Consolidated Highlights
	Letter to the Shareholders
	Transforming Our Business
	Business Unit Results
	Improving the Company's Competitive Position
	Remembering Sept. 11
	Employees
	Board of Directors
	Summary

LETTER TO THE SHAREHOLDERS

To our shareholders:

In many ways, 2001 was one of the most challenging years American Express has seen in its 151-year history. During the first half of the year, we were confronted with a weakening economy, depressed equity markets, historically high default rates for high-yield securities and a sharp slowdown in spending by Corporate Cardmembers. This was followed by the terrorist attacks of September 11, which led to even sharper slowdowns in corporate and consumer spending, business travel and investment activity.

Together, these issues had a profound negative impact on nearly every aspect of our card, travel and financial services businesses. The impact was evident in many of the business indicators I will discuss later in this report. It was also evident in three significant items:

A first-half charge of $1.01 billion pretax ($669 million after-tax), reflecting write downs in the investment portfolio held by American Express Financial Advisors (AEFA) and losses associated with rebalancing the portfolio toward lower-risk securities;

Restructuring charges in the third and fourth quarters, totaling $631 million pretax ($411 million after-tax), primarily to cover the cost of reducing our workforce. In combination with reductions identified earlier in the year, we are reducing our staffing levels by approximately 16 percent or 14,500 jobs; and

The one-time costs and business interruption losses of $98 million pretax ($65 million after-tax) resulting from the September 11 attacks. As a result, our financial performance in 2001 fell far short of our long-term targets of 12 to 15 percent growth in earnings per share, return on equity of 18 to 20 percent and revenue growth of 8 percent, on average and over time:

Net income was $1.31 billion, down 53 percent from $2.81 billion in 2000. Diluted earnings per share declined 53 percent to $0.98 from $2.07.

Net revenues on a managed basis totaled $21.4 billion, down 3 percent from $22.1 billion in 2000.

Return on equity was 10.9 percent, compared with 25.3 percent in 2000.

The factors cited above also contributed to a decline in our share price. Total shareholder return for 2001 declined 34 percent relative to 2000, exceeding the percentage declines of both the S&P 500 (down 12 percent) and the S&P Financials (down 9 percent).

Following the losses in our high-yield portfolio and the decision to take the third quarter restructuring charge, we suspended our share repurchase program. This action helped us maintain our capital position. No share repurchases are anticipated for approximately the first half of 2002.

On an absolute basis, we are disappointed with our 2001 results. Our relative performance, however, was generally in line with that of our competitors, particularly diversified financial companies and financial services firms. Several key business indicators - notably lending balances, consumer billings and earnings from our financial services business (excluding high-yield losses and related charges) - compared well with those of relevant industry peers, demonstrating our solid competitive position.

While the disappointment in our financial results cannot be minimized, 2001 was also a year of significant accomplishments for the company. We did not merely weather the storm. We took decisive action in making a series of fundamental changes that strengthened our position for the long term. In fact, as a result of these measures, I believe we are now in a stronger position than we have been over the last several years.

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In 2001, total shareholder return declined 34 percent, exceeding the percentage declines of both the S&P Financial Index and the S&P 500 Index. For the past five years, American Express' cumulative return to shareholders outperformed the S&P Financials and the S&P 500.