche  Post) services. The financial year of Deutsche  Post AG and its consolidated sub- sidiaries is the calendar year. Deutsche  Post AG, whose registered office is in Bonn, Germany, is entered in the commercial register of the Bonn Local Court under HRB 6792. Basis of preparation Basis of accounting 1 As a listed company, Deutsche  Post AG prepared its consoli- dated financial statements in accordance with Section 315e Handelsgesetzbuch (HGB – German Commercial Code) (“con- solidated financial statements in accordance with International Financial Reporting Standards”) in compliance with International Financial Reporting Standards (IFRS s) and related Interpreta- tions 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 sat- isfied 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 bal- ance sheet, the cash flow statement, the statement of changes in equity and the notes. In order to improve the clarity of pre- sentation, 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 disclo- sures in the notes to the IFRS consolidated financial statements for the 2021 financial year are generally based on the same accounting policies used in the 2020 consolidated financial statements. Exceptions to this are the changes in international fi- nancial reporting under the IFRS s described in  note 5 that have been required to be applied by the Group since 1 January 2021. The accounting policies are explained in  note 7. These consolidated financial statements were autho- rised for issue by a resolution of the Board of Management of Deutsche  Post AG dated 18 February 2022. The consolidated financial statements are prepared in euros (€). Unless otherwise stated, all amounts are given in mil- lions of euros (€ million, € m). No separate reporting is provided in cases where effects cannot be unequivocally attributed to the COVID-19 pandemic. Consolidated group 2 The consolidated group includes all companies controlled by Deutsche  Post AG. Control exists if Deutsche  Post AG has de- cision-making powers, is exposed, and has rights, to variable returns, and is able to use its decision-making powers to affect the amount of the variable returns. The Group companies are consolidated from the date on which Deutsche  Post  DHL Group is able to exercise control. When Deutsche  Post  DHL Group holds less than the major- ity 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 de- spite 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 concern- ing 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 accor- dance with Section 313(2), Nos. 1 to 6, and (3) HGB may be viewed on the  company’s website. The number of companies consolidated with Deutsche Post AG is shown in the following table: 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 2020 2021 81 633 1 0 1 17 83 636 1 0 1 16 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 88 No material acquisitions or sales of companies were conducted in the 2021 financial year. Other changes in the consolidated group resulted from companies being formed or liquidated. 2.1 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. Aerologic has been assigned to the Express segment. It was jointly established by Lufthansa Cargo AG and Deutsche  Post Beteiligungen Holding GmbH, which each hold 50 % of its capital and voting rights. Aerologic’s shareholders are simultaneously its customers, giving them access to its freight aircraft capacity. Aerologic mainly serves the DHL Express network from Monday to Friday, and 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 The following significant transactions occurred in the 2021 fi- nancial year: In March 2021, the Board of Management of Deutsche Post AG resolved a share buy-back programme for up to 30 million shares at a total purchase price of up to €1 billion. The repurchased shares will either be retired or used to ser- vice long-term executive remuneration plans. The repurchase via the stock exchange started on 10 May 2021 and ended in October 2021. With the termination of the share buy-back pro- gramme, 17.7 million shares were bought back for a total of €1 billion. The share buy-back programme is based on the au- thorisation resolved by the company’s Annual General Meeting on 6 May 2021,  note 33.3. In the fourth quarter of 2021, Deutsche  Post  DHL Group paid a special bonus of €300 per employee (FTE) to its work- force of approximately 550,000 as an acknowledgement of their achievements during the pandemic. This led to expenses of €165 million,  note 15. In August 2021, the Board of Management signed an agreement to fully acquire J. F. Hillebrand Group AG (Hillebrand) and its subsidiaries for approximately €1.5 billion. Hillebrand is a global service provider specialised in the ocean freight for- warding, transport and logistics of beverages, non-hazardous bulk liquids and other products that require special care. This acquisition serves to accelerate expansion in the dynamic ocean freight forwarding market. A deposit of €100 million was made in conjunction with this transaction which will be offset against the purchase price upon conclusion of the transaction. The clos- ing is scheduled for the first half of 2022. Adjustment of prior-period amounts 4 The Lead Logistics Provider (LLP) business which had, to date, been partially reported in the Global Forwarding, Freight segment has been bundled in the Supply Chain division since January 2021. The presentation of revenue and materials ex- pense was standardised based on a review of certain customer contracts as part of this transition. The prior-period amounts were adjusted accordingly. Income statement 2020 € m Revenue Materials expense Amount Adjustment 66,806 –33,794 – 90 90 Adjusted amount 66,716 –33,704 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 89 5 New developments in international accounting under IFRS s New accounting standards effective in the 2021 financial year The following standards, changes to standards and interpreta- tions must be applied from 1 January 2021: Standard Subject matter and significance Amendments to IFRS 16: COVID-19-Related Rent Concessions and COVID-19-Related Rent Concessions beyond 30 June 2021 Under certain conditions, the amendment permits lessees to not assess whether rent concessions granted as a direct consequence of the COVID-19 pandemic are lease modifications. If the conditions are met, lessees may instead account for those rent concessions as if they are not lease modifications. The amendment was initially applicable only for relevant lease payments before 30 June 2021. This simplification of the rule was extended for one year with a further amendment to IFRS 16. The application did not materially affect the consolidated financial statements. Amendments to IFRS 4, Insurance Contracts – Deferral of Effective Date of IFRS 9 The effective date of IFRS 17, which will replace IFRS 4, was deferred to 1 January 2023. The expiry date of the temporary exemption from IFRS 9 in IFRS 4 was therefore also deferred to 1 January 2023. Interest Rate Benchmark Reform (IBOR Reform) – Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 The amendments simplify the reporting of changes to contractual cash flows and hedge accounting required as a result of IBOR reform. They relate to the actual change in interest rate benchmarks. The consolidated financial statements were not materially affected. New accounting standards adopted by the EU but only effective in future periods The following standards, changes to standards and interpreta- tions have already been endorsed by the EU. However, they will only be required to be applied in future periods. Standard Subject matter and significance Amendments to IFRS 3, Reference to the Conceptual Framework (issued on 14 May 2020 and applicable for financial years beginning on or after 1 January 2022) The amendments contain an update to IFRS 3 so that it refers to the 2018 revision of the Conceptual Framework. Additionally, it stipulates that, for transactions within the scope of IAS 37 or IFRIC 21, an acquirer applies IAS 37 or IFRIC 21 to identify liabilities assumed in a business combination instead of the Conceptual Framework. Contingent liabilities are excluded from this requirement. IFRS 3 continues to prohibit recognition of contingent assets. Application is not expected to have an effect on the consolidated financial statements. Amendments to IAS 16, Property, Plant and Equipment – Proceeds before Intended Use (issued on 14 May 2020 and applicable for financial years beginning on or after 1 January 2022) The amendment prohibits deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced whilst bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended. Application is not expected to have a material effect on the consolidated financial statements. Amendments to IAS 37, Onerous Contracts – Cost of Fulfilling a Contract (issued on 14 May 2020 and applicable for financial years beginning on or after 1 January 2022) Annual Improvements to IFRS s (2018 – 2020 Cycle) (issued on 14 May 2020 and applicable for financial years beginning on or after 1 January 2022) The amendment defines the cost of fulfilling a contract. All costs that relate directly to the contract must be included when assessing whether a contract is onerous. Application is not expected to have a material effect on the consolidated financial statements. The amendments relate to IFRS 1, First-Time Adoption of International Financial Reporting Standards; IFRS 9, Financial Instruments; IFRS 16, Leases; and IAS 41, Agriculture. Application is not expected to have a material effect on the consolidated financial statements. IFRS 17, Insurance Contracts (issued on 18 May 2017), including amendments to IFRS 17 (issued on 25 June 2020 and applicable for financial years beginning on or after 1 January 2023) IFRS 17 will replace IFRS 4, Insurance Contracts, in future. It 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 the effect 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. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 90 New accounting standards not yet adopted by the EU ( endorsement procedure) The IASB and the IFRIC issued further standards, amendments to standards and interpretations in the 2021 financial year and in previous years whose application is not yet mandatory for the 2021 financial year. The application of these IFRS s is dependent on their adoption by the EU. Standard Subject matter and significance Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies (issued on 12 February 2021 and applicable for financial years beginning on or after 1 January 2023) Amendments to IAS 8, Definition of Accounting Estimates (issued on 12 February 2021 and applicable for financial years beginning on or after 1 January 2023) Amendments to IAS 1, Classification of Liabilities as Current or Non-current (issued on 23 January 2020 and applicable for financial years beginning on or after 1 January 2023) and Deferral of the Effective Date The amendments serve to assist entities with deciding which accounting policies to disclose in their financial statements. The amendment of IAS 1 explains and requires that a disclosure of “material” rather than “significant” accounting policies must be made. To support this approach, the amendments to IFRS Practice Statement 2 demonstrate the application of the concept of materiality to accounting policy disclosures. The effects on the consolidated financial statements are being assessed. The amendments introduced a new definition of accounting estimates and explain how entities should distinguish changes in accounting estimates from changes in accounting policies. The effects on the consolidated financial statements are being assessed. The amendments to IAS 1 relate solely to the presentation of debt and other liabilities in the statement of financial position. They clarify that a liability must be classified as non-current if the entity has a substantial right at the reporting date to defer settlement of the liability for at least 12 months after the reporting date. The determining factor is that such a substantial right exists; no intention to exercise that right is required. No material effects on the consolidated financial statements are expected. The effective date was deferred to 1 January 2023 due to the COVID-19 pandemic. Amendments to IAS 12, Deferred Tax related to Assets and Liabilities arising from a Single Transaction (issued on 7 May 2021 and applicable for financial years beginning on or after 1 January 2023) The amendment limits the exemption from the (initial) recognition of deferred tax in that it no longer applies to transactions for which entities recognise both an asset and a liability (e. g. leases and decommissioning obligations). In future, deferred tax assets and liabilities must be recognised for such transactions to the extent that equal amounts of deductible and taxable temporary differences arise. No material effects on the consolidated financial statements are expected. Amendment to IFRS 17, Initial Application of IFRS 17 and IFRS 9 – Comparative Information (issued on 9 December 2021 and applicable for financial years beginning on or after 1 January 2023) The narrow-scope amendment to IFRS 17 permits entities to apply an optional classification overlay, if certain conditions are met, with the aim of providing useful comparative information on financial instruments for 2022. The amendment was issued because the initial application of IFRS 9 is not required to be retroactive, whereas this is the case for IFRS 17. This can result in accounting mismatches for financial instruments. The impact on the consolidated financial statements is being reviewed. 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 eco- nomic environment in which they mainly generate and use cash. Within the Group, the functional 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 translation dif- ferences are recognised in other comprehensive income. In the 2021 financial year, currency translation differences amounting to €931 million (previous year: €–961 million) were recognised in other comprehensive income,  Statement of comprehensive income. Goodwill arising from business combinations after 1 Jan- uary 2005 is treated as an asset of the acquired company and therefore carried in the functional currency of the acquired company. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 91 The exchange rates for the currencies that are significant for the Group were as follows: Currency AUD CNY GBP HKD INR JPY SEK USD Country Australia China United Kingdom Hong Kong India Japan Sweden United States Closing rates Average rates 2020 1 EUR = 1.5878 7.9777 0.8984 9.5118 89.6163 126.4647 10.0295 1.2268 2021 1 EUR = 1.5622 7.2024 0.8401 8.8351 84.2390 130.4249 10.2528 1.1328 2020 1 EUR = 1.6561 7.9017 0.8893 8.8952 84.9217 121.8717 10.4793 1.1468 2021 1 EUR = 1.5781 7.6120 0.8581 9.1859 87.3248 130.3173 10.1551 1.1816 The carrying amounts of non-monetary assets recognised at sig- nificant consolidated companies operating in hyperinflationary economies are generally indexed in accordance with IAS 29 and thus reflect the current purchasing power at the reporting date. In accordance with IAS 21, receivables and liabilities in the financial 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 in- come statement. In the 2021 financial year, income of €336 mil- lion (previous year: €294 million) and expenses of €321 million (previous year: €308 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 statements of the entities included in the consolidated financial statements. The consolidated financial statements are prepared under the historical cost convention, except for items that 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 express deliv- ery, freight transport, supply chain management, e-commerce solutions and letter and parcel dispatch in Germany. All income relating to normal business operations is recognised as revenue in the income statement. All other income is reported as other operating income. Revenue is recognised when control over the goods or ser- vices 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. There must be a contract with enforceable rights and obligations and, amongst other things, the receipt of consideration must be likely, taking into account the customer’s credit quality. Revenue corre- sponds 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 to the extent that the uncertainty associated 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 consideration is not adjusted for the time value of money. For each performance obli- gation, revenue is either recognised at a point in time or over time. The obligation to perform transport services is fulfilled over time and revenue is recognised over the performance period. The revenue generated by providing other logistics ser- vices is recognised in the reporting period in which the service was rendered. Whenever third parties are involved in the performance of a service, a distinction must be drawn between the principal and agent. If Deutsche  Post  DHL Group serves as the principal, then the gross amount of revenue is recognised. If the Group acts as the agent, the net amount is recognised. The transaction price for this specific service is limited to the amount of the commission to be received. Deutsche  Post  DHL Group is generally the principal when transport services are provided. Operating expenses are recognised in income when the service is utilised or when the expenses are incurred. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 92 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 recognised at cost if it is probable that their production will generate an in- flow of future economic benefits and the costs can be reliably measured. In the Group, this concerns internally developed soft- ware. If the criteria for capitalisation 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 appropriate share of allocable production overhead costs. Any borrowing costs in- curred 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. Impair- ment losses are recognised in accordance with the principles described in the Impairment section. The useful lives of signif- icant intangible assets are as follows: Intangible assets that are not affected by legal, economic, con- tractual or other factors that might restrict their useful lives are considered to have indefinite useful lives. They are not amortised but are tested for impairment annually or whenever there are indications of impairment. They generally include brand names from business combinations and goodwill, for example. Impair- ment testing is carried out in accordance with the principles de- scribed in the Impairment section. Property, plant and equipment Property, plant and equipment is carried at cost, reduced by ac- cumulated depreciation and valuation allowances. In addition to direct costs, production cost includes an appropriate share of al- locable production overhead costs. Borrowing costs that can be allocated directly to the purchase, construction or manufacture of property, plant and equipment are capitalised. Value added tax arising in 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: Useful lives Useful lives Internally developed software Purchased software Licences Customer relationships Buildings Technical equipment and machinery Aircraft IT equipment Transport equipment and vehicle fleet Other operating and office equipment Years 1 up to 10 up to 5 term of agreement up to 20 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 specific factors such as time and location. 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 specific factors such as time and location. If there are indications of impairment, an impairment test must be carried out; see the Impairment section. Impairment At each reporting date, the carrying amounts of intangible assets, property, plant and equipment and investment property are reviewed for indications of impairment. If there are any such indications, an impairment test is carried out. This is done by determining the recoverable amount of the relevant asset and comparing it with the carrying amount. In accordance with IAS 36, the recoverable amount is the asset’s fair value less costs to sell or its value in use (present value of the pre-tax free cash flows expected to be derived from the asset in future), whichever is higher. The discount rate used for the value in use is a pre-tax rate of interest reflecting cur- rent 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 independently generates cash flows (cash generating unit – CGU). If the recover- able amount of an asset is lower than its carrying amount, an im- pairment loss is recognised immediately in respect of the asset. If it can be determined, the fair value or value in use of the indi- vidual assets represents their minimum carrying amount. If, after an impairment loss has been recognised, a higher recover able amount is determined for the asset or the CGU at a later date, the impairment loss is reversed up to a carrying amount that does not exceed the recoverable amount. The increased carry- ing 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 recog- nised in respect of goodwill may not be reversed. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 93 Since January 2005, goodwill has been accounted for us- ing the impairment-only approach in accordance with IFRS 3. This stipulates that goodwill must be subsequently measured at cost, less any cumulative adjustments from impairment losses. Purchased goodwill is therefore no longer amortised and instead is tested for impairment annually in accordance with IAS 36, re- gardless of whether any indication of possible impairment exists, as in the case of intangible assets with an indefinite useful life. In addition, the obligation remains to conduct an impairment test if there is any indication of impairment. Goodwill resulting from company acquisitions is allocated to the 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 management purposes. The carrying amount of a CGU to which goodwill has been allocated is tested for impairment annually and whenever there is an indi- cation 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 com- pensation. Lessee In accordance with IFRS 16, the Group as lessee has recognised at present value assets for the right of use received and liabil- ities 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 interest rate implicit in the lease to the extent that this can be determined. Otherwise, they are discounted at the incremental borrowing rate of the respective lessee. Right-of-use assets are measured at cost, which comprises the following: • lease liability; • lease payments made at or prior to delivery, less lease incen- tives received; • initial direct costs; and • restoration obligations. Right-of-use assets are subsequently measured at amor- tised cost. They are depreciated over the term of the lease using the straight-line method. The Group makes use of the relief options provided for leases of low-value assets and short-term leases (shorter than 12 months) and expenses the payments in the income statement using the straight-line method. Additionally, the requirements do not apply to leases of intangible assets. The Group also exer- cises the option available for contracts comprising both lease and non-lease components to not separate these components, except in the case of real estate and aircraft leases. In addition, under IFRS 8, intra-Group leases – in line with internal management – are generally presented as operating leases in segment reporting. 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 ex- ercising 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. Lessor For operating leases, the Group reports the leased asset at amortised cost as an asset under property, plant and equipment where it is the lessor. The lease payments received in the period are recognised under other operating income or revenue if they belong to ordinary business activities. Where the Group is the lessor in a finance lease, it recog- nises the assets as lease receivables in the amount of the net investment in the balance sheet. As part of the review of leases in the Supply Chain division, the presentation of certain subleases embedded in customer contracts was standardised as finance leases at the lessor. In the balance sheet, this resulted in a reduction in rights of use and an increase in non-current financial assets; correspondingly, no Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 94 revenue was recognised – to the extent that it was attributable to the lease – and the right of use was not amortised. In the cash flow statement, net cash from operating activities decreased accordingly. There was an opposite effect in net cash used in investing activities. and derivative financial assets. Financial liabilities include con- tractual 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. Investments accounted for using the equity method Investments accounted for using the equity method cover asso- ciates 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 investments, the carrying amount of the in- vestment 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 attributable to the invest- ments of Deutsche  Post AG or its consolidated subsidiaries. An impairment loss is recognised on investments accounted 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 in- vestments accounted for using the equity method are recognised in other operating income or other operating expenses. Impair- ment losses and their reversal are recognised in net income / loss from investments accounted for using the equity method. 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, Measurement The Group measures financial assets at fair value plus the trans- action costs directly attributable to the acquisition of these assets on initial recognition if they are not subsequently measured at fair value through profit or loss. The transaction costs of assets measured at fair value through profit or loss are recognised as expenses. 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 income rather than in the income statement. Classification Financial assets are classified in the measurement categories below. The classification of debt instruments depends on the business model used to manage the financial assets and their contractual cash flows. DEBT INSTRUMENTS AT AMORTISED COST Debt instruments that are assigned to the “hold to collect con- tractual cash flows” business model and whose cash flows exclusively comprise interest and principal are measured and recognised at amortised cost. Interest income from these finan- cial assets is reported in financial income using the effective interest method. DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (FVOCI) Debt instruments assigned to the “hold to collect and sell” busi- ness model must be measured and recognised at fair value. Gains and losses from fair value measurement are recognised in other comprehensive income. Cumulative gains and losses are reclassified to the income statement when the financial asset is derecognised. DEBT INSTRUMENTS, DERIVATIVES AND EQUITY INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL) Debt instruments, derivatives and equity instruments acquired to maximise their cash flows by selling them in the short to me- dium term are assigned to the “sell” business model. They are measured at fair value. The resulting measurement gains and losses are reported in the income statement. EQUITY INSTRUMENTS CLASSIFIED AS FVOCI Most of the equity instruments that the Group invests in for stra- tegic reasons are assigned to the FVOCI measurement category. They are measured at fair value. The effects of any change in the fair value of these equity instruments are recognised in other comprehensive income. On derecognition, these effects are not reclassified to the income statement. Dividends from such in- struments are reported in other income in the income statement. Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 95 Impairment The Group makes a forward-looking assessment of the expected credit losses associated with its debt instruments (expected- credit-loss model). Expected credit loss (ECL) within the meaning of IFRS 9 is an estimate of credit loss over the expected lifetime 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. The expected credit loss takes into account the amount and tim- ing of payments. Accordingly, 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 ECL model: trade receiv- ables and contract assets, on the one hand, and debt instruments measured at amortised cost, on the other. Cash and cash equiv- alents are also subject to the IFRS 9 impairment rules. However, the impairment 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. In accordance with the three-stage model, debt instru- ments 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 12 months following the reporting date. Financial assets that have experienced a signifi- cant increase in counterparty credit risk 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 life- time (lifetime PD). The impairment loss is equivalent to the loss that may occur due to possible default events during the remain- ing 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 rea- son to believe that the debtor is experiencing significant financial difficulties. This constitutes objective evidence of a credit loss. The financial asset must therefore be transferred to Stage 3. 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 12-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 cat- egory if the risk of non-performance is low and the debtor is at all times in a position to meet contractual payment obligations at short notice. Trade receivables and contract assets are generally short term in nature and contain no significant financing components. According to the simplified impairment approach in IFRS 9, 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 historical data, current economic conditions and reliable forecasts of future economic conditions (macroeconomic factors). Impairment losses on trade receivables and contract assets are offset against gains on the reversal of impairment losses. Further details are presented in  note 43. Derivatives and hedges The Group began to apply the IFRS 9 hedge accounting require- ments as at 1 January 2020. 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 inter- est 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 Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 96 reserve in equity. Ineffective portions resulting from changes in the fair value of the hedging instrument are recognised directly in income. The gains and losses generated by the hedging trans- actions are initially recognised in equity and are then reclassified to profit or loss in the period in which the financial asset acquired or financial 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 comprehen- sive income, whilst the gain or loss attributable to the ineffective portion is recognised directly in the income statement. The gains or losses recognised in other comprehensive income remain there until the disposal or partial disposal of the net investment. Detailed information on hedging transactions can be found in  note 43. Recognition and derecognition Regular-way purchases and sales of financial assets are recog- nised 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 obli- gations arising from them have expired. Netting Financial assets and liabilities are offset on the basis of netting agreements (master netting arrangements) only if there is an enforceable right of offset and settlement on a net basis is in- tended as at the reporting date. If the right of offset is not enforceable in the normal course of business, the financial assets and liabilities are recognised in the balance sheet at their gross amounts as at the reporting date. The master netting arrangement then creates only a conditional right of offset. 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  Impairment section. Inventories Inventories are assets that are held for sale in the ordinary course of business, are in the process of production or are consumed in the production process or in the rendering of services. They are measured at the lower of cost or net realisable value. Valuation allowances are charged for obsolete inventories and slow-mov- ing goods. Government grants In accordance with IAS 20, government grants are recognised at their fair value only when there is reasonable assurance that the conditions attached 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 for 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. Such deferred income is presented in other operating income. Assets held for sale and liabilities associated with assets held for sale Assets held for sale are assets available for sale in their present condition and whose sale is highly probable. The sale must be ex- pected to qualify for recognition as a completed sale within one year of the date of classification. Assets held for sale may con- sist of individual non-current assets, groups of assets (disposal groups), components of an entity or a subsidiary acquired exclu- sively for resale (discontinued operations). Liabilities intended to be disposed of together with the assets in a single transaction form part of the disposal group or discontinued operation and are also reported separately as liabilities associated with assets held for sale. Assets held for sale are no longer depreciated or amortised, but are recognised at the lower of their fair value less costs to sell and the carrying amount. Gains and losses arising from the remeasurement of individual non-current assets or dis- posal groups classified as held for sale are reported in profit or Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 97 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. 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. equity-settled share-based payment transactions is determined using internationally recognised valuation techniques. Cash-settled, share-based payments (stock appreciation rights, SAR s) 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 dur- ing the vesting period (lock-up period). A provision is recognised for the same amount. Changes in value due to share price move- ments occurring after the grant date are recognised as other fi- nance costs in net finance costs. Non-controlling interests Non-controlling interests are the proportionate minority interests in the equity of subsidiaries and are recognised at their carrying amount. If an interest is acquired from, or sold to, other shareholders without affecting the existing control relation- ship, this is presented as an equity transaction. The difference between the proportionate net assets acquired from, or sold to, other shareholders and the purchase price is recognised in other comprehensive income. If non-controlling interests are in- creased by the proportionate net assets, no goodwill is allocated to the proportionate net assets. Share-based payments to executives Equity-settled share-based payment transactions are measured at fair value at the grant date. The fair value of the obligation is recognised in staff costs over the vesting period. The fair value of Retirement benefit plans There are arrangements (plans) in many countries under which the Group grants post-employment benefits to its employees. These benefits include pensions, lump-sum payments on retire- ment and other post-employment benefits and are referred to in these disclosures as retirement benefits, pensions and similar benefits, or pensions. A distinction must be made between de- fined benefit and defined contribution plans. THE GROUP’S DEFINED BENEFIT RETIREMENT PLANS Defined benefit obligations are measured using the projected unit credit method prescribed by IAS 19. This involves making certain actuarial assumptions. Most of the defined benefit retirement plans are at least partly funded via external plan assets. The remaining net liabilities are funded by provisions for pensions and similar 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, net interest cost in net finance costs and the remeasure- ments outside the income statement in other comprehensive income. Any rights to reimbursement are reported separately in financial assets. DEFINED CONTRIBUTION RETIREMENT PLANS FOR CIVIL SERVANT EMPLOYEES IN GERMANY In accordance with statutory provisions, Deutsche  Post AG pays contributions for civil servants 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 – Former Deutsche Bundespost Employees Act), Deutsche  Post AG provides retirement benefits and assistance benefits through the Postbeamtenversorgungskasse (PVK – Postal civil servant pen- sion fund) at the Bundesanstalt 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 ap- pointment. The amount of Deutsche  Post AG’s payment obli- gations is governed by Section 16 PostPersRG. This act obliges Deutsche  Post AG to pay into the PVK an annual contribution of 33 % of the gross compensation of its active civil servants and the notional gross compensation of civil servants on leave of absence who are eligible for a pension. Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 98 Under Section 16 PostPersRG, the federal government makes good the difference between the current payment obli- gations 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 obliga- tions 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 United Kingdom, the United States 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 United States and the Netherlands. However, the relevant institutions do not provide the participating companies with sufficient information to use defined benefit accounting. The plans are therefore accounted for as if they were defined con- tribution plans. Regarding these multi-employer plans in the United States, 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, which could then include a liability for other entities’ obligations as governed by US federal law. The expected employer contributions to the funds for 2022 are €73 million (actual employer contributions in the reporting period: €66 million, in the previous year: €58 million). Some of the plans in which Deutsche  Post  DHL Group participates are underfunded according to information provided by the funds. No information is available to the Group that would indicate any change from the contribution rates set by current collec- tive 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. Contribution rates for one multi-employer retirement plan in the Netherlands are determined each year by the management body of the pension fund with the involvement of the central bank of the Netherlands, based on cost coverage. These con- tribution rates are the same for all employers and employees involved. There is no liability for the employer towards the fund beyond the contributions set, even in the case of withdrawal or obligations not met by other entities. Any subsequent under- funding ultimately results in the rights of members being cut and / or no indexation of their rights. The expected employer contributions to the fund for 2022 are €29 million (actual em- ployer contributions in the reporting period: €28 million, in the previous year: €25 million). As at 31 December 2021, the cover- age degree of plan funding was above a required minimum of approximately 105 %, according to information provided by the fund. Deutsche  Post  DHL Group does not represent a significant portion of the fund in terms of contributions. Other provisions Other provisions are recognised for all legal or constructive ob- ligations to third parties existing at the reporting date that have arisen as a result of past events, that are expected to result in an outflow of future economic benefits and whose amount can be measured 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 –0.30 % and 10.00 % (previous year: 0.00 % to 7.75 %). The effects arising from changes in inter- est rates are recognised in net financial income / net finance cost. Provisions for restructurings are only established in ac- cordance with the aforementioned criteria for recognition if a detailed, formal restructuring plan has been drawn up and communicated to those affected. The technical reserves (insurance) consist mainly of out- standing 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 ex- pected 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 insur- ers. 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 Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 99 ultimate loss liabilities using actuarial methods and also com- missions an independent actuarial study of these each year in order to verify the reasonableness of its estimates. 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. Financial liabilities Financial liabilities are carried at fair value less transaction costs on initial recognition. The price determined in an 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. Financial liabilities are measured at amortised cost in subsequent periods. Any differences between the amount re- ceived and the amount repayable are recognised in the income statement over the term of the loan using the effective interest method. Disclosures on financial liabilities under leases can be found in the  Leases section. CONVERTIBLE BOND ON DEUTSCHE POST AG SHARES The convertible bond on Deutsche  Post AG shares is split into an equity and a debt component, in line with the contractual ar- rangements. The debt component, less the transaction costs, is reported under financial liabilities (bonds), with interest added back up to the issue amount over the term of the bond using the effective interest method (unwinding of the discount). The value of the call option, which allows Deutsche  Post AG to redeem the bond 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 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. Deferred taxes In accordance with IAS 12, deferred taxes are recognised for temporary differences between the carrying amounts in the IFRS financial statements 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 re- coverability 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 differ- ences between the carrying amounts in the IFRS financial state- ments 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 liabili- ties are calculated using the tax rates applicable in the individual countries at the reporting date or announced for the time when the deferred tax assets and liabilities are realised. The tax rate applied to German Group companies is unchanged at 30.5 %. 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 de- ferred tax items. The income tax rates applied for foreign com- panies amount to up to 38 % (previous year: 38 %). Income taxes Income tax assets and liabilities are recognised when they are probable. They are measured at the amounts for which repay- ments from, or payments to, the tax authorities are expected to be received or made. If uncertain tax items are recognised because they are probable, they are measured at their most likely amount. 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 ex- istence will be confirmed only by the occurrence, or non-occur- rence, 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 Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 100 resources embodying economic benefits, or where the amount of the outflow of resources embodying economic benefits can- not be measured with sufficient reliability. In accordance with IAS 37, contingent liabilities are not recognised in the balance sheet;  note 44. 8 Exercise of judgement in applying the accounting policies The preparation of IFRS-compliant consolidated financial state- ments 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, man- agement must determine 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 li- abilities 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 included in the balance sheet, the amounts of income and expenses, and the disclosures relating to contin- gent 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 impairment test- ing 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 37. The Group has operating activities around the globe and is subject to local tax laws. Management can exercise judgement when calculating the amounts of current and deferred taxes in the relevant countries. Although management believes that it has made a 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 between actual events and the estimate made could have an effect on tax li- abilities and deferred taxes in the period in which the matter is finally decided. The amount recognised for deferred tax assets could be reduced if the estimates of planned taxable income or changes to current tax laws restrict the extent to which future tax benefits can be realised. Goodwill is regularly reported in the Group’s balance sheet as a consequence of business combinations. When an acquisition is initially recognised in the consolidated financial statements, all identifiable assets, liabilities and contingent liabilities are measured at their fair values at the date of acquisition. One of the important estimates this requires is the determination of the fair values of these assets and liabilities at the date of acquisi- tion. Land, buildings and office equipment are generally valued by independent experts, whilst securities for which there is an active market are recognised at the quoted exchange price. If in- tangible 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 the complexity involved in determining its fair value. The independent expert determines the fair value using appropriate valuation techniques, 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 recoverable amount of the CGU must then be cal- culated. 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 management be- lieves that the assumptions made for the purpose of calculating the recoverable amount are appropriate, possible unforesee- able changes in these assumptions – e. g. a reduction in the EBIT margin, an increase in the asset charge 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  note 45. The outcome of these proceedings are disclosed in Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 101 could have a significant effect on the net assets, financial posi- tion and results of operations of the Group. Management regu- larly analyses the information currently available about these proceedings and recognises provisions for probable obligations including estimated legal costs. Internal and external legal ad- visors participate in making this assessment. In deciding 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 necessarily mean that a provision is recognised for the associated risk. It is possible that climate change will give rise to uncertain- ties and risks for the net assets, financial position and results of operations of the Group. Increased restrictions imposed by law to combat climate change are expected in the coming years, in- cluding limits on air transport or access to city centres. In certain cases this may also affect our existing business models and our ability to operate optimally. All assumptions and estimates are based on the circum- stances prevailing and assessments made at the reporting date. For the purpose 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 differ- ent sectors and regions in which the Group operates,  Combined management report, Expected developments, opportunities and risks. In the event of developments in these economic parameters that diverge from the assumptions made, the actual amounts may differ from the estimated amounts. In such cases, the assump- tions 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 statements, there is no indication that any significant change in the assumptions 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 the 2022 financial year to the carrying amounts of the assets and liabilities recog- nised 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 2021. Acquisition accounting for subsidiaries included in the consolidated 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 proportion 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 pre- viously held is remeasured at the fair value applicable at the acquisition date, and the resulting gain or loss is recognised in the income statement. Intra-Group revenue, other operating income, and expenses as well as receivables, liabilities and provisions between com- panies that are consolidated or proportionately consolidated are eliminated. Intercompany profits or losses from intra-Group deliveries and services not realised by sale to third parties are eliminated. Unrealised gains and losses from business transac- tions with investments accounted for using the equity method are eliminated on a proportionate basis. Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 102 Segment reporting disclosures 10 Segment reporting Segments by division € m Express Global Forwarding, Freight 1 Supply Chain 1 eCommerce Solutions Post & Parcel Germany Group Functions Consolidation 1, 2 Group 1 1 January to 31 December 2020 2021 2020 2021 2020 2021 External revenue Internal revenue Total revenue 18,722 23,704 14,784 21,553 12,457 13,760 413 513 1,029 1,280 92 104 19,135 24,217 15,813 22,833 12,549 13,864 Profit / loss from operating activities (EBIT) 2,751 4,220 592 1,303 424 705 of which net income / loss from investments accounted for using the equity method 3 –2 –2 –1 1 2 Segment assets 16,263 18,806 8,901 11,536 7,889 8,386 of which investments accounted for using the equity method Segment liabilities Net segment assets Capex (assets acquired) Capex (right-of-use assets) Total capex Depreciation and amortisation Impairment losses Total depreciation, amortisation and impairment losses Other non-cash income (–) and expenses (+) 24 6 4,224 5,233 12,039 13,573 19 3,296 5,605 20 5,012 6,524 1,428 974 2,402 1,383 0 1,383 527 1,707 1,246 2,953 1,511 0 1,511 524 104 207 311 246 0 246 90 132 215 347 245 0 245 158 14 2,912 4,977 351 973 15 3,505 4,881 483 667 1,324 1,150 849 71 920 234 756 0 756 245 2020 4,692 137 4,829 158 –35 1,878 0 717 2021 5,792 136 2020 2021 15,983 16,895 472 550 5,928 16,455 17,445 417 1,592 1,747 2020 79 1,531 1,610 – 669 2021 44 1,750 1,794 – 413 2020 –1 2021 2020 2021 –1 66,716 81,747 –3,674 – 4,333 0 0 –3,675 – 4,334 66,716 81,747 –1 –1 4,847 7,978 0 0 0 –2 33 2,212 6,188 6,902 5,267 5,645 0 876 1,161 1,336 141 143 284 164 5 169 60 245 178 423 179 0 179 5 0 2,716 3,472 0 2,631 4,271 17 1,567 3,700 590 14 604 329 0 329 359 883 14 897 334 0 334 302 385 448 833 753 31 784 209 71 1,718 3,927 445 760 1,205 744 0 744 51 1 – 80 –1 – 62 –18 0 0 0 –2 1 –1 –1 –1 0 –72 –1 – 53 –19 0 0 0 –2 1 –1 0 0 –34 32 46,306 53,415 73 111 15,370 18,922 30,936 34,493 2,999 2,759 5,758 3,722 108 3,830 1,478 3,895 3,080 6,975 3,767 1 3,768 1,285 502,207 528,079 Employees 3 99,365 108,896 42,240 42,348 159,288 167,666 29,819 32,099 158,889 164,429 12,607 12,641 1 Prior-year amounts adjusted, note 4. 2 Including rounding. 3 Average FTEs. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 103 Information about geographical regions € m 1 January to 31 December External revenue Non-current assets Capex 1 Prior-year amounts adjusted, note 4. Germany (excluding Germany) Americas Asia Pacific Middle East / Africa Group 1 Europe 1 2020 19,814 10,093 1,707 2021 21,554 11,043 2,347 2020 18,922 10,526 1,409 2021 23,740 11,308 1,746 2020 12,993 7,782 1,887 2021 17,487 8,943 2,085 2020 12,260 4,817 615 2021 15,736 5,213 606 2020 2,727 599 140 2021 3,230 686 191 2020 66,716 33,817 5,758 2021 81,747 37,193 6,975 10.1 Segment reporting disclosures Deutsche  Post  DHL Group reports five operating segments for the 2021 financial year; these are managed independently by the responsible segment management bodies in line with the prod- ucts 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 responsibility who report directly to Deutsche  Post  DHL Group’s top management. External revenue is the revenue generated by the divi- sions 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 principle). 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 obli- gation (nationwide retail outlet network, delivery every working day), and from its obligation to assume the remuneration struc- ture as the legal successor to Deutsche Bundespost, are allocated to the Post & Parcel Germany division. In keeping with internal reporting, capital expenditure (capex) is disclosed. Additions to intangible assets net of good- will and to property, plant and equipment, including right-of-use assets, are reported in the capex figure. Depreciation, amort isation 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 recognition of provisions. The profitability of the Group’s operating divisions is meas- ured 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 distinguishes between the following divisions: Express The Express division offers time-definite courier and express ser- vices to business and private customers. The division comprises the Europe, Middle East and Africa, Americas and Asia Pacific regions. Global Forwarding, Freight The Global Forwarding, Freight division comprises international air, ocean and overland freight forwarding services. The divi- sion’s business units are Global Forwarding and Freight. Supply Chain The Supply Chain division delivers customised supply chain solu- tions to its customers based on globally standardised modular components including warehousing, transport and value-added services. The division comprises the Europe, Middle East and Africa, Americas and Asia Pacific regions. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 104 eCommerce Solutions The eCommerce Solutions division is home to the Group’s inter- national parcel delivery business. The core business activities are domestic parcel delivery in selected countries in Europe, the United States and Asia and non-TDI cross-border services. Post & Parcel Germany The Post & Parcel Germany division transports, sorts and deliv- ers documents and goods in and outside of Germany. Its business units are called Post Germany, Parcel Germany and International. In addition to the reported segments shown above, segment reporting comprises the following categories: Group Functions Group Functions includes Corporate Center, Global Business Services (GBS) and Customer Solutions & Innovation (CSI). The profit / loss generated by GBS is allocated to the operating seg- ments, whilst its assets and liabilities remain with GBS (asym- metrical allocation). Consolidation The data for the divisions is 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 (excluding Germany), the Americas, Asia Pacific and Middle East and Africa. 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 com- prise intangible assets, property, plant and equipment and other non-current assets (excluding pension assets). 10.4 Reconciliation of segment amounts to consolidated amounts The following table shows the reconciliation of Deutsche  Post  DHL Group’s total assets to the segment assets. Financial asset com- ponents, income tax assets, deferred taxes, cash and cash equiv- alents and other asset components are deducted. The following table shows the reconciliation of Deutsche  Post  DHL Group’s total liabilities to the segment liabilities. Components of the provisions and liabilities as well as income tax liabilities and deferred taxes are deducted. Reconciliation to segment liabilities € m Total equity and liabilities Equity Consolidated liabilities 2020 55,307 2021 63,592 –14,078 –19,499 41,229 44,093 Non-current provisions and liabilities –22,237 –21,513 Current provisions and liabilities Segment liabilities of which Group Functions total for reported segments Consolidation –3,622 15,370 1,567 13,865 – 62 –3,658 18,922 1,718 17,257 – 53 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 Group Functions total for reported segments Consolidation 1 1 Including rounding. 2020 55,307 –12 – 579 –20 –2,390 –209 –10 –1,299 – 4,482 46,306 5,267 41,119 – 80 2021 63,592 – 48 –1,006 – 421 –1,943 –230 – 9 –2,989 –3,531 53,415 5,645 47,842 –72 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 105 The following table shows the reconciliation of the segment amounts to the income statement: Reconciliation to the income statement € m Total for reported segments 1 Group Functions Group / Consolidation 1, 2 Consolidated amount 1 Reconciliation to Income statement disclosures 11 Revenue by business unit 2020 –1 –3,674 –3,675 –1,525 1 3,788 9 1 1,399 1,490 1 –1 0 –1 2020 66,638 2,143 68,781 1,983 2021 81,704 2,583 84,287 2,236 248 214 –36,297 – 46,955 –21,175 –22,778 –3,047 – 4,943 –3,025 – 5,586 2020 79 1,531 1,610 1,637 43 –1,195 –1,068 –784 – 910 2021 44 1,750 1,794 1,607 134 –1,325 –1,112 –744 – 800 –33 –1 –2 33 5,517 8,392 – 669 – 413 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 / loss 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-year amounts adjusted. 2 Including rounding. € m Express Global Forwarding, Freight Global Forwarding 1 Freight Supply Chain 1 eCommerce Solutions Post & Parcel Germany 2021 –1 – 4,333 – 4,334 –1,552 2020 66,716 0 66,716 2,095 2021 81,747 0 81,747 2,291 0 292 348 Post Germany 4,383 –33,704 – 43,897 Parcel Germany 11 –22,234 –23,879 International 2020 18,722 14,784 11,368 3,416 12,457 4,692 15,983 7,986 5,885 1,944 168 78 2021 23,704 21,553 17,795 3,758 13,760 5,792 16,895 7,952 6,756 2,036 151 43 1 –3,830 – 4,454 –3,768 – 4,896 Other Group Functions / Consolidation Total revenue 66,716 81,747 –34 32 1 Prior-period amounts adjusted, note 4. 4,847 – 676 4,171 – 995 3,176 2,979 197 7,978 – 619 7,359 –1,936 5,423 5,053 370 The total amount includes revenue from performance obliga- tions in the amount of €45 million (previous year: €12 million) settled in prior periods. The change in revenue of €15,031 million is attributable exclusively to organic growth driven by volume and price effects and includes negative currency effects of €301 million; for de- tailed information, see  Combined management report. The allocation of revenue to geographical regions is pre- sented in the segment reporting. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 106 The increase in income from the reversal of provisions relates, among other things, to the early retirement programme, and insurance-related items. 14 Materials expense € m 2020 2021 Income from operating leases was attributable mainly to 2020 2021 12 Other operating income € m Income from currency translation Insurance income Income from the reversal of provisions Income from the remeasurement of liabilities Operating lease income Income from fees and reimbursements Subsidies Income from the disposal of assets Sublease income Income from prior-period billings Income from loss compensation Income from the derecognition of liabilities Recoveries on receivables previously written off Reversals of impairment losses on receivables and other assets Income from derivatives 294 268 191 160 110 110 177 49 65 53 36 25 18 3 46 336 301 274 195 130 112 96 85 74 61 30 25 18 16 6 leasing of the aircraft fleet’s cargo space. In the previous year, greater use was made of government subsidies for labour costs in the course of lockdown measures in the United Kingdom. Miscellaneous other operating income includes a large number of smaller individual items. 13 Changes in inventories and work performed and capitalised € m Changes in inventories – expense (–) / income (+) Work performed and capitalised Total 2020 2021 74 218 292 66 282 348 Miscellaneous Total 490 2,095 532 2,291 Changes in inventories are largely attributable to real estate de- velopment projects. The increase in work performed and capi- talised is largely attributable to the production of StreetScooter electric vehicles for Group companies. 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 1 Cost of temporary staff and services Maintenance costs IT services Lease expenses Short-term leases Leases (incidental expenses) Low-value asset leases Variable lease payments Commissions paid Other purchased services Materials expense 1 Prior-year figures adjusted, note 4. 1,012 1,833 664 345 469 132 101 365 762 401 302 150 96 250 3,088 3,794 24,173 32,434 2,106 1,470 633 490 101 60 17 608 958 30,616 33,704 2,559 1,586 773 506 110 74 21 637 1,403 40,103 43,897 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 107 Social security contributions relate, in particular, to statu- 16 Depreciation, amortisation and impairment losses The increase in materials expense resulted mainly from a rise in transport costs in the Global Forwarding, Freight division and higher aircraft fuel costs in the Express division. A total of €103 million (previous year: €106 million) of the other expenses included in the cost of raw materials, consum- ables and supplies, and of goods purchased and held for resale, relates to the production of electric vehicles. The other expenses item includes furthermore a large number of individual items. 15 Staff costs / employees € m Wages, salaries and compensation Social security contributions Retirement benefit expenses Expenses for other employee benefits tory social security contributions paid by employers. Retirement benefit expenses include the service cost re- lated to the defined benefit retirement plans. These expenses also include contributions to defined contribution retirement plans for civil servants in Germany in the amount of €347 million (previous year: €376 million), as well as for the Group’s hourly workers and salaried employees, totalling €410 million (previ- ous year: €352 million),  note 7. For information on the increase in retirement benefit expenses, see  note 37. The average number of Group employees in the reporting period, broken down by employee group, was as follows: 2020 17,701 2,705 944 884 2021 18,987 2,921 1,031 940 Employees Headcount (annual average) Hourly workers and salaried employees Staff costs 22,234 23,879 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 due largely to salary increases and new hires. As in the previous year, further expenses were also incurred for the early retirement programme in the amount of €40 million (previous year: €108 million). Wages, salaries and compensation include a special bonus of €300 paid to each employee in recognition of their service during the past several months, as in the previous year, and led to an additional expense of €165 million (previous year: €163 million). Civil servants Trainees Total Full-time equivalents 1 As at 31 December Average for the year 1 Including trainees. The employees of companies acquired or disposed of during the financial year were included rateably. The number of full-time equivalents at joint operations included in the consolidated finan- cial statements as at 31 December 2021 amounted to 527 on a proportionate basis (previous year: 422). € m Amortisation of and impairment losses on intangible assets (excluding goodwill), of which impairment losses: 0 (previous year: 3) Depreciation of and impairment losses on property, plant and equipment acquired, of which impairment losses: 0 (previous year: 19) Land and buildings Technical equipment and machinery Transport equipment Aircraft IT equipment Operating and office equipment Depreciation of and impairment losses on right-of-use assets, of which impairment losses: 0 (previous year: 73) Land and buildings Technical equipment and machinery Transport equipment 2020 2021 518,277 547,889 23,611 5,240 21,203 4,955 547,128 574,047 526,896 502,207 548,042 528,079 Aircraft IT equipment Investment property Impairment of goodwill Depreciation, amortisation and impairment losses 2020 2021 203 201 224 381 289 384 149 104 235 401 311 459 147 95 1,531 1,648 1,494 1,347 45 229 310 1 4 43 223 296 1 9 2,083 13 1,919 0 3,830 3,768 The impairment losses for the financial year are spread amongst different asset classes and each amounts to less than €1 million after rounding. The impairment losses for the prior year in the amount of €108 million can be found in the segment reporting. These related chiefly to negative impacts stemming from lock- down measures resulting from the pandemic and to property, plant and equipment as well as rights of use acquired. Goodwill im- pairment is attributable to the realignment of StreetScooter GmbH. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 108 17 Other operating expenses € m Cost of purchased cleaning and security services Warranty expenses, refunds and compensation payments Expenses for advertising and public relations Other business taxes Currency translation expenses Office supplies Travel and training costs Telecommunication costs Write-downs and remeasurements Insurance costs Customs clearance-related charges Services provided by Bundesanstalt für Post und Telekommunikation (German federal post and telecommunications agency) Consulting costs (including tax advice) Entertainment and corporate hospitality expenses Monetary transaction costs Voluntary social benefits Losses on disposal of assets Contributions and fees Commissions paid Legal costs Audit costs Donations Expenses from prior-period billings Expenses from derivatives Miscellaneous Total 475 515 331 306 308 208 225 211 189 186 165 162 103 102 82 78 102 65 66 63 32 27 19 8 568 482 433 322 321 247 244 225 218 204 196 166 139 126 107 89 86 79 76 75 33 28 16 5 426 4,454 411 4,896 The increase in the cost of purchased cleaning and security services resulted from the stepped-up safety measures due to the COVID-19 pandemic. 2020 2021 Expenses for advertising and public relations rose for rea- sons including the global brand campaign. Of interest income, €16 million relates to income from finance lease receivables. The expense from the unwinding of discounts on bonds resulting from the application of the effective interest method amounted to €12 million (previous year: €13 million). Taxes other than income taxes are either recognised in the related expense item or, if no specific allocation is possible, in other operating expenses. Interest income and interest expenses result from financial assets and liabilities that were not measured at fair value through profit or loss. Miscellaneous other operating expenses include a large number of smaller individual items. Information on interest expenses from unwinding dis- counted net pension provisions can be found in  note 37. Posi- tive effects on the interest expense resulted from changes in the discount rate for other non-current provisions. 18 Net finance costs € m Financial income Interest income Gains on changes in fair value of financial assets Other financial income Finance costs Interest expense from unwinding discounts on provisions Interest expense on leases Other interest expenses Losses on changes in fair value of financial assets Other finance costs Foreign currency result Net finance costs 19 Income taxes 2020 2021 € m 74 127 19 220 – 89 –394 –151 –145 – 59 – 838 – 58 – 676 101 80 10 191 – 46 –383 –142 –107 – 68 –746 – 64 – 619 Current income tax expense Current recoverable income tax Deferred tax income from temporary differences Deferred tax expense from tax loss carryforwards Income taxes 2020 – 870 12 – 858 2021 –1,459 47 –1,412 28 13 –165 –137 – 995 – 537 – 524 –1,936 The reconciliation to the effective income tax expense based on consolidated net profit before income taxes and the expected income tax expense is as follows: Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 109 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 2020 4,171 2021 7,359 –1,272 –2,244 9 45 253 –16 –115 101 – 995 1 19 241 –13 –194 254 –1,936 The difference from deferred tax assets not recognised for initial differences is due to differences between the carrying amounts in the opening tax accounts of Deutsche  Post AG and the car- rying amounts in the IFRS financial statements as at 1 Janu- ary 1995 (initial differences). In accordance with IAS 12.15(b) and IAS 12.24(b), the Group did not recognise any deferred tax assets in respect of these temporary differences, which related mainly to property, plant and equipment as well as to pension provisions 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 €107 million as at 31 December 2021 (previous year: €109 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 de- ferred 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 carryforwards and temporary differences in the amount of €7 million (previous year: €8 million) relate to the reduction of the effective income 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 the Americas region) reduced the deferred tax expense by €323 million (pre- vious year: €368 million). Effects from unrecognised deferred tax assets amounting to €4 million (previous year: €5 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 carryforwards for which no deferred taxes were recognised. A deferred tax asset in the amount of €34 million was rec- ognised 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 the 2021 financial year, the change in the UK tax rate gave rise to a deferred tax expense of €52 million. In other tax jurisdictions abroad, tax rate changes had no material effect; there was no effect whatsoever at domestic Group companies. The effective income tax expense includes prior-period tax expenses from German and foreign companies in the amount of €13 million (tax expense) (previous year: expense of €16 million). The following table presents the tax effects on the compo- nents of other comprehensive income: Other comprehensive income € m Before taxes Income taxes After taxes 2021 Change due to remeasurements of net pension provisions Hedging reserves Reserve for equity instruments without recycling Currency translation reserve Share of other comprehensive income of investments accounted for using the equity method 2,005 29 16 925 6 Other comprehensive income 2,981 2020 Change due to remeasurements of net pension provisions Hedging reserves Reserve for equity instruments without recycling Currency translation reserve Share of other comprehensive income of investments accounted for using the equity method –1,087 –18 – 5 – 954 – 8 Other comprehensive income –2,072 –78 – 6 –1 0 0 – 85 1,927 23 15 925 6 2,896 80 –1,007 6 0 0 –12 – 5 – 954 1 87 –7 –1,985 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 110 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 the 2021 financial year were €4.10 (previous year: €2.41). Basic earnings per share Consolidated net profit for the period attributable to Deutsche  Post AG shareholders € m 2020 2,979 2021 5,053 Weighted average number of shares outstanding Basic earnings per share number 1,236,900,096 1,232,451,264 € 2.41 4.10 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 Potentially dilutive shares Weighted average number of shares for diluted earnings Diluted earnings per share € m € m € m € m 2020 2,979 8 1 2021 5,053 8 1 2,986 5,060 number 1,236,900,096 1,232,451,264 number 28,591,660 29,645,735 number 1,265,491,756 1,262,096,999 € 2.36 4.01 To compute diluted earnings per share, the weighted average number of shares outstanding is adjusted for the number of all potentially dilutive shares. This item includes the execu- tives’ rights to shares under the Performance Share Plan and Share Matching Scheme (as at 31 December 2021: 11,678,092 shares; previous year: 10,649,742) and the maximum number of ordinary shares that can be issued on exercise of the con- version rights under the convertible bond issued in Decem- ber 2017. Consolidated net profit for the period attributable to Deutsche  Post AG shareholders was increased by the amounts spent for the convertible bond. Diluted earnings per share in the reporting period were €4.01 (previous year: €2.36). 21 Dividend per share A dividend per share of €1.80 is being proposed for the 2021 financial year (previous year: €1.35 paid). Further details on the dividend distribution can be found in  note 35. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 111 Balance sheet disclosures 22 Intangible assets 22.1 Overview € m Cost Balance as at 1 January 2020 Additions from business combinations Additions Reclassifications Disposals Currency translation differences Balance as at 31 December 2020 / 1 January 2021 Additions Reclassifications Disposals Currency translation differences Balance as at 31 December 2021 Depreciation, amortisation and impairment losses Balance as at 1 January 2020 Depreciation, amortisation and impairment losses Impairment losses Reclassifications Disposals Currency translation differences Balance as at 31 December 2020 / 1 January 2021 Depreciation, amortisation and impairment losses Reclassifications Disposals Currency translation differences Balance as at 31 December 2021 Carrying amount as at 31 December 2021 Carrying amount as at 31 December 2020 Internally generated intangible assets Purchased brand names Purchased customer lists Other purchased intangible assets 1,291 0 39 58 –111 – 4 1,273 43 66 –73 4 1,313 1,133 67 1 2 –102 –3 1,098 65 –1 – 59 2 1,105 208 175 476 0 0 0 0 –26 450 0 0 0 30 480 445 0 0 0 0 –23 422 0 0 0 28 450 30 28 45 0 0 0 0 – 4 41 0 0 0 2 43 23 4 0 0 0 –1 26 3 0 0 2 31 12 15 1,587 1 62 76 –125 –36 1,565 60 81 –139 33 1,600 1,253 129 2 –2 –108 –27 1,247 133 1 –120 27 1,288 312 318 Advance payments and intangible assets under development 106 0 132 –101 –12 0 125 152 –110 – 6 1 162 0 0 0 1 0 0 1 0 0 0 0 1 161 124 Goodwill 12,398 0 0 0 0 –358 12,040 0 0 –14 392 12,418 1,062 0 13 0 0 –33 1,042 0 0 –13 36 1,065 11,353 10,998 Total 15,903 1 233 33 –248 – 428 15,494 255 37 –232 462 16,016 3,916 200 16 1 –210 – 87 3,836 201 0 –192 95 3,940 12,076 11,658 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 112 Goodwill impairment in the previous year related exclusively to StreetScooter GmbH,  note 16. Purchased software, concessions, industrial rights, licences and similar rights and assets are reported under purchased in- tangible assets. Internally generated intangible assets relate to development costs for internally developed software. 22.2 Allocation of goodwill to CGU s For the purposes of annual impairment testing in accordance with IAS 36, the Group determines the recoverable amount of a CGU on the basis of its value in use. This calculation is based on projections of free cash flows that are initially discounted at a rate corresponding to the post-tax cost of capital. Pre-tax discount rates are determined iteratively. € m Express Global Forwarding, Freight Global Forwarding Freight Supply Chain eCommerce Solutions Post & Parcel Germany 31 Dec. 2020 3,895 31 Dec. 2021 3,910 3,858 278 1,887 160 920 4,072 279 1,977 159 956 Total goodwill 10,998 11,353 The cash flow projections are based on the detailed planning for EBIT, depreciation and amortisation / investment planning adopted by management, as well as changes in net working cap- ital, and take both internal historical data and external macroeco- nomic data into account. From a methodological perspective, the detailed planning phase covers a three-year planning horizon from 2022 to 2024. Planning is supplemented by a perpetual annuity representing the value added from 2025 onwards. This is calculated using a long-term growth rate, which is determined for each CGU separately and is shown in the table below. The growth rates applied are based on long-term real growth figures for the relevant economies, growth expectations for the rele- vant 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. A key planning assumption for the impairment test is the EBIT margin for the perpetual annuity. The pre-tax cost of capital is based on the weighted aver- age cost of capital. The (pre-tax) discount rates for the material CGU s and the growth rates assumed in each case for the perpet- ual annuity are shown in the following table: % Express Global Forwarding, Freight Global Forwarding Freight Supply Chain eCommerce Solutions Post & Parcel Germany Discount rates Growth rates 2020 5.8 2021 6.0 2020 2.0 2021 2.0 6.5 6.7 6.5 6.6 6.1 7.0 7.2 7.0 7.2 6.9 2.5 2.0 2.5 1.5 0.5 2.5 2.0 2.5 1.5 0.5 On the basis of these assumptions and the impairment tests carried out for the individual CGU s to which goodwill was allo- cated, it was established 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 Decem- ber 2021. When performing the impairment test, Deutsche  Post  DHL Group conducted sensitivity analyses for the significant CGU s in accordance with IAS 36.134 for the EBIT margin, the discount rate and the growth rate. These analyses – which included var- ying the essential valuation parameters within an appropriate range – did not reveal any risk of impairment to goodwill. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 113 23 Property, plant and equipment Overview of property, plant and equipment, including right-of-use assets € m Cost Balance as at 1 January 2020 Additions from business combinations 1 Additions Reclassifications Disposals Currency translation differences Balance as at 31 December 2020 / 1 January 2021 Additions from business combinations 2 Additions Reclassifications Disposals Currency translation differences Balance as at 31 December 2021 Depreciation, amortisation and impairment losses Balance as at 1 January 2020 Additions from business combinations 1 Depreciation, amortisation and impairment losses Impairment losses Reclassifications Reversals of impairment losses Disposals Currency translation differences Balance as at 31 December 2020 / 1 January 2021 Additions from business combinations 2 Depreciation, amortisation and impairment losses Impairment losses Reclassifications Reversals of impairment losses Disposals Currency translation differences Balance as at 31 December 2021 Carrying amount as at 31 December 2021 Carrying amount as at 31 December 2020 Land and buildings Technical equipment and machinery IT systems, operating and office equipment Aircraft Transport equipment Advance payments and assets under development 15,516 16 2,171 203 –731 – 503 16,672 0 2,428 360 –1,457 330 18,333 4,821 12 1,652 66 1 –2 – 466 –188 5,896 0 1,582 0 1 –10 –757 142 6,854 11,479 10,776 6,385 9 249 336 –217 –157 6,605 0 240 520 –198 124 7,291 3,652 7 418 7 1 0 –155 – 85 3,845 0 444 0 –15 0 –171 72 4,175 3,116 2,760 2,529 2 136 114 –192 – 94 2,495 0 125 129 –335 61 2,475 1,836 1 252 2 –2 0 –180 – 64 1,845 0 243 0 8 0 –325 45 1,816 659 650 5,312 83 714 925 –383 –299 6,352 35 719 881 –187 343 8,143 1,927 43 694 0 0 0 –328 – 89 2,247 8 755 0 0 0 –156 98 2,952 5,191 4,105 3,793 1 672 35 –341 – 89 4,071 5 738 101 –355 64 4,624 1,755 1 502 17 – 4 0 –273 – 42 1,956 5 534 0 12 0 –306 35 2,236 2,388 2,115 1,759 11 1,583 –1,647 –30 –73 1,603 0 2,470 –2,025 –27 49 2,070 0 0 0 0 2 0 0 0 2 0 0 0 –2 0 0 0 0 2,070 1,601 Total 35,294 122 5,525 –34 –1,894 –1,215 37,798 40 6,720 –34 –2,559 971 42,936 13,991 64 3,518 92 –2 –2 –1,402 – 468 15,791 13 3,558 0 4 –10 –1,715 392 18,033 24,903 22,007 1 Change in the method of consolidation. 2 Proportionate change from joint operations. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 114 Disclosures on right-of-use assets are contained in  note 41. In the prior year, disposals related primarily to disposals of right-of-use assets as a result of amended lease terms and terminations. In the 2021 financial year, a portion of disposals was attributable to the reclassification of subleases embedded in customer contracts to financial assets,  note 7. Advance payments relate only to advance payments on items of property, plant and equipment for which the Group has paid advances in connection with incomplete transactions. They relate in particular to the renewal of the Express air fleet. Ad- vances for this purpose amounted to €412 million in the financial year (previous year: €587 million). Assets under development 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. Investment property 24 The investment property largely comprises leased property en- cumbered by heritable building rights and developed and un- developed land. € m Cost Balance as at 1 January Additions Reclassifications Disposals Currency translation differences Balance as at 31 December Depreciation, amortisation and impairment losses Balance as at 1 January Depreciation, amortisation and impairment losses Disposals Reclassifications Currency translation differences Balance as at 31 December Carrying amount as at 31 December of which right-of-use assets € m Balance as at 1 January Additions Disposals Impairment losses Changes in Group’s share of equity Changes recognised in profit or loss Profit distributions Changes recognised in other comprehensive income Balance as at 31 December Aggregate financial data Profit after income taxes Other comprehensive income Total comprehensive income 2020 2021 28 4 39 –1 1 71 16 9 –1 –1 0 23 48 41 38 0 – 6 –1 –3 28 13 4 –1 1 –1 16 12 7 2020 108 13 –19 –30 – 5 –2 –7 58 – 5 –7 –12 25 Investments accounted for using the equity method The following table is an 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. The previous year was marked by impairment losses on France-based Relais Colis SAS in the amount of €30 million due to lockdown measures. As part of a public flotation of Global-E Online, Israel, in May 2021, a capital measure was carried out at the company which led to the dilution of shares held. The dilu- tion and the resulting remeasurement of the shares generated income of €39 million. Associates Joint ventures 2021 58 2 0 –3 34 –2 6 95 –11 6 – 5 2020 15 2021 15 0 0 0 1 0 –1 15 1 –1 0 0 0 0 1 0 0 16 1 0 1 2020 123 13 –19 –30 – 4 –2 – 8 73 – 4 – 8 –12 Total 2021 73 2 0 –3 35 –2 6 111 –10 6 – 4 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 115 26 Financial assets € m Assets measured at cost Assets at fair value through other comprehensive income Assets at fair value through profit or loss Financial assets Non-current 2021 834 46 310 1,190 2020 466 29 251 746 Current 2021 1,257 0 1,831 3,088 2020 81 0 1,234 1,315 2020 547 29 1,485 2,061 Total 2021 2,091 46 2,141 4,278 Assets measured at cost also include the deposit made in con- junction with the acquisition of Hillebrand of €100 million. At the same time, assets measured at cost increased through the purchase of term deposits, and assets measured at fair value through profit or loss increased, largely on account of the pur- chase of money market fund shares. For details on impairment losses, default risk, maturity structures and restraints on disposal, see  note 43. Assets measured at cost include €579 million (previous year: €107 million) in receivables from finance leases. The increase relates primarily to the receivables from certain embedded sub-  note 7. The notional amounts of the outstanding lease leases, payments have the following maturity dates: Maturities of undiscounted lease payments 2021 € m Up to 1 year More than 1 year to 2 years More than 2 years to 3 years More than 3 years to 4 years More than 4 years to 5 years More than 5 years Total undiscounted lease payments Interest component included over entire term Receivable from leasing of which current non-current 160 139 108 70 46 100 623 – 44 579 160 419 27 Other assets € m Prepaid expenses Tax receivables Pension assets, non-current only Income from cost absorption Contract assets Other assets from insurance contracts Creditors with debit balances Receivables from private postal agencies Recoverable start-up costs, non-current only Receivables from insurance business Receivables from loss compensation (recourse claims) Receivables from employees Receivables from cash on delivery Miscellaneous, of which non-current: 79 (previous year: 74) Other assets of which current non-current 2020 937 551 20 111 182 115 66 37 66 50 54 27 3 756 2,975 2,815 160 2021 1,593 632 421 208 113 97 89 88 87 69 59 34 5 680 4,175 3,588 587 The increase in prepaid expenses results primarily from the growth of business in Global Forwarding, Freight and the corre- sponding increase in prepayments for transport services. Pension assets increased, primarily because of actuarial gains,  note 37. Of the tax receivables, €478 million (previous year: €430 million) relates to VAT, €109 million (previous year: €86 million) to customs and duties and €45 million (previous year: €35 million) to other tax receivables. Miscellaneous other assets include a large number of in- dividual items. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 116 28 Deferred taxes Breakdown by balance sheet item and maturity € m The increase in finished goods and work in progress is attrib- utable mainly to real estate development projects. Adequate valuation allowances were recognised. 2020 2021 Deferred tax assets Deferred tax liabilities Deferred tax assets Deferred tax liabilities 30 Trade receivables For information on impairment losses, default risk and maturity structures, see  note 43. 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 22 416 2 14 65 589 1,632 198 1,752 4,690 954 3,736 –2,300 2,390 111 1,995 66 26 58 44 26 10 2,336 242 2,094 –2,300 36 13 479 3 16 67 640 1,700 244 1,267 4,429 1,029 3,400 –2,486 1,943 145 2,102 34 44 102 159 24 13 2,623 231 2,392 –2,486 137 A total of €438 million (previous year: €1,065 million) of the deferred taxes on tax loss carryforwards relates to tax loss carryforwards in Germany and €829 million (previous year: €687 million) to foreign tax loss carryforwards (mainly from the Americas region). No deferred tax assets were recognised for tax loss car- ryforwards of around €1.7 billion (previous year: €2.6 billion) chiefly from the Americas region and for temporary differences of around €3.0 billion (previous year: €4.1 billion) primarily from Germany, as it can be assumed that the Group will probably not be able to use these tax loss carryforwards and temporary dif- ferences in its tax planning. The tax loss carryforwards from the Americas region for which no deferred tax assets were recognised do not expire prior to 2029. Deferred taxes have not been recognised for temporary differences of €568 million (previous year: €403 million) for accrued earnings of German and foreign subsidiaries, because these temporary differences will probably not reverse in the foreseeable future. 29 Inventories € m Raw materials, consumables and supplies Work in progress Finished goods and goods purchased and held for resale Advance payments Inventories 2020 202 196 30 11 439 2021 222 254 106 11 593 € m Trade receivables Deferred revenue Trade receivables 31 Cash and cash equivalents € m Cash equivalents Bank balances / cash in transit Cash Other cash and cash equivalents 2020 8,222 763 8,985 2021 10,607 1,076 11,683 2020 2,787 1,635 17 43 2021 1,238 2,231 11 51 Cash and cash equivalents 4,482 3,531 Of the €3,531 million in cash and cash equivalents, €1,905 mil- lion was not available for general use by the Group as at the reporting date (previous year: €1,248 million). Of this amount, €1,818 million (previous year: €1,169 million) was attributable to countries where exchange controls or other legal restrictions apply (mostly China, India and Thailand) and €87 million (pre- vious year: €79 million) primarily to companies with non-con- trolling-interest shareholders. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 117 Changes in issued capital and treasury shares € m 2020 2021 Issued capital Balance as at 1 January Addition due to contingent capital increase (Performance Share Plan) Balance as at 31 December Treasury shares Balance as at 1 January Purchase of treasury shares Issue / sale of treasury shares Balance as at 31 December 1,237 2 1,239 –1 –2 3 0 1,239 0 1,239 0 –20 5 –15 Total as at 31 December 1,239 1,224 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 StreetScooter production rights – Group Functions segment Sale of Greenplan GmbH, Germany – Group Functions segment Sale of Steinfurt property, Germany – Group Functions segment Sale of fuel business of DHL Supply Chain Limited, United Kingdom – Supply Chain segment Other Assets held for sale and liabilities associated with assets held for sale On 3 January 2022, Deutsche  Post  DHL Group sold the produc- tion rights and the complete ownership of the intangible assets for the production of StreetScooter electric vans as well as all shares in StreetScooter Japan K. K. and StreetScooter Schweiz to ODIN Automotive S. à. r. L., Luxembourg,  note 51. As at 31 De- cember 2021, the corresponding assets and liabilities were disclosed under assets and liabilities held for sale. The assets comprise primarily intangible assets, rights of use and cash and cash equivalents. The liabilities comprise primarily lease liabilities. Deutsche  Post  DHL Group intends to sell Greenplan GmbH, a provider of route-planning solutions. With the sale, the Group is continuing the adjustment of its portfolio in favour of its core business. The most recent remeasurement prior to reclassifica- tion to assets held for sale and liabilities associated with assets held for sale did not result in any impairment loss. The sale was completed on 3 January 2022. The sale of the property in Steinfurt was completed in Oc- tober 2021. The disposal gain of €5 million is recognised under other operating income. Assets 2021 18 2 0 0 1 21 Liabilities 2020 2021 0 0 0 7 0 7 4 1 0 0 0 5 2020 0 0 9 7 0 16 The fuel business of DHL Supply Chain Limited, United Kingdom, was sold in the first half of 2021. The disposal gain of €4 million is recognised under other operating income. Issued capital and purchase of treasury shares 33 As at 31 December 2021, KfW Bankengruppe (KfW) held a 20.49 % interest, unchanged from the previous year, in the share capital of Deutsche  Post AG. Free float accounts for 78.28 % of the shares and the remaining 1.23 % of shares are owned by Deutsche  Post AG. KfW holds the shares in trust for the Federal Republic of Germany. 33.1 Changes in issued capital The issued capital amounts to €1,239 million. It is composed of 1,239,059,409 no-par-value registered shares (ordinary shares) with a notional interest in the share capital of €1 per share and is fully paid up. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 118 33.2 Authorised and contingent capital The Articles of Association may be viewed on the  company’s website or in the electronic company register. They may also be viewed in the commercial register of the Bonn Local Court. Authorised and contingent capital as at 31 December 2021 Authorised Capital 2021 (Annual General Meeting on 6 May 2021) Contingent Capital 2017 (Annual General Meeting on 28 April 2017) Contingent Capital 2018 / 1 (Annual General Meeting on 24 April 2018) Contingent Capital 2020 / 1 (Annual General Meeting on 27 August 2020) Contingent Capital 2020 / 2 (Annual General Meeting on 27 August 2020) Amount € m 130 Purpose Increase in share capital against cash / non-cash contributions (authorisation until 5 May 2026) 75 Issue of options / conversion rights (authorisation until 7 May 2018) 12 12 Issue of Performance Share Units to executives (authorisation until 8 October 2020) Issue of Performance Share Units to executives (authorisation until 26 August 2023) 40 Issue of options / conversion rights (authorisation until 26 August 2023) Authorised Capital 2021 The Board of Management is authorised, subject to the consent of the Supervisory Board, to issue up to 130 million new, no-par- value registered shares until 5 May 2026 in exchange for cash and / or non-cash contributions and thereby increase the com- pany’s share capital by up to €130 million. 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 financial year under review. Contingent Capital 2017 The contingent capital increase serves to issue bonds with war- rants, convertible bonds and / or income bonds as well as profit participation certificates, or a combination thereof, in an aggre- gate principal amount of up to €1.5 billion, and to grant options or conversion rights for up to 75 million shares with a proportionate interest in the share capital not to exceed €75 million. The new shares participate in profit from the beginning of the financial year in which they are issued. The authorisation was exercised in part in December 2017 by issuing the convertible bond 2017 / 2025 in an aggregate principal amount of €1 billion. The share capital was increased on a contingent basis by up to €75 million. Contingent capital was not utilised in the 2021 financial year. Contingent Capital 2018 / 1 The contingent capital increase serves to grant Performance Share Units (PSUs) to selected Group executives. The new shares participate in profit from the beginning of the financial year in which they are issued. The share capital was increased on a contingent basis by up to €12 million through the issue of up to 12 million no-par-value registered shares. Contingent capital was not utilised in the 2021 financial year. Contingent Capital 2020 / 1 The contingent capital increase serves to grant Performance Share Units (PSUs) to selected Group executives. The share capital was increased on a contingent basis by up to €12 million through the issue of up to 12 million no-par-value registered shares. The new shares participate in profit from the beginning of the financial year in which they are issued. Contingent capital was not utilised in the 2021 financial year. Contingent Capital 2020 / 2 The contingent capital increase serves to issue bonds with war- rants, convertible bonds and / or income bonds as well as profit participation certificates, or a combination thereof, in an aggre- gate principal amount of up to €1.5 billion, and to grant options or conversion rights for up to 40 million shares with a proportionate interest in the share capital not to exceed €40 million. The new shares participate in profit from the beginning of the financial year in which they are issued. The share capital was increased on a contingent basis by up to €40 million. Contingent capital was not utilised in the 2021 financial year. 33.3 Authorisation to acquire treasury shares By way of a resolution adopted by the Annual General Meeting on 6 May 2021, the company is authorised to acquire treasury shares in the period to 5 May 2026 of up to 10 % of the share capital existing when the resolution was adopted. The authori- sation 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. In addition, the Board of Management is authorised to acquire treasury shares totalling up to 5 % of the share capital existing when the resolution was adopted by means including using derivatives. Share buy-back programme At the end of the share buy-back programme,  note 3, in Oc- tober 2021, 17.7 million shares had been purchased for a total amount of €1 billion, at an average price of €56.53 per share. In the 2021 financial year, treasury shares were also acquired and issued to executives to settle the 2020 tranche and claims to matching shares under the 2016 tranche. The 2.6 million shares were acquired at an average price per share of €44.96 for a total of €118 million. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 119 A total of 2.5 million treasury shares were issued to the 34 Reserves executives concerned to settle the 2020 PSP tranche. As at 31 December 2021, Deutsche  Post AG held 15,247,431 34.1 Capital reserves treasury shares (previous year: 0 treasury shares). 33.4 Disclosures on corporate capital In the 2021 financial year, the equity ratio was 30.7 % (previous year: 25.5 %). The company’s capital is monitored using the net gearing ratio, which is defined as net debt divided by the total of equity and net debt. Corporate capital € m Financial liabilities Less operating financial liabilities 1 Less cash and cash equivalents Less current financial assets Less non-current derivative financial instruments Net debt Plus total equity Total capital Net gearing ratio (%) 1 Relates to e. g. liabilities from overpayments. 2020 19,098 –372 – 4,482 –1,315 –1 12,928 14,078 27,006 47.9 2021 19,897 – 506 –3,531 –3,088 0 12,772 19,499 32,271 39.6 € m Balance as at 1 January Share Matching Scheme Addition to obligation Utilisation of obligation Total for Share Matching Scheme Performance Share Plan Addition to obligation Utilisation of obligation Total for Performance Share Plan Employee Share Plan Addition to obligation Total for Employee Share Plan Issue of treasury shares Differences between purchase and issue prices of treasury shares 2020 3,482 2021 3,519 87 –77 10 26 –26 0 0 0 24 3 104 – 99 5 25 –28 –3 3 3 0 9 Balance as at 31 December 3,519 3,533 35 Equity attributable to Deutsche  Post AG shareholders The equity attributable to Deutsche  Post AG shareholders in the 2021 financial year amounted to €19,037 million (previous year: €13,777 million). Dividends Dividends paid to the shareholders of Deutsche  Post AG are based on the net retained profit of €10,239 million reported in Deutsche  Post AG’s annual financial statements in accordance with the HGB. The Board of Management is proposing a dividend of €1.80 per no-par-value share carrying dividend rights. This corresponds to a total dividend of €2,205 million. The amount of €8,034 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 appropriation of net retained profit on the date of the Annual General Meeting. Total dividend € m Dividend per share € 34.2 Retained earnings In addition to the items evident in the statement of changes in equity, retained earnings also include changes due to capital increases / decreases: Dividend distributed in the 2021 financial year for the year 2020 Dividend distributed in the 2020 financial year for the year 2019 1,673 1,422 1.35 1.15 Capital increase / decrease € m Share buy-back Share Matching Scheme Performance Share Plan Differences between purchase and issue prices of treasury shares Other Total 2020 0 31 0 –3 0 28 2021 – 982 –19 26 – 9 3 – 981 36 Non-controlling interests This balance sheet item includes adjustments for the interests of non-Group shareholders in consolidated equity from acquisition accounting, as well as their interests in profit or loss. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 120 The following table shows the companies to which the Financial data for material non-controlling interests non-controlling interests relate: € m € m DHL Sinotrans International Air Courier Ltd., China Blue Dart Express Limited, India PT. Birotika Semesta, Indonesia DHL Aero Expreso S. A., Panama Other companies Non-controlling interests 2020 2021 196 345 15 14 18 58 25 23 22 47 301 462 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 There are material non-controlling interests in the following two companies: Net assets Non-controlling interests DHL Sinotrans International Air Courier Ltd. (Sinotrans), China, which is assigned to the Express segment, provides do- mestic and international express delivery and transport services. Deutsche  Post  DHL Group holds a 50 % interest in the company. Deutsche  Post AG holds a 75 % interest in Blue Dart Express Limited (Blue Dart), India, which is assigned to the eCommerce Solutions segment. Blue Dart is a courier service provider. The fol- lowing table gives an overview of their aggregated financial data: 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 as at 31 December Sinotrans Blue Dart 2020 2021 2020 2021 124 607 731 24 314 338 393 196 149 966 1,115 35 391 426 689 345 2,179 2,720 408 103 305 –14 291 146 119 153 390 –14 –254 122 262 –14 370 753 189 564 58 622 311 162 282 610 17 –343 284 370 57 711 94 109 203 32 89 121 82 15 355 3 1 2 –7 – 5 –1 0 0 17 –10 – 5 2 8 –1 9 122 125 247 28 100 128 119 25 482 49 13 36 4 40 10 1 9 84 – 46 –34 4 9 2 15 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 121 The portion of other comprehensive income attributable to non-controlling interests largely relates to the currency trans- lation reserve. The changes are shown in the following table: € m Balance as at 1 January Transactions with non-controlling interests Total comprehensive income Changes from unrealised gains and losses Changes from realised gains and losses Currency translation reserve as at 31 December 2020 –16 3 –15 0 –28 2021 –28 –1 37 0 8 37 Provisions for pensions and similar obligations The Group’s most significant defined benefit retirement plans are in Germany and the United Kingdom. A wide variety of other defined benefit retirement plans in the Group are to be found in the Netherlands, Switzerland, the United States and a large number of other countries. There are specific risks associated with these plans along with measures to mitigate them. 37.1 Plan features Germany In Germany, Deutsche  Post AG has an occupational retirement benefit arrangement 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 pen- sion account. A 2.5 % increase on the previous year is included in every newly allocated component. When the statutory pension falls due, the hourly workers and salaried employees can choose whether to receive payment as a lump-sum or in instalments, or lifelong monthly benefit payments that increase by 1 % each year. The large majority of Deutsche  Post AG’s obligations relates to older vested entitlements of hourly workers and salaried employ- ees from a previous agreement, and to legacy pension commit- ments towards former hourly workers and salaried employees who have left or retired from the company. In addition, retirement benefit arrangements are available to executives below the Board of Management level and to specific employee groups through deferred compensation in particular. For information on the pen- sion scheme for the Board of Management, see  note 47.2. The prime source of external funding for Deutsche  Post AG’s respective retirement benefit obligations is a contractual trust arrangement, 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 fund- ing 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, Versorgungsanstalt der Deutschen Bundespost (VAP – Deutsche Bundespost institution for supplementary retirement pensions), a shared pension fund for successor companies to Deutsche Bundespost, is used for some of the legacy pension commitments. Individual subsidiaries in Germany have retirement bene- fit plans that were acquired in the context of acquisitions and transfers of operations and that are closed to new entrants. Con- tractual trust arrangements are in place for two subsidiaries for external funding. United Kingdom In the United Kingdom, the Group’s defined benefit pension ar- rangements are closed to new entrants and for further service accrual. One arrangement which, exceptionally, was partly open until 31 March 2019, was then also closed to new entrants and for further service accrual. Furthermore, in 2019 certain active members of this arrangement were given the option to transfer their past service benefits to an external pension arrangement. This led to settlement payments in the previous year. With regard to some of the arrangements of the Group, a full commutation exercise was carried out during the year under review, which entailed offering certain members with small pensions the op- portunity to exchange their pension for a lump-sum payment. This will lead primarily to settlement payments in the following year (2022). The Group’s defined benefit pension arrangements in the United Kingdom 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 deficit contributions must be negotiated with the trustee in the course of funding valuations, which are carried out every three years and most recently in the year under review. Normal con- tribution amounts no longer accrue since the arrangements for further service accrual have been closed. Other In the Netherlands, collective agreements require that those em- ployees who are not covered by a sector-specific plan participate in a dedicated defined benefit retirement plan. The dedicated plan provides for annual accruals which are subject to a pension- able salary cap. The plan provides for monthly benefit payments that are indexed in line with inflation, on the one hand, and the Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 122 funds available for such indexation, on the other. In Switzerland, employees receive an occupational pension in line with statutory requirements, where pension payments depend on the contribu- tions paid, an interest rate that is fixed each year, certain annu- ity 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 United States, the companies’ defined benefit retirement plans have been closed to new entrants and accrued entitlements have been frozen. In the year under review, a bundle of small pensions there was transferred to an insurance company, which primarily led to settlement payments. The Group companies fund their dedicated defined bene- fit retirement plans in these three countries primarily by using respective joint funding institutions. In the previous year, the allocation of plan assets to the participating Group companies was harmonised in the Netherlands. In the Netherlands and in Switzerland, both employers and employees contribute to plan funding. In the United States, no regularly recurring contribu- tions are currently made in this regard. 37.2 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 as 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 Present value of defined benefit obligations Fair value of plan assets Net pension provisions 2020 18,618 2021 19,664 2020 13,758 2021 13,849 227 –19 –2 – 206 285 – 285 491 –10 1,708 – 65 – 274 – 6 – 4 – 264 192 – 192 456 –180 –1,209 112 – – 36 –733 – 68 0 –2 –311 – 28 –729 – 55 –13 0 429 – – – –10 –10 – 213 213 203 – – – 546 546 68 19 –358 – 67 –2 – 5 –313 – – – –10 –10 – 140 140 130 – – – 728 728 48 28 – 417 – 54 1 0 426 2020 4,860 227 –19 –2 10 216 285 –213 72 288 –10 1,708 – 65 – 546 2021 5,815 274 – 6 – 4 10 274 192 –140 52 326 –180 –1,209 112 –728 1,087 –2,005 – 68 17 –375 –1 2 3 2 – 48 0 –312 –1 –14 0 3 19,664 18,503 13,849 14,739 5,815 3,764 Remeasurements recognised in the statement of comprehensive income 1,633 –1,277 Employer contributions Employee contributions Benefit payments Settlement payments Transfers Acquisitions / divestitures Currency translation effects Balance as at 31 December 1 Including other administration costs in accordance with IAS 19.130 from plan assets. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 123 As at 31 December 2021, the effects of asset ceilings amounted to €46 million; an expedient was applied to their recognition by deducting this amount from the fair value of plan assets (1 January 2021 / 31 December 2020: €5 million; 1 January 2020: €5 million). There were settlement payments in the United States in particular in the reporting period. In the previous year, there were settlement payments in particular in the United Kingdom. Moreover, in Germany, the proportion of benefit payments paid directly by the company increased. The remeasurements caused net pension provisions to fluctuate heavily. Total payments amounting to €409 million are expected with regard to net pension provisions in 2022. Of this amount, €330 million is attributable to the Group’s expected direct bene- fit payments and €79 million to expected employer contributions to pension funds. The disaggregation of the present value of defined benefit obligations, fair value of plan assets and net pension provisions, as well as the determination of the balance sheet items, is as follows: Germany UK Other Total 9,927 – 6,229 3,698 0 3,698 11,134 – 5,901 5,233 0 5,233 5,497 – 5,895 –398 400 2 5,450 – 5,437 13 13 26 3,079 –2,615 464 21 485 3,080 –2,511 569 7 576 18,503 –14,739 3,764 421 4,185 19,664 –13,849 5,815 20 5,835 € m 31 December 2021 Present value of defined benefit obligations Fair value of plan assets Net pension provisions Reported separately Pension assets Provisions for pensions and similar obligations 31 December 2020 Present value of defined benefit obligations Fair value of plan assets Net pension provisions Reported separately Pension assets Provisions for pensions and similar obligations In the “Other” area, the Netherlands, Switzerland and the United States account for a share in the corresponding present value of the defined benefit obligations of 48 %, 18 % and 9 %, respectively (previous year: 45 %, 18 % and 11 %, respectively). Additionally, rights to reimbursement from former Group companies existed in the Group in Germany in the amount of around €13 million (previous year: €14 million), which had to be reported separately under financial assets. Corresponding benefit payments are being made directly by the former Group companies. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 124 37.3 Additional information on the present value of defined benefit obligations The significant financial assumptions are as follows: % 31 December 2021 Discount rate (defined benefit obligations) Expected annual rate of future salary increase Expected annual rate of future pension increase 31 December 2020 Discount rate (defined benefit obligations) Expected annual rate of future salary increase Expected annual rate of future pension increase Germany 1.50 2.50 1.75 0.80 2.50 1.75 UK 1.90 n. a. 3.15 1.20 n. a. 2.60 Other 1.61 2.39 1.67 1.06 2.36 1.02 Total 1.64 2.48 2.65 0.95 2.47 2.11 The discount rates for defined benefit obligations in the eurozone and the United Kingdom were each derived from an individual yield curve comprising the yields of AA-rated corporate bonds and taking into account membership composition and duration. For other countries, the discount rate for defined benefit obli- gations 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. The selection of corporate bonds to be used for the eurozone was refined in June 2020. For the annual pension increase in Germany, fixed rates in particular must be taken into account, in addition to the assump- tions shown. The effective weighted average therefore amounts to approximately 1.00 % (previous year: 1.00 %). The most significant demographic assumptions made relate to life expectancy and / or mortality. For the Group companies in Germany, they are based on the HEUBECK RICHT- TAFELN 2018 G mortality tables. Life expectancy for the retire- ment benefit plans in the United Kingdom was based mainly on the S3PMA_H / S3PFA_H (previous year: S2PMA / S2PFA) tables of the Continuous Mortality Investigation (CMI) of the Institute and Faculty of Actuaries, adjusted to reflect plan-specific mortal- ity according to the latest funding valuation. Current projections of future mortality improvements were taken into account based on the CMI core projection model. For other countries, their own country-specific current standard mortality tables were used. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 125 If one of the significant financial assumptions were to change, the present value of the defined benefit obligations would change as follows: 31 December 2021 Discount rate (defined benefit obligations) Expected annual rate of future salary increase Expected annual rate of future pension increase 31 December 2020 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 UK Other Total 1.00 –1.00 0.50 – 0.50 0.50 – 0.50 1.00 –1.00 0.50 – 0.50 0.50 – 0.50 –12.50 16.00 0.14 – 0.13 0.34 – 0.31 –13.41 17.38 0.15 – 0.14 0.36 – 0.33 –13.76 17.53 n. a. n. a. 5.32 – 5.12 –14.75 19.08 n. a. n. a. 6.01 – 5.64 –15.25 20.45 0.99 – 0.89 7.29 – 5.54 –15.36 20.66 1.05 – 0.94 7.13 – 5.33 –13.33 17.18 0.24 – 0.22 2.96 –2.60 –14.08 18.36 0.25 – 0.23 2.97 –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. sumptions; 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 beneficiary would increase the present value of the defined benefit obligations by 4.87 % in Germany (previous year: 5.20 %) and by 4.77 % in the United Kingdom (previous year: 4.40 %). The corresponding increase for other countries would be 3.37 % (previous year: 3.33 %) and the total increase would be 4.59 % (previous year: 4.69 %). When determining the sensitivity disclosures, the present values were calculated using the same methodology used to cal- culate the present values at the reporting date. The presentation does not take into account interdependencies between the as- The weighted average duration of the Group’s defined bene- fit obligations as at 31 December 2021 was 14.3 years in Germany (previous year: 15.3 years) and 15.6 years in the United Kingdom (previous year: 17.1 years). In the other countries it was 18.6 years (previous year: 18.4 years), and in total it was 15.4 years (previous year: 16.3 years). A total of 30.5 % (previous year: 32.1 %) of the present value of the defined benefit obligations was attributable to active beneficiaries, 20.6 % (previous year: 19.6 %) to formerly employed beneficiaries and 48.9 % (previous year: 48.3 %) to retirees. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 126 37.4 Additional information on the fair value of plan assets The fair value of the plan assets can be disaggregated as follows: € m 31 December 2021 Equities Fixed income securities Real estate Alternatives 1 Insurances Cash Other Fair value of plan assets 31 December 2020 Equities Fixed income securities Real estate Alternatives 1 Insurances Cash Other Germany UK Other Total 1,153 2,080 1,785 434 519 230 28 564 4,554 309 277 0 151 40 783 1,237 357 11 158 25 44 2,500 7,871 2,451 722 677 406 112 6,229 5,895 2,615 14,739 617 1,755 1,670 356 529 945 29 513 4,243 270 271 0 140 0 751 1,152 343 54 155 17 39 1,881 7,150 2,283 681 684 1,102 68 13,849 Fair value of plan assets 5,901 5,437 2,511 1 Primarily includes absolute return products and private equity investments. Quoted market prices in an active market exist for around 68 % (previous year: 70 %) of the total fair values of plan assets. The re- maining assets for which no such quoted market prices exist are attributable as follows: 14 % (previous year: 14 %) to real estate, 10 % (previous year: 9 %) to fixed income securities, 5 % (previous year: 5 %) to insurances, 2 % (previous year: 2 %) to alternatives and 1% (previous year: 0%) to other. The majority of the invest- ments on the active markets are globally diversified, with certain country-specific focus areas. Real estate included in plan assets in Germany with a fair value of €1,653 million (previous year: €1,563 million) is occu- pied by Deutsche  Post  DHL Group. In the previous year, hedging measures triggered by de- velopments on the capital markets in 2020 (as a result of the COVID-19 pandemic) resulted in a decrease in the proportion of equity and fixed-income holdings and an increase in the propor- tion of the cash holdings. Asset–liability studies are performed at regular intervals in Germany, the United Kingdom and, amongst other places, the Netherlands, Switzerland and the United States, for the purpose of matching assets and liabilities; the strategic allocation of plan assets is adjusted accordingly. Sustainable approaches based mainly on an integration of ESG criteria are increasingly being used when investing plan assets. 37.5 Risk Specific risks are associated with the defined benefit retire- ment 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 obli- gation and would in principle be accompanied by an increase (decrease) in the fair value of the fixed income securities con- tained in the plan assets. Further hedging measures are applied, in some cases using derivatives. INFLATION RISK Pension obligations – especially relating to final salary schemes or schemes involving increases during the pension payment phase – can be linked directly or indirectly to changes in 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 system of retire- ment benefit components and, in the case of the United Kingdom, by closing the defined benefit arrangements. In addition, fixed rates of increase have been set and increases partially capped, and / or lump-sum payments have been provided for. There is also a positive correlation with interest rates. INVESTMENT RISK The investment is in principle subject to a large number of risks; in particular, it is exposed to the risk that market prices may change. This is managed primarily by ensuring broad diversifi- cation and the use of hedging instruments. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 127 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 obli- gations. The mortality tables used in Germany and the United Kingdom, for example, include an allowance for expected future increases in life expectancy. 38 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 Miscellaneous provisions Other provisions 38.1 Changes in other provisions € m Balance as at 1 January 2021 Changes in consolidated group Utilisation Currency translation differences Reversal Unwinding of discount / changes in discount rate Reclassification Addition Balance as at 31 December 2021 Non-current Current 2020 738 482 211 – 31 328 1,790 2021 799 517 209 – 25 396 1,946 2020 2021 2020 181 230 72 204 41 352 160 250 98 275 50 375 919 712 283 204 72 680 1,080 1,208 2,870 3,154 Total 2021 959 767 307 275 75 771 Other employee benefits Restructuring provisions Technical reserves (insurance) Aircraft maintenance Tax provisions Miscellaneous provisions 919 0 – 485 37 – 67 –3 13 545 959 72 0 –37 2 –21 0 0 59 75 712 0 – 44 14 –20 –3 0 108 767 283 11 – 52 10 –10 1 0 64 307 204 0 –29 4 – 9 0 0 105 275 680 0 –230 15 –147 –1 0 454 771 Total 2,870 11 – 877 82 –274 – 6 13 1,335 3,154 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 128 The provision for other employee benefits primarily covers work- force reduction expenses such as severance payments, partial retirement, early retirement, stock appreciation rights (SAR s) and jubilee payments. The increase is attributable mainly to higher obligations for partial retirement. Technical reserves (insurance) mainly consist of outstand- ing loss reserves and IBNR (incurred but not reported) reserves; further details can be found in  note 7. The provision for aircraft maintenance relates to obliga- tions for major aircraft and engine maintenance by third-party companies. Of the tax provisions, €131 million (previous year: €99 mil- lion) relates to VAT, €45 million (previous year: €40 million) to customs and duties and €99 million (previous year: €65 million) to other tax provisions. Miscellaneous provisions, which include a large number of individual items, break down as follows: € m Litigation costs of which non-current: 56 (previous year: 50) Risks from business activities of which non-current: 6 (previous year: 7) Miscellaneous other provisions of which non-current: 334 (previous year: 271) Miscellaneous provisions 2020 2021 111 49 520 680 114 45 612 771 38.2 Maturity structure The maturity structure of the provisions recognised in the 2021 financial year is as follows: € m 2021 Other employee benefits Technical reserves (insurance) Aircraft maintenance Tax provisions Restructuring provisions Miscellaneous provisions Total Up to 1 year More than 1 year to 2 years More than 2 years to 3 years More than 3 years to 4 years More than 4 years to 5 years More than 5 years Total 160 250 98 275 50 375 1,208 154 283 50 0 14 152 653 64 78 93 0 3 64 302 50 44 16 0 4 44 158 48 31 7 0 4 39 129 483 81 43 0 0 97 704 959 767 307 275 75 771 3,154 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 129 The amounts due to banks mainly comprise current overdraft facilities and long-term loans due to various banks. The amounts reported under liabilities at fair value through profit or loss relate mainly to the negative fair values of derivative financial instruments. Bonds The bond issued by Deutsche  Post Finance B. V. is fully guaranteed by Deutsche  Post AG. The bond 2016 / 2021 was completely repaid at the begin- ning of January 2021. 39 Financial liabilities € m Bonds Amounts due to banks Lease liabilities 1 Liabilities at fair value through profit or loss Other financial liabilities Financial liabilities 1 Explanations,  note 41. Significant bonds Bond 2012 / 2022 Bond 2012 / 2024 Bond 2013 / 2023 Bond 2016 / 2021 Bond 2016 / 2026 Bond 2017 / 2027 Bond 2018 / 2028 Bond 2020 / 2026 Bond 2020 / 2029 Bond 2020 / 2032 Convertible bond 2017 / 2025 1 Non-current Current 2020 6,660 290 8,638 1 262 2021 6,167 356 9,841 1 249 15,851 16,614 2020 750 189 1,821 53 434 3,247 Total 2021 6,669 544 11,805 13 866 2020 7,410 479 10,459 54 696 19,098 19,897 2021 502 188 1,964 12 617 3,283 2020 Nominal coupon % Issue volume € m Issuer Carrying amount € m Fair value € m Carrying amount € m 2.950 2.875 2.750 0.375 1.250 1.000 1.625 0.375 0.750 1.000 0.050 500 Deutsche  Post Finance B. V. 700 Deutsche  Post AG 500 Deutsche  Post AG 750 Deutsche  Post AG 500 Deutsche  Post AG 500 Deutsche  Post AG 750 Deutsche  Post AG 750 Deutsche  Post AG 750 Deutsche  Post AG 750 Deutsche  Post AG 1,000 Deutsche  Post AG 499 699 498 750 498 496 743 745 747 747 967 525 786 542 750 536 534 846 771 798 825 1,024 500 699 499 – 498 497 743 746 748 747 974 2021 Fair value € m 508 764 527 – 525 526 818 759 776 793 1,002 1 Fair value of the debt component; the fair value of the convertible bond 2017 / 2025 is €1,200 million (previous year: €1,084 million). Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 130 CONVERTIBLE BOND The convertible bond issued carries a conversion right that al- lows holders to convert the bond into a predetermined number of Deutsche  Post AG shares. In addition, Deutsche  Post AG was granted a call option allowing it to repay the bond 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 bond has a debt component and an equity compo- nent. In subsequent years, interest will be added to the carrying amount of the bond, up to the issue amount, using the effective interest method and recognised in profit or loss. Convertible bond 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 2017 / 2025 13 Dec. 2017 €1 billion €1 billion 13 Dec. 2020 to 13 June 2025 1 2 January 2023 to 10 June 2025 €946 million €53 million Transaction costs (debt / equity component) €4.7 / 0.3 million Conversion price at issue Conversion price after adjustment 4 in 2018 in 2019 in 2020 in 2021 €55.69 €55.61 €55.63 €55.74 €55.66 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. 40 Other liabilities € m Tax liabilities Incentive bonuses Compensated absences Contract liabilities of which non-current: 30 (previous year: 17) Wages, salaries, severance payments Payables to employees and members of executive bodies Social security liabilities Deferred income of which non-current: 95 (previous year: 70) Debtors with credit balances Overtime claims Postage stamps (contract liabilities) Insurance liabilities COD liabilities Other compensated absences Liabilities for damages of which non-current: 0 (previous year: 7) Liabilities from cheques issued Liabilities from the sale of residential building loans of which non-current: 30 (previous year: 39) Accrued insurance premiums for damages and similar liabilities Accrued rentals Miscellaneous other liabilities of which non-current: 149 (previous year: 195) Other liabilities of which current non-current 2020 1,267 1,002 395 2021 1,622 1,157 446 278 293 241 182 169 161 108 130 33 22 38 38 25 51 14 13 360 342 241 210 210 149 128 107 58 54 45 45 43 40 18 14 1,003 5,463 5,135 328 1,153 6,442 6,138 304 Of the tax liabilities, €661 million (previous year: €650 million) relates to VAT, €754 million (previous year: €439 million) to cus- toms and duties and €207 million (previous year: €178 million) to other tax liabilities. The liabilities from the sale of residential building loans re- late 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 individual items. Maturity structure There is no significant difference between the carrying amounts and the fair values of the other liabilities due to their short matur- ities or near-market interest rates. There is no significant interest rate risk because most of these instruments bear floating rates of interest at market rates. € 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 2020 5,135 146 72 47 25 38 2021 6,138 142 63 37 21 41 5,463 6,442 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 131 Lease disclosures 41 Lease disclosures Currency translation income on lease liabilities totalled €16 mil- lion (previous year: €28 million), whilst the related expenses amounted to €49 million (previous year: €25 million). Gains from sale-and-leaseback transactions came in at €105 million (previous year: €149 million) with €96 million (previous year: €131 million) attributable to real estate development projects. The right-of-use assets carried as non- current assets resulting from leases are presented separately in the following table: Right-of-use assets € m 31 December 2020 Accumulated cost of which additions Accumulated depreciation and impairment losses Carrying amount 31 December 2021 Accumulated cost of which additions Accumulated depreciation and impairment losses Carrying amount Land and buildings Technical equipment and machinery IT systems, operating and office equipment Aircraft Transport equipment Advance payments and assets under development 11,431 1,874 3,543 7,888 12,472 2,116 4,318 8,154 227 83 90 137 236 24 117 119 8 1 6 2 9 1 7 2 2,079 534 632 1,447 3,016 543 961 2,055 899 266 402 497 1,098 310 511 587 0 1 0 0 251 86 0 251 Total 14,644 2,759 4,673 9,971 17,082 3,080 5,914 11,168 In the real estate area, the Group primarily leases warehouses, office buildings and mail and parcel centres. The leased aircraft are predominantly deployed in the air network of the Express segment. The additions also relate to the renewal of the aircraft fleet. Leased transport equipment also includes the leased vehi- cle fleet. The real estate leases in particular are long-term leases. The Group had 79 real estate leases with remaining lease terms of more than 20 years as at 31 December 2021 (previous year: 62 leases). Aircraft leases have remaining lease terms of up to 14 years. Leases may include extension and termination options,  note 7. The leases are negotiated individually and include a wide range of different conditions. Lease liabilities are presented in the following table: € m Non-current lease liabilities Current lease liabilities Total 2020 8,638 1,821 2021 9,841 1,964 10,459 11,805 Future cash outflows amounted to €14 billion (previous year: €13 billion) as at the reporting date,  note 43. Possible future cash outflows amounting to €2.6 billion (previous year: €2.0 bil- lion) were not included in lease liabilities because it is not reason- ably certain that the leases will be extended (or not terminated). Leases that the Group has entered into as a lessee but that have not yet commenced result in possible future payment outflows totalling €1.6 billion (previous year: €0.2 billion), which primar- ily result from the renewal of the aircraft fleet. Additional infor- mation on the lessee required under IFRS 16 can be found in  note 12, 14, 18 and 42. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 132 Cash flow disclosures 42 Cash flow disclosures The following table shows the reconciliation of changes in li- abilities arising from financing activities in accordance with the IFRS requirements: Liabilities arising from financing activities € m Balance as at 1 January 2020 Cash changes 2 Non-cash changes Leases Currency translation Other changes Balance as at 31 December 2020 / 1 January 2021 Cash changes 2 Non-cash changes Leases Currency translation Other changes Balance as at 31 December 2021 Bonds 5,467 1,853 0 –1 91 7,410 – 845 0 1 103 6,669 Amounts due to banks Lease liabilities Other financial liabilities 1 468 41 0 – 44 14 479 21 0 32 12 544 10,301 –2,288 2,850 – 409 5 10,459 –2,395 3,408 309 24 11,805 365 –76 0 – 8 43 324 12 0 8 17 361 Total 16,601 – 470 2,850 – 462 153 18,672 –3,207 3,408 350 156 19,379 1 Differences from the financial liabilities presented in note 39 (other financial liabilities and financial liabilities at fair value through profit or loss) in the amount of €518 million ( previous year: €426 million) are due to factors presented in other cash flow items, e. g. derivatives, contingent consideration from company acquisitions or operating financial liabilities. 2 Differences in cash changes from the total amount of net cash used in financing activities (€–6,224 million; previous year: €–2,250 million) are due primarily to interest payments in addition to payments relating to equity transactions. The interest payments reported in the cash flow statement also include payments that do not relate to liabilities from financing activities. As at the reporting date, there were no hedges attributable solely to the liabilities arising from financing activities. The effects on cash flows from hedges are presented in the “Other financing activities” cash flow item in the amount of €111 million. 42.1 Net cash from operating activities At €9,993 million, net cash from operating activities was €2,294 million higher than in the prior-year period (€7,699 mil- lion). Income taxes paid saw an increase of €569 million to a total of €1,323 million. The cash outflow from the change in working capital amounted to €430 million (previous year: €404 million). Non-cash income and expenses are as follows: Non-cash income and expense € m Expense from the remeasurement of assets Income from the remeasurement of liabilities Income (–) / expense (+) on asset disposals Staff costs relating to equity-settled share-based payments Result from investments accounted for using the equity method Other Non-cash income (–) and expenses (+) 2020 176 –176 –3 73 34 28 132 2021 176 –198 – 4 79 –32 1 22 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 133 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 availabil- ity), 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 2021, the Group had central liquidity reserves of €5.6 billion (previous year: €5.9 billion), consisting of central financial investments amounting to €3.6 billion plus a syndicated credit facility of €2 billion. 42.2 Net cash used in investing activities Net cash used in investing activities increased from €3,640 mil- lion to €4,824 million. Cash paid to acquire property, plant and equipment and intangible assets increased by €814 million to €3,736 million. Investing activities focused on, amongst other things, the ongoing expansion and renewal of the road vehicle and air fleet. The purchase of money market funds in the amount of €950 million led to, amongst other things, cash paid to acquire current financial assets totalling €1,508 million (previous year: €933 million). 42.3 Net cash used in financing activities At €6,224 million, net cash used in financing activities was €3,974 million higher than the prior-year figure (€2,250 million). Share buy-backs led to cash paid to acquire treasury shares in the amount of €1,115 million. The dividend payment to the share- holders also increased, rising by €251 million to €1,673 million. For further details on the cash flow statement and free cash flow, see the  Combined management report. Other disclosures 43 Risks and financial instruments of the Group 43.1 Risk management As a result of its operating activities, the Group is exposed to 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 exclu- sively to mitigate non-derivative financial risks, and fluctuations in their fair value should not be assessed separately from the underlying transaction. The Group’s internal risk guidelines govern the universe of 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 relation- ships. 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 and the hedging instruments de- ployed to mitigate them. Financial instruments are accounted for and measured in accordance with IFRS 9. The Group be- gan to apply the IFRS 9 hedge accounting requirements as at 1 January 2020. Disclosures regarding risks associated with the Group’s defined benefit retirement plans and their mitigation can be found in  note 37.5. Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 134 The maturity structure of non-derivative financial liabilities within the scope of IFRS 7 based on cash flows is as follows: Maturity structure of financial liabilities € m As at 31 December 2021 Non-current financial liabilities 1 Non-current lease liabilities Other non-current financial liabilities Non-current financial liabilities Current financial liabilities Current lease liabilities Trade payables Other current financial liabilities Current financial liabilities As at 31 December 2020 Non-current financial liabilities 1 Non-current lease liabilities Other non-current financial liabilities Non-current financial liabilities Current financial liabilities Current lease liabilities Trade payables Other current financial liabilities Current financial liabilities 1 The convertible bond 2025 is contained in the “More than 3 years to 4 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 745 1,993 8 2,746 679 1,833 10 2,522 798 1,603 7 2,408 656 1,491 8 2,155 1,076 1,350 6 2,432 939 1,151 7 2,097 1,327 1,122 4 2,453 1,165 949 6 2,120 3,155 5,754 5 8,914 4,355 5,050 15 9,420 74 0 0 74 1,321 2,355 9,556 339 13,571 89 0 0 89 1,428 2,198 7,309 348 11,283 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 135 The maturity structure of the derivative financial instruments based on cash flows is as follows: Maturity structure of derivative financial instruments € m As at 31 December 2021 Derivative receivables – gross settlement Cash outflows Cash inflows Net settlement Cash inflows Derivative liabilities – gross settlement Cash outflows Cash inflows Net settlement Cash outflows As at 31 December 2020 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 –15 16 –20 21 –34 35 –26 26 –1 1 –19 21 – 6 7 –25 25 –2,944 3,008 8 –1,195 1,183 0 –2,167 2,191 0 –2,094 2,054 –11 – 4 4 –1 1 – 6 7 –1 1 –16 16 –3 3 The contract terms stipulate how the parties must meet their obligations arising from derivative financial instruments, either by net or by 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: On-balance-sheet currency risks arise from the meas- urement and settlement of recognised foreign currency items if the exchange rate on the measurement or settlement date differs from the rate at initial recognition. The resulting foreign exchange differences directly impact profit or loss. In order to mitigate this impact as far as possible, all significant on-bal- ance-sheet currency risks within the Group are centralised in Deutsche  Post AG’s in-house bank function. The centralised cur- rency risks are aggregated by Corporate Treasury to calculate a net position per currency and hedged externally based on val- ue-at-risk limits. The currency-related value at risk (95 % / one- month holding period) for the portfolio totalled €5 million (pre- vious year: €4 million) at the reporting date; the limit is currently a maximum of €5 million. The notional amount of the currency forwards and currency swaps used to manage on-balance-sheet currency risks amounted to €4,078 million at the reporting date (previous year: €3,562 million); the fair value was €46 million (previous year: €–16 million). Hedge accounting was not applied. Derivatives are accounted for as trading derivatives (free-stand- ing derivatives). Currency risks arise from planned foreign currency trans- actions if the future transactions are settled at exchange rates that differ from the originally projected rates. These currency risks are also captured centrally in Corporate Treasury. Currency risks from planned transactions and transactions with existing contracts are only hedged in selected cases. The relevant hedged items and derivatives used for hedging purposes are accounted for using cash flow hedge accounting,  note 43.3. Currency risks also result from translating assets and liabil- ities of foreign operations into the Group’s currency (translation risk). No translation risks were hedged at the reporting date. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 136 Currency forwards and currency swaps in a notional amount of €4,270 million (previous year: €4,503 million) were outstanding at the reporting date. The corresponding fair value was €49 million (previous year: €–24 million). Of the unrealised gains or losses from currency derivatives recognised in equity as at 31 December 2021, €4 million (previ- ous year: €–7 million) is expected to be recognised in income in the course of the following year. 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 cal- culation (95 % confidence / one-month holding period). It is as- sumed that the portfolio as at the reporting date is representative for the full year. 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. Deutsche  Post AG determines monthly exchange rates and guarantees these to the Group companies. Exchange rate-re- lated changes therefore have no effect on the profit or loss and equity of the Group companies. Where 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. The following table presents currency-related effects on value at risk: Risk data on currency risk € m Profit or loss effects Equity effects Profit or loss effects Equity effects 2020 2021 Primary financial instruments and free-standing derivatives Derivative instruments (cash flow hedges) Total value at risk 1 4 5 5 7 4 6 1 The total amount is lower than the sum of the individual amounts, owing to interdependencies. INTEREST RATE RISK AND INTEREST RATE MANAGEMENT No interest rate hedging instruments were recognised as at the reporting date. The proportion of financial liabilities with short-  note 39, amounts to 16 % (previous year: term interest lock-ins, 17 %) of the total financial liabilities as at the reporting date. The effect of potential interest rate changes on the Group’s financial position remains insignificant. MARKET RISK 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. As the impact of the related fuel surcharges is delayed by one to two months, earnings may be affected temporarily if there are sig- nificant short-term fuel price variations. The remaining fuel price risk is partly hedged with swap transactions in the notional amount of €13 million (previous year: €45 million) and a fair value of €7 million (previous year: €–7 million) running until the end of 2022. A 10 % increase in the commodity prices underlying the de- rivatives as at the reporting date would therefore have increased fair values and equity by €2 million (previous year: €4 million). A corresponding decline in commodity prices would have had the opposite effect. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 137 CREDIT RISK Credit risk arises for the Group from operating activities and from financial transactions. The aggregate carrying amount of finan- cial assets represents the maximum default risk. In an effort to minimise credit risk from operating activities and financial transactions, counterparties are assigned individ- ual limits, the utilisation of which is regularly monitored. The Group’s heterogeneous customer structure means that there is no risk concentration. Financial transactions are only entered into with prime-rated counterparties. A test is performed at the reporting dates to establish whether an impairment loss needs to be charged on financial assets and the positive fair values of derivatives due to changes in credit quality. This was not the case for any of the counterparties as at 31 December 2021. The credit risk of financial assets arising from operations is managed by the divisions. As a rule, the expected credit loss associated with financial assets must be determined. Based on the expected credit loss model (impairment model), a loss allowance must be anticipated for the possible credit loss,  note 7. The impairment model is applicable to non-current and current debt instruments recognised at amortised cost and to lease receivables. Debt instruments comprise mainly deposits, collateral provided and loans to third parties. The gross amounts of financial assets subject to the impair- ment model are presented in the following table: Stage 1 – 12-month ECL € m Gross carrying amount Loss allowance Net carrying amount Balance as at 1 January 2021 913 –36 877 Newly originated financial assets Impairment loss Disposal Reversal of loss allowance Increase in loss allowance Currency translation differences Changes in consolidated group / Reclassifications Balance as at 31 December 2021 Balance as at 1 January 2020 Newly originated financial assets Impairment loss Disposal Reversal of loss allowance Increase in loss allowance Currency translation differences Changes in consolidated group / Reclassifications Balance as at 31 December 2020 1,940 –13 –719 29 410 2,560 1,165 623 –3 – 832 – 43 3 32 – 46 – 50 –28 24 –32 1,940 –13 –719 32 – 46 29 410 2,510 1,137 623 –3 – 832 24 –32 – 43 3 913 –36 877 No cash flows from debt instruments were modified in the finan- cial year and no changes were made to the model for determin- ing risk parameters. The inputs 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. There were no indications at the reporting date of any poor performance of the debt instruments and lease receivables. There was no reclassification between the stages in the financial year. Trade receivables from customer relationships amounting to €11,683 million were due within one year at the reporting date (previous year: €8,985 million). 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 € m Gross receivables Balance as at 1 January Changes Balance as at 31 December Loss allowances Balance as at 1 January Changes Balance as at 31 December Carrying amount as at 31 December 2020 2021 8,728 485 9,213 –167 – 61 –228 8,985 9,213 2,758 11,971 –228 – 60 –288 11,683 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 138 The following table provides an overview of loss rates by age band that were used in the Group for the financial year under review: for doubtful accounts) 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 2021 amounted to €90 million (previous year: €255 million). 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 2020 0.1 – 0.3 1.0 – 4.0 2021 0.1 – 0.2 1.4 –3.1 6.0 –31.0 8.0 –25.0 42.0 –76.0 40.0 –75.0 80.0 80.0 –100.0 Trade receivables are derecognised when a reasonable assess- ment indicates they are no longer recoverable. The relevant indi- cators include a delay in payment of more than 360 days. In the 2021 financial year, there were factoring agreements in place that obliged the banks to purchase existing and future trade receivables. The banks’ purchase obligations were limited to a maximum portfolio of receivables of €616 million (previous year: €672 million). Deutsche  Post  DHL Group can decide at its discretion whether, and to what extent, the revolving notional volume is utilised. The risks relevant to the derecognition of the receivables include credit risk and the risk of delayed payment (late payment risk). Credit risk represents primarily all the risks and rewards associated with ownership of the receivables. This risk is trans- ferred in full to the bank against payment of a fixed fee for doubt- ful accounts. A significant late payment risk does not exist. All of the receivables were therefore derecognised. In the 2021 financial year, the Group recognised programme fees (interest, allowances 43.2 Collateral Collateral provided € m Non-current collateral of which for assets for the settlement of residential building loans for sureties paid Current collateral of which for restricted cash for sureties paid 2020 147 46 101 16 0 16 2021 148 38 110 200 100 100 The collateral provided relates primarily to sureties paid and restricted cash. 43.3 Derivative financial instruments FAIR VALUE HEDGES There were no fair value hedges as at 31 December 2021, as in the previous year. At the reporting date, unwinding interest rate swaps resulted in carrying amount adjustments of €2 million (previous year: €6 million) which are included in current financial liabilities in the amount of €2 million (previous year: €0 million). The remaining carrying amount adjustments will be amortised using the effective interest method over the remaining term of the liabilities (2022) and will reduce interest expense. CASH FLOW HEDGES The Group uses currency forwards and currency swaps to hedge the cash flow risk from future foreign currency operating rev- enue and expenses. The notional amount of these currency forwards and currency swaps amounted to €192 million at the reporting date (previous year: €942 million); the fair value was €3 million (previous year: €–8 million). The hedged items will have an impact on cash flow by 2027. In addition, cash flow hedges were used to hedge fuel price risk with swap transactions in the notional amount of €13 million (previous year: €45 million) and a fair value of €7 million (pre- vious year: €–7 million) running until the end of 2022. Only the product price component of the fuel price was designated as the hedged item; based on official statistics, the product price component accounted, on average, for 90 % of overall fuel price fluctuations in the past. The gains and losses on open hedging instruments recog- nised in equity at the reporting date amounted to €10 million (previous year: €–14 million). No ineffective portions of hedges were recognised. In the financial year under review, €3 million in realised gains from cash flow hedges for fuel price risk were recognised in materials expense. 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: Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 139 Notional volume of hedging instruments € m 31 December 2021 Hedges of currency risk Currency forwards buy EUR / CZK Currency forwards sell EUR / USD Currency forwards buy USD / CNY 31 December 2020 Hedges of currency risk Currency forwards buy USD / HKD Currency forwards sell EUR / CZK Currency forwards buy USD / TWD As in the previous year, carrying amounts of derivative assets amounting to €11 million (previous year: €1 million) and deriva- tive liabilities amounting to €–1 million (previous year: €–16 mil- lion) included in cash flow hedges did not result in ineffectiveness within the period. This is because the changes in the fair value of the hedged items (€–30 million) and hedging transactions (€30 million) offset each other (previous year: €21 million and €–21 million). Total notional volume Up to 1 year 1 year to 5 years More than 5 years Average hedge rate € Remaining term 132 21 16 378 –199 103 65 21 16 378 – 89 103 66 1 –110 26.68 1.13 6.49 7.76 26.53 28.41 NET INVESTMENT HEDGES Currency risks resulting from the translation of foreign oper- ations were not hedged in 2021. At the reporting date, there was still a positive amount of €25 million from terminated net investment hedges in the currency translation reserve as in the previous year. 43.4 Additional disclosures on the financial instruments used in the Group The Group classifies financial instruments based on the relevant balance sheet items. The following table reconciles the finan- cial instruments to the categories and their fair values as at the reporting date: Cash flow hedging reserve € m Balance as at 1 January Gains and losses on effective hedges Reclassification due to the recognition of hedged items Balance as at 31 December 1 1 Excluding deferred taxes. OCI I Effective portion of the hedge OCI II Cost of hedging –24 29 7 12 4 –1 – 5 –2 2020 –2 11 –29 –20 2021 –20 28 2 10 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 140 Reconciliation of carrying amounts in accordance with IFRS 9 and level classification € m 31 December 2020 31 December 2021 Level classification financial instruments within the scope of IFRS 9 Level classification financial instruments within the scope of IFRS 9 Financial instruments within the scope of IFRS 9 Other financial instruments outside IFRS 9 1 Carrying amount IFRS 7 fair value Level 1 Level 2 Level 3 Carrying amount Financial instruments within the scope of IFRS 9 Other financial instruments outside IFRS 9 1 IFRS 7 fair value Level 1 Level 2 Level 3 ASSETS Debt instruments measured at cost Non-current financial assets Current financial assets 2 Other current assets 2 Trade receivables 2 Cash and cash equivalents 2 Equity instruments at fair value through other comprehensive income Non-current financial assets Reserve for equity instruments without recycling Current financial assets Reserve for equity instruments without recycling 106 81 25 14,344 14,238 466 81 330 8,985 4,482 29 29 29 385 56 330 8,985 4,482 29 29 29 473 473 n. a. n. a. n. a. n. a. 29 29 29 29 29 29 Debt instruments and equity instruments at fair value through profit or loss 1,485 1,485 1,485 1,461 Non-current financial assets Debt instruments Equity instruments Fair value option Derivatives designated as hedges Current financial assets Debt instruments Trading derivatives Derivatives designated as hedges Not IFRS 7 Other non-current assets Other current assets TOTAL ASSETS 251 249 1 1 1,234 1,211 22 1 251 249 1 1 1,234 1,211 22 1 2,645 160 2,485 250 249 1 251 249 1 1 1,234 1,211 1,211 1,211 22 1 n. a. n. a. n. a. 392 392 24 1 1 23 22 1 567 410 157 17,724 17,157 834 1,257 419 11,683 3,531 46 46 46 424 1,100 419 11,683 3,531 46 46 46 846 846 n. a. n. a. n. a. n. a. 46 46 46 46 46 46 2,141 2,141 2,141 2,072 310 309 1 0 1,831 1,762 58 11 310 309 1 0 1,831 1,762 58 11 3,756 587 3,169 310 309 1 310 309 1 0 1,831 1,762 1,762 1,762 58 11 n. a. n. a. n. a. 436 436 69 0 0 69 58 11 18,503 15,752 106 1,987 1,490 416 23,667 19,344 567 3,033 2,118 505 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 141 31 December 2020 31 December 2021 Level classification financial instruments within the scope of IFRS 9 Level classification financial instruments within the scope of IFRS 9 Financial instruments within the scope of IFRS 9 Other financial instruments outside IFRS 9 1 IFRS 7 fair value Level 1 Level 2 Level 3 10,459 8,638 1,821 16,281 7,212 39 1,373 7,309 348 54 1 1 53 38 15 593 554 39 54 1 1 53 38 15 7,861 7,268 7,822 7,268 39 n. a. n. a. n. a. 54 1 1 53 38 15 n. a. n. a. n. a. Carrying amount 26,740 15,850 39 3,194 7,309 348 54 1 1 53 38 15 5,076 289 4,787 Financial instruments within the scope of IFRS 9 Other financial instruments outside IFRS 9 1 IFRS 7 fair value Level 1 Level 2 Level 3 11,805 9,841 1,964 18,048 6,772 30 1,307 9,556 383 13 1 1 12 12 0 653 623 30 13 1 1 12 12 0 7,343 6,689 7,313 6,689 30 n. a. n. a. n. a. 13 1 1 12 12 0 n. a. n. a. n. a. Carrying amount 29,853 16,613 30 3,271 9,556 383 13 1 1 12 12 0 6,029 274 5,755 EQUITY AND LIABILITIES Liabilities measured at cost Non-current financial liabilities 3 Other non-current liabilities Current financial liabilities 2 Trade payables 2 Other current liabilities 2 Liabilities at fair value through profit or loss Non-current financial liabilities 3 Earn-out obligation Trading derivatives Derivatives designated as hedges Current financial liabilities Earn-out obligation Trading derivatives Derivatives designated as hedges Not IFRS 7 Other non-current liabilities Other current liabilities TOTAL EQUITY AND LIABILITIES 31,870 16,335 10,459 7,915 7,268 647 35,895 18,061 11,805 7,356 6,689 666 1 Relates to lease receivables or liabilities. 2 The fair value is assumed to be equal to the carrying amount (IFRS 7.29a). Levels are not disclosed for these financial instruments. 3 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. The bonds are therefore 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 €1,200 million as at the reporting date. The fair value of the debt component at the reporting date was €1,002 million. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 142 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, quoted market prices for similar instruments or recognised valuation models are used to deter- mine fair value. IFRS 13 requires financial assets to be assigned to the ap- propriate level of the fair value hierarchy: Level 1 comprises 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. In addition to financial assets and financial liabilities meas- ured at amortised cost, commodity, interest rate and currency derivatives are reported under Level 2. The fair values of assets measured at amortised cost are determined using the multiplier method, amongst other things. The fair values of the derivatives are measured on the basis of discounted expected future cash flows, taking into account forward rates for currencies, inter- est rates and commodities (market approach). For this purpose, price quotations observable in the market (exchange rates, interest rates and commodity prices) are imported from stan- dard market information platforms into the treasury management system. The price quotations reflect actual transactions involving similar instruments on an active market. All significant inputs used to measure derivatives are observable in the market. There were no Level 3 financial assets or liabilities to report. As in the previous year, no financial instruments were trans- ferred between levels in the 2021 financial year. The following table documents the net gains and losses of the categories of financial instruments: Net gains and losses by measurement category € m 2020 2021 Net gains / losses on financial assets Debt instruments at amortised cost 1 Net gains (+) / losses (–) recognised in profit or loss –176 –195 Debt instruments at fair value through profit or loss (FVTPL) Net gains (+) / losses (–) recognised in profit or loss 34 25 Net gains / losses on financial liabilities Debt instruments at fair value through profit or loss (FVTPL) Net gains (+) / losses (–) recognised in the income statement – 41 –32 Debt instruments at amortised cost Net gains (+) / losses (–) recognised in the income statement 0 0 1 Only effects from impairment losses are listed. The net gains and losses mainly include the effects of fair value measurement, impairment and disposals of financial in- struments. Dividends and interest are not taken into account for the financial instruments measured at fair value through profit or loss. Interest income and expenses and expenses from commission agreements relating to financial instruments mea- sured at amortised cost are recognised separately in the income statement. The following tables show the impact of netting agreements based on master netting arrangements or similar agreements on financial assets and financial liabilities as at the reporting date: Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 143 Offsetting – assets € m As at 31 December 2021 Derivative financial assets Trade receivables Funds As at 31 December 2020 Derivative financial assets Trade receivables Funds Offsetting – liabilities € m As at 31 December 2021 Derivative financial liabilities Trade payables Funds As at 31 December 2020 Derivative financial liabilities Trade payables Funds Gross amount of assets Gross amount of liabilities offset Recognised net amount of assets offset Liabilities that do not meet offsetting criteria Collateral received Total Assets and liabilities not offset in the balance sheet 69 11,793 550 24 9,052 715 0 110 462 0 67 619 69 11,683 88 24 8,985 96 12 12 0 18 0 0 0 24 0 0 15 0 57 11,647 88 6 8,970 96 Gross amount of liabilities Gross amount of assets offset Recognised net amount of liabilities offset Assets that do not meet offsetting criteria Collateral received Total Assets and liabilities not offset in the balance sheet 13 9,666 462 54 7,376 619 0 110 462 0 67 619 13 9,556 0 54 7,309 0 12 18 0 18 0 0 0 67 0 0 0 0 1 9,471 0 36 7,309 0 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 144 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 trans- actions. This agreement provides for a conditional right of offset, resulting in the recognition of the gross amount of the financial derivative transactions at the reporting date. The conditional right of offset is presented in the tables. Settlement processes arising from services related to postal deliveries are subject to the Universal Postal Convention and the Interconnect Remuneration Agreement – Europe (IRA-E). These agreements, particularly the settlement conditions, are binding on all public postal operators in respect of 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 offset exists in the normal course of business. The tables show the receivables and payables before and after offsetting. 44 Contingent liabilities and other financial obligations In addition to provisions and liabilities, the Group has contingent liabilities and other financial obligations. The contingent liabili- ties are broken down as follows: Contingent liabilities € m Guarantee obligations Warranties Liabilities from litigation risks Other contingent liabilities Total 2020 96 13 183 440 732 2021 132 8 213 470 823 Other contingent liabilities also include a potential obligation to make settlement payments in the United States, which had arisen in 2014 mainly as a result of a change in the estimated settlement payment obligations assumed in the context of the restructuring measures in the United States, and other tax-related obligations. Other financial obligations such as the purchase obligation for investments in non-current assets amounted to €1,190 mil- lion (previous year: €1,582 million). They relate primarily to the delivery of additional cargo aircraft from the contract concluded with Boeing in December 2020. 45 Litigation Many of the postal services rendered by Deutsche  Post AG and its subsidiaries (particularly the Post & Parcel division) are sub- ject to sector-specific regulation by the German federal network agency (Bundesnetzagentur). The Bundesnetzagentur approves or reviews prices, formulates the terms of downstream access, has special supervisory powers to combat market abuse and guarantees the provision of universal postal services. This general regulatory risk could lead to a decline in revenue and earnings in the event of negative decisions. Revenue and earnings risk can arise in particular from the price cap procedure used by the German federal net- work agency to determine the rates for individual pieces of letter mail. The approval of the rates approved in the price cap procedure for the period from 1 July 2019 to 31 Decem- ber 2021 was issued by the German federal network agency on 12 December 2019. In its capacity as a consumer of postal services, a Ger- man courier, express and parcel (CEP) association and other customers and providers of postal services filed an action with the Cologne Administrative Court against the pricing approvals granted on 12 December 2019. On 4 January 2021, the Cologne Administrative Court ruled that the CEP association’s action suspends the effect of the German federal network agency’s decision to raise prices for standard, compact, large format (Großbrief) and extra-large format (Maxibrief) letters within Germany. The ruling only applies to the CEP association. The proceedings in the main action are still pending. Moreover, the aforementioned CEP association had pre- viously filed an action against the pricing approvals granted on 4 December 2015 for the years from 2016 to 2018. The German Federal Administrative Court ruled on that action on 27 May 2020. The only one of the approvals that the court deemed unlawful concerned the increase in the price of a standard domestic letter to €0.70. The ruling is only directly applicable to the plaintiff. The amount in dispute was set by the German Federal Administrative Court at a mid-range, four-digit euro amount. To date, the plaintiff had not asserted any claims for a refund of postal charges for the period from 2016 to 2018. In the grounds for its decision, the court stated that the pricing approval in question was unlawful because the method Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 145 used to calculate the allowable profit margin under the amended provisions of the 2015 Post­Entgeltregulierungsverordnung (PEntgV – Postal Rate Regulation Act) was not in compliance with the provisions of the Postgesetz (PostG – German Postal Act) regarding the authority to issue statutory instruments. The German government eliminated this formal deficiency estab- lished by the German Federal Administrative Court by way of an amendment to the Postgesetz (German Postal Act) entering into force in March 2021 in addition to other amendments. As a result, previous regulatory practice can continue by and large. Possible negative effects on Deutsche  Post of these court rulings and the proceedings underway on pricing approvals by the German federal network agency cannot be ruled out. 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 sub- ject to individually 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 at the tax court with jurisdiction in this matter,  note 44. On 30 June 2014, DHL Express France received a state- ment of objections from the French competition authority al- leging 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). On 22 September 2021, the Cour de Cassation decided to reject DHL Express France’s appeal and all other appeals. All legal remedies have therefore been exhausted and the case is considered closed. In view of the ongoing or announced legal proceedings men- tioned above, no further details are given on their presentation in the financial statements. 46 Share-based payment Assumptions regarding the price of Deutsche  Post AG’s shares and assumptions regarding employee fluctuation are taken into account when measuring the value of share-based payments for executives. All assumptions are reviewed on a quarterly basis. The staff costs are recognised pro rata in profit or loss to reflect the services rendered as consideration during the vesting period (lock-up period). In the financial year, a total of €184 million (previous year: €132 million) was recognised for share-based payments, €105 million (previous year: €59 million) of which were cash-settled and €79 million (previous year: €73 million) of which were equity-settled. 46.1 Share-based payment for executives (Share Matching Scheme) Under the share-based payment system for executives (Share Matching Scheme), certain executives receive part of their var- iable remuneration for the financial year in the form of shares of Deutsche  Post AG in the following year (deferred incentive shares). All Group executives can specify an increased equity component individually by converting a further portion of their variable 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 arrangements are entered into each year, with 1 December 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 instru- ments and the debt and equity components must be measured separately. However, in accordance with IFRS 2.37, only the debt component is measured due to the provisions of the Share Matching Scheme. The investment shares are therefore treated as cash-settled share-based payments. Of the expenses under the Share Matching Scheme, €50 million (previous year: €46 million) was attributable to equity-settled share-based payments, and €54 million related to cash-settled share-based payments for investment shares (previous year: €35 million), all of which were unvested as at 31 December 2021. Additional information on granting and settlement of these rights can be found in  note 33 and 34. Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 146 Share Matching Scheme Grant date of incentive shares and associated matching shares 1 December 2016 1 December 2017 – 1 December 2019 1 December 2020 1 December 2021 Grant date of matching shares awarded for investment shares 1 April 2017 1 April 2018 1 March 2019 1 April 2020 1 April 2021 1 April 2022 Term End of term months 52 52 52 52 52 52 March 2021 March 2022 June 2023 March 2024 March 2025 March 2026 2016 tranche 2017 tranche Alternative programme 2018 tranche 2019 tranche 2020 tranche 2021 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; it will be determined on 1 April 2022. 2 Expected number. € € thousands thousands thousands thousands 29.04 31.77 320 288 901 1,148 39.26 34.97 256 230 864 n. a. 27.30 n. a. n. a. 854 33.29 23.83 369 332 1,343 40.72 46.52 246 222 1,007 53.55 61.00 1 194 2 174 793 46.2 Long-Term Incentive Plan (2006 LTIP) for members of the Board of Management Since the 2006 financial year, the company has granted mem- bers of the Board of Management cash remuneration linked to the company’s long-term share price performance through the issue of stock appreciation rights (SAR s) as part of a Long- Term Incentive Plan (LTIP). Participation in the LTIP requires Board of Management members to make a personal invest- ment of 10 % of their annual base salary by the grant date of each tranche, primarily in shares. The SAR s granted can be fully or partly exercised after the expiration of a four-year lock-up period at the earliest, provided absolute or relative performance targets have been achieved at the end of this lock-up period. After expiration of the lock-up 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 determined in accordance with four (absolute) performance targets based on the share price and two (relative) performance targets based on a benchmark index. One-sixth of the SAR s granted are earned each time the closing price of Deutsche  Post shares exceeds the issue price by at least 10, 15, 20 or 25 % at the end of the waiting period (absolute performance targets). Both relative performance targets are tied to the performance of the shares in relation to the STOXX Europe 600 Index (SXXP; ISIN EU0009658202). They are met if the share price equals the index performance or if it outperforms the index by more than 10 %. Performance is determined by comparing the average price of Deutsche  Post shares and the average index value dur- ing a reference 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 lock-up period. The average (closing) price is cal- culated as the average closing price of Deutsche  Post shares in Deutsche Börse AG’s Xetra trading system. If absolute or relative performance targets are not met by the end of the lock-up pe- riod, the SAR s attributable to them will expire without replace- ment or compensation. Each SAR exercised entitles the Board of Management member to receive a cash settlement equal to the difference between the average closing price of Deutsche  Post shares for the five trading days preceding the exercise date and the exercise price of the SAR. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 147 LTIP 2006 2016 tranche 2017 tranche 2018 tranche 2019 tranche 2020 tranche 2021 tranche The Board of Management members received a total of 862,272 SAR s (previous year: 816,498 SAR s) with a total value, at the time of issue, of €8.3 million (previous year: €8.0 million). A stochastic simulation model is used to determine a fair value for the SAR s from the 2006 LTIP. The result in the 2021 financial year was an expense of €52 million (previous year: expense of €24 million) and a provision at the reporting date of €44 million (previous year: €34 million). The provision for the rights exercisable by the Board of Management amounted to €14 million at the reporting date (previous year: €20 million). For further disclosures on share-based payment for mem- bers of the Board of Management, see  note 47.2. 46.3 Performance Share Plan (PSP) for executives The Annual General Meeting on 27 May 2014 resolved to intro- duce the Performance Share Plan (PSP) for executives. Under the PSP, shares are issued to participants at the end of the wait- ing period. The granting of the shares at the end of the waiting period is linked to the achievement of demanding performance targets. The performance targets under the PSP are identical to the performance targets under the LTIP for members of the Board of Management. Issue date Issue price € Waiting period expires 1 September 2016 1 September 2017 1 September 2018 1 September 2019 1 September 2020 1 September 2021 28.18 34.72 31.08 28.88 37.83 58.68 31 August 2020 31 August 2021 31 August 2022 31 August 2023 31 August 2024 31 August 2025 Performance Share Units (PSUs) were issued to selected ex- ecutives 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 Decem- ber 2021, a total of €25 million (previous year: €26 million) has been appropriated 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). Fu- ture dividends were taken into account, based on a moderate increase in dividend distributions over the respective measure- ment period. The average remaining maturity of the outstanding PSUs as at 31 December 2021 was 24 months. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 148 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 Number Rights outstanding at 1 January 2021 Rights granted Rights lapsed Rights settled at the end of the waiting period Rights outstanding at 31 December 2021 46.4 Employee Share Plan (ESP) for executives The Employee Share Plan (ESP) was introduced for another se- lected group of executives starting on 1 September 2021. Partici- pation in the ESP is voluntary. Executives participating in the ESP can acquire shares of Deutsche  Post AG at a discount of 25 % from the market price, up to a cap of €10,000 or €15,000, depending on their level. The ESP is offered quarterly. Prior to every savings period, the participating executives can choose the share of their remuneration they wish to invest in the ESP during the upcoming three-month savings period. At the beginning of the following quarter, executives receive shares at a discount of 25 % from the market price. The shares acquired under the ESP are subject to a two- year lock-up period. In the consolidated financial statements as at 31 Decem- ber 2021, €3 million was appropriated to capital reserves for the purposes of the ESP, with an equal amount recognised in staff costs. 2017 tranche 2018 tranche 2019 tranche 2020 tranche 2021 tranche 1 September 2017 1 September 2018 1 September 2019 1 September 2020 1 September 2021 €34.72 €31.08 €28.88 €37.83 58.68 31 August 2021 31 August 2022 31 August 2023 31 August 2024 31 August 2025 – 0.48 % 3.31 % 23.03 % 16.34 % 2.78 % – 0.39 % 3.70 % 22.39 % 16.29 % 2.66 % – 0.90 % 3.98 % 21.38 % 14.79 % 2.21 % – 0.72 % 3.57 % 24.89 % 16.62 % 3.05 % 2,631,486 3,042,048 3,417,264 2,645,394 0 47,400 2,584,086 0 89,646 0 0 90,600 0 0 49,200 0 – 0.80 % 3.07 % 26.49 % 17.33 % 3.25 % 0 1,774,848 4,728 0 0 2,952,402 3,326,664 2,596,194 1,770,120 47 Related-party disclosures 47.1 Related-party disclosures (companies and Federal Republic of Germany) All companies that are controlled by the Group or with which a joint arrangement exists, or over which the Group can exercise significant influence, are recorded in the  list of shareholdings. 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 author- ities and other government agencies as independent individual customers. The services provided for these customers are insig- nificant 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 pur- chased shares of Deutsche  Post AG from the Federal Republic in several stages since 1997 and executed various capital mar- ket transactions using these shares. KfW’s current interest in Deutsche  Post AG’s share capital is 20.49 %. Deutsche  Post AG is thus considered to be an associate of the Federal Republic. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 149 RELATIONSHIPS WITH THE BUNDESANSTALT FÜR POST UND RELATIONSHIPS WITH THE GERMAN FEDERAL TELEKOMMUNIKATION (BANST PT) 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 insurance fund, the recreation programme, the Postbeamtenversorgungskasse (PVK – Postal civil servant pension fund), the Versorgungsanstalt der Deutschen Bundespost (VAP – Deutsche Bundespost institution for supplementary re- tirement 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 2021, Deutsche  Post AG was invoiced for €142 million (previous year: €143 million) in instalment payments relating to services pro- vided by the BAnst PT. Further disclosures on the PVK and the VAP can be found in  note 7 and 37. RELATIONSHIPS WITH THE GERMAN FEDERAL MINISTRY OF FINANCE 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 trans- ferring them, initially for 6 months, and are then transferred per- manently 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 2021, this initiative resulted in 8 permanent transfers (previ- ous year: 39) and 4 secondments with the aim of a permanent transfer in 2022 (previous year: 5). EMPLOYMENT AGENCY Deutsche  Post AG and the German Federal Employment Agency entered into an agreement dated 12 October 2009 relating to the transfer of Deutsche  Post AG civil servants to the Federal Employment Agency. In 2021, this initiative resulted in 1 perma- nent transfer (previous year: 4). RELATIONSHIPS WITH DEUTSCHE BAHN AG AND ITS SUBSIDIARIES Deutsche Bahn AG is wholly owned by the Federal Republic. Ow- ing to this control relationship, Deutsche Bahn AG is a related party to Deutsche  Post AG. Deutsche  Post  DHL Group has vari- ous 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 €1,653 million (previous year: €1,563 million) – which can be offset as plan assets – of which Deutsche  Post Pensions-Treuhand GmbH & Co. KG, Deutsche  Post Altersvorsorge Sicherung e. V. & Co. Objekt Gronau KG and Deutsche  Post Grundstücks-Vermietungsgesellschaft beta mbH Objekt Leipzig KG are the legal owners, is let almost exclusively € m Trade receivables Loans Receivables from in-house banking Financial liabilities Trade payables Income 1 Expenses 2 to the Group via Deutsche  Post Immobilien GmbH. These ar- rangements led to lease liabilities of €471 million as at 31 De- cember 2021 (previous year: €494 million). In the 2021 financial year, Deutsche  Post Immobilien GmbH extinguished €25 million (previous year: €24 million) in lease liabilities and paid €15 million (previous year: €16 million) in interest. Deutsche  Post Pensions- Treuhand GmbH & Co. KG owns 100 % of Deutsche  Post Pensions- fonds AG. Further disclosures on pension funds can be found in  note 7 and 37. RELATIONSHIPS WITH UNCONSOLIDATED COMPANIES, INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD AND JOINT OPERATIONS In addition to the consolidated subsidiaries, the Group has dir- ect 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. Transactions were conducted in the 2021 financial year with major related parties, resulting in the following items in the consolidated financial statements: Investments accounted for using the equity method Unconsolidated companies 2020 2021 2020 2021 5 1 0 0 3 8 1 2 1 0 0 5 11 1 3 1 0 3 2 0 15 5 0 0 9 6 2 10 1 Relates to revenue and other operating income. 2 Relates to materials expense, staff costs and other operating expenses. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 150 Deutsche  Post AG issued letters of commitment in the amount of €7 million (previous year: €4 million) for these companies. Of this amount, €1 million (previous year: €1 million) was attributable to investments accounted for using the equity method, €6 mil- lion (previous year: €1 million) to joint operations and €0 million (previous year: €2 million) to unconsolidated companies. 47.2 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 fam- ilies. Related parties are defined as the Board of Management, the Supervisory Board and the members of their families. There were no reportable transactions or legal transactions involving these related parties in the 2021 financial year. In particular, the company granted no loans to these related parties. The remuneration of key management personnel of the Group requiring disclosure under IAS 24 comprises the remu- neration of the active members of the Board of Management and the Supervisory Board. The active members of the Board of Management and the Supervisory Board were remunerated as follows: € m Short-term employee benefits (excluding share-based payment) Post-employment benefits Termination benefits Share-based payment Total 2020 2021 15 3 0 19 37 18 4 0 45 67 The employee representatives on the Super visory Board em- ployed by the Group also receive their normal salaries for their work in the company in addition to the aforementioned bene- fits for their work on the Supervisory Board. 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 €42 million at the reporting date (previous year: €44 million). Starting in 2008, newly appointed Board of Management members began receiving a defined contribution pension com- mitment. This entails the company crediting an annual amount totalling 35 % of each Board of Management member’s base salary to a virtual pension account. This capital bears interest until eligibility to receive benefits begins. The pension benefit is paid out as capital in the amount of the accumulated pension balance. Pension eligibility is triggered at the earliest when re- tirement age is reached, in the event of invalidity during the term of office, or upon death. When eligible for the pension benefit, the beneficiary may choose an annuity option. The Chairman of the Board of Management is still entitled to a legacy commitment in the form of a direct pension based on his final salary. 47.3 Remuneration disclosures in accordance with the HGB BOARD OF MANAGEMENT REMUNERATION The remuneration paid to members of the Board of Management in the 2021 financial year totalled €15.3 million (previous year: €12.6 million). Non-performance-related components (fixed and fringe benefits) accounted for €8.6 million (previous year: €8.3 million). A total of €4.1 million (previous year: €3.9 million) was attributable to the annual bonus paid as a performance- related component along with €2.6 million from the 2019 medium- term component (previous year: €0.4 million from the 2018 medium-term component). An additional €4.1 million (pre- vious year: €3.9 million) of the annual bonus was transferred to the medium-term component in 2021 and will be paid out in 2024. The condition for that payout is that the EAC (EBIT after asset charge) sustainability target is met. In the financial year, the Board of Management members also received a total of 862,272 SAR s (previous year: 816,498 SAR s), which at the is- sue date were valued at €8.3 million (previous year: €8.0 million). FORMER MEMBERS OF THE BOARD OF MANAGEMENT Benefits paid to former members of the Board of Management or their surviving dependants amounted to €5.2 million (previous year: €8.9 million). The defined benefit obligation (DBO) for cur- rent pensions calculated under IFRS s was €92 million (previous year: €105 million). REMUNERATION OF THE SUPERVISORY BOARD The total remuneration of the Supervisory Board in the 2021 financial year amounted to €2.6 million; as in the prior year, €2.4 million of this amount was also attributable to a fixed com- ponent and €0.2 million to attendance allowances. Further information on the itemised remuneration of the Board of Management and the Supervisory Board can be found no later than at the time the Annual General Meeting is convened in the remuneration report published on the  company’s website. SHAREHOLDINGS OF THE BOARD OF MANAGEMENT AND SUPERVISORY BOARD As at 31 December 2021, shares held by the Board of Manage- ment 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 can be viewed on the  company’s website. Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 151 48 Auditing fee The fee for the auditing services provided by Pricewaterhouse- Coopers GmbH Wirtschaftsprüfungsgesellschaft amounted to €11 million in the 2021 financial year and was recognised as an expense. Auditing fee € m Audit services Other assurance services Tax advisory services 1 Other services 1 Total 1 Rounded below €1 million. 2021 10 1 0 0 11 The audit services category includes the fees for auditing the consolidated 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, support by auditors in connection with implementing new ac- counting requirements and the fees for voluntary audits beyond the statutory audit engagement, such as audits of the internal control system (ICS), are also reported in this category. Other assurance services related in particular to attestation reports relating to the internal control system. Tax advisory ser- vices were attributable in particular to support during tax audits conducted by the tax authorities. Other services were comprised mainly of general training sessions (workshops) in areas outside of accounting. 49 Exemptions under the HGB For the 2021 financial year, the following German subsidiaries have exercised the simplification options under Section 264(3) HGB or Section 264b HGB and, if applicable, Section 291 HGB: • Agheera GmbH • Albert Scheid GmbH • ALTBERG GmbH • Betreibergesellschaft Verteilzentrum GmbH • CSG 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 & Co. Logistikzentren KG • Deutsche  Post  DHL Express Holding GmbH • Deutsche  Post  DHL Real Estate Deutschland GmbH (formerly: Deutsche  Post  DHL Corporate Real Estate Management GmbH) • Deutsche  Post  DHL Research and Innovation GmbH • Deutsche  Post Dialog Solutions GmbH • Deutsche  Post Direkt GmbH • Deutsche  Post E-POST Solutions GmbH • Deutsche  Post Expansion GmbH • Deutsche  Post Fleet GmbH • Deutsche  Post Immobilien GmbH • Deutsche  Post InHaus Services GmbH • Deutsche  Post Investments GmbH • Deutsche  Post IT Services GmbH • Deutsche  Post IT Services (Berlin) GmbH • Deutsche  Post Mobility GmbH • Deutsche  Post Shop Essen GmbH • Deutsche  Post Shop Hannover GmbH • Deutsche  Post Shop München GmbH • Deutsche  Post Vermarktungs GmbH • Deutsche  Post Zahlungsdienste GmbH • DHL 2-Mann-Handling GmbH • DHL Airways GmbH • DHL Automotive GmbH • DHL Automotive Offenau GmbH • DHL Consulting GmbH • DHL Delivery GmbH • DHL Express Customer Service GmbH • DHL Express Germany GmbH • DHL Express Network Management GmbH • DHL FoodLogistics GmbH • DHL Freight Germany Holding GmbH • DHL Freight GmbH • DHL Global Event Logistics GmbH (formerly: DHL Trade Fairs & Events 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 Paket 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 Operations GmbH (formerly: DHL Fashion Retail Operations GmbH) • DHL Supply Chain VAS 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 Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF DEUTSCHE POST AG 152 RESPONSIBILITY STATEMENT 50 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 Conform- ity with the German Corporate Governance Code for the 2021 financial year required by Section 161 AktG. This Declaration of Conformity can be accessed on the  company’s website. 51 Significant events after the reporting date and other disclosures On 3 January 2022, Deutsche  Post  DHL Group sold the produc- tion rights and the complete ownership of the intangible assets for the production of StreetScooter electric vans as well as all shares in StreetScooter Japan K. K. and StreetScooter Schweiz for a purchase price of €100 million to ODIN Automotive S. à. r. L., Luxembourg. As part of the transaction, the Group acquired a non-controlling interest in the amount of 10 % in ODIN. The sale resulted in disposal gains of €88 million to be recognised for the 2022 financial year. As was decided at the beginning of 2020, StreetScooter GmbH, which remains within the Group, will con- tinue to serve as a supplier of vehicle parts and batteries for the Group and focus on maintaining and repairing the existing fleet. Beyond that, there were no reportable events after the RESPONSIBILITY STATEMENT To the best of our knowledge, and in accordance with the ap- plicable reporting principles, the consolidated financial state- ments 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, which is combined with the management report of Deutsche  Post AG, includes a fair review of the devel- opment 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, 18 February 2022 Deutsche  Post AG The Board of Management Dr Frank Appel Ken Allen Oscar de Bok Melanie Kreis reporting date. Dr Tobias Meyer Dr Thomas Ogilvie John Pearson Tim Scharwath Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT 153 INDEPENDENT AUDITOR’S REPORT To Deutsche  Post AG, Bonn Report on the Audit of the Consolidated Financial Statements and of the Group Management Report Audit opinions We have audited the consolidated financial statements of Deutsche  Post AG, Bonn, and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at December 31, 2021, the consolidated statement of com- prehensive income, consolidated 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, 2021, and notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the Group management report of Deutsche  Post AG, which is combined with the compa- ny’s management report, for the financial year from January 1 to December 31, 2021. In accordance with the German legal re- quirements, 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 com- ply, in all material respects, with the IFRS s as adopted by the EU and the additional requirements of German commer- cial law pursuant to § [Article] 315e Abs. [paragraph] 1 HGB [ Handelsgesetzbuch: German Commercial Code] and, in com- pliance with these requirements, give a true and fair view of the assets, liabilities and financial position of the Group as at December 31, 2021, and of its financial performance for the financial year from January 1 to December 31, 2021, and • the accompanying Group management report as a whole pro- vides 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 management report listed in the “Other Informa- tion” 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 state- ments 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 [Insti- tute of Public Auditors in Germany] (IDW). We performed the audit of the consolidated financial statements in supplementary compliance with the International Standards on Auditing (ISAs). Our responsibilities under those requirements, principles and standards are further described in the “Auditor’s Responsibili- ties for the audit of the consolidated financial statements and of the Group management report” section of our auditor’s report. We are independent of the Group entities in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these require- ments. In addition, in accordance with Article 10 (2) point (f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opin- ions on the consolidated financial statements and on the Group management 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 consoli- dated financial statements for the financial year from January 1 to December 31, 2021. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our audit opinion thereon; we do not provide a separate audit opinion on these matters. In our view, the matters of most significance in our audit were as follows: 1 Recoverability of goodwill 2 Pension obligations and plan assets 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 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 11.4 billion is reported under the balance sheet item “Intangible assets”, representing approximately 18 % of total assets and 58 % of the Group’s Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT 154 reported equity. Goodwill is tested for impairment by the company on an annual basis or if there are indications that goodwill may be impaired. The impairment test of goodwill is based on the recoverable amount, which is determined by applying a measurement model using the discounted cash flow method. This matter was of particular significance in our audit, because the result of this measurement depends to a large extent on the estimation of future cash inflows by the com- pany’s executive directors and the discount rate used, and is therefore subject to considerable uncertainty. 2 We satisfied ourselves as to the appropriateness of the future cash inflows used in the calculation by, inter alia, comparing this data with the current budgets in the three- year plan prepared by the executive directors and approved by the company’s Supervisory 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 re- coverable amount calculated using this method, we also focused our testing on the parameters used to determine the discount rate applied, including the weighted average cost of capital, and evaluated the company’s calculation procedure. Due to the materiality of goodwill and the fact that its measurement also depends on economic conditions which are outside of the company’s sphere of influence, we carried out our own additional sensitivity analyses and found that the respective goodwill is sufficiently covered by the discounted future cash inflows. 3 Overall, the measurement parameters and assump- tions used by the executive directors to be reproduceable. The company’s disclosures regarding goodwill are con- tained 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 4.2 billion is reported under the balance sheet item “Provisions for pensions and similar obliga- tions”. As a result of pension scheme surpluses in some defined benefit plans, pension assets of EUR 0.4 billion are reported under the balance sheet item “Other non- current assets”. The net pension provisions of EUR 3.8 billion were calculated on the basis of the present value of the obliga- tions amounting to EUR 18.5 billion, less the plan assets of EUR 14.7 billion, which were measured at fair value. The obligations from defined benefit pension plans were measured using the projected unit credit method in ac- cordance with IAS 19. This requires in particular that as- sumptions are made as to the long-term salary and pen- sion 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 cor- porate 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 financial measurement parameters and experience adjustments resulted in actuarial gains of EUR 1.3 billion. The plan assets are measured at fair value, which in turn involves making estimates that are subject to estimation uncertainties. Deviations from the planned development of the fair value of the plan assets are also recognized directly in equity. These deviations resulted in gains of EUR 0.7 billion. In our view, these matters were of particular signifi- cance, 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 signif- icant effect on the consolidated financial statements, we assessed the appropriateness of the values adopted, in particular the measurement parameters used in the cal- culation of the pension provisions, inter alia on the basis of actuarial reports made available to us and taking 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 appraisals. 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 pension provisions. The company’s disclosures relating to provisions for pen- sions and similar obligations as well as pension assets are contained in note 37 of the notes to the consolidated finan- cial statements. 3 Other information The executive directors are responsible for the other informa- tion. The other information comprises the following non-audited parts of the Group management report: • the statement on corporate governance pursuant to § 289 f HGB and § 315 d HGB included in section “governance” of the Group management report • the non-financial statement pursuant to § 289 b Abs. 1 HGB and § 315 b Abs. 1 HGB included in section “non-financial statement” of the Group management report The other information comprises further all remaining parts of the annual report – excluding cross-references to external information – with the exception of the audited consolidated fi- nancial statements, the audited Group management report and our auditor’s report. Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT 155 Our audit opinions on the consolidated financial state- ments 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. addition, they are responsible for financial reporting based on the going concern basis of accounting unless there is an inten- tion to liquidate the Group or to cease operations, or there is no realistic alternative but to do so. In connection with our audit, our responsibility is to read the other information mentioned above and, in so doing, to consider whether the other information • is materially inconsistent with the consolidated financial state- ments, with the Group management report disclosures audited in terms of content or with 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 Super visory Board for the consolidated financial statements and the Group management report The executive directors are responsible for the preparation of the consolidated 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 § 315 e Abs. 1 HGB and that the consolidated financial statements, in compliance with these requirements, give a true and fair view of the assets, liabilities, financial position, and financial per- formance of the Group. In addition, the executive directors are responsible for such internal control as they have determined necessary 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 ex- ecutive 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 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 respects, consistent with the consolidated financial statements, complies with German legal requirements, and ap- propriately presents the opportunities and risks of future devel- opment. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have consid- ered necessary to enable the preparation of a Group management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the Group management report. The Supervisory Board is responsible for overseeing the Group’s financial reporting process for the preparation of the consolidated financial 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 re- spects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the op- portunities and risks of future development, as well as to issue an auditor’s report that includes our audit opinions on the consoli- dated 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. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consoli- dated financial statements and this Group management report. We exercise professional judgment and maintain profes- sional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements and of the Group manage- ment report, whether due to fraud or error, design and per- form 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 mate- rial misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls. • 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 executive 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 Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT 156 conclude that a material uncertainty exists, we are required to draw attention in the auditor’s report to the related disclosures in the consolidated financial statements and in the Group man- agement report or, if such disclosures are inadequate, 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 consolidated financial statements, including the disclosures, and whether the consolidated financial statements present the underlying transactions and events in a manner that the con- solidated financial statements give a true and fair view of the assets, liabilities, financial position 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 § 315 e Abs. 1 HGB. • Obtain sufficient appropriate audit evidence regarding the fi- nancial information of the entities or business activities within the Group to express audit opinions on the consolidated finan- cial statements and on the Group management report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinions. • Evaluate the consistency of the Group management report with the consolidated financial statements, its conformity with German law, and the view of the Group’s position it provides. • Perform audit procedures on the prospective information pre- sented by the executive directors in the Group management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant assumptions used by the executive directors as a basis for the prospective infor- mation, and evaluate the proper derivation of the prospective information from these assumptions. We do not express a sep- arate audit opinion on the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that future events will differ materially from the prospec- tive information. 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 deficien- cies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with the relevant independ- ence 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 governance, we determine those matters that were of most sig- nificance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter. Other legal and regulatory requirements Report on the assurance on the electronic rendering of the consolidated financial statements and the Group management report prepared for publication purposes in accordance with § 317 Abs. 3a HGB Assurance opinion We have performed assurance work in accordance with § 317 Abs. 3a HGB to obtain reasonable assurance as to whether the rendering of the consolidated financial statements and the Group management report (hereinafter the “ESEF documents”) con- tained in the electronic file DP_AG_KA_KLB_ESEF-2021-12- 31 . zip and prepared for publication purposes complies in all material respects with the requirements of § 328 Abs. 1 HGB for the electronic reporting format (“ESEF format”). In accordance with German legal requirements, this assurance work extends only to the conversion of the information contained in the consolidated financial statements and the Group management report into the ESEF format and therefore relates neither to the information contained within these renderings nor to any other information contained in the electronic file identified above. In our opinion, the rendering of the consolidated financial statements and the Group management report contained in the electronic file identified above and prepared for publication purposes complies in all material respects with the require- ments of § 328 Abs. 1 HGB for the electronic reporting format. Beyond this assurance opinion and our audit opinion on the accompanying consolidated financial statements and the ac- companying Group management report for the financial year from January 1 to December 31, 2021 contained in the “Report on the audit of the consolidated financial statements and on the Group management report” above, we do not express any assurance opinion on the information contained within these renderings or on the other information contained in the elec- tronic file identified above. Basis for the assurance opinion We conducted our assurance work on the rendering of the con- solidated financial statements and the Group management report contained in the electronic file identified above in accordance with § 317 Abs. 3a HGB and the IDW Assurance Standard: Assur- ance Work on the Electronic Rendering, of Financial Statements and Management Reports, Prepared for Publication Purposes in Accordance with § 317 Abs. 3a HGB (IDW AsS 410 (10.2021)) and the International Standard on Assurance Engagements 3000 (Revised). Our responsibility in accordance therewith is further described in the “Group auditor’s responsibilities for the assur- ance work on the ESEF documents” section. Our audit firm ap- plies the IDW Standard on Quality Management 1: Requirements for Quality Management in the Audit Firm (IDW QS 1). Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT 157 Responsibilities of the executive directors and the Supervisory Board for the ESEF documents The executive directors of the company are responsible for the preparation of the ESEF documents including the electronic ren- derings of the consolidated financial statements and the Group management report in accordance with § 328 Abs. 1 Satz 4 Nr. [number] 1 HGB and for the tagging of the consolidated finan- cial statements in accordance with § 328 Abs. 1 Satz 4 Nr. 2 HGB. In addition, the executive directors of the company are responsible for such internal control as they have considered necessary to enable the preparation of ESEF documents that are free from material non-compliance with the requirements of § 328 Abs. 1 HGB for the electronic reporting format, whether due to fraud or error. The Supervisory Board is responsible for overseeing the process for preparing the ESEF documents as part of the finan- cial reporting process. Group auditor’s responsibilities for the assurance work on the ESEF documents Our objective is to obtain reasonable assurance about whether the ESEF documents are free from material non-compliance with the requirements of § 328 Abs. 1 HGB, whether due to fraud or error. We exercise professional judgment and maintain profes- sional skepticism throughout the assurance work. We also: • Identify and assess the risks of material non-compliance with the requirements of § 328 Abs. 1 HGB, whether due to fraud or error, design and perform assurance procedures responsive to those risks, and obtain assurance evidence that is sufficient and appropriate to provide a basis for our assurance opinion. • Obtain an understanding of internal control relevant to the assurance work on the ESEF documents in order to design as- surance procedures that are appropriate in the circumstances, but not for the purpose of expressing an assurance opinion on the effectiveness of these controls. • Evaluate the technical validity of the ESEF documents, i. e., whether the electronic file containing the ESEF documents meets the requirements of the Delegated Regulation (EU) 2019 / 815 in the version in force at the date of the consolidated financial statements on the technical specification for this elec- tronic file. • Evaluate whether the ESEF documents provide an XHTML rendering with content equivalent to the audited consolidated financial statements and to the audited Group management report. • Evaluate whether the tagging of the ESEF documents with Inline XBRL technology (iXBRL) in accordance with the requirements of Articles 4 and 6 of the Delegated Regulation (EU) 2019 / 815, in the version in force at the date of the consolidated finan- cial statements, enables an appropriate and complete ma- chine-readable XBRL copy of the XHTML rendering. Further information pursuant to article 10 of the EU Audit regulation We were elected as Group auditor by the Annual General Meet- ing on May 6, 2021. We were engaged by the Supervisory Board on November 24, 2021. We have been the Group auditor of the Deutsche  Post AG, Bonn, without interruption since the company first met the requirements of a public-interest entity within the meaning of 316a Satz 2 Nr. 1 HGB in 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). Reference to an other matter – use of the auditor’s report Our auditor’s report must always be read together with the audited consolidated financial statements and the audited Group management report as well as the assured ESEF documents. The consolidated financial statements and the Group management report converted to the ESEF format – including the versions to be published in the Federal Gazette – are merely electronic ren- derings of the audited consolidated financial statements and the audited Group management report and do not take their place. In particular, the “Report on the assurance on the electronic render- ing of the consolidated financial statements and the Group man- agement report prepared for publication purposes in accordance with § 317 Abs. 3a HGB” and our assurance opinion contained therein are to be used solely together with the assured ESEF documents made available in electronic form. German Public Auditor responsible for the engagement The German Public Auditor responsible for the engagement is Verena Heineke. Düsseldorf, 18 February 2022 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft Dietmar Prümm Wirtschaftsprüfer (German Public Auditor) Verena Heineke Wirtschaftsprüferin (German Public Auditor) Deutsche Post DHL Group – 2021 Annual Report CONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT PRACTITIONER’S REPORT 158 INDEPENDENT PRACTITIONER’S REPORT on a Limited and Reasonable Assurance Engagement on Non-financial Reporting PricewaterhouseCoopers GmbH has performed a limited as- surance engagement on the German version of the combined non-financial statement and issued an independent practitioner’s report in German language, which is authoritative. The following text is a translation of the independent practitioner’s report. To Deutsche  Post AG, Bonn We have performed an assurance engagement on the combined non-financial statement of Deutsche  Post AG, Bonn, (hereinaf- ter the “Company”) for the period from 1 January to 31 Decem- ber 2021 (hereinafter the “Combined Non-financial Statement”) included in section “Non-financial Statement” of the combined management report. In accordance with our engagement we have divided the level of assurance to be obtained by us and • performed a reasonable assurance engagement on the indicators • Realised Decarbonisation Effects 2021 in the first paragraph of the section “GHG emissions above prior-year level” • Disclosures for 2021 in the table “GHG emissions (well-to- wheel)” • Disclosures in the chart “GHG emissions by mode of transpor- tation” • GHG efficiency (CEX) in the first paragraph of the section “GHG • Disclosures for 2021 in the table “Energy consumption in the company’s own fleet and buildings (Scopes 1 and 2)” • Share of female employees 2021 in the table “Workforce development” • Share of unplanned employee turnover 2021 in the table “Workforce development” • Disclosures for 2021 in the table “Selected results from the Employee Opinion Survey” • Share of women in middle and upper management in the third paragraph of the section “Diversity is our strength” • Disclosures in the table “Workplace accident statistics” • Sickness rate in the fifth paragraph of the section “Occupational health and safety” • Approval rate for proud of the Group’s contribution to society in the third paragraph of the section “Partnerships and initiatives” • Compliance training certification rate in middle and upper man- agement 2021 in the seventh paragraph of the section “Trusted business partner thanks to compliance” • Number of audits by Corporate Internal Audit in the eighth paragraph of the section “Trusted business partner thanks to compliance” • Number of on-site reviews relating to respect for human rights in the fourth paragraph of the section “Respecting human rights” • Number of audits relating to respect for human rights by Cor- porate Internal Audit in the sixth paragraph of the section “Re- specting human rights” disclosed in the Combined Non-financial Statement (hereafter the “Indicators”) and • performed a limited assurance engagement on all informa- tion other than the Indicators in the Combined Non-financial Statement. Responsibility of the Executive Directors The executive directors of the Company are responsible for the preparation of the Combined Non-financial Statement in accordance with §§ (Articles) 315c in conjunction with 289c to 289e HGB (“Handelsgesetzbuch”: “German Commercial Code”) and Article 8 of REGULATION (EU) 2020 / 852 OF THE EURO- PEAN PARLIAMENT AND OF THE COUNCIL of 18 June 2020 on establishing a framework to facilitate sustainable investment and amending Regulation (EU) 2019 / 2088 (hereinafter the “EU  Taxonomy Regulation”) and the Delegated Acts adopted thereunder, as well as for making their own interpretation of the wording and terms contained in the EU Taxonomy Regulation and the Delegated Acts adopted thereunder, as set out in section “EU Taxonomy” of the Combined Non-financial Statement. This responsibility includes the selection and application of appropriate non-financial reporting methods and making as- sumptions and estimates about individual non-financial disclo- sures of the Company that are reasonable in the circumstances. Furthermore, the executive directors are responsible for such internal controls as they consider necessary to enable the prepa- ration of a Combined Non-financial Statement that is free from material misstatement whether due to fraud or error. The EU Taxonomy Regulation and the Delegated Acts is- sued thereunder contain wording and terms that are still subject to considerable interpretation uncertainties and for which clar- ifications have not yet been published in every case. Therefore, the executive directors have disclosed their interpretation of the EU Taxonomy Regulation and the Delegated Acts adopted thereunder in section “EU Taxonomy” of the Combined Non- financial Statement. They are responsible for the defensibility of this interpretation. Due to the immanent risk that indeterminate legal terms may be interpreted differently, the legal conformity of the interpretation is subject to uncertainties. efficiency drops” • Share of electricity from renewable sources in the third para- graph of the section “Using sustainable technologies and fuels” Not subject to our assurance engagement are the external sources of documentation or expert opinions mentioned in the Combined Non-financial Statement. Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT PRACTITIONER’S REPORT 159 Independence and Quality Control of the Audit Firm We have complied with the German professional provisions regarding independence as well as other ethical requirements. Our audit firm applies the national legal requirements and professional standards – in particular the Professional Code for German Public Auditors and German Chartered Auditors (“Berufssatzung für Wirtschaftsprüfer und vereidigte Buch­ prüfer”: “BS WP / vBP”) as well as the Standard on Quality Con- trol 1 published by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany; IDW): Requirements to quality control for audit firms (IDW Qualitätssicherungsstandard 1: Anforderungen an die Qualitätssicherung in der Wirtschafts­ prüferpraxis - IDW QS 1) – and accordingly maintains a compre- hensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Responsibility of the Assurance Practitioner Our responsibility is to express a conclusion with reasonable as- surance on the Indicators disclosed in the Company’s Combined Non-financial Statement and a limited assurance on all infor- mation other than the Indicators in the Combined Non-financial Statement based on our assurance engagement. We conducted our assurance engagement in accordance with International Standard on Assurance Engagements (ISAE) 3000 (Revised): Assurance Engagements other than Audits or Reviews of Historical Financial Information, issued by the IAASB. This Standard requires that we plan and perform the assurance engagement to • obtain reasonable assurance whether the Indicators disclosed in the Company’s Combined Non-financial Statement for the pe- riod from 1 January to 31 December 2021 have been prepared, in all material respects, in accordance with §§ 315 c in conjunc- tion with 289c to 289e HGB by the executive directors and • obtain limited assurance about whether any matters have come to our attention that cause us to believe that all infor- mation other than the Indicators in the Company’s Combined Non-financial Statement, other than the external sources of documentation or expert opinions mentioned in the Combined Non-financial Statement, are not prepared, in all material re- spects, in accordance with §§ 315 c in conjunction with 289c to 289e HGB and the EU Taxonomy Regulation and the Dele- gated Acts issued thereunder as well as the interpretation by the executive directors disclosed in section “EU Taxonomy” of the Combined Non-financial Statement. The procedures performed for the limited assurance engagement part are less extensive than those performed for the reason able assurance engagement part, and accordingly a substantially lower level of assurance is obtained. The selection of the assur- ance procedures is subject to the professional judgement of the assurance practitioner. In the course of our assurance engagement, we have, amongst other things, performed the following assurance pro- cedures and other activities: • Gain an understanding of the structure of the Company’s sus- tainability organization and stakeholder engagement • Inquiries of the executive directors and relevant employees involved in the preparation of the Combined Non-financial Statement about the preparation process, about the internal control system relating to this process and about disclosures in the Combined Non-financial Statement • Identification of likely risks of material misstatement in the Combined Non-financial Statement • Analytical procedures on selected disclosures in the Combined Non-financial Statement • Reconciliation of selected disclosures with the corresponding data in the consolidated financial statements and group man- agement report • Evaluation of the process to identify taxonomy-eligible eco- nomic activities and the corresponding disclosures in the Com- bined Non-financial Statement • Inquiries on the relevance of climate-risks • Evaluation of the presentation of the Combined Non-financial Statement In the course of our reasonable assurance engagement part on the Indicators disclosed in the Company’s Combined Non-financial Statement, we have performed the following assurance proce- dures and other activities in addition to those described above: • Evaluation of the internal control system regarding the Indicators • Inspection of processes for the collection, control, analysis and aggregation of selected data of different sites of the Company on the basis of samples In determining the disclosures in accordance with Article 8 of the EU Taxonomy Regulation, the executive directors are required to interpret undefined legal terms. Due to the immanent risk that undefined legal terms may be interpreted differently, the legal conformity of their interpretation and, accordingly, our assur- ance engagement thereon are subject to uncertainties. Deutsche Post DHL Group – 2021 Annual ReportCONSOLIDATED FINANCIAL STATEMENTS INDEPENDENT PRACTITIONER’S REPORT 160 Assurance Opinion In our opinion the Indicators disclosed in the Company’s Com- bined Non-financial Statement for the period from 1 January to 31 December 2021 have been prepared, in all material respects, in accordance with §§ 315 c in conjunction with 289c to 289e HGB by the executive directors. Based on the assurance procedures performed and evi- dence obtained, nothing has come to our attention that causes us to believe that all information other than the Indicators in the Combined Non-financial Statement of the Company for the period from 1 January to 31 December 2021 is not prepared, in all material respects, in accordance with §§ 315 c in conjunc- tion with 289c to 289e HGB and the EU Taxonomy Regulation and the Delegated Acts issued thereunder as well as the inter- pretation by the executive directors disclosed in section “EU Taxonomy” of the Combined Non-financial Statement. We do not express an assurance opinion on the external sources of documentation or expert opinions mentioned in the Combined Non-financial Statement. Restriction of Use We draw attention to the fact that the assurance engagement was conducted for the Company’s purposes and that the report is intended solely to inform the Company about the result of the assurance engagement. Consequently, it may not be suitable for any other purpose than the aforementioned. Accordingly, the report is not intended to be used by third parties for mak- ing ( financial) decisions based on it. Our responsibility is to the Company. We do not accept any responsibility to third parties. Our assurance opinion is not modified in this respect. Düsseldorf, 18 February 2022 PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft Hendrik Fink Wirtschaftsprüfer (German Public Auditor) ppa. Thomas Groth Deutsche Post DHL Group – 2021 Annual Report FINANCIAL CALENDAR – CONTACTS Deutsche Post DHL Group – 2021 Annual Report 161 FINANCIAL CALENDAR CONTACTS Deutsche Post AG Headquarters 53250 Bonn Germany Investor Relations  + 49 (0) 228 182-6 36 36  ir @ dpdhl.com Press Office  + 49 (0) 228 182-99 44  pressestelle @ dpdhl.com 2022 3 May Results of the first quarter of 2022 6 May 2022 Annual General Meeting 11 May Dividend payment 5 August Results of the first half of 2022 8 November Results of the first nine months of 2022 2023 9 March Results of financial year 2022 3 May Results of the first quarter of 2023 4 May 2023 Annual General Meeting 9 May Dividend payment 1 August Results of the first half of 2023 7 November Results of the first nine months of 2023 Updates to the financial calendar as well as information on live webcasts can be found on our Reporting hub. 

Continue reading text version or see original annual report in PDF format above