Global Shippers GDP Growth from Developing Nations & the Rise of E-Commerce Will Stimulate Demand for Courier & Delivery Services Introductions

Global Shippers GDP Growth from Developing Nations & the Rise of E-Commerce will Stimulate Demand for Courier & Delivery Services Introductions

Adam Potvin Nina Sysoeva Jordan Rai Marielle Colomb Analyst, Shipping & Logistics Analyst, UPS Analyst, FedEx Analyst, Deutsche Post

• Worked as an Analyst Intern • Worked as a Junior • Worked as a Summer Intern • Worked at Crédit Agricole at Desjardins Capital Markets Accountant for GableCraft for Ernst & Young (French bank) • Worked as an Analyst Intern Homes • Case competitor for SFU JDC • French exchange student at Yellow Point Equity • Case competitor for SFU JDC West’s Accounting team Partners West’s Finance team Agenda

1. Industry Overview 2. UPS Analysis 3. FedEx Analysis 4. Deutsche Post Analysis 5. Final Rankings 6. Appendix Industry Overview

Overview UPS FedEx Deutsche Post Global Shippers In a Nutshell

Logistics companies provide delivery services of parcels, documents and packages by air, water, and land to customers, who are mostly businesses. Sophisticated distribution and information networks are required so that transportation and delivery is as efficient is possible. Global shippers often own or lease large aircraft and vehicle fleets. This industry does not include national post services, such as Canada Post, nor does it include commercial airlines.

Source: IBIS World Overview UPS FedEx Deutsche Post Historical Performance: S5AIRFX (GICS—S&P 500)

Trailing 12 Months Last Five Years Annualized Annualized Return: - 4.05% Return: 7.26%

Last 10 Years Since Inception of Industry Classification (~27 Years) Annualized Annualized Return: 4.49% Return: 9.20%

Source: Bloomberg; returns assume dividends reinvested into index Overview UPS FedEx Deutsche Post Current Industry Valuation & Performance

Modest Multiples Reflect Modest Growth Expectations Industry Players Have Struggled

50%

40%

30% Dividend P/E P/Sales P/FCF P/Book EV/EBITDA Yield 20%

19.8x 0.8x 34.2x 9.1x 7.1x 2.10% 10% Deutsche Post 18.8x 0.5x 22.2x 2.6x 6.3x 3.55% 0% FedEx 14.3x 0.8x 62.5x 2.6x 5.5x 0.70% TNT Express 0.6x 1.9x -10% UPS 18.6x 1.6x 18.1x 36.4x 9.5x 3.08% -20% Yamato Holdings 27.3x 0.7x 1.7x 1.06% -30%

-40% 2015-03-15 2015-06-15 2015-09-15 2015-12-15 2016-03-15

TNT Express UPS Yamato Holdings FedEx Deutsche Post

Source: Bloomberg Note: Multiples are on a TTM basis, except EV/EBITDA which is on a forward 12M estimate Overview UPS FedEx Deutsche Post History of Logistics: 2700 B.C. – 700 A.D.

• The Egyptians needed to transport the massive building blocks for the Great Pyramid of Giza. To do so, ~2700 B.C. they needed transport/hoisting equipment. Technology in material handling started at this point as multi-ton stones were transported and assembled on-site.

• The Greeks developed rowing vessels, which greatly bolstered intercontinental trade. This would later ~300 B.C. benefit Greek armies led by Alexander the Great who needed to incorporate large and sophisticated logistics systems to travel (along with their weapons and families) as far as India.

• The construction of the famous Mezquita Mosque in Spain required the use of procurement logistics to ~700 A.D ensure that pillars arrived in Spain in a timely manner. These pillars were sent from all around the Islamic Empire during the Umayyad dynasty.

Source: DHL Website Overview UPS FedEx Deutsche Post History of Logistics: 1200 – 1800

• Hamburg, Germany was founded as a place to make sea travel more secure and as a node for shipment ~1200 of fur pelts and other business goods from other nations. Hamburg was a node within the Hanseatic League, which was an international network of trading partners.

• The first postal service that operated under clearly defined transit times is developed. Letters were ~1500 delivered from Paris to Spain to Vienna.

• The invention of vehicles, railroads, ships and the use of the steam engine meant that goods could be ~1800 transported faster and more efficiently than ever. This new economic era presented a world of opportunity in the realm of logistics

Source: DHL Website Overview UPS FedEx Deutsche Post History of Logistics: 1940 – 1980

• Military logistics had been refined since WWI. During WWII, logistics was a vital link for troops to receive ~1940 their supplies, rations, weapons and equipment

• The sea container is invented by Malcom McLean, which changed methods of productions and 1956 consumer habits. The sea container could be used to ship goods abroad which acted as a significant boon for international trade and helped create a more efficient and free market and brought about increased globalization.

• Just-in-time logistics is introduced by Japan’s Toyota Motor Company. The purpose was to link logistics 1970-1980 to other functions of the operation, with an emphasis on procurement.

Source: DHL Website Overview UPS FedEx Deutsche Post History of Logistics: 1990 – Present Day

• Quick Response (QR) and Efficient Consumer Response (ECR) technologies are developed and applied ~1990 by retailers and wholesalers. Now, distribution centres are responsible for transporting goods instead of merely storing them. This means that companies can now better react to market fluctuations and act more nimbly.

• Supply chain management has evolved to the point where it is now vital to the business processes Today that link the supplier to the vendor to the end user. Supply chain management is interactive and requires constant monitoring of competing objectives.

• As globalization increases, using logistics to strengthen international supply chains has increasingly Today become a way for companies to distinguish themselves in a globally competitive environment.

Source: DHL Website Overview UPS FedEx Deutsche Post Point-to-Point Model

Point-to-Point Model • Was the dominant method of transportation for both the airline and logistics industries until the 1970s • The protocol is to ship from one node to another directly without needing to be rerouted • Due to the complexity of handling larger volumes and the inefficient nature of transporting goods on half-empty planes, this delivery model has fallen out of favour for large logistics companies • Today, this method is primarily used by smaller logistics companies and budget airliners that handle smaller volumes with fewer nodes to consider • The point-to-point concept is used in a variety of different contexts, including in telecommunications and in computer networking (i.e. peer-to-peer file sharing)

Source: DHL & Southwest Airlines Websites Overview UPS FedEx Deutsche Post Hub and Spoke Model

Hub and Spoke Model • In 1955, Delta Air Lines pioneered the hub and spoke model • When the airline industry was deregulated in 1978, this model became common practice in the airline industry • FedEx would be the first logistics company to adopt this model in the mid 1970s • The protocol is to ship goods from all nodes to a central location (hub) where the goods are re-sorted and then shipped to its destination • Hubs can vary in scale; there can be regional hubs and a central global hub—this is done by UPS for instance • Is the dominant method of transporting goods used today by most large logistics companies due to the efficiency of the model • Companies in other industries have also implemented the model, including Lowe’s and Wal-Mart

Source: DHL Website Overview UPS FedEx Deutsche Post Point-to-Point Versus Hub and Spoke

Point-to-Point

Advantages Disadvantages  Reduces travel time between nodes X There is a limit to the number of nodes that can be adequately and  Reduces risk of lost shipments efficiently connected  Fuel (and subsequent greenhouse gas emissions) is lower per unit X Has been proven to be a costlier method of transportation for larger shipped logistics companies due to greater overall travel leading to higher total fuel costs and the need for goods to be sorted at each node, leading to higher labour costs

Hub and Spoke

Advantages Disadvantages  Company can concentrate and downsize its workforce by having goods X Any disruption at the hub can cause delays throughout the entire sorted at one central location instead of multiple locations—this system reduces labour costs X Efficiency of model depends on the capacity of the hub  Ensures that flights or vehicle trips are at or near capacity when X Route scheduling may be complicated delivering goods, ensuring greater efficiency and reduced fuel costs X Requires longer journeys for goods to arrive at their destination  Spokes can easily be created within the model

Sources: Global Logistics: Mangan, Lalwani & Butcher; Aviation Knowledge Overview UPS FedEx Deutsche Post Market Segments

Who Uses Courier & Delivery Services?

1. Business services Used primarily by bankers, bureaucrats and lawyers, this market segment relies on speedy and reliable B2B service for time-sensitive package delivery. This market segment has risen in importance since the latest financial recession as business spending increases.

2. Retailers and wholesalers This market segment includes businesses in various sectors including consumer goods, fashion and electronics. A retailer/wholesaler would use a courier to transport raw materials between business locations, for instance. Amazon has contributed a large share of revenue for this segment, as it uses FedEx and UPS for a majority of shipments.

3. Households Self-employed individuals may use couriers to delivery various packages. Due to the rise in popularity of e-commerce, individuals/households are increasingly likely to use courier services to trade items in the years to come.

4. Other This includes third-party logistics and supply chain management companies that are excluded from the business services segment.

Source: IBIS World Overview UPS FedEx Deutsche Post Geographical Markets

Where do Courier Service Companies Make Their Revenue? 1. North America Home to the two biggest names in the industry, UPS & FedEx, the U.S. market accounts for 90% of North American revenue and is mainly focused around the express segment. 2. Europe Operators in the European segment rely heavily on road and rail transportation. Recently, some European nations have relaxed national post systems and have removed various barriers relating to customs, which have opened the door for companies to take advantage of new markets. This is especially true for countries that were previously part of the Soviet Union. 3. North Asia More than half of the revenue in this market is from Japan, which has one of the most advanced courier systems in the world, largely attributable to the customer-oriented model that exists there. South Korea and Japan both have high internet penetration, making e-commerce extraordinarily popular. The manufacturing industry for electronics has also led to increased exports via courier from South Korea. While China has potential due to its massive manufacturing base, strong competition, and stifling regulation around letter delivery and road transportation has pushed out some large shippers from the country and has made it difficult for local small operators to expand. China’s express segment is made up mostly of local operators, with China Post as the biggest player in this segment. 4. Other Regions India only accounts for 2.1% of industry revenue, despite it having 15% of the global population—this is largely due to poor transportation infrastructure in the country. However, a growing middle class should eventually overcome this and lead to significant future growth. Southeast Asia and South America have both been exceptional drivers of recent industry demand. Africa still has an undeveloped economy and poor infrastructure, thus its courier industry is served locally.

Source: IBIS World Overview UPS FedEx Deutsche Post Revenue Breakdown

Revenue by Market Segment Revenue by Continent

South East Asia 9% South Africa & Middle East 6% America 6% 3% 10% North Asia India & Central 19% Asia 2% Oceania 2%

55% 29% Europe 23% North America 36%

Business Services Retailers & Wholesalers Households Other

Source: IBIS World Overview UPS FedEx Deutsche Post Revenue Segments

Express Courier Services Segments as a Percentage of Industry Revenue • Refers to services that are conducted over a relatively short period of time • This means same-day, overnight, or next day delivery • This relies on cargo aircraft • Relies on the hub system; all freight is transported a central “hub” where it is sorted and then rerouted to destination • This segment of the industry has become more dominant over the last five years • This segment is dominated by the big players (i.e. UPS & FedEx) 43.8%

Service Couriers & Messengers 56.2% • Includes ground transportation that and is typically conducted over a longer period of time than the express segment • This usually means that this service is cheaper for customers • Many operators in this space are relatively small and serve single, local urban markets • This segment relies more heavily on labour and thus more employees Express Courier Surface Courier & Messengers work in this segment than in express • However, as a portion of revenue, this segment has declined relative to the express segment

Source: IBIS World Overview UPS FedEx Deutsche Post Revenue Growth

Historical Performance Total Industry Revenue Expected to Grow • Industry has experienced stagnant growth since the financial recession • Developed nations, especially those in Europe, have contributed greatly to the industry’s struggles • Industry experienced rapid growth between 2009 – 2011 with greater activity in emerging economies • Emerging economies have recently experienced a slowdown however, which has dampened industry growth • Increasing number of people with internet access has also helped industry grow • However, internet access has acted as a double-edged sword; many now scan documents electronically instead of shipping documents

Forecasted Performance • Expected to grow at a modest rate, due to increased global e- commerce and increased emphasis on quick delivery times for manufacturers, such as just-in-time delivery • Consumer spending expected to rise, but will be partially offset by a continued slowdown in emerging markets

Source: IBIS World Overview UPS FedEx Deutsche Post Industry Competition

Market Concentration Factors Affecting Competition • The shipper market is neither fragmented nor concentrated • The rise of technology stresses the importance of developing solid • The large and developed markets (N.A., Europe & Japan) are information management systems and a strong e-commerce platform dominated by the large players • Countries with nationalized post systems see relatively low competition • Similarly, the large players are primarily focused on serving • Bigger companies can operate at higher margins these developed markets • Long-term contracts are an important source of revenue; for instance, • The economic slowdown in Europe caused large players were hurt, electronics companies may choose one company to exclusively deliver while the growth in emerging markets, which are served by local its products couriers, helped smaller players; these two factors combined to make • The advantages of signing documents online as opposed to having a the industry less concentrated over the last five years physical copy shipped presents an external threat • However, increased merger activity in the coming years should lead to greater concentration Barriers to Entry Major Players • There is little resistance to entry for small operators who wish to serve small, niche markets, especially where only road transportation is Other: 20.9% 39.5% required, from both regulatory and investment points of view • It is difficult to gain significant market share internationally, given the need for capital investment in aircraft fleets, large delivery trucks, etc. 18.4% that are required to cover large geographical regions • There is also much more regulation regarding aircraft fleets 3.2% Source: IBIS World 4.2% 13.8% Overview UPS FedEx Deutsche Post Operating Conditions

Labour Intensity Technological Advancement • Industry operators are expected to invest a mere $0.10 in capital • There is reasonable change in technology in this industry expenditures for every $1.00 that is expended on labour • The rise of e-commerce has led to enhanced customer service • However, capital intensity has increased recently as companies • Bar coding technology has reduced the burden of the truck driver have been investing in more efficient aircraft, trucks and concerning labels and information that used to be dealt with manually technology by paper • Capital intensity is higher for larger companies as efficient equipment • Improved tracking systems has meant that customers can track parcels reduces the need for labour in real-time • For owner-operators (those who both own and operate the daily • The use of the digital pen is now often used for customers to sign when operations of the business—typically smaller logistics companies), receiving packages and allows for more efficient data transfer work long hours, adding to the labour intensity on the smaller end of the spectrum

Revenue Stability • Because of the diversity of clients that operators serve, revenue is stable in this industry • Increasingly liberalized international trade and the strength of e- commerce has provided downside protection for revenue • Industry revenue fluctuates about 2% a year

Source: IBIS World Overview UPS FedEx Deutsche Post Cost Structure

Industry Cost Structure Factors Affecting Costs Purchases: Fuel represents the largest purchase—the lower the price of crude, the lower the cost. Some of the bigger players actually hired “fuel managers” to hedge against rising fuel prices. Purchases can also include transportation costs for smaller companies who don’t own aircraft fleet.

Other: Includes insurance, cleaning, landing fees, among others.

Wages: Increased automation and a higher share of employment from developing nations with lower wages have led to a decline in wages as a percentage of revenue.

Rent & Utilities: These are costs of renting distribution centres, warehouses, and terminal spaces at airports.

Depreciation: Includes the depreciation of aircraft fleet and vehicles as well as communications equipment and computer software and hardware.

Profit Margins: Margins have increased from 6.3% in 2011. Operators in the express courier space see higher margins due to premium pricing for time- sensitive delivery.

Source: IBIS World Overview UPS FedEx Deutsche Post Supply Chain

Economic Drivers

• Number of Internet users • Price of crude oil • Consumer spending & trade

Supply Industries Global Shippers Demand Industries

• Internet service providers • Wholesale and retail trade • Computer hardware manufacturing • Manufacturing • Aircraft and automobile • Business activities manufacturing

Source: IBIS World Overview UPS FedEx Deutsche Post Economic Drivers: Number of Internet Users

Internet Commentary Internet Users by Continent • As alluded to earlier, increased internet access has the negative side- 2.0 effect of reduced need to courier or deliver items that can otherwise 1.6 be sent electronically 1.5 • However, the positive of increased access to online retail outweighs this negative side-effect 1.0 • Therefore, # Internet users = $ industry revenue 0.6 0.5 0.3 0.3 0.3 Internet Penetration by Continent

Internet Users (billions) Users Internet 0.0 Asia Europe Latin America / Africa North America Caribbean

North America Europe Latin America / Asia Africa Caribbean 12% 27% 44% 40% 29%

74% 56% 60% 88% 71%

With Internet No Internet With Internet No Internet With Internet No Internet With Internet No Internet With Internet No Internet

Source: IBIS World Overview UPS FedEx Deutsche Post Economic Drivers: Price of Crude Oil

How Crude Affects Shippers Crude Oil Commentary • Given that the primary activity of the industry is transporting goods, a • Clearly, skyrocketing oil prices from 2009 – 2011 was not correlated major cost driver (second only to perhaps wages) is fuel with high industry growth over this time • Fuel costs are largely the result of the price of crude oil; crude oil is • It is possible that consistent high oil prices between 2011 – 2014 refined into various refined products: diesel, gasoline, etc. slowed industry growth • When fuel costs are high, large shipping operators are able to pass a • Recent drastic downturn in oil price should benefit industry large portion of this increase onto its customers, which leads to profitability decreased volumes and ultimately, reduced profitability • Today’s price of crude: ~$40/barrel • Small shipping operators are unable to pass on fuel cost increases to its customers and thus profit margins would shrink • Price volatility represents a threat to the industry Recent Volatility in Crude Oil Price

$110 $100 $90 $80 $70 $60

$50 CrudeOil (US$/barrel) Price $40

Source: IBIS World Overview UPS FedEx Deutsche Post Economic Drivers: Consumer Spending & Trade

Consumer Spending US Consumer Spending By Category • The industry is heavily reliant and is quite correlated with global consumer spending • More specifically, the industry is strongly tied to discretionary spending and is a function of consumer confidence 13.20% • Global consumer spending will likely have increased at an annualized 17.40% rate of 2.6% from 2011 – 2016E • However, consumer spending decreased in Europe due to the Eurozone crisis, which offset emerging market growth • Of particular note is consumer spending in durable goods, given the 21.70% 16.80% nature of shipping goods International Trade

• Many emerging countries have relaxed their trade barriers, creating an 31.20% opportunity for stronger demand in the industry concerning internationally-shipped products • Free trade agreements and the notion of globalization benefit the Housing Services Healthcare Services industry All other Household Services Non-durable Goods • Foreign exchange risk is a threat to some players in the industry; the Durable Goods recent appreciation of the US dollar has hurt shippers whose customers reside outside of the US

Source: IBIS World Overview UPS FedEx Deutsche Post Industry Trends: Mergers and Acquisitions

Why Have Mergers Become Prominent in the Shipping Industry?

1. Mergers have become prominent in the developed world (Europe and N.A.) because companies wish to expand the services they offer, like bolstering e-commerce platforms, and acquisitive growth is often perceived as the best way to achieve this

2. Merger activity, including joint ventures, have increased in developing nations where a monopoly on courier services had once existed—offering better service and pricing to previously uncompetitive environments has proven attractive

C.H. Robinson Acquires Freightquote.com (2015) FedEx Acquires GENCO (2015)

• C.H. Robinson (market cap: $10.4 billion) acquires privately-held, • FedEx (market cap: $39.6 billion) acquires large logistics firm (sales of internet-based American freight broker for $365 million $1.6 billion) that specializes in handling product returns—handles more • Rationale behind acquisition was Freightquote’s proprietary e- than 600 million returns a year commerce platform, allowing shippers to better access lower rates • GENCO’s leadership in “reverse logistics” provided the rationale for the deal • Price of acquisition: $1.4 billion

Source: Canadianshipper.com Overview UPS FedEx Deutsche Post Industry Trends: Employment and Establishments

Employment Trends Degree of Industry Consolidation • Increased company restructuring and the exit of some industry players • Number of establishments (physical locations) and enterprises (the smaller companies), in addition to increased automation, have led (separately managed divisions) have both dropped off about 10% over to a decreased workforce despite modestly growing industry revenue the last 8 years due to increased consolidation in the industry • Currently, global workforce stands at around 2.5 million workers • Large players expanded into emerging markets through (includes part-time, temporary, & full-time employees) acquisition of smaller companies here • Workforce expected to increase at a rate slightly below the industry • Large industry operators have also cut capacity in developed nations, growth rate which has also contributed to the decrease in enterprises and establishments Global Workforce Expected to Increase • Robust growth in developing economies will offset industry consolidation in Europe and N.A. and is projected to lead to a 1.3% 3.00 annual growth rate in establishments over the next five years 2.90 2.80 Number of Enterprises Number of Establishments 2.70 5% 2.60 2.50 0% 2.40 2.30 -5% 2.20 -10%

Employment Units (in millions) Forecasted CAGR = 1.87% 578,155 2.10 Historical CAGR = -0.53% 558,315 2.00 -15%

Source: IBIS World Overview UPS FedEx Deutsche Post Pertinent Regulations – US & Europe

Air Operations Ground Operations • The U.S. Department of Transportation (“DOT”) regulates the • The Federal Motor Carrier Safety Administration (“FMCSA”) regulates economic aspects of air transportation, including insurance and pricing ground transportation as it relates to safety, insurance, and the • International operations subject to bilateral agreements transportation of hazardous materials between U.S. and foreign governments • The Postal Accountability and Enhancement Act (2006) oversees • The Federal Aviation Administration (“FAA”) regulates the safety aspects of the U.S. Postal Service (created in 1970) aspects of air transportation, including the transportation of • Has authority over postal rates, product offerings and service hazardous materials and maintenance standards • The Transportation Security Act (“TSA”, 2001) regulates security • The Motor Carrier Act (1980) deregulated the trucking industry in aspects of air cargo transportation easing entry restrictions, and limiting the ability for agencies or collections of companies to set rates • The U.S. Department of Homeland Security regulates cargo security European Regulations Environmental • The European Union does not allow monopolies in the mail handling • Various federal, state and local environmental regulations oversee industry, which has allowed private carriers to more easily enter that regulations regarding proper storage, handling and disposal of waste, market management of stormwater, underground storage tank, adherence to • England has decreased its limit on the average weekly hours a truck clean air laws, emissions standards, responding to spills, among others driver can work from 55 to 48 • The Environmental Protection Agency (“EPA”) assists in governing • Air Carriers must follow International Civil Aviation Organization aircraft noise in the US and there are noise regulations in foreign (“ICAO”) guidelines, which oversee environmental, safety, and security countries standards Source: UPS Website Overview UPS FedEx Deutsche Post Customs, Tariffs & Industry Associations

Customs Industry Associations • Custom laws in various countries regulate the import and export of • The Messenger Courier of Association (created in 1997) represents shipments ~500 courier companies in the US and abroad • The Bureau of Customs and Border Protection oversees customs • This not-for-profit promotes the common interests of the courier brokerage (a customs broker “clears” goods through customs) and industry freight forwarding (an entity that organizes shipments from a • The European Express Association represents the courier industry in manufacturer to a market) Europe • It is divided into committees that deal with competition and markets, customs, transport and environment, and security

Tariffs • There are no tariffs imposed on the industry per se, but there are tariffs on the products shipped by industry operators • The overall lowering of tariffs has led to a surge in outsourcing and offshoring for production of goods

Source: IBIS World Overview UPS FedEx Deutsche Post Trailing 12M Freight Statistics

Total Freight YoY Cargo Revenue Ton Miles Distribution (Millions)

Latin America, 129 8%

6% Pacific, 799

4% Domestic, 1,309

Atlantic, 557 2% International, 2,622 0%

-2%

-4%

-6% • A Cargo Revenue Ton Mile is a ton of cargo multiplied by the number of miles it North America Asia Pacific Europe travels • This data is for the month of December, 2015 • Total ton miles traveled for 2015: ~65 billion

Source: Bloomberg Overview UPS FedEx Deutsche Post Trailing 12M Price Trends

Inbound Europe Price Index Outbound Europe Price Index

142 175

140 170 138 165 136 160 134 132 155 130 150

Inbound Asia Price Index Outbound Asia Price Index

155 150 150 145 145 140 140 135 135 130 130 125 120 125

Source: Bloomberg Overview UPS FedEx Deutsche Post Trailing 12M Price Trends

East-West Price Index: USA Shanghai to New York: USD/kg

102 $5.00

100 $4.50

98 $4.00 96 $3.50 94 $3.00 92 $2.50 90 $2.00 88 $1.50 86

84 $1.00

82 $0.50

80 $0.00

Source: Bloomberg Overview UPS FedEx Deutsche Post Revenue Metrics

Revenue Growth YoY Revenue per Employee

Source: CSI Market Note: As of Q3-2015 Overview UPS FedEx Deutsche Post Margins

Gross Margin EBITDA Margin

Source: CSI Market Note: As of Q3-2015 Overview UPS FedEx Deutsche Post Return on Balance Sheet Items

Return on Equity Return on Investment Return on Assets

Source: CSI Market Note: As of Q3-2015 Overview UPS FedEx Deutsche Post Stakeholder Growth Trends

Free Cash Flow Growth YoY Operating Income Growth YoY

Source: CSI Market Note: As of Q3-2015 Overview UPS FedEx Deutsche Post Balance Sheet Metrics

Capital Expenditure Growth YoY Quick Ratio

Source: CSI Market Note: As of Q3-2015 Overview UPS FedEx Deutsche Post Net Income & Dividend Payout Ratio

Net Income Growth YoY Dividend Payout Ratio

Source: CSI Market Note: As of Q3-2015 Overview UPS FedEx Deutsche Post United Parcel Service, Inc. (UPS)

Overview UPS FedEx Deutsche Post Stock & Company Overview

Overview UPS FedEx Deutsche Post Stock Information

Stock Performance Since IPO Key Metrics Current Price 101.29 120 Day's Range 100.48-101.60 100 Bid/Ask 100.10/101.00 52-week Range 87.30 - 107.32 80 Market Cap 89.5 B 60 Net Debt 9.6 B 40 Enterprise Value 99.1 B Dividend Yield 3.09% 20 Average Volume (3-month) 3.5 M Shares Outstanding 883.7 M P/E (ttm) 18.93 EPS (ttm) 5.35 P/B (ttm) 36.33 Beta 0.94 Exchange: NYSE Next Earnings Date 28-Apr-16 Ticker: UPS US Equity All prices in USD as of 3/14/2016 Source: Yahoo Finance

Overview UPS FedEx Deutsche Post Stock Information

5-Year Stock Performance 120 110 100 90 80 70 60 50 40 2011-03-31 2012-03-31 2013-03-31 2014-03-31 2015-03-31

Overview UPS FedEx Deutsche Post Stock Information

1-Year Stock Performance 2015 Financial Highlights 110 Revenue 58.4 B 105 FCFF 5.05 B 100 Net Income 4.8 B 95 Adjusted Net Income 4.9 B 90 Deluted EPS 5.35 85 80 Dividends Declared (per share) 2.92 Dividend Yield 3.0%

All prices in USD Source: UPS 2015 Annual Report Exchange: NYSE Ticker: UPS US Equity

Overview UPS FedEx Deutsche Post Stock vs. Industry Performance

1-Year Performance 10%

-5%

-10%

-15%

-20% 2015-03-20 2015-05-20 2015-07-20 2015-09-20 2015-11-20 2016-01-20

UPS US EQUITY NYA: NYSE Composite BIXPRSGT: Global Express & Courier Top Peer Index TRAN: Dow Jones Transportation Average

SECTOR INDUSTRY SUB-INDUSTRY INDUSTRIALS TRANSPORTATION COURIER SERVICES

Overview UPS FedEx Deutsche Post Stock vs. Industry Performance

1-Year Performance 10%

-5%

-10%

-15% 2015-03-20 2015-05-20 2015-07-20 2015-09-20 2015-11-20 2016-01-20

UPS US EQUITY BIXPRSGT: Global Express & Courier Top Peer Index

SECTOR INDUSTRY SUB-INDUSTRY INDUSTRIALS TRANSPORTATION COURIER SERVICES

Overview UPS FedEx Deutsche Post Company Overview

World’s Largest Package Delivery Company Vision Guided by 4 Transformative Strategies

• Founded in 1907 as a private messenger and delivery 1. Deploying technology-enabled operations service 2. Providing unique and industry-specific customer • Currently headquartered in Atlanta, Georgia, U.S. solutions

• The largest in terms of revenue and volume 3. Expanding global network

 Deliver packages each business day for 1.5 million 4. Serving the needs of end consumers around the world shipping customers to 7.9 million receivers

 Operate in over 220 countries and territories

 In 2013, delivered 16.9 million pieces per day worldwide, or a total of 4.3 billion packages

Overview UPS FedEx Deutsche Post Company Overview

Self-Defined Competitive Strengths Industry Focus

• Integrated global network backed by sophisticated • Aerospace & Defense optimization system • Automotive • A leader in developing technology to enable customers • Consumer Services to optimize their shipping & logistics business processes • Government Agencies • Cross-selling small package, supply chain and freight • Healthcare services across customer base – an important growth • High Tech mechanism • Industrial Manufacturing & Distribution • Strong brand equity and distinctive culture with • Professional Services employee stock ownership tradition dating back to 1927 • Retail

Overview UPS FedEx Deutsche Post Company Overview

Quick Facts

Source: UPS 2015 Annual Report

Overview UPS FedEx Deutsche Post Fleet as of December 31, 2015

Aircrafts

Vehicles • A global ground fleet of 110,000 package cars, vans, tractors and motorcycles • Ground support fleet of 33,000 pieces of equipment designed to support aircraft fleet, ranging from nonpowered container dollies and racks to powered aircraft main deck loaders and cargo tractors • 33,000 containers used to transport cargo in our aircraft

Overview UPS FedEx Deutsche Post History & Management

Overview UPS FedEx Deutsche Post History Timeline

• In 1907, two teenage entrepreneurs created what would become the world's largest package delivery service • Starting in a Seattle basement with a $100 loan, Claude Ryan & Jim Casey opened the American Messenger 1907-1913 Company Creating a • The company fulfilled a range of tasks, from running errands and carrying notes on foot or on bicycle, to making Messenger Service home deliveries for drugstore customers

• A merger with Evert McCabe's competing package delivery business helped the company redefine its primary charge 1913-1918 • In 1913, the company shifted its focus to delivering packages from grocery and drug stores to customers' homes, Retail Beginning changing its name to Merchants Parcel Delivery • In 1918, 3 of Seattle's leading department stores became customers, abandoning their own internal delivery efforts, and turning over business to Merchants Parcel Delivery

• In 1919, the company expanded beyond Seattle to Oakland, California, becoming United Parcel Service • In 1922, acquired common carrier service in Los Angeles (manufacturer  distributor) 1918-1930 • In 1924, introduced an innovative conveyor belt system used for package handling Entering the • In 1929, began to offer air service through private airlines for the next 2 years, until the economic downturn Common Carrier • Moved headquarters to New York City Era • Jim Casey in the 1920s gave staff the opportunity to purchase company shares

Overview UPS FedEx Deutsche Post History Timeline

• UPS grew throughout the 1930s and early 1940s by acquiring delivery responsibilities for department stores in Chicago, Cincinnati, Milwaukee, Minneapolis, and Philadelphia 1930-1975 • Reintroduced air service, offering two-day delivery to major East and West Coast cities in 1953 Expansion • Over the course of 30 years, UPS pursued more than 100 applications for additional operating authority

• In 1975, the corporate headquarters moved from New York City to Greenwich, Connecticut • UPS went abroad, expanding its service throughout the Americas and Europe 1975-1990 • In 1989, purchased IML, a British delivery company, expanding to the Middle East, Africa, & the Pacific Rim International Growth & UPS • Deregulation of the airline industry allowed new opportunities for UPS, it started creating its own fleet Airlines • In 1988, UPS won approval from the Federal Aviation Administration (FAA), launched UPS Airlines

• In 1994, to improve cost efficiencies moved headquarters to its current home – Atlanta, Georgia • Since the late 1990s, UPS invested billions in technology development and infrastructure 1990-1999 • Delivery Information Acquisition Device (DIAD), was developed to upload information to the UPS network Consistent • New services included transportation and distribution for larger shipments via road, rail, air, and ocean Innovation • In 1998 created UPS Capital, financial services unit; bought First International Bank, for commercial lending • In 1999, UPS offered 10% of its stock to the public for the first time (IPO)

Overview UPS FedEx Deutsche Post History Timeline

• Full-service business, with UPS Supply Chain Solutions (logistics, global freight, financial, and mail services) • In 2001, UPS ventured toward retail business – acquired Mail Boxes Etc. • Opened air hubs in Louisville, Kentucky, and Cologne, Germany 1999-2010 • In 2003, UPS issued its first Corporate Sustainability report Global Commerce & • In 2005, launched the first non-stop delivery service between the U.S. and Guangzhou, China Evolution • In 2005, acquired the interest held by its joint venture business partner in China, giving it access to 23 cities that cover more than 80% of the country's international trade • Growth through acquisitions in Latin America, North America, U.K., and Poland (air carriers & freight)

• DIAD V is rolled out to speed package tracking detail between UPS and its customers • Acquired Brussels-based Kiala and launched UPS Access Point, an alternative to home delivery, allowing UK consumers to purchase goods over the Internet and choose convenient delivery locations 2010-2016 • In 2013, became the first global express delivery company to be wholly-owned in Vietnam • UPS expanded into the healthcare market, with facilities in China, Hungary, Australia, Italy and North The New Logistics America • ORION, On-Road Integrated Optimization and Navigation, reduces miles driven by optimizing driver routes will be completed by 2017

Overview UPS FedEx Deutsche Post History: Takeaways

1. Vertical integration and technological enhancements drive efficiency 2. Growth by acquisitions across different geographies create economies of scale 3. Expansion into markets other than parcel delivery add new revenue streams 4. Employee ownership creates incentives and promotes the culture

5. Regulations across business units affect operations & expansion plans 6. Environmental regulations and CSR are becoming the areas of increasing concern 7. E-commerce and new technology drive competition & growth CAPEX

Overview UPS FedEx Deutsche Post Management Committee

David Abney, UPS Chairman and Chief Executive Officer • Unanimously appointed by the Board of Directors as Chairman in 2016 • Appointed CEO in 2014 (11th CEO in the 108-year history of UPS) • Began his UPS career in 1974 in a small facility in Greenwood, Mississippi, while attending Delta State University • BBA from Delta State University • 2007-2014: chief operating officer at UPS, overseeing logistics, sustainability, engineering and all facets of the transportation network • 2002-2007: president of UPS International, was involved in a number of global acquisitions • Earlier served as president of SonicAir, a same-day delivery service that signaled UPS's move into the service parts logistics sector

Richard Peretz, Chief Financial Officer • Joined UPS Customer Service in 1981 while attending college at the University of Texas at San Antonio • BBA from University of Texas San Antonio; MBA from the Goizueta Business School at Emory University • Was a member of the team that managed UPS’s Initial Public Offering in 1999 • In 2013, became Corporate Controller, and in 2014 expanded his role to include Corporate Treasurer • In 2008, responsible for corporate finance and accounting • In 2003, became International Chief Financial Officer and helped to open operations in China and expand in Poland, Japan and the United Kingdom • In 1989, was promoted to district controller in the Americas Region as part of the development team for Mexico and Latin America • Serves on the board of the American Red Cross Metropolitan Atlanta Chapter

Overview UPS FedEx Deutsche Post Management Committee

Jim Barber, President, UPS International • President of UPS International since 2013 • Began his UPS career in 1985 • Degree in Finance from Auburn University • 2011-2013: president of UPS Europe • Prior served as a UPS District Manager, Region & District Controller, Accounting Manager, and Billing Supervisor

Myron Gray, President, U.S. Operations • Began his UPS career in 1978 as a part-time package handler in the Tennessee District while attending college • Completed advanced management programs at INSEAD in Fontainebleau, France and the Yale School of Business • In 2010, he led a strategic transformation of the company's U.S. small package business • Served as the president of the Americas Region, covering Canada, Mexico, Central America, South America and the Caribbean • Held various positions of increasing responsibility in industrial engineering, human resources, business development and operations • Sits on the boards of the Atlanta Police Foundation, the National Urban League, the Federal Reserve Bank of Atlanta

David Barnes, Chief Information and Global Business Services Officer • Prior to being named CIO, Barnes was UPS's vice president, Application Portfolios • Began his UPS career in 1977 as a part-time package loader in St. Louis, Mo. • BBA from the University of Missouri • Held key positions during UPS's global expansion efforts in the late 1980s and early 1990s • Served on numerous technology company advisory boards and non-profit boards including two terms as a member of the National United Way Board of Trustees; currently serves on the Board of Directors of Ingram Micro, Inc.

Overview UPS FedEx Deutsche Post Management & Board Analysis

ESG Scores: 5-Year Horizon Independency of the Board

90 88% 3 80 85% 85% 85% 83% 83% 2.5 70 83% 82% 82% 60 80% 80% 80% 2 50 80% 1.5 40 78% 30 75% 1 75% 20 0.5 10 73% - 70% 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Environmental Disclosure Score Social Disclosure Score % of Independent Directors Political Donations Governance Disclosure Score Total ESG Disclosure Score

1. The Board of Directors is largely independent with only 3/15 dependent members 2. A decrease in the Governance score in 2012 is due to a decline in political donations

Overview UPS FedEx Deutsche Post Management & Board Analysis

Share Ownership Top 5 Insiders

3% 2% 1% Position Market 4% Holder Name Title Position Ownership Change Value Eskew Michael Former CEO 250 82 25,158 0.04% Investment Advisor Mcdevitt John Former SVP HR 103 10,433 0.02% Finley Teresa SVP Global Mkt 43 4,318 0.01% Others Nichols Mitch Former Eng SVP 38 3,878 0.01% Pension Fund (Erisa) Barber James SVP & President 27 2,720 0.00% Government In Thousands of USD Unless Otherwise Specified Bank Source: Bloomberg

90%

1. Insiders own a low percentage of shares: 0.07% in total, with a large market value at $46.5 million 2. Current CEO & CFO do now own a significant stake, former management tends to be insider owners 3. The majority of the shares is owned by investment advisors

Overview UPS FedEx Deutsche Post Share Ownership: Top 10 Shareholders

Holder Name Position Position Change Market Value Ownership Report Date Country Blackrock 45,973 17 4,635,009 6.66% 2016-03-10 USA Vanguard Group 43,153 865 4,350,734 6.25% 2016-01-31 USA Wellington Management 29,550 -642 2,979,191 4.28% 2015-12-31 USA State Street Corp 26,030 -63 2,624,348 3.77% 2015-12-31 USA Sun Life Financial I 22,896 -184 2,308,341 3.32% 2016-01-31 CANADA FMR LLC 18,369 -1,399 1,851,974 2.66% 2015-12-31 USA Bank Of America Corp. 11,069 -1,574 1,115,986 1.60% 2015-12-31 USA Franklin Resources 10,505 -420 1,059,079 1.52% 2015-12-31 USA Wells Fargo & Company 9,673 168 975,203 1.40% 2015-12-31 USA Northern Trust Corp. 8,891 -1,099 896,439 1.29% 2015-12-31 USA

In Thousands of USD Unless Otherwise Specified Source: Bloomberg

Overview UPS FedEx Deutsche Post Management: Takeaways

1. Top executives are appointed internally & have been with UPS for decades 2. Management has business background – shareholder friendly 3. The Board of Directors is largely independent at 80% 4. Some of the former executives are insider owners at 0.07%

Overview UPS FedEx Deutsche Post Financial Analysis

All Financial Statements are in Millions of USD Source: UPS 2015 Annual Report

Overview UPS FedEx Deutsche Post Selected Income Statement

2015 was a strong year for UPS:

1. Total Revenue slightly up/flat • Caused by increase in the U.S. Domestic Package • Continued growth in e-commerce & retail • Offset by a decline in International Package

2. Total Operating Profit up 54% • Caused by increase in the U.S. operating profits

Overview UPS FedEx Deutsche Post Revenue Streams

By Service Segment

Change in Revenue Proportion: 10-Year Horizon 60 2015 Revenue Distribution 16%

USD 50 40 30

21% billions of billions 20 63% 10

0 Revenue in in Revenue 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 U.S. Domestic Package $37 B International Package $12 B U.S. Domestic Package International Package Supply Chain & Freight Supply Chain & Freight $9 B 5-Year CAGR: 4.3% 1.8% 1.8%

5-Year Total Revenue Growth: CAGR = 3.3% Highest Growth Segment: U.S. Domestic Package Largest Segment by Absolute Revenue: U.S Domestic Package

Overview UPS FedEx Deutsche Post Revenue Streams

By Geography

Change in Revenue Proportion: 10-Year Horizon 2015 Revenue Distribution 28% 80% 22% 78% 25% 75% 23% 73% 78% 20% 70% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 United States International International United States

UPS attempted to reshape its revenue streams, expanding internationally In 2015, International Revenue declined in its proportion to total & in the absolute terms ($14B  $13B) While expanding abroad, UPS still earns 78% of revenues from the U.S.

Overview UPS FedEx Deutsche Post 1. U.S. Domestic Package Operations

Overview UPS FedEx Deutsche Post 2. International Package Operations

Overview UPS FedEx Deutsche Post 3. Package Operations

Overview UPS FedEx Deutsche Post Segments: Takeaways

Volumes in all segments – Next Day Air, Deferred, and Ground U.S. Domestic Packaging (83% of total) – were up, allowing to leverage transportation network and leading to improved productivity.

This was slightly offset by higher pension and healthcare costs, contractual union wage increases and the negative impact of fuel. Margin was stronger.

Volumes were up on 3.2% increase in Exports, slightly offset International Package Operations by 0.3% decrease in Domestic (58% of total). Strong demand from healthcare and diversified vehicles & parts segments.

Operating profit & margin were positively affected by base rate increases, modifications to the fuel surcharge indices and the net impact of fuel. Margin was stronger.

Total revenue within the segment was up, driven by Supply Chain & Freight Operations forwarding & logistics sub-segment (62% of total).

Combined operating profit for this segment was up, primarily due to higher operating profit at UPS Capital and our service contracts with the U.S. Postal Service. Margin was stronger.

Overview UPS FedEx Deutsche Post Package Yield Analysis

Revenue per Package % Growth (Yield)

10% U.S. Domestic Package: 5% In the past 3 years, yield has largely stayed flat 0%

-5% International Package: In the past 3 years, yield has -10% declined at an average of 5%

-15% Conclusion: -20% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Revenue growth comes from increasing volumes, not prices U.S. Domestic Package International Package

Overview UPS FedEx Deutsche Post Margins Analysis

Consolidated Margins

30% Company Margins 25%

20% • Fluctuate over time

15% • Recovered since 2012

10% • Improved in 2015 5%

0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Gross Margin EBITDA Margin Profit Margin

Overview UPS FedEx Deutsche Post Margins Analysis

Operating Margin (EBIT Margin) by Service Segment

20% 18% The most profitable business: 15% International Package 13% 10% U.S. Domestic Package business 8% contributes 63% of total revenue: 5% Important to keep higher margin 3% 0% 2009 2010 2011 2012 2013 2014 2015

International Package US Domestic Package Supply Chain & Freight

Overview UPS FedEx Deutsche Post Ratios: DuPont Analysis

Historical Returns ROE Decomposition

250%

200% X X =

150%

Profit Margin Profit

Asset Turnover Asset

Equity Multipler Equity Return on Equity on Return 100% 2015 8.3% 1.6 15.4 202% 50% 2014 5.2% 1.6 16.4 139% 2013 7.9% 1.5 5.6 65% 0% 2012 1.5% 1.5 8.2 18% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2011 7.2% 1.6 4.9 54% ROE ROA 2010 6.7% 1.5 4.2 43%

2015 Metrics: WACC = 7.5% ROE = 202% ROA = 66%

Overview UPS FedEx Deutsche Post Cost Structure

Operating Expenses: Snapshot

Overview UPS FedEx Deutsche Post Cost Structure

Operating Expenses: Distribution

60,000

50,000

40,000

30,000

20,000 In Millions of USD ofMillions In 10,000

- 2011 2012 2013 2014 2015 Salaries, Wages & Employee Benefits Purchased Transportation Other Operating Expenses Transportation Fuel Depreciation and Amortization Transportation Maintenance Expense Occupancy/Rent Expense

Overview UPS FedEx Deutsche Post Ratios: Credit& Liquidity

Historical Debt Ratios

100% 600% 4.0 3.5 80% 500% 3.0 400% 60% 2.5 300% 2.0

40% % Level % 200% 1.5 Multiple 20% 1.0 100% 0.5 0% 0% - 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total Debt/Capital Total Debt/Total Assets Total Debt/Equity Net Debt/EBITDA

Debt has been increasing in the past, since UPS pursues growth through acquisitions USP has the highest debt/capital ratio when compared to its close competitors

Overview UPS FedEx Deutsche Post Debt Analysis

Debt Schedule

Overview UPS FedEx Deutsche Post Free Cash Flow

Historical Free Cash Flow Generation 10,000 20

8,000 15

6,000 10 4,000 5

In millions USD millions In 2,000

0 amount) share (per USD In 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 -2,000 -5 Axis Title

Free Cash Flow to Firm Free Cash Flow to Equity Free Cash Flow per Basic Share

Overview UPS FedEx Deutsche Post Dividend Payout

Source: UPS Investor Relations Shares Outstanding: 883.7 M

Overview UPS FedEx Deutsche Post Cash Flow Takeaways

1. In 2015, the company generated strong cash flow from its operations, primarily driven by higher incomes and depreciation expense 2. Cash was reinvested in acquisitions, facilities’ upgrades, and investments in marketable securities 3. $5.1 million in debt is due to repayment in 2016, the dividend payout has been historically on the rise 4. Average FCFF generated is around $5B annually, debt due in 2016 is $5.1B, with those levels, dividend payout ratio seems high

Overview UPS FedEx Deutsche Post Comparable Companies

Shares Dividend Operating Profit Market Enterprise Debt to Cap Price Net Debt Outstanding Yield (%) Margin (%) Margin (%) Cap Value (%)

United Parcel Service Inc 101.42 883.70 3.08 13.14 8.30 89,625 9,608 99,233 85.19

FedEx Corp 143.07 275.62 0.70 3.93 2.21 39,432 3,505 42,937 32.65

Deutsche Post AG 26.56 1,212.75 3.55 4.05 2.60 32,210 1,292 33,502 30.91

Yamato Holdings Co Ltd 21.54 425.16 1.06 4.94 2.69 9,158 (934) 8,224 19.16

TNT Express NV 8.64 548.90 nm 0.55 (0.72) 4,745 (262) 4,483 9.20

Overview UPS FedEx Deutsche Post Comparable Companies

EBITDA EV/EBITDA EPS P/E 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017

United Parcel Service Inc 9,745 10,420 10,953 10.2x 9.5x 9.1x 5.29 5.77 6.24 19.2x 17.6x 16.3x

FedEx Corp 6,905 7,592 8,315 6.2x 5.7x 5.2x 8.91 10.55 11.92 16.1x 13.6x 12.0x

Deutsche Post AG 4,333 5,437 5,792 7.7x 6.2x 5.8x 1.82 2.15 2.34 14.6x 12.4x 11.3x

Yamato Holdings Co Ltd 973 1,008 1,037 8.4x 8.2x 7.9x 0.82 0.86 0.95 26.3x 25.0x 22.8x

TNT Express NV 239 335 594 18.8x 13.4x 7.5x 0.18 0.26 0.39 47.0x 33.1x 22.0x Median 8.4x 8.2x 7.5x 19.2x 17.6x 16.3x Mean 10.3x 8.6x 7.1x 24.6x 20.3x 16.9x Min 6.2x 5.7x 5.2x 14.6x 12.4x 11.3x Max 18.8x 13.4x 9.1x 47.0x 33.1x 22.8x 25th Percentile 7.7x 6.2x 5.8x 16.1x 13.6x 12.0x 75th Percentile 14.5x 11.4x 8.5x 36.6x 29.0x 22.4x

Overview UPS FedEx Deutsche Post Consolidated Balance Sheet: Assets

Goodwill: In the U.S. Domestic Package segment was related to the acquisition of Coyote

In the Supply Chain & Freight segment was related to acquisitions of Poltraf, Parcel Pro, and the Insured Parcel Services division of G4S International Logistics

Overview UPS FedEx Deutsche Post Consolidated Balance Sheet: Liabilities & SE

Overview UPS FedEx Deutsche Post Statement of Consolidated Income

Overview UPS FedEx Deutsche Post Statement of Consolidated Comprehensive Income

Overview UPS FedEx Deutsche Post Statement of Consolidated Cash Flows: CFO

Overview UPS FedEx Deutsche Post Statement of Consolidated Cash Flows: CFI & CFF

FCI Acquisitions: Poltraft Sp. in Poland, and Parcel Pro and Coyote Logistics Midco in the U.S. Marketable Securities: Purchases & sales of marketable securities due to rebalancing of investments

CFF Additional Debt: Consisted of euro-denominated senior notes and facility bonds associated with Pennsylvania airport, and commercial papers Share Repurchase Program: Extended to $10.0 B with no expiration date

Overview UPS FedEx Deutsche Post Valuation Results & Recommendation

Football Field Diagram Valuation Summary 2016 P/E Method 111.14 52-Week Range 2016 EV/EBITDA Method 73.56 2016 P/CF Method 93.30 Analyst Concensus Analyst Consensus 107.00 Average $ 96.25 2016 P/CF Method

2016 EV/EBITDA Method Downside given average projected price: 5.0% 2016 P/E Method Upside given analysts consensus: 0 25 50 75 100 125 150 175 200 225 250 Share Price 5.6%

1) Does not incorporating dividend yield 2) As of 3/14/2016 Recommendation: HOLD 3) Current Share Price = 101.29

Overview UPS FedEx Deutsche Post FedEx Overview

Overview UPS FedEx Deutsche Post Financial Snapshot

Overview UPS FedEx Deutsche Post 1 Year Performance

Overview UPS FedEx Deutsche Post 5 Year Performance

Overview UPS FedEx Deutsche Post 10 Year Performance

Overview UPS FedEx Deutsche Post P/E Ratio

Overview UPS FedEx Deutsche Post FedEx Vs. S&P/TSX Composite

Overview UPS FedEx Deutsche Post Company Profile

• Frederik W. Smith started Federal Express in 1971 to bring innovation to the shipping industry • Provides a diverse portfolio of transportation, e-commerce, and business solutions • Air, ground, and sea networks span over 220 countries and territories • Headquartered in Memphis, Tennessee

Overview UPS FedEx Deutsche Post Mission

FedEx Corporation will produce superior financial returns for its shareowners by providing high-value- added logistics, transportation, and related business services through focused operating companies.

Overview UPS FedEx Deutsche Post Growth Strategies and Long Term Goals

Growth Strategies Long Term Goals 1. Grow core package business 1. Achieve 10%+ operating margin 2. Grow internationally 2. Increase EPS 10%-15% per year 3. Grow our supply chain capabilities 3. Grow profitable revenue 4. Grow through e-commerce & 4. Improve cash flows technology 5. Increase ROIC 5. Grow through new services & 6. Increase returns to alliances shareowners

Overview UPS FedEx Deutsche Post FedEx Express

Provides rapid, reliable, Strategic Goals time-definite delivery to • Efficiency of Staff Functions and more than 220 countries Processes and territories, • Modernizing our Air Fleet connecting markets that • comprise more than 90 U.S. Domestic Transformation percent of the world’s • International Profit gross domestic product Improvement within one to three • Targeted Growth and Yield business days Management

Overview UPS FedEx Deutsche Post FedEx Express

Overview UPS FedEx Deutsche Post FedEx Ground

FedEx Ground is a leading Strategic Goals North American provider • Maintain Industry-Leading of ground small-package Operating Margins by delivery services, Leveraging Our Seven Core providing service to the U.S. and Canada. Strengths • Offer Superior Service through Includes: Innovation • FedEx Home Delivery • Invest in Technology and • FedEx SmartPost Automation • Manage Yields • Expand the Network

Overview UPS FedEx Deutsche Post FedEx Ground

Overview UPS FedEx Deutsche Post FedEx Freight

FedEx Freight is a leading Strategic Goals U.S. provider of less- • Provide Superior Service and than-truckload (LTL) Options for Customers freight services across all • Improve Speed lengths of haul. • Invest in Technology and Automation Includes: • Become the Most Profitable • FedEx Custom Critical LTL Carrier • FedEx Multimodal

Overview UPS FedEx Deutsche Post FedEx Freight

Overview UPS FedEx Deutsche Post Frederick W. Smith

• Chairman, President, and CEO • Responsible for providing strategic direction for all FedEx Corp. operating companies, including FedEx Services, FedEx Express, FedEx Ground, and FedEx Freight. • Education • Bachelor’s Degree – Yale 1966 • Founded FedEx in 1971

Overview UPS FedEx Deutsche Post Alan B. Graf Jr.

• Executive Vice President and CFO • Responsible for all aspects of the corporation’s global financial functions, including financial planning, treasury, tax, accounting and controls, internal audit, investor relations, and corporate development • Member of the five-person Executive Committee • Education • Bachelor of Business Administration – Indiana University • Masters of Business Administration – Indiana University • Joined FedEx in 1980

Overview UPS FedEx Deutsche Post Christine P. Richards

• Executive Vice President, General Counsel and Secretary • Responsible for ensuring that FedEx Corporation’s global activities are in compliance with international, federal, state and local government regulations, and is responsible for international and domestic legal, security and government affairs for the corporation and its subsidiaries. • Education • Bachelor’s Degree - Bucknell University 1976 • Joined FedEx in 1984

Overview UPS FedEx Deutsche Post Robert B. Carter

• Executive Vice President, FedEx Information Services, and CIO • Responsible for setting the technology direction of the FedEx applications, infrastructure, networks, and data centers that provide around-the-clock and around- the-globe support for FedEx product offerings • Serves as co-CEO and CIO of FedEx Corporate Services • Member of the five-person Executive Committee • Education • Bachelor’s Computer and Information Science – University of Florida • Master’s Degree – University of South Florida • Joined FedEx in 1993

Overview UPS FedEx Deutsche Post T. Michael Glenn

• Executive Vice President, Market Development and Corporate Communications • Responsible for all marketing, sales, customer service, and retail operations functions for all FedEx companies • Serves as president and co-CEO of FedEx Corporate Services • Member of the five-person Executive Committee • Education • Bachelor’s Degree - University of Mississippi • Master’s Degree – University of Memphis • Joined FedEx in 1981

Overview UPS FedEx Deutsche Post Future Outlook

Customer • Enhanced retail network • Increasing locations Convenience • Increased services

Fleet • Improving margins Modernization • Add flexibility to domestic and international operations

• TNT Express Acquisitions • GENCO • Bongo

Overview UPS FedEx Deutsche Post Business Risks

Capital Intense Intensive Competition

Business Risk

Oil Prices Regulatory Environment

Overview UPS FedEx Deutsche Post Financial Analysis

Overview UPS FedEx Deutsche Post Balance Sheet (Assets) 10Q

Overview UPS FedEx Deutsche Post Balance Sheet (Liabilities) 10Q

Overview UPS FedEx Deutsche Post Balance Sheet (Assets) 10K

Overview UPS FedEx Deutsche Post Balance Sheet (Liabilities) 10K

Overview UPS FedEx Deutsche Post Income Statement 10Q

Overview UPS FedEx Deutsche Post Comprehensive Income Statement 10Q

Overview UPS FedEx Deutsche Post Income Statement 10K

Overview UPS FedEx Deutsche Post Comprehensive Income Statement 10K

Overview UPS FedEx Deutsche Post Cash Flow (Operating) 10K

Overview UPS FedEx Deutsche Post Cash Flow (Investing) 10K

Overview UPS FedEx Deutsche Post Cash Flow (Financing) 10K

Overview UPS FedEx Deutsche Post Cash Flow (Operating) 10Q

Overview UPS FedEx Deutsche Post Cash Flow (Investing) 10Q

Overview UPS FedEx Deutsche Post Cash Flow (Financing) 10Q

Overview UPS FedEx Deutsche Post Stock Forecast

Overview UPS FedEx Deutsche Post Recommendation

Overview UPS FedEx Deutsche Post Deutsche post DHL

Trading sign : DPW : GR Trade on Xetra Stock market in Frankfurt Created in 1924 International since late 1990s Net sales : € 59 bn 480,000 employees in over 220 countries and territories Headquarter in Bonn, Germany Overview UPS FedEx Deutsche Post Deutsche Post American Depository Receipt

Overview UPS FedEx Deutsche Post 1Month Performance DHL : DPW : GR

Market cap : 28.5 Bn € Dividend indicated Gross Yield : 3,55% Shares outstanding : 1,213 M One year return : - 16,01% P/E : 19.27 EPS : 1,22€

Overview UPS FedEx Deutsche Post 1-Year Performance

Overview UPS FedEx Deutsche Post 5-Year Performance

Overview UPS FedEx Deutsche Post History

• Franz von Taxis in considered the founder of the modern postal system. By the mid-16th century, his successors had set up a courier network covering all of Western Europe. 1490 • Post stations became crucial focal points in the development of village and cities

• Elector Friedrich Wilhelm issues postal regulations establishing regular postal service between Berlin, Munster, Osnabrück, Kleve and Konïgsberg (Thirty Years’ War) 1646 • The decree grants private individuals (merchants) the right to have their mail transported by the electoral postal system.

• Foundation of Danzas by a lieutenant in Napoleon’s Grande Armée in Alsace : the postal company could deliver mails within 24 hours by 1885. 1815 • Danzas became a part of Deutsche Post in 1999.

• An international agreement on reciprocal transport of mail is signed by 22 nations in 1878 which will become a UN specialized agency in 1948 : Universal Postal Union. • Approximately 6 million postal employees in over 700,000 postal facilities around the world currently provide more than 6 billion people with 1874 some 440 billion postal shipments per year • In 1876, Chancellor Bismarck united the post and telegraph administration of the German Empire into one top-level administrative body

Overview UPS FedEx Deutsche Post History

• DHL is founded by Adrian Dalsey, Larry Hillblom, and Robert Lynn. • First, they transported cargo documents from San Francisco to Honolulu by plane. • Creation of a new sector of industry : international air express service that is to say rapid transport of documents and cargo papers by plane 1969 • DHL became a wholly owned subsidiary of Deutsche Post in 2002

• DHL expands its network at high speed. Following expansion in the Far East and in the Pacific Rim (1971), DHL also begins offering services in 1971 Japan, Hong Kong, Singapore and Australia (1972) and later in Europe (1974), Latin America (1977), the Middle East and Africa (1978).

• DHL adds parcel delivery to its list of services. Until this time, the company offered delivery of documents only. 1979

• DHL enters into a joint venture with the People’s Republic of China, making it the first express company to operate inside of China. 1986

Overview UPS FedEx Deutsche Post History

• Law concerning the structure of Posts and Telecommunication of July 1, 1989 : organizational and regulatory changes 1989 • 1990 : East German Deutsche Post in incorporated into Deutsche Bundespost

• Three companies emerged from Deutsche Bundespost (among them, Deutsche post) and they are converted into stock companies under private law. Gradually shares are offered for sale (from the federal government) to private shareholders. 1995 • Deutsche post started to innovate its distribution process.

• Two strategic acquisitions : Air Express International ( international airfreight) and Danzas (logistics provider). Deutsche Post acquires a dense transport network and an impressive of value-added services • 2000 : Deutsche Post AG goes public. 1999 • Progressively, Deutsche Post acquires DHL from Lufthansa Carga (1998-2002) • 2002 : STAR program : value creation and integration became the guilding principle across all functions, units, locations and employees

• DHL is launched in America and in the Asia-Pacific region. • 2005 : European relaunch 2004 • 2005 : acquires Exel for 5.5 bn € (110,000 employes in 13 countries) • 2006 : acquires Williams Lea (document management and mail services)

• Launching of its digital letter the E-postbrief (reliable as a letter and as fast as a e-mail). 2010 • 2012 : expansion in Asia. • 2013 : entry into the German long-distance bus market

Overview UPS FedEx Deutsche Post Recent Acquisitions

No acquisitions in 2015 Two acquisitions in 2014 In 2015, Deutsche Post has 139 subsidiaries in Germany and 658 abroad

Overview UPS FedEx Deutsche Post Corporate Strategy 2020: Focus. Connect. Grow

Presented in April 2014 Defines the group’s strategic priorities for the coming years Goal : become the company that defines the logistics industry - Focus : Continued expansion of logistics services in the world’s emerging markets (85 % of revenue coming from Focus Connect logistics business by 2020) and secure letter business in Germany - Connect : training for all employees, internal exchange of know-how (customer-oriented strategy), increase Grow quality - Grow : Expansion in growth markets (emerging markets) and segments (parcel business, e-commerce) by organic Growth (30 % of revenue stemed from emerging markets by 2020)

Overview UPS FedEx Deutsche Post Corporate Responsibility

• Corporate responsability report since 2003 • Deutsche Post publishes its first Environmental Report under the title “Naturally networked.” • Greenhouse gas efficiency as a key indicator : in 2015 improved to 25 index points • 2004 : Deutsche Post presents the first Human Resources and Social Report in the company’s history, entitled “The Individual, Creative Force of the Company”. • It focuses on the content and goals of the Group’s human resources strategy as well as the tasks and accomplishments of its employees. • Employee opinion survey as a key performance indicator : active Leadership achieves an approval rating of 72 %

Overview UPS FedEx Deutsche Post Shareholder Structure

KfW Bankengruppe is a public bank whose capital is held for 80 % by the Federal Republic of Germany and for 20 % by the Länder.

Overview UPS FedEx Deutsche Post Products Being Produced

Four services on a equal basis in percentage of sales Deutsche Post’s strategy : • Develop international segments • Sold of fashion logistics business in Mail France (2013) 26% • Sold of Exel Direct and Llano Logistics (US) (supply chain division) Supply • Concentrate on fast-growth areas Corporate Chain • Offer specialised, Full-line solutions for supply 0,1 % chain Deutsche 25,7% • Wine to China Post DHL • Concentrate on niche areas (pharmaceuticals logistics) • Multi-hub strategy for the asia pacific region Global air, • In 2007, moved from Manila to Hong Express ocean and Kong. road freight 22,4% • Focused on its facility in Shanghai 25,7 % • Invest in facility expansion

Overview UPS FedEx Deutsche Post Mail : Post, E-commerce, Parcel Postal services : 61 million letters delivered every working day (Europe’s largest postal company) • Deliver physical, hybrid and electronic letters and merchandise • Special services : cash on delivery, registered mail, insured items, E-POST • 62 % of market volume (market : €4,4bn) Targeted and cross-channel advertising : - Dialogue marketing services to allow advertisers to efficiently reach specific customer target groups (end-to-end services : advertising mail, telephone and e-mail marketing). - 13,1% of market (market : €16,5 bn) Sending mail and merchandise internationally : - International dialogue marketing services - Mail and light-weight merchandise shipments (B2C) - 15% of market (market : €6,6bn) Worldwide portfolio of parcel and e-commerce services : - Offer a dense network of parcel acceptance points in Germany (Parcelcopter and car drop delivery services, parcel box units for apartment building to send and receive) - Marketplace : Allyouneed.de and AllyouneedFresh.com, DHL Multibox (online grocery shopping segment) - 2-Mann-Handling service for sending larger and heavier items ordered online - 43,7% of market (market : €9,5 bn)

Overview UPS FedEx Deutsche Post Express

• In more than 220 countries and territories • 2,5 million customers • Pre-defined delivery service : Time Definite International • Industry-specific services (Medical Express transport solution with thermal packaging for temperate-controlled, chilled anf frozen content), collect and return (high tech industries) • One of the latest innovation : in 2015, DHL introduced the LifeTrack App, the first cold-chain tracking mobile app designed for the pharmaceutical industry

Overview UPS FedEx Deutsche Post Global Forwarding, Freight

Responsible within the Group for air, ocean and overland freight transport : two distinct services :

DHL Global Forwarding: DHL Freight: - By air : mostly concentrated in Europe weak market environment The European road freight market stagnant in 2015 Strong competition (low oil price no longer supporting market growth, DHL still Air freight leader volume increase due to the slight economic upturn in Europe) - By ocean Second-largest provider behind DB Schenker Slight grow and low freight rates (surplus capacities) Second global actor (behind Kuehne + Nagel)

Overview UPS FedEx Deutsche Post Supply Chain

• Customised logistics solutions for clients • Including warehousing, transport and value- added services, even recycling • All-inclusive services • Standardised solutions and local knowledge • DHL is the global market leader (Europe and North America) : hold 7,4 % of contract logistics market (2014) (market value : €176 bn) • Market really segmented : top ten players represent 20,3 % of the market • Some industries concerned with supply chain services : life sciences & healthcare sector, automotive sector.

Overview UPS FedEx Deutsche Post Fleight

European Air Transport Leipzig is DHL’s Airline (100% subsidiary of DHL express). EAT has : • 11 Boeing 757 • 14 Airbus 300-600 freighter aircraft • More than 750 pilots, maintenance engineers and specialists

The total DHL fleet capacity is of more than 250 aircrafts (170 dedicated jet aircrafts and more than 80 feeder aircrafts). It serves over 500 airports via 20 regional hubs and three global hubs in Leipzig, Cincinnati and Hong Kong. What’s more, they use third-party providers to expand the capacity of the fleet as demand requires.

Deutsche Post develops new means of transportation more eco-friendly (Iveco Electri Daily lorry).

Overview UPS FedEx Deutsche Post Revenue by Operating Division

Overview UPS FedEx Deutsche Post Firm Cost Structure and Revenue Composition

EBIT margin by segment Unit : % of EBIT over sales, weighted average 2011-2013

Each segment represent approximatively 25 % of sales

Nevertheless, Express and Mail are the most profitable segments (8% EBIT margin). They altogether represent 48,4% of DHL sales.

DHL has spent 3% of its consolidated revenues to improve its service.

Overview UPS FedEx Deutsche Post Capital Expenditure by Segment and Region

Capex breakdown by segment Unit : % of share, weighted Capex 2015 : € 2,02 bn (+7,9%) average 2011-2013 • € 1,800 in property, plant and equipment (€54 million in aircraft, €109 million in IT equipment, € 179 million in transport equipment) • € 224 million in intangible assets (excluding goodwill)

Deutsche post invest a lot in Supply Chain, then Global air, Ocean and Road Freight (purchase of new aircraft or trucks)

Deutsche Post is mostly investing in Germany (domestic market)

Overview UPS FedEx Deutsche Post Geographic Sales

Geographic sales : Percentage of sales (geographically • Deutsche post is focused on Europe speaking) Other (63% in Europe) regions • Starts to develop other regions and 4% products segment. ( due to Europe crisis)

Asia Pacific 16% Germany 31%

Europe 32% Americas 17%

Overview UPS FedEx Deutsche Post Costs: Revenue 2015 : € 59 230 M

Flexibility has a price … Just-in-time services (maintenance, …) Overview UPS FedEx Deutsche Post Corporate Structure

DHL is a German stock corporation.

Deutsche Post has a dual management and supervisory structure.

In the supervisory board : • Shareholders’ Representatives : 10 persons Among them : - Werner Gatzer, Federal Ministry of Finance - People from Danone S.A, Deutsche Lufthansa, Deutsche Postbank … • Employees’ Representatives : 10 employees - Among them, 6 women

Overview UPS FedEx Deutsche Post Management

Board of Management are appointed by the Supervisory Board and are responsible for the management of the company. The Board of Management currently consists of six members.

Observation about the Board of Management: - Management fully committed to DHL (Long term orientation) - Management in its fifties - One woman only - 2 members came from McKinsey&Co, one from Booz (consulting experience)