annual report 2011 - panalpina · unit of measurement based on a 20-foot iso container ......

Annual Report

2011

A passion for solutions

Letter to Shareholders 4

Report of the Executive Board 6

Group Management Structure 15

Reporting Regions 16

Product Divisions 18

CEO Statement 30

Success Factors

Global Network 34

Industry Verticals 36

Employees 38

Compliance and Corporate Culture 40

Information Technology 42

Procurement 43

Quality, Security and HSE 44

Responsibilities

Social Commitment 49

Corporate Governance 50

Global Reporting Initiative 61

Consolidated and

Annual Financial Statements 2011

Consolidated Financial Statement 64

Annual Financial Statement 134

Appendix

Information for Investors 142

Pictures 144

Imprint 145

Contents

Twenty-foot Equivalent Unit (TEU)

Unit of measurement based on a 20-foot ISO container

(6.10 meters long)

Full Container Load (FCL)

This refers to containers that are fully loaded by the consignor and

unloaded by the recipient at the destination.

Less than Container Load (LCL)

This refers to part-loads or small loads that are grouped together and

transported in containers throughout the transport chain.

2007 2008 2009 2010 2011

10,500

9,000

7,500

6,000

4,500

3,000

1,500

0

Net forwarding revenue

7,1

64

6,5

00

8,8

78

5,9

58

8,6

41

2007 2008 2009 2010 2011

1,000

875

750

625

500

375

250

125

0

Shareholders’ equity

871

86

4

812

9151,

02

6

2007 2008 2009 2010 2011

Gross profit

2,050

1,900

1,750

1,600

1,450

1,300

1,150

1,000

1,4

80

1,4

77

1,8

03

1,7

42

1,3

77

Consolidated profit

245

210

175

140

105

70

35

0

–35

2007 2008 2009 2010 2011

114 12

7

10

–2

6

211

320

280

240

200

160

120

80

40

0

EBIT

2007 2008 2009 2010 2011

19

3

29

9

30

174

15

The containers are unloaded when they reach the various recipients

at different destinations. The term LCL is used mainly for containers

shipped as ocean freight.

Ocean freight and air freight: a comparison of capacity

The capacity of a 12,000-TEU container ship is equivalent to that of

1,000 Boeing 747 cargo planes.

The English version takes precedence over the German version.

Glossary

Five-year developmentin million CHF

Core Services

Standard

Warehousing

Overland

Value-Added Logistics Services

Supply Chain Services

Air and

Ocean Freight

Panalpina at a glance

The Panalpina Group is one of the world’s leading providers

of supply chain solutions, combining intercontinental air

and ocean freight with comprehensive Value-Added Logis-

tics Services and Supply Chain Services.

Thanks to its in-depth industry know-how and customized

IT systems, Panalpina provides globally integrated end-to-

end solutions tailored to its customers’ supply chain manage-

ment needs. Panalpina operates a global network with

some 500 branches in more than 80 countries. In a further

80 countries, it cooperates closely with partner companies.

Panalpina employs approximately 15,500 people worldwide.

Vision

We deliver reliable supply chain solutions that provide value

to our customers – every time.

Core values

Performance – is our continuous commitment to long-term

sustainable development and financial success: We aspire

to out-play competition.

Integrity – is the compass which drives our behavior and

attitude towards each other and our customers: We keep

our promises and comply with the rules.

Professionalism – is how we create value for our custom-

ers through our solutions and by anticipating their business

needs: We know our business and create value for our

stakeholders.

Panalpina’s business model: focussed to deliver end-to-end supply chain solutions

Panalpina Annual Report 2011

Key figures 2011

Net forwarding revenue per product division

in % 2011 2010

Return on equity (ROE) 14.9 – 3.1

Return on capital employed (ROCE) 43.2 – 5.4

Air Freight

Ocean Freight

Logistics

50%

36%

14%

Europe, Middle East, Africa and CIS

North America

Central and South America

Asia Pacific 19%

19%

13%

49%

Share price development in comparison to SPIReturns

Net forwarding revenue per region

Net forwarding revenue of CHF 6,500 million

Currency adjusted gross profit increase by 12 % year-on-year, supported

by organic growth across all regions and product divisions

Consolidated profit of CHF 127 million

Net working capital intensity at all-time low of 1.1 %

Forwarding volumes: 848,000 tons in Air Freight (– 5 % year-on-year) and

1,310,000 TEUs in Ocean Freight (+ 6 % year-on-year)

Swiss Performance Index (SPI)

Panalpina World Transport110%

100%

90%

80%

70%

60%

Jul 1Dec 31,

2010

Mar 1 May 1 Sep 1 Nov 1 Dec 31,

2011

4


Letter to Shareholders

Sustainably profitable

Panalpina closed the year under review with a solid business

result. It recorded a gross profit of CHF 1,477 million and

consolidated earnings of CHF 127 million. In comparison to

2010, Panalpina’s ocean freight volumes grew by 6 % to

a new record of 1,310,000 TEUs transported. Air freight

forwarding volumes sank by 5 % to 848,000 million tons,

but an increase in gross profit per ton of air freight compen-

sated the decline in volumes. The Company acquired new

business and expanded existing mandates in all customer

segments.

Clear growth strategy

In its corporate strategy, Panalpina confirmed its role as

one of the leading providers of global supply chain solutions

and dedicated itself to sustainable, profitable growth. The

focus on profitability with a product-oriented organization

targeted towards strategic customer segments has already

proven itself in the reporting year. The ten centers of exper-

tise are targeted entirely toward the needs of customers,

which enables to recognize and develop market niches and

future markets. The asset-light business model has again

proved its flexibility. It enables Panalpina to rapidly and effi-

ciently react to uncertain market situations in order to take

advantage of growth opportunities.

To implement the corporate strategy with its ambitious

growth objectives in the regions, Panalpina will introduce

three regional CEOs in 2012. This places the decision

makers closer to the customers, which enhances Panalpina’s

clout in the markets. The three regional CEOs will belong

to the Executive Committee, the operative management

body. The regional management structure will be kept lean.

Another route for generating growth is through acquisitions.

Panalpina consistently reviews potential acquisitions for

their value-generating and strategic potential. Panalpina

found such a candidate in early 2011 with Grieg Logistics.

Panalpina can expand its global presence with this Nor-

wegian logistics service provider, particularly in the oil and

gas industry, and integrate the know-how. Despite the

constant investments in organic growth, Panalpina remains

practically without debt. The Company is financially solid,

with adequate cash reserves and remains open to oppor-

tunities for acquisitions that make a good fit.

Board of Directors and Executive Board

With Lars Förberg and Knud Elmholdt Stubkjær, the Annual

General Meeting elected two new proven experts to the

Board of Directors on May 10, 2011. The Swedish citizen

Lars Förberg, is Managing Partner and co-founder of

Cevian Capital. The Dane Knud Elmholdt Stubkjær, looks

back on a long and successful career in the shipping in-

dustry, including as CEO of the Mærsk Line, which belongs

to the Danish A.P. Møller-Mærsk Group. Board member

Günter Rohrmann stood down from the Board at the Annual

General Meeting. The composition of the Executive Board

remained unchanged in 2011.

Dividend payout

Based on the solid results of the 2011 business year, the

Board of Directors of Panalpina World Transport (Holding)

Ltd. proposes to the Annual General Meeting a dividend

payout of CHF 2.00 and a nominal value payback of

CHF 1.90 per share.

Appreciation

Panalpina thanks the high motivation and excellent commit-

ment of its employees for the success and positive devel-

opment in 2011. They deserve the highest recognition from

the entire Board of Directors and the Executive Board. We

extend our thanks to our customers and suppliers for the

partnership and the trust placed in the Company, as well as

our valued shareholders for their loyalty and constant con-

fidence. We look forward to a successful future together.

Monika Ribar Rudolf W. Hug

Chief Executive Officer Chairman of the Board

of Directors

With a consolidated profit of CHF 127 million, Panalpina left an economically volatile

year behind and entered a new year strengthened for the future. Concentration on

the strategic orientation and the consistent focus on profitability are already paying off.

Stakeholders can be paid a dividend.


5

Letter to Shareholders

6


Report of the Executive Board

Market development

After a period of strong growth in 2010, world trade and

global freight markets were characterized by the uncer-

tainty of economic prospects around the world in 2011.

The International Monetary Fund estimates that global trade

volumes rose approximately 7 % in 2011 – only about half

of the 13 % growth rate posted the year before, which had

been boosted by the restocking of inventories. In addition,

and in contrast to 2010, growth in 2011 was relatively

unevenly distributed across geographical trade lanes and

transport modes. The amount of international cargo moved

by air freight in 2011 slightly declined compared to the year

before and thus once again fell short of the record volumes

reached in 2007. In contrast, the global ocean freight

market developed more robustly, growing by more than

5 %, making 2011 a new record year with some 160 million

TEUs transported on the ocean globally.

Freight moved on two of Panalpina’s major trade lanes,

the far east westbound and transpacific eastbound routes –

jointly comprising around one quarter (Air) and one third

(Ocean) of the Group’s volumes – developed under-propor-

tionately in 2011 in comparison with cargo moved on other

trade lanes due to relatively lackluster imports into Europe

and North America. In Japan, the world’s fourth largest

economy, the devastating earthquake and tsunami in March

led to a major disruption of economic activity for several

weeks, although, fortunately, with no major adverse conse-

quences for either Panalpina employees or for the Group’s

business.

At the same time, above-average growth was recorded for

trade lanes connecting some of the largest emerging

markets, such as China, India and Brazil – markets in which

Panalpina continued to invest and further expanded its

presence during the year under review. As such, in 2011,

three new offices were opened in India (Ahmedabad,

Jaipur and Ludhiana). In China, Panalpina complemented

its increasing footprint in the central part of the country

through the opening of an office in Chongqing at the begin-

ning of the year, adding to the two branches in Wuhan

and Chengdu, bringing the total number of offices in the

Greater China region to 20. In addition, Panalpina also

opened a logistics center in Tianjin, which marked an impor-

tant milestone in the Group’s forward strategy to extend

its Value-Added Logistics Services capabilities.

Strengthening of the corporate platform

Throughout the year, notwithstanding an increasingly

cloudy economic environment, Panalpina kept its focus on

further strengthening its corporate platform and setting the

ground for leveraging future growth. During the first half

of the year, the Group also reviewed, clarified and refined

its strategy for the years to come and, in this context, in

June, the Group announced a mid-term target of raising the

EBITDA-to-gross profit conversion ratio to 20 % by 2014.

Panalpina’s ambition is to offer comprehensive end-to-end

supply chain solutions to its customers, with the core

service offering in Air and Ocean Freight complemented

by Supply Chain Services and Value-Added Logistics

Services.

The year 2011 was characterized by widespread uncertainty of economic prospects,

resulting in nervous market behavior and high volatility. Growth slowed, particularly in

the debt-burdened economies of the eurozone and the United States, where consumer

confidence slid to very low levels. However, robust growth continued in many emerging

markets, led in size by China, India and Brazil. Furthermore, the Company’s reporting

currency, the Swiss franc, appreciated significantly against all major currencies during

the reporting year and impacted the Group’s financial results materially. In this chal-

lenging environment, Panalpina achieved solid organic gross profit growth and further

solidified its position within the industry. Sticking to its focused strategy of going for

sustainable and profitable growth, the Group managed to increase its profitability, further

expanded its profit margins and generated a substantial amount of free cash flow.

Focused execution leads to solid financial results


7


Executive Board (clockwise): Monika Ribar (President and CEO), Marco Gadola (Chief Financial Officer),

Karl Weyeneth (Chief Operating Officer), Christoph Hess (Chief Legal Officer and Corporate Secretary) and

Alastair Robertson (Chief Human Resources Officer)

8



On a product level, all three product divisions (Air Freight,

Ocean Freight, Logistics) were strengthened by a number

of key divisional management hires during the reporting

year. Moreover, Panalpina also continued its strict focus on

restoring unit profitability, particularly gross profit per ton

of air freight, which rose 9 % year-on-year (+ 21 % in local

currencies). As a consequence, a number of larger, yet un-

profitable customer contracts were not renewed, leading

to an adverse effect on the Group’s transported air freight

volumes, because, in a declining market, the volumes

represented by these contracts could not be immediately

replaced with new business. In terms of product innova-

tion, Panalpina signed a new ACMI (aircraft, crew, mainte-

nance and insurance) contract for two Boeing 747-8Fs with

one of its long-term business partners. The aircraft will enter

service in the first half of 2012 and operate in Panalpina’s

unique own-controlled air freight network, replacing two

Boeing 747-400Fs. Compared to the 747-400F, the indus-

try’s newest freighter has 16 % additional cargo volume,

but is expected to have the lowest carbon dioxide emissions

in its class. With the new aircraft, Panalpina is optimally set

up to meet industry specific requirements and the increas-

ing demand for large-freighter capacity, especially in the

Healthcare, Hi-tech, Automotive and Oil and Gas verticals.

In Ocean Freight, in line with the corporate strategy to

aggressively expand its Less than Container Load (LCL)

business and to focus on emerging markets, Panalpina

launched more than 50 new LCL point-to-point services

in 2011. Most of the new regular services run out of Asia

and meet increased customer demand for reliable LCL

solutions on the Intra Asia and Asia-Europe trades.

In the third product division, Logistics, the Group extended

its product line with a range of new services which all sup-

port the strategic focus of offering value-added services to

customers. In addition to launching regional centers of

expertise on three continents, Panalpina also opened sev-

eral new logistics centers, including a facility in Huntsville

(USA). The 3,700 square-meter Huntsville Logistics Center

is situated in close proximity to the Panalpina Huntsville

hub and provides complete kitting and parts assembly as

well as temperature-controlled storage areas.

Out of its nine existing industry verticals where Panalpina

has a dedicated setup in place to effectively serve its cus-

tomers with industry-specific solutions, four focus industry

verticals were defined, which are particularly well aligned

with the product strategies: Consumer and Retail, Health-

care, Hi-tech, and Oil and Gas. In terms of gross profit

growth, the largest advances during the reporting year

came from Automotive, Healthcare, Hi-tech, Telecom and

Fashion. In Oil and Gas, the signing of a strategic services

master agreement with one of the world’s largest oil and

gas companies marked a major milestone in the execution

of the Group’s growth strategy. The scope of the multi-year

agreement comprises transportation services for air, ocean,

road and rail, industrial projects, freight management and

other logistics services connected with the exploration and

production of oil and gas.

While Panalpina aims for predominantly organic growth, it

also looks selectively into acquisition opportunities to sup-

port and accelerate the execution of the corporate strategy.

One company which the Group identified as an optimal

strategic fit and acquired in 2011 is Grieg Logistics, a lead-

ing logistics provider to the Norwegian oil and gas indus-

try with approximately 100 staff and an annual turnover of

roughly NOK 400 million (CHF 67 million). Through this ac-

quisition, Panalpina added seven new locations in Norway

and thus significantly expanded its presence in the country.

Through the set of initiatives embarked on during the year,

complemented by a new volume record in Ocean Freight,

Panalpina achieved a solid organic (ie, expressed in local

currencies) gross profit growth of 12 % and thus managed

to further solidify its position within the industry. Further-

more, through effective cost management, profitability was

significantly increased and profit margins further expanded

in 2011.

Outlook

The economic situation in many of the developed nations –

a majority of which are struggling with critical levels of debt

and continuously high levels of unemployment – is set to

remain challenging in the years ahead, while the stability of

the financial sector yet needs to be restored. On the other

hand, growth prospects for many of the emerging econo-

mies remain promising. Regardless of the short-term eco-

nomic environment and in line with its sustainable, profitable

growth strategy, Panalpina remains committed to further

improving productivity while continuing to invest selectively

and specifically in Marketing and Sales, IT and Value-Added

Logistics Services competence and maintaining a strong

focus on cost control – all with the aim of delivering reliable

solutions to our customers and ensuring above-market

growth. To facilitate implementation of the corporate strat-

egy, to drive growth and increase profitability, the Panalpina

Group will put in place (effective July 1, 2012) three regional

CEOs (with respective respon sibility for Asia Pacific, Europe

and Middle East, and the Americas), each supported by a

small team of dedicated regional resources. With this lean

regional setup, the decision-making power will shift from


9


Panalpina’s headquarters closer to where decisions are

made by its customer base, facilitating exploitation of

regional and local growth opportunities in the various mar-

kets where Panalpina operates.

Overall, Group management expects world trade and

global outsourcing to expand further in the years to come,

albeit with a bias towards the emerging economies –

particularly in Asia, Latin America and Africa, which will

continue to gain in relative importance. With its global and

asset-light network, coupled with the ability to react swiftly

and offer its customers first-class, tailor-made, end-to-

end supply chain solutions, Panalpina is well prepared to

take advantage of the growth opportunities ahead and

to further enlarge its footprint in the global logistics market.

Net forwarding revenue (NFR)

With the Swiss franc as its reporting currency, Panalpina’s

financial results in 2011 were massively distorted by the

strength of the Swiss franc versus all foreign currencies

relevant to the Company. On average, the euro and the

US dollar lost approximately 11 % and 15 %, respectively, in

value against the Swiss franc during the reporting year.

Net forwarding revenue amounted to CHF 6,500 million,

a reduction of 9 % compared to the CHF 7,164 million the

year before, yet in local currencies, NFR advanced 2 %

versus the prior year. This slight increase can be attributed

to a variety of factors, including a balanced volume effect

(more shipments handled in Ocean Freight and Logistics,

fewer shipments handled in Air Freight) as well as factors

over which Panalpina has limited influence, such as a signifi-

cant increase in oil prices, resulting in higher fuel surcharges,

which were counterbalanced by sharply lower average

freight rates prevailing in the market caused by significant

overcapacities.

At regional level, net forwarding revenue declined in all

four reporting regions due to a variety of factors. In Europe,

Middle East, Africa and CIS (EMEA), NFR decreased 13 %

to CHF 3,171 million. This region recorded a material adverse

translation impact from the weak euro, and was also

affected by the import weakness of many European econ-

omies and falling freight rates. EMEA remains Panalpina’s

largest region in revenue terms, contributing to almost half

of the Group’s turnover.

In North America, NFR fell by 10 % to CHF 1,270 million, a

large part of which can be attributed to the depreciating

US dollar. Moreover, persistently low consumer confidence

resulted in lower import volumes.

Compared to 2010, Panalpina’s NFR in 2011 in Central and

South America declined 1 % to CHF 834 million. The Group

recorded strong double-digit volume growth in this region

on the import side, while the currency translation effect

and falling freight rates both acted as a drag on turnover.

The Asia Pacific region saw a decline in NFR of 4 % to

CHF 1,225 million. Also here, the translation of locally gen-

erated turnover into Swiss francs along with severely

depressed freight rates, particularly on the Asia-Europe

route, overshadowed double-digit volume growth rates on

lanes such as Asia to Latin America and Intra Asia.

In 2011, the Panalpina Group generated 49 % of its net for-

warding revenue in Europe, Middle East, Africa and CIS,

19 % each in North America and Asia Pacific and 13 % in

Central and South America.

Net forwarding revenue per region

4,000

3,000

2,000

1,000

0

Asia PacificNorthAmerica

Central andSouth America

Europe, Middle East,Africa and CIS

3,1

71

1,2

70

83

4

1,2

25

3,6

40

1,4

09

84

5

1,2

70

2011 2010

in million CHF

Net forwarding revenue per region (2011)


North America


Asia Pacific 19%

19%

13%

49%

On a divisional level, the oversupply of carrier capacity,

which was prevalent for a large part of the year, led to

a substantial drop of carrier freight rates, which – together

with the strength of the Swiss franc – adversely impacted

the Group’s NFR in Air Freight and Ocean Freight, due to

the pass-through character of freight rates for an asset-light

service provider like Panalpina. These impacts were only

partially mitigated by increasing oil prices, which in 2011 on

average rose more than 40 % above 2010 levels, resulting

10



in distinctly higher fuel and bunker surcharges (essentially

also items with a pass-through character) which the Group

invoiced to its customers.

Influenced by these developments and coupled with lower

volumes, but improved pricing discipline per file handled,

as described in the preceding paragraph, the Group’s NFR

generated with Air Freight decreased by 6 % to CHF 3,281

million. In the Ocean Freight division, NFR saw the biggest

impact from falling freight rates and decreased by 17 % to

CHF 2,313 million, despite an expansion of volumes. In the

third product division, Logistics, NFR saw an increase of

2 % to CHF 906 million, which was driven by an expansion

of business activities particularly in distribution, value-

added logistics services as well as overland.

In 2011, the Panalpina Group generated 50 % of its net for-

warding revenue with Air Freight, 36 % with Ocean Freight

and 14 % with Logistics.

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

Air Freight Ocean Freight Logistics

3,5

03

3,2

81

2,3

13

90

6

2,7

71

89

0

Net forwarding revenue per product division

in million CHF

2011 2010

Air Freight

Ocean Freight

Logistics

Net forwarding revenue per product division (2011)

50%

36%

14%

Gross profit (GP)

Gross profit, a better measure of actual sales performance

than net forwarding revenue in the forwarding industry,

remained essentially flat at CHF 1,477 million in 2011 (2010:

CHF 1,480 million). Organically (ie, in local currencies),

however, GP increased by 12 %.

With respect to regional performance, Europe, Middle

East, Africa and CIS is also the most important region for

Panalpina in terms of gross profit generation, representing

approximately half of the Group’s gross profit. In 2011,

gross profit generated in the region increased 6 % in local

currencies, supported by higher freight volumes on all

major export trade lanes. Translated into Swiss francs, GP

in this region decreased by 4 % to CHF 731 million.

In North America, gross profit translated into Swiss francs

took a major hit due to the weak US dollar, but nevertheless

grew by 2 % to CHF 271 million. In local currencies, gross

profit even grew by 19 %, which is a reflection of new busi-

ness generated in various industry verticals, higher volumes

handled on transatlantic routes and strong growth in

exports to Central and South America.

Asia Pacific and Central and South America recorded

similarly strong increases in GP, which management attri-

butes to the relatively better economic development of

these regions in 2011, which manifested itself in strong

intraregional and import-related trade flows in and between

these parts of the world. In Asia Pacific, gross profit rose

5 % (+ 18 % in local currencies) to a record CHF 313 million,

making this region the Group’s second largest in terms of

GP, while gross profit in Central and South America

increased 4 % (+ 19 % in local currencies) to a total of CHF

162 million.

In 2011, the Panalpina Group generated 50 % of its gross

profit in Europe, Middle East, Africa and CIS, 21 % in Asia

Pacific, 18 % in North America and 11 % in Central and

South America.

Gross profit per region

800

600

400

200

0

Asia PacificNorthAmerica

Central andSouth America

Europe, Middle East,Africa and CIS

76

0

731

271

16

2

313

266

156 2

98

in million CHF

2011 2010


11


Gross profit per region (2011)

21%

18%

11%

50%Europe, Middle East, Africa and CIS

North America


Asia Pacific

In Air Freight, a number of larger, yet unprofitable, customer

contracts were not renewed due to the Group’s focus on

restoring unit profitability. This led to an adverse effect on

the Group’s transported volumes, which declined by 5 %

compared to the year before. In addition to an improved

pricing discipline, the Air Freight division also benefited for

the first time from a centrally managed volume tender ini-

tiative, which led to a reduction in the cost of goods sold.

These efforts combined led to an increase of 9 % (+ 21 %

in local currencies) in gross profit per ton of Air Freight,

which more than compensated for the declining volumes.

As a result, the Group’s gross profit realized through Air

Freight forwarding services increased by 3 % in 2011

(+ 15 % in local currencies), reaching CHF 688 million ver-

sus CHF 667 million the year before.

In the Ocean Freight division, GP saw a slight contraction

of 3 % to CHF 439 million, but posted growth of 9 % in local

currencies. Panalpina’s volume growth rate amounted to

6 % and grew approximately in line with the market, with

market share gains in the year’s second half as the strength-

ening of divisional structures started to unfold. Gross profit

per 20-foot equivalent unit fell 8 % (+ 3 % in local curren-

cies) compared to the prior year, because the low level of

freight rates prevailing for most of the year and the highly

competitive environment made it difficult to maintain the

same mark-up to customers.

Gross profit generated through the Logistics division con-

tracted by 3 % to reach a total of CHF 350 million. In local

currencies, this product division recorded a growth of 9 %,

which was mainly driven by an expansion in the Group’s

Distribution, Value-Added Logistics Services and Overland

activities.

In 2011, the Panalpina Group generated 46 % of its gross

profit with Air Freight, 30 % with Ocean Freight and 24 %

with Logistics.

700

600

500

400

300

200

100

0

Air Freight Ocean Freight Logistics

66

7

68

8

43

9

35

0

45

3

36

0

Gross profit per product division

in million CHF

2011 2010

Air Freight

Ocean Freight

Logistics

46%

30%

24%

Gross profit per product division (2011)

Earnings before interest, taxes,

depreciation and amortization (EBITDA)

Panalpina achieved an EBITDA of CHF 212 million in the

reporting year (2010: CHF 62 million*), which was nega-

tively impacted by CHF 27 million through currency trans-

lation. The EBITDA-to-gross profit margin in 2011 improved

to 14.4 % (2010: 4.2 %*).

The two main items included in operating expenses –

personnel expenses and other operating expenses –

developed as follows:

(+ 12 % currency adjusted) at CHF 892 million in 2011

(2010: CHF 891 million). Panalpina increased its head-

count during the reporting period by 6 % to 15,700 full-time

equivalents (FTEs). This number includes approximately

100 FTEs which joined Panalpina from Grieg Logistics.

of the Group’s total operating expenses, amounted to

CHF 372 million in 2011 (2010: CHF 527 million*), equiva-

lent to a decrease of 29 % (– 20 % currency adjusted).

12



2011

2010*

EBITDA Operating expenses

in million CHF

62

1,418

1,265

212

Overall development

* Other operating expenses in 2010 included a charge of CHF 128 million which the Company recognized to cover all costs arising from the settlement of two legal claims in the United States and associated compliance consulting costs as well as from an internal reorganization project.

Regional development

Panalpina assesses segmental operating performance

primarily from a geographical perspective, as the Group’s

operations are predominantly managed by geography.

A useful measure for assessing the operating performance

by region is EBITDA. The segmental EBITDA provided in

the financial accounts developed as follows in the report-

ing period:

declined from CHF 78 million in 2010 to CHF 39 million

in 2011. The main reasons for the decrease are the depre-

ciation of the euro versus the Swiss franc, a reconditioned

compensation scheme introduced at the beginning of

the reporting year (reflecting compensation on a door-to-

door shipment between the exporting and importing

station), along with a general slowdown of business in

Europe and Africa.

US dollar, this region recorded a substantial improve-

ment in EBITDA, from a negative result of CHF 17 million

in 2010 to a gain of CHF 8 million in 2011, helped by the

elimination of certain unprofitable contracts as well as

the acquisition of new businesses with a variety of cus-

tomers across different sectors, including oil and gas.

Moreover, this region was also positively impacted by the

above mentioned compensation scheme.

decreased from CHF 19 million in 2010 to CHF 17 million

in 2011. While the operating result also suffered from an

adverse currency translation effect, this region made var-

ious investments in logistics facilities during the reporting

period in order to appropriately position the Company to

take advantage of future business opportunities.

CHF 92 million in 2010 to CHF 88 million in 2011, which

was mainly related to an adverse currency translation

effect as well as the already mentioned compensation

scheme.

to CHF 60 million in 2011. The improvement was sup-

ported by higher royalties from Group companies and an

adjusted renumeration model of centralized functions.

EBITDA per region

100

80

60

40

20

0

–20

78

39

8 17

88

60

–17

19

92

18

2011 2010*

in million CHF

* Figures adjusted by non-recurring charges as already mentioned.

Asia Pacific CorporateNorthAmerica

Centraland SouthAmerica

Europe,Middle East,

Africa and CIS

Balance sheet

Current assets

Panalpina’s cash and cash equivalents amounted to

CHF 573 million on December 31, 2011 and thus

increased by CHF 45 million from the year before, which

can be mainly attributed to the substantial amount of

free cash flow generated during the reporting period.

Trade receivables and unbilled forwarding services

increased by CHF 29 million, from CHF 1,033 million at

the end of 2010 (equivalent to 52 % of total assets) to

CHF 1,062 million at the end of 2011 (equivalent to 50 %

of total assets). The increase in trade receivables was

more than compensated by an increase in trade payables.

In total, the net working capital intensity (defined as net

working capital as a percentage of gross forwarding reve-

nue) at the end of 2011 was at a record low level of 1.1 %.


13


Non-current assets

Panalpina’s non-current assets increased from

CHF 303 million on December 31, 2010 to CHF 390 million

on December 31, 2011. The increase is primarily a result

of an increase in intangibles due to the acquisition of

Grieg Logistics, a Norway-based logistics company that

Panalpina acquired effective April 1, 2011, as well as

various investments in money market instruments classi-

fied as financial assets.

Total assets

Trade receivables and unbilled forwarding services

Other current assets

Non-current assets

Cash and cash equivalents

1,989

573 1,062 390 2,135110

529 1,033 303124

2011

2010

in million CHF

Trade payables and accrued cost of services

Panalpina’s trade payables and accrued cost of services,

which jointly comprised 63 % of total liabilities on Decem-

ber 31, 2011, increased to CHF 773 million, compared to

CHF 696 million on December 31, 2010. This favorable

development is primarily attributable to a further improved

payment discipline and renegotiation of payment terms

with various vendors.

Borrowings (short-/ long-term)

Total borrowings were further reduced from CHF 10 million

at year-end 2010 to CHF 7 million at year-end 2011.

Other liabilities

Panalpina’s other liabilities declined from CHF 471 million

at year-end 2010 to CHF 440 million at year-end 2011.

The key reason for this decline is a decrease of provisions

due to the payment of fines in connection with the settle-

ment of the two legal claims in the United States.

Total equity

The increase in shareholders’ equity is almost entirely

attributable to the change in reserves which – as a result

of the significant improvement of the net result for the

reporting year – rose from CHF 950 million on Decem-

ber 31, 2010, to CHF 1,053 million on December 31, 2011.

Total equity increased by CHF 103 million during the

reporting period, from CHF 812 million on December 31,

2010, to CHF 915 million on December 31, 2011.

Total liability and equity

Short- and long-term borrowings

Other liabilities

Equity

Trade payables and accrued cost of services

773

7

915 2,135440

696

10

812 1,989471

2011

2010

in million CHF

Cash flow

Net cash from operating activities

Panalpina’s net cash from operating activities in the report-

ing period amounted to CHF 193 million, CHF 156 million

above the prior year’s figure (2010: CHF 37 million). Major

contributors to the positive development were the substan-

tial expansion of net profit for the period and the simulta-

neous decrease of the net working capital. In addition, net

cash from operating activities includes an outflow of

approximately CHF 30 million during the reporting year due

to the payment of fines to US authorities for which provi-

sions were taken in the prior year and which the Group is

paying in several installments over a period of three years

(in 2010, corresponding outflows amounted to CHF 27 mil-

lion). The remaining payable amount totalling CHF 33 million

will be paid in two equal installments, which are due in

2012 and 2013.

Cash flow from investing activities

Expenditures on property, plant and equipment (mainly

IT equipment) increased slightly during the reporting year

to CHF 31 million (2010: CHF 28 million). Net investments

into acquired subsidiaries increased from CHF 2 million in

2010 to CHF 60 million in 2011, mainly as a result of the

purchase of Grieg Logistics. Moreover, the Group invested,

compared to 2010, an additional CHF 51 million of its cash

holdings in money market instruments with a maturity of

more than three months. Overall, the net cash outflow from

investing activities rose substantially from CHF 31 million

in 2010 to CHF 152 million in 2011.

Capital expenditures in 2011 amounted to 0.8 % of net for-

warding revenue (2010: 0.6 %). The slight increase over

the prior year was mainly related to higher investments into

software.

14



Free cash flow

The free cash flow, calculated as net cash from operating

activities minus net cash flow from investing activities,

increased from CHF 6 million in 2010, to CHF 42 million in

2011. Adjusted for the above-mentioned increase of invest-

ments in acquired companies and money market instru-

ments, free cash flow even increased to CHF 153 million in

2011 (2010: CHF 12 million).

Free cash flow Net cash generatedfrom operating activities

42

6

193

37

Cash flow development

2011

2010

in million CHF

Cash flow from financing activities

The net cash used in financing activities decreased by

CHF 4 million in 2011 compared to the year before. A large

portion of this improvement came from lower investments

for the (Management Incentive Plan-related) purchase

of treasury shares due to a lower average share price.

Net cash

in million CHF Dec 312011

Dec 312010

% change

Cash and cash equivalents 573.6 528.9 8

Other current financial assets 20.0 6.1 228

Short-term debt – 7.3 – 9.3 – 22

Long-term debt – 0.2 – 0.4 – 50

Net cash 586.1 525.3 12

Net cash increased by CHF 61 million during the year

under review to CHF 586 million on December 31, 2011.

Employees

full-time equivalents (FTEs)as at December 31

Region 2011 2010 %

change

Europe, Middle East, Africa and CIS 6,746 6,485 4

North America 2,418 2,423 0

Central and South America 2,474 2,294 8

Asia Pacific 3,601 3,259 10

Corporate 461 415 11

Total 15,700 14,876 6

In 2011, Panalpina continued to selectively invest and

increased the number of FTEs by 6 %, from 14,876 on

December 31, 2010, to 15,700 on December 31, 2011.

An increase took place in various reporting regions in

order to accommodate the volume growth in Ocean

Freight and Logistics and to complement organizational

structure.


15


Group Management StructureAs at December 31, 2011

Audit Committee

Legal and Compliance Committee

Board of Directors

Chairman Rudolf W. Hug

Vice Chairman Beat Walti

Lars Förberg, Chris E. Muntwyler, Roger Schmid, Hans-Peter Strodel,

Knud Elmholdt Stubkjær

Chief Executive OfficerMonika Ribar

Air Freight

Ocean Freight

Logistics

Marketing and Sales

Business Processes and Quality

AreasPanprojects

Corporate Accounting

Corporate Taxes

Corporate Controlling

Investor Relations

Indirect Purchasing

Strategic Finance and Projects

Group Treasury

Corporate Information Technology

HR Processes and Projects

International Compensation and Benefits

HR Operations

Capability Development and PanAcademy

Corporate Legal Services

Corporate Insurance Management

Chief Legal Officer / Corporate SecretaryChristoph Hess

Chief Operating OfficerKarl Weyeneth

Chief Financial OfficerMarco Gadola

Chief Human Resources OfficerAlastair Robertson

Corporate Audit Compensation and Nomination Committee

Corporate and Regional Development, Agent Relations

Corporate Communications

Corporate Compliance

www.panalpina.com / organization

16



Promising achievements in each of the four regions

Asia PacificEurope, Middle East,

Africa and CIS

Reporting Regions

Key data

Areas: 11

BeNe, Central Europe, Eastern Europe, France, Iberia,

Northern Europe, Northwest Europe, Southwest Europe,

Sub-Saharan, Black and Caspian Sea, Arabian Belt

Net forwarding revenue: CHF 3,171 million

Employees in full-time equivalents: 6,746

Market conditions

A clear deterioration occurred in this heterogeneous

economy. A decline in cargo to move has led to a highly

competitive environment. Customers tried to obtain

financing from forwarders. The Arabian Spring and the

high oil price hurt Middle East market conditions.

Highlights

Central Europe strengthened its partnerships and

gained new logistics businesses of customers in the

Hi-tech and Fashion verticals.

Panalpina was awarded with more overland trans-

ports in Continental Europe.

Norway-based Grieg Logistics was acquired and

successfully integrated.

In booming Turkey, two offices (Ankara /Bursa) and

a new warehouse in Istanbul opened.

A new standalone logistics facility was launched in

Didcot, Southeast England.

The first Panalpina Saudi Arabia office opened in

Dammam.

Dubai’s role as a distribution hub for Africa grew.

An office in Murmansk was opened and a state-of-

the-art warehouse began operations in Moscow. The

area became a front runner in e-customs clearance.

Panalpina expanded to East Africa and pursued

opportunities in the mining industry along the West

African coast.

Key data

Areas: 5

India, East Asia, Southeast Asia, Greater China, Oceania



Market conditions

Asia Pacific faced stagnating EU and US demand

but remains a growth market. The airline industry

experienced turbulence, with soft demand and capacity

oversupply. Ocean freight rates were deteriorating to

unsustainable levels for the carriers. Very competitive

market conditions are forcing continued cost reductions.

Highlights

The new Intra Asia trucking service began operations,

connecting China with Vietnam, Laos, Thailand,

Malaysia and Singapore.

Rail-air transport from Urumqi to Europe and sea-air

moves via Los Angeles to Brazil were relaunched.

New business units were launched in Suzhou,

Wuhan and Chongqing, China. Two regional distribu-

tion centers opened, one in Tianjin and another

in Shanghai. 5,000 square meters of warehouse

capacity came into service in Singapore.

Three consol services from Shanghai, Ningbo and

Hong Kong to the Jebel Ali hub serving the Middle

East region kicked off.

Expansion continued in India as three offices opened

and the local sales organization was strengthened.

Long-time partner Apollo was integrated in Perth,

Australia.

A stringent subcontractor management concept,

designed to maintain overall margins in all trades and

products, was implemented.


17


North America Central and South America

Key data

Areas: 2

Canada, USA



Market conditions

The growth of US economy slowed down considerably.

High unemployment and sluggish housing markets

remained the principal concerns. US companies focused

more and more on growth in emerging markets. Canada

as an import market felt a slowdown in volumes.

Highlights

Both Areas began a major realignment and upgrading

of their key organizational structures.

The Canada division, dedicated to the needs of the

helicopter industry, continued to grow.

New, direct Less than Container Load (LCL) services

from major ports in China to Montreal augmented the

existing services to Vancouver and Toronto.

Two new business units opened: Malta (New York)

and Indianapolis (Indiana).

The Healthcare vertical of Panalpina in the US flour-

ished. Additional significant investments in cold-chain

capabilities have been made.

In the US, Panalpina was able to strengthen major

accounts in all vertical markets.

The Huntsville Logistics Center enlarged its offering of

end-to-end solutions and value-added services along

with Panalpina’s own-controlled network.

Two new Panalpina-controlled flights between Hong

Kong and Huntsville have been filled continuously.

Key data

Areas: 3

Andina, Mercosur, Middle America

Net forwarding revenue: CHF 834 million


Market conditions

Consistent economic growth has greatly enlarged a

middle class hungry for durable goods and consumer

products. In Brazil, future international events such as

the 2016 Olympic Games and the FIFA World Cup in 2014

require greater logistics capabilities and infra structure

investments. In Middle America, rising insecurity due to

drug-related crime affected foreign investments.

Highlights

All areas strengthened customer relationships and

gained new businesses. For example: A Brazilian

blue chip company contracted Panalpina to distribute

its products throughout Latin America and France.

Panalpina became Mercosur’s number one LCL

provider and the leading exporter of containerized

sugar.

Mercosur Area was leading in telecom distribution.

Warehousing activities increased as Panalpina

added space in Mexico City and a newly finished

20,000 square meter depot in Panama, where a

12,000 square meter warehousing and distribution

business in the Hi-tech vertical covering end-to-end

supply chain needs was launched.

New logistics operations opened in Peru and

Colombia.

The warehouse in Santiago, Chile, reached profit-

ability and a new multi-customer warehouse in

Cajamar, Brazil, opened.

18



Panalpina expands its product range in all divisions

Air Freight Ocean Freight

Product Divisions

Key figures

1,310,000 TEUs transported

Generated 36 % of Panalpina’s net forwarding revenue

Market conditions

The business faced substantial overcapacity in major

east-west trade lines. Ocean freight rates deteriorated

to unsustainable levels, resulting in massive losses

for carriers, very much like in the 2009 shipping season.

Highlights

Panalpina increased its worldwide footprint, recorded

volume growth and therefore gained market share.

In fact, 2011 marked the highest volumes ever in

Panalpina’s Ocean Freight.

Ocean Freight further focused on its profitability per

cargo unit.

Panalpina’s Ocean Freight business aligned its global

strategies and established a strong focus on trade

lane growth, niche verticals, and managed solutions.

Integrated systems, processes and data quality are

an essential part of the growth strategy.

Panalpina adjusted its global Less than Container

Load (LCL) hub setup and launched in excess of

50 new LCL services. Operated by the in-house car-

rier Pantainer Express Line, they support customer

needs for simplicity and global reach through a single

integrated LCL network. The new services reduce

transit times and CO2 emissions.

Outlook

Overcapacity on the main east-west routes is expected

to decrease in 2012 while rates will increase. Panalpina

Ocean Freight will concentrate on five stra tegic trade

lanes (Asia–Europe, Asia–North America, Asia–Latin

America, Asia–Middle East and Intra Asia).

Key figures

848,000 tons of freight moved


Market conditions

2011 started out fairly strongly but dropped off in the

second half of the year. The air freight market stayed

very soft in most major trade lanes until year-end.

Highlights

Panalpina has become one of the world’s biggest

Qualified Envirotainer Providers for active cooling

solutions. In 2011 the Company offered a total of

43 accredited locations in 27 countries.

Air Freight improved successfully its profitability

per cargo unit.

Panalpina launched a second twice-weekly transpa-

cific service between Hong Kong and Huntsville and

between Huntsville and São Paulo (Viracopos).

Air Freight implemented a new centralized global pro-

curement process and system.

The Cargo 2000 Certification and the Global Air

Sourcing Initiative were successfully introduced to

Panalpina’s global carriers. These credentials ensure

efficient air cargo transport.

Panalpina signed contracts for the upgrade of two

B747-8F aircraft, the latest environmentally friendly

freighter technology from Boeing. Operated with Atlas

Air, they will replace the two existing B747-400F by

2012.

Outlook

The soft market conditions will persist into 2012, though

with an expectation for growth in the second half.

Panalpina’s Air Freight business will focus on growth in

the five strategic trade lanes (Asia–Europe, Asia–North

America, Asia–Latin America, Asia–Middle East and

Intra Asia).


19


Logistics

Key figures


Market conditions

A large number of customers continued to outsource their

logistics activities; market growth trends are continuing,

but the competition in contract logistics remains strong.

Highlights

A global Logistics strategy focusing on value-added

services for customers was developed and the

product line extended with inbound to manufacturing,

aftermarket spare parts and service logistics, techni-

cal distribution, and postponement services.

Newly developed logistics tools allow optimization of

warehousing by simulation, what-if modelling, and

accurate activity-based cost calculation.

Regional centers of expertise opened in Asia Pacific,

Europe and the Americas along with strengthened

services.

Panalpina provided additional logistics space in

Brazil, Canada, China, Colombia, France, Germany,

Japan, Korea, Luxembourg, Mexico, Panama, Peru,

Russia, Singapore, Sweden, Turkey, the United

Kingdom, and the USA.

With its European road project, Logistics launched

a new procurement process and a standardized

IT platform, leading to higher utilization factors.

Outlook

Panalpina expects this market to grow. Logistics further

emphasizes continuous improvements to existing

operations while maintaining the development of strate-

gic geographies, industry verticals, and corresponding

service offerings.

20



21

Tim Bauer

Lane Manager for Air Freight from Europe to

the Americas and for own-controlled flight

operations, has the capacity overview on all

lanes out of Luxembourg


Samia Guerroumi

Procurement and Capacity Management

Clerk for Air Freight from Europe to Central

and South America


Jasmine Medhora

of Panalpina’s Pantainer Express Line

based in Hamburg checks operational

queries of Ocean Freight on correct

procedures and guidelines


Marco Parnitzke

Booking Agent for Less than Container Load

Ocean Freight from Hamburg to South America,

handled 3175 shipments in 2011


Andrea Ribaudo

Logistic Platform Manager at Milan

warehouse from where approximately

15 million units have been shipped in 2011

30


CEO Statement

Profitability built on sustainable business model

Despite the economic gloom and uncertainty, the Panalpina Group emerged from 2011

with its market position strengthened. Our strategic orientation towards profitability,

underpinned by our business model, has already proved its worth. But it is nonetheless

set to encounter fresh challenges in the future.

All aspects of Panalpina’s operations are guided by the

principle of sustainable development. To progressively

strengthen the welfare of our company, the environment

and the population at large, equal weight is given to social,

economic and ecological criteria in the evaluation of strat-

egies, projects and innovations. Overall, this offers the

best means for Panalpina to honor its obligations towards

shareholders, employees, suppliers, customers and the

general public.

Sound business operations

The foundation for accepting broader responsibility is laid by

entrepreneurial success. Solid business performance and

the efficient deployment of corporate resources are crucial

to unlocking creative freedoms and meeting the varying

demands of the Company’s different stakeholders. In today’s

global logistics and forwarding markets, simply delivering

the right goods to the right place at the right time no longer

suffices for long-term success.


31

CEO Statement

Success factors as growth drivers

2011 saw Panalpina put in place a carefully crafted corpo-

rate strategy – initially for the period up to 2014 – which is

built on the principles of performance, integrity and profes-

sionalism. While striving to continuously provide our cus-

tomers with absolutely reliable logistics services that are

tailored to their needs, our strategy targets sustainable and

profitable growth. Our most crucial assets in the current

business environment include our in-depth know-how in key

industry verticals and the associated client focus, an

extensive global network, a highly qualified and committed

workforce, process-optimized information technology,

outstanding compliance standards, and efficient and trans-

parent procurement.

Value-added services

Panalpina is far more than a freight forwarding company.

Our core air and ocean freight business is backed up

by supply chain services and value-added logistics. The

former includes, for instance, the optimization of supply

chains and management of orders. The latter generally

entails the acceptance of consignments for production or

as part of postponement or customer service solutions.

By expertly combining these services, we can offer our

customers door-to-door products closely geared to their

supply chains. Thanks to our world-spanning network

embracing some 500 offices on six continents, these solu-

tions can be implemented in all corners of the globe.

Standard

Warehousing

Overland

Value-Added Logistics Services

Supply Chain Services

Global Network

Quality and Procurement

Employees

Information Technology

Industry Verticals

Compliance and

Corporate Culture

Air and

Ocean Freight

Core Services

Success Factors

Delivering end-to-end supply chain solutions: Panalpina’s business model with success factors

32


CEO Statement

We are planning a further expansion of our own logistical

capacities in the years ahead. The focus here will be

on value-added services rather than mere warehousing

provision.

Focus on specific sectors

Crucial for the provision of tailored solutions for our cus-

tomers’ supply chains is an intimate knowledge of the

forwarding sector’s key target industries. Panalpina has

pooled this expertise in nine vertical centers of expertise

known as “customer groups” or “industry verticals.” These

are additionally supported by the Panprojects unit, which

is charged with handling large industrial projects. Being

conversant with the extremely diverse needs of customers

in the different industrial sectors, the centers’ employees

are able to deliver the appropriate solutions. While the auto-

motive trade, for instance, gives high priority to just-in-time

delivery directly to the production line, the pharmaceutical

industry requires temperature-controlled door-to-door ship-

ments in order to safeguard the quality of active ingredients.

All industries in which Panalpina operates contribute to the

Group’s sustainable growth. In our bid to achieve above-

average growth in our air freight, ocean freight and logistics

business, we will concentrate in particular on the consumer

and retail, healthcare, hi-tech, and oil and gas sectors over

the next few years. By 2014, we are looking to earn a place

among the top five in all the industries served by our cen-

ters of expertise.

Own-controlled air freight network

The Panalpina’s own-controlled air freight network, widely

acknowledged in the market as a powerful unique selling

point, will be a major asset for future growth. It creates a

wealth of options for the Group to deliver customized solu-

tions without any reliance on airline flight schedules. Our air

freight network is due for a further upgrade in 2012 through

replacement of the previously deployed cargo planes by

two new Boeing 747-8F freighters. The new aircraft consume

less fuel, are far quieter than their predecessors, and offer

greater freight capacity. They are also equipped with wide-

ranging facilities for the transportation of temperature-sen-

sitive cargo.

Maximum flexibility thanks to asset-light business model

The two new aircraft epitomize two of Panalpina’s key cor-

porate principles: its asset-light strategy and its PanGreen

initiative. Asset-light means that the Group does not own

vehicles and warehousing facilities itself, but purchases

capacity as needed from its suppliers. Accordingly, even

the new planes will remain in the ownership of our long-

time partner Atlas Air, while Panalpina concentrates on mar-

keting and flight scheduling. This policy enables us to

adapt more easily to fluctuations in demand than many of

our competitors with their own vehicle fleets or ware-

houses. It also helps to minimize debt while boosting flexi-

bility. Moreover, the asset-light approach is sustainable in

that our procurement processes are highly transparent and

help to cultivate trusting relationships with our suppliers.

Ecological transport logistics

The PanGreen program helps to sharpen both our own

environmental profile and that of our customers and sup-

pliers. The program makes it possible to obtain detailed

information on the environmental impact of customers’ con-

signments as well as the options available for lower-carbon

ocean shipments. In addition, as of mid-2012 the new air-

craft will allow us to offer air shipments with a much smaller

carbon footprint. The PanGreen program also benefits

from our flexibility in that customers are able at all times to

switch to a more ecological transport mode.

Employee development as the path to excellence

Our business is a people business. In other words, our

service quality reflects the skills of our workforce. Hence

the high priority which – in line with our corporate values –

we attach to further training, talent management, and pro-

active succession planning. All forms of personnel devel-

opment implemented by us worldwide are closely geared

to promoting the organizational skills, individual competen-

cies and commitment of our staff.

Leverage through information technology

To work efficiently and raise productivity, our highly quali-

fied staff members rely on standardized processes and

modern information technology. Greater speed, quality and

transparency are required in the provision of data to both

Panalpina and its customers. The immense importance

attached to the continuous refinement of our IT platforms

is reflected by the substantial annual investment in this

field. One key IT project is the worldwide introduction of

the SAP Transportation Management (SAP TM) system.

This platform is currently being phased in, with completion

scheduled for 2015.


33

CEO Statement

Highest compliance standard

Our corporate values, Code of Conduct and compliance

processes govern all our actions. The principles behind

Panalpina’s Code of Conduct are derived from the United

Nations’ Universal Declaration of Human Rights and from

internationally recognized environmental standards and

labor laws. Our compliance processes are implemented

company-wide, undergo continuous revision, and are

deemed exemplary within our industry. As customers place

increasing demands on the compliance procedures of

their suppliers, Panalpina’s existing standards are steadily

sharpening its competitive edge.

External growth drivers

The key drivers in our market include continuing globaliza-

tion, the trend towards services outsourcing, the rising

demand for value-added logistics services, and the ever

greater market penetration of freight forwarders. In both air

freight and ocean freight, routes between Asia and the

Western World, between Asia and other emerging markets,

and especially the intra-Asian lanes, are growing rapidly.

Thanks to our business model, strategy and the commit-

ment of our workforce, we are excellently equipped to

achieve sustainable development in this environment – for

the good of all our stakeholders.

Monika Ribar

Chief Executive Officer

34


Success Factors

Global Network

Worldwide presence – local knowledge

North America




Net forwarding revenue: CHF 834 million


Across time zones and borders, Panalpina operates a world-spanning network

embracing some 500 branches. With detailed knowledge of local markets

and characteristics Panalpina’s professionals deliver every time comprehensive

door-to-door solutions.

As at December 31, 2011


35

Success Factors

Asia Pacific






Panalpina branches in over 80 countries

Partner companies in further 80 countries

www.panalpina.com / addresses

36


Success Factors

Industry Verticals

Sharpening the focus on customer needs

Panalpina concentrated on the special division Panprojects and nine core industry

verticals in which it provides industry-leading expertise and tailor-made customer-

specific solutions. In 2011 these ten centers of expertise further strengthened their

know-how and gained new businesses.

HealthcareThe healthcare industry saw increasing demand for

end-to-end supply chain solutions. In developed coun-

tries, there was continuing pressure on costs as well

as on regulatory aspects and quality control. Not only

did Panalpina become one of the world’s biggest Quali-

fied Envirotainer Providers in 2011, but it is now recog-

nized as one of the leading companies in terms of end-

to-end cold chain solutions.

Customer needs:

Temperature-controlled services

Direct delivery to pharmacy, patient or hospital

Warehousing, distribution and packaging services

Zero defects in supply chain

Telecom2011 saw a significant investment in telecom infrastruc-

ture, which resulted in positive volume growth. Orders

from new telecom operators in emerging markets (Latin

America, Africa, Middle East) came atop higher volumes

in existing accounts. The outlook for 2012 remains stable

in terms of volume but price erosion is to be expected.

Customer needs:

Aftermarket and repair services

Enhanced and innovative last mile solutions

Warehousing and distribution services

Order management with IT integration

Consumer and RetailGrowth was fueled by fast-moving global consumer

brands and by large and medium-size retailers. Asia

remained an important market not only from a sourcing

point of view but also in terms of consumer demand.

In addition, though, established markets such as North

America or Europe will remain important, particularly

with regard to purchase order management and end-to-

end milestone tracking.

Customer needs:

Purchase order management with IT integration

Vendor management and integration

Sophisticated buyer consolidation services

End-to-end milestone tracking

PanprojectsThe project business for the petrochemical and process

sector was flat, but previously awarded contracts con-

tinued from prior years. The upturn in the global mining

industry provided the bulk of the work. In a difficult

market Panalpina achieved operational excellence while

meeting high health, security, environmental and com-

pliance standards. The goal is to expand investments,

including into Sub-Saharan Africa.

Customer needs:

Worldwide coverage

Integrated turn-key solutions

Fast and secure shipments for bulky and oversized

goods

www.panalpina.com / iv


37

Success Factors

ChemicalsIn the International Year of Chemistry all buyers in the

value chain reduced their stock, decreasing further the

volumes traded. Industry mergers and acquisitions gave

Panalpina a stronger foothold within the top account

landscape as cost-saving and efficiency efforts reached

a new peak. New products on the market create numer-

ous opportunities for Panalpina.

Customer needs:

Product know-how and technical support

Key partnership programs with global coverage

Supply chain excellence and visibility

Compliance program and health, safety and

environment (HSE) competence

AutomotiveContinued growth of volume with major automotive

manufacturers and suppliers was strongly based on

their need for air freight services. The latest natural

disasters have triggered alternative supply chain design

discussions in which just-in-time is being weighed care-

fully against just-in-case inventories. As a consequence,

effective crisis management became an integral part of

the service portfolio.

Customer needs:

Flexible and reliable supply chains with zero defects

Purchase order management and warning systems

Buyer consolidation

Oil and GasFor more than five decades, Panalpina has proven its

commitment to the industry with a focus on servicing

the highly demanding upstream part of the business

(exploration and production). The vertical expanded its

lead position with operators and oilfield service compa-

nies, demonstrating excellence in processes, compliance,

HSE standards, and service innovation.

Customer needs:

End-to-end supply of on- and offshore locations

Integrated project management for on- and offshore

facilities, including rig moves

Pick and pack of hazardous material, bulk and heavy

shipments

ManufacturingThanks to full order books at most manufacturing com-

panies across all segments, Panalpina was able to

grow in its newest industry vertical (established 2010).

In addition, Panalpina developed specific industry value

propositions such as non-containerized cargo or

smart air freight solutions related to the aftermarket of

Panalpina’s client base.

Customer needs:

End-to-end transport and logistics solutions

Special equipment management

Buyer and shipper consolidations

Aftermarket logistics

Packaging

FashionThe fashion industry performed well. This was due to

customer growth in emerging markets. Panalpina’s

performance was underpinned by growth in Asia and in

the Americas. Fashion companies faced cost pressure

but also had to address increased consumer demands.

Panalpina will continue to support them in their con-

tinued trend to globalization and with its multi-channel

solution offer.

Customer needs:

High supply chain reliability and predictability

High security and cost focus

Multimodal solutions

Hi-techMeeting the needs of a dynamic and volatile market

whose products exhibit a short lifecycle requires a highly

flexible supply chain design. Panalpina leverages its

global reach as more companies move their production

sites to Asia and other emerging markets. This vertical

already has a sophisticated mix of transport and logistics

services in place to meet customer demand.

Customer needs:

Lead-time reductions at low cost

Last-mile delivery services

Postponement

High security

Reverse logistics with repair services

38


Success Factors

Employees

Empowering staff for service excellence

Panalpina’s future success depends on the investment it makes now in the

development of its employees. Attracting, screening, and selecting the right people

for the right jobs, and retaining them through value-added training and employee

development are central to this investment, which will pay dividends into the future.

At the end of 2011, Panalpina had 15,051 employees in over

80 countries. Its global human resources (HR) function is

responsible for enabling organizational development so as

to secure the ongoing engagement and effectiveness of

Panalpina’s employees. The systems, processes and train-

ing programs that form a strong foundation for such a cul-

ture for these efforts are based on Panalpina’s core values

and a pragmatic leadership competency model. These are

continually evaluated and refined to ensure that Panalpina

managers have a robust framework that will sustain a

high-performance culture within the Company.

Human Resources transformation continues

In its fourth year, the HR transformation process remains

focused on building on the foundation of its strategic

priorities, namely, (1) identifying, attracting, managing, and

deploying the talent required to perform; (2) propagating

a sustainable high-performance organization and work-

force; (3) developing leadership and other capability require-

ments; and (4) designing, implementing, and optimizing

HR processes, policies and service delivery so that they

efficiently meet the needs of our global business units and

workforce.

System support for talent management

PanLink, a web-based Human Resources management

system, was launched in late 2010 to support the imple-

mentation and institutionalization of the automation and

global centralization of objective and performance manage-

ment, talent management, succession planning, and com-

pensation for Panalpina’s senior management. In 2012, the

system will be introduced for all employees in India and

at the head office in Basel. The scope of PanLink has also

been expanded to include a Recruitment Module, which

is expected to be a key tool for all hiring managers in the

coming years.

Organizational commitment to employee development

The global Human Resources team continually monitors

various indicators of training, development and engage-

ment in the workforce. In 2011, Panalpina launched its

second Employee Engagement Survey to identify areas

where enhanced programming would be beneficial. In

total, 84 % of employees responded, and improvement was

noted in the following areas: Panalpina’s management

has improved in terms of its ability to state objectives clearly,

establish priorities, make decisions promptly, provide

leadership, and communicate with people. Panalpina’s

employees felt they are better informed about the Com-

pany’s strategy and performance, and they reported that

greater efforts are being made to obtain their views. More

employees noted satisfaction with the training opportunities

available to them and stated that Panalpina is doing a good

job in employee development and in providing deserving

employees with opportunities for advancement.

Nevertheless, opportunities for helping Panalpina to con-

tinue its development were identified. For example, the

survey showed scope for improvement in relation to oper-

ating conditions and efficiency, to the integration of

Panalpina’s core values into the corporate culture, and to

performance review processes.

The virtual campus: PanAcademy

In response to the results of the 2009 survey, Panalpina

continued to strengthen its commitment to providing

learning opportunities for all its employees. PanAcademy,

Panalpina’s e-learning platform, grew to include 33 learn-

ing units covering the Company’s strategic environmental

PanGreen initiative as well as operations, product com-

petence, and compliance. E-learning also expanded the

coordinated launch of multi-language units – highlighted

by the unit covering a Panalpina “core values journey” that

includes refresher courses on anti-corruption.


39

Success Factors

Discovering and developing leadership talent

Panalpina’s commitment to employee development and tal-

ent management extend to all levels of the organization.

In 2011, the CEO personally led learning workshops focused

on enhancing strategy execution. 44 senior managers

spent four days in an offsite program to create a common

understanding and alignment of the challenges linked to

strategy execution, supply chain management from a cus-

tomer’s perspective and high-performance leadership.

During these four days, they participated in an intuitive tai-

lor-made business simulation called Mexus that challenged

each Panalpina manager to deliver value to customers

consistently, collaborate across the organization, and drive

strong financial performance.

Tailor-made learning programs

In 2011, the Company’s global program on collaborative

strategic leadership skills, Navigating our Future, enrolled

an additional 35 candidates. The program is offered to

high-potential employees in mid-senior positions who are

willing to pursue an international career. In its third year,

it is augmented by the re-launched global leadership and

managerial skills program Steering Success. In 2012, this

includes over 609 department heads, team leaders and

supervisors who will participate in three modules offered in

Mandarin, German, French, Portuguese, Spanish, Italian,

and English. Panalpina continually seeks the best possible

candidates, either internal or external, for management

and line roles, and thus does not have a policy to preferen-

tially hire people who are living locally.

In 2012, four new training initiatives will begin to help em-

ployees deal with the challenges faced in the work envi-

ronment – namely: securing success for new and first time

leaders, performance management, empowerment and

coaching, and effective communications.

In parallel, Panalpina continued to build upon its internal

assessment capabilities. Over the last two years more than

150 assessments have been run internally with a strategic

partner; these assessments are now well established as a

source of sound information regarding an individual’s capa-

bilities and as a means of identifying development needs.

Benchmarking for fair, transparent, and motivational

compensation

Global, regional and local compensation benchmarking

again played an important role in ensuring best competi-

tive practices and maintaining a competitive edge by retain-

ing and motivating employees. In 2011 the practice was

enhanced to include reviews of global job levels and com-

pensation structures against industry norms.

Building further on the foundations for annual global cost

transparency in relation to cross-border transfers, another

internally developed enhancement to a global compen-

sation and benefit reporting process was established in

2012. This introduces extra transparency into comparisons

of actual costs versus budgeted costs, thus enabling

Panalpina to accurately track the return on investment.

The Company expects that the continued evolution of this

cutting-edge tool will facilitate strategic decisions that

include cost factors. It will then be better equipped to deploy

these high-value, high-cost resources strategically around

the globe.

www.panalpina.com / jobs

Employeesas at December 31, 2011

Full-time equivalents*

Europe, Middle East, Africa and CIS 6,746

North America 2,418

Central and South America 2,474

Asia Pacific 3,601

Corporate 461

Total 15,700

* Full-time equivalents include also part-time assignments and employees provided by labor agencies.

Number of employees 15,051

40


Success Factors

Compliance and Corporate Culture

Ethics, values and compliance

As a global organization with operations on six continents, Panalpina is integrated into

the cultures of many different countries. This makes cross-cultural understanding

crucial. Furthermore, Panalpina’s strong corporate culture is based on shared values

and ethical behavior that encompass fairness, respect and responsibility.

A key aspect of Panalpina’s commitment to outstanding

service is its culture of ethical behavior, rigorous compliance

with all applicable laws, and the global experience con-

tributed by its employees. Panalpina realizes that its ultimate

success depends on its employees’ awareness of the

Company’s long term values, and an understanding of how

their individual work contributes to the Company’s success.

Cultivating strong values and a healthy corporate culture

is a long process that calls for commitment and investment

on the part of all stakeholders.

Global experience supports performance

With approximately 500 of its own representative offices in

over 80 countries and close collaboration with partner

companies in 80 more countries, Panalpina has the global

footprint and experience base to help its customers suc-

ceed and prosper in the international marketplace. To sup-

port this, Panalpina offers its employees an extensive

internal exchange program through which they have the

opportunity to spend an average of three months abroad

within the Company. This popular program remains a prior-

ity for 2012 as it provides employees with multi-cultural

and international experiences that strengthen cross-border

understanding and collaboration.

Panalpina’s Code of Conduct

The Panalpina Code of Conduct encompasses binding rules

on health, safety, and environment; on employee relations

(including protection from discrimination and harassment);

on ethical business conduct (including fair competition and

antitrust and trade regulations); on the strict prohibition on

bribery and corruption (including a ban on political contribu-

tions by the Company); and on responsibility for Company

assets as well as financial integrity. Derived from the United

Nations’ Universal Declaration of Human Rights and from

internationally recognized environmental standards and

labor laws, Panalpina’s Code of Conduct continues to reflect

its commitment to integrity and responsibility across all

operations and divisions.

The Code of Conduct is available in 30 languages and is

readily accessible by all employees via the intranet and on

the Corporate website, see www.panalpina.com/culture.

Since 2008, it is applied consistently and rigorously through-

out the Company regardless of an employee’s status or

tenure; all Panalpina employees are required to sign the

Code of Conduct, indicating their commitment to adhere

to the standards therein. Staff members are encouraged to

report breaches of the Code of Conduct to their line or HR

managers, or directly to the Corporate Compliance Office.

However, if employees are unwilling or unable to do so,

they can also contact a neutral, external hotline or file a

confidential report via the internet.

Resources and training for compliance

Panalpina’s Corporate Compliance Officer reports directly

to the CEO and to the Legal and Compliance Committee

of the Board of Directors, and is assisted by a team of

eight full-time Corporate Compliance Managers. In 2011,

Panalpina expanded its corporate compliance team by

adding a position dedicated to focusing on trade compli-

ance, which includes oversight of export regulations and

issues regarding sanctioned and embargoed countries.

Furthermore, in the year under review, the compliance

team visited Panalpina operations in 27 countries for one

to two weeks each in order to ensure that Code of Con-

duct and Compliance programs were implemented fully

and correctly. The selection of the countries was based in

part on the Corruption Perceptions Index of Transparency

International, a global civil society organization focused on

the fight against corruption.

Training has remained a focal point in Panalpina’s overall

Compliance Program. Since 2008 it has been supported

by an interactive e-learning platform which enables em-

ployees to familiarize themselves with the Code of Conduct

and various aspects of compliance. This program was

enhanced in 2011 by the launch of modules that focus on

the topics of anti-trust and anti-corruption. These modules


41

Success Factors

are specifically designed for employees who may confront

these issues in their work.

In 2011, Panalpina conducted over 90 on-site compliance

training sessions, with over 1000 employees participating

worldwide.

Sharing compliance initiatives with suppliers and

customers

Panalpina initiates regular face-to-face discussions, semi-

nars and workshops on various aspects of compliance

with its suppliers and customers. This is seen as a key ele-

ment to building long-term, trusted collaboration among

the Company’s different stakeholders. In 2011, Panalpina

continued to engage with key suppliers, particularly those

in countries where compliance has been seen as particu-

larly important, regarding performance, necessary

improvements, and compliance certification standards.

Panalpina was admitted as a signatory member to the

World Economic Forum Partnering Against Corruption

Initiative (PACI) in 2009, and continued its support for this

important initiative in 2011. The PACI requires CEO level

commitment to zero tolerance for bribery as well as a com-

mitment to implement a practical and effective anti-cor-

ruption program within the Company, benchmarked against

the PACI Principles.

www.panalpina.com / culture

42


Success Factors

Information Technology

Drivers for efficiency excellence

Continuous investment in the most advanced information technology (IT) systems is

an essential part of Panalpina’s mission to offer state-of-the-art solutions to customers

with complex transport and logistical needs. To guide this effort, Panalpina has a

focused three-year strategic plan dedicated to streamlining data management processes

and improving efficiency.

The global logistics industry is becoming increasingly reli-

ant on the secure and efficient processing of information.

Therefore, having a robust, effective, and scalable IT infra-

structure is critically important to future growth and suc-

cess. In this era of rapid technological progress, identifying

the latest technologies and realizing their value requires

careful analysis of company operations as well as a clear

understanding of customers’ needs.

Ongoing IT advancements

Following the worldwide rollout of a Documentation Man-

agement System in 2010, Panalpina began the implementa-

tion of a new collaboration platform in 2011 to provide a

highly secure portal that is accessible to customers. The

objective is to improve efficiency and quality assurance

within the Company while providing a more streamlined

approach to communication and documentation exchange

between Panalpina and its customers and partners. Com-

mitted to providing reliable information in a timely manner,

the collaboration platform is part of an Integrated Standard

Business Platform which will be rolled out in its entirety by

the end of 2012. In addition, the Event Management System

will increase the transparency, the quality of data and the

supply chain visibility for customers.

Also introduced in 2011 was the SAP Transportation Man-

agement (TM) platform, which will be rolled out globally

step by step. Following the 2011 implementation of the sea

freight SAP TM application, air freight pilot installations

will be deployed toward the end of 2012. Beginning in 2013,

both the air and ocean freight systems will be rolled out

on a corporate-wide basis. This comprehensive project will

be completed by 2015.

Outlook for 2012

Part of Panalpina’s three-year strategic plan is an ongoing

effort to renew legacy applications. Existing systems are

being adapted to improve real-time automation capabilities

and assure data quality. These advancements will simplify

processes and positively influence internal IT organization

and quality targets. Innovation is also a key aspect of the

strategic plan, with an emphasis on the adoption of more

sophisticated technologies that promise to enhance com-

munication, speed, efficiency and, ultimately, productivity.

Various platforms based on mobile communication and

information technologies will be explored with the goal of

improving communication between Panalpina and its

customers and partners. Panalpina recognizes the poten-

tial value in emerging technologies such as tablets, smart-

phones and other mobile solutions, and is prepared to

incorporate these devices when deemed valuable to cus-

tomers, business partners, and employees.

In addition to the three-year IT strategy, Panalpina will

implement standardized procedures and templates where

possible to streamline processes and meet the demands

of its fast-paced market, while also ensuring efficient and

reliable service. This will include directing its attention to its

supply chain to meet customers’ high expectations in

areas such as package tracking and other real-time data

monitoring capabilities.

In 2012, Panalpina will launch an information security

campaign. As part of this project, Panalpina will ensure

that the Corporate Information Security Policy is signed

and adhered to by all employees. Security awareness will

be reinforced through training and refresher sessions.

Lastly, as a final step in Panalpina’s long-term effort to unify

data centers, security levels and disaster recovery precau-

tions will be strengthened by a consolidation across the IT

infrastructure throughout 2012 and into 2013. This process

sustains the Company’s business intelligence and mitigates

the risk of business disruption in the event of unforeseeable

emergencies.


43

Success Factors

Procurement

Strong subcontractor relations as a key asset

One of Panalpina’s ongoing strategic goals is to build long-term partnerships with

world-class vendors. In order to effectively maintain this network, Panalpina’s

procurement of each product division has streamlined its purchasing processes to

ensure fair, equitable, and efficient treatment of its current and potential partners.

Procurement is a fundamental driver for Panalpina’s

success. The Company depends on its network of subcon-

tractors to continuously improve efficiency and uphold

Panalpina’s reputation in order to maintain a competitive

position in the global market. This network is one of

Panalpina’s most valuable assets, and results in signifi-

cant dividends that are passed along to its customers.

Therefore Panalpina is thorough and diligent in selecting

the best possible partners with whom to do business.

Finding and keeping the best partners

In order to choose the most qualified subcontractors for

ocean, air and logistics operations, Panalpina imple-

mented clear criteria for assessing potential subcontrac-

tors: compliance, credibility, pricing, quality of service,

consistency and performance. In addition to excelling in

terms of these criteria, candidates must be willing to

engage in a cooperative partnership, adhere to the Com-

pany’s rules and policies, and remain compliant with appli-

cable laws and regulations. Panalpina is also committed

to practicing fair selection procedures, which include

conducting a consistent evaluation process, allowing for

negotiations, disregarding nationality as a criterion, and

utilizing standard contracts. Because Panalpina is a global

company that applies high standards for its vendors, it

does not have a policy to preferentially hire suppliers that

are local to its operations.

Improvements on both sides

In its fast-paced industry, Panalpina must work with its

partners to strengthen relationships and recognize areas

for improvement. Panalpina’s suppliers have the opportu-

nity to leverage its considerable experience in the industry to

improve their own operations. Since 2010, the PanGreen

program assesses the energy and environmental impacts

of subcontractors and calculates the carbon footprint of

cargo shipments. Results from this program provided a data

baseline for the network of subcontractors against which

they can measure their own environmental performance.

It is not uncommon for Panalpina’s sub contractors to also

be a source of innovative ideas that improve service offer-

ings. By monitoring each step along the supply chain, and

by actively engaging with its sup pliers, Panalpina can im-

prove overall performance and offer its customers higher-

quality services.

Ensuring compliance

Panalpina must also carefully manage its exposure to

liability from the actions of its subcontractors. There are

numerous national and international anti-corruption laws

and regulations, environmental regulations, and other legal

requirements with which the Company must comply.

Therefore, as a means of averting risk, regular audits are

conducted to ensure subcontractor compliance with

Panalpina’s Anti-Corruption Policies and Code of Conduct,

as well as all applicable laws and regulations.

Continued partnership

Ultimately, both Panalpina and its subcontractors have

the opportunity to benefit from these relationship-building

and compliance assurance procedures. In support of

Panalpina’s asset-light strategy, the Company attaches

great importance to its growing network of trusted and

reliable partners. As this will remain a key priority in future

too, Panalpina intends to continue improving and secur-

ing its position in the market by developing new partner-

ships that meet the Company’s business demand.

44


Success Factors

Quality, Security and HSE

A strong commitment to sustainable values

To exceed its customers’ expectations, Panalpina is focused on applying outstanding

quality and strong environmental performance. Consequently, it is steadily optimizing

its processes and improving its services to secure long-term success.

Panalpina’s robust business and quality control processes

greatly increase the value of its services and ultimately

the satisfaction of its customers. The responsibilities of the

Business Processes and Quality team extend throughout

the organization and are central to maintaining its culture

of responsibility and accountability and its close coopera-

tion with subcontractors. Key aspects of their efforts include

employee training and development programs, and facili-

tating and monitoring the implementation of global standards

for measuring and ensuring the quality of the operational

service delivered to customers.

Employee training for quality improvement

In the past year, Panalpina continued its focus on quality

services by implementing Six Sigma methodologies

around the world. This was highlighted by the successful

completion of the first Lean Six Sigma Green Belt Training

at the facility in Basel, Switzerland. Fourteen Panalpina

employees participated in the training program, which is

based upon the PanCIP framework – the continuous im-

provement methodology designed to actively drive process

improvement for Panalpina and its customers. In 2012,

the Green Belt Training participants will focus on a series

of quality improvement initiatives to address key elements

of Panalpina’s business processes or the specific needs of

certain customers.

In 2011, the Panalpina Project Management program,

PanPM, was expanded to include worldwide class room

trainings. PanPM started in 2010 as a common, standard-

ized project management methodology intended to stream-

line project management across the organization. Over

the past year, almost 1000 Panalpina employees have par-

ticipated in the classroom, e-learning or introductory train-

ing sessions on the PanPM methodology.

Customer engagement

Engaging with customers and obtaining feedback on

Panalpina’s performance continued as an important

goal in 2011. The results from previous surveys show that

quality and speed of service are the two most important

factors for Panalpina’s customers. Surveys such as these

play a critical role in informing process improvement and

customer relationship management efforts.

Streamlining information flows

In early 2011, the GlobaI Invoicing Speed and Quality ini-

tiative began at Panalpina in selected business units

and departments. The expected benefits of this effort are

to eliminate defects, to issue and process invoices more

quickly and thereby to improve cash flow. Ultimately the

lessons learned can be passed on to customers as best

practices. This initiative is also built upon the PanCIP

framework and utilizes the principles of the Lean Six Sigma.

Panalpina Cargo 2000 Phase 1 certified

In 2011, Panalpina announced that the Group is now Cargo

2000 certified for Phase 1. Cargo 2000 is a three-phase,

multiple stakeholder industry initiative aimed at implement-

ing a quality management system for the worldwide air

cargo industry in order to improve efficiency. Phase 1 man-

ages airport-to-airport processes, and Phase 2 tackles

door-to-door shipments. Phase 2 certification is expected

to follow in 2013, in line with the roll-out of a strategic IT

initiative at Panalpina.

Recognition for outstanding performance

In 2011, a number of different units were recognized with

awards. During the eyefortransport’s 9th Annual 3PL

Summit held at Antwerp, Panalpina received awards in two

categories: Best European 3PL for Pharmaceutical, Health-

care and Life Sciences, and Best European 3PL for Indus-

trial Supply Chain. Panalpina Greater China was named

the Molex 2010 Supplier of the Year. This is the first logistics

service award from Molex Chengdu and acknowledges

Panalpina’s continuous improvement in supply chain man-

agement services, quality, delivery, cost control, and infor-

mation technology. In early 2011 Panalpina Poland received

the Market Leader in Sea and Air Freight Forwarding in


45

Success Factors

Poland award in the 9th Logistics Provider of the Year 2010

competition. Panalpina’s agent in South Africa, Safcor

Panalpina – in 2011 renamed Bidvest Panalpina Logistics –

has achieved the diamond award in the latest PMR sur-

vey on freight forwarders. The Company reached the high-

est rating amongst 150 respondents. Panalpina Northwest

Europe received the Best Logistics Partner 2010 award

from Huawei and was acclaimed by Tesco for its outstand-

ing customer service. In Switzerland, Panalpina ranked

28 out of 250 of the largest Swiss companies assessed

for their sustainability reporting (with special emphasis

on transparency) and garnered first place in the logistics

sector.

Dedication to security

In 2011, Panalpina continued to enhance its ability to pro-

vide solid security solutions, such as secure shipment and

storage of valuable goods in line with its customers’ ever-

changing needs and demands. Led by the addition of a new

Head of Security for Corporate Key Accounts, supplement-

ing the existing Corporate Regional Heads of Security and

Area Security Managers, the Panalpina team has vast expe-

rience accrued from years of work in the applicable fields

of supply chain and logistics, law enforcement, military, and

government (Department of Homeland Security).

The tailored supply chain security measures that Panalpina

offers its customers include Authorized Economic Opera-

tors (AEO), US Customs (CBP) Trade Partnership Against

Terrorism (C-TPAT), US Transportation Security Adminis-

tration (TSA), and the Transported Asset Protection Associ-

ation (TAPA) security guidelines and protocols. In the past

year, Panalpina also continued its solid compliance with

its international regulatory responsibilities, which included

additional AEO certifications, re-certification and valida-

tion in the C-TPAT program, and its record of 100 % screen-

ing of cargo shipped via passenger aircraft from the

US in accordance with the TSA requirements through its

expanding network of ten Certified Cargo Screening

Facilities (CCSF).

Panalpina’s Corporate Security team provides subject

matter expertise to the supply chain security field by creat-

ing, reviewing, and updating industry-accepted publica-

tions and guidelines, participating in workshops and high-

level industry and government meetings, and developing

“best practices” for supply chain security. In the past year,

representatives from Panalpina’s Corporate Security team

have been asked to present at the United Nations in

Europe and to participate in working groups with CBP’s

and TSA’s Air Cargo Advanced Screening pilot program

in the US, as well as assisting with standards and programs

in conjunction with the Business Alliance for Secure

Commerce in South America.

Moving forward, Panalpina’s Corporate Supply Chain

Security team will remain flexible and adapt to the ever-

evolving security environment: it will remain dedicated

and committed to the needs of its customers. In 2012, some

planned improvements include:

Panalpina functions in supporting the integration of secu-

rity considerations in the development of new facilities.

technology solution, which will increase Panalpina’s

ability to monitor and manage risk in the Company’s (and

its industry partners’) supply chain network; it will also

provide actual trend and statistical analysis of vulnerabili-

ties in order to reduce future risk.

to Panalpina employees through e-learning modules and

updates to the Company’s intranet; this will highlight the

importance of security and emphasize why all employees

should make security a priority in their daily work functions.

Commitment to health, safety, and the environment

The health and safety of Panalpina’s employees is of para-

mount importance to all of Panalpina’s stakeholders. The

Company’s efforts in this area include ensuring a safe and

hygienic workplace, instilling a culture of responsibility and

risk mitigation, and communicating with employees and

contractors on issues of health risks, preventive measures,

hygiene, and proper medical care. Employees at all levels

of the Panalpina Group working on any client project are

responsible for upholding the health, safety, and environ-

mental policies, principles, and objectives of both the client

and Panalpina.

The Corporate Business Sustainability and Improvement

Manager – Panalpina’s global Health, Safety and Environ-

ment (HSE) representative – ensures the implementation

and maintenance of all processes needed for the HSE sys-

tem globally and reports the performance of the system

to the Executive Board. Panalpina Management defines the

overall goals of the HSE plan, appoints responsibilities,

provides the authority and necessary resources for imple-

mentation, assesses performance against the goals, and

takes corrective actions as appropriate.

46


Success Factors

In 2011, Panalpina reported zero fatal accidents and

305 nonfatal accidents which included onsite subcontrac-

tors. As part of the Behavioral Safety Program, employees

are also encouraged to report events with 73 “near misses”

reported compared to 82 in the previous year. 35 lost work

day cases resulted in 17.1 days lost per 200,000 total work-

ing hours. Globally, there are more than 40 health, safety

and environment representatives in place at Panalpina, who

provide guidance and assistance to the senior manage-

ment on HSE issues. Internal audits are performed by more

than 100 trained auditors and 645 on-site inspections

were carried out in 2011. All areas passed the ongoing sur-

veillance audits completed by an external certification firm.

Environmental initiatives

Panalpina’s global environmental program, PanGreen, is

organized into four key areas: ISO certification, internal data

collection and monitoring, supplier outreach, and green-

house gas calculations. These initiatives, which originate

from the Panalpina Executive Board and include all busi-

ness units and departments, form the basis for Panalpina’s

ongoing commitment to reducing its environmental

impacts worldwide.

ISO certification

Comprehensive and systematic environmental manage-

ment is a key component of PanGreen. To support this,

Panalpina has achieved certification for all offices worldwide

according to the Environmental Management Standard

ISO 14001: 2004. This required integrating the Environmen-

tal Global Standards in compliance with ISO 14001: 2004

into the Panalpina Integrated Management System and

subsequently applying this framework to all facilities world-

wide. In addition, all countries had to identify all relevant

local environmental legislation and ensure these laws were

implemented and checked for compliance. On completion

of the rollout and training, very rigorous internal audits

were carried out, supplemented by external audits by third-

party firms that specialize in such processes.

Internal data collection

Comprehensive and timely data collection from across the

organization is critical in order to continually monitor and

manage Panalpina’s environmental and sustainability related

performance. Over the past years, a number of key perfor-

mance indicators have been developed that form the core

of this data collection process. By using an enterprise data

collection tool to measure and monitor key environmental

data, the HSE and Quality team is able to monitor a range

of data on an annual, quarterly and monthly basis. Such

data includes:

This data set is continuously being assessed and

expanded upon as new data becomes available or is seen

as material to Panalpina’s ongoing performance.

Calculating CO2 emissions for suppliers and customers

With its Eco-Consumption and Eco-Transport programs,

Panalpina emphasizes its commitment to minimizing its

own environmental footprint and to helping its customers

find ways to reduce the impact of their shipments. In the

coming years, these programs will be extended to include

Panalpina’s primary subcontractors in order to understand

more fully the various environmental impacts across its

supply chain.

By using a tool that calculates CO2 emissions from transpor-

tation via air, sea, and road, Panalpina helps its customers

and suppliers understand their greenhouse gas emissions.

The tool is linked to Panalpina’s operational data ware-

house, where information regarding each shipment’s origin,

destination, weight, and mode of transport is consolidated

and centrally stored. The output is a concise report that

gives Panalpina’s customers a quarterly summary of their

total CO2 emissions by mode of transport, KPIs for the

overall CO2 efficiency, statistics on total tonnage and trans-

port performance, and analyses of the top ten lanes utilized.

Customers may use this tool for their own carbon report-

ing requirements and to identify opportunities for reducing

carbon emissions.

Environmental performance in 2011

In 2011, Panalpina continued its efforts to collect, compile,

and monitor progress against key environmental impact

indicators in a harmonized manner across all countries

where it operates.

With this commitment came the realization that in order to

establish robust and credible goals for environmental

performance improvements, it is necessary to have clear

baseline data from which to measure and monitor impacts.


47

Success Factors

Previous goals included 5 % reductions in electricity, vehi-

cle fuel and water usage, and – through the roll-out of paper-

less processes – a 10 % reduction in paper usage by the

end of 2011. With the recent fluctuations in the global econ-

omy, and the continued improvement in the coverage and

quality of the data collection efforts, the baseline data has

continually shifted in the past several years. Therefore

new goals will be established at the end of 2012 in order

to accurately reflect the true scope of Panalpina’s envi-

ronmental impacts.

Compared to the previous year, total electricity consump-

tion increased by 18 %, heating energy rose by 84 %

and vehicle fuel consumption fell by 22 %. Similarly, direct

(Scope 1) CO2 emissions increased by 15 % while indirect

(Scope 2) emissions were up by 30 %. Scope 3 data rele-

vant to business travel by air has been collected and

showed a 31 % increase over 2010 figures. In 2011, there

were 4.5 tons of CO2 equivalent emissions per full-time

equivalent. As discussed above, these changes can be pri-

marily attributed to fluctuations in business due to the

global economic situation and the improved data collection

efforts. Panalpina is committed to improving even further

on its environmental monitoring and will continue to improve

the coverage and quality of its data collection efforts

in 2012.

The table on the next page gives an overview of the envi-

ronmental performance figures collected in 2011 across

Panalpina’s global internal operations.

48


Success Factors

www.panalpina.com / quality

www.panalpina.com / security

www.panalpina.com / hse

in Gigajoule

240,000

200,000

160,000

120,000

80,000

40,000

0

Electricity Heating Owned

vehicles

Indirect

renewable energy

Indirect

energy

Direct energy

Energy balance by energy category

Activities 1 Performance indicator Unit 2011

Energy and CO2

Electricity Consumption Terajoule 226

Heating Overall consumption Terajoule 169

– District heat Terajoule 10

Vehicle fuel Consumption (Panalpina-owned and lease vehicles only) Terajoule 208

CO2 emissions 2 Total emissions Tons 67,779

– Direct (Scope 1) Tons 27,352

– Indirect (Scope 2) Tons 29,795

– Indirect (Scope 3, business air travel) Tons 10,631

Relative emissions per FTE 2 Tons / FTE 4.5

Materials

Paper Consumption Tons 1,113

Water Consumption m3 /1000 257

Spillages 3 Incident Number 14

Notes:1 For each number, data accuracy from many contributing countries was improved compared to the previous year. There are some

locations for which no data was available. For more details, see the GRI content index.2 CO2 emissions were calculated according to the guidelines of the Greenhouse Gas Protocol. Emission factors for direct emissions

were taken from IPCC, 2006. Emission factors for indirect emissions were taken from the International Energy Agency (IEA) and the UK Department for Environment, Food and Rural Affairs (DEFRA). For more details please refer to the GRI content index.

3 There were no cases causing significant damage.

CO2 emission by scope and activity

Scope 2Scope 1

in tons of CO2 equivalent

30,000

25,000

20,000

15,000

10,000

5,000

0

Electricity Heating Owned

vehicles


49

Responsibilities

Social Commitment

Responsibility to society

The Panalpina Group honors its social responsibility at different levels. Since 2003,

through its support for the Vision First program in Ghana, it has helped combat

avoidable blindness. On top of this, Panalpina’s regional business units are involved

in many local projects.

Engagement at regional level

The ways in which Panalpina and its workforce underscore

their social commitment are manifold: Examples include

the collection of over USD 10,000 by employees who took

part in a sponsored run for the American Heart Associa-

tion, free-of-charge container deliveries to Haiti, the partic-

ipation of 1500 staff members in the 2011 Earth Hour of

the Worldwide Fund for Nature (WWF), and Greater China’s

own “One Shipment, One Dollar” fundraising campaign,

whose proceeds were used to reconstruct a Chinese

school.

Vision First: the fight against avoidable blindness

Apart from its regional sponsorships, Panalpina has since

2003 been involved in the Vision First program in Ghana.

In this program, the Swiss and local Red Cross societies

work in partnership with the Ghana Ministry of Health.

Through the wider provision of access to eye care treat-

ment, these organizations are able in many cases to pre-

vent patients from becoming blind.

It is estimated that around 1 % of Ghana’s approximately

24 million-strong population, or about 230,000 people, are

blind. Some 80 % of blindness cases have preventable and

treatable causes, such as cataract, trachoma or malnutri-

tion. Poverty, coupled with a shortage of eye care profes-

sionals, makes it difficult for sufferers to find suitable treat-

ment. In Africa, there is only about one ophthalmologist

per million inhabitants.

Local resources as key to sustainable progress

The Vision First program adopts a three-pronged approach:

treating eye disorders, training specialized medical pers-

onnel, and expanding the infrastructure and technology

base. This is made possible by a combination of external

funding and local resources. To provide eye care in remote

village communities, the program maintains a network of

volunteers. These carry out sight checks, assist sufferers

in obtaining glasses or treatment at the nearest clinic,

and offer vital information on eye care that helps many to

avoid visual impairment in the first place.

Transition to independent framework

Panalpina’s annual contribution to the Vision First program

runs to CHF 200,000, equivalent to a quarter of the proj-

ect costs. Having been sponsored by the Group through-

out its pilot and on-the-ground implementation phases, the

project has now entered the completion stage, which will

see the various institutions gain autonomy. To date, over

1.3 million people have been treated at clinics and advice

surgeries and more than 31,000 operations performed.

www.panalpina.com / society

2011 results of Vision First program

Patients treated 166,051

Operations performed 2,144

Patients issued vision aids 2,142

Clinics/hospitals in operation 16

Persons provided with health education 507,860

Number of project participants

Opticians and ophthalmologists 5

Nurses (trained to treat minor eye disorders) 28

Schoolteachers (with special training in healthcare issues)

325

Active Red Cross volunteers 1,000

50


Responsibilities

1 Group structure and shareholders

1.1 Group structure

1.1.1 Operational group structure

Panalpina’s business activities are primarily regionally ori-

ented. The operating structure is divided into the following

four regional units:

In 2009, Panalpina integrated the regional management

layer into its Head Office structure.

Secondary, the business activities are subdivided into the

following business segments:

Supplementary information can be taken from the

segmental reporting section of the Consolidated Financial

Statements (pages 84 – 86).

1.1.2 Listed companies within the scope of

consolidation

Panalpina World Transport (Holding) Ltd. (PWT), the ultimate

holding company of the Panalpina Group, is the only listed

company within the scope of consolidation. PWT has its

registered office in Basel, Switzerland. The PWT shares are

exclusively listed on the SIX Swiss Exchange. The market

capitalization on the closing date amounted to CHF 2.4 bil-

lion (25,000,000 registered shares at CHF 96.20 per share).

The PWT shares are traded under Valor no. 216808,

ISIN CH0002168083, symbol PWTN.

1.1.3 Non-listed companies within the scope of

consolidation

The main subsidiaries and associated companies are

disclosed in the Consolidated Financial Statements

(pages 122–125) itemized by registered office, nominal

capital, equity interest in percent, investment and method

of consolidation.

1.2 Significant shareholders

The Ernst Göhner Foundation, Zug, Switzerland, is the main

shareholder of PWT, with an equity participation of 43.58 %.

Cevian Capital II Master Fund LP held 11.37 % and Panalpina

World Transport (Holding) Ltd., held a share capital of 5.47 %

on closing date. The respective treasury shares were pur-

chased as a result of PWT’s share buyback program (refer-

enced in section 2.3) and its share and option programs

(referenced in section 5). Other significant shareholders are

Artisan Partners Limited Partnership (5.01 %) and Bestinver

Gestión, S.G. SGIIC (5.05 %).

With regard to other significant shareholders, during the

reporting year disclosures were made on the SIX online

publication platform. The notifications (listed by shareholder

and transaction date) are summarized as follows:

Bestinver Gestión, S.G. SGIIC, Spain

15. 07. 2011 increase of share capital to 3.04 %

17. 10. 2011 increase of share capital to 5.05 %

1.3 Cross-shareholdings

No cross-shareholdings exist between PWT and any other

company.

Corporate Governance and Remuneration Report:

committed to a transparent management structure

Panalpina is committed to a transparent management structure that is governed

by international corporate governance principles. This Corporate Governance Report

complies with the revised Directive of the SIX Swiss Exchange and therefore serves

to provide investors with key information regarding corporate governance in an

accessible format. Section 5 of this report also serves as a Compensation Report as

recommended by economiesuisse in its Swiss Code of Best Practice for Corporate

Governance guidelines.

Corporate Governance


51

Responsibilities

2 Capital structure

2.1 Capital

On the closing date, the ordinary share capital of PWT

amounted to CHF 50,000,000 and is divided into

25,000,000 registered shares, with a nominal value of

CHF 2.00 each.

2.2 Authorized and conditional share capital

The extraordinary Shareholders’ Meeting of PWT held on

August 23, 2005 agreed with the Board of Directors’ pro-

posal to create an authorized share capital up to a maximum

aggregate amount of CHF 6,000,000 by issuing a maxi-

mum of 3,000,000 registered shares with a nominal value of

CHF 2.00 each. At the Shareholders’ Meeting of May 10,

2011 the authorized share capital was renewed at the same

value until May 2013.

The Board of Directors is authorized to exclude the pre-

emptive rights of shareholders and to convey them to third

parties, provided that such new shares are to be used for

the takeover of entire enterprises, divisions or assets of

enterprises or participations or for the financing of such

transactions. The Board of Directors has not yet made use

of this authorization.

No decision has been made regarding the creation of

conditional capital.

2.3 Change in capital over the past three years

With the exception of the share split introduced at the IPO

in August 2005, there has been no change in the share

capital structure during the years through 2011.

In August 2007, the Board of Directors initiated a share

buyback program. Under this program, shares amounting

to 5 % of the share capital (1,250,000 shares) have been

repurchased. The buyback program was concluded on

September 2, 2008. The proposal of the Board of Directors

to the Annual General Meeting to reduce the share capital

and cancel the repurchased shares has been postponed

with the explicit consent of the Swiss Takeover Board.

2.4 Shares and participation certificates

On the closing date, 25,000,000 fully paid-in PWT regis-

tered shares with a nominal value of CHF 2.00 each were

issued. On this date, no participation certificates were

issued.

2.5 Dividend-right certificates

On the closing date, no dividend-right certificates had

been issued.

2.6 Limitations on transferability and nominee

registrations

2.6.1 Limitations on transferability for each share

category; indication of statutory group clauses and rules

for granting exceptions

Acquirers of PWT shares are entered into the share regis-

ter as shareholders with voting rights upon provision of

proof of the acquisition of the shares and provided that they

expressly declare that they hold the shares in their own

name and for their own account.

The Articles of PWT specify that any shareholder may

exercise voting rights to a maximum of 5 % of the total

number of shares recorded in the commercial register.

This limitation for registration in the share register shall also

apply to persons who hold shares fully or in part through

nominees within the meaning of the Articles. Furthermore,

this limitation for registration in the share register also

applies to registered shares that are acquired through the

exercising of pre-emptive rights, warrants and conversion

rights. The Board of Directors is empowered to allow

exemptions from the limitation for registration in the share

register in particular cases.

The Articles make provision for group clauses.

The limitations on transferability do not apply to the shares

held by the Ernst Göhner Foundation because it held

PWT shares prior to the implementation of the limitations

(so-called grandfathering).

2.6.2 Reasons for granting exceptions in the year

under review

No exceptions were granted during the reporting year.

2.6.3 Admissibility of nominee registrations; indication

of any percent clauses and registration conditions

The Articles of PWT specify that the Board of Directors

may register nominees with voting rights in the share regis-

ter up to a maximum of 2 % of the share capital recorded

in the commercial register. Nominees are persons who do

not expressly declare in their application that they hold the

shares for their own account and with whom the Company

has entered into an agreement to this effect.

The Board of Directors is empowered to register nominees

with voting rights exceeding 2 % of the share capital re-

corded in the commercial register as long as the respective

52


Responsibilities

nominees inform PWT of the names, addresses, nationali-

ties (registered office in the case of legal entities) and the

shareholdings of those persons for whose account they

hold 2 % or more of the share capital recorded in the com-

mercial register.

The Articles make provision for group clauses.

2.6.4 Procedure and conditions for cancelling statutory

privileges and limitations on transferability

A resolution of the General Shareholders Meeting of PWT

on which at least two-thirds of the voting shares repre-

sented agree is required for any abolition or change of the

provisions relating to transfer limitations.

2.7 Convertible bonds, warrants and options

There were no convertible bonds outstanding on the

closing date.

The only issued options relate to the share and option

participation program (Management Incentive Plan, MIP)

are for currently approximately 480 senior managers

of Panalpina. As of 2009, the Board of Directors and the

Executive Board have been excluded from participation

in this program. As of 2011, the options under the MIP pro-

gram have been replaced by a free share ratio scheme.

For further details please refer to section 5.1.

3 Board of Directors

3.1 Members of the Board of Directors

At the Annual General Meeting of May 10, 2011, Lars

Förberg and Knud Elmholdt Stubkjær were elected

to the Board of Directors whereas Rudolf W. Hug, Beat

Walti, Chris E. Muntwyler, Roger Schmid and Hans-Peter

Strodel were re-elected to the Board of Directors for a

one-year term.

On the closing date, the Board was composed of

seven persons.

Three members of the Board of Directors (Rudolf W. Hug,

Roger Schmid and Beat Walti) are also members of the

Board of Trustees (Stiftungsrat) of PWT’s main shareholder,

the Ernst Göhner Foundation.

Lars Förberg is a member of the Board of Directors of

Cevian Capital, the second largest PWT shareholder.

The biographies of the members are as follows:

Rudolf W. Hug, Chairman. Swiss citizen. Born in 1944.

Re-elected in 2011 (until 2012).

Rudolf W. Hug holds a PhD in law from the University of

Zurich and a MBA from INSEAD, Fontainebleau (France).

In 1985, he participated in the Executive Program of the

Graduate School of Business at Stanford University.

From 1977 to 1997, he worked in several positions for

Schweize rische Kreditanstalt (today Credit Suisse). During

the period from 1987 to 1997, he ran the international

division and served as a member of the Executive Board

of Credit Suisse and Credit Suisse First Boston. Since

1998, Rudolf W. Hug has been active as an independent

management consultant.

Rudolf W. Hug has been a member of the Board of Direc-

tors since 2005 and was appointed Chairman of the Board

of Directors on May 15, 2007 following the retirement of

his predecessor.

Beat Walti, Vice Chairman. Swiss citizen. Born in 1968.

Re-elected in 2011, (until 2012).

Beat Walti holds a PhD in law from the University of Zurich.

In 1998, he became a consultant with McKinsey & Company

in Zurich. In 2001, he was a project manager, shareholder

and board member for the start-up ETOILE Medical. Since

2002, Beat Walti is a lawyer with Wenger & Vieli in Zurich

specializing in corporate, commercial, contract, competition

and antitrust law. He became partner with Wenger & Vieli

in 2007.

Lars Förberg, Member of the Board of Directors. Swedish

citizen. Born in 1965. Elected 2011 (until 2012).

Lars Förberg studied economics in Stockholm and Michi-

gan and holds a M. Sc. in Economics and Business Admin-

istration from the Stockholm School of Economics. He

started his career as an investment manager and partner

at the private equity company Nordic Capital in Sweden.

At the end of 1997 he moved to the former AB Custos, one

of Sweden’s largest public limited investment companies,

where he worked until September 2001, most recently as

Chief Investment Officer. Since October 2001, Lars Förberg

has been managing partner in Cevian Capital, an invest-

ment company specializing in public limited companies,

which he co-founded.

Chris E. Muntwyler, Member of the Board of Directors.

Swiss citizen. Born in 1952. Re-elected in 2011 (until 2012).

Chris E. Muntwyler attended the School of Commerce

in Zürich and completed various executive programs at

Harvard University, IMD in Lausanne and at the Wharton

University. From 1972 to 1999 he held several positions at

Swissair, until 1981 in various leadership functions in the

Marketing Division, in 1982 as General Manager Marketing


53

Responsibilities

and Sales Scandinavia and from 1986 for North America.

In 1990, he took over the responsibility for the global Price-

and Distribution Policy and was then leading the develop-

ment and introduction of the new group IT strategy. Before

leaving Swissair at the beginning of 1999, he was Vice

President Global Distribution. From 1999 to 2008, Chris

E. Muntwyler held several executive positions at DHL

Express, in 1999 as Managing Director Switzerland, in

2002 as Managing Director Germany, in 2003 as Chief

Executive Central Europe, and in 2005 as Chief Executive

United Kingdom.

Today Chris E. Muntwyler is President and CEO of the

management consulting company Conlogic AG.

Roger Schmid, Member of the Board of Directors.


Roger Schmid holds a university degree in law as well as

a PhD in law from the University of Zurich. From 1991

to 1995, he was Legal Counsel and Director at Bank Leu,

a subsidiary of Credit Suisse. Roger Schmid works as

an Executive Director of the Ernst Göhner Foundation.

Roger Schmid has been a member of the Board of Direc-

tors since 2003.

Hans-Peter Strodel, Member of the Board of Directors.


Hans-Peter Strodel holds a PhD in economics from the

University of St. Gallen. From 1969 until 1974 he was an

executive assistant at Maschinenfabrik Benninger und

Heberlein AG. From 1975 until 1994, he held several posi-

tions at the Oerlikon-Bührle Group, in 1975 as Head of

Planning and Marketing in Italy, and from 1980 as Head of

Finance at Werkzeugmaschinenfabrik Oerlikon-Bührle AG

and Oerlikon-Contraves. From 1995 until 2008, Hans-Peter

Strodel was CFO at Schweizerische Post.

Knud Elmholdt Stubkjær, Member of the Board of

Directors, Danish citizen. Born in 1956. Elected in 2011

(until 2012).

Knud Elmholdt Stubkjær holds a shipping degree from the

Mærsk International Shipping Academy, supplemented with

various executive programmes, a.o. from IMD and INSEAD.

From 1977 through 2007, he held various positions within

the A.P. Møller-Mærsk Group, including a number of post-

ings in various Asian and European countries. This included

positions as Head of Mærsk Line United Kingdom, Presi-

dent of Mærsk K.K. Japan, CEO A.P. Møller-Mærsk Singa-

pore and at the same time Regional Manager A.P. Møller

Group Asia / Oceania / Middle East. In 1999, he became

Head of Mærsk container business worldwide, based in

Copenhagen, and the same year became partner in the

A.P. Møller-Mærsk Group. In 2008, he became partner in

the E.R. Capital Holding Group in Hamburg, serving as

CEO of one of its subsidiaries, E.R. Schiffahrt GmbH,

a leading maritime service provider within container, bulk

and offshore shipping.

All the members of the Board are non-executive members

and do not actively perform any managerial functions at

PWT or any of the Group companies. Nor have they held

any executive positions within the past three years prior to

this reporting year. None of the members of the Board of

Directors has a substantial business relationship with PWT

or any of its group companies.

3.2 Other activities and vested interests

Rudolf W. Hug, Member of the Board of Trustees

(Stiftungsrat) of the Ernst Göhner Foundation, Zug

(Switzerland), and Member of the Board of Directors of

the following companies: Deutsche Bank (Schweiz) AG,

Geneva (Switzerland), Allreal Holding AG, Baar (Switzer-

land); Ionbond AG, Olten (Switzerland).

Beat Walti, Chairman of the Board of Trustees of the

Ernst Göhner Foundation, Zug (Switzerland).

Lars Förberg, Chairman of the Board of Directors of Cevian

Capital AG, Pfäffikon (Switzerland), a member of the

Board of Directors of Cevian Capital Ltd., Jersey (Channel

Islands), member of the Nomination Committees of Metso,

Helsinki (Finland), Tieto, Helsinki (Finland), and Volvo,

Gothenburg (Sweden).

Chris E. Muntwyler, Member of the Board of Directors of

Austrian Post in Vienna (Austria) and of National Express

Group PLC, London (England).

Roger Schmid, Member of the Board of Trustees and

Executive Director of the Ernst Göhner Foundation, Zug

(Switzerland).

Hans-Peter Strodel, Member of the Board of Directors of

Skyguide, Meyrin (Switzerland).

Knud Elmholdt Stubkjær, Vice Chairman of E.R. Capital

Holding, Hamburg (Germany) and member of the

Board of Directors of Unifeeder A/S, Aarhus (Denmark)

and FR8 Holdings Pty Ltd., Singapore.

Other than these, the members of the Board of Directors

do not hold other material offices, nor do they carry out any

other principal activities that affect the Group.

54


Responsibilities

3.4 Elections and terms of office

3.4.1 Principles of the election procedure and limitations

on the terms of office

The Articles of PWT do not make provision for the general

renewal of office for the Board of Directors. The members

of the Board of Directors are elected at each General

Meeting of Shareholders with a one-year period of office.

They may be re-elected at any time. The Organizational

Regulations of PWT specify an age limit of 72 years for the

members of the Board of Directors.

3.4.2 The first election and remaining term of office

for each member of the Board of Directors

The timing of the first election and the remaining term of

office for each member of the Board of Directors is speci-

fied under section 3.1.

3.5 Internal organizational structure

The Board of Directors is responsible for the ultimate man-

agement of the Company and monitoring of the Executive

Board. It represents the Company externally and is respon-

sible for all matters which have not been transferred to

another executive body of the Company by the Swiss Code

of Obligations or the Articles. In line with the Articles, the

Board of Directors has established Organizational Regula-

tions that transfer certain management responsibilities to

the Executive Board.

3.5.1 Allocation of tasks within the Board of Directors

The Board of Directors self-constitutes and appoints its

Chairman and Vice Chairman. The Chairman (in his

absence the Vice Chairman) directly supervises the busi-

ness affairs and activities of the Executive Board and is

entitled to regularly attend Executive Board meetings. The

Corporate Auditor as well as the Corporate Secretary, in his

capacity as secretary to the Board of Directors, are directly

subordinated to the Chairman of the Board of Directors.

3.5.2 Member list, tasks and areas of responsibility

for each committee of the Board of Directors

Three committees exist under the Board of Directors.

The Audit Committee consists of the following members

of the Board of Directors: Hans-Peter Strodel (Chairman),

Lars Förberg (since May 2011) and Roger Schmid. The

Audit Committee supports the Board of Directors with the

review of the Company’s financial statements, the super-

vision of the financial accounting standards and reporting,

the review of the effectiveness of the Internal Control Sys-

tem and with the efficiency of external and internal audit

procedures, including risk management. The Audit Com-

mittee reviews the consolidated annual financial statements

as well as the published interim financial statements and

submits an application to the Board of Directors for approval.

It regularly maintains contact with the Group Auditors and

the Corporate Auditor. On this basis, it adopts the detailed

reports of the Group Auditors and semi-annual reports of

Corporate Audit. It is therefore in the position to audit the

quality, effectiveness and interaction between the control

systems, to determine the audit priorities, to introduce pro-

posed measures and to monitor their implementation. The

Audit Committee determines the organization of Corporate

Audit, adopts the internal audit charter and approves the

annual planning and scope of internal audit.

In the field of risk management, the Audit Committee

approves the detailed and weighted risk map of the Exec-

utive Board, adopts the necessary measures for risk con-

trol and risk mitigation and reports the respective outcome

to the Board of Directors on a yearly basis. The risk map

itself covers any strategic, financial, operational, legal and

compliance risks that could significantly impact the Com-

pany’s ability to achieve its business goals and financial

targets. Identified risks are weighted and prioritized by the

Executive Board according to their significance and likeli-

hood of occurrence. For each risk, specific risk mitigation

measures – including their current status – are defined and

responsibilities are allocated. The risk map, which is com-

piled by the Risk Review Committee, chaired by the Corpo-

rate Secretary, for review by the Executive Board and sub-

sequent approval by the Audit Committee, contains risks

identified and assessed by the respective corporate func-

tions, selected country management, Corporate Audit and

the Group Auditors. The group’s key risks are annually

reported to the Board of Directors.

During the reporting year the Audit Committee held five

half day meetings. During Audit Committee meetings, direct

discussions took place with representatives of the Group

Auditors and Corporate Audit. Representatives from the

Group Auditors were present at three of these meetings and

the Corporate Auditor (being a permanent participant of

the Audit Committee since August 2010) attended all of the

above-mentioned meetings. At these meetings, the Execu-

tive Board was regularly represented by the CEO, the CFO

and the Corporate Secretary.

The Compensation and Nomination Committee consists of

the following members of the Board of Directors: Rudolf

W. Hug (Chairman), Chris E. Muntwyler and Knud Elmholdt

Stubkjær (since May 2011). It monitors the selection process

for members of the Board of Directors, the Executive Board


55

Responsibilities

and other selected senior management positions, deter-

mines the overall remuneration and terms of employment

for members of the Board of Directors and the Executive

Board as well as remuneration bands for highly com-

pensated employees. Regarding the compensation of the

members of the Executive Board (overall remuneration,

including target bonus), the Committee makes a decision

subject to the final approval of the Board of Directors;

applications for the compensation of the Board members

are decided by the Committee and shared with the Board

of Directors. Each year the Committee decides on the

bonus compensation for the CEO and the other members

of the Executive Board for the previous year, based on

recommendations of the Chairman (for the CEO) and the

CEO (for other Executive Board members). Furthermore,

the Committee regularly reviews the Board Stock Award

Plan, the Executive Board Mid-term and Long-Term Incen-

tive plans and the Group’s Management Incentive Plan

and submits proposals for final approval to the Board of

Directors. Moreover, it approves concepts and policies

for the Group’s management performance assessment,

succession planning and expat programs.

During the reporting year, the Compensation and Nomina-

tion Committee held three meetings of approximately two

hours each. The Executive Board was regularly represented

at these meetings by the CEO, the Chief HR Officer and

the Corporate Secretary.

The Legal and Compliance Committee consists of the fol-

lowing members of the Board of Directors: Rudolf W. Hug

(Chairman), Roger Schmid and Beat Walti. It oversees the

Company’s handling of major legal matters, including the

pending anti-trust investigations and related proceedings

as well as the development of the Company’s compliance

policies and procedures. Furthermore the Committee over-

sees the compliance undertakings to which the Company

has agreed with the US Department of Justice under

a Deferred Prosecution Agreement in November 2010.

During the reporting year, the Committee has held four

meetings. The Executive Board was represented at these

meetings by the CEO and the Corporate Secretary.

The Committees generally meet prior to Board of Directors

meetings. The chairmen of the committees inform and

update the Board of Directors on the topics discussed and

decisions made during such meetings. They submit pro-

posals for approval related to decisions that fall within the

scope of the Board of Directors.

Objectives, organization, duties and the cooperation with

the Board of Directors are defined in the Terms of Refer-

ence of the respective committees which are reviewed and

adopted by the Board of Directors.

The overall responsibility of the Board of Directors is not

affected by these committees.

3.5.3 Working methods of the Board of Directors and its

committees

During the reporting year, the Board of Directors held three

full-day meetings, one two-day meeting and one telephone

conference. The Executive Board was represented by all

its members at these meetings. In urgent cases, telephone

conferences or decisions by circular may be organized in

order for decisions to be taken.

At every meeting, the Executive Board updates the Board

of Directors on business and key financial developments and

main regional and segment development. On a quarterly

basis, detailed consolidated financial statements on the

group, regional and business segment levels are reported

to the Board of Directors in accordance with International

Financial Reporting Standards (IFRS). The Board of Direc-

tors is furnished in time with an agenda, detailed meeting

documentation related to topics on the agenda and minutes.

3.6 Definition of areas of responsibility

In line with the law and the Articles, the Board of Directors

has transferred the responsibility to develop and implement

the group strategy, as well as the responsibility to super-

vise business and financial development of the Group’s

subsidiaries, to the Executive Board.

The Organizational Regulations adopted by the Board of

Directors govern the cooperation between the Board of

Directors, the Chairman and the Executive Board. It con-

tains a detailed catalogue of duties and competencies

which determine the financial thresholds within which the

Board of Directors and the Executive Board can efficiently

execute their daily business. The Organizational Regula-

tions, which are accessible on Panalpina’s website, also

outline the reporting duties of the Executive Board on

Group and Holding level.

The main responsibilities of the Board of Directors on Group

level include the determination of the business strategy

on the basis of the proposals of the Executive Board, the

approval of major Group policies and organizational struc-

tures, including topics related to Corporate Governance

and Compliance, the approval of the annual operational and

investment budgets, the approval of any extraordinary

additional investment applications as well as financial plan-

ning. Further responsibilities include decisions regarding

56


Responsibilities

mergers and acquisitions and major human resources and

remuneration decisions following recommendations and

preparatory work of its Compensation and Nomination

Committee.

3.7 Information and control instruments

vis-à-vis the senior management

The Executive Board informs the Board of Directors of

business developments in a written format on a monthly

basis and a detailed update is provided at each Board of

Directors meeting. Elements of this reporting include

monthly financial reports, consolidated quarterly regional

and business segment results according to IFRS (with

actual figures, previous years’ figures, quarter results and

budget figures as well as a comparison with the financial

guidance), the reporting of business development in all

regions and business segments (including focus on prob-

lematic organizations), the development of shipments,

volumes and tonnages, the debtors’ and creditors’ reports

(including DSO and DPO) as well as the net working capital.

Further information regarding personnel and organizational

changes, extraordinary events and the activities of analysts,

investors and competitors form part of the regular report-

ing. Moreover, the Board of Directors annually reviews and

approves the Group’s targets for the individual regions and

business segments and adopts the respective report of

the Executive Board.

During the reporting year, the Chairman of the Board of

Directors partly attended two Executive Board meetings

and regularly receives the minutes of the Executive Board

meetings. The members of the Executive Board regularly

join meetings of the Board of Directors. In addition, individ-

ual senior executives attend specific topic discussions per-

taining to their particular field of expertise when required.

Furthermore, specific meetings of the Board of Directors

are dedicated to a detailed review of major markets, busi-

ness segments and the Group’s strategy according to pre-

defined schedule. For further details please refer to sec-

tions 3.5.2 and 3.5.3.

The Audit Committee of the Board of Directors monitors

and assesses the activities of the Corporate Auditor as

well as his cooperation with the Group Auditors.

The Audit Committee receives the Corporate Auditor’s

half-year reports and also adopts the comprehensive

annual risk map of the Executive Board. The Audit Com-

mittee approves the proposed risk control and risk miti-

gation measures as well as the annual planning and scope

of the internal audit, which is also based on the Risk Map.

For further details please refer to section 3.5.2.

4 Executive Board

4.1 Members of the Executive Board

On the closing date, the Executive Board was composed

of five persons.

Monika Ribar, Chief Executive Officer, Swiss citizen. Born

in 1959. Member of the Executive Board since 2000 and

CEO since October 2006. Apart from her CEO function,

Monika Ribar has special responsibilities for Corporate and

Regional Development, Corporate Compliance, Corporate

Communications and Panprojects.

Monika Ribar joined the Group in 1991. She held several

positions within the Group’s controlling, IT and global

project management departments. From 2000 to 2005,

she held the position of the CIO (Chief Information Officer)

of the Group and was member of the Executive Board.

In 2005, Monika Ribar was appointed as CFO of the Group

and her appointment as CEO was announced in June

2006. She officially took office as CEO in October 2006.

She holds a university degree in Finance and Controlling

from the University of St. Gallen. She participated in the

Executive Program of the Graduate School of Business at

Stanford University, Palo Alto, California in 1999.

Marco Gadola, Chief Financial Officer, Swiss citizen.

Born in 1963. Joined Panalpina as a member of the Exec-

utive Board in September 2008. Responsible for Cor-

porate Finance, Controlling, Investor Relations, Strategic

Finance and Projects, Indirect Purchasing and Information

Technology.

Marco Gadola is a finance and economics expert with

many years’ experience in international companies. Before

joining Panalpina he was Group CFO and Executive Vice

President Operations of Straumann Holding, a world-lead-

ing Swiss-based dental and oral technology company;

prior to that he was Group CFO of the Swiss-based inter-

national consumer foods company Hero. He also held

leading management positions at the Hilti Group, which

manufactures and sells products for the construction

and building industries. Furthermore, both at Straumann

and at Hero Marco Gadola oversaw production, logistics,

investor relations and information technology worldwide,

and played a leading part in the acquisition and integration

of companies. Marco Gadola has a Masters Degree in

Business Administration and Economics from the University

of Basel (Switzerland). He also completed the Accelerated

Management Development Program at the London School

of Economics.

Christoph Hess, Chief Legal Officer and Corporate Secre-

tary, Swiss citizen. Born in 1955. Member of the Executive


57

Responsibilities

Board since October 2006. Responsible for Corporate

Legal Services and Insurance.

Christoph Hess joined the Group’s head office in 1994 as

Secretary of the Board of Directors and the Executive

Board. In this capacity he also manages both the Group’s

Legal and Insurance departments. He also managed

Corporate Communications until August 2008. Christoph

Hess holds a degree in law from the University of Basel

and has been admitted to the bar in Switzerland.

Alastair Robertson, Chief Human Resources Officer,

British citizen. Born in 1960. Member of the Executive

Board since April 2008. Responsible for Human Resources.

Alastair Robertson joined the Group in 2007 as Head of

Global Human Resources. Before joining Panalpina, he

had been a Vice President at Tetra Pak since 1996, where

he held various positions in the field of Human Resources:

between 1999 and 2001 as Vice President Human

Resources Americas and from 2002 to 2004 as Vice Presi-

dent Human Resources Europe and Africa. From 1992

to 1996, he worked for W. H. Smith in the field of Person-

nel, Development and Training and between 1989 and

1992 he was with Graham Builders Merchants as Manager

Human Resources Management, Training and Development.

He previously served in the military, where he attained the

rank of Major and served in numerous countries. Alastair

Robertson holds an MBA in Strategy and Marketing from

the University of Huddersfield, Bradford (United Kingdom).

He also attended the Royal School of Military Engineering

and the Royal Military Academy in the United Kingdom.

Karl Weyeneth, Chief Operating Officer, Swiss citizen.

Born in 1964. Member of the Executive Board since April

2008. Responsible for Air Freight, Ocean Freight, Logis-

tics, Marketing and Sales and Business Processes and

Quality.

Karl Weyeneth joined the Group in 2007 as Regional CEO

for North America, where he was responsible for the

development and results of the subsidiaries in USA and

Canada. He is a professional with profound leadership

and management experience in logistics, including freight

management, 3PL and contract logistics. Before joining

Panalpina, he was President and CEO Americas of Hell-

mann Worldwide Logistics, Inc. (USA) and prior to this he

was Executive Vice President and CFO of Danzas Manage-

ment Latin America (USA), where he attained profound

experience in all finance matters. He holds a Bachelor in

Economics and Business Administration from the Univer-

sity of Berne, Switzerland.

4.2 Other activities and vested interests

Monika Ribar: Member of the Board of Directors of Logi-

tech International SA, Romanel / Morges (Switzerland) and

Sika AG, Baar (Switzerland).

Marco Gadola: Member of the Board of Directors of

Calida Holding AG, Sursee (Switzerland) and Luxair SA,

Luxembourg.

4.3 Management contracts

No management contracts exist with any third party

outside the Group.

5 Compensation, shareholdings and loans

5.1 Content and method of determining

the compensation and the share-ownership

programs

The compensation and principles governing the Board of

Directors Stock Award Plan, the Executive Board mid- and

long-term incentive plans and the Management Incentive

Plan for other senior management (excluding the Executive

Board) are determined and approved by the Board of

Directors based on the proposal of the Compensation and

Nomination Committee. Further, the Committee regularly

updates the Board of Directors during the Board of Direc-

tors meetings, applies for changes in the remuneration

system as required and annually reports the bonus alloca-

tion of individual Executive Board members. Members of

the Executive Board do not attend respective discussions

regarding decisions related to their own remuneration.

Remuneration of Executive Board members is bench-

marked against regular market data surveys compiled

through leading Executive Compensation consultants.

The benchmark custom peer group is consisting of some

of Panalpina's main competitors completed with some

Swiss multinational companies with comparable size and

geographical network reach in order to make the sample

substantial enough.

The members of the Board of Directors receive a fixed

annual compensation. Moreover and introduced in 2009,

part of each Board member’s remuneration is in free

shares of the Company to the value of CHF 50,000. The

corresponding number of shares is based on the share’s

closing price on April 30, and has a one-year restriction

period.

The salary package for the members of the Executive

Board consists of a fixed basic salary, lump sum vehicle

58


Responsibilities

and general expense allowances, additional pension con-

tributions and a target bonus. 50 % of the target bonus

depends on budgeted Group EBITDA and the achievement

of the external financial guidance for the respective busi-

ness year, whereas 50 % depends on the achievement of

measurable individual performance targets. Individual per-

formance targets are defined for the CEO by the Chair-

man and for other Executive Board members by the CEO.

Each Executive Board member is subject to a formal

performance appraisal process. For each reporting year,

performance targets are jointly determined and a year-end

performance assessment is carried out. The maximum

target bonus of the CEO equals 100 % of the annual basic

salary, whereas maximum target bonuses of other Execu-

tive Board members equal between 67 % and 80 % of their

respective annual basic salaries depending on their func-

tion. All bonus payments are cut if the respective group or

individual performance targets have not been reached.

The Compensation and Nomination Committee annually

reports to the Board of Directors on bonus payments to

the members of the Executive Board.

In 2009, the bonus scheme for Executive Board members

was adjusted to focus on the Company’s sustainable mid-

and long-term success. Only 60 % of the bonuses – which

continue to be set by the achievement of annually reviewed

Group KPIs and individual performance targets as out-

lined above – are paid out in cash, whereas the remainder

is converted into PWTN shares with a one-year restriction

period. The applicable share price for such deferred bonus

shares is the PWTN closing price on April 30, in the first year

of a three-year cycle (2009 to 2011) which was CHF 62.50.

The deferred bonus share price will thus be redefined on

April 30, 2012. In addition, the number of such allocated

deferred bonus shares is matched by the Company after

twelve months (qualifying period during which the Execu-

tive Board member must remain with the Company) with a

free PWTN share award which also has a one-year restric-

tion period.

Furthermore, each Executive Board member is partici-

pating in a Long-Term Incentive Plan Pool which rewards

long-term value creation measured by economic profit.

Under this plan, each year (as of 2009) 5 % of the year-on-

year change in economic profit is added to the pool,

whereas negative economic profit is deducted from the

pool. At the end of a five-year plan cycle (2013) each Exec-

utive Board member is entitled to be paid out in cash an

equal share of such pool. Vesting of this plan occurs after

three years at 25 % (2011), after four years at 50 % and

100 % after five years.

Due to the introduction of a new share program for the

members of the Board of Directors and the Executive Board

in 2009, neither the members of the Board of Directors

nor the members of the Executive Board are eligible to par-

ticipate in the Company’s Management Incentive Plan.

Employment agreements with Executive Board members

stipulate a notice period of twelve months. They do not

contain “golden parachutes” in case of a change of control

nor severance payments after termination of employment.

Further information related to both overall and individual

remuneration of the Board of Directors and Executive

Board members as well as shares and options held by

these persons at the closing date including a comparison

with the previous year are reflected in the audited Notes

to the Consolidated Financial Statements (pages 89 – 93

and 115 – 118) according to article 663bbis of the Swiss

Code of Obligations.

Compared to the previous year, the annual compensation

of the Board of Directors remained unchanged. The Board

Stock Award Plan, which was introduced in 2009, has

been applied for the business year 2011.

Overall compensation for the CEO increased in the report-

ing year due to a salary increase resulting in higher bonus

potential and other related benefits.

Compensation to other Executive Board members also

increased due to salary increase for certain Executive Board

functions and due to an increase of the maximum bonus

payments to a new range of 67 % – 80 % depending on

their function (2010: 50 % – 67 %).

6 Shareholders’ participation

6.1 Voting rights and representation restrictions

Each share carries one vote at the General Meeting of

Shareholders. The Articles state that when exercising voting

rights, no shareholder may directly or indirectly represent

more than 5 % of the total shares issued by the Company

for own and represented shares.

The Articles provide for group clauses.

The voting right restrictions are not applicable to represen-

tatives of the corporate body (Organvertreter) as well as

the independent proxy holder of voting rights (unabhängiger

Stimmrechtsvertreter). In order to facilitate the exercise of

voting rights of deposited shares, the Board of Directors is

entitled to enter into agreements with banks which deviate

from the voting restrictions.


59

Responsibilities

The voting restrictions do not apply to the shares held by

the Ernst Göhner Foundation, because it held PWT

shares prior to the introduction of the voting restrictions

(grandfathering).

Any abolition or change of the provisions relating to the

restrictions on voting rights requires a resolution of the

General Meeting of Shareholders on which at least two-

thirds of the voting shares represented agree.

A written proxy entitles a shareholder to be represented at

the General Meeting of Shareholders by his or her legal

representative, or by another shareholder with the right to

vote, or by the representative of the corporate body

(Organvertreter), or by the independent proxy holder of

voting rights (unabhängiger Stimmrechtsvertreter) or by the

proxy holder of deposited shares (Depotvertreter).

6.2 Statutory quorums

In principle, the legal rules on quorums apply. Supplemen-

tary to the quorums legally listed, a two-thirds majority

of the shares represented at the General Meeting of Share-

holders is required for the following resolutions:

transfer restrictions;

restriction of voting rights;

shares;

Directors;

well as the repeal or relief of the stated quorum. A reso-

lution to increase the quorum as set forth in the Articles

must be based on the consent of the increased quorum.

6.3 Convocation of the General Meeting

of Shareholders

There are no provisions deviating from the law.

6.4 Agenda

Shareholders who individually or together with other

shareholders represent shares in the nominal value of

CHF 1 million may request that an item be placed on

the agenda. Such a request must be made in writing to

PWT at least 60 days prior to the General Meeting of

Shareholders.

6.5 Inscriptions into the share register

Registered shares can only be represented by shareholders

(or nominees) who have been entered into the PWT share

register. Shareholders (or registered nominees) who cannot

personally attend the General Meeting of Shareholders are

entitled to nominate a representative according to the pro-

visions in the Articles, who represents them by written proxy.

For the purpose of determining voting rights, the share

register is closed for registration from the date upon which

the General Meeting of Shareholders has been called

(date of invitation) until the day after the General Meeting

of Shareholders has taken place.

7 Changes of control and defense measures

7.1 Duty to make an offer

No opting-out or opting-up provisions exist.

7.2 Clauses on changes of control

Neither the contracts of the members of the Board of

Directors nor of the Executive Board have a change-of-

control clause.

8 Auditors

8.1 Duration of the mandate and term of office

of the lead auditor

The mandate to act as statutory and Group Auditors is

assumed by KPMG, Zurich. The lead auditor, Regula

Wallimann, took up office on May 6, 2008 for a seven-year

term.

8.2 Auditing fees

According to financial accounting, invoices for auditing

fees for the financial year amounted to CHF 2,999,000.

Further KPMG invoiced CHF 49,000 for audit-related

services.

8.3 Additional fees

The auditors KPMG were compensated an additional

amount of CHF 1,204,000 for further services rendered in

the financial year. KPMG was mandated in the reporting

year in particular for tax consulting (CHF 1,129,000) and

other non-audit related work (CHF 75,000).

60


Responsibilities

8.4 Informational instruments pertaining to

the external audit

The Group Auditors are supervised and controlled by the

Audit Committee. The Group Auditors report to the Audit

Committee and periodically the lead auditor participates in

the meetings. During these meetings, the Group Auditors

present a detailed audit plan for the current year including

risk-based audit priorities, the audit scope, proposals regard-

ing audit fees, organization and timing as well as updates

and status of the results of the Internal Control System. In

subsequent meetings they present interim audit findings

with respective statements and recommendations later fol-

lowed by a detailed audit report. Presentations also con-

tain references to upcoming changes in legislation and IFRS.

The main criteria for the selection of Group Auditors include

independence, network capabilities, industry and IT expe-

rience of the audit team, a risk-based audit approach,

a central process management as well as the integration

of Corporate Audit and risk management functions. The

Audit Committee annually assesses the performance of the

Group Auditors and determines the audit fees (refer to

section 3.5).

9 Information policy

Panalpina regularly updates its website at

www.panalpina.com, informing the public of any major

events, organizational changes and (quarterly) financial

results. Press releases are accessible to all visitors to the

website; alternatively, subscriptions can be made so that

the latest press releases are automatically forwarded via

e-mail. Furthermore, all publications such as the Annual

Report (including the Corporate Governance and Compen-

sation Report), customer magazine and sales brochures

are available online. The dates of the General Meeting of

Shareholders as well as dates of publication of the quar-

terly financial results are printed in the Annual Report and

appear in the Financial Calendar on the web site (under

Investor Relations). The minutes of shareholder meetings

are available online.

www.panalpina.com / corpgov


61

Responsibilities

www.panalpina.com / gri

Global Reporting Initiative

Consolidated and Annual

Financial Statements 2011

62


Contents

Consolidated Financial Statements 2011

Consolidated Income Statement 64

Consolidated Statement of Comprehensive Income 65

Consolidated Statement of Financial Position 66

Consolidated Statement of Changes in Equity 67

Consolidated Statement of Cash Flows 69

Notes to the Consolidated Financial Statements 70

Principal Group Companies and Participations 122

Report of the Group Auditors 127

Key Figures in CHF (five-year review) 128

Consolidated Statement of Financial Position in CHF (five-year review) 130

Key Figures in EUR (five-year review) 131

Consolidated Statement of Financial Position in EUR 133

Annual Financial Statements 2011 of Panalpina World Transport (Holding) Ltd.

Income Statement 134

Balance Sheet as of December 31 (before profit appropriation) 135

Notes to the Financial Statements 136

Appropriation of Available Earnings 140

Report of the Statutory Auditors 141

63


64



in thousand CHF Notes 2011 2010

Forwarding services 7,925,993 8,675,826

Customs, duties and taxes (1,426,345) (1,511,665)

Net forwarding revenue 5 6,499,648 7,164,161

Forwarding services from third parties 5 (5,022,599) (5,684,084)

Gross profit 5 1,477,049 1,480,077

Personnel expenses 6 (892,421) (890,937)

Other operating expenses 9 (372,438) (527,051)

(Losses)/gains on sales of non-current assets 10 (106) 277

EBITDA 212,084 62,366

Depreciation of property, plant and equipment 14 (28,484) (38,891)

Amortization of intangible assets 15 (9,383) (8,113)

Operating result (EBIT) 174,217 15,362

Finance income 11 6,268 6,248

Finance costs 11 (11,903) (15,488)

Profit before income tax (EBT) 168,582 6,122

Income tax expenses 12 (41,169) (32,119)

Consolidated profit 127,413 (25,997)

Consolidated profit attributable to:

Owners of the parent 126,294 (27,350)

Non-controlling interests 24 1,119 1,353

Earnings per share (in CHF per share)

Basic 13 5.34 (1.16)

Diluted 13 5.33 (1.16)

The notes on pages 70 to 125 are an integral part of these consolidated financial statements.

Consolidated Income Statement for the years ended December 31, 2011 and 2010

65



Consolidated Statement of Comprehensive Income for the years ended December 31, 2011 and 2010


Consolidated profit 127,413 (25,997)

Other comprehensive income

Available-for-sale financial assets 16 3,994 (1,828)

Amounts recognized in equity for defined benefit post-employment plans

– Actuarial gains (losses) 7 (23,297) (11,347)

– Exchange difference 7 1,163 751

Exchange difference on translations of foreign operations (11,238) (15,027)

Income tax on components of other comprehensive income 12 5,296 5,289

Other comprehensive income for the period, net of tax (24,082) (22,162)

Total comprehensive income for the period 103,331 (48,159)

Attributable to owners of the parent 102,416 (49,082)

Attributable to non-controlling interests 24 915 923


66



Consolidated Statement of Financial Positionas at December 31, 2011 and 2010

Assetsin thousand CHF Notes 2011 2010

Non-current assets

Property, plant and equipment 14 113,180 113,833

Intangible assets 15 141,743 78,091

Investments 16 72,256 34,843

Derivative financial instruments 21 459 0

Post-employment benefit assets 7 0 10,312

Deferred income tax assets 27 62,313 65,871

Total non-current assets 389,951 302,950

Current assets

Other receivables and other current assets 19 84,997 97,957

Unbilled forwarding services 77,346 74,742

Trade receivables 20 984,404 958,114

Derivative financial instruments 21 5,045 20,454

Other current financial assets 22 20,000 6,089

Cash and cash equivalents 22 573,579 528,936

Total current assets 1,745,371 1,686,292

Total assets 2,135,322 1,989,242

Liabilities and equityin thousand CHF Notes 2011 2010

Equity

Share capital 23 50,000 50,000

Treasury shares 23 (197,278) (196,003)

Reserves 1,053,086 950,282

Total equity attributable to owners of the parent 905,808 804,279

Non-controlling interests 24 9,082 7,890

Total equity 914,890 812,169

Non-current liabilities

Borrowings 25 231 403

Provisions 26 85,032 112,579

Post-employment benefit liabilities 7 47,151 40,671

Derivative financial instruments 21 0 539

Deferred income tax liabilities 27 14,492 20,745

Total non-current liabilities 146,906 174,937

Current liabilities

Trade payables 588,104 521,207

Other payables and accruals 144,354 134,264

Accrued cost of services 184,519 174,840

Borrowings 25 7,296 9,335

Derivative financial instruments 21 4,648 4,993

Provisions and other liabilities 28 125,420 141,053

Current income tax liabilities 19,185 16,444

Total current liabilities 1,073,526 1,002,136

Total liabilities 1,220,432 1,177,073

Total equity and liabilities 2,135,322 1,989,242


67



Consolidated Statement of Changes in Equityfor the year ended December 31, 2011

Attributable to the owners of the parent

Non- controlling

interests

Total equity

in thousand CHF

Notes

Share capital

Treasury shares

Other reserves

Transla-tion

reserveRetained earnings

Total

Balance on January 1, 2011 50,000 (196,003) (108,862) (151,070) 1,210,214 804,279 7,890 812,169

Consolidated profit 126,294 126,294 1,119 127,413

Available-for-sale financial assets 16 3,994 3,994 3,994


– Actuarial gains (losses) 7 (23,297) (23,297) (23,297)

– Exchange difference 7 1,163 1,163 1,163

Exchange difference on translations of foreign operations (11,034) (11,034) (204) (11,238)

Income tax on components of other comprehensive income 12 5,296 5,296 5,296

Total comprehensive income for the period 0 0 (12,844) (11,034) 126,294 102,416 915 103,331

Dividends paid 24 0 0 (46) (46)

Share-based payments employee share plan 8 1,255 1,255 1,255

Share-based payments option plan 8 662 662 662

Changes in treasury shares, net (1,274) (1,530) (2,804) (2,804)

Acquired non-controlling interests 24 0 0 323 323

Balance on December 31, 2011 50,000 (197,277) (121,706) (162,104) 1,336,895 905,808 9,082 914,890


68



Consolidated Statement of Changes in Equityfor the year ended December 31, 2010

Attributable to the owners of the parent

Non- controlling

interests

Total equity

in thousand CHF

Notes

Share capital

Treasury shares

Other reserves

Transla-tion

reserveRetained earnings

Total

Balance on January 1, 2010 50,000 (192,567) (101,723) (136,473) 1,237,327 856,564 7,015 863,579

Consolidated profit (27,350) (27,350) 1,353 (25,997)

Available-for-sale financial assets 16 (1,828) (1,828) (1,828)


– Actuarial gains (losses) 7 (11,347) (11,347) (11,347)

– Exchange difference 7 751 751 751

Exchange difference on translations of foreign operations (14,597) (14,597) (430) (15,027)

Income tax on components of other comprehensive income 12 5,289 5,289 5,289

Total comprehensive income for the period 0 0 (7,135) (14,597) (27,350) (49,082) 923 (48,159)

Dividends paid 24 0 0 (52) (52)

Share-based payments employee share plan 8 676 676 676

Share-based payments option plan 8 1,540 1,540 1,540

Changes in treasury shares, net (3,436) (1,979) (5,415) (5,415)

Reclassification non-controlling interests 24 (4) (4) 4 0

Balance on December 31, 2010 50,000 (196,003) (108,862) (151,070) 1,210,214 804,279 7,890 812,169


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Profit for the period 127,413 (25,997)

Income tax expenses 12 41,169 32,119

Depreciation of property, plant and equipment 14 28,484 38,891

Amortization of intangible assets 15 9,383 8,113

Finance income and dividend on available-for-sale financial assets 11 (6,268) (6,078)

Interest expenses 11 5,932 5,516

Exchange differences 11 2,840 609

(Losses)/gains on sales of property, plant and equipment 10 106 (277)

Equity-settled share-based payment transactions 8 2,936 2,281

Other non-cash expenses (869) 9,791

211,126 64,968

Working capital adjustments:

(Increase)/decrease receivables and other current assets (21,893) (208,859)

Increase/(decrease) payables, accruals and deferred income 89,262 133,890

(Decrease)/increase long-term provisions (15,508) 48,980

(Decrease)/increase short-term provisions and other liabilities (33,915) 36,287

Cash generated from operations 229,072 75,266

Interest paid (2,577) (5,198)

Income taxes paid (32,996) (33,031)

Net cash from operating activities 193,499 37,037

Interest received 4,695 5,206

Dividends received 11 172 99

Proceeds from sales of PPE 1,633 3,009

Proceeds from investments held for trading 12 0

Proceeds from sales of securities 0 150

Loan and receivables repayments 1,148 7,586

Repayment of other financial assets 1,927 1,345

Purchase of property, plant and equipment (30,715) (28,173)

Acquisition of subsidiary, net of cash acquired 30 (59,986) (2,384)

Purchase of intangible assets and other assets (19,648) (13,967)

Purchase of investments held for trading (13,840) 0

Purchase of other financial assets (36,954) (3,663)

Net cash used in investing activities (151,556) (30,792)

Free cash flow 41,943 6,245

Proceeds of short- and long-term borrowings 142 2,831

Repayment of short- and long-term borrowings 0 (5,228)

Dividends paid to non-controlling interests 24 (46) (52)

Purchase of treasury shares (8,617) (10,540)

Sale of treasury shares 4,685 4,865

Net cash used in financing activities (3,836) (8,124)

Effect of exchange rate changes on cash and cash equivalents 6,536 (988)

Net increase (decrease) in cash and cash equivalents 44,643 (2,867)

Cash and cash equivalents at the beginning of the year 22 528,936 531,803

Cash and cash equivalents at the end of the year 22 573,579 528,936


Consolidated Statement of Cash Flows for the years ended December 31, 2011 and 2010

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General information

Panalpina World Transport (Holding) Ltd. (referred to hereafter as the Company) and its subsidiaries is one of the world’s leading providers of supply chain solutions, combining intercontinental Air and Ocean Freight with comprehensive Value-Added Logistic Services and Supply Chain Services. Thanks to its in-depth industry know-how and customized IT systems, Panalpina provides globally integrated end-to-end solutions tailored to its customers’ supply chain management needs.

Panalpina World Transport (Holding) Ltd. is a limited company incorporated and domiciled in Basel. The registered address is Viadukt-strasse 42, 4002 Basel, Switzerland. The Company shares are publicly traded and are listed on the SIX Swiss Exchange in Zurich.

The consolidated financial statements for the year ending December 31, 2011 were authorized for issuance in accordance with a resolu-tion by the Board of Directors on March 2, 2012.

Summary of significant accounting policies

Basis of preparation of the consolidated financial statements

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. The consolidated financial statements of the Company as at and for the year ended December 31, 2011 comprise the Company and its affiliates (together referred to as the Group and individually as Group entities).

Statement of compliance

The consolidated financial statements are based on the accounts of the individual subsidiaries on December 31, which have been drawn up according to uniform Group accounting principles. The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.

Basis of measurement

The consolidated financial statements have been prepared under the historical cost basis, except for available-for-sale financial assets, financial assets and financial liabilities (including derivative instruments) at fair value through profit and loss and liabilities for cash-settled share-based payment arrangements which have been measured at fair value. Defined benefit assets are recognized at the net total of the plan assets plus unrecognized past-service costs and unrecognized actuarial losses and the present value of the defined benefit obligation.

The methods used to measure fair values are discussed further in note 3.

Presentation currency

The consolidated financial statements are presented in Swiss francs (CHF) which is the functional currency of the Company and all values are rounded to the nearest thousand except where otherwise indicated.

Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect application of accounting policies and the reported amounts of assets, liabilities, income and expenses. It requires management to exercise its judgments and assumptions in the process of applying the Group’s accounting policies. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Deviations from estimates and judgments are recognized in the period in which the estimates are revised and in any future periods affected.

The areas involving a higher degree of judgment or complexity, or areas in which assumptions and estimates are significant to the consoli-dated financial statements, are disclosed in note 4.

Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities, unless otherwise stated. If necessary, comparative amounts have been reclassified to conform with the current year’s presentation.

Effective from January 1, 2011, the Group adopted the revised standard IAS 24 “Related Party Disclosures” as well as the amendments to IAS 32 “Financial Instruments: Presentation – Classification of Rights Issues” and IFRIC 14 “The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction – Prepayments of a Minimum Funding Requirement.”

1

2

3

Notes to the Consolidated Financial Statements

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IAS 24 (revised) “Related Party Disclosures” The revised standard supersedes IAS 24 “Related Party Disclosures”, issued in 2003. IAS 24 (revised) is mandatory for periods beginning on or after January 1, 2011. The revised standard provides a simplified definition of related parties by clarifying its intended meaning and eliminating inconsistencies from the definition. The adoption of the revised standard did not impact on the financial statements of the Group.

IAS 32 (amendment) “Financial Instruments: Presentation – Classification of Rights Issues”The amendment applies to annual periods beginning on or after February 1, 2010. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors.” As Panalpina has no rights issues, the adoption of this amendment did not have any impact on the consolidated financial statement.

IFRIC 14 (amendment) “The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction – Prepay-ment of a Minimum Funding Requirements”The amendment corrects an unintended consequence of IFRIC 14 “IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction.” Without the amendment, entities are not permitted to recognize some voluntary prepayments for minimum funding contributions as an asset. With this amendment this has been revoked and should be applied retrospectively to the earliest comparative period presented. The adoption of this amendment did not impact on the financial statements of the Group.

In addition, the IASB issued amendments to its standards in May 2010, primarily with a view to remove inconsistencies and clarifying the wording. There are separate transitional provisions for each standard. The adoption of the amendments resulted in changes to the accounting policies but did not have any significant impact on the financial position or performance of the Group.

The following new or revised standards, amendments to standards and interpretations that have been published are mandatory for the Group’s accounting periods beginning on or after January 1, 2012 or for later periods, but the Group has not yet adopted them:

IFRS 7 (amended) “Disclosures – Transfers of Financial Assets”In October 2010 the IAS issued “Disclosures – Transfers of Financial Assets” (amendments to IFRS 7) with an effective date of July 1, 2011. Panalpina is in the process of analyzing the impact of the amendments to IFRS 7.

IFRS 9 “Financial instruments” Addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortized cost. The determination is made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The Group is yet to assess IFRS 9’s full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after January 1, 2015.

IFRS 10 “Consolidated Financial statements” The new standard creates a uniform definition regarding the concept of control thus setting a uniform basis for the existence of a parent-subsidiary relationship and the related definition of the scope of consolidation. The Group is yet to assess IFRS 10’s full impact and intends to adopt IFRS 10 no later than the accounting period beginning January 1, 2013.

IFRS 11 “Joint Arrangements” IFRS 11 addresses joint arrangements distinguishing between arrangements where an entity exercises joint control over a joint venture or joint operation and the accounting of such. The new Standard supersedes IAS 31 “Interests in Joint Ventures” and SIC-13 “Jointly Controlled Entities – Non-Monetary Contributions by Venturers” as the henceforth relevant provisions addressing issues of accounting for jointly held entities. The Group is yet to assess IFRS 11’s full impact and intends to adopt IFRS 11 no later than the accounting period beginning January1, 2013.

IFRS 12 “Disclosure of interests in other entities” Includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The Group is yet to assess IFRS 12’s full impact and intends to adopt IFRS 12 no later than the accounting period beginning on or after January 1, 2013.

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IFRS 13 “Fair value measurement” The aim of the standard is to improve consistency and to reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements across all IFRS standards. The requirements, which are largely aligned between IFRS and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS or US GAAP. The Group is yet to assess IFRS 13’s full impact and to adopt IFRS 13 no later than the accounting period beginning on or after January 1, 2013.

Amendments to IAS 1 “Presentation of Financial Statements”In June 2011 the IASB issued Presentation of items of Other Comprehensive Income (amendments to IAS 1) “Presentation of Financial Statements” with an effective date of July 1, 2012. The Group is yet to assess the amendments impact.

Amendments to IAS 12 “Deferred Tax – Recovery of Underlying Assets”In December 2010 the IASB issued Deferred Tax: “Recovery of Underlying Assets” - Amendments to IAS 12. The Amendment offers a partial clarification of the treatment of timing differences arising in connection with the application of the fair-value model of IAS 40. In the case of real estate held for investment purposes, it is often difficult to assess whether existing differences will reverse through continued use or as a result of a sale. The amendment to IAS 12 provides that reversal in principle occurs as a result of a sale. As a consequence of the amendment, SIC 21 “Income Taxes – Recovery of Revalued Depreciable Assets” shall no longer be effective for real estate held for investment purposes measured at fair value. The Group anticipates no impact on its financial statements in applying this amendment, which will become effective for accounting periods on or after January 1, 2012.

IAS 19 “Employee benefits” The standard was amended in June 2011. As the Group already eliminated the corridor approach and recognized all actuarial gains and losses in Other Comprehensive Income (OCI) as they occurred and already recognized all past service costs the impact on Group l evel will only be the replacement of interest costs, and the expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability (asset). In addition the amendments require additional disclosures. The Group is yet to assess the full impact of the amendments. The amendments are mandatory for periods beginning on or after January 1, 2012.

IAS 27 “Consolidated and Separate Financial Statements”

IAS 27 will be renamed from “Consolidated and Separate Financial Statements” to “Separate Financial Statements” and henceforth shall apply only to entities preparing stand-alone financial statements in accordance with IFRS. The new standard has no impact on the Group as it does not prepare stand-alone financial statements in accordance with IFRS.

IAS 28 “Investments in Associates”In the amendments to IAS 28, the content of the provisions governing the accounting for shares in associates and joint ventures is expanded. The Group is yet to assess full impact of this amendment and intends to adopt the amendment no later than the accounting period beginning January 1, 2013.

Amendments to IAS 32 “Financial Instruments: Presentation” and IFRS 7 “Financial Instruments: Disclosures – Offsetting of Financial Assets and Financial Liabilities”The preconditions set out in IAS 32 regarding the set-off are set out in additional application guidelines. The Amendments to IFRS 7 concern new disclosure requirements in connection with certain netting agreements. The Group is yet to assess full impact of these amendments and intends to adopt the amendments no later than the accounting period beginning January 1, 2014.

There are no other IFRS or IFRIC interpretations that are not yet effective and would be expected to have a material impact on the Group.

Basis of consolidation

Consolidation policyThe subsidiaries are those companies controlled directly or indirectly, by Panalpina World Transport (Holding) Ltd., where control is defined as the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. This control is normally evidenced when the Group owns, either directly or indirectly, more than one half of the voting rights or currently exercisable potential voting rights of a company’s share capital. Inter-company balances, transactions and resulting unrealized income are eliminated in full. Changes in ownership interests in subsidiaries are accounted for as equity transactions if they occur after control has already been obtained and if they do not result in a loss of control.

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisi-tion of a subsidiary is determined by the fair values of the assets transferred, the liabilities incurred to previous owners and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair value at acquisition date. On an acquisition by acquisition basis, the Group recog-nizes any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. Investments are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment.

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The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired are recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of bargain purchase, the difference is recognized directly in the statement of comprehensive income.

The Group treats transactions with non-controlling interests as transactions with equity owner of the Group. For purchases from-non- controlling interest, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

When the Group ceases to have significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequent accounting for the retained interest as an associate, joint venture or financial asset. Any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. The amounts previously recognized in other comprehensive income are reclassified to profit or loss.

Associates are all entities over which the Group has significant influence, but where it does not have control, generally accompanying a shareholding of business between 20 % and 50 % of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment losses.

The Group’s share of its associates’ post-acquisition profits or losses is recognized in the income statement, and its share of post-acquisi-tion movements is recognized in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses unless it has incurred obligations or made payments on behalf of the associate.

Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associ-ates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Dilution gains and losses arising in investments in associates are recognized in the income statement.

Operating segment informationThe determination of the Group’s operating segments is based on the organization units for which information is reported to the Group’s management. The Group is primarily organized by regions and has four reportable segments: Europe, Middle East, Africa and CIS, North America, Central and South America and Asia Pacific. Each reportable segment offers the same products and services. The Executive Board reviews monthly the Group’s internal reporting in order to assess performance and allocate resources. Performance is measured based on gross profit and operating result (EBIT). Income tax expenses, finance income and costs as well as special items are not assessed by segment. Certain headquarter activities are reported as Corporate. These consist of corporate headquarters, including the Corporate Executive Committee, Corporate Communications, Corporate Operations, Corporate Human Resources, Corporate Finance, including Treasury, Taxes and Pension Fund Management.

Transfer prices between operating segments are set out at arm’s-length basis. Operating assets and liabilities consist of property, plant and equipment, goodwill and intangible assets, trade receivables/payables, other assets and liabilities such as provisions and current income taxes, which can be reasonably attributed to the reported operating segments. Non-operating assets and liabilities mainly include deferred income tax balances, post-employment benefit assets/liabilities and financial assets/liabilities such as marketable securities and investments.

Foreign currency

Functional currencyMost Group companies use their local currency as their functional currency. Certain Group companies use other currencies (such as US dollars or euros) as their functional currency where this is the currency of the primary economic environment in which the entity or branch operates.

Transactions and balancesLocal transactions in other currencies are initially reported using the exchange rate at the date of the transaction or reporting date. Gains and losses from the settlement of such transactions and gains and losses on transactions of monetary assets and liabilities denominated in other currencies are included in the income statement, except when they arise on monetary items that, in substance, form part of the Group’s net investment in a foreign entity. In such cases the gains and losses are deferred into other comprehensive income.

Non-monetary items that are measured in terms of historical cost in foreign currency are translated using the exchange rate as of the dates of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates on the date on which the fair value is determined.

Changes in fair value of securities denominated in foreign currency classified as available-for-sale are split into components resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Foreign exchange remeasurement differences related to changes in amortized cost are recognized in profit or loss, and other changes in the carrying amount are recognized in equity.

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Presentation currencyUpon consolidation, assets and liabilities of Group companies using functional currency other than Swiss francs are translated into Swiss francs using a year-end rate of exchange. Income, expenses and net income and cash flows are translated at the average rates of exchange for the year. Translation differences due to the changes in exchange rates between the beginning and the end of the year and the difference between net incomes translated at the average and year-end exchange rates are recognized as a separate component of other comprehensive income.

The income and expenses of foreign operations in hyperinflationary economies are translated to Swiss francs at the exchange rate on the reporting date. Prior to translating the financial statement of foreign operations in hyperinflationary economies, their financial statements are restated to account for changes in the general purchasing power of the local currency. The restatement is based on relevant price indices on the reporting date. Foreign currency differences are recognized directly in comprehensive income in the foreign currency translation reserve.

On disposal of a foreign entity, the identified cumulative currency translation differences within equity relating to that foreign entity are recognized in the income statement as part of the gain or loss on divestment.

Any goodwill arising on the acquisition is treated as assets and liabilities of the foreign operation and translated at the closing rate.

The most important exchange rates used in the reported financial statements are:

2011 2010

Statement of Financial Position

Income Statement

Statement of Financial Position

Income

Statement

EUR 1.21628 1.23080 EUR 1.25134 1.37870

USD 0.94082 0.88478 USD 0.93670 1.04137

HKD 0.12114 0.11366 HKD 0.12049 0.13403

CNY 0.14950 0.13690 CNY 0.14177 0.15385

CAD 0.92165 0.89488 CAD 0.93820 1.01107

GBP 1.45278 1.41844 GBP 1.45170 1.60781

Revenue recognition

Net forwarding revenue includes amounts received, receivables and unbilled forwarding services for forwarding performed for customers after deducting trade discounts and volume rebates and excluding sales taxes and value-added taxes less charges for customs and duty.

Trade discounts and volume rebates are recorded on an accrual basis consistent with recognition of the related revenue recorded as a deduction for accounts receivable or as accrued liabilities. Such estimates are based on analyses of existing contractual obligations, historical trends and the Group’s experience.

Net forwarding revenue is recognized at the time the services are performed. Logistics projects with a longer period of delivery are recognized at the stage of completion of the services on the reporting date. The stage of completion is assessed in reference to comple-tion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. Where necessary, single transactions are split into separately identifiable components to reflect the substance of the transaction. Conversely, two or more transactions may be considered together for revenue recognition purposes, where the commercial effect cannot be under-stood without reference to the series of transactions as a whole.

Gross profit includes net forwarding revenue from services rendered less related expenses for services provided by third parties net of customs, duty and taxes.

Interest income is recognized as interest accrued using the effective interest method. Interest income is included in finance income in the income statement.

Dividends are recognized when the Group’s right to receive the payment is established.

Forwarding services from third parties

Forwarding services from third parties includes the corresponding direct services costs and related services costs rendered by a third party. Trade discounts and volume rebates are recorded on an accrual basis consistent with the recognition of the related services.

Employee benefits

Wages, salaries, social security contributions, paid annual leave, sick leave and other benefits are paid or accrued undiscounted in the year in which the associated services are rendered by employees of the Group. Legal or constructive obligations such as bonus or profit-sharing plans are recognized for the amount expected to be paid in the year in which the services are provided.

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Termination benefits are recognized as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to voluntary redundancy. Termination benefits for voluntary redundancies are recognized as expenses if the Group has made an offer of voluntary redundancy and it is probable that the offer will be accepted. If benefits are payable more than twelve months after the reporting date, then they are discounted to their present value.

Pension obligationMost employees are covered by defined benefit and defined contribution post-employment plans sponsored by the Group companies. The schemes are generally funded through payments to insurance companies or trustee-administrated funds. The Group’s contributions to defined contribution plans are recognized in the income statement within the operating results when they are due. The Group has no legal or constructive obligation to pay further contributions.

The asset and liability recognized in the statement of financial position in regard to defined benefit pension plans is the present value of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, together with adjustments for unrecog-nized past-services costs. The accounting and reporting of defined benefit plans are based on recent actuarial valuations. The defined benefit obligations and service costs are calculated using the projected unit credit method. This reflects services rendered by employees to the date of valuation and incorporates actuarial assumptions primarily regarding discount rates used in determining the present value of benefits, projected rates of remuneration growth and long-term expected rates of return for plan assets using the interest rates of high- quality corporate bonds that are denominated in the currency in which the benefits will be paid and which have maturity dates approximat-ing the terms of the related pension liability. Past services costs are recognized immediately in the income statement, unless the changes to the pension plans are conditional on the employees remaining in service for a specified period of time. In this case post service costs are amortized on a straight-line basis over the vesting period.

Actuarial gains and losses, which consist of differences between assumptions and actual experiences and the effects of changes in actuarial assumptions, are recorded in equity in other comprehensive income in the period in which they arise.

Pension assets and liabilities in different defined benefit plans are not offset against each other unless the Group has a legally enforceable right to use the surplus in one plan to settle obligations in the other plan. The recognition of pension assets is limited to the present value of any future refunds from the plans or reductions in future contributions to the plans and any cumulative unrecognized past service costs. Adjustments arising from the limit on the recognition of assets for defined benefit plans are charged in equity in other comprehensive income.

Other long-term employee benefitsNet obligation in regard to long-term employee benefits other than pension plans is the amount of future benefits that employees have earned in return for their service in the current and/or prior periods. Benefits are discounted to determine their present value and the fair value of any related asset is deducted. The expected costs of these benefits are accrued over the period of employment using the same method of valuation that is used for defined benefit pension plans. Any actuarial gains or losses which consist of differences between assumptions and actual experiences and the effects of changes in actuarial assumptions are recognized in the income statement in the period in which they arise.

Share-based compensationCertain employees of the Group participate in share-based compensation plans. The fair value of the employee services received in exchange for the granting of the options and the discount on the shares granted is estimated at the grant date and recorded as an expense over the vesting period. The expense is recognized as other employee benefits in the income statement within the operating result of Corpo-rate. For equity-settled plans, an increase in equity is recorded for this expense and any subsequent cash flows from exercises of vested awards are recorded as changes in equity. For cash-settled plans, a liability is recorded, which is measured at fair value at each reporting date with any movements in fair value being recorded in the income statement. Any subsequent cash flows from exercise of vested awards are recorded as a reduction of the liability.

Other operating expenses

Other operating expenses primarily include administrative expenses, communication expenses, rent and utilities expenses, travel and promotion expenses, insurance expenses and claims, changes in provisions from impairments of trade receivables and collection expenses and other operating expenses necessary to render forwarding revenue to third parties. The expenses are recognized when the expenses recorded on an accrual basis have been incurred.

Finance income and costs

Finance income comprises interest income on funds invested, dividend income, cash discounts, gains on disposals of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, and gains on derivatives that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, cash discounts, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognized on financial assets, losses on hedging instru-ments that are recog nized in profit or loss, bank charges and bank guarantee fees. All borrowing costs are recognized in profit or loss using the effective interest method.

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Income tax expenses

Income taxes include all taxes based on the taxable profits of the Group, including withholding taxes payable on the distribution of retained earnings within the Group. Other taxes not based on income, such as capital taxes, are included within other operating expenses. Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or sub-stantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred income tax assets and liabilities are recognized on temporary differences between the carrying amounts and the tax bases of assets and liabilities for financial statement. Deferred income tax assets relating to the carry-forward of unused tax losses are recognized to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilized.

Deferred income tax is not recognized for the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit nor loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred income tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill.

Deferred income tax assets and liabilities are offset when the income taxes are levied by the same taxation authority and when there is a legally enforceable right to offset them. Deferred income tax is measured based on the currently enacted tax rates applicable in each tax jurisdiction where the Group operates.

Current income tax and deferred income tax are recognized in profit or loss except to the extent that they relate to a business combination, or items recognized directly in equity or in other comprehensive income.

Property, plant and equipment

Property, plant and equipment are measured at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Initially property, plant and equipment are recorded at cost of purchase or construction and include all cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Interest and other borrowing costs for long-term construction projects are capitalized and included in the carrying value of the assets. All other repair and maintenance costs of the day-to-day servicing are recognized in the income statement as incurred. The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. When components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Gains and losses on a disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognized net within gains or losses on sales of non-current assets in the income statement.

Land and buildings are carried at cost less depreciation and/or accumulated impairment losses.

Depreciation is recognized in the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reason-ably certain that the Group will obtain ownership by the end of the lease term. Land and construction in progress are not depreciated.

The estimated useful lives for the current and comparative periods are as follows:

Years

Warehouse and office buildings 25 – 40

Warehouse and transportation equipment 3 – 10

Office furnishings and equipment 5 – 10

EDP hardware 3

Trucks, trailers and special vehicles 3 – 10

Automobiles 3 – 5

The assets’ residual value and estimated useful lives are regularly reviewed and adjusted. If appropriate, the future depreciation charge is accelerated.

Leases

Where the Group is the lessee, leases of property, plant and equipment where the Group has substantially all of the risks and rewards of ownership are classified as finance leases. Financial leases are capitalized at the start of the lease at fair value, or the present value of the minimum lease payments, if lower. Assets acquired under finance leases are depreciated in accordance with the Group’s policy on property, plant and equipment. If there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the lease term based on the effective interest rate method. Leases where substantially all of the risk and rewards of ownership are not transferred to the Group are classified as operating leases. Payments made under operating leases are charged against the income statement on a straight-line basis over the period of the lease.

The corresponding leasing obligations, net of finance charges, are included in borrowings. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

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Intangible assets

Business combination and goodwillBusiness combinations are accounted for using the acquisition method of accounting. The consideration transferred in a business combi-nation is measured at fair value at the date of acquisition and includes the cash paid plus the fair value at the date of exchange of assets given, liabilities incurred or assumed and equity instruments issued by the Group. The fair value of the consideration transferred also includes contingent consideration arrangements at fair value. Directly attributable acquisition-related costs are expensed in the income statement. At the date of acquisition the Group recognizes the identifiable assets acquired and the liabilities assumed at fair value. Where the Group does not acquire 100 % ownership of the acquired business, non-controlling interests are recorded as the proportion of the fair value of the acquired net assets attributable to non-controlling interest. Goodwill is recorded as the surplus of the consideration transferred over the Group’s interest in the fair value of acquired net assets. Any goodwill and fair value adjustments are recorded as assets and liabilities of the acquired business in the functional currency of that business. When the initial accounting for a business combination is incomplete at the end of a reporting period, provisional amounts are used. During the measurement period, the provisional amounts are retrospec -tively adjusted and additional assets and liabilities may be recognized, to reflect new information obtained about the amounts recognized at that date, had they been known. Goodwill is not amortized but assessed for possible impairment at each reporting date and is addition-ally tested annually for impairment. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Changes in ownership interest in subsidiaries are accounted for as equity transactions if they occur after control has already been obtained and if they do not result in a loss of control.

Trademarks and licensesSeparately acquired trademarks and licenses are shown at historical cost. Trademarks and licenses acquired in a business combination are recognized at fair value at the acquisition date. Trademarks and licenses have a finite useful life and are carried at cost less accumu-lated amortization and/or accumulated impairment losses. Amortization is calculated using the straight-line method to allocate the cost of trademarks and licenses over their estimated useful lives of five to ten years.

Customer relationshipsCustomer relationships acquired in a business combination are recognized at fair value at the acquisition date. Customer relations have a finite useful life and are carried at cost less accumulated amortization and / or accumulated impairment losses. Amortization is calculated using the straight-line method over the expected life of the customer relationship of three to five years.

Computer softwareDevelopment costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognized as intangible assets when the following criteria are met:

• it is technically feasible to complete the software product so that it will be available for use;

• management intends to complete the software product and use or sell it;

• there is an ability to use or sell the software product;

• it can be demonstrated how the software product will generate probable future economic benefits;

• adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and

• the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalized as part of the software product include software development costs, employee costs and an appropriate portion of relevant overhead costs. Other development expenditures that do not meet these criteria are recognized as an expense as incurred. Development costs previously recognized as expenses are not recognized as an asset in a subsequent period. Costs associated with maintaining computer software programs are recognized as an expense as incurred. Computer software development costs recognized as assets are amortized over their estimated useful life, which does not exceed three to five years.

Other intangible assetsOther intangible assets that are acquired by the Group that have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses.

Impairment of property, plant and equipment and intangible assets

An impairment assessment is carried out when there is evidence that an asset may be impaired. In addition, intangible assets that are not yet available for use are tested for impairment annually. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell, and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or asset groups. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assess-

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ments of the time value of money and the risks specific to the asset. An appropriate valuation model is used to determine fair value less costs to sell. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. Impairment losses are recognized in the income statement. When an impairment loss arises, the useful life of the asset in question is reviewed and, if necessary, the future depreciation/amortization charge is accelerated.

Impairment of goodwill

Goodwill is assessed for possible impairment at each reporting date and is additionally tested annually for impairment. When the recover-able amount of the cash-generating units, being the higher of its fair value less costs to sell or its value in use, is less, then the carrying value of the goodwill is reduced to its recoverable amount. The reduction is reported in the income statement as an impairment loss. The methodology used in the impairment testing is further described in note 15.

Financial assets

Financial assets, including cash and marketable securities, short- and long-term deposits, trade and other receivables, loans and other receivables, quoted and unquoted financial instruments and derivative financial instruments, are classified either as fair value through profit or loss, loans and receivables, available-for-sale, or in exceptional cases, as held to maturity. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. All financial assets are initially recognized at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. All purchases and sales are recognized on the settlement date.

Subsequent measurementFinancial assets at fair value through profit or lossFinancial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that do not meet the hedge accounting criteria. Derivatives, including separately embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair value through profit or loss are carried on the statement of financial position at fair value with gains or losses recognized in the income statement.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such financial assets are normally carried at amortized cost using the effective interest rate method. Gains and losses are recognized in the income statement when the loans and receivables are derecognized or impaired, as well as through the amortization process.

Trade receivables originated by the Group are financial assets that are created by providing money or services directly to the debtor. Such receivables are not quoted and are not originated with the intention to be sold immediately or in the near term. Receivables are presented in current assets for maturities up to twelve months (accounting treatment of trade receivables is outlined in more detail in the section: Trade receivables).

Held-to-maturity investmentsNon-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the Group has the positive intention and ability to hold them until maturity. After initial measurement, held-to-maturity investments are measured at amortized cost using the effective interest method. This method uses an effective interest rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Gains and losses are recognized in the income statement when the investments are derecognized or impaired, as well as through the amortization process. The Group did not have any held-to-maturity investments during the periods under review.

Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. After initial measurement, available-for-sale financial assets are measured at fair value with unrealized gains or losses recognized in comprehensive income until the investment is derecognized, at which time the cumulative gain or loss recorded in comprehensive income is recognized in the income statement, or determined to be impaired, at which time the cumulative loss recorded in comprehensive income is recognized in the income statement.

Fair value of financial instruments

Fair value is the amount for which a financial asset, liability or instrument could be exchanged between knowledgeable and willing parties in an arm’s-length transaction. It is determined by reference to quoted market prices or by the use of established valuation techniques such as option pricing models and the discounted cash flow method if quoted prices in an active market are not available. Valuation tech niques will incorporate observable market data about market conditions and other factors that are likely to affect the fair value of a financial instrument. Valuation techniques are typically used for derivative financial instruments. The fair values of financial assets and liabilities at the reporting date are not materially different to their reported carrying value unless specifically mentioned in the notes to the consolidated financial statements. Information on fair value hierarchy is included in note 18 on risk management.

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Amortized cost of financial instruments

Amortized cost is computed using the effective interest method less any allowance for impairment and principal repayment or reduction. The calculation takes into account any premium or discount on acquisition and includes transaction costs that are an integral part of the effective interest rate.

Impairment of financial assets

Financial assets are individually assessed for possible impairment at each reporting date. An impairment charge is recorded where there is objective evidence of impairment, such as where the issuer is in bankruptcy, default or other significant financial difficulty. In addition, any available-for-sale equity securities that have a market value of more than 25 % below their original cost, net of any previous impairment, will be considered as impaired. Any available-for-sale equity securities that have a market value below their original cost, net of any previous impairment, for a sustained six-month period will also be considered as impaired. Any decreases in the market price of less than 25 % of original cost, net of any previous impairment, which are also for less than a sustained six-month period are not by themselves considered as objective evidence of impairment. Such movements in fair value are recorded in equity until there is objective evidence of impairment or until the asset is sold or otherwise disposed of. For financial assets carried at amortized cost, any impairment charge is the difference between the carrying value and the recoverable amount, calculated using estimated future cash flows discounted using the original effective interest rate. For available-for-sale financial assets the original cost, net of any previous impairment charge, is the amount currently carried in equity for the difference between the original cost, net of any previous impairment, and at fair value. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For debt securities measured at amor-tized cost that are available-for-sale, the reversal is recognized in income. For equity held available-for-sale, the reversal is recognized directly in equity.

Derecognition of financial assets

A financial asset is derecognized when:

• the Group’s rights to receive cash flows from the asset have expired; or

• the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substan-tially all the risks and rewards of the asset or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Derivatives

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Derivative financial instru-ments are initially recognized and subsequently carried at fair value on the date a derivative contract is entered into. Apart from those derivatives designated as qualifying cash flow hedging instruments in the “hedging” policy below, all changes in fair value are recorded as financial income in the period in which they arise. Embedded derivatives are recognized separately if not closely related to the host contract and where the host contract is carried at amortized cost. Attributable transaction costs are recognized in the income statement when incurred.

Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

The fair value of forward currency contracts is the difference between the forward exchange rate and the contract rate. The forward exchange rate is referenced to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest swap contracts is determined by reference to market value for similar instruments.

Hedge accounting

For the purpose of hedge accounting, hedging relationships may be of three types. A fair value hedge is a hedge of the exposure to changes in fair value of a recognized asset or liability, or an unrecognized commitment, or an identified portion of such an asset, liability or com-mitment that is attributable to a particular risk and could affect profit or loss. A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction and could affect profit or loss. A “hedge of a net investment in a foreign operation” is a hedge of the foreign currency exposure on a net investment in a foreign operation.

To qualify for hedge accounting, the hedging relationship must meet several strict conditions on documentation, probability of occurrence (for cash flow hedges), hedge effectiveness and reliability of measurement. If these conditions are not met, then the derivative instrument does not qualify for hedge accounting. In this case, the hedging instrument and the hedged item are valued independently of one another. The derivative hedging instrument is reported at fair value with the changes in fair value included in income or expenses. Where the Group will hold a derivative as an economic hedge for a period beyond twelve months after the statement of financial position date, the derivative is classified as non-current consistent with the classification of the underlying item.

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At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flow attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine whether they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges that meet the strict criteria for hedge accounting are accounted for as follows:

Fair value hedgesThe change in the fair value of hedging derivatives is recognized in the income statement. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the income statement.

For fair value hedges relating to items carried to amortized cost, the adjustment to carrying value is amortized through the income statement over the remaining term to maturity. Amortization may begin as soon as an adjustment exists and shall begin no later than when the hedge item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedge item is derecognized, the unamor-tized fair value is recognized immediately in the income statement.

When an unrecognized firm commitment is designated as a hedged item, subsequent cumulative change in the fair value of the firm commit-ment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in the income statement.

Cash flow hedgesThe effective portion of the gain or loss on the hedging instrument is recognized directly in equity, while any ineffective portion is recognized in the income statement. Amounts taken to equity are transferred to the income statement when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognized or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognized in equity are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked amounts previously recognized in equity remain in equity until the forecast transaction or firm commitment occurs.

Hedges of a net investmentHedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a manner similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized directly in equity while any gains or losses relating to the ineffective portion are recognized in the income state-ment. Upon disposal of the foreign operation, the cumulative value of any such gains or losses recognized directly in equity is transferred to the income statement.

Hedging activities and derivative financial instrumentsThe Group uses foreign-currency-denominated borrowings and forward contracts to manage its transaction exposures. These currency forward contracts are not designated as cash flow, fair value or net investment hedges and are entered into for periods consistent with currency transaction exposure (generally one to six months). Such derivatives do not qualify for hedge accounting.

At year-end, the contract value is calculated on the total volume of individual contracts using the fair value at this time. The positive replacement value represents the theoretical profit if the open currency contracts were closed out as of December 31. Correspondingly, the negative replacement value represents the theoretical loss on closing the currency transactions open as of December 31.

Trade receivables

Trade receivable are carried at the original invoice amount less valuation adjustments for impairment, trade discounts, volume rebates and similar allowances. Subsequently, accounts receivable are measured at amortized cost using the effective interest method. An allowance for doubtful accounts trade receivables is recorded when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bank-ruptcy or financial reorganization, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognized in the income statement within other operating expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off or 100 % impaired are credited against operating expenses in the income statement. Trade discounts, volume rebates and similar allowances are recorded on an accrual basis consistent with the recognition of the related sales, using estimates based on existing contractual obligations, historical trends and the Group’s experience. Long-term accounts receivable are discounted to take into account the time value of money.

Unbilled forwarding services

Unbilled forwarding services represent the gross unbilled amount expected to be collected from customers for forwarding services in progress for which costs are incurred but not yet invoiced. For logistics projects and other services with a longer period of delivery, recognized profits are included.

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Cash and cash equivalents and other current financial assets

Cash and cash equivalents included in the statement of financial position and statement of cash flows represent cash on hand, bank and postal checks, bills of exchange net, current balance with banks and similar institutions less bank overdraft as well as time deposits and highly liquid money market papers with a maturity period of less than three months from the date of acquisition. Such balances are only reported as cash if they are readily convertible to known amounts of cash and are subject to insignificant risk of change in value.

Other current financial assets include time deposits and highly liquid money market papers with a maturity period between three months and one year.

Non-current assets held for sale

Non-current assets or disposal groups are classified as assets held for sale when their carrying amount is to be recovered principally through a sales transaction and a sale is considered highly probable. Before classification as held for sale, the assets or components of a dis-posal group are remeasured in accordance with the Group’s accounting policies. Thereafter, generally the assets or disposal groups are measured at the lower of their carrying amount and fair value less costs. Any impairment loss on a disposal group is allocated first to goodwill, and then to remaining assets and liabilities on a pro rata basis, except that no loss is allocated to financial assets, deferred tax assets and employee benefit assets, which continue to be measured. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognized in the income statement. Gains are not recognized in excess of any cumu-lative impairment loss.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are recognized in equity as a deduction, net of tax effects, from the proceeds.

Treasury shares

When share capital recognized as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, is net of any tax effects and is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, the resulting surplus or deficit on the transaction is trans-ferred to retained earnings.

Retained earnings and other reserves

Retained earnings and other reserves contain legal reserves which are not distributable to the shareholders pursuant to Swiss law, cumula-tive translation adjustments of all foreign currency differences arising from the translation of the financial statements of foreign operations as well as cumulative actuarial gains and losses from defined benefit post-employment plans net of taxes and accumulated difference in available-for-sales assets.

Financial liabilities

Financial liabilities are either classified as financial liabilities at fair value through profit or loss, financial liabilities at amortized cost or as derivatives designated as hedging instruments in an effective hedge as appropriate. The Group determines the classification of its financial liabilities at initial recognition. Financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, loans and borrowings and derivative financial instruments.

Subsequent measurementFinancial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. This category includes derivative financial instruments entered into by the Group that do not meet the hedge accounting criteria. Gains or losses on liabilities at fair value through profit or loss are recognized in the income statement.

Loans and borrowingsAfter initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost. Any discount between the net proceeds received and the principal value due on redemption is amortized over the duration of the debt instruments and is recognized as part of financing costs using the effective interest rate method.

Derecognition of financial liabilitiesFinancial liabilities are derecognized when the obligation under the liability is discharged or cancelled or expired. Where a financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability. The recognition of a new liability and the difference in the respective carrying amounts is recognized in the income statement.

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Provisions

Provisions are recognized where a legal or constructive obligation has been incurred and if an outflow of resources that can be estimated reliably. Provisions are recorded for the estimated ultimate liability that is expected to arise, taking into account foreign currency effects arising from their translation from their functional currency into Swiss francs and the time value of money where material, determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost. Provisions are established in particular for accrued costs of services, freight forwarding claims, short-term employee benefits, termination and other long-term employee benefits, post-employment benefit liabilities and decommissioning provisions. Provisions for restructuring are recognized only when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating costs are not provided for.

Critical accounting estimates and judgments

The preparation of the Group’s consolidated financial statements in conformity with IFRS requires management to make estimates and judg-ments that affect the application of policies and reported amounts of assets, liabilities, income, expenses and related disclosures. Estimates and the underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. The results of which form the basis for making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based, or as a result of new information or more experience. Such changes are recognized in the period in which the estimate is revised.

The estimations and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.

Impairment of goodwillThe Group tests periodically whether goodwill has suffered any impairment in accordance with the Group’s accounting policy and details disclosed in note 15 – Intangible assets, section: Impairment test for goodwill. The recoverable amounts of cash-generating units (CGUs) have been determined based on value-in-use calculations. The underlying calculations require the use of estimates.

Fair value of financial instrumentsWhere the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from future markets, it is determined using the valuation technique including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required to establish fair value. The judg-ments include considerations of inputs such as credit risk, liquidity risk and volatility. Changes in assumptions concerning these factors could affect the reported fair value of financial instruments.

Pension and other post-employment benefitsThe cost of defined benefit pension plans and other post-employment medical benefits as well as the present value of the pension obliga-tion are determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return of assets, future salary increases, mortality rates and future pension increases. All assumptions are reviewed at each reporting date. When determining the appropriate discount rate, management considers the interest rates on high-quality corporate bonds (with an AAA or AA rating) in the respective country and appropriate duration. The mortality rate is based on publicly available mortality tables for the specific country. Future salary increases and pension increases are based on expected future inflation rates for the specific coun-try. Such differences are recognized in full directly in equity in the period in which they occur without affecting the income statement. At December 31, 2011 the Group had a deficit of the fair value of plan assets below the present value of funded obligations of CHF 9.5 million (2010: surplus CHF 7.6 million) for funded plans and a negative present value of unfunded plans of CHF 37.7 million (2010: CHF 37.9 million) for unfunded plans (see note 7). The actuarial assumptions used may differ materially from actual results due to changes in market and economic conditions, higher or lower withdrawal rates, longer or shorter life spans of participants and other changes in the factors assessed. These differences could impact the assets or liabilities recognized in the statement of financial position in future periods.

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ProvisionsA number of subsidiaries are subject to litigation arising from the normal conduct of their businesses, as a result of which claims could be raised against them.

The Group has established a captive reinsurance company that insures a dedicated risk portion of its errors and omissions, transporter operator and commercial general liability programs. The exposure of its captive reinsurance company is limited by a third-party insurer that covers losses exceeding an amount of CHF 1 million on a single-case basis and a total aggregate limit of CHF 9 million annually for claims exceeding CHF 50,000 per incident. In a consolidated view, the Group, through its captive reinsurance company, bears the risks insured with its captive reinsurance company up to the limit as if such risks were not insured at all. Furthermore, as third-party coverage is subject to a considerable deductible and a total aggregated limit per year, the Group, in effect, bears the risk of damages, losses and claims that are above such aggregated limits as well. The Group used for the above-mentioned provision an actuarial calculation method, which requires for the calculation of the “incurred but not reported reserves” (IBNR), among other estimations, the overall circum-stances which may impact the future losses, such as the growth of business. At December 31, 2011 the recognized liability for claims amounts to CHF 33.0 million (2010: CHF 52.5 million). If the management decided to use the optimal actuarial calculation method, which only takes into consideration the linear loss development according to historical figures, the carrying amount of claim provisions would be approximately CHF 2.3 million lower (2010: CHF 0.8 million). Using a more conservative percentile, the carrying amount of claim provi-sions would be approximately CHF 1.7 million higher (2010: CHF 1.3 million).

The Group is also subject to legal and regulatory proceedings and government investigations in various jurisdictions. These proceedings are related to the area of competition law. Such proceedings may result in criminal or civil sanctions, penalties or damages against the Company. Regulatory and legal proceedings, as well as government investigations, involve complex legal issues, the outcome of which is difficult to predict. Accordingly, management’s judgment is affected in determining whether it is more likely or not that such a proceeding will result in an outflow of resources and whether the amount of the obligation can be reliably estimated. These judgments are subject to change as new information becomes available. Upon resolution of any legal or regulatory proceeding or government investigation, the Group may incur a provision for such matters. It cannot be ruled out that the financial condition or results of operations of the Group will be materially affected. For additional information see note 31 – Pending legal claims. Related legal costs are recognized when incurred.

Deferred income tax assetsDeferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based on the likely timing and level of future taxable profits.

The carrying value of recognized tax loss carry-forwards amounts to CHF 98.0 million (2010: CHF 96.0 million) and unrecognized tax loss carry-forwards to CHF 100.1 million (2010: CHF 80.3 million). Further details are provided in note 27.

If the Group were able to recognize all unrecognized deferred tax assets, consolidated profit would increase by CHF 31.6 million (2010: CHF 25.2 million). If the Group failed to achieve the expected future taxable profits, the consolidated profit would decrease by CHF 31.9 million (2010 CHF 31.3 million) but the management believes that the full amount of the recognized deferred tax assets are recoverable in the foreseeable future.

Income taxesAt December 31, 2011, the net liability for current income taxes amounts to CHF 19.2 million (2010: CHF 16.4 million). As the Group is subject to income taxes in numerous jurisdictions, significant judgments are required in determining worldwide provisions for income taxes.

Some of these estimates are based on interpretations of existing tax laws or regulations. Management believes that the estimates are reasonable and that the recognized liabilities for income-tax-related uncertainties are adequate. Various external factors may have favor-able or unfavorable effects on income taxes. These factors include, but are not limited to, changes in tax law regulations and/or rates, changing interpretation of existing tax laws or regulations and changes in management estimations. Such changes that arise could affect the assets and liabilities recognized in the statement of financial position in future periods.

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Operating segment information

Management has determined the operating segments based on the reports reviewed by the Executive Board that are used to make stra-tegic decisions. The Executive Board considers the business from a geographic perspective, as the Group’s operations are predominantly managed by the geographical location. The Executive Board assesses performance of the operating segments based on a measure of adjusted EBIT. This measurement basis excludes the effects on non-recurring expenditure from the operating segments such as restruc-turing costs, legal expenses, reorganization costs as well as fines recognized and related expenses. The measurement also excludes the unrealized gains / losses on financial instruments as well as interest income and expenditure, as this type of activity is driven by the central treasury function, which manages the cash position of the Group. Income and deferred income taxes are not assessed by segment.

2011 (in million CHF)

Europe, Middle

East, Africa,

CIS

North America

Central

and South

America

Asia Pacific

Total operating segment

Elimi- nations

Cor- porate

Total Group

External forwarding services 3,171 1,270 834 1,225 6,500 0 6,500

Intra-group forwarding services 1,574 469 177 1,547 3,767 (3,767) 0

Net forwarding revenue 4,745 1,739 1,011 2,772 10,267 (3,767) 0 6,500

Forwarding services from third parties (4,014) (1,468) (849) (2,459) (8,790) 3,767 (5,023)

Gross profit 731 271 162 313 1,477 0 0 1,477

Personnel expenses (445) (169) (77) (125) (816) (76) (892)

Other operating expenses (247) (94) (68) (100) (509) 136 (373)

Segment EBITDA 39 8 17 88 152 0 60 212

Depreciation and amortization (17) (5) (4) (6) (32) (6) (38)

Segment operating result (Segment EBIT) 22 3 13 82 120 0 54 174

Financial result

– Finance income 6

– Finance costs (12)

Profit before income tax (EBT) 168

Income tax expenses (41)

Consolidated profit 127

Information about segment assets and liabilities:


Europe, Middle

East, Africa,

CIS

North America

Central

and South

America

Asia Pacific


Non- segment

assets

Non- segment liabilities

Total Group

Segment assets 755 247 209 372 1,583 552 2,135

Segment liabilities 542 170 94 234 1,040 180 1,220

Net forwarding revenue and segment assets from the country of domicile (Switzerland) and major countries within above-mentioned segments:

2011 (in million CHF) Switzerland

Germany

United States of America

Brazil

Republic of

China

Net forwarding revenue 905 1,376 1,445 412 1,182

Segment assets 69 189 195 86 131

The Group does not have sales in excess of 10 % of the total net forwarding revenues to any single external customer.

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Europe, Middle

East, Africa,

CIS

North America

Central

and South

America

Asia Pacific


Elimi- nations

Cor- porate

Total Group

External forwarding services 3,640 1,409 845 1,270 7,164 0 0 7,164

Intra-group forwarding services 1,432 421 147 1,954 3,954 (3,954) 0 0

Net forwarding revenue 5,072 1,830 992 3,224 11,118 (3,954) 0 7,164

Forwarding services from third parties (4,312) (1,564) (836) (2,926) (9,638) 3,954 0 (5,684)

Gross profit 760 266 156 298 1,480 0 0 1,480

Personnel expenses (432) (181) (76) (121) (810) 0 (81) (891)

Other operating expenses (250) (102) (61) (85) (498) 0 99 (399)

Segment EBITDA 78 (17) 19 92 172 0 18 190

Depreciation and amortization (25) (6) (4) (7) (42) 0 (5) (47)

Segment operating result (Segment EBIT) 53 (23) 15 85 130 0 13 143

Fines and related costs (112)

Reorganisation costs (14) (2) (16)

Financial result

– Finance income 6

– Finance costs (15)

Profit before income tax (EBT) 6

Income tax expenses (32)

Consolidated profit (26)

Information about segment assets and liabilities:


Europe, Middle

East, Africa,

CIS

North America

Central

and South

America

Asia Pacific


Non- segment

assets

Non- segment liabilities

Total Group

Segment assets 728 219 168 311 1,426 563 1,989

Segment liabilities 517 144 75 233 969 208 1,177

Net forwarding revenue and segment assets from the country of domicile (Switzerland) and major countries within above-mentioned segments:

2011 (in million CHF) Switzerland

Germany

United States of America

Brazil

Republic of

China

Net forwarding revenue 931 1,425 1,495 358 1,653

Segment assets 70 176 170 58 124

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Information by business

The Group’s business can be divided into three divisions: Air Freight, Ocean Freight and Logistics.


Air Freight

Ocean Freight

Logistics

Total Group

Net forwarding revenue 3,281 2,313 906 6,500

Forwarding services from third parties (2,593) (1,874) (556) (5,023)

Gross profit 688 439 350 1,477


Air Freight

Ocean Freight

Logistics

Total Group

Net forwarding revenue 3,503 2,771 890 7,164

Forwarding services from third parties (2,836) (2,318) (530) (5,684)

Gross profit 667 453 360 1,480

Personnel expenses

in thousand CHF 2011 2010

Wages and salaries 695,473 694,834

Compulsory social security contributions 84,421 85,304

Contributions to defined contribution plans 49,166 47,649

Expenses related to defined benefit plans (note 7) 987 4,946

Staff training 8,823 7,561

Share-based compensation (note 8)

Equity-settled compensation plan 1,917 2,216

Cash-settled compensation plan 1,019 65

Other personnel-related expenses 50,615 48,362

Total personnel expenses 892,421 890,937

Number of employees 15,051 14,136

thereof in Switzerland 775 749

Post-employment benefit obligations

Panalpina’s objective is to provide attractive post-employment benefits to employees, while at the same time ensuring that the various plans are appropriately financed, while managing any potential impacts on the Group’s long-term financial position. The nature of such plans varies according to legal regulations and fiscal requirements in the countries in which the employees are employed. Other post-employment benefits consist mostly of post-retirement schemes. Post-employment benefit plans are classified for IFRS as “defined contribution plans” if the Group pays fixed contributions in a separate fund or to a third-party financial institution and will have no further legal or constructive obligation to pay further contributions. All other plans are classified as defined benefit plans. The Group’s major defined benefit plans are located in Switzerland, Germany, Japan, Taiwan and France. Plans are usually established as trusts independent of the Group and are funded by payments from the Group and by employees. In some cases, notably for the major defined benefit plans in Germany and Japan, the plans are unfunded and the Group pays pensions to retired employees directly from its own financial resources.

Current and past services as well as expected returns on plan assets and interest costs are charged to the income statement as personnel expenses. Actuarial gains and losses are recorded directly in equity. The recognition of pension assets is limited to the total of the present value of any future refunds from the plans or reduction in future contributions to the plans and any cumulative unrecognized past service costs. Adjustments arising from the limit on the recognition of assets for defined benefit plans are recorded directly in equity.

Qualified independent actuaries carry out valuations on a regular basis and for major plans annually as at the reporting date. For funded plans, which are usually trusts independent of the Group’s finances, the net asset / liability recognized on the Group’s statement of

6

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financial position corresponds to the over-/underfunding of the plan, adjusted for unrecognized past service costs. For unfunded plans, where the Group meets the pension obligations directly from its own financial resources, a liability for the defined benefit obligation is recorded in the Group’s statement of financial position. Pension assets and liabilities in different defined benefit plans are not offset.

The amounts recognized in the statement of financial position are determined as follows:


Fair value of plan assets 211,525 217,656

Present value of funded obligation (221,002) (210,094)

Surplus (deficit) (9,477) 7,562

Present value of unfunded obligations (37,674) (37,921)

(Net liability) net asset recognized in statement of financial position (47,151) (30,359)

thereof recognized as asset 0 10,312

thereof recognized as liability (47,151) (40,671)

The following amounts relating to defined benefit pension plans were recorded in the income statement:


Net pension cost for year ending

Current service cost (13,488) (12,259)

Recognized past service cost 3,448 0

Interest cost (7,232) (8,046)

Expected return on plan assets 10,226 9,842

Employee contribution 4,960 4,369

Settlements 922 950

Curtailments 177 198

Expenses for defined benefit plans (987) (4,946)

The movement in the defined benefit obligation over the year is as follows:


Changes in defined benefit obligation (DBO)

DBO at beginning of year (248,015) (232,899)

Current service cost (13,488) (12,259)

Recognized past service cost 3,448 0

Interest cost (7,232) (8,046)

Actuarial (losses) gains recognized in OCI (10,777) (12,297)

Benefits paid 16,196 11,786

Curtailments 177 198

Liabilities extinguished on settlement 29 0

Currency impact 986 5,502

DBO at end of year (258,676) (248,015)

The movement in the fair value of plan assets of the year is as follows:


Changes in fair value of plan assets

Fair value at beginning of year 217,656 208,217

Employer contributions 6,167 5,060

Employee contributions 4,960 4,369

Expected return on plan assets 10,226 9,842

Actuarial gains (losses) recognized in OCI (12,520) 950

Benefits paid (14,943) (10,733)

Currency impact (21) (49)

Fair value at end of year of plan assets 211,525 217,656

The fair value of the plan assets includes none of the Group’s shares for either 2011 or 2010.

88



An analysis of the amounts recognized in equity is shown in the table below:


Analysis of amounts recognized in other comprehensive income

Recognized in other comprehensive income on January 1 104,601 94,005

Actuarial (gains) losses plan assets 12,520 (950)

Actuarial losses (gains) DBO 10,777 12,297

Currency impact (1,163) (751)

Recognized in other comprehensive income on December 31 126,735 104,601

Plan assets are comprised as follows:


in CHF in % in CHF in %

Major categories of plan assets

Cash and cash equivalents 3 0.0088 % 1,016 0.47 %

Equity investments 61,021 28.85 % 66,922 30.75 %

Bonds 117,765 55.68 % 115,128 52.89 %

Hedge funds and private equity 6,500 3.07 % 3,130 1.44 %

Real estate funds 22,893 10.82 % 24,042 11.04 %

Others 3,343 1.58 % 7,418 3.41 %

Actuarial assumptionsActuarial assumptions are unbiased and mutually compatible estimates of variables that determine the ultimate cost of providing past employment benefits. They are set on an annual basis by local management and actuaries and are subject to approval by corporate man-agement. Actuarial assumptions consist of demographic assumptions on matters such as mortality and employee turnover, and financial assumptions on matters such as salary and benefit level, interest rates and return on investments. The Group operates defined benefit plans in many countries and the actuarial assumptions vary based upon local economic and social conditions.

Demographic assumptionsThe most significant demographic assumptions relate to mortality rates. The Group’s actuaries use mortality tables which take into account historic patterns and expected changes, such as further increases in longevity. The mortality tables used for the major schemes are:

Switzerland: BVG 2010 and adjustment Germany: tables 2005G from Klaus Heubeck France: table INSEE TV / TD 2004 / 2006

Rates of employee turnover, disability and early retirement are based on historical behavior within the Group companies.

Financial assumptionsThese are based on market expectations for the period over which the obligations are to be settled. The assumptions used in the actuarial valuations with stable currencies and interest are shown below:

2011 2010

Discount rate 2.57 % 2.99 %

Expected return on pension plan assets 3.99 % 4.74 %

Future salary increase 1.75 % 2.97 %

Future pension increase 1.25 % 1.24 %

Discount rates, which are used to calculate the discounted present value of the defined benefit obligation, are determined with reference to market yields on high-quality corporate bonds.

Expected returns on plan assets are based on market expectations of expected returns on the assets in funded plans over the duration of the related obligation. This takes into account the split of the plan assets between equities, bonds, properties and other investments. The calculation includes assumptions concerning expected dividend and interest income and realized and unrealized gains on plan assets. Due to the long-term nature of the obligations, the assumptions used for matters such as returns on investments may not necessarily be consistent with recent historical patterns. The expected return on plan assets included in the income statement is calculated by multiplying the expected rate of return by the fair value of plan assets. The difference between the expected return and the actual return in any twelve–month period is an actuarial gain/loss and recorded directly to equity. In 2011, the actual return on plan assets was CHF – 2.3 mil-lion (2010: CHF 10.8 million).

89



Expected rates of salary increases, which are used to calculate the defined benefit obligation and the current service cost included in the income statement, are based on the latest expectation and historical behavior within Group entities.

A five-year summary of the Group’s defined benefit plans is shown in the table below:

in thousand CHF 2011 2010 2009 2008 2007

DBO 258,676 248,015 232,899 256,441 268,675

Plan assets (211,525) (217,656) (208,217) (213,520) (255,989)

Deficit (surplus) 47,151 30,359 24,682 42,920 12,686

Experience adjustments arising on:

plan liability 8,974 (2,858) 3,149 (7,692) 9,290

plan asset (12,510) 1,042 20,539 (40,859) (8,668)

Share and option ownership program

The Group operates several share and option ownership programs. The members of the Board of Directors, the members of the Executive Board as well as selected preferential employees had the option of voluntarily participating in the share and option ownership program introduced in 2005 and continued in a modified program in the following years.

Management Incentive Program II (MIP II)

In June 2006, the Group introduced the Management Incentive Program II. Participants in this program had the right to purchase shares with a discount of 25 % based on the share price corresponding to the average closing price of one share at the SIX Swiss Exchange dur-ing the months January to May in the respective year of purchase. The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares. The shares are subject to a one-year lock-up period. For every purchased share under this plan, the Group granted one option free of charge to the par-ticipant. The options have a contractual term of six years and a vesting period of one to three years. Each option entitles the participant to obtain one share of Panalpina World Transport (Holding) Ltd. at a predetermined strike price which equals the average closing price of one share at the SIX Swiss Exchange during the months January to May in 2006. The share options cannot be settled in cash. In May 2007, the Board of Directors decided to divide the Management Incentive Program II into an “International Management Incentive Plan” and a “United States Management Incentive Plan.” Beneficiaries of the “United States Management Incentive Plan” are selected preferential employ-ees of the subsidiary in the United States of America and members of the Board of Directors with residence in the United States of America. The conditions of this plan do not differ from those of the “International Management Incentive Plan” except for the strike price, which equals the closing price of one share at the SIX Swiss Exchange on the date of disbursement. Under this changed program, beneficiaries of the “United States Management Incentive Plan” holding options to purchase shares of the Group’s capital stock were given the opportu-nity to exchange their existing options for new options to purchase an equal number of shares. 3,550 options with a strike price of CHF 111.30 were tendered pursuant to the “United States Management Incentive Plan.” In May 2007, those options were accepted and cancelled by the Group. The Group undertook to grant new options on a one-for-one basis, in lieu of the tendered options, to the affected employees. The new options, which totaled 5,350, were granted with a strike price of CHF 114.00.

The following table lists the parameters based on which the option valuation of both plans was performed:

in CHF

International Management

Incentive Plan II

United States Management

Incentive Plan II

Market price of share 114.00 114.00

Exercise price of option 111.30 114.00

Expected volatility (in %) 30.00 30.00

Option life (in years) 5 5

Dividend yield (in %) 1.78 1.78

Risk-free interest rate based on Swiss government bonds (in %) 2.670 2.670

Management Incentive Program III (MIP III)

The third share and option program was introduced in June 2007, which conceptually completely mirrors the modified program of 2006. Par-ticipants of the “International Management Incentive Plan III” subscribed for 38,921 options with a strike price of CHF 201.10. Participants in the “United States Management Incentive Plan III” subscribed for 4,096 options with a strike price of CHF 251.00. The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares.

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90




in CHF


Incentive Plan III


Incentive Plan III







Management Incentive Program IV (MIP IV)

A fourth share and option program was introduced in June 2008. The conditions of this share and option program are identical to the Man-agement Incentive Program II of the Group except for the purchase price of the shares, which equals 75 % of the closing price of one share at the SIX Swiss Exchange on April 30, 2008. The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares. The plan is also divided into an “International Management Incentive Plan” and a “United States Management Incentive Plan.” The exercise price of options of the “Interna-tional Management Incentive Plan” is equal to the closing price of one share at the SIX Swiss Exchange on April 30, 2008. The exercise price of options of the “United States Management Incentive Plan” is equal to the share price at the SIX Swiss Exchange on the grant date. Participants in the “International Management Incentive Plan IV” subscribed for 32,436 options with a strike price of CHF 132.00. Partici - pants in the “United States Management Incentive Plan IV” subscribed for 4,689 options with a strike price of CHF 122.40.


in CHF


Incentive Plan IV


Incentive Plan IV







Management Incentive Plan 08 / 09 (MIP 08 / 09)

In 2009, the management introduced a new plan. The terms of this share and option program are identical to the Management Incentive Program IV as described above apart from the strike price of the “International Management Incentive Plan,” which equals the closing price of the share on the cut-off day at the SIX Swiss Exchange. Under this program participants of the “International Management Incen-tive Plan” received 65,921 options with a strike price of CHF 62.50 and participants of the “United States Management Incentive Plan” received 5,132 options with a strike price of CHF 83.05.


in CHF


Incentive Plan 08/09









91




In 2010 an additional management incentive plan was set up. Apart from the strike price of the “International Management Incentive Plan”, which equals the closing price of the share on the cut-off day at the SIX Swiss Exchange, the terms of this share and option program are identical to the Management Incentive Program 08/09. Under this program participants of the “International Manage-ment Incentive Plan” received 12,099 options with a strike price of CHF 97.60 and participants of the “United States Management Plan” received 1,354 options with a strike price of CHF 89.55.

The weighted average fair value of the share options granted during the reporting period is determined using the binominal valuation model, applying the following significant inputs into the model:

in CHF











The following table summarizes the movements in the number of share options outstanding and their related average exercise prices:

2011 2010

Average ex-ercise price

per share (in CHF)

Options

(number)

Average ex-ercise price

per share (in CHF)

Options

(number)

Options outstanding on January 1 115.72 173,692 114.79 179,369

Granted 0.00 0 96.79 13,453

Exercised 74.52 (16,065) 72.09 (11,196)

Forfeited 71.62 (3,367) 92.70 (3,993)

Expired 150.92 (5,808) 155.97 (3,941)

Options outstanding on December 31 119.80 148,452 115.72 173,692

Options exercisable on December 31 132.57 115,799 140.20 99,454

During the reporting year the following numbers of options were exercised with the respective exercise prices:

2011 2010

Exercise price

of option (in CHF)

Number of exercised

options

Exercise price

of option (in CHF)

Number of exercised

options

International Management Incentive Plan II 111.30 3,435 111.30 2,152

International Management Incentive Plan 08 / 09 62.50 11,781 62.50 8,930

United States Management Incentive Plan 08 / 09 83.05 226 83.05 114

International Management Incentive Plan 09 /10 97.60 501 0.00 0

United States Management Incentive Plan 09 /10 89.55 122 0.00 0

Weighted average exercise price of options exercised

during the year 74.52 72.09

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The average exercise prices and the expiry date of the outstanding options at period-end are as follows:

2011

Average exercise price

per share (in CHF)

Number of options

expiring at year-end

2012 111.68 29,635

2013 206.45 30,061

2014 130.70 32,439

2015 64.55 44,095

2016 96.79 12,222

Total 119.80 148,452


In 2011 a new management incentive plan was set up. Participants in this program had the right to purchase shares with a discount of 10 % based on the share price equal to the closing price on the SIX Swiss Stock Exchange at the cut-off day. The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares. The shares are subject to a one-year lock-up period. For every purchased share under this plan, the Group granted a number of free shares according to a “Free Share Ratio” which is annually set by the Compensation and Nomination Committee. For the current year the ratio was set to 1:4 (one free share per four shares bought). The free shares have a vesting period of one to three years. On non-vested free shares, no dividends are paid and there is no entitlement for dividends. The shares cannot be settled in cash. The fair value of the free shares corresponds to the market price of the shares at the grant date.

2011 Management


Fair value of free share (in CHF) 119.30

Granted free shares 7,124

Vested free shares (138)

Forfeited free shares (25)

Free shares outstanding on December 31 6,961

The Group holds its own shares in order to meet its obligations under the Management Incentive Programs. These own shares are deducted from equity (note 23).

The members of the Executive Board and the Boards of Directors did not participate in the above-mentioned incentive plans.

Executive Board Mid-Term Incentive Plan

The Mid-Term Incentive Plan has been set up such that only 60 % of the bonuses, which continue to be set by the achievement of annually reviewed Group key performance indicators (KPIs) and individual performance targets, are paid out in cash, whereas the remainder is paid out in shares with a restriction period of one year. This number of shares will be matched by the Company after this restriction period. In addition, the members of the Executive Board will receive the corresponding number of shares, based on the share’s closing price on April 30, 2009 of CHF 62.50. These shares will thereafter be subject to a further one-year restriction period. In the reporting period under review Executive Board members received 40 % of the bonus in company shares totaling 13,528 shares (previous year: 4,155 shares) with a restriction period of one year. This number of shares will, additionally, be matched by the company after this restriction period. These additional shares are also subject to a further one-year restriction period.

During the period under review the management received matched shares totaling 4,155 shares reflecting the 40 % bonus paid in the previous year.

Executive Board Long-Term Incentive Plan

The Long-Term Incentive Plan rewards long-term value creation measured by economic profit. Under this plan, which has a five-year cycle, the individual Executive Board member is entitled to an equal share of the respective pool after the expiry of the five-year plan period. This plan can be cash-settled. The carrying amount of the liability at December 31, 2011 amounts to CHF 2,527 thousand, which is also the intrinsic value.

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Board of Directors Restricted Stock Award Plan

The Restricted Stock Award Plan for the Board of Directors was introduced in 2009. Part of the remuneration of each Board member is settled in free shares of the company. The corresponding number of shares per member will be based on the share’s closing price at the assignment date. The shares have a one-year restriction period. During the period under review the board of directors received 2,562 shares (2010: 0 shares)

Costs of share-based compensation

Recognized costs of share-based compensation were as follows:

in CHF 2011 2010

Employee share plan 2,273,801 740,818

Option plan 662,587 1,540,175

Total cost of share-based payments 2,936,388 2,280,993

Share-based compensation costs are not reported in operating segments. They are reported under Corporate.

Other operating expenses


Administrative expenses 37,905 61,786

Communications expenses 64,949 65,346

Rent and utilities expenses 183,294 185,815

Travel and promotion expenses 42,717 38,222

Insurance expenses and claims 6,352 131,632

Bad debt and collection expenses 6,558 10,353

Other 30,663 33,897

Total other operating expenses 372,438 527,051

Rent and utilities expenses include rentals amounting to CHF 103.6 million (2010: CHF 100.0 million) and lease of machinery, equipment and vehicles of CHF 20.2 million (2010: CHF 23.9 million). Bad debt and collection expenses include CHF 1.4 million (2010: CHF 2.2 million) of credit insurance premiums. In last year’s period, the Group recognized fines amounting to CHF 104.0 million as claim expenses (2011: none).

Gains and losses on sales of non-current assets


Gains on sales of property, plant and equipment 618 1,103

Losses on sales of property, plant and equipment (724) (826)

Total net (losses)/gains on sales of non-current assets (106) 277

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10

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Finance income and costs


Interest income

Interest income on current bank accounts 3,986 3,795

Interest income on financial assets at fair value through profit or loss 11 13

Interest differential on forwards and swaps 1,741 1,750

Interest income on loans 7 5

Cash discount income 351 416

Subtotal interest income 6,096 5,979

Guarantee fees income 0 16

Dividend on available-for-sale financial assets 172 99

Fair value adjustments on financial assets 0 154

Total finance income 6,268 6,248

Interest expenses

Interest expenses on loans (242) (642)

Interest expenses on current bank accounts (760) (1,041)

Interest differential on forwards and swaps (4,345) (3,493)

Interest expenses on financial leasing (71) (86)

Cash discount expenses (514) (254)

Subtotal interest expenses (5,932) (5,516)

Bank charges (2,277) (2,958)

Exchange differences (2,840) (609)

Guarantee fees expenses (529) (760)

Other financial expenses (303) (886)

Impairment on financial assets 0 (4,759)

Fair value adjustments on financial assets (22) 0

Total finance costs (11,903) (15,488)

Net finance costs (5,635) (9,240)

Income tax expenses


Current income taxes

Current period 37,064 43,457

Adjustments for prior periods 1,566 883

Total income taxes 38,630 44,340

Deferred income taxes (note 27)

Origination and reversal of taxes on temporary differences and on tax loss carry forwards 1,931 (12,384)

Effect of changes in the tax rate on temporary differences 980 305

Utilization of non-recognized tax loss carry-forwards (372) (142)

Total deferred income taxes 2,539 (12,221)

Total income tax expenses 41,169 32,119

Management decided to calculate the applicable standard tax rate as in the previous year based on the standard tax rate in its Basel headquarters domicile.

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12

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The Group’s effective tax rate can be reconciled to the Group’s average expected tax rate as follows:


Profit before income tax 168,582 6,122

Tax at the applicable tax rate of 23.37 % (2010: 23.37 %) 39,398 1,431

Effect of differing national tax rates (17,375) (6,479)

Utilization of not yet recognized tax loss carry-forwards (372) (142)

Recognition of deferred tax assets from previous periods (2,835) (259)

Not yet recognized tax loss carry-forwards 13,510 13,434

Adjustment of previous year tax provision 1,566 883

Effect of changes in the tax rate on temporary differences 980 305

Withholding tax on dividends received 3,339 4,907

Expenses not deductible for tax purposes and non-taxable income 1,840 17,298

Miscellaneous 1,118 741

Actual tax charge 41,169 32,119

The following table shows the reconciliation for 2011 in percent:

2011

Tax at the applicable tax rate of 23.37 % 23.37 %

Effect of differing national tax rates (10.31 %)

Utilization of not yet recognized tax loss carry-forwards (0.22 %)

Recognition of deferred tax assets from previous periods (1.68 %)

Not yet recognized tax loss carry-forwards 8.01 %

Adjustment of previous year tax provision 0.93 %

Effect of changes in the tax rate on temporary differences 0.58 %

Withholding tax on dividends received 1.98 %

Expenses not deductible for tax purposes and non-taxable income 1.09 %

Miscellaneous 0.66 %

Actual tax charge 24.42 %

Income tax recognized in the consolidated statement of comprehensive income:

2011 2010

in thousand CHF

Before tax

Tax benefit (expense)

Net of tax

Before tax

Tax benefit (expense)

Net of tax

Translation and exchange differences (11,238) 0 (11,238) (15,027) 0 (15,027)

Available-for-sale financial assets 3,994 0 3,994 (1,828) 0 (1,828)

Other taxes directly recognized in equity 0 (123) (123) 0 (123) (123)

Actuarial gains (losses) on defined benefit plans (22,134) 5,419 (16,715) (10,596) 5,412 (5,184)

Total (29,378) 5,296 (24,082) (27,451) 5,289 (22,162)

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Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding (total shares less treasury shares) during the period.


Consolidated profit attributable to owners of the parent 126,294 (27,350)

Weighted average number of ordinary shares outstanding 23,639 23,668

Basic earnings per share (in CHF) 5.34 (1.16)

Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group only has share options outstanding that can be categorized as dilutive potential ordinary shares. For the share options, a calculation is made to determine the number of shares that could have been acquired at fair value based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is com-pared with the number of shares that would have been issued assuming the exercise of the share options.


Consolidated profit attributable to owners of the parent 126,294 (27,350)

Weighted average number of ordinary shares outstanding 23,639 23,668

Adjustments for share options 17 7

Adjustments for share ownership program 20 4

Weighted average number of ordinary shares for diluted earnings per share 23,676 23,679

Diluted earnings per share (in CHF) 5.33 (1.16)

At December 31, 2011, 103,125 options (2010: 66,946 options) were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.

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Property, plant and equipment

During the period under review, the Group acquired mainly machinery and equipment. The reclassification of CHF 14.3 million in 2010 from construction in progress mainly to buildings refers to the commissioning of a new warehouse in Dubai. In 2010, the net assets of two barges were revalued. As the recoverable amount of these assets did not exceed the carrying amount, an impairment of CHF 4.7 million was recognized in 2010 (2011: CHF 0.0).

2011 (in thousand CHF)

Land and buildings

Machinery and

equipment

Vehicles

Construc- tion in

progress

Total

Acquisition costs

Balance on January 1 130,222 215,619 39,669 5 385,515

Translation differences (1,962) (4,008) (326) 0 (6,296)

Acquisition of subsidiaries, net of cash acquired 39 258 147 0 444

Additions 8,874 20,902 1,512 37 31,325

Disposals (2,518) (2,485) (4,693) 0 (9,696)

Reclassifications 5 0 0 (5) 0

Balance on December 31 134,660 230,286 36,309 37 401,292

Accumulated depreciation


Translation differences (894) (2,926) (277) 0 (4,097)

Additions 6,344 19,280 2,860 0 28,484

Disposals (1,552) (1,805) (4,600) 0 (7,957)


Net book value on January 1 59,528 45,201 9,099 5 113,833

Net book value on December 31 60,068 45,319 7,756 37 113,180

Of which net book value of assets acquired under finance leases 245 51 1,138 0 1,434


Land and buildings

Machinery and

equipment

Vehicles

Construc- tion in

progress

Total

Acquisition costs

Balance on January 1 133,833 239,225 41,401 15,749 430,208

Translation differences (16,261) (20,515) (3,740) (1,418) (41,934)

Acquisition of subsidiaries, net of cash acquired 1 68 65 0 134

Additions 5,169 18,062 3,109 2 26,342

Disposals (4,310) (23,068) (1,857) 0 (29,235)

Reclassifications 11,790 1,847 691 (14,328) 0


Accumulated depreciation


Translation differences (9,248) (17,260) (3,133) 0 (29,641)

Additions 6,756 20,757 11,378 0 38,891

Disposals (3,215) (22,240) (1,048) 0 (26,503)

Reclassifications 0 (1) 1 0 0


Net book value on January 1 57,432 50,063 18,029 15,749 141,273


Of which net book value of assets acquired under finance leases 304 44 1,236 0 1,584

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Intangible assets


Goodwill

Software

Brands/ Customer

lists

Other intangible

assets

Total

Acquisition costs


Translation differences (2,701) (901) (1,172) (54) (4,828)

Acquisition of subsidiaries, net of cash acquired 40,869 0 15,927 0 56,796

Additions 0 19,731 0 106 19,837

Disposals 0 (2,635) 0 0 (2,635)


Accumulated depreciation or impairment losses


Translation differences (260) (670) (250) (50) (1,230)

Additions 0 6,684 2,649 50 9,383

Disposals 0 (2,635) 0 0 (2,635)





Goodwill

Software

Brands/ Customer

lists

Other intangible

assets

Total

Acquisition costs


Translation differences (1,170) (3,831) (1,732) (44) (6,777)

Acquisition of subsidiaries, net of cash acquired 1,404 2 844 0 2,250

Additions 0 13,677 0 21 13,698

Disposals 0 (1,003) 0 (9) (1,012)


Accumulated depreciation or impairment losses


Translation differences (225) (3,453) (1,433) (45) (5,156)

Additions 0 6,385 1,569 159 8,113

Disposals 0 (1,003) 0 (9) (1,012)




The net book value of software is comprised of accumulated, internally generated, capitalized software development costs of CHF 33.4 mil-lion (2010: CHF 22.6 million). All intangible assets with estimable useful lives are amortized over the period of their respective estimated useful lives to their estimated residual values, and reviewed for impairment. Neither in 2011 nor 2010 there were any impairment charges on these intangible assets.

Impairment test for goodwill

Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to the country of operation. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets ap proved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.

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A summary of the goodwill allocation per CGU is presented below:


Air freight division (CGU Airfreight) 31,151 31,151

Grampian International Freight Aberdeen & Beverwijk (CGU Grampian) 6,393 6,388

Panalpina World Transport (Singapore) Pte. Ltd. (CGU Janco) 3,981 4,008

Panalpina World Transport (Pty) Ltd. (CGU Australia) 3,606 1,404

Grieg Logistics AS (CGU Norway) 36,248 0

Total goodwill 81,379 42,951

The following key assumptions have been used for the value-in-use calculations of each CGU:

2011

CGU Norway

CGU Australia

CGU Airfreight

CGU Grampian

CGU Janco

Growth rate1 9.25 % 6.75 % 3.50 % 7.25 % 4.50 %

Operating expenses in % of forwarding revenues2 97.62 % 98.73 % 98.19 % 99.83 % 98.73 %

WACC3 7.57 % 11.18 % 6.65 % 8.08 % 6.85 %

2010

CGU Australia

CGU Airfreight

CGU Grampian

CGU Janco

Growth rate1 4.50 % 2.25 % 4.63 % 3.13 %

Operating expenses in % of forwarding revenues2 96.87 % 98.37 % 98.62 % 97.74 %

WACC3 15.53 % 10.44 % 12.60 % 10.51 %

1 Weighted average growth rate used to extrapolate cash flows beyond the budget period2 Budgeted operating expenses in % of forwarding revenues3 Pre-tax discount rate applied to the cash flow projections

The management determined budgeted growth rates based on past performance and its expectations of market development. The oper-ating expenses, as a percentage of forwarding revenues, are consistent with the forecasts and past experience. The weighted average cost of capital (WACC) used are pre-tax and reflect specific risks relating to the relevant CGUs. For the impairment testing procedure the planning assumptions of prior years were critically reviewed. The impairment testing procedure assumes that the CGU would achieve sales growth at market growth for the planning period. It was also assumed that the percentage of operating expenses as a percentage of forwarding revenue, will remain stable.

For CGU Grampian a change in the assumptions of the growth rate of the gross profit (2.6 percentage points) or the WACC (1.8 percent-age points) would cause the carrying value of goodwill to exceed the recoverable amount. The same applies for CGU Norway for which a change in the assumptions of the growth rate of the gross profit (2.9 percentage points) or the WACC (2.7 percentage points) would also cause the carrying value of goodwill to exceed the recoverable amount.

For other CGUs the carrying value of goodwill would only exceed the recoverable amount if following changes in the key assumptions gross profit growth or WACC would occur:

CGU Airfreight Gross profit growth rate – 54.5 percentage points WACC + 34.6 percentage pointsCGU Janco Gross profit growth rate – 30.3 percentage points WACC + 8.6 percentage pointsCGU Grampian Gross profit growth rate – 2.6 percentage points WACC + 1.8 percentage pointsCGU Australia Gross profit growth rate – 58.5 percentage points WACC + 34.6 percentage pointsCGU Norway Gross profit growth rate – 2.9 percentage points WACC + 2.7 percentage points

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Investments


Available-for-sale investments 19,670 15,625

Fair value through profit or loss investments 775 816

Loans receivable 311 208

Long-term receivables 47,975 14,061

Other 3,525 4,133

Total investments 72,256 34,843

Long-term receivables primarily include rental and guarantee deposits of CHF 13.7 million (2010: CHF 12.8 million) and investments in money market and time deposits with a maturity longer than 360 days of CHF 34.3 million (2010: CHF 0.0 million).

Available-for-sale investments – unquoted equity shares


Balance on January 1 15,625 17,794

Translation differences (13) (78)

Additions 69 5

Disposals (5) (142)

Fair value adjustments recognized in statement of comprehensive income 3,994 (1,702)

Reclassifications 0 (252)

Balance on December 31 19,670 15,625

Less: non-current portion 19,670 15,625

Current portion 0 0

In 2011, no shares (2010: shares of CHF 252 thousand) were transferred from available-for-sale investments to fair value through profit or loss. Fair value adjustments amounting to CHF 126 thousand previously recorded in comprehensive income are recognized in the income statement (2011: CHF 0).

Fair value through profit or loss investments


Balance on January 1 816 618


Disposals (7) (8)

Fair value adjustments recognized in profit or loss (22) 39

Reclassifications 0 252

Balance on December 31 775 816

Less: non-current portion 775 816

Current portion 0 0

Group risk management

In the field of risk management, the Audit Committee approves the detailed and weighted risk map of the Executive Board. It adopts the necessary measures for risk control and risk mitigation and reports the respective outcome to the Board of Directors on an annual basis. The risk map itself covers any strategic, financial, operational, legal and compliance risks that could significantly impact the Company’s ability to achieve its business goals and financial targets. Identified risks are weighted and prioritized by the Executive Board according to their significance and likelihood of occurrence. For each risk, specific risk-mitigation measures – including their current status – are defined and responsibilities are allocated. The risk map, which is compiled by the Risk Review Committee, chaired by the Corporate Secretary, for

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review by the Executive Board and the Audit Committee and subsequently approved by the Audit Committee, contains risks iden tified and assessed by the respective corporate functions, selected country management, Corporate Audit and the Group auditors. The annual risk map also features risks which have increased or decreased in the course of the reporting year. Financial risk management specifically is described in further detail below.

Financial risk management

The Group’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main pur-pose of these financial liabilities is to raise funds for Group operations. The Group has trade and other receivables, loans, cash, short and long-term deposits that arise directly from its operations. The Group also holds available-for-sale investments and enters into deriva-tive transactions.

The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management oversees the management of these risks. It is supported by a financial risk committee that advises on financial risks and the appropriate financial risk governance framework for the Group. The financial risk committee provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accor dance with Group policies and Group risk appetite. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Group’s policy that no trading in derivatives for speculative purposes shall be undertaken.

The Board of Directors reviews and agrees on policies for managing each of these risks, which are summarized below.

Financial risk factors

Carrying amount and fair value of financial assets by asset classes


Cash

Available- for-sale

Fair value through profit or

loss held for trading

Loans and receivables

Carrying amount

Total (fair value)

Trade receivables and other receivables 1,002,163 1,002,163 1,002,163

Unbilled forwarding services 77,346 77,346 77,346

Accrued interest income 757 757 757

Cash and cash equivalents 1,693 571,886 573,579 573,579

Other current financial assets 20,000 20,000 20,000

Derivative financial instruments 5,504 5,504 5,504

Investments:

Bonds and debentures 171 171 171

Shares 19,670 379 20,049 20,049

Other investments 225 225 225

Third-party loans 373 373 373

Rental and guarantee deposits 47,975 47,975 47,975

Other 3,525 3,525 3,525

Total on December 31, 2011 1,693 19,670 6,279 1,724,025 1,751,667 1,751,667


Financial liabilities at

fair value through

profit or loss


measured at amortized

cost

Carrying amount

Total (fair value)

Payables and accruals 915,529 915,529 915,529

Borrowings 6,921 6,921 6,921

Finance lease liabilities 606 606 606


Provisions and other liabilities 50,852 50,852 50,852

Total on December 31, 2011 4,648 973,908 978,556 978,556

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Cash

Available- for-sale

Fair value through profit or

loss held for trading

Loans and receivables

Carrying amount

Total (fair value)

Trade receivables and other receivables 1,055,438 1,055,438 1,055,438

Unbilled forwarding services 74,742 74,742 74,742

Accrued interest income 340 340 340

Cash and cash equivalents 1,423 527,513 528,936 528,936

Other current financial assets 6,089 6,089 6,089


Investments:

Bonds and debentures 181 181 181

Shares 15,625 394 16,019 16,019

Other investments 241 241 241

Third-party loans 354 354 354

Rental and guarantee deposits 12,849 12,849 12,849

Total on December 31, 2010 1,423 15,625 21,270 1,677,325 1,715,643 1,715,643


Financial liabilities at

fair value through

profit or loss


measured at amortized

cost

Carrying amount

Total (fair value)

Payables and accruals 830,310 830,310 830,310

Borrowings 8,858 8,858 8,858

Finance lease liabilities 879 879 992


Provisions and other liabilities 120,451 120,451 120,451


Fair value hierarchy The table below analyzes financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (ie, as prices) or indirectly (ie, derived from prices)

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

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2011 (in thousand CHF) Level 1 Level 2 Level 3 Total


Financial assets at fair value through profit or loss held for trading 663 112 0 775

Derivative financial assets 0 5,504 0 5,504

Available-for-sale financial assets at cost 315

Total 25,949

Derivative financial liabilities 0 4,648 0 4,648

Total 4,648

2010 (in thousand CHF) Level 1 Level 2 Level 3 Total


Financial assets at fair value through profit or loss held for trading 691 125 0 816

Derivative financial assets 0 20,454 0 20,454

Available-for-sale financial assets at cost 323

Total 36,895

Derivative financial liabilities 0 5,532 0 5,532

Total 5,532

The fair value of financial instruments traded in active markets is based on quoted market prices at the statement of financial position date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s-length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely, as little as possible, on entity-specific estimates. If all significant inputs required to fair-value an instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Neither in 2010 nor in 2011 investments have been sold.

The Group used the discounted cash flow method to determine the fair value of level 3 financial instruments.

The following table presents the changes in level 3 instruments for the year ended December 31, 2011:

in thousand CHF

Available-for-sale financial assets

Total

Balance on January 1 14,228 14,228

Fair-value adjustments in statement of comprehensive income 3,412 3,412

Balance on December 31 17,640 17,640

Total gains or losses for the period included in the statement of comprehensive income for assets held at the end of the reporting period 3,412 3,412

Neither in 2011 nor in 2010 did the Group transfer financial instruments into another level.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market price. Market prices entail three types of risk: foreign currency risk, interest rate risk and other price risk such as equity risk.

The Group’s activities expose it primarily to financial risk due to changes in foreign currency exchange rates.

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Foreign currency riskThe Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily in regard to the US dollar and the euro. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities as well as net investments in foreign operations.

Management has set up a policy to require Group companies to manage their foreign exchange risk against their functional currency. The Group companies are required to hedge their entire foreign exchange risk exposure with the Group Treasury, if possible. To manage foreign exchange risks arising from future commercial transactions or recognized assets and liabilities, entities in the Group use forward contracts. Foreign exchange risk arises when future commercial transactions or recognized assets and liabilities are denominated in a currency that is not the Group entity’s functional currency. The Group Treasury is responsible for managing the net position using external derivative contracts. For segment reporting purposes, each subsidiary designates contracts with the Group Treasury as fair value hedges. External foreign exchange contracts are designated at the Group level as hedges of foreign exchange risk on specific assets and liabilities on a gross basis.

At December 31, 2011, the Group’s net foreign currency risk exposure amounted to CHF 9.4 million (2010: CHF 31.6 million). The following table demonstrates the sensitivity to a reasonable possible change of 10 % in the USD, EUR and HKD exchange rate, with all other variables held constant, of the Group’s profit before income tax (due to changes in the fair value of monetary assets and liabilities).

Profit before income tax

Effect in thousand CHF 2011 2010

Euro (1,648) 371

US dollar (105) (2,286)

Hong Kong dollar (947) (896)

Total effect (2,700) (2,811)

The movement in the pre-tax effect results from the change in the fair value of derivative financial instruments not designated in a hedging relationship and monetary assets and liabilities denominated in USD, EUR and HKD, in which the functional currency of the entity is a cur-rency other than USD, EUR or HKD. Although the derivatives have not been designated in a hedge relationship, they act as a commercial hedge and will offset the underlying transactions should they occur. If the exchange rates of all currencies changed by 10 %, the total maximum net effect would amount to CHF 0.9 million (2010: CHF 3.2 million).

Interest rate riskThe Group has a clear funding policy that prohibits affiliates from borrowing in foreign currency and has a clear preference for intragroup financing. Affiliates are also required to repatriate their excess cash. Liquidity is mainly managed at the corporate level by using money market products. Derivative instruments are used to manage the duration of financial instruments in a prudent manner.

As the Group generally has no significant interest-bearing liabilities, and given their short-term nature, the Group has a limited exposure to inter-est rate risk. Consequently the Group’s expense and operating cash flows are substantially independent of changes in market interest rates.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a finan cial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activi-ties, including deposits with banks and other financial institutions, foreign exchange transactions and other financial instruments.

Credit risk related to trade receivablesCustomer credit is managed by each business unit and subject to the Group’s established policy, procedures and control relating to cus-tomer credit risk management. Credit limits are established for all customers based on external ratings or, if not available, according to internal rating criteria. The customer’s credit quality is assessed based on an extensive credit rating scorecard. Outstanding customer receivables are regularly monitored. The objective of the management of trade receivables is to sustain the growth and profitability of the Group by optimizing asset utilization while maintaining risks at an acceptable level. There is no significant concentration of counterparty credit risk due to the Group’s large number of customers and their wide geographical spread. Risk limits and exposures are continuously monitored by country and by the nature of counterparties. Additionally, the Group obtains credit insurance and similar enhancements when appropriate to protect the collection of trade receivables.

Credit risk related to financial instruments and cash deposit Credit risk from balances with banks and financial institutions is managed by the Group Treasury in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and with credit limits assigned to each counterparty with a mini-mum rating of A. Counterparty credit limits are reviewed by senior management on a regular basis. The limits are set to minimize the concentra tion of risks and therefore mitigate financial loss through potential counterparty failure.

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The table below shows the Group’s maximum exposure to credit risk:


Cash and cash equivalents (without cash in hand) 571,886 527,513

Derivative financial instruments 5,504 20,454

Trade receivables and other receivables 1,106,317 1,057,090

Loans and other financial assets 49,123 18,547

Total financial assets shown in statement of financial position subject to credit risk 1,732,830 1,623,604

Guarantees 242,045 134,169

Total credit risk 1,974,875 1,757,773

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group’s approach to managing liquidity is to ensure, to the extent possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts, bank loans, de bentures, finance leases and hire purchase contracts. The Group’s liquidity is reported to the Management on a monthly basis.

To secure liquidity, the Group holds a net cash position of CHF 586.1 million (2010: CHF 525.3 million) and credit lines with various finan cial institutions totaling CHF 515.9 million (2010: CHF 520.9 million). Of this total, CHF 179.8 million (2010: CHF 190.9 million) is allocated to bank guarantees and foreign exchange lines.

The table below summarizes the maturity profile of the Group’s financial liabilities on December 31, 2011/2010 based on contractual un discounted payments.


between

1 and 3 months

between 3 months and

1 year

between

1 and 5 years

Total remaining contractual

payments

Borrowings (note 25) 2,838 4,457 232 7,527

Trade and other payables 633,436 29,545 0 662,981

Accruals 223,462 29,086 0 252,548

Other liabilities 21,193 8,051 0 29,244

Foreign exchange contracts

Cash inflow (800,997) (15,204) (6,115) (822,316)

Cash outflow 765,705 15,558 5,723 786,986

Total 845,637 71,493 (160) 916,970


between

1 and 3 months

between 3 months and

1 year

between

1 and 5 years

Total remaining contractual

payments

Borrowings (note 25) 2,884 6,451 403 9,738

Trade and other payables 557,671 24,372 9,971 592,014

Accruals 217,396 14,821 6,080 238,297

Provisions and other liabilities 80,311 40,142 0 120,453

Foreign exchange contracts

Cash inflow (750,894) (65,039) (7,025) (822,958)

Cash outflow 737,807 63,495 7,541 808,843

Total 845,175 84,242 16,970 946,387

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Capital risk management

The Group’s objectives when managing capital are to safeguard its ability to continue as an ongoing concern so as to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts.

Capital is monitored on the basis of the equity ratio, which is calculated as equity (including non-controlling interests) as a percentage of total assets. This is reported to the management as part of the Group’s regular internal management reporting.

The Group’s capital and equity ratio is shown in the table below:


Capital and reserves attributable to Panalpina shareholders 905,808 804,279

Equity attributable to non-controlling interests 9,082 7,890

Total equity 914,890 812,169

Total assets 2,135,322 1,989,242

Equity ratio 42.8% 40.8%

The Group is not subject to regulatory capital adequacy requirements.

Other receivables and other current assets


Office supplies 0 1,721

Taxes (VAT, withholding tax) 41,949 42,660

Accrued income 6,092 1,391

Accrued interest income 757 340

Personnel advances 1,405 2,559

Prepaid rent expenses 5,371 6,829

Prepaid communication and IT expenses 3,325 3,039

Supplier rebates 16,912 21,535

Short-term loans 847 146

Others 8,339 17,737

Total other receivables and other current assets 84,997 97,957

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Trade receivables


Commercial clients 990,839 962,919

Agents 17,684 22,508

Total trade receivables (gross values) 1,008,523 985,427

Individual allowance (282) (1,864)

Overall allowance (23,837) (25,449)

Total trade receivables (net) 984,404 958,114

Europe, Middle East , Africa, CIS 479,358 518,859

thereof European Union 380,646 419,529

thereof Switzerland 42,185 38,370

North America 201,398 179,090

Central and South America 133,770 102,248

Asia Pacific 169,878 157,917


There is no concentration of credit risk with regard to trade receivables as the Group has a large number of customers that are dispersed internationally.

Provisions for impaired trade receivables are collectively assessed and represent the impairment that has been incurred but not indentified. Panalpina establishes its provisions for doubtful trade receivables based on its historical loss experiences. Significant financial difficulties of the debtor are individually impaired. The maximum exposure to credit risk on the reporting date is the carrying amount of net trade receiv-ables mentioned above. Based on past experience, the Group does not anticipate writing off not-past-due nor unprovided trade receiv-ables. The creation and usage of provisions for impaired trade receivables have been included in other operating expenses in the income statement.

The following table summarizes the movement in the provision for impairment of trade receivables:


Balance as of January 1 27,313 34,848

Receivables written off during the year as uncollectible (7,470) (9,684)

Changes in provision for doubtful accounts 4,276 2,149

Balance as of December 31 24,119 27,313

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The following table provides details about the age of trade receivables that are not overdue as the payment terms specified in the terms and conditions established with Panalpina customers have not been exceeded, as well as an analysis of overdue amounts and related provi-sions for doubtful trade receivables:


Commercial clients 990,839 962,919

Agents 17,684 22,508

Total trade receivables (gross values) 1,008,523 985,427

Allowance for bad debt (24,119) (27,313)


of which:

Not overdue 734,894 708,293

Past due not more than 30 days 182,956 189,671

Past due more than 30 days up to 180 days 83,667 82,139

Past due more than 180 days up to 360 days 12,932 8,052

Past due more than 360 days 10,137 10,153

Prepayment (16,063) (12,881)

Total trade receivables (gross) 1,008,523 985,427

Allowance for bad debt (24,119) (27,313)


Derivative financial instruments

Contract value

Positive replacement value

Negative replacement value

in thousand CHF 2011 2010 2011 2010 2011 2010

Forward foreign exchange contracts 728,316 805,302 5,504 20,454 (4,648) (5,532)

Forward trading hedges 728,316 805,302 5,504 20,454 (4,648) (5,532)

Contract value

Positive replacement value

Negative replacement value

in thousand CHF 2011 2010 2011 2010 2011 2010

Terms of the forward foreign exchange contracts 728,316 805,302 5,504 20,454 (4,648) (5,532)

0 – 3 months 675,587 734,333 4,540 18,579 (3,945) (4,890)

4 – 12 months 46,614 63,428 505 1,875 (703) (103)

13 – 18 months 6,115 7,541 459 0 0 (539)

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Derivative financial instruments are spread over the following currencies:

Forward foreign exchange contracts


USD 443,673 399,245

EUR 214,650 278,063

SGD 24,222 2,001

GBP 10,618 11,178

HKD 7,511 17,074

CZK 6,456 998

CAD 6,452 25,097

NZD 4,725 1,452

MXN 2,353 2,211

NOK 2,342 1,361

SEK 2,261 8,154

CHF 520 4,100

AUD 0 15,002

COP 0 11,228

Other 2,533 28,138

Total 728,316 805,302

Cash and cash equivalents


Cash on hand 1,693 1,423

Cash at bank 569,983 531,658

Checks and bills of exchange in transit 1,903 (4,145)

Total cash and cash equivalents 573,579 528,936

Net cash (debt) is comprised as follows:


Cash and cash equivalents 573,579 528,936

Other current financial assets 20,000 6,089

Short-term borrowings (7,296) (9,335)

Long-term borrowings (231) (403)

Net cash (debt) 586,052 525,287

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Share capital and treasury shares

in thousand CHF

Outstanding number of shares

(numbers)

Ordinary

shares

Treasury

shares

Total

Balance on January 1, 2011 23,642,458 50,000 (196,003) (146,003)

Treasury shares

Sold 20,245 0 2,190 2,190

Purchased (79,042) 0 (8,617) (8,617)

Sold under employee share plan 32,182 0 3,462 3,462

Sold under employee option plan 16,065 0 1,690 1,690

Balance on December 31, 2011 23,631,908 50,000 (197,278) (147,278)

The share capital is presented by 25 million issued shares (2010: 25 million) of CHF 2.00 par value, fully paid in.

On December 31, 2011, the number of outstanding shares amounted to 23,631,908 shares (2010: 23,642,458) and the number of treas-ury shares to 1,368,092 (2010: 1,357,542). Treasury shares have been deducted from equity attributable to owners of the parent. All shares issued by the Company were fully paid in.

The extraordinary Shareholders’ Meeting held on August 23, 2005, authorized the Board of Directors to create authorized capital to the maximum amount of CHF 6 million by issuing a maximum of 3,000,000 registered shares with a nominal value of CHF 2.00 each at any time until August 22, 2007. At the Annual General Meeting held on May 15, 2007, the shareholders approved the proposal of the Board of Directors to extend the authorized share capital until May 2009 with an unchanged amount. The extension of the authorized capital for another two years was approved at the Annual General Meeting held on May 5, 2009. On May 10, 2011, the General Meeting extended the resolution, with unchanged conditions until May 10, 2013. The Board of Directors has not made use of this au thorization. The Company has no conditional share capital.

In 2007, the Board of Directors decided to return excess capital to the shareholders by launching a share buyback program via a second trading line on the SIX Swiss Exchange. Between August 13, 2007 and September 2, 2008, the Group repurchased 1,250,000 registered shares, totaling a value of CHF 185.0 million and representing 5 % of share capital.

The amount available for dividend distribution is based on the available distributable retained earnings of Panalpina World Transport (Holding) Ltd. determined in accordance with the legal provisions of the Swiss Code of Obligations. On May 10, 2011, the shareholders approved that no dividends will be distributed in respect of the 2010 business year.

The Board of Directors has proposed dividends for the fiscal year 2011 of CHF 2.00 per share. In addition to the dividend payment the Board of Directors has proposed to cancel the 1,250,000 repurchased shares. This would result in a total remaining share capital of CHF 47.5 million (23,750,000 shares). Furthermore, the Board of Directors requests a reduction of the nominal value of the remaining 23,750,000 shares by CHF 1.90 per share. If the shareholders would approve the proposal of the Board of Directors to reduce the nominal value per share from currently CHF 2.00 to CHF 0.10, the share capital would further decrease by CHF 45.125 million to CHF 2.375 million. The proposal of the dividend payment, the cancelation of the repurchased shares and the reduction of share nominal value are subject to approval at the Annual Meeting of Shareholders on May 8, 2012.

Non-controlling interests


Balance on January 1, (net) 7,890 7,015

Reclassification of parent’s ownership interest 0 9


Reclassification of translation difference to parent shareholders’ equity 0 (5)

Interest in profit 1,119 1,298

Reclassification of interest in profit to parent shareholders’ equity 0 55

Dividend paid (46) (52)

Acquisition Grieg 279 0

Capital increase Panalpina Vietnam 44 0

Total net non-controlling interests 9,082 7,890

During the year under review, non-controlling interest increased by TCHF 44 due to the capital increase of Panalpina World Transport (Vietnam) Company Ltd. In addition, the Grieg acquisition included non-controlling interests of TCHF 279 for the participation in Grieg Triangle Logistics B.V., Netherlands. In 2010, the negative non-controlling interests of Panalpina Kuwait were reclassified to parent shareholders’ equity.

23

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111



Borrowings

This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortized cost. For more information about the Group’s exposure to foreign currency and liquidity risk, see note 18.


Current liabilities

Overdraft 2,681 0

Current portion of secured bank loans 4,233 8,855

Unsecured bank facility 4 0

Current portion of finance lease liabilities 378 480

Total current liabilities 7,296 9,335


Non-current portion of finance lease liabilities 228 399

Other loans 3 4

Total non-current liabilities 231 403

Terms and repayment schedule

2011 2010

in thousand CHF

Currency

Nominal interest rate

Year of maturity

Carrying amount Fair value

Carrying amount Fair value

Current liabilities

Secured bank loan USD 5.85 % 2011 0 0 6,020 6,020

Secured bank loan COPDTF

+3.00 % 2011 0 0 4 4

Secured bank loan COP 4.91 % 2011 0 0 2,831 2,831

Secured bank loan USD 2.74 % 2012 4,233 4,233

Unsecured bank facility COP 8.48 % 2012 4 4

Total current liabilities 4,237 4,237 8,855 8,855


Other loans SGD n/a 2013 3 3 4 4

Total interest-bearing liabilities 4,240 4,240 8,859 8,859

Finance lease liabilities

2011 2010

in thousand CHF

Future minimum

lease payments

Interest

Present value of minimum

lease payments

Future minimum

lease payments

Interest

Present value of minimum

lease payments

Less than 1 year 429 51 378 542 62 480

Between 1 and 5 years 255 27 228 450 51 399

Total interest-bearing liabilities 684 78 606 992 113 879

The weighted average interest rate of bank borrowings and other financing liabilities is 3.90 % (2010: 5.78 %). The carrying amounts of short-term bank borrowings approximate their fair value.

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The maturity of the Group’s long-term financial debts (excluding lease liabilities) is shown in the following table:

2011 2010

in thousand CHF

2011 0 4

2013 3 0

Total 3 4

The carrying amounts of the Group’s borrowings are denominated in the following currencies:


USD 4,179 6,020

EUR 2,741 18

GBP 296 654

PLN 250 165

COP 4 2,835

AUD 0 0

Others 57 46

Total 7,527 9,738

Long-term provisions


Employee

benefits

Claims and other provisions

Total provisions

Balance on January 1 34,450 78,129 112,579

Translation differences (587) 14 (573)

Change in scope of consolidation 267 414 681

Addition 8,904 5,086 13,990

Reversal of unused amount (1,948) (14,778) (16,726)

Charged in income statement 6,956 (9,692) (2,736)

Utilization (3,217) (5,106) (8,323)

Transfers 0 (16,596) (16,596)

Balance on December 31 37,869 47,163 85,032


Employee

benefits

Claims and other provisions

Total provisions

Balance on January 1 28,756 37,902 66,658

Translation differences (2,513) (3,725) (6,238)

Addition 9,492 70,923 80,415

Reversal of unused amount (2,939) (35,449) (38,388)

Charged in income statement 6,553 35,474 42,027

Utilization (5,092) (514) (5,606)

Transfers 6,746 8,992 15,738

Balance on December 31 34,450 78,129 112,579

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Employee provisions mostly relate to certain employee benefit obligations, such as “anniversary” benefits, termination payments and long service benefits, mainly in Switzerland, Germany, Austria, Italy, France and the USA. The timings of these cash outflows can be reasonably estimated based on past performance. In addition, employee provisions include the liability of CHF 2,527 thousand for the cash-settled compensation plan. Significant provisions are discounted by using the corresponding discount rate applicable in the respective countries where the obligation occurs.

The balance for claims represents a provision for certain claims brought forward against the Group by customers and forwarding agents. The balance as of December 31, 2011 is expected to be utilized within the next two to five years. Long-term claims include an additional provision for probable potential future payments in connection with transport damages. Furthermore, in 2010, a long-term provision in the amount of CHF 38.0 million was recorded to cover the fines, legal penalties and compliance consultancy fees relating to the settlement of the US Foreign Corrupt Practices Act (FCPA). In the period under review the current portion of CHF 16.6 million has been reclassified to provisions and other liabilities as it is expected to be utilized within one year. The management determined the provision based on past performance and its expectation of the funds needed for the future settlement of the claims which are not yet reported (see also note 4 Critical accounting estimates and judgments).

The current portion of employee provisions and claim provisions are disclosed in note 28.

Deferred income taxes

Deferred taxes are related to the following statement of financial position items:

in thousand CHF

Balance January 1

2010

Recog- nized

translation differences

Recog-

nized in income statement

Recog- nized

in OCI

Balance Decem-

ber 31 2010

Recog- nized

translation differences

Recog-

nized in income statement

Recog- nized

in OCI

Balance Decem-

ber 31 2011

Deferred tax assets

Receivables 2,928 (307) (1,358) 0 1,263 (4) 1,278 0 2,537

Fixed assets 4,060 (425) (440) 0 3,195 (10) 180 0 3,365

Provisions 15,710 (1,645) 6,402 (1,794) 18,673 (56) 1,195 (410) 19,402

Other statement of financial position captions 8,763 (917) 3,610 0 11,456 (35) (6,305) 0 5,116

Deductible loss carry-forwards 23,878 (2,500) 9,906 0 31,284 (94) 703 0 31,893

Total deferred tax assets 55,339 (5,794) 18,120 (1,794) 65,871 (199) (2,949) (410) 62,313

Deferred tax liabilities

Receivables (640) (4) 135 0 (509) 0 104 0 (405)

Fixed assets (9,171) (57) (510) 0 (9,738) 7 (2,152) 0 (11,883)

Provisions (8,591) (54) (668) 7,206 (2,107) 1 (5,563) 5,829 (1,840)

Other statement of financial position captions (4,801) (30) (3,560) 0 (8,391) 6 8,021 0 (364)

Deductible loss carry-forwards 1,288 8 (1,296) 0 0 0 0 0 0

Total deferred tax liabilities (21,915) (137) (5,899) 7,206 (20,745) 14 410 5,829 (14,492)

Net deferred tax assets

(liabilities) 33,424 (5,931) 12,221 5,412 45,126 (185) (2,539) 5,419 47,821

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The gross movement in the deferred income tax account is as follows:


Balance January 1 45,126 33,424

Translation differences (185) (5,931)

Income statement charge (2,539) 12,221

Tax charged to equity due to IAS 19 5,419 5,412

Balance December 31 47,821 45,126

In 2011, temporary differences in the amount of CHF 3.6 million (2010: CHF 4.9 million) were not capitalized because it was not probable that they could be offset against future profits.

Year of expiry of unrecognized tax loss carry-forwards (in thousand CHF) 2011 2010

2011 – 2,360

2012 16,702 18,321

2013 15,399 15,544

2014 7,884 2,677

2015 768 723

2016 674 –

Later 58,672 40,698

Total unrecognized tax loss carry-forwards 100,099 80,323

The total increase of CHF 19.8 million (2010: increase of CHF 25.3 million) derived mainly from unrecognized tax loss carry-forwards in Angola, Belgium, Brazil and Luxembourg. During the period under review, tax loss carry-forwards expired mainly in Finland, Denmark and Angola. Tax loss carry-forwards of CHF 13.4 million (2010: CHF 21.9 million) were utilized mainly in Switzerland, USA and Australia.

Provisions and other liabilities


Employee benefits and

others

Outstanding vacation

entitlement

Claims

Restruc-

turing

Total


Translation differences (1,001) (571) (177) (20) (1,769)

Change in scope of consolidation 259 1,004 0 0 1,263

Addition 66,003 6,348 11,917 0 84,268

Reversal of unused amounts (15,043) (3,075) (23,399) 0 (41,517)

Charged in income statement 50,960 3,273 (11,482) 0 42,751

Utilization (41,848) (735) (31,721) (170) (74,474)

Transfers 0 0 16,596 0 16,596


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Employee benefits and

others

Outstanding vacation

entitlement

Claims

Restruc-

turing

Total

Balance on January 1 45,285 21,077 32,983 4,026 103,371

Translation differences (3,073) (2,168) (1,247) (1,144) (7,632)

Addition 122,915 4,113 90,338 265 217,631

Reversal of unused amounts (11,502) (1,253) (16,440) (584) (29,779)

Charged in income statement 111,413 2,860 73,898 (319) 187,852

Utilization (88,888) (2,320) (33,868) (1,724) (126,800)

Transfers 0 0 (15,738) 0 (15,738)


Apart from outstanding vacation entitlement and the current portions of provisions as disclosed in note 26, provisions and other liabilities include personnel profit participation and related social security costs and payroll taxes as well as compliance consultancy fees. During the period under review, CHF 30.8 million of personnel profit participation (2010: CHF 30.7 million) was paid out. For the current year additional personnel profit participation of CHF 51.2 million (2010: CHF 51.2 million) including related social security costs and payroll taxes was recognized.

As disclosed in notes 3 and 26, claim provisions include the current portion of certain claims brought forward against the Group by cus-tomers and forwarding agents. In addition, in 2010 short-term provision in the amount of CHF 31.0 million was recorded to cover the fines, legal penalties and compliance consultancy fees relating to the settlement of the US Foreign Corrupt Practices Act (FCPA) and the US as well as the New Zealand antitrust investigations. During the period under review the previous year recognized provision was paid out.

In 2010, the management reassessed the cash outflow of claims and came to the conclusion that, based on past utilization, the duration until claims can be settled increased substantially. The reclassification to long-term claim provisions of CHF 15.7 million reflects this change. The balance as of December 31, is expected to be utilized within one year.

Restructuring provisions arise from planned programs that materially change the scope of business undertaken by the Group or the manner in which business is conducted. Such provisions include only the costs necessarily entailed by the restructuring which are not associated with the recurring activities of the Group. In 2010, additionally recognized restructuring provisions related to adjustments of the previous year estimations. Neither in 2011 nor in 2010, an additional restructuring plan was approved. The timings of these cash outflows are expected to occur within one year.

Related parties

Key management personnel compensation

Key management personnel consists of the Board of Directors and the Executive Board. The members of the Board of Directors receive a fixed annual compensation and participate in certain equity compensation plans (see note 8). In 2011, there were 7 (2010: 6) members of the Board of Directors.

The compensation of the Executive Board consists of a fixed portion and a variable portion, which depends on the course of business and the individual manager’s performance. In addition, members of the Executive Board receive indirect benefits and are able to participate in certain equity compensation plans (see note 8). In 2011, there were 5 (2010: 5) members of the Executive Board.

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116



The following table shows the compensation of key management personnel:


Annual salary1

Bonus

Termi- nation

benefits

Other

benefits2

Share- based

payment3

Social security

contribution

Total compen-

sation

Option

granted

Board of Directors

Rudolf W. Hug, Chairman 453 50 63 566

Beat Walti, Vice Chairman 153 50 22 225

Lars Förberg, Member 79 50 11 140

Chris E. Muntwyler, Member 153 50 22 225

Roger Schmid, Member* 155 50 205

Hans-Peter Strodel, Member 155 50 17 222

Knud Elmholdt Stubkjær, Member 77 50 12 139

Board of Directors leaving

Günter Rohrmann 102 102

Total remuneration of Board of Directors 1,327 0 0 0 350 147 1,824 0

Executive Board

Monika Ribar, Chief Executive Officer 913 570 125 380 145 2,133

Members of the Executive Board 2,246 1,014 144 1,157 555 5,116

Executive Management leaving 113 9 16 138

Total remuneration of Executive Board 3,272 1,584 0 278 1,537 716 7,387 0

Total remuneration of key manage-

ment personnel 4,599 1,584 0 278 1,887 863 9,211 0

1 Salaries incl. fixed remuneration, salary and discount on shares granted2 Other benefits incl. expense allowance and fringe benefits3 According to the Executive Board Mid-term Incentive Plan (see Note 8) the members of the Executive Board received matched shares

totaling 4,155 shares reflecting the 40 % bonus paid in the previous year* Remuneration respectively shares have been transferred to Ernst Göhner Stiftung (employer of respective board member)

117




Annual salary1

Bonus

Termi- nation

benefits

Other

benefits2

Share- based

payment3

Social security

contribution

Total compen-

sation

Option

granted

Board of Directors

Rudolf W. Hug, Chairman 454 50 46 550

Günter Rohrmann, Vice Chairman 154 50 0 204

Roger Schmid, Member * 155 50 0 205



Beat Walti, Member 77 50 8 135

Board of Directors leaving

Günther Casjens, Member 154 0 154

Wilfried Rutz, Vice Chairman 127 12 139

Yuichi Ishimaru, Member 77 7 84

Glen R. Pringle, Member 51 0 51

Total remuneration of Board of Directors 1,403 0 0 0 300 88 1,791 0

Executive Board

Monika Ribar, Chief Executive Officer 800 730 27 633 110 2,300

Members of the Executive Board 2,220 1,141 149 1,017 420 4,947

Executive Management leaving 850 33 73 206 134 1,296

Total remuneration of Executive Board 3,870 1,871 33 249 1,856 664 8,543 0

Total remuneration of key manage-

ment personnel 5,273 1,871 33 249 2,156 752 10,334 0

1 Salaries incl. fixed remuneration, salary and discount on shares granted2 Other benefits incl. expense allowance and fringe benefits3 According to the Executive Board Mid-term Incentive Plan (see Note 8) the members of the Executive Board received matched shares

totaling 4,155 shares reflecting the 40% bonus paid in the previous year* Remuneration respectively shares have been transferred to Ernst Göhner Stiftung (employer of respective board member)

There were no contributions or donations to close members of the families of the key management.

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The following table shows the equity holdings in Panalpina World Transport (Holding) Ltd. (PWT) of key management personnel and their related parties in line with article 663bbis and 663c of the Swiss Code of Obligations.

Number of PWT nominal shares

Number of options (End of vesting period)

2012 2013 2014

Board of Directors

Rudolf W. Hug, Chairman 8,362 1,200 1,325 2,020

Beat Walti, Vice Chairman 427 0 0 0

Lars Förberg, Member 0 0 0 0


Roger Schmid, Member* 9,375 1,800 1,325 0


Knud Elmholdt Stubkjær, Member 0 0 0 0


Executive Board

Monika Ribar, Chief Executive Officer 26,183 1,800 1,325 2,020

Christoph Hess, General Counsel and Corporate Secretary 4,208 600 600 1,000

Karl Weyeneth, Chief Operating Officer 9,044 0 497 303

Marco Gadola, Chief Financial Officer 3,858 1,800 1,325 2,020

Alastair Robertson, Chief Human Resources Officer 4,050 0 0 200



Number of PWT nominal shares

Number of options (End of vesting period)

2012 2013 2014

Board of Directors

Rudolf W. Hug, Chairman 7,935 1,200 1,325 2,020

Günter Rohrmann, Vice Chairman 2,820 2,020

Roger Schmid, Member 9,375 1,800 1,325


Executive Board

Monika Ribar, Chief Executive Officer 21,063 1,800 1,325 2,020

Christoph Hess, General Counsel and Corporate Secretary 3,000 600 600 1,000

Karl Weyeneth, Chief Operating Officer 5,315 0 497 303

Marco Gadola, Chief Financial Officer 2,572 1,800 1,325 2,020

Alastair Robertson, Chief Human Resources Officer 2,200 0 0 200



* Remuneration respectively shares have been transferred to Ernst Göhner Stiftung (employer of respective board member)

Shareholders, pension funds, associated companies and all subsidiaries are defined as parties related to the Group. Apart from the trans-actions with related parties mentioned above, we refer to notes 7 and 8.

119



Business combinations/disinvestments

On February 1, 2011, Panalpina World Transport (Pty) Ltd. in Sydney announced the purchase of defined tangible and intangible assets and the business of Apollo Forwarding in Perth. Apollo and Panalpina have been close partners for more than ten years. During that time, Apollo Perth has acted as an agent of Panalpina. The purchase enables Panalpina to further enlarge the geographical office coverage in Oceania and widen the customer base. In addition to being a well-established customs broker, Apollo Perth also provides international freight forwarding services to its Australia-based customers who now gain access to Panalpina’s global network. The acquisition has been settled for a final cash consideration of CHF 2.9 million.

As per April 1, 2011 the Group acquired 100 percent of the issued share capital of Grieg Logistics AS, a company today encompassing freight forwarding, domestic transportation, warehousing, distribution and customs clearance with operations in fourteen locations. Grieg Logistics, established in 1969, is a leading logistics provider to the Norwegian oil and gas, shipping and maritime industries. It has a broad product portfolio including logistics, freight forwarding and project development. In Norway, Grieg Logistics serves the national market with offices throughout the country. Businesses will add approximately NOK 400 million (CHF 67.0 million) to the Panalpina Group’s annual turnover. Grieg Logistics, with its strategic locations throughout Norway, has built up a strong reputation for providing customers with tailor-made services to meet their needs. The acquisition was settled for a final cash consideration of CHF 60.3 million. The acquired business contributed net forwarding revenue of CHF 49.4 million and net profit of CHF 0.2 million to the Group for the period from April 1 to December 31, 2011.

Tangible assets acquired in 2011 include mainly office equipment and vehicles. Intangible assets include customer relationships.

Details of net assets acquired and goodwill are as follows:


Purchase consideration

– Cash paid 63,160 2,384

Total purchase consideration 63,160 2,384

Fair value of net assets acquired (22,570) (980)

Non-controlling interest 279 0

Goodwill 40,869 1,404

The goodwill is attributable to market knowledge and experience of the acquired employees, the profitability of the acquired business and the synergies expected to arise after the Group’s acquisition.

The assets and liabilities arising from the acquisition are the following:

in thousand CHF

Acquiree’s

carrying amount

Revaluation due to purchase

accounting

Fair value

2011

Fair value

2010

Cash and cash equivalents 3,174 0 3,174 0

Property, plant and equipment 444 0 444 134

Intangible assets 0 15,927 15,927 846

Other non-current assets 351 (72) 279 0

Trade receivables 10,322 0 10,322 0

Other current assets 357 0 357 0

Total acquired assets 14,648 15,855 30,503 980

Payables (2,501) 0 (2,501) 0

Provisions (681) 348 (333) 0

Other current liabilities (5,099) 0 (5,099) 0

Total acquired liabilities (8,281) 348 (7,933) 0

Net assets acquired 6,367 16,203 22,570 980

Non-controlling interests (279) 0

Less acquired liquidity (3,174) 0

Goodwill 40,869 1,404

Total cash used in acquisition of businesses 59,986 2,384

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Additional information

Contractual commitments on non-cancellable operating lease contracts 2011 2010

in thousand CHF

Less than one year 139,128 137,768

Between one and five years 261,044 283,793

More than five years 99,459 116,535

Total residual commitments 499,631 538,096

Included in the residual lease commitments is an operating lease contract for aircrafts of CHF 33.8 million (2010: CHF 76.8 million), leased by Panalpina Air & Ocean Ltd. The contract, with a one-year notice period, was renewed in 2010 for the first aircraft until August 31, 2012. In 2010, a second aircraft was leased with a period at least until September 30, 2012.

Pledged assets

As of the statement of financial position date 2011 and 2010, the Group does not have any pledged assets.

Pending legal claims

IntroductionIn addition to the matters discussed in note 4 – Provisions, from time to time the Group is involved in legal proceedings in the ordinary course of its business. Other than as noted below, the Group is not a party to any legal, administrative or arbitration proceedings which could significantly harm the Group’s business, financial condition and results of operations taken as a whole, and it does not know of any such proceedings which may currently be contemplated by governmental or third parties.

Claim against Pantainer Ltd.In a case which originated in 2004, it is alleged that a fire occurred on a container vessel due to containers shipped under Pantainer bills of lading containing chemicals that were not declared as hazardous cargo. As a consequence the vessel has declared general average. Claimants may seek compensation of general average contributions, damage and loss of cargo and potential damages to the vessel. For-mal legal proceedings were launched in Tokyo in 2005 against the shipper which, in turn, commenced third-party proceedings against Pantainer Ltd. and other companies of the Group. Neither Pantainer nor any other Panalpina Group companies are named defendants in the Tokyo litigation. In July 2010, the court dismissed all claims of the plaintiffs and plaintiffs have appealed the judgment. The value in dispute amounts to approximately CHF 25 million.

Business practices investigationIn November 2010, Panalpina entered into a Deferred Prosecution Agreement (DPA) with the US Department of Justice (DOJ) to resolve claims against it arising from an investigation by the DOJ and the US Securities and Exchange Commission (SEC) for violations of the US Foreign Corrupt Practices Act (FCPA). Under the DPA, the DOJ has agreed to defer any criminal prosecution for three years. Panalpina has accepted certain obligations under the DPA, such as further strengthening its compliance policies and procedures and providing regular reports to the DOJ on the company’s progress. If Panalpina satisfies its obligations under the DPA, the DOJ has agreed to release the company from criminal liability at the end of the three-year term.

Freight forwarding antitrust investigationIn October 2007, Panalpina’s headquarters in Switzerland and the USA were raided by the respective competition authorities. Further, a request for information was served by the New Zealand Commerce Division and a document retention notice by the Competition Bureau Canada.

In April 2008, the Australian Competition and Consumer Commission served a notice on the Australian subsidiary requesting information and documents and in June 2008, Panalpina’s UK subsidiary was the recipient of a request for information issued by the European Commission requesting certain information and records relating to alleged antitrust violations in the freight forwarding industry. In August 2010, Brazilian authorities announced preliminary investigations against the freight forwarding industry. In December 2011, Panalpina’s local subsidiary received a letter from the Competition Commission Singapore to detail whether it has engaged in similar anti-competitive conduct.

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121



These activities were part of an investigation of several competition authorities against various major freight forwarding companies for alleged anti-competitive behavior.

Furthermore, a civil class action lawsuit was filed in the USA against Panalpina and a number of its major competitors as a direct conse-quence of these investigations, alleging a conspiracy in the pricing of freight forwarding services. In July 2009, plaintiffs filed an amended complaint adding additional defendants and claims. In November 2009, the Company, along with other defendants, filed motions to dismiss the amended complaint for failure to state a claim and for lack of subject matter jurisdiction. Oppositions to the motions were filed in January 2010. At this stage, Panalpina is unable to express an opinion as to the probable outcome of this litigation and thus to estimate the potential loss, if any.

In 2009, the Competition Bureau Canada closed its investigation into alleged anti-competitive activity due to a lack of evidence substanti-ating an undue lessening of competition.

In January 2010, the Australian Competition and Consumer Commission also discontinued its investigation.

In February 2010, Panalpina was served with a Statement of Objections by the European Commission, alleging anti-competitive behavior in the freight forwarding industry. In an oral hearing before the Commission’s case team held in July 2010, Panalpina has presented its arguments. In January 2011, Panalpina received an additional request for information issued by the European Commission. A final decision is not expected prior to early 2012.

In October 2010, Panalpina announced a settlement with the DOJ over violations of the Sherman Antitrust Act related to the sale of international air freight forwarding services. Under the terms of the settlement, which has been approved by the competent court, Panalpina has agreed to pay a fine of approximately USD twelve million.

In the reporting year Panalpina completed settlement negotiations with the New Zealand Commerce Commission and the agreed penalty has been approved by the competent court.

It is not possible to predict the outcome of the pending anti-trust proceedings at this stage. They may, however, result in material penalties being imposed on Panalpina. As Panalpina is not yet in a position to assess its exposure and the potential financial consequences in these proceedings, no related provisions have been made as of December 31, 2011.

Subsequent events

Since the statement of financial position date, no events have become known for which a disclosure is required.

122



Principal Group companies and participations

Company

Registered

Currency

Nominal capital

in 1,000

Equity interest

in %

Invest-

ment

Method of con-

solidation

Europe

Panalpina World Transport (Holding) Ltd. Basel CHF 50,000 K

Panalpina Management Ltd. Basel CHF 2,500 100 1 K

Panalpina Ltd. Basel CHF 600 100 1 K

Pantainer Ltd. Basel CHF 100 100 1 K

Panalpina Insurance Broker Ltd. Basel CHF 100 100 1 K

Panalpina International Ltd. Basel CHF 100 100 1 K

Hausmann Transport Ltd. Basel CHF 100 100 1 K

Panalpina Air & Ocean Ltd. Basel CHF 2,700 100 1 K

Jacky Maeder international forwarding Ltd. Basel CHF 300 100 1 K

Panalpina Global Employment Services Ltd. Basel CHF 100 100 1 K

Panalpina Welttransport (Deutschland) GmbH Mörfelden EUR 10,226 100 1 K

Panalpina Welttransport GmbH Vienna EUR 36 100 1 K

Panalpina Welttransport GmbH Höchst EUR 36 100 1 K

Panalpina France Transports Internationaux S.A.S. Paris-Roissy EUR 2,000 100 1 K

Panalpina Trasporti Mondiali S.p.A. Milan EUR 2,000 100 1 K

Panalpina Transportes Mundiales S.A. Madrid EUR 451 100 1 K

Panalpina Transportes Mundiais Lda Lisbon EUR 50 100 1 K

Panalpina World Transport Ltd. London GBP 12,350 100 1 K

Panalpina World Transport (Ireland) Ltd. Dublin EUR 25 100 1 K

Panalpina World Transport N.V. Antwerp EUR 13,050 100 1 K

Panalpina Luxembourg S.A. Luxembourg EUR 31 100 1 K

Panalpina World Transport B.V. Amsterdam EUR 4,091 100 1 K

Grieg Triangle Logistics B.V. Spijkenisse EUR 50 51 1 K

Grampian International Freight B.V. Beverwijk EUR 18 100 1 K

Panalpina Czech Sro. Prague CZK 1,000 100 1 K

Panalpina Croatia d.o.o. Rijeka HRK 400 100 1 K

Panalpina Slovakia S.R.O. Bratislava EUR 23 100 1 K

Panalpina Magyarorszag Kft. Budapest HUF 528,000 100 1 K

Panalpina Romania S.R.L. Oradea RON 72 100 1 K

Panalpina Polska Sp. z o.o. Wroclaw PLN 1,500 100 1 K

Panalpina AB Gothenburg SEK 1,000 100 1 K

Panalpina A/S Oslo NOK 75,060 100 1 K

Panalpina World Transport Nakliyat Ltd. Srk. Istanbul TRY 808 100 1 K

Panalpina World Transport ZAO Moscow RUB 2,100 100 1 K

Panalpina CIS Helsinki OY Vantaa EUR 8 100 1 K

Panalpina Logistics LLC Moscow RUB 240 100 1 K

Panalpina World Transport Ltd. Kiev UAH 376 100 1 K

Luxair S.A. Luxembourg EUR 13,750 12 3 N

32

123



Company

Registered

Currency

Nominal capital

in 1,000

Equity interest

in %

Invest-

ment

Method of con-

solidation

North, Central and South America

Panalpina Inc. Jersey USD 83,000 100 1 K

Panalpina FMS, Inc. (Washington) Jersey City USD 1 100 1 K

International Claims Handling Services Inc. Miami USD 1 100 1 K

Panalpina Inc. Toronto CAD 100 100 1 K

Panalpina Transportes Mundiales, S.A. de C.V. Mexico City MXN 35,834 100 1 K

Panalpina S.A. Panama City USD 1,250 100 1 K

Almacenadora Mercantil S.A. Panama City USD 25 100 1 K

Panalpina S.A. de C.V. San Salvador SVC 100 100 1 K

Panalpina Transportes Mundiales S.A. San José CRC 2,500 100 1 K

Las Fronteras S.A. San José CRC 1,590 100 1 K

Panalpina Uruguay Transportes Mundiales S.A. Montevideo UYU 4,093 100 1 K

Panalpina S.A. Santa Fé de Bogotá COP 7,450,838 100 1 K

DAPSA Depositos Aduaneros Panalpina S.A. Santa Fé de Bogotá COP 2,815,208 100 1 K

Panalpina C.A. Caracas VEF 7,299,297 100 1 K

Panalpina Ecuador S.A. Quito USD 1 100 1 K

Panalpina Aduanas S.A. Lima PEN 732 100 1 K

Panalpina Transportes Mundiales S.A. Lima PEN 4,008 100 1 K

Panalpina Ltda São Paulo BRL 127,317 100 1 K

Panalpina Chile Transportes Mundiales Ltd.a Santiago CLP 1,593,521 100 1 K

Panalpina Transportes Mundiales S.A. Buenos Aires ARS 800 100 1 K

Panalpina Logistics S.R.L. Buenos Aires ARS 12 100 1 K

Panalpina Transportes Mundiales S.A. de C.V. Santo Domingo DOP 1,000 100 1 K

Mondi Reinsurance Ltd. Hamilton CHF 1,000 100 1 K

124



Company

Registered

Currency

Nominal capital

in 1,000

Equity interest

in %

Invest-

ment

Method of con-

solidation

Asia and Australia

Panalpina World Transport (Singapore) Pte. Ltd. Singapore SGD 2,500 100 1 K

PT Panalpina Nusajaya Transport Jakarta IDR 1,500,000 100 1 K

Panalpina China Ltd. Hong Kong HKD 1,000 100 1 K

Panalpina World Transport (PRC) Ltd. Shanghai CNY 13,500 100 1 K

Panalpina Logistics (Shanghai) Ltd. Shanghai CNY 5,000 100 1 K

Panalpina Logistics (Wuhan) Ltd. Wuhan CNY 10,000 100 1 K

Panalpina Asia-Pacific Services Ltd. Hong Kong HKD 500 100 1 K

Panalpina World Transport Ltd. Hong Kong HKD 500 100 1 K

Pantainer (H. K.) Limited Hong Kong HKD 100 100 1 K

International Claims Handling Services Ltd. Hong Kong HKD 10 100 1 K

Panalpina Taiwan Ltd. Taipei TWD 15,500 100 1 K

Panalpina IAF (Korea) Ltd. Seoul KRW 500,000 100 1 K

Panalpina World Transport (Thailand) Ltd. Bangkok THB 27,000 100 1 K

Panalpina Asia-Pacific Services (Thailand) Ltd. Bangkok THB 10,000 100 1 K

Panalpina Macao Ltd. Macao HKD 1,000 100 1 K

Panalpina World Transport (Vietnam) Company Ltd. Ho Chi Minh City VND 6,360,145 49 2 K

Panalpina Transport (Malaysia) Sdn. Bhd. Kuala Lumpur MYR 4,215 100 1 K

Panalpina World Transport (Japan) Ltd. Tokyo JPY 50,000 100 1 K

ASB Air Japan Ltd. Tokyo JPY 10,000 100 1 K

Panalpina World Transport (India) Pvt. Ltd. Delhi INR 100,050 100 1 K

Panindia Cargo Private Ltd., Delhi Delhi INR 100 100 1 K

Panalpina World Transport (Philippines) Inc. Manila PHP 10,000 100 1 K

Panalpina World Transport (Pty) Ltd. Sydney AUD 15,000 100 1 K

Panalpina World Transport LLP Almaty KZT 1,252,395 100 1 K

125



Company

Registered

Currency

Nominal capital

in 1,000

Equity interest

in %

Invest-

ment

Method of con-

solidation

Middle East and Africa

Panalpina Gulf LLC Dubai AED 1,000 49 2 K

Panalpina Jebel Ali Ltd. Jebel Ali AED 100 100 1 K

Panalpina World Transport (Dubai) DWC-LLC Dubai AED 300 100 1 K

Panalpina World Transport (Kuwait) WLL Kuwait KWD 20 49 2 K

Panalpina (Bahrain) WLL Manama BHD 20 100 1 K

Panalpina Central Asia EC Manama USD 17,020 100 1 K

Panalpina Georgia LLC Tbilisi GEL 11 100 1 K

Panalpina Azerbaijan LLC Baku AZN 1 100 1 K

Panalpina Turkmenistan LLC Turkmenbashi TMT 62 100 1 K

Qatar Shipping Company (Panalpina Qatar) WLL Doha QAR 200 49 2 K

Panalpina World Transport (Saudi Arabia) Ltd. Al Khobar SAR 500 100 1 K

Panalpina Transports Mondiaux Cameroun S.A.R.L. Douala XAF 150,000 100 1 K

Panalpina Transports Mondiaux Algérie EURL Hassi Messaoud DZD 128,039 100 1 K

Panalpina Transports Mondiaux Congo S.A.R.L. Pointe-Noire XAF 70,000 100 1 K

Panalpina Transports Mondiaux Gabon S.A. Port-Gentil XAF 50,000 90 1 K

Panalpina (Ghana) Ltd. Accra GHS 10 100 1 K

Panalpina Transportes Mundiais Navegãçao e Trânsitos S.A.R.L. Luanda AOA 18,000 92 1 K

K = fully consolidatedN = not consolidated

1 = capital participation 50 – 100 %2 = controlling influence over management3 = capital participation less than 50 %

126



127



Panalpina World Transport (Holding) Ltd., Basel

As statutory auditor, we have audited the accompanying consolidated financial statements of Panalpina World Transport (Holding) Ltd., which comprise the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity, consolidated statement of cash flows and notes on pages 64 to 125 for the year ended December 31, 2011.

Board of Directors’ ResponsibilityThe board of directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The board of directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards as well as International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial state-ments. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements for the year ended December 31, 2011 give a true and fair view of the financial posi-tion, the results of operations and the cash flows in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.

Report on Other Legal RequirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the board of directors.

We recommend that the consolidated financial statements submitted to you be approved.

KPMG AG

Regula Wallimann Martin RohrbachLicensed Audit Expert Licensed Audit ExpertAuditor in Charge

Zurich, March 2, 2012

Report of the Statutory Auditor on the Consolidated Financial Statements to the General Meeting of Shareholders of

128



in million CHF 2011 2010 2009 2008 2007

Forwarding services 7,926 8,676 7,340 10,597 10,548

Change in % (8.64) 18.19 (30.73) 0.47 13.41

Net forwarding revenue 6,500 7,164 5,958 8,878 8,641

Change in % (9.27) 20.25 (32.89) 2.74 11.71

Gross profit 1,477 1,480 1,377 1,742 1,803

Change in % (0.21) 7.49 (20.94) (3.43) 13.35

in % of net revenue 22.72 20.66 23.11 19.62 20.87

Consolidated profit 127.4 (26.0) 10.4 113.8 210.6

Change in % 590.06 (348.94) (90.82) (45.98) 14.77

in % of gross profit 8.63 (1.76) 0.76 6.53 11.68

EBITDA 212.1 62.4 79.7 240.7 360.8

Change in % 240.09 (21.78) (66.88) (33.29) 15.39

in % of gross profit 14.36 4.21 5.79 13.82 20.01

EBITA 183.6 23.5 42.5 204.7 310.7

Change in % 682.11 (44.77) (79.23) (34.13) 11.80


EBIT 174.2 15.4 29.9 193.0 299.4

Change in % 1,033.97 (48.64) (84.50) (35.54) 14.70


Cash generated from operations 229.1 75.3 311.8 274.5 278.9

Change in % 204.35 (75.86) 13.58 (1.58) (13.20)


Net cash from operating activities 193.5 37.0 259.8 193.2 209.5

Change in % 422.45 (85.74) 34.45 (7.78) (13.03)


Free cash flow 41.9 6.2 225.9 170.2 138.1

Change in % 570.94 (97.24) 32.73 (23.20) (25.74)


Net working capital 85.2 143.0 132.2 351.6 487.8

Change in % (40.42) 8.20 (62.42) (27.92) 17.72

Capital expenditure on fixed assets 51.2 40.0 41.8 58.4 50.8

Change in % 27.87 (4.31) (28.34) 14.90 (10.84)


Net capital expenditure on fixed assets 108.7 28.5 29.4 25.6 45.4

Change in % 281.81 (3.24) 14.81 (43.56) (15.90)


Key Figures in CHF Five-year review

129



in million CHF 2011 2010 2009 2008 2007

Depreciation and amortization 37.9 47.0 49.8 47.8 61.5

Change in % (19.37) (5.65) 4.33 (22.33) 18.91


Personnel expenses 892.4 890.9 879.1 992.5 1,002.5

Personnel

Number of employees at year-end (world) 15,051 14,136 13,570 14,804 15,301

Number of employees at year-end (Switzerland) 775 749 737 778 769

Productivity ratios (CHF)

Net sales per average employee 425,226 503,703 429,864 582,867 587,344

Gross profit per average employee 96,624 104,062 99,343 114,356 122,581

Personnel expenses per average employee 58,380 62,641 63,430 65,163 68,138

Personnel cost in % of gross profit 60.42 60.20 63.85 56.99 55.59

Leverage (liabilities/equity) 1.35 1.46 1.24 1.27 1.23

Net interest-bearing liabilities (591) (546) (535) (381) (325)

Gross gearing (interest-bearing liabilities/equity) 0.01 0.01 0.02 0.02 0.03

Net gearing (net interest-bearing liabilities/equity) (0.65) (0.68) (0.63) (0.44) (0.32)

ROCE (EBIT less tax/capital employed) in % 43.22 (5.40) 6.14 23.03 34.84

Current cash debt coverage ratio (net operating cash flow/average current liability) 0.19 0.04 0.27 0.19 0.20

Cash debt coverage ratio (net operating cash flow/average total liability) 0.16 0.03 0.24 0.16 0.18

Return on equity in % 14.9 (3.1) 1.2 12.1 21.2

Change in % (575.95) (360.88) (89.97) (42.92) 4.83

130



in million CHF 2011 2010 2009 2008 2007

ASSETS 2,135 1,989 1,925 1,971 2,278

Change in % 7.34 3.36 (2.35) (13.48) 8.08

Current assets 1,745 1,686 1,599 1,679 1,922

Change in % 3.50 5.48 (4.78) (12.64) 8.40

Liquid funds 599 555 548 401 358

Change in % 7.77 1.30 36.69 12.00 (4.73)

Receivables and other current assets 1,147 1,131 1,050 1,278 1,564

Change in % 1.41 7.66 (17.80) (18.28) 11.94

Non-current assets 390 303 326 292 356

Change in % 28.72 (7.04) 11.66 (18.00) 6.06

Property, plant and equipment 113 114 141 148 168

Change in % (0.57) (19.42) (4.35) (11.89) 3.47

Financial assets 135 111 113 70 103

Change in % 21.62 (1.53) 60.07 (31.29) 42.59

Intangible assets 142 78 72 74 86

Change in % 81.51 8.65 (2.52) (14.06) (15.63)

LIABILITIES AND EQUITY 2,135 1,989 1,925 1,971 2,278

Change in % 7.34 3.36 (2.35) (13.48) 8.07

Liabilities 1,220 1,177 1,061 1,100 1,252

Change in % 3.68 10.93 (3.50) (12.18) 10.73

Payables, accruals and deferred income 1,002 914 878 912 1,056

Change in % 9.71 4.05 (3.69) (13.65) 5.33

Borrowings 8 10 13 20 33

Change in % (22.70) (24.43) (36.49) (39.38) 22.60

Provisions 210 254 170 167 163

Change in % (17.02) 49.17 1.54 2.91 61.10

Non-controlling interests 9 8 7 8 7

Equity 906 804 857 864 1,019

Change in % 12.62 (6.10) (0.83) (15.25) 5.07

Share capital 50 50 50 50 50

Change in % 0.00 0.00 0.00 0.00 0.00

Treasury shares (197) (196) (193) (198) (101)

Change in % 0.65 1.78 (2.62) 95.03 575.98

Translation reserves (162) (151) (136) (146) (74)

Change in % 7.30 10.70 (6.51) 96.03 13.50

Retained earnings and other reserves 1,215 1,101 1,136 1,157 1,145

Change in % 10.34 (3.02) (1.89) 1.09 14.50

Consolidated Statement of Financial Position in CHF Five-year review

131



Key Figures in EUR Five-year review

in million EUR 2011 2010 2009 2008 2007

Forwarding services 6,440 6,293 4,861 6,677 6,421

Change in % 2.34 29.46 (27.20) 3.99 8.92

Net forwarding revenue 5,281 5,196 3,945 5,594 5,260

Change in % 1.64 31.71 (29.48) 6.35 7.28

Gross profit 1,200 1,074 912 1,097 1,098

Change in % 11.73 17.76 (16.86) (0.09) 8.91

in % of net revenue 22.72 20.67 23.12 19.61 20.87

Consolidated profit 103.5 (18.9) 6.9 71.7 128.2

Change in % 647.62 (373.91) (90.38) (44.07) 10.23

in % of gross profit 8.63 (1.76) 0.76 6.54 11.68

EBITDA 172.3 45.2 52.8 151.7 219.7

Change in % 281.19 (14.39) (65.19) (30.95) 10.83


EBITA 149.2 17.0 28.1 129.0 189.1

Change in % 777.65 (39.50) (78.22) (31.78) 7.40


EBIT 141.5 11.1 19.8 121.6 182.2

Change in % 1,174.77 (43.94) (83.72) (33.26) 10.18


Cash generated from operations 186.1 54.6 206.5 172.9 232.1

Change in % 240.84 (73.56) 19.43 (25.51) 13.98


Net cash from operating activities 157.2 26.9 172.0 121.7 127.5

Change in % 484.39 (84.36) 41.33 (4.55) (16.48)


Free cash flow 34.0 4.5 149.6 107.2 84.1

Change in % 655.56 (96.99) 39.55 27.47 (28.68)


Net working capital 70.0 114.3 89.0 236.1 293.1

Change in % (38.76) 28.43 (62.30) (19.45) 14.09

Capital expenditure on fixed assets 42.1 32.0 28.2 39.2 30.5

Change in % 31.56 13.48 (28.06) 28.52 (13.75)


Net capital expenditure on fixed assets 89.4 22.8 19.8 17.2 27.3

Change in % 292.11 15.15 15.12 (37.00) (18.79)


132



in million EUR 2011 2010 2009 2008 2007

Depreciation and amortization 30.8 34.1 33.0 30.1 37.4

Change in % (9.68) 3.33 9.63 (19.52) 14.44


Personnel expenses 725.1 646.2 582.2 625.4 610.2

Personnel

Number of employees at year-end (world) 15,051 14,136 13,570 14,804 15,301

Number of employees at year-end (Switzerland) 775 749 737 778 769

Productivity ratios (in EUR)

Net sales per average employee 345,480 365,324 284,632 367,277 357,539

Gross profit per average employee 78,503 75,511 65,801 72,024 74,620

Personnel expenses per average employee 47,436 45,433 42,006 41,061 41,478

Personnel cost in % of gross profit 60.43 60.17 63.84 57.01 55.59

Leverage (liabilities/equity) 1.35 1.46 1.24 1.27 1.23

Net interest-bearing liabilities (486) (436) (361) (256) (195)

Gross gearing (interest-bearing liabilities/equity) 0.01 0.01 0.02 0.02 0.03

Net gearing (net interest-bearing liabilities/equity) (0.65) (0.68) (0.63) (0.44) (0.32)

ROCE (EBIT less tax / capital employed) in % 43.22 (5.40) 6.14 23.03 34.84

Current cash debt coverage ratio (net operating cash flow/average current liability) 0.19 0.04 0.27 0.19 0.20

Cash debt coverage ratio (net operating cash flow/average total liability) 0.16 0.03 0.24 0.16 0.16

Return on equity in % 14.9 (3.1) 1.2 12.1 12.1

Change in % (575.95) (360.88) (89.97) (42.92) (42.92)

133



Consolidated Statement of Financial Position in EUR Five-year review

in million EUR 2011 2010 2009 2008 2007

ASSETS 1,756 1,590 1,297 1,323 1,369

Change in % 10.44 22.59 (1.97) (3.36) 14.56

Current assets 1,435 1,348 1,077 1,127 1,155

Change in % 6.45 25.16 (4.44) (2.42) 15.54

Liquid funds 492 444 369 269 215

Change in % 10.81 20.33 37.17 25.12 (7.73)

Receivables and other current assets 943 904 708 858 940

Change in % 4.31 27.68 (17.48) (8.72) 8.05

Non-current assets 321 242 220 196 214

Change in % 32.64 10.00 12.24 (8.41) 2.33

Property, plant and equipment 93 91 95 99 101

Change in % 2.20 (4.21) (4.04) (1.98) 0.71

Financial assets 111 89 76 47 62

Change in % 24.72 17.11 61.70 (24.19) 36.89

Intangible assets 117 62 48 49 52

Change in % 88.71 29.17 (2.04) (5.77) (19.45)

LIABILITIES AND EQUITY 1,756 1,590 1,297 1,323 1,369

Change in % 10.44 22.59 (1.97) (3.36) 4.39

Liabilities 1,003 941 715 738 752

Change in % 6.59 31.61 (3.12) (1.86) 7.01

Payables, accruals and deferred income 824 730 592 612 634

Change in % 12.88 23.31 (3.27) (3.47) 1.83

Borrowings 6 8 9 14 20

Change in % (25.00) (11.11) (35.71) (30.00) 18.30

Provisions 173 203 115 112 98

Change in % (14.78) 76.52 2.68 14.29 55.18

Non-controlling interests 7 6 5 5 4

Equity 745 643 577 580 612

Change in % 15.86 11.44 (0.52) (5.23) 1.55

Share capital 41 40 34 34 30

Change in % 2.50 17.65 0.00 13.33 (6.12)

Treasury shares (162) (157) (130) (133) (61)

Change in % 3.18 20.77 (2.26) 118.03 5,992.36

Translation reserves (133) (121) (92) (98) (45)

Change in % 9.92 31.52 (6.12) 117.78 9.12

Retained earnings and other reserves 999 880 765 777 688

Change in % 13.52 15.03 (1.54) 12.94 10.61

134



Financial Statements 2011 Panalpina World Transport (Holding) Ltd.


Income

Income from participations 87,737 142,904

Financial income 41,728 55,670

Royalties income 49,577 34,741

Release of valuation allowance on loans to Group companies 47,268 3,520

Total income 226,310 236,835

Expenses

Personnel expenses 13,357 11,939

Other administrative expenses 12,973 35,034

Financial expenses 10,357 12,820

Depreciation and value adjustments 168,740 36,336

Total expenses 205,427 96,129

Taxes 1,817 2,159

Profit for the year 19,066 138,547

Income Statementfor the years ended December 31, 2011 and 2010

135



Balance Sheetas of December 31 (before profit appropriation)

Assets


Current assets

Cash 303,247 353,736

Cash pool receivables from Group companies 101,647 82,140

Receivables:

– from Group companies 3,340 3,371

– from third parties 242 194

Financial receivables from Group companies 167,895 103,667

Marketable securities 20,000 6,089

Prepaid expenses and deferred charges 53,176 51,075

Total current assets 649,547 600,272

Long-term assets

Participations 161,361 162,069

Loans to Group companies1 161,378 241,515

Financial assets 34,234 0

Own shares 84,128 82,853

Total long-term assets 441,101 486,437

Total assets 1,090,648 1,086,709

1 Thereof subordinated CHF 68.0 million (2010: CHF 68.0 million)

Liabilities and Equity


Short-term liabilities

Cash pool payables to Group companies 105,152 122,601

Payables:

– due to Group companies 2,528 5,945

– due to third parties 1,424 1,589

Financial liabilities to Group companies 79,702 74,469

Accrued expenses 11,977 10,178

Total short-term liabilities 200,783 214,782

Long-term liabilities

Provisions 4,306 5,434

Total long-term liabilities 4,306 5,434

Total liabilities 205,089 220,216

Equity

Share capital 50,000 50,000

General legal reserve 10,000 10,000

Reserve for own shares 197,277 196,003

Special reserve 130,573 131,847

Accumulated earnings:

– balance brought forward from previous year 478,643 340,096

– profit for the year 19,066 138,547

Total equity 885,559 866,493

Total liabilities and equity 1,090,648 1,086,709

136



General

The Group’s consolidated financial statements must be considered for an appropriate financial and economic assessment of the Group. The presented statutory financial statements of Panalpina World Transport (Holding) Ltd. were prepared in accordance with the requirements of the Swiss Code of Obligations (SCO).

Valuation methods and translation of foreign currencies

Treasury shares are valued at the lower of cost and market value. All other assets, including participations, are reported at cost less appropriate write-downs. Assets and liabilities denominated in foreign currencies are translated into Swiss francs (CHF), using year-end rates of exchange, except participations which are translated at historical rates. Marketable securities are reported at market value. Transactions during the year which are denominated in foreign currencies are translated at exchange rates effective at the relevant transaction dates. Resulting exchange gains and losses are recognized in the income statement with the exception of unrealized gains which are deferred.

Income from participations

The decrease of CHF 55.2 million is due to the fact that Panalpina Welttransport (Holding) Ltd. received fewer dividends from subsidiaries.

Financial income

The drop of CHF 13.9 million compared to the prior year is predominantly attributable to lower foreign exchange gains of CHF 10.3 million and less interest income of CHF 3.4 million from subsidiaries.

Royalty income

In 2009, Panalpina World Transport (Holding) Ltd. received for the first time a fee from its subsidiaries for usage of the Panalpina network and trademark. This fee increased in 2011 by CHF 14.8 million.

Release of valuation allowance on loans to Group companies

As a result of Debt/Equity Swaps, the Company was able to release a valuation allowance amounting to CHF 47.3 million.

Personnel expenses

In accordance with the Transparency Act, the compensation of the key management personnel is disclosed in note 29 in the Group’s financial statements.

Other administrative expenses

The reduction of CHF 22.1 million in other administrative expenses is mostly attributable to less legal and consulting expenses in connection with the FCPA investigation (CHF 19.0 million) and a decline in claims expenses (CHF 4.9 million).

Financial expenses

The drop in financial expenses of CHF 2.5 million is mainly due to the fact that in 2011 CHF 1.0 million less losses of subsidiaries had to be covered and CHF 1.0 million less interest had to be paid.

Depreciation and value adjustments

In 2011, value adjustments to participations amounting to CHF 168.7 million were booked to the income statement in accordance with the Company’s practice to directly write off capital contributions to cover losses or undercapitalization in subsidiaries.

Cash pool receivables and payables

The cash pool receivables augmented for CHF 19.5 million and the cash pool payables declined for CHF 17.4 million, thus the net receiv-ables increased for CHF 37.0 million.

Financial receivables and loans to Group companies

Financial receivables and loans to Group companies increased by CHF 64.2 million compared to 2010 mainly due to swap of financing struc-ture of subsidiaries from long-term loans to short-term loans.

Marketable securities

In the year under review, investments of CHF 20.0 million were made in fixed-term deposits.

Notes to the Financial Statements

137



Participations

The principal direct and indirect subsidiaries of Panalpina World Transport (Holding) Ltd. are listed under the heading “Principal Group companies and participations” on pages 122 to 125.

Financial assets

In 2011, for the first time investments into fix term deposits were done, the investments amount to CHF 34.2 million.

Own shares

In the year under review, treasury shares purchased totaled 79,042 shares (2010: 94,142 shares) with an average purchase price per share of CHF 109.02 (2010: CHF 111.96) and treasury share sales totaled 68,492 shares (2010: 69,123 shares) with an average sale price of CHF 68.40 (2010: CHF 74.14). Of these shares a total of 118,092 (2010: 107,542) are held for serving the employee option plan. The other 1,250,000 shares (2010: 1,250,000) are held for the share buyback program. This program was launched in 2007 by the Board of Directors to return excess capital to the shareholders. The share buyback program includes up to 5 % of the total share capital, which represents a maximum of 1,250,000 registered shares. The number of treasury shares held by Panalpina World Transport (Holding) Ltd. meets the definitions and requirements of art. 659, 659a, 663b para 10 and 671a SCO.

Number of shares

31.12.2011

Movement in year

31.12.2010

Movement in year

31.12.2009

Total Panalpina World Transport (Holding) Ltd. shares issued 25,000,000 0 25,000,000 0 25,000,000

Total treasury shares held by Panalpina World Transport (Holding) Ltd. 1,368,092 10,550 1,357,542 25,019 1,332,523

in % 5.47 5.43 5.33

Provisions

An amount of CHF 1.8 million is related to the obligations Panalpina has accepted under the DPA as mentioned in note 31.

Share capital

As in the previous year, the fully paid-in share capital on December 31, 2011 amounts to CHF 50 million consisting of 25 million registered shares at a par value of CHF 2.00 each. With regard to the authorized capital increase and share buyback program we refer to note 23 in the Group’s financial statements.

in % 2011 2010

Shareholders

Ernst Göhner Stiftung, Switzerland 43.58 43.58

Cevian Capital II Master Fund L.P. 11.37 10.31

Bestinver Gestión, S.G. SGIIC, Spain 5.05 –

Artisan Partners Limited Partnership, USA 5.01 5.01

Portfolio investment (according to the share register, there are no more shareholders with holdings of more than 3 % or 5 %) 29.52 35.67*

Panalpina World Transport (Holding) Ltd. 5.47 5.43*

Nominees

Chase Nominees Ltd., UK 5.23 6.02

* restated considering own shares of Panalpina

138



General legal reserves

The legal reserve must be at least 20 % of the share capital of Panalpina World Transport (Holding) Ltd. in order to comply with the SCO. Panalpina World Transport (Holding) Ltd. has met the legal requirements for legal reserves under art. 671 SCO.

Guarantees


Guarantees in favor of third parties

Guarantees and indemnity liabilities, SCO, art. 663b para 1 198,780 199,076

Additionally, Panalpina World Transport (Holding) Ltd., Basel, has issued letters of awareness in favor of various banks concerning liabilities due from subsidiaries amounting to CHF 2.7 million (previous year: CHF 0.2 million).

Contingent liabilities

In 2008, Panalpina World Transport (Holding) Ltd. signed a letter of indemnity as a security for the intraday cash pool overdraft limits over a maximum amount of CHF 60 million.

Panalpina World Transport (Holding) Ltd. carries joint liability to the federal tax authorities for value-added tax of all Swiss subsidiaries.

Pending legal claims

Business practices investigationIn November 2010, Panalpina entered into a Deferred Prosecution Agreement (DPA) with the US Department of Justice (DOJ) to resolve claims against it arising from an investigation by the DOJ and the US Securities and Exchange Commission (SEC) for violations of the US Foreign Corrupt Practices Act (FCPA). Under the DPA, the DOJ has agreed to defer any criminal prosecution for three years. Panalpina has accepted certain obligations under the DPA, such as further strengthening its compliance policies and procedures and providing regular reports to the DOJ on the company’s progress. If Panalpina satisfies its obligations under the DPA, the DOJ has agreed to release the company from criminal liability at the end of the three-year term.

Freight forwarding antitrust investigationIn October 2007, Panalpina’s headquarters in Switzerland and the USA were raided by the respective competition authorities. Further, a request for information was served by the New Zealand Commerce Division and a document retention notice by the Competition Bureau Canada.

In April 2008, the Australian Competition and Consumer Commission served a notice on the Australian subsidiary requesting information and documents and in June 2008, Panalpina’s UK subsidiary was the recipient of a request for information issued by the European Commission requesting certain information and records relating to alleged antitrust violations in the freight forwarding industry. In August 2010, Brazilian authorities announced preliminary investigations against the freight forwarding industry. In December 2011 Panalpina’s local subsidiary received a letter from the Competition Commission Singapore to detail whether it has engaged in similar anti-competitive conduct.

These activities were part of an investigation of several competition authorities against various major freight forwarding companies for alleged anti-competitive behavior.

139



Furthermore, a civil class action lawsuit was filed in the USA against Panalpina and a number of its major competitors as a direct conse-quence of these investigations alleging a conspiracy in the pricing of freight forwarding services. In July 2009, plaintiffs filed an amended complaint adding additional defendants and claims. In November 2009, the Company, along with other defendants, filed motions to dis-miss the amended complaint for failure to state a claim and for lack of subject matter jurisdiction. Oppositions to the motions were filed in January 2010. At this stage, Panalpina is unable to express an opinion as to the probable outcome of this litigation and thus to estimate the potential loss, if any.

In 2009, the Competition Bureau Canada closed its investigation into alleged anti-competitive activity due to a lack of evidence substanti-ating an undue lessening of competition.

In January 2010, the Australian Competition and Consumer Commission also discontinued its investigation.

In February 2010, Panalpina was served with a Statement of Objections by the European Commission, alleging anti-competitive behavior in the freight forwarding industry. In an oral hearing before the Commission’s case team held in July 2010, Panalpina has presented its arguments. In January 2011, Panalpina received an additional request for information issued by the European Commission. A final decision is not expected prior to early 2012.

In October 2010, Panalpina announced a settlement with the DOJ over violations of the Sherman Antitrust Act related to the sale of inter-national air freight forwarding services. Under the terms of the settlement, which has been approved by the competent court, Panalpina has agreed to pay a fine of approximately USD twelve million.

In the reporting year Panalpina completed settlement negotiations with the New Zealand Commerce Commission and the agreed penalty has been approved by the competent court.

It is not possible to predict the outcome of the pending anti-trust proceedings at this stage. They may, however, result in material penalties being imposed on Panalpina. As Panalpina is not yet in a position to assess its exposure and the potential financial consequences in these proceedings, no related provisions have been made as of December 31, 2011.

Risk management

The detailed disclosures regarding risk management/assessment that are required by Swiss law are included in the Panalpina Group’s consolidated financial statements on pages 100 – 106.

140



Appropriation of Available Earnings

The Board of Directors proposes the following appropriation of available earnings of total CHF 497,709,723 at the Annual General Meeting:

in CHF 2011

Distribution of an ordinary dividend of CHF 2.00 gross per share* 47,263,816

To be carried forward 450,445,907

Total 497,709,723

* It is not planned to pay dividends on own shares held by the Group.

141



Panalpina World Transport (Holding) Ltd., Basel

As statutory auditor, we have audited the accompanying financial statements of Panalpina World Transport (Holding) Ltd., which comprise balance sheet, income statement and notes on pages 134 to 140 for the year ended December 31, 2011.

Board of Directors’ ResponsibilityThe board of directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The board of directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The pro-cedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial state-ments, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements for the year ended December 31, 2011 comply with Swiss law and the company’s articles of incorporation.

Report on Other Legal RequirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the board of directors.

We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorpora-tion. We recommend that the financial statements submitted to you be approved.

KPMG AG

Regula Wallimann Martin RohrbachLicensed Audit Expert Licensed Audit ExpertAuditor in Charge

Zurich, March 2, 2012

Report of the Statutory Auditor on the Financial Statements to the General Meeting of Shareholders of

142


Appendix

2007 2008 2009 2010 2011

10,500

9,000

7,500

6,000

4,500

3,000

1,500

0

7,1

64

6,5

00

8,8

78

5,9

58

8,6

41

2007 2008 2009 2010 2011

1,000

875

750

625

500

375

250

125

0

871

86

4

812

9151,

02

6

2007 2008 2009 2010 2011

2,050

1,900

1,750

1,600

1,450

1,300

1,150

1,000

1,4

80

1,4

77

1,8

03

1,7

42

1,3

77

245

210

175

140

105

70

35

0

–35

2007 2008 2009 2010 2011

114 12

7

10

–2

6

211

320

280

240

200

160

120

80

40

0

2007 2008 2009 2010 2011

19

3

29

9

30

174

15

Information for Investors

Key figures

in million CHF 2011 2010 * Change in %

Net forwarding revenue 6,500 7,164 – 9.3

Gross profit 1,477 1,480 – 0.2

EBITDA 212 62 240.1

EBIT 174 15 1,034.0

Consolidated profit 127 – 26 590.1

Cash generated from operations 229 75 204.4

* Certain comparatives have been restated to conform to the current period’s presentation.

Share information

Share symbol PWTN

Reuters PWTN.S

Bloomberg PWTN SW

Trading exchange SIX

Fiscal year ends December 31

Valoren 000216808

ISIN CH0002168083

Share register SIS Aktienregister AG, Olten, Switzerland

Five-year development

in million CHF

Net forwarding revenue

EBIT

Shareholders’ equity

Consolidated profit

Gross profit


143

Appendix

Swiss Performance Index (SPI)

Panalpina World Transport110%

100%

90%

80%

70%

60%

Jul 1Dec 31,

2010

Mar 1 May 1 Sep 1 Nov 1 Dec 31,

2011

Ordinary gross dividend payments

Financial year

Amount

(in million CHF)

Per share

(in CHF)

2011 47 2.00 **

2010 0 0.00

2009 0 0.00

2008 45 1.90

2007 80 3.20

2006 75 3.00

2005 50 * 2.00

* Included a special one-time jubilee dividend of CHF 20 million

** In addition, CHF 1.90 per share are paid to shareholders through a reduction of the nominal value per share from

CHF 2.00 to CHF 0.10. Ordinary dividend and payback are subjects to vote by the Annual General Meeting of May 8, 2012.

Earnings per share

Weighted average of oustanding shares 2011 2010

Basic EPS 23,639 CHF 5.34 CHF – 1.16

Diluted EPS 23,676 CHF 5.33 CHF – 1.16

Share price development

in CHF 2011 2010

Last day of trading previous year 120.50 65.80

High 132.00 128.50

Low 70.90 64.65

Last day of trading current year 96.20 120.50

Average trading volume 51,764 77,922

Total shareholder return (in %) – 16.9 83.1

Market capitalization as per December 31, 2011 (in CHF million) 2,405 3,013

Financial calendar

January 1 to December 31 Financial year

May 4, 2012 First quarter results

May 8, 2012 Annual General Meeting

July 31, 2012 Half-year results

November 2, 2012 Third quarter results

March 6, 2013 2012 full-year results

May 8, 2013 Annual General Meeting

Share price development in comparison to SPI

December 31, 2010 to December 31, 2011

144


Appendix

Pictures

Cover A Boeing 747-400F aircraft of Panalpina’s

own-controlled air freight network while

loaded in Luxembourg

Page 5 Monika Ribar (CEO) and Rudolf W. Hug

(Chairman of the Board of Directors)

Page 7 Executive Board

Page 20/21 Panalpina employee Tim Bauer in front of

a Boeing 747-400F operated by Atlas Air

and part of Panalpina’s own-controlled

network in Luxembourg

Page 22/23 Panalpina employee Samia Guerroumi

inside a Boeing 747-400F while loaded

Page 24/25 Jasmine Medhora of Panalpina’s

Pantainer Express Line at the port

of Hamburg

Page 26/27 Marco Parnitzke of Panalpina’s Ocean

Freight division at the port of Hamburg

Page 28/29 Andrea Ribaudo in Panalpina’s Milan

warehouse

Page 30 Monika Ribar (CEO)

Appendix


145Imprint

Panalpina World Transport

(Holding) Ltd.

Viaduktstrasse 42

P. O. Box

CH-4002 Basel

Switzerland

Phone +41 61 226 11 11

Fax +41 61 226 11 01

[email protected]

www.panalpina.com

The Panalpina Annual Report is published in German and English.

For additional copies please refer to the above addresses.

An electronic version is available at: www.panalpina.com /ar

Editorial body

Corporate Communications, Corporate Finance and Investor Relations

Project management

Heidi Stöckli, Corporate Communications

Concept and design

Wirz Corporate AG, Zurich

Photography

Scanderbeg Sauer Photography, Zurich

Portraits

Julian Salinas, Basel

Translations and editing

Text Control, Zurich

BMP Translations AG, Basel

Word + Image, Zufikon

Lithography

Wirz Medienrealisation

Printed by

Neidhart + Schön AG, Zurich

Consultant on sustainability

sustainserv, Zurich and Boston

Disclaimer

Certain sections of this Annual Report may contain forward-looking statements that are based on management’s expectations,

estimates, projections and assumptions. These statements are not guarantees of future performance and involve certain

risks and uncertainties, which are difficult to predict. Therefore, future developments and trends may differ materially from what

is forecast in forward-looking statements.

All forward-looking statements speak only as of the date of their publication or, in the case of any document incorporated by

reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company

or any person acting on the Company’s behalf are qualified by the cautionary statements. The Company does not undertake

any obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or

changes in expectations after the date of this report.

Panalpina World Transport

(Holding) Ltd.

Viaduktstrasse 42

P. O. Box

CH-4002 Basel

Phone +41 61 226 11 11

Fax +41 61 226 11 01

[email protected]

www.panalpina.com

annual report 2011 - panalpina · unit of measurement based on a 20-foot iso container ......

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