Consistency in Uncertain Times

As we began 2002, our headquarters staff was dispersed across three states, and the emotional journey back to our headquarters building in lower Manhattan was months away.

Our financial results in 2001 had been disappointing, and we faced a challenging economic environment in the year ahead. Rather than become distracted by these factors, we recognized the challenges before us and focused on those things we could control, working together to implement our strategies, serve our customers and improve our business models.

The renewal within our company and community was symbolized by the return to our headquarters at the World Financial Center this past spring, which in many respects was a fitting metaphor for the revitalization that took place across our business in 2002.

The business conditions that we — and virtually all companies — currently face are daunting. There is uncertainty about economic conditions and the equity markets; real and legitimate concern over national and world security; and an understandable reduction in the level of trust that the general public has in the business community. In times like these, it is important to have maximum flexibility to anticipate and react to challenges. At the same time, it is essential to have a clear sense of who you are and to adhere to your traditional values.

We know who we are. We continue to be guided by our corporate vision, which is to become the world's most respected service brand. The strategies we have in place to grow our core business in global payments and retail financial services are sound. While we have made many changes to our business models over the past two years, they are grounded in consistent principles and do not represent changes to our identity.

A corporate identity is also about what you stand for as an organization. Given our long history, what we stand for at American Express is well established. We are a premium provider, committed to demonstrating the qualities inherent in our brand — trust, integrity, service and quality. We aim for any product or service we offer, and any management action we take, to support our brand and reflect these qualities.

Being a premium provider is at the heart of who we are in the marketplace. While American Express is a leader in serving the affluent and upscale market in most of our businesses, being a premium provider does not just mean serving elite customers. For us, it means providing products and services that offer premium value in every line of business and for every customer segment we choose to serve.

By providing premium value to our customers, we will earn their loyalty and have greater pricing flexibility in the marketplace. To ensure this takes place, we are increasing the rigor we bring to measuring what superior value means to our customers, developing the right products and services to meet those needs better than our competitors, and having the appropriate measures in place to reward performance against our customer goals.

Our commitment to customers is paralleled by our commitment to our employees. At American Express, we work hard to create an environment in which all of our people feel that they are valued and can thrive. Staying true to this commitment, particularly in tough times, is essential.

Return and Renewal_ Eight months after the attacks of September 11, 2001, the company's return to its restored headquarters symbolized the company's commitment to help revitalize lower Manhattan. Continuing its longstanding tradition of good corporate citizenship, American Express sponsored a variety of events to bring people back downtown, including the first-ever Tribeca Film Festival and the Downtown NYC River to River Festival 2002.

Some of the changes that we have made in the past two years in response to the harsh environment, such as our workforce reductions, have involved difficult choices. By the close of 2002, we had reduced our workforce by 13,400 positions, or 15 percent, from where we stood at the start of 2001. This change was painful for the organization but necessary to strengthen the company for the future. We made the tough calls that were required, but we did it in a thoughtful way that built upon and remained true to our traditional values as a company. As a result, rather than becoming demoralized or distracted, our employees remained motivated and focused — more resilient and confident in our ability to be successful.

Results from our annual employee satisfaction survey support this view. About 86 percent of employees worldwide participated in the 2002 survey. The results were strong, showing improvement for the company overall and within most major businesses and markets. Company-wide, there were gains in 11 of 12 categories measured in the survey. (One category remained unchanged.) The results also compared very favorably with external benchmarks.

Due to our focus on maintaining and improving the quality of our workplace, we are receiving increased external recognition as a top employer. During 2002, we appeared on a record 16 media lists, including Working Mother's 100 Best Companies for Working Mothers (where we made the top 10 for the first time) and Fortune's 100 Best Companies to Work For in America (on which we moved up significantly to 36 from 91). We were also cited on numerous occasions for the successful return to our headquarters and our commitment to rebuilding the lower Manhattan community.

Our return to our corporate headquarters building in lower Manhattan, which had been damaged in the attacks of September 11, 2001, was an important aspect of our company's renewal in 2002. In May, we celebrated our return to the American Express Tower. Our headquarters staff had been scattered across seven locations in New York, New Jersey and Connecticut while we waited for repairs to be completed and the World Financial Center area to be restored. During this time, our employees showed great resolve, refusing to become distracted when physical circumstances forced us to work apart from each other. Our actions in reaffirming our commitment to New York City and supporting the revitalization of lower Manhattan are a source of pride for our people worldwide.

I would like to once again thank all the employees of American Express for their dedication and incredible efforts over the past year. Through all the distractions and challenges we faced, they stayed focused on providing exceptional service to our customers and moving the business forward. The results that we achieved and the progress we made in 2002 are a testament to their character and talent. Our people are the source of our strength and success, and I am proud to work with them.

Board of Directors

The importance of strong, independent boards of directors was highlighted by the corporate scandals of 2002. American Express continued to benefit from the governance, counsel and guidance of our directors. On behalf of our employees and shareholders, I would like to thank the Board for the diligence and insight they bring to exercising their duty to the company. In the past year, we welcomed a new addition to our Board: Robert D. Walter, Chairman and Chief Executive Officer of Cardinal Health, Inc.

I also would like to express our gratitude to Beverly Sills Greenough, who retired from the Board in April, for the many contributions she made to our company during her 12 years of service.