Panalpina Annual Report 2006 · · 2018-05-09it to offer intelligent, ... • Global market...

Panalpina Annual Report 2006 A Passion for Solutions

Group Management Structureas of April 2007

On 6 Continents

The Panalpina Group operates a network of some 500 branches in 90 countries. In a further 60 countries, the Group cooperates closely with selected partners.

Financial Reporting

Tax Management

Corporate Treasury

Controlling

Credit Control

Investor Relations

Marketing & Sales

Key Account Management

Industry Verticals

Supply Chain Management

Oil & Gas

Chief Financial OfficerJürg Honegger

Chief Marketing & Sales Officer John Klompers

Chief Executive OfficerMonika Ribar

Regional CEO NoramKarl Weyeneth 3

Regional CEO EuropeSandro Knecht 1

Regional CEO ApacLukas Fischer 2

Regional CEO AmecJörg Eggenberger a. i. 1

Regional CEO China/TaiwanRobert Timmerman 2

Regional CEO LatamJosef Zech 4

Chief Operations Officer Jörg Eggenberger

Operations Air & Ocean

Procurement Air & Ocean

Business Processes & Quality

Information Technology

Agent Relations

Security

Panprojects

Executive Board

Financial reporting regions:Europe/Africa/ME/CISAsia /PacificNorth AmericaCentral and South America

1234

Corporate functions

Internal Auditor Board of Directors

ChairmanGerhard Fischer until 15 May 2007Rudolf W. Hug as of 15 May 2007

Vice ChairmanWilfried Rutz

Günther CasjensYuichi IshimaruGlen R. PringleRoger Schmid

Corporate Legal Services

Corporate Communications

Corporate SecretaryChristoph Hess

Human Resources

Audit Committee

Compensation & Nomination Committee

Corporate Development

www.panalpina.com/addresses

www.panalpina.com/organization

A world-class provider of forwarding and logistics services...Panalpina is one of the world’s leading providers of intercontinental air and ocean freight forwarding services and associated supply chain management solutions.

The Group serves a wide range of sectors, but has particular expertise in the key hi-tech, automotive, healthcare and retail and fashion industries. For many years now, it has been the global market leader in the provision of logistics solutions for the worldwide oil and gas industry’s supply chain.

Panalpina’s in-depth knowledge of the industry enables it to offer intelligent, efficient solutions tailored to the customers’ needs – even for the most demanding forwarding and logistics challenges.

... with convincing competitive strengths• A global network with detailed knowledge of local

markets

• Strong brand recognition throughout the world

• An asset-light business model that ensures high operational and financial flexibility together with reduced exposure to fluctuations in sector conditions

• A healthy balance between major global customers and internationally operating SMEs

• Centralized purchasing and management of air and ocean freight capacities

• Substantial volume mass ensuring partnership agreements with leading carriers

• Recognition as a specialist provider to a number of key industries

• Global market leader in logistics solutions for the oil and gas industry

• Best-in-class IT platforms to increase operational effi-ciency and cater to individual customer requirements

• Continued training and development of highly qualified and motivated staff

• Management team with long-term industry experience

www.panalpina.com/vision

Kennzahlen 2006 at a Glance • Net forwarding revenue increased by 11.3%

to CHF 7,735 million

• Net earnings increased by 52.5% to CHF 184 million

• Substantially improved profitability

• Air freight and ocean freight activities clearly outperformed the respective market growth rates

• More than 1 million TEUs transported for the first time ever

• More than 700 new jobs created worldwide

• Impressive share price development

Key Figures

in million CHF 2006 2005Change

in %

Invoicedforwardingservices 9,301 8,280 12.3

Customs, duty and taxes (1,566) (1,332)

Netforwardingrevenue 7,735 6,949 11.3

Contributionmargin(grossprofit) 1,591 1,408 13.0

in % of net forwarding revenue 20.6 20.2

Ebitda 313 214 46.0

in % of contribution margin 19.7 15.2

Ebit(operatingresult) 261 166 57.6

in % of contribution margin 16.4 11.8

Netearnings 184 120 52.5

in % of shareholders’ equity 19.0 14.1

Cashflow 321.3 216.4 48.5

in % of gross profit 20.2 15.4

Netcashflowfromoperatingactivities 240.9 141.9 69.8

in % of gross profit 15.1 10.1

Totalbalancesheetsize 2,108 1,831 15.8

Totalfinancialdebts 27.5 20.4 34.8

Shareholders’equity 969.7 850.9 14.0

Returnonequity(ROE)in% 21.6 19.9

Returnoncapitalemployed(ROCE)in% 32.0 21.0

Numberofemployees 14,304 13,583 5.3

www.panalpina.com/facts

Panalpina Annual Report 2006 �

Gerhard FischerA solid basis for a successful future: The retiring Chairman of the Board of Directors looks back, assessing the development of the Company, whose destiny he was so instrumental in shaping – from 1987 to 1995 as CEO, and subsequently as Chairman of the Board of Directors.

Business year 2006The business year’s very convincing figures mark a clear record in the history of Panalpina and are further proof of the success of the Group’s strategy. Panalpina again successfully transformed its assetlight business model into attractive services for its worldwide customers: a convincing performance, which was also reflected by the excellent share price development.

Financial ReportIn a generally favorable market environment, the Group succeeded in increasing net forwarding revenue by 11.3% to CHF 7,735 million and net earnings by 52.5% to CHF 184 million. The continued significant increase in profitability is a clear proof that Panalpina is consistently pursuing its business strategy and keeping costs under control.

Contents

Interview with Gerhard Fischer 4

Report of the Board of Directors 8

Interview with Rudolf W. Hug 9

Executive Board 10

Reporting Regions

Europe /Africa / Middle East / CIS 26

North America 28

Central and South America 29

Asia / Pacific 30

Marketplace India �2

Core Activities

Air Freight 39

Ocean Freight 40

Supply Chain Management 43

Customer Groups 45

Sustainable Growth 51

Quality, Security, HSE 52

Employees 54

Information Technology 56

Social Commitment 57

Corporate Culture 58

Corporate Governance 59

Consolidated and Annual Financial Statements 2006

Consolidated Financial Statement 69

Annual Financial Statement 117

Information for Investors 126

Main Offices Worldwide 128

Imprint 130

Core ActivitiesPanalpina continued to maintain its leading global position in both air and ocean freight in 2006. Revenues increased by 8.9% in air and 17.8% in ocean freight, where the landmark volume of one million TEUs was passed for the first time. Supply chain management posted a growth of 4.7%: an impressive confirmation by satisfied customers.

Customer GroupsThroughout the world, Panalpina serves a well balanced portfolio of diverse customers in a broad range of sectors. At the same time the Group focuses on a number of highly globalized key in dustries with special requirements in terms of forwarding and logistics. Each of these offers untapped market potentials.

Reporting RegionsOnce again all reporting regions posted impressive growth. Asia / Pacific has the unremitting economic boom in Asian markets to thank for its continued vigorous growth. North America also maintained its positive development. It exceeded its target of breaking even and went into profit – proving the success of its reorganization.

Sustainable GrowthPanalpina sees no contradiction between an entrepreneurial attitude and sustainable action. It bases its operations on economic, securityfocused and ecological principles that foster its longterm business success in as comprehensive a way as possible. Entrepreneurial responsibility is seen as an allembracing obligation that becomes part of the daily lives of both management and employees.

Marketplace IndiaIndia is seen as a challenging market for logistics companies, as it requires a high degree of innovation and flexibility – especially given the phenomenal yearonyear growth posted by the Indian market. Panalpina has been running an operational organization on the subcontinent for over nine years now, and is excellently prepared for the forthcoming challenges.

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24 �6 44

50 �2

4 Panalpina Annual Report 2006

“A solid basis for a successful future”

The retiring Chairman of the Board of Directors looks back, assessing the development of the Company, whose destiny he was so instrumental in shaping – from 1987 to 1995 as CEO, and subsequently as Chairman of the Board of Directors.

In May 2007 you will leave Panalpina after 42 years with the Company. What are your thoughts as you look back on those years?

Satisfaction, gratitude – and also pride. Today the Group stands on a firm foundation – not just financially, but also with regard to its strategy, market position and customer acceptance. So I think I have successfully carried out my principal task: creating a solid basis on which the Group can continue its successful development.

So it’s the perfect time to retire?

Actually I would have liked to retire sooner, rather than waiting until I was 74. When I came back into operational management at the beginning of 2006, it was a stopgap measure. But given the circumstances, it was the best option for all con

cerned. Luckily I’m in good physical shape, otherwise I wouldn’t have been able to take the helm again. I’m convinced that a timely change of personnel at top level always gives a company room for new ideas and new commitment. Nevertheless, I’m confident that rather than immediately throwing everything into the melting pot, my successor will build on what has been achieved in the past. What’s true for an athlete is also true for Panalpina: il faut reculer pour mieux sauter – taking a step back gives you a better runup.

You caused something of a commotion when you handed over the top management position to a woman.

Monika Ribar was quite simply the best choice. She has been with the company for fifteen years, she’s the right age, she has an excellent educational background and broad experience, and she has the stamina necessary to face the future with drive and resolution. She also shares my enthusiasm for the assetlight strategy, which we both spent many years developing and implementing. That makes Panalpina a pioneer in our industry, and I hope my successors will not deviate from such a successful course without extremely compelling reasons.

What do you think of the selection of Rudolf W. Hug as your designated successor?

I’m also very happy with this decision of the Board of Directors. We know from experience that the post of CEO is very lonely, so it’s enormously important to have an experienced, intelligent Chairman of the Board of Directors as sparring partner. I am convinced that a relationship based on trust between the two functions, together with an intensive exchange of ideas, is proof of good, practical corporate governance.

Unlike you, Rudolf W. Hug doesn’t come from the transport sector.

That’s correct. But he has extensive professional experience, and he has maintained a certain distance from daytoday business. That facilitates an objective view of the company as a whole. I have been familiar with him and his capabilities for a number of years, not least from our having worked together on other boards of directors – and I’m convinced that he’s exactly the right choice for Panalpina.

“A timely change of personnel at top level always gives a company room for new ideas and new commitment.”

Interview with Gerhard Fischer

Panalpina Annual Report 2006 5


“Today the Panalpina Group stands on a firm foundation – not just financially, but also with regard to its strategy, market position and customer acceptance.”

Have you any tips to help your successors on their way?

One formula for the successful management of a global group is to put the right people in the right jobs. Nobody can be an expert in every country: local circumstances have to be assessed on the ground. That’s why it’s absolutely essential both to delegate responsibility and to supervise the people who exercise it. My experience of this has been positive. But the CEO must still be visible to the outside world – there’s no way round that. Freight transport has always been a people business, and the customers – quite rightly – want to know the people to whom they are entrusting their valuable cargo.

What other qualities does successful management require?

Readiness to learn and a levelheaded assessment of oneself. Every company goes through highs and lows. One naturally concentrates on successes when communicating with the outside world, but every company also has its setbacks. And it’s from setbacks that one can learn the most. Even the most spectacular successes must be properly assessed, with due regard for all the circumstances – external as well as internal. This is one of the central tasks facing the Executive Board – advised and assisted by the Board of Directors, which is not involved in daytoday business. Over the years, the Board of Directors repeatedly gave its advice and assistance, with great dedication – and I should like to take this opportunity to offer all my colleagues my heartfelt thanks.



What memories stand out after four decades with Panalpina?

Too many to count. I was with the company back in 1966, when the first 20foot and 40foot containers were introduced and the first cargo jet planes came into service. You see them all over the world today, but back then they were a breakthrough in logistics. Obviously the major milestones stand out from all my other memories – like the beginning of the oil boom, when we laid the foundations in West Africa for our presentday leading position in the oil and gas sector. Or the establishment of Air Sea Broker (now Panalpina Air & Ocean) in 1973

and our first freightonly flights to North America, Africa and Asia. There was also the important strategic decision we took in 1987 to concentrate on air and ocean freight, and not to invest in European overland transport – which is what all our competitors were doing. Then, of course, our “final examination”, as it were: our very successful flotation in September 2005.

How much has the business changed over the years?

Basically we still move “boxes from A to B”, just more and more of them, and faster and faster – while customer requirements and safety regulations become increasingly complex. Right from the start, the transport and logistics sector was both

an essential component of global industrial de velopment and its logical beneficiary. In the last twenty years especially, the driving forces behind our business have been the outsourcing of production processes and the development of new markets. Panalpina was one of those pioneering transport companies that systematically faced the challenges of globalized industries and services, seeking solutions to the problems emanating from by the increasingly complex goods and data flows of our globally active customers.

“Customers want to know the people to whom they are entrusting their valuable cargo.”

“Panalpina was one of those pioneering transport companies that systematically faced the challenges of globalized industries.”



How do you assess the sector’s future growth prospects?

The true importance of forwarding and logistics is still underestimated. Just think what millions of companies all over the world spend on research and development, marketing and distribution – but what are their products worth if they can’t get them to where they are needed, on time and un damaged? The outlook for the future of our industry is still positive because the places where goods are produced and where they are consumed are drifting further and further apart – and the logistics chains are becoming ever more complex.

The share price suggests that investors agree with you.

Yes, but if you constantly have one eye on the stock market, you’ll never build up a company that will last. That takes a strong product – or in our case a firstclass service – that the customers feel they must have. Shareholder value matters, but so does the satisfaction of all our other stakeholders. Going public helped us by significantly rais ing our profile. This, together with the accompanying increase in transparency, has made yet more potential customers all over the world aware of who we are and what we do. I was an energetic supporter of flotation because it laid a firm foundation for the Group’s future development.

And what will that future development look like?

I hope Panalpina will remain true to its strategy of pursuing sustained organic growth. I am proud that we have never seen any great fluctuations in

our employee numbers – the workforce has continuously increased. Continuity is important for all stakeholders, but especially so for our employees. In any case, I was not the only one who wanted Panalpina to be a reliable, responsible employer: that aspiration has always been shared by the Ernst Göhner Foundation. Our employees are our most important asset. Every day they make decisions that determine the success or failure of our strategy. That’s something we must never forget.

“Our employees are our most important asset. Every day they make decisions that determine the success or failure of our strategy.”


Further increases in revenue, earnings and profitabilityIn 2006 Panalpina once more confirmed its position as one of the world market leaders in forwarding and logistics, with impressive increases in net forwarding revenue (+11.3%) and net earnings (+52.5%). A good performance, which investors also found convincing.

Shareprice development

The Panalpina share price has performed extremely well since flotation, demonstrating that investors find the Group’s strategy and assetlight business model convincing. But the performance of the share price in the short term is not a high priority for the Board of Directors. They regard it as an expression of confidence, and of appreciation for the Group’s achievements during the financial year – but they are sticking to their declared strategy of pursuing sustained, longterm growth.

Shareholder structure

Contrary to original expectations, the shareholder structure is now gratifyingly broad and international. The Ernst Göhner Foundation is still Panalpina’s major shareholder, with more than 40% of the equity. As of the reporting date, no other investor held more than 5%. The company itself holds 0.71% as treasury shares in connection with current employee shareoption programs.

Board of Directors

The Board of Directors has settled in extremely well following its expansion to seven members in August 2005. It is a guarantor of continuity and specialist expertise. Rudolf W. Hug, the new Chairman Designate, is an international businessman of proven abilities, with extensive experience in the working of supervisory boards.

Executive Board

Monika Ribar was appointed CEO in October. An accomplished manager, she has been with the company for 15 years – and she has a wealth of experience to draw on, having been responsible for the areas of finance, controlling and IT. During the flotation she played a key role in gaining the confidence of investors. She was succeeded as CFO by respected financial specialist Jörg Honegger. John Klompers (Chief Marketing & Sales Officer) and Christoph Hess (General Counsel and Corporate Secretary) joined the Executive Board.

Results

In a market environment that was generally favorable for a global transport services provider, the Group succeeded in increasing net forwarding revenue by 11.3% to CHF 7,735 million and net earnings by 52.5% to CHF 184 million. The Board of Directors is particularly satisfied with the continued significant increase in profitability, clear proof that Panalpina is consistently pursuing its business strategy and keeping costs under control.

Once again all reporting regions posted impressive growth. Asia/Pacific (net forwarding revenue +15.6%) has the unremitting economic boom in Asian markets to thank for its continued vigorous growth. North America (+10.6%) also maintained its positive development. It exceeded its target of breaking even and went into profit – proving the success of its reorganization.

Panalpina continued to maintain its leading global position in both air and ocean freight in 2006. Revenues increased by 8.9% in air freight and as much as 17.8% in ocean freight, where the landmark volume of one million TEUs was exceeded for the first time. Both areas increased their market shares: tonnages were up by 10.5%, volumes by 17.4% – once more significantly ahead of market growth rates. Supply chain management activities also posted a nice growth, at 4.7%: an impressive confirmation of the value placed by customers on Panalpina’s logistics services.

Dividend increase

The Board of Directors will submit a proposal for a dividend payment of CHF 3.00 at the General Meeting of Shareholders on 15 May 2007. The resulting dividend payout ratio is at the top 30 to 40% band indicated by Panalpina. Dividend yield, based on year end share price, is 1.81%.

Gerhard Fischer Chairman of the Board of Directors

Report of the Board of Directors

www.panalpina.com/bod


What is Panalpina’s view on the pressure to consolidate in the sector?

In the last few years we have conclusively demonstrated our ability to keep increasing market shares in all our core activities through our own efforts. We shall continue to pursue sustained organic growth as long as it makes sense to do so, and we can see no indication that this will change in the medium term. We are convinced that major takeovers give rise to such serious problems of integration and coordination that they are very seldom justified. All too often the interests of shareholders, employees or customers fall by the wayside.

So is Panalpina sticking to its strategy of growing mainly through supplementary acquisitions?

In the past, we have focused on selected bolton acquisitions in fields and regions where they make real sense for us and our customers, and we shall consistently continue to do so in future whenever the need and the opportunity arise. We attach greater importance to the riskconscious, qualitative extension of our range of services than to making quantum leaps at any price.

“We shall be true to our principle of sustained organic growth”

For many years Panalpina has concentrated on air and ocean freight. Does this strategy have a future?

The Board of Directors is convinced that it does, and we shall consistently pursue it – although in the recent past we have also successfully positioned ourselves in the market with our third mainstay: supply chain management. As an architect of transport solutions, Panalpina organizes the entire process, optimizes all interfaces and selects the ideal partners for every stage…

… with no infrastructure of its own.

We have taken a conscious decision not to acquire our own warehouses or fleets of any kind. This gives the Group the maximum possible independence and minimizes the risk that comes from having capital tied up, while at the same time maximizing flexibility. It also means that our customers can rely on the best local experts in any market and always benefit from the latest developments.

But this model means that you have to be content with lower margins than your competitors.

The differences are relatively small, and the reduction in risk more than makes up for them. We are not compelled to invest our own resources in areas connected with the physical transportation of goods. Our core competency is the organization and supervision of integrated solutions. If no adequate local resources are available, we develop our own services that are tailormade for the job at hand.

What do your customers think of this “asset light” approach?

Our excellent growth rates speak for themselves. Customers have given our business model a favorable reception. They find it attractive and competitive in daytoday operations. Panalpina offers a full range of transport and logistics services. The individual customer decides which activities along its goods chain it wants us to manage.

Interview with Rudolf W. Hug

The Chairman Designate of the Board of Directors on the strategy, business model and growth policy of the Panalpina Group.

Rudolf W. HugChairman Designate of the Board of Directors

Rudolf W. Hug holds a PhD in law from the University of Zurich and a MBA form 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 Schweizerische Kreditanstalt (today Credit Suisse). During the period from 1987 to 1997, he ran the international division and served as 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.


Sandro KnechtRegional CEO Europe

Lukas FischerRegional CEO Apac

Robert TimmermanRegional CEO China/Taiwan

Regional CEOs

Jörg Eggenberger

Chief Operations Officer,Regional CEO Amec a. i.

Executive Board

Christoph Hess

Corporate Secretary


Monika Ribar

Chief Executive Officer

Jürg Honegger

Chief Financial Officer

John Klompers

Chief Marketing & Sales Officer

Josef ZechRegional CEO Latam

Karl WeyenethRegional CEO Noram

www.panalpina.com/eb


Business year 2006: Further significant increase of resultsThe Company increased its gross revenue by 12.3% and its net forwarding revenue by 11.3% to CHF 7,735 million, achieved by pure organic growth and reflecting the positive economic trend for the forwarding and logistics industry. Net earnings improved by 52.5% to CHF 183.5 million.

Overview of the Group and its business Panalpina is one of the world’s leading providers of forwarding and related logistics services, specializing in intercontinental air freight and ocean freight and associated supply chain management solutions. Panalpina believes that it is the market leader in the provision of freight forwarding services for the oil and gas industry globally and that it also maintains leading expertise and capabilities in the forwarding markets for the automotive, hitech, retail and fashion, and healthcare sectors.

Through some 500 offices in 90 countries (representing over 90% of the global GDP), and additional representation in 60 countries with partner companies, the Group operates one of the largest networks in air and ocean freight forwarding globally. As a Group, Panalpina utilizes its global network, bestinclass technology systems, welltried relationships with transportation providers and complementary logistics services to assist over 100,000 customers with the management of their global supply chains. The Group serves a large and diverse base of global and SME (small and midsized enterprises) customers, many of which operate in industries that the Group believes will experience aboveaverage growth.

The Group is primarily organized by regions, and the secondary segmentation is based on its core activities. The risks and returns of the Group’s operations are primarily determined by the geographical location of the Group’s operations. This is reflected by the Group’s management and organizational structure.

In 2006, the Group generated 57.1% of its net forwarding revenues in Europe /Africa / Middle East / CIS, 22.0% in North America, 12.2% in Asia /Pacific and 8.7% in Central and South America. The Group has a particularly strong presence in the major Asia – Europe – Asia and transatlantic trade lanes.

The Group’s principal sources of revenue are from air and ocean freight forwarding and supply chain management services. In 2006 the Group derived 48.0% of its revenues from air freight forwarding, 36.5% from ocean freight forwarding, and 15.5% from associated supply chain management services.

Strategic business priorities

Based on its primary strategic focus as a pureplay global air and ocean freight forwarder, the Group is:

Leveraging continuing growth in Asian trade flows The Asia – Europe – Asia trade lane represents the Group’s most important market, and its share of the volumes transported on this lane is significantly higher in both air and ocean freight than its respective average global market shares. The Group intends to capitalize on its strong presence in Asia, where demand for transportation is expected to grow faster than in other regions of the world.

The liberalization of trade services in China paved the way for the Group to obtain the license for a wholly owned enterprise in Shanghai in 2004. All preparations are finalized for the establishment of further fully owned branches which are due to replace the current sales representations.

Further strengthening specialist capabilities in selected target industries The Group will further strengthen the industry specific competence centers it has established in order to provide tailormade services to the oil and gas, automotive, hitech, retail and fashion, and healthcare industries and to create new competence centers. These industry verticals are offering promising growth and require industryspecific transportation services.

Report of the Executive Board

Panalpina Annual Report 2006 1�


Maintaining a balanced customer mix of SMEs and global accounts Management estimates that approximately 20% and 80% of its net forwarding revenues are derived from its global accounts and SME customers respectively. Retaining a wellbalanced customer mix is essential to and a high priority for the Group. On the one hand, global accounts have a significant volume on certain trade lanes, which enables the Group to optimize the procurement of transportation capacity and foster the expansion of its operations. On the other hand, maintaining a highly diversified portfolio of SME customers is mitigating the Group’s exposure to any individual global account. Management believes that its customer mix strategy balances the Group’s growth and creates benefits for its customers.

Improving efficiency and service quality The Group will continue to lower its cost base by further optimizing internal processes, by developing shared service centers for its regional operations, and by consequently utilizing the economies of scale created by its increasing volumes. Management believes that its ongoing drive to improve efficiency and reduce costs allows Panalpina to outbalance the potentially negative impacts of increasing price competition in some of its markets.

Achieving strong organic growth, supported by selected bolton acquisitions The Group’s acquisition strategy is based on the following three pillars:

• Scale expansion to further strengthen its position in the fast growing trade lanes out of Asia and to improve the Group’s market position in areas where the Group is underrepresented compared to its global position. These efforts are concentrated in the Far and Middle East and some countries in (Eastern) Europe.

• Network expansion to acquire partner companies in strategic markets in order to have direct control of the customer base and enable customers to fully benefit from the services the Group provides globally.

• Skill expansion to add and strengthen its capability in selected industry verticals in specific geographic areas. This is concentrated predominantly in the oil and gas sector, where the Group has a leading position in the Americas, Europe and Africa and will achieved the same throughout Asia. The current strategy does not contemplate any diversification into areas where the Group does not have a specific competence.

Focusing on an assetlight approach for supplementary supply chain services The Group is providing its freight forwarding customers with logistics and supply chain management solutions, thereby complementing its core air and ocean freight service offering. Management believes that such services lead to closer cooperation with key customers in the longer term and provide opportunities for profitable growth. The Group, however, will maintain its assetlight business model for logistics services and therefore will focus on the service aspects of such businesses. As the lead logistics provider, the Group will concentrate on the management and coordination of such services and keep investments and operation of assets (such as warehouses and related equipment) to a minimum by subcontracting to bestinclass partners.

Developing human capital Panalpina considers itself to be an employerofchoice in the industry. In order to achieve its corporate objectives, the Group is strongly committed to attract some of the best talent in the market and to retain its internal high performers. The Group rewards outstanding achievements with performancebased incentive plans whilst offering global career options and provides a continuous learning environment, equal opportunities, empowerment, training and development to its workforce in order to meet the business requirements.

Share and option programs for management are creating an additional performance and growth incentive.

Core activities

The Group engages in the following core activities:

Air freight forwarding Through its own offices and partner companies, the Panalpina Group provides air freight forwarding services in 150 countries. In 2006, air freight forwarding services accounted for approximately 48% of the Group’s net revenue. The Group operates a system of hubs and gateways (e.g. Frankfurt, Luxembourg, Paris, Chicago, Huntsville, Los Angeles, Miami, Dubai, Macao and Singapore). Approximately 65% of the total air transport capacity utilized is contracted in advance; approximately one tenth of that amount represents commitments valid for six to twelve months and approximately nine tenths represent commitments valid for less than six months. The other 35% of total air transport capacity is purchased in the spot market. This mix ensures a certain amount of controlled capacity at peak times, while providing the Group with the necessary flexibility to adapt capacities to actual demand.



Ocean freight forwarding The Group itself provides ocean freight forwarding services in 90 countries and, through its partner companies, in an additional 60 countries. Ocean freight forwarding services accounted for 36.5% of the Group’s net revenue in 2006. The Group has tailored its services to the transportation needs of its customers. For customers who transport full container loads, it offers FCL (full container load) services. In contrast, for customers who ship smaller consignments, the Group offers a competitively priced consolidation product with its LCL (less than container load) service. As customers can combine these products with standardized service options, such as doortodoor, doortoport, porttodoor and porttoport deliveries, the services the Group offers in the oceanfreight area can easily be tailored to each customer’s needs.

Supply chain management In 2006, supply chain management services accounted for 15.5% of the Group’s net revenue. The Group offers a whole range of services and logistics solutions designed to improve its customers’ supply chain management. For customers who run supply chain management inhouse, the Group offers consulting services related to both the planning of logistics processes and the selection and management of logistics service suppliers. For clients who outsource supply chain management, the Group also provides warehousing and distribution services, including orderfulfillment, invoicing and reporting. In this way, the Group combines its traditional forwarding services with logistics services tailored to customers’ needs, offering customers complete supply chain solutions.

Results of the year 2006Significant impacts of currency fluctuation, rates, taxes, customs and duties

Management believes that the operating results of the Group are effectively currency neutral. The currency mix of revenues and cost items is fairly balanced due to the diversified nature of the business, industry practices and the worldwide nature of the Group’s activities.

Forwarding revenue

The net forwarding revenue of the Group increased by 11.3% (or 10.2% currency adjusted) over the year 2005, from CHF 6,949 million to 7,735 million. A reclassification of 2005 figures in the amount of CHF 13.5 million has been made: suppliers’ discounts have been reclassified from forwarding services revenue to reduce the forwarding services expenses from third parties.

Revenue growth was merely organic, the acquisitions realized during the course of 2005 accounted for 1.0% of the growth.

Historically, the Group’s results have been subject to seasonal trends. The Group’s first fiscal quarter is traditionally weaker than other fiscal quarters, and the third and fourth fiscal quarters have generally been the strongest. This seasonality is based on many factors, including holiday seasons, consumer demand, climate and economic conditions. In particular, a substantial portion of the Group’s revenues are derived from customers in industries whose shipping patterns are tied closely to consumer demand or are based on justintime production schedules. Management estimates that due to seasonal trends approx. 46 – 48% of the annual net forwarding revenue is generated in H1 each year and approximately 52 – 54% in H2 each year.

In the year under review, for the first time ever, the first quarter showed an accelerated start due to high volumes, resulting in an impressive quarter end in March. The higher number of working days compared to the previous year contributed as well to the higher revenues.

In the opinion of Management, this strong start was also the result of a slight shift in the world economy from the second quarter into this first quarter; the volumes shipped across the globe and the high levels of the different surcharges (fuel and security) contributed to these results.

The second quarter ended only slightly higher than the first, with the month of June showing its traditional quarter end surge. Additionally, the amount of working days mainly in Emea, accounting for 57% of the Group’s net forwarding revenue, had a negative effect on the second quarter.

Volumes pushed by the growth of existing customers, the oil and gas environment still very active thanks to the energy prices, the acquisition of new accounts, large and small, the commodity prices encouraging the mining industries to increase their developments, all these factors contributed to the double digit growth of the net forwarding revenues in 2006.

Illustrated below are the historical trends of seasonality including 2006 as observed in the development of net forwarding revenue in 2006 compared to the previous two years:



2,200

2,100

2,000

1,900

1,800

1,700

1,600

1,500

1,400

1,300

Q11,8341,517

20062005

Q21,8581,673

Q31,9441,767

Q42,0991,991

21.8%

23.7%

24.1%

24.0%

25.1%

25.4%

28.7%

27.2%

in million CHF

% of share per quarter of total net forwarding revenue

Regional development of net forwarding revenue

Asia/Pacific

North America

Central and South America

Europe/Africa/Middle East /CIS

12,2%

22%

8,7%

57,1%

Net forwarding revenue share per region

The 11.3% increase in net forwarding revenue is primarily due to improved results from all regions. Significant developments in the geographic regions in 2006 were as follows:

• Net forwarding revenue in Europe /Africa / Middle East / CIS increased from CHF 3,929 million in 2005 to CHF 4,418 million respectively at 12.4%. The fast growing Far East market and the im portance of the Asia – to – Europe lane, being the largest for Panalpina, contributed to the growth in this geographical region. Not only could new large accounts be secured during the course of 2006, but the increase in the volumes shipped by existing customers resulted in impressive double digit growth numbers. At the same time, further developments of the oil and gas sector in the African countries as well as around the Caspian Sea, in conjunction with the acquisition performed in 2005 (Overseas Shipping in Norway) to complement the Group’s network for this industry, led to the sustained growth that started the previous year.

• The 10.6% increase in net forwarding revenue in North America (2005 CHF 1,536 million to 1,699 million in 2006) was primarily due to the overall business volume increases, high activities in the oil and gas sector but also in the mining sector.

• In Central and South America, net forwarding revenues increased 1.2% respectively CHF 8 million to 670 million in 2006. Central and South America form an important contributor within the Panalpina network, supporting major business es usually controlled and managed in Europe or North America. Also on this continent, the oil and gas sector as well as, if not even to a higher extend, the mining business have gained additional share in the overall revenues. The telecom industry has also increased thanks to business wins during 2005.

• Asia / Pacific’s net forwarding revenue increased 15.5% (2005 CHF 821 million to 948 million in 2006) mainly due to the increase of business awarded to Panalpina from Asian companies. Apart from European and North American companies importing from Asia, exports from Asian companies are also increasing their share within the trade flows. Asia/Pacific represents also a very important contributor within the Group and is crucial for its development.

Core activities overview

In 2006, the Group derived 48.0% (previous year 49.1%) of its revenues from air freight forwarding, 36.5% (34.5%) from ocean freight forwarding, and 15.5% (16.4%) from associated supply chain management services, which represents a slight shift in proportion from air freight and supply chain management services in favor of ocean freight compared to 2005.

Net forwarding revenue from air freight increased 8.9% from CHF 3,408 million in 2005 to CHF 3,713 million in 2006, from ocean freight it increased an impressive 17.8% from CHF 2,399 million to 2,826 million and from supply chain management it increased 4.7% from CHF 1,142 million to 1,196 million.

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

Air freight Ocean freight Supply chainmanagement

Net forwarding revenue

3,4

08

3,71

3

2,3

992,

826

1,14

2

1,19

6

2006 2005

in million CHF



Air freight review

According to statistics gathered by IATA, International Air Transport Association, the international freight tonnages grew by 4.6% in FTKs (freight ton kilometers measuring the actual freight traffic). This is still below the trends seen in the past of 5.6% in average, but better than in 2005, where the air freight market growth was 3.2%.

Industry sources have attributed the continued downturn in freight tonnages to high oil prices that are dampening economic activity.

The air freight activity in 2006 for the Group can be summarized as follows:

• Tonnages grew 10.5% reaching 874,000 tons. This outgrowing of the market was fueled by the gaining of new accounts as well as by the increase of existing business favored by the positive trend of the world economy in 2006.

• Fuel and security surcharges were still inflating the net forwarding revenues, remaining at high levels during the better part of the year.

Tonnages on westbound traffics, namely Asia – Europe, and eastbound Asia – North America remained buoyant and grew at rates well above the average growth rate experienced in the market. Tonnage growth on eastbound traffics from Europe to the Far East and Asia were still suffering from overcapacity and a downtrend in prices to customers. Overall, the tonnages flown on the lane Emea – Asia – Emea experienced an increase of over 19.5%. This remains the Group’s single most important trade lane comprising over 30% of total tonnage.

Next to those rather traditional high volume trade lanes, in 2006 a new trend started to show and recorded impressive growth rates: Asia – Latin America has increased more than 20% compared to previous year.

In summary, air freight tonnages grew at a much higher pace than in 2005 with continued imbalances on the different trade lanes and fierce competition to secure capacity during high season: price pressure both from airlines and customers is omnipresent.

Ocean freight review

Recording an impressive revenue growth of 17.8% over previous year, ocean freight was the front running core activity in 2006. The reasons thereof are enumerated below:

• 17.4% volume increase outpaced market growth of 10.7% (Clarkson, January 2007). The absolute figure rose from 922,880 TEU in 2005 to exceed the million TEU with 1,084,000. For the first time since many years, the supply in containerized capacity substantially outpaced the demand, having a compressing effect on the level of the ocean freight buying rates. The Europe – Far East eastbound / westbound trade lanes are the Group’s strongest trade lanes, comprising over 35% of ocean freight volumes, followed by the Transpacific eastbound /westbound trade lane, which comprised 17%, and the Transatlantic eastbound/westbound, which comprised 16%. In ocean freight, the same scenario as in air freight could be observed: one of the most significant growth rates was recorded on the Asia – Latam southbound lane growing by 47%.

• The net forwarding revenue of the first quarter 2006 ended even higher than the highest quarter of 2005, announcing a record year. The revenue growth was affected by both, a considerable increase in volume and a growing imbalance of supply and demand for capacity on the market. This granted the industry and consequently Panalpina further rate decline on the major East / West trades. In a contrast, the capacity supply for bulk vessels, necessary for the Group’s special project business, was not exceeding demand in the same way as the container ships capacity. Consequently the freight rates of this sector increased during 2006, contributing to higher net forwarding revenues, the project business accounting for 5% of the total Group’s revenues. The Bunker Adjustment Factor (BAF), corresponding to the fuel surcharge for ocean freight, remained at very high levels during the majority of the year, slightly easing up during the last quarter. Nevertheless, the average BAF for 2006 was higher than for the previous year. Management estimates its share on the net forwarding revenues increase over the previous year to be approximately 7%.

• Continued pressure from customers.

2,250

2,000

1,750

1,500

1,250

1,000

750

500

250

248

53

573

4

315

675

84

4

271

59

381

0

29

267

98

87

283

625

85

9

315

717

912

34

06

46

1,0

05

274

755

1,07

0

Air freight Ocean freight Supply chain management

Q1/05

Q1/06

Q2/05

Q2/06

Q3/05

Q3/06

Q4/05

Q4/06

in million CHF

Quarterly development of the core activities



Bearing the above in mind, overall growth in net forwarding revenue of ocean freight was influenced by volume growth in highrevenue trade lanes, decreasing freight rates, continued pressure from customers.

Supply chain management review

Supply chain management (SCM) services are specifically offered in specific geographical areas and as integrated solutions for targeted industry verticals including oil and gas in order to meet the entire range of customer’s requirements. The offering of supply chain management services also supports crossselling opportunities for existing customer segments in air and ocean freight.

The growth derived from SCM of 4.7% in 2006 was substantially lower than in 2005, where the Group recorded an increase in net forwarding revenue of 22.5%. 2005 was an exceptional year influenced in particular by the award of a major contract by one of the world’s leading mobile phone manufacturers in South America. It was also attributable to the integration of Grampian International Freight, a successful acquisition with main activities in supply chain management in the oil and gas sector.

In 2006 however, supply chain management solutions have been offered to new accounts in the automotive industry in the USA, supporting their continuous penetration of the North American market.

Contribution margin (gross profit)

The most significant driver of freight forwarding profitability is the contribution margin (gross profit). This margin is basically the difference between the buying and selling rate on perunitofweightorvolume (i.e. kilograms, tons, TEUs) basis. Contribution margin (gross profit) per unitofweightorvolume basis is generally driven by available capacity, competition, and supply/demand imbalances.

An important factor that influences the contribution margin (gross profit) is changes in buying rates that have a direct impact on the cost of forwarding services from third parties. Management believes that until 2005, freight capacity has been strained causing frequent increases in freight rates, especially in ocean freight. The trend turned to the opposite during the course of 2006. Management also believes that cyclical trends in freight capacity tend to be shorter for air freight than for ocean freight. The time span before additional capacities are realized and released in ocean freight is, due to the nature of the business, longer than those in air freight.

During a period of accelerated demand for freight services, owners of freight capacity impose substantial rate increases, taking advantage of their enhanced pricing power. In turn, freight forwarders attempt to pass on these rate increases to their customers. However, there is typically a lag between these two events, leading to a short term rise in capacity costs that are absorbed by the forwarders. This leads to temporary margin pressure that persists until freight rate increases can be fully passed on to customers. Pressure on the contribution margin (gross profit) is eased as additional capacities are released and/or forwarders successfully pass on rate increases to their customers. In the Group’s experience, the converse applies in periods of declining freight rates, when the lag effect leads to temporary margin improvements.

The Group’s contribution margin (gross profit) increased by 13.0% from CHF 1,408 million in 2005 to CHF 1,591 million in 2006. The currency development during 2006 had a favorable impact of 1.0% or CHF 14 million. The contribution margin (gross profit) as a percentage of net forwarding revenue increased slightly from 20.3% to 20.6%.

Change in contribution margin (gross profit)

in million CHF 2006 2005

Change vs. Previous

year in %

Net forwarding revenues 7,735 6,949 11.3

Contribution margin (gross profit) 1,591 1,408 13.0

As percentage of net forwarding revenues 20.6% 20.3%

0.3 percentage point

The Group’s contribution margin (gross profit) was impacted by several factors during 2006 namely:

• a strong start in 2006 compared to previous years;

• overall reduction of freight buying rates due to overcapacity on the main markets and trade lanes;

• less fuel surcharge volatility than in 2005, impacting less on the gross profit margins;

• the full year impact of the previous year’s bolt on acquisitions in the oil and gas sector, which lives a striving period. These acquisitions count for 1% of the contribution margin (gross profit) growth.



It needs to be mentioned that the 2005 contribution margin (gross profit) for the region Europe / Africa / Middle East / CIS was negatively impacted by the effect of the onetime incident in the air freight division of Panalpina Airfreight Management Ltd. of CHF 22.4 million.

The substantial increase of the contribution margin (gross profit) in this region in 2006 can be ex plained by different factors: on the one hand, the further development and expansion of the oil and gas sector from existing customers out of the traditional African oil and gas countries, but also from emerging energy producing geographical areas like Central Asia (Kazakhstan, Azerbaijan a.s.f.). On the other hand, the constantly increasing demand for goods produced in Asia, either from European or, more and more, upcoming Asian companies, is the reason for the volume growth into Europe. Not to forget the full year impact of the acquisitions realized in 2005 in Norway accounting for 1.2% of the contribution margin (gross profit) increase of this region. At the same time, the Group was awarded various additional multinational accounts in the telecom industry that contributed to the achieved increase.

The North American region continued on the growth path it engaged on during 2005 to the difference that the margin erosion stopped and even reversed slightly to end the year with positive results. Important contributors to these gains are multinational accounts in the different industry verticals but mainly in the oil and gas sector as well as the mining sector.

Central and South America could record a considerable contribution margin (gross profit) level thanks to project business in the mining sector as well as the positive development of Asian imports.

The Asia / Pacific region solely experienced a gross profit margin reduction mainly resulting from the increasing air freight rates that were most significant in the fourth quarter, where capacity traded at high levels because of high demand. Fierce competition which forced price reductions to customers and some modal shifts on the Asia – Europe – Asia trade lane affected the margin as well.

in million CHFFull year

2006GPM*

in %∆ per year

in %share in %

Full year 2005

GPM*in %

share in %

Europe /Africa / Middle East / CIS 916 20.7 14.4 57.6 801 20.3 56.9

North America 307 18.1 12.5 19.3 273 17.8 19.4

Central and South America 137 20.4 14.2 8.6 120 18.1 8.5

Asia / Pacific 231 24.4 7.9 14.5 214 26.1 15.2

Total 1,5�1 20.6 1�.0 100.0 1,408 20.2 100.0

* GPM: gross profit margin (gross profit in percent of net forwarding revenues)

Contribution margin (gross profit) share per region

The development of the share of gross profit in 2006 was relatively balanced across the regions.

Europe/Africa/Middle East/CIS (Emea) regained share of the Group’s contribution margin, increasing by 70 bps from 56.9% to 57.6%.

This gain happened to the detriment of Asia/Pacific (Apac).

Central and South America (Latam) as well as North America remained stable.

Asia/Pacific

North America


Europe/Africa/Middle East /CIS

14.5%

19.3%

8.6%

57.6%

Regional development of contribution margin (gross profit)

Panalpina invoices a service based on customer requirements. For example, air freight services sold and invoiced in Europe may cover the transport of goods from Asia to Europe. Invoiced revenues in such a case are fully reflected within Europe. However, a portion of the contribution margin (gross profit) is shared with Asia in line with revenue sharing agreements and responsibilities. Therefore, when comparing Panalpina’s geographic region reporting, no final conclusions can be drawn based solely on the amount of revenues or contribution margin (gross profit) derived from the regions and various trade lanes. However, management believes that comparing a geographic region’s revenues yearonyear reveals trends within that region and helps explain business development.

The following table shows the percentage shares and growth rates of the contribution margin (gross profit) as well as the contribution margin (gross profit) as a percentage of net forwarding revenue per region for the years 2005 and 2006.

Contribution margin(gross profit)

Forwarding services/expenses

in million CHF

6,144

5,541

1,591

1,408

2006

2005



Contribution margin review per core activity

In 2006, the Group derived 43.2% of its contribution margin (gross profit) from air freight forwarding, 30.9% from ocean freight forwarding, and 25.9% from associated supply chain management services, which represents a slight shift in proportion from air freight in favor of ocean freight while supply chain management services remained stable compared to 2005.

Contribution margin (gross profit) from air freight increased 8.0% from CHF 636 million in 2005 to CHF 687 million in 2006. Normalized due to onetime impact from the incident in the air freight division in 2005, the increase over the previous year would be 4.3%. The contribution margin (gross profit) from ocean freight increased an impressive 22.1% from CHF 403 million to 492 million and from supply chain management, it increased 11.7% from CHF 369 million to 412 million.

800

700

600

500

400

300

200

100

Air freight Ocean freight Supply chainmanagement


63

6687

40

3

49

2

36

9412

2006 2005

in million CHF

Quarterly development of the core activities

450

400

350

300

250

200

150

100

50

7691

149

9111

615

7

107

101

147

107

118

169

93

103

156

102

128

174

93

108

184

112

130

187

Air freight Ocean freight Supply chain management

Q1/05

Q1/06

Q2/05

Q2/06

Q3/05

Q3/06

Q4/05

Q4/06

in million CHF

The Group’s air freight activity developed according to expectations in 2006. The increase in contribution margin (gross profit) was impacted by the tonnages outpacing market growth, as already seen in the net forwarding revenues.

On the other hand, the gross profit margin dropped 20 bps from 18.7% to 18.5% reflecting the further compression of the yields by tight rate environments, especially in the last quarter, while capacity demand largely exceeded supply during peak season, driving the buying rates to high levels. This was mainly observed out of Asia to Europe or to North America, the main trade lanes of Panalpina.

2006 was the year of ocean freight: not only the volumes shipped through the Group’s network outgrew the market performance, but the gross profit margins increased yearonyear by 60 bps. This allowed to achieve a contribution margin (gross profit) 22.1% higher than in the previous year.

The main reason for this incremental margin is the increased supply of container capable capacity, leading to the substantial drop of buying rates for ocean freight, especially in the first half of the year. Another factor influencing the gross profit margin was the lesser volatility of the BAF, the fuel surcharge indicator in ocean freight. As explained previously, the passing on of those rates variations typically happen with a certain time lag, the forwarder absorbing the difference in either direction.

in million CHFFull year

2006GPM*

in %∆ per year

in %share in %

Full year 2005

GPM*in %

share in %

Air freight 687 18.5 8.0 43.2 636 18.7 45.2

Ocean freight 492 17.4 22.1 30.9 403 16.8 28.6

Supply chain management 412 34.4 11.7 25.9 369 32.3 26.2

Total 1,5�1 20.6 1�.0 100.0 1,408 20.� 100.0

* GPM: gross profit margin (gross profit in percent of net forwarding revenues)


during 2005 accounted for 1% of the increase in other operating expenses (non currency adjusted).

• A further event had a positive impact on the other operating expenses. An updated actuarial calculation on the Group’s captive insurance company revealed an excess of claims provisions made in 2003, when the entity was established. Based on a longer time series of data, the provision has now been adjusted. The positive impact of CHF 5.4 million has been recorded in the last quarter in the region Europe /Africa / Middle East / CIS.

• After those adjustments, the resulting other operating expenses increase from current operations reflects on one side the business growth handled in 2006, but also the impact of the expansion of the Group’s network in certain strategic geographical areas like China and Eastern Europe, where offices were opened during the course of the year. The sale of owned buildings realized in 2005 engendered in 2006 additional rent and maintenance expenses.

Normalized Ebitda (calculated by excluding impact of gain on sale of noncurrent assets and excluding the impairment of financial assets) increased from CHF 202 million to 313 million in 2006 or an increase of 54.7% as follows:

in thousand CHF YE 2006 YE 2005

Ebitda as per annual report 312,669 214,170

in % of contribution margin (gross profit) 19.7 15.2

Normalized Ebitda* �12,�68 202,216


* Calculated excluding impact of gain on sale of noncurrent assets and excluding impairment of financial assets.

Normalized Ebit (calculated by excluding impact of gain on sale of noncurrent assets, impairment of financial assets increased from CHF 153.9 million to CHF 261.6 million in 2006 or an increase of 70.0% as follows:

in thousand CHF YE 2006 YE 2005

Ebit per annual report 260,998 165,633

Gain on sale of noncurrent assets 99 (11,954)

Impairment of financial assets 511 174

Normalized Ebit* 261,608 15�,85�


* Calculated excluding impact of gain on sale of noncurrent assets, impairment of financial assets


Supply chain management achieved a contribution margin (gross profit) growth of 11.7% over the previous year. This value added service is increasingly attractive to our existing customers, who also become more and more demanding for tailormade solutions supporting their outsourcing strategies.

Operating result

EbitdaConsolidatet netearnings

Cash flow fromoperating activities

in million CHF

184313

338

120214215

2006

2005

The Group’s Ebit increased by 57.6% from CHF 165.6 million in 2005 to 261.0 million in 2006, respectively 57.8% currency adjusted. The currency impact at this level is a very minimal amount of 0.2 percentage points. The acquisitions performed during 2005 and recorded for a full year period in 2006 had an effect of 1.6% on Ebit level. Furthermore, the operative result was influenced by the increases in the following income/expense categories during 2006:

• An increase of 5.1% in personnel expenses reaching CHF 886.9 million compared to 2005. A 1 percentage point currency impact needs to be considered translating in CHF 8.2 million additional expenses. The increase was influenced by a 5.3% increase in headcount, onetime termination benefits related to the change on Executive Board level, but also worth mentioning is the high levels of personnel expenses recorded last year due to onetime change in management in North America.

• While additional human resources were hired in Asia to support the business growth, highly skilled employees were necessary to handle the specialized business in the oil and gas and the mining industry in the Africa and CIS regions, whereas the European and Central and South American countries concentrated on increasing productivity.

• Other operating expenses were positively impacted by a onetime adjustment amounting to CHF 11 million, which has been recorded in accordance with the change in estimations of allowance for trade receivables as described in the notes of the consolidated financial statements. Normalized, the resulting expense increase mainly derives from a raise in rent and communication expenses in line with the business growth. The impact from the acquisitions performed


• Although Central and South America is constantly confronted with inflation and currency appreciation, improvements in gross profit margins, acting as important player within the network for European and North American customers and a tremendous effort in productivity gains contributed to the success of this region.

• In Asia / Pacific the Ebit was impacted by the ongoing investments and associated expenses related to the expansion of the operational network in China: not only from an infrastructure point of view but also from a staffing point of view. The market is becoming more competitive through the local niche competitors, setting pressure from the revenue side but the volumes handled are constantly increasing leading to the deterioration of the cost/income ratios.


In addition to the factors that have impacted the contribution margin (gross profit), the following operating cost items had a significant impact on the operating results (Ebit) by region in 2006 compared with 2005:

• When comparing the Ebit of 2005 and the current year for the region Europe /Africa / Middle East / CIS, it needs to be noted that the previous year results were impacted by the onetime incident in the air freight division Panalpina Airfreight Management Ltd. of CHF 22.4 million. Despite this impact, the performance of this region was the strongest ever, driven by the overall economic growth in Europe, the increased volumes traded with Asia, the booming oil and gas and mining sectors investing in further developments. At the same time, productivity gains could be achieved keeping the increase of expenses at the lowest level within the Group.

• In North America, the Ebit of the previous year was positively influenced by the gain on sale of two buildings, one in the USA, the other in Canada. Absent the gain, North America’s normalized Ebit loss of CHF 9 million must be reviewed in the context of the onetime costs related to the change of management. In 2006, the region delivered a positive result which exceeded management’s expectations: the results of the restructuring and reorganization to rationalize the cost structure showed promising trends and helped achieve positive results in the region. North America reached an Ebit of CHF 11 million, mainly coming from exceptional project and oil and gas business as well as from considerable wins in Canada.

Regional development of the operating result

Normalized Ebit versus reported Ebit per region was as follows:

in million CHFReported

Ebit

2006

Normalized Ebit*

in % of contribution

margin Reported

Ebit

2005

Normalized Ebit*

in % of contribution

margin

Europe /Africa / Middle East / CIS 163 163 17.8 82 82 10.3

North America 11 11 3.6 3 –9 –2.9

Central and South America 19 19 13.9 11 11 9.0

Asia / Pacific 68 68 29.4 70 70 32.6

Total 261 261 16.4 166 154 11.0

* Calculated excluding impact of gain on sale of noncurrent assets and impairment of financial assets

160

140

120

100

80

60

40

20

Europe/AfricaMiddle East /CIS

Asia/Pacific Central andSouth America

NorthAmerica

Ebit per region

82

7068

11 11

19

3

163

2006 2005

in million CHF


Current assets

The Group’s current assets increased by 19.3% from CHF 1,486 million on 31 December 2005 to CHF 1,773 million on 31 December 2006. The increase in current assets is primarily attributed to the increase in cash and trade receivables.

The total balance of cash and financial assets increased by CHF 144 million as a result of the Group’s strong cash generation. The Group’s net cash position increased from CHF 210 million to 347 million.

Trade receivables which comprise 56% of total assets increased 7.0% from CHF 1,108 million on 31 December 2005 to CHF 1,185 million on 31 December 2006. The increase in trade receivables was below to the increase of 12.3% in forwarding revenues and in coherence with the growth of the business.

Trade receivables as a percentage of forwarding services of the preceding twelve months decreased from 13.4% on 31 December 2005 to 12.7% on 31 December 2006. End of 2006, management determined based on analyses of historical trends, Group’s experience and markets observation, to


AssetsLiabilities

in million CHF

2006

2005

0

(1,131)

(962)

2,108

1,820

Financial positionsBalance sheet

Net assets (equity)

in million CHF

978

858

2006

2005

Condensed consolidated balance sheet

31 December2006

(mCHF)

31 December2005

(mCHF) % change

Cash and financial assets 374 230 62

Other current assets 1,399 1,255 11

Property, plant and equipment 162 152 6

Intangible assets 102 109 –6

Other noncurrent assets 72 73 –2

Total assets 2,108 1,820 16

Debt (current and noncurrent) (27) (20) 34

Other current liabilities (986) (837) 18

Other noncurrent liabilities (117) (105) 12

Total liabilities (1,131) (962) 18

Total liabilities ��8 858 14

Capital and reserves attributable to Panalpina shareholders 970 851 14

Equity attributable to minority interests 8 7 15

Total equity 978 858 14

A full consolidated balance sheet is presented on page 71 of the Consolidated Financial Statements.

adjust the estimates for allowance of trade receivables not individually impaired. The effect of this change in accounting estimates has resulted in an increase in trade receivables in approximately CHF 11 million. In consideration of this change, the outstanding trade receivables in percentage of forwarding services would decrease by 0.1 percentage points to 12.6% compared to 13.4% in 2005.

Noncurrent assets

The Group’s noncurrent assets increased modestly by 0.4% from CHF 334.3 million on 31 December 2005 to CHF 335.6 million on 31 December 2006, primarily as a result of the impact in property, plant and equipment which increased from CHF 152.5 million on 31 December 2005 to CHF 161.6 million on 31 December 2006.

Current liabilities

The Group’s current liabilities increased by 18.1% from CHF 855.5 million on 31 December 2005 to CHF 1,010.1 million on 31 December 2006. The increase in current liabilities was primarily due to an increase in trade payables and accrued cost of services resulting from better management of



payables and improved payment terms from suppliers.

Trade payables increased from CHF 437.4 million on 31 December 2005 to CHF 501.1 million on 31 December 2006, which reflects the growth of the business, whereas accrued cost of services increased by 40.0% from CHF 157.6 million on 31 December 2005 to CHF 220.6 million on 31 December 2006. The increase in accrued cost of services reflects the high business activities in the last days in 2006.

Non current liabilities and shareholder’s equity

The Group’s noncurrent liabilities increased by 13.1% from CHF 106.5 million on 31 December 2005 to CHF 120.5 million on 31 December 2006. This was primarily a result of increased provision for claims and for pensions and other postem ployment benefits. The most significant movements in shareholder’s equity were the income of CHF 183.5 million, the Panalpina dividend payments of 49 million (2005: CHF 50 million) and currency translation losses of CHF 8.1 million. The currency translation losses mainly arose from investments in foreign operations.

Liquidity and Capital Resources

Cash flow from operating activities

in million CHF

338.3

214.6

2006

2005

Cash flow

The Group had a very strong cash flow from operating activities of CHF 338.3 million compared with CHF 214.6 million in 2005, which was 21.3% and 15.2% respectively of the reported contribution margin (gross profit).

Working capital management

The net working capital decreased from CHF 418.7 million on 31 December 2005 to CHF 413.0 million. In early 2005, management introduced successfully measures which are consequently reflected in the positive impact in net working capital.

Despite the growth in forwarding services and in trade receivables, the Group could maintain the net working capital stable. The Group reduced net working capital in percentage of forwarding services by 0.62 percentage points to 4.44% from 5.06% last year.

Cash Flow from investing activities

In 2006, the Group invested a total of CHF 57.0 million for capital expenditure (CHF 48.2 million in property, plant and equipment, and CHF 8.8 million in software). In 2006, there was no investment through business combinations (in 2005 CHF 11.7 million).

All capital expenditures in 2006 were financed by the operational cash flow of CHF 240.9 million generated during the current year.

Disinvestments decreased from CHF 39.0 million in 2005 to CHF 2.8 million in 2006. Previous year disinvestments derived essentially form the sale of operational property in USA and Canada.

Cash Flow from financing activities

Cash flow from financing activities was mainly driven by dividend payments and disposal of treasury shares.

Employees

Region 2006 2005

Europe /Africa / Middle East / CIS 7,529 7,499

North America 2,241 1,990

Central and South America 1,988 1,923

Asia / Pacific 2,546 2,171

Total 14,�04 1�,58�

In accordance with the market development and the Group’s network expansion on the Asian continent, the staff count in Asia / Pacific increased by 17.3% during the year 2006.

www.panalpina.com/news


“Demand soaring on a global scale thanks to positive economic climate and booming Asian markets.”


Reporting Regions


Reporting Regions

Panalpina achieved impressive growth in all Emea areas. Major new orders were signed and existing contracts extended not only in the oil and gas industry, which has traditionally been of particular importance in this region, but also in all other key sectors.

Western Europe

A thriving economy and buoyant imports from the booming Asian markets ensured strong revenues in most West European countries, with the highest growth experienced in Switzerland, Germany and the British Isles.

In Switzerland, supply chain management services recorded a particularly exceptional growth in the year under review, as an increasing number of firms chose to outsource their logistics. In response, Panalpina installed a number of implant teams, mainly within companies in the chemical and pharmaceutical sectors. Furthermore, the Group successfully defended its high market share in air and ocean freight import services as well as ocean freight export services. The Group was also successful in achieving its goal of increasing the proportion of customers from the SME sector.

Against a backdrop of the country’s strongest economic performance since 2000, Panalpina achieved very high growth in all core activities in Germany. Major new orders were signed for ocean freight, and also for air freight imports from Asia, particularly in the retail and fashion sector. This positive trend in freight volumes from Asia was echoed in the transatlantic traffic between Germany and the US. Significant new global accounts boosted air freight exports to Japan by a third. At the end of the year, Panalpina staff moved into the new, stateoftheart logistics center in Hamburg. This has been built to the highest safety standards, has direct access to the port and will also act as a hub and depot for the Group’s container business.

The UK and Ireland also saw very positive growth. This was chiefly owing to a further rise in imports, mainly from China, India and Vietnam. The segment of smallertomidsized customers expanded further, as it had in the previous year, while several major customers were gained in the retail, chemical and automotive sectors. Booming investment in global oil production, and thus also in the North Sea, led to sizeable new orders from suppliers to this industry.

Italy and France, as well as the Iberian, Scandinavian and Benelux countries, continued to perform well in 2006, and contributed to the successful result for this region. New business in the hitech, retail and fashion and telecommunications sectors resulted in a gratifying rise in revenues from air and ocean freight.

Central and Eastern Europe

The gradually increasing financial strength of the countries in this subregion has led to a noticeable rise in consumer spending, and consequently greater demand for consumer goods. Panalpina recorded a rise in imports, particularly from the Far East.

The customer base, which used to consist chiefly of companies from the hitech, automotive and retail and fashion industries, expanded further. At the start of 2006, new Panalpina branches were set up in Warsaw, Wroclaw and Gdynia to serve the Polish market.

European Regional Competence Center Based in Basel

Amec Regional Competence Center Based in Dubai

Net revenue: CHF 4,418 million

Headcount: 7,529

Branches: 258

Broadbased economic growth and increased investment in the oil and gas industryIn the largest of its reporting regions, Panalpina was able to exploit the generally positive economic climate to full potential and capitalize on the Group’s undisputed market leadership in the oil and gas sector to boost net forwarding revenue for 2006 by an impressive 12.4%.

Europe / Africa / Middle East / CIS


Middle East

The Middle East is also seeing rapid growth in the oil and gas industry, as well as investment in a large number of infrastructure projects in a variety of sectors as a result of rising oil revenues. In 2006, three regional oil companies extended their contracts with Panalpina for the provision of logistics services in Saudi Arabia and Qatar, while two global computer and semiconductor manufacturers chose the Group as their distribution partner in the United Arab Emirates. In September, Panalpina signed the lease for a large logistics terminal in Dubai Logistics City, which will act as a transit warehouse for the whole region when it is completed at the end of 2007.

Central Asia

The newly set up back offices in Bahrain and Dubai and the centrallymanaged procurement system for river transport capacity will help Panalpina reinforce its already strong position in the rapidly developing Central Asian oil and gas market, which is in turn acting as a stimulus for new infrastructure projects throughout the region. In addition to winning new forwarding orders that included the transportation of exploration facilities, Panalpina successfully extended its contract with a leading regional extraction company. More than 80 ultraheavy consignments were shipped by river transport – onto freight barges that had been specially constructed the previous year – to extraction sites under construction in the Caspian Sea.

Russia and Ukraine

Strong demand in the oil and gas industry also enabled Panalpina to achieve robust growth in Russia, but higher general freight flows also contributed. Four major global customers from the hitech and retail and fashion industries chose the Group as new logistics partner in 2006. A new ocean freight office was set up in St. Petersburg to serve the local market even more efficiently. Another new branch has been operational in Irkutsk since October. Its main focus is on handling the increasing number of project forwarding orders connected with oil and gas extraction in Eastern Siberia. In view of the ambitious extraction projects off the island of Sakhalin, an oil company extended its logistics contract with Panalpina and a new deal was concluded with the global market leader in extraction technology. The end of the year has seen an official change of ownership for several Russian extraction projects, but this had practically no impact on Panalpina’s business, since in most cases responsibility for the challenging technological and logistics requirements remains with the existing foreign consortium partners.

Reporting Regions

North Africa

Panalpina’s main activities in this subregion are increasingly focused on Algeria and Libya, where the rise in oil prices is boosting economic development, and the leading international service companies for the oil industry are numbered among the Group’s customers. In 2006, the biggest contracts consisted of forwarding several entire extraction facilities to these two countries and to Tunisia. Panalpina introduced a new weekly char ter flight from Luxembourg to Tripoli to cope with the increasing volume of air freight being flown to Libya. The local organization is currently being restructured and strengthened, particularly the sales division, with the aim of exploiting the growing market potential in Algeria and Libya to an even greater extent.

West Africa

Oil and gas extraction makes by far the most im portant contribution to the economy in West Africa, and during the year under review the Group was again able to profit from its decades of experience in this subregion. In addition to gaining new business in Congo and Gabon, Panalpina succeeded in extending a contract with a global oil company in Angola for three years (with the option of renewing for an additional two years), and also concluded a number of deals with five other global leaders in the oil industry. The Panalpina office in Cabinda has been expanded, as there will be increased extraction activity during the next two years, including the planned extension from 9 to 17 offshore facilities. A new branch was opened in Lobito,

and the airport office in Luanda is set for expansion in 2007. In view of the market potential, the number of people employed in Angola has increased from 193 to 270. The supply service run by Panalpina along the coast of West Africa to serve oil and gas customers now uses six rather than three ships.


Reporting Regions

The restructuring of the North American organization implemented in 2005 can be regarded as a great success. The target of breaking even for the year under review was clearly exceeded, and the business is now back in the black.

Slimmeddown management, new leadership

The US organization again achieved a noticeable increase in profitability and sales through streamlining regional management, reorganizing the local and branch office structure, improving staff training and consolidating business with similar requirements. An able successor to Peter Merath, who is taking wellearned retirement on 1 February 2007, has been found in Karl Weyeneth (42). The latter will push ahead with developing the regional business further.

Big increase in US imports

The USA’s everexpanding trade deficit was again reflected in a sharp rise in imports during the year under review, particularly from China, Japan, the EU and Mexico. Growth in air freight significantly exceeded market expectations. Panalpina accordingly strengthened its sales efforts and services in the freight import sector. Following a reassessment of the most important transport routes, the Group now considers Germany, Italy, France and India – in addition to the countries mentioned above – as key exporters to the US. Also here, Panalpina strengthened its commitment to ocean freight significantly, in view of the gradual rise in volume and a gratifying improvement in margins.

New business in the oil and gas sector and in logistics services

Two business areas turned in the strongest growth in this reporting region, the first being the oil and gas industry. Houston, one of the four global hubs, benefited from increased investment activity in this sector. Supply chain management was the other main area in which marked growth was achieved in all market segments. Contracts were signed or extended for a number of major logistics projects in Miami, on the West Coast and in Canada. The latest IT applications for warehouse management

were rolled out at the distribution centers in Detroit, Wichita (Kansas) and San Francisco. The guidelines for the selection and organization of regional subcontractors were reviewed and tightened in order to ensure optimal quality and enhanced efficiency.

SME segment again expanded

The strategic initiative to reach more customers in the SME segment began to reap dividends in the reporting year. Several valuable new contracts were concluded with internationally active SMEs, including some in the key hitech and automotive industries, thanks to closer cooperation between the sales and route planning teams.

More imports from Canada and Mexico

There was also a big rise in goods imported into the USA by road, both from its northern and southern neighbors. The majority of Canada’s positive trade balance is attributable to exports to the USA, while imports from Mexico also rose because many American companies relocate their final assembly from Asia to Mexican plants (or maquiladores) just across the US border. Panalpina was therefore able to continue its expansion in this area, making good use of the new branches that were set up near the border in 2005.

Noram Regional Competence Center Based in San Francisco

Net revenue: CHF 1,699 million

Headcount: 2,241

Branches: 78

North America

Breakeven target clearly exceededRising US imports as well as strong growth in the oil and gas sector and demand for logistics services led to a 10.6% rise in revenues, underlining the success of the restructuring measures.


Reporting Regions

Despite parliamentary and presidential elections in several Central and South American states, economic trends stayed more or less steady throughout the region. Inflation remained under control, i. e. ran at less than 5%, in all countries except in Venezuela. The generally stable situation allowed Panalpina to secure solid business growth in the reporting year.

Ocean freight exports up by one third

Panalpina witnessed the biggest surge in the ocean freight sector, where export volumes shot up by a third yearonyear. Doubledigit growth was also recorded in air shipments. Though narrowly failing to match the previous year’s figures, goods flows within the region also continued on a strong up ward trend. On the imports front – except in the case of specific brandname items, luxury commodities and hitech goods – Asia has now clearly ousted Europe as the foremost supplier of finished and semifinished products to Central and South America. Panalpina saw its business expand most rapidly in the telecommunications and automotive sectors and in the perishables market (e.g. flowers from Columbia and asparagus from Peru). The company was also entrusted by one of the world’s largest computer manufacturers with the management, as of January 2007, of its entire warehousing and distribution logistics for the Mexican market.

Major oil and gas as well as mining projects

Panalpina was able to expand its logistics operations for a number of largescale projects in the oil and gas and mining sectors, with further growth definitely on the cards for the future. A sizeable new contract concluded with a regional oil company enabled Panalpina to push up its market share in Columbia and thereby assume market leadership in yet another country. Panalpina’s many years of experience with deepwater offshore rigs in Africa also helped it to land a contract for the first highprofile oil production scheme in Brazil. On one of Peru’s biggest copper mining projects, Panalpina is coordinating the entire supply chain for the relevant building contractor. In the reporting year

alone, this involved the doortodoor shipment of 130,000 tons – equivalent to over 5,000 truckloads – of material. Further investment, in the order of several hundred million dollars, is planned by the mining company with the aim of trebling production at the site over the next three years.

New branches, centralized service provision

The wholly positive results in establishing ties with small and mediumsized enterprises prompted Panalpina in the year under review to extend its network of customerfocused call centers, originally set up in 2005, to cover a total of 12 countries. 2006 also saw the establishment of central finan

cial service centers for the Andina and Central American subregions, to complement the one opened the previous year in Brazil. A similar center is planned for the Mercosur area in 2007. The new operational service center launched in Brazil will be followed in 2007 by two further facilities in Mexico City and Bogota. The reporting year also saw a further refinement of the regional branch network, with new offices starting up in Monterrey (Mexico), Curitiba and Porto Alegre (Brazil). Also, a new logistics warehouse was opened in Manaus to meet all of the distribution needs for overland shipments within Brazil.

Latam Regional Competence Center Based in São Paulo

Net revenue: CHF 670 million

Headcount: 1,988

Branches: 65


Rising exports and consistently high freight volumes within the regionMajor oil and gas production and mining projects, as well as an upswing in exports and new logistics contracts in the hitech and automotive sectors, helped Panalpina to achieve a revenue growth of 1.2%.

�0 Panalpina Annual Report 2006

Reporting Regions

Apac Regional Competence Center Based in Bangkok

China / Taiwan Regional Competence Center Based in Shanghai

Net revenue: CHF 948 million

Headcount: 2,546

Branches: 92

Registering a 10%plus jump in GDP, the Chinese economy continued to boom in the reporting year, with knockon effects for goods flows across virtually all sectors.

Palpable growth on all shipping routes to and from China

On the back of the continuing upswing, Panalpina recorded doubledigit rises acrosstheboard and some even massive increases in air freight tonnages and ocean freight volumes. The number of shipments in northern and central China was nearly 20% up, with aboveaverage rises in air exports and ocean imports. The number of air shipments transported from what is currently the most dynamic economic region, China’s Pearl River Delta area, actually rose by over a third. Panalpina arranged some 200 fullfreighter flights from China on top of its regular freight shipments with commercial airlines just to meet the demand peaks during the busiest season. Despite the continuing uptrend in freight volumes also on routes to North America (+10%), Latin America (+20%) and the Amec countries (+30%), the ChineseEuropean links, which account for over 50% of cargo, remain Panalpina’s main focus for the time being.

Africa’s thirdlargest trading partner already

Having risen fivefold in only six years, China’s trading volume with Africa hit a record USD 50 billion in 2006, a figure set to double by 2010. This now makes China the African continent’s thirdlargest trading partner, after the USA and France, underlining the growing importance of this trade route. Panalpina’s decadesold African branch network enables it to offer its Chinese customers a wide variety of attractive forwarding and logistics services, and the Group is ideally positioned to reap further benefits from this burgeoning market in the future. Nonetheless, the growing demand for other African destinations will necessitate the provision of new air and sea routes together with a suitable enlargement of the network in the medium term.

Sustained demand for logistics solutions

Panalpina witnessed an appreciable expansion in business in all key industries. In the automotive sector, where in 2006 China overtook Japan as the world’s second biggest market and will become a formidable player in the export market to Europe and the USA, Panalpina recorded growing demand for integrated supply chain management solutions. In 2006, the company managed to clinch profitable contracts with several global suppliers and a bigname German automotive group. Elsewhere too, specifically in the hitech, telecommunications and retail and fashion markets, Panalpina was able to strengthen its market position by renewing a number of major contracts and winning new business, with an increasing number of SMEs joining the key global accounts in the Group’s customer base. Demand was also on the rise in the children’s toys, consumer goods and petrochemical sectors.

Continuing increase in goods flows to and from the boom regionSpearheaded by China, most countries in the region continued to register strong economic growth. Panalpina capitalized on the favorable climate and on clients’ staunch confidence in the Group’s services to record an impressive 15.6% growth in revenue.

Asia / Pacific

Panalpina Annual Report 2006 �1

Reporting Regions

Southeast Asia and Oceania

Though not quite on a par with China, economic growth in this subregion was generally healthy, with a number of developing markets such as Vietnam performing particularly well. The political instability in Thailand and the Philippines had no noticeable impact on cargo volumes. In both air freight and ocean freight, Panalpina again managed to outstrip the average market growth. A particularly sharp rise was observed in air freight exports on the main routes from Singapore, Bangkok and Seoul to Europe and the USA. The strong market growth also served to boost the volume of intraAsian air and ocean cargo flows. Major new business won by Panalpina in the reporting year included sizeable contracts with four globally operating mobile phone producers and three hitech manufacturers. Favorable trends also spawned new business in the automotive industry (two new key accounts) and the retail and fashion sector (three new key accounts). Panalpina was also commissioned by a global leader in the sportswear market to develop and implement a concept for the consolidation of freight from the region. Having scooped two substantial new contracts in Singapore and Indonesia along with a number of other attractive deals in Vietnam and Thailand, the Group was able to defend its market leadership in the oil and gas industry. To enhance the services provided for this sector also in Australia, a new branch was opened in Perth.

South Asia

Benefiting from the extremely positive climate in the similarly buoyant South Asian economy, Panalpina managed to increase turnover in this subregion by well over a third in the year under review. Business trends in India were particularly dynamic (see report on page 32) and remain promising well for the future. Particularly encouraging were the substantial growth in air freight and ocean freight volumes and the rising logistics demand from global clients and larger SMEs.

Production of extraction facilities climbing

Given the country’s huge energy demand, Chinese energy companies are increasingly investing in major extraction projects in different parts of the world. While most of the investment to date has been purely financial, the market still holds interesting prospects for Panalpina’s Oil and Gas division due to China’s growing prominence as a manufacturer of production platforms. In the year under review, Panalpina duly shipped some 30 complete installations plus additional plant items (the total weight exceeding 150,000 freight tons) by sea from Shanghai to various sites across the globe.

New regional breakdown

To maximize the benefits afforded by China’s immense economic momentum, Panalpina further refined its regional structures. Following the successful hivingoff of the China / Taiwan subregion in 2005, this was further subdivided into three areas – the Chinese mainland (PRC), Pearl River Delta (PRD) and Taiwan – in the reporting year. Newly opened facilities in Weihai, Wu han and Zhongshan brought the total number of field offices in China and Taiwan to 28. Mounting demand from customers necessitated an extension of the office and warehousing premises in Hong Kong, a strengthening of the workforce in Guangzhou and Shenzhen and the leasing of a new warehouse in Yantian (Shenzhen). Additional 100%owned operational branches were set up in Nanjing, Ningbo and Chengdu, with further startups planned for 2007.


India has always exerted a particular fascination on the West. This started long before Hermann Hesse’s books became popular, or famous musicians undertook spiritual quests in the 1960s. For centuries before that, the richness and variety of this vast country drew people from all over the world, so that the population is now a mixture of countless ethnic, cultural and religious groups. India has over one billion inhabitants who between them speak about 20 regional languages and over 1,000 dialects in addition to Hindi and English. Hinduism is the most widespread religion, but there are also significant Buddhist, Jain, Moslem, Sikh, Christian and Jewish minorities. Religion and State are now separate, and great emphasis is placed on protecting the rights of religious minorities. Given this immensely varied ethnic, linguistic and religious backdrop, it is hardly surprising that Indians are so open to the rest of the world. That is one reason why the country has been going through an unparalleled economic boom in recent years.

India is one of the fastestgrowing economies in the world, having generated an annual growth of 8% for some years now. Political reforms, investment in infrastructure and education, tax incentives for foreign companies and the creation of special economic zones (SEZs) should ensure that the boom will continue for a long time to come. According to a report by PricewaterhouseCoopers,

a total of EUR 18.7 billion will have been invested in SEZs by 2009, creating up to 500,000 new jobs. The biggest flows of investment funding are ex pected to go to the IT, pharmaceuticals, biotechnology, textiles, petrochemicals and automotive sectors, although service industries will also have access to SEZs and the tax breaks they offer. Sixty of these zones are currently being created or are at an advanced stage of planning.

Marketplace India

Soon to be the world’s thirdlargest economyIndia is seen as a challenging market for logistics companies, as it requires a high degree of innovation and flexibility – especially given the phenomenal yearonyear growth posted by the Indian market. Panalpina has been running an operational organization on the subcontinent for over nine years now, and is excellently prepared for the forthcoming challenges.

Delhi

Ahmedabad Kolkata

Hyderabad

Chennai

Cochin

Bangalore

Coimbatore

Pune

Mumbai

Tirupur

Panalpina Annual Report 2006 ��

Marketplace India

Heading for the top three

Many experts believe that India will be the world’s thirdbiggest economy after the US and China in about 25 years’ time. The Global Economics Paper No. 152 (January 2007), published by Goldman Sachs, predicts that the Indian economy will continue to achieve annual growth of 8% until 2020,

and will overtake the US in terms of GDP before 2050. The authors base their forecasts on the assumption that the government will go on introducing measures aimed at stimulating growth. The other reason for their confident prediction is the fact that India is undergoing a structural, rather than cyclical, upturn. This is thanks to a massive rise in productivity on the part of private enterprise, boosted by growing competition. At the root of this progress lie economic and political reforms that have led to the opening up of the Indian marketplace, good education and high levels of investment in information and communications technology.

Rapid growth

Each year, the amount of land used for new construction is roughly equal to the total area covered by business premises four years ago. It’s a similar story for telecommunications: today, the number of mobile phones sold each month is greater than the number of telephones available throughout

the whole country at the beginning of the 1990s. Anyone who has recently visited an Indian city will be able to confirm this. Mobiles are everywhere, with people phoning each other wherever they are and whatever they are doing. Urgently needed investment in the road and rail networks is already in the pipeline. Together with an almost inexhaustible supply of labor in urban areas, this will ensure that the Indian economy continues to power ahead. According to Goldman Sachs, ten of the thirty fastestgrowing cities in the world are already to be found in India, and by 2050 some 700 million people – more or less equal to the population of Europe – will have migrated to urban areas. There should therefore be no shortage of workers for the growth industries and service sector in the foreseeable future. At the same time,

From lowwage country to engine of growthFor some time, India was seen as a lowwage country for western companies that required lowpriced manufacturing of their products for the global market, but this has changed over the years. Since the early 1990s, the government has been pushing through political and fiscal reforms leading to the opening up of markets and greater foreign investment. This was accompanied by the rise of the middle class, which is now estimated at between 250 and 350 million consumers.

Today, wellknown foreign companies manufacture goods in India for the domestic market. These include

major mobile phone manufacturers as well as their suppliers. One example is a leading global mobile phone manufacturer which has had a base in India for over ten years and has built a 29,000 m2 production facility on a huge site between Bangalore and Chennai. Its most important suppliers are also located onsite, delivering goods to the production lines on a justintime basis. This company currently employs 3,600 people there on shift work, and it is set to increase the workforce massively in the next few years. Like practically all private companies, it has a strong commitment to providing training and professional development for its staff.


Marketplace India

large sums are going to be invested in infrastructure, residential construction and the service sector.

Infectious enthusiasm

This isn’t just a question of numbers. “The sense of excitement is tangible practically everywhere,” says Kurt Breinlinger, Managing Director of Panalpina India. “People know that they are part of this success story and can make their own contribution to it.” Euphoria isn’t the right word to describe the state of mind of many Indians, particularly those who belong to the rapidly expanding middle classes. Instead, their enthusiasm is founded on selfconfidence and a tremendous belief in the future. Whereas 20 years ago many Indians emigrated for reasons of economic ne cessity, they are now staying in their homeland in order to benefit from its increasing affluence. “There is still enormous potential,” says Sundaresan Ramakrishnan, Procurement Manager at Wipro Infotech, one of Panalpina’s key customers. “India has a huge, welleducated workforce, and the conditions for economic and social progress have never been so good. Right now there’s nowhere else in the world I’d rather be than in India,” he emphasizes, his body language confirming every word. He concedes that there is still much to be done, particularly in the areas of transport infra

structure and bureaucracy. “But these problems have been recognized, and the authorities are working hard to correct the deficiencies. At the same time, privatesector initiatives are ensuring that improvements are implemented faster,” he states with conviction. Like many other companies, Wipro has set up its own foundation to respond to social needs and provide extra education and training.

Discerning customers

Wipro Infotech belongs to the Wipro group, which is one of the most successful corporations in India. Its headquarters are in Bangalore – the stronghold of the IT industry. The firm has been working with Panalpina for over seven years. Nevertheless, it makes high demands on the forwarding and logistics company. Wipro’s client list includes all the big names in the hightech and IT sector, including the main mobile phone manufacturers, as well as banks, insurance companies and many others. “We offer our customers integrated solutions, including systems maintenance. The hardware comes from countries including the USA, Ireland, Hong Kong and Malaysia. Our customers are used to receiving firstclass products and services. That’s why we expect the same from partners such as Panalpina. We cannot afford to compromise on quality!” The high demands that Indian

Panalpina in IndiaPanalpina has been operationally active in India since 1999. The company employs around 240 people and has branches in Delhi, Bangalore, Chennai, Cochin, Coimbatore, Hyderabad, Kolkata, Mumbai, Pune and Tirupur. Education and training programs are provided for newlyappointed staff. These do not simply convey technical knowledge, but also aim to familiarize the recruits with the Panalpina Group, its culture and values.

Panalpina is excellently positioned in India thanks to its status as a service company with outstanding local market knowledge and a global network. Its customer base comprises Indian companies as well as globally active key customers from the hightech, automotive, oil and gas and healthcare sectors. About 60% of business is for global accounts, mostly in the form of logistics contracts with major suppliers to the mobile

phone industry. Panalpina also looks after major customers in the retail and fashion segment, particularly fashion and sports clothing – a sector with enormous potential in India, since there are plans to build some 400 large shopping centers. More and more joint ventures are also being set up between foreign and Indian companies in the consumer goods market.

Logistics has an immensely important role to play in the Indian market. Poorly developed transport infrastructure in many areas, together with bureaucratic hurdles, present quite a challenge in terms of expertise and flexibility, particularly since the rapid availability of products and low costs are decisive factors in such a highly competitive market.

Panalpina Annual Report 2006 �5

Marketplace India

companies place on themselves and their business partners are part of their recipe for success. “We find ourselves in an incredibly competitive environment. Lead times for new products are extremely short and there is great pressure on prices. A company’s choice of logistics provider and the services it offers therefore contribute directly to a company’s success or failure.” The Wipro manager leaves us in no doubt that in India people don’t rest on their laurels but constantly seek new and cheaper solutions. The services provided by partners are regularly reviewed and evaluated, in all areas. A good sales organization is important for acquiring customers, but if it is to keep them, a company needs to demonstrate operational excellence.

India – more than just IT

Not long ago, India was equated with the IT sector and perceived chiefly as an offshore center for the West. This no longer applies, although information technology is still a vital contributor to the Indian economy. The IT company Infosys, for ex ample, has regularly beaten its own records for years. Founded 24 years ago with 200 employees, the Nasdaqlisted company now has a workforce of over 20,000. Its huge campus in Bangalore contains 43 buildings set in parkland, including offices, fitness centers, training rooms, leisure facilities and banks. Training and professional de velopment have high priority, with every employee having to complete annual training courses and tests. The whole economy benefits, since foreign companies, which invest enormous sums, also depend on having access to a good supply of welltrained employees. The time is now over when India’s main attraction was its low wages. The huge domestic market with its sizeable middle class acts as a magnet for international companies from sectors such as telecommunications, hightech, automotive or fashion and sports clothing. All these companies, along with the products and the hundreds of thousands of jobs they create, are helping to ensure that India’s progress towards being a global economic power is proceeding rapidly.


“Rapid tonnage growth: one million TEUs exceeded for the first time ever.”

Core Activities



Air Freight

As expected, positive economic trends throughout the world generated further increases in air freight volumes during the year under review. And yet again, Panalpina succeeded in growing faster than the market as a whole.

Asia: still the strongest growth region

As production centers in Asia continue to increase in importance, flows of goods from this region once again posted the largest increases in 2006. Panalpina succeeded in increasing its market shares, especially on the Asia – EU and Asia – North America routes. There has also been a sharp rise in domestic traffic within China and Asia, which could well become even more important in the near future. The same applies to the China – Africa route, on which Panalpina opened a new link in 2006 via Dubai. Further links are planned in the medium term.

Troublefree highseason coverage

Several improvements – particularly affecting the transpacific timetable – were introduced in the light of changes in demand and increased network reliability. As a result of targeted capacity increases in the adhoc chartering, and also thanks to im proved planning processes, all the demand peaks in the 2006 high season were once again weather ed without difficulty. Increased oil and gas extraction activities led to a noticeable increase in the demand for specialized air freight capacities on routes to various remote destinations, principally in Africa and Central Asia.

Increased concentration on preferred carriers

Panalpina does not own any cargo aircraft. Instead, in accordance with its assetlight business model, it cooperates with the best airlines throughout the world. During the year under review, in line with its proven purchasing strategy and carrier policy, the Group concentrated still more closely on a small group of carefully selected preferred carriers. There was an increase in the proportion of overall capaci ty accounted for by commercial airlines (operating on fixed timetables), whereas the percentage of owncontrolled capacities (fully chartered by

Panalpina) in their entirety slightly fell. Despite this, the owncontrolled network again generated significant added value for certain customers, in particular those sending freight at peak times and those dispatching special freight or consignments to remote destinations. Having this freight capacity at its sole disposal makes Panalpina the only global carrier with a charter division – operating 24 hours a day and 365 days a year – available to customers at any time, also for adhoc and emergency assignments.

Further refinement of services and processes

During the year under review, in the light of increased demand for individual customer solutions rather than predefined products, Panalpina increased the flexibility of its product structure and continued to optimize its operating processes. With the objective of matching the purchase of commercial freight capacities still more closely with individual customer needs, decisions on purchasing commercial capacities were delegated to individual countries, increasing their customer proximity. Hubs and gateways, with the exception of Luxembourg and Dubai, were reintegrated into the local organizations. The control and management of overall air freight capacities, however, remains with the triedandtested central capacity management. This is supported by Panalpina’s Airwarder software, which guarantees optimum capacity utilization and full coverage at peak times.

Successful expansion of market position: sharp rise in tonnagePanalpina transported a total of 874,000 tons of air freight in 2006 to confirm its position as the global number three in the sector. This increase of 10.5% being substantially ahead of growth in the market as a whole, Panalpina continued to increase its market share.

Core Activities

www.panalpina.com/air

Estimated air freight growth 2006–2010

Europe–AfricaAfrica–Europe

Europe–AsiaAsia–Europe

Source: IATA

Growth in percent

5.4

4.7

6.6

4.7

3.7

6.7

5.0

4.1

4.0

3.8

Intra-Latam/Caribbean

Europe–Middle EastMiddle East–Europe

Intra-Europe

TransatlanticTranspacific

North America-Latam/Caribbean

Europe–Latam/Caribbean

Intra-Asia


Core Activities

Ocean Freight

As in previous years, the biggest share of the global volume growth in the year under review was generated by the three most important routes: westwards from the Far East, eastwards across the Pacific, and freight movements within Asia – reflecting the huge significance of Asia, and of China in particular. But transatlantic routes also developed well, as did those linking Europe and Asia to Latin America.

Successful capacity management

Freight capacities on transport routes in heavy demand are regularly in short supply at peak times, which means that constructive longterm relations with selected carriers – which Panalpina has maintained for many years – play a key role. Some 55% of the Group’s overall ocean freight volume is now transported by six global shipping companies, all of which feature in the topten sector. The systematic care and maintenance of these partnerships with selected shipping lines facilitates growth on all routes, while simultaneously ensuring that Panalpina can deliver services at its customary high level. In order to maintain its leading competitive position, Panalpina assigns a high priority to joint measures designed to increase efficiency and productivity.

Dynamic market development

The various markets developed along different lines during the year under review. Rate erosion on the route from the Far East to Europe during the first halfyear was countered by carriers with a successful attempt to restore rates to profitable levels as freight volumes increased. On some subsidiary routes, however, freight rates came under increased pressure, because the deployment of new, ever larger ships on the principal routes – in a cascade effect – displaces the ships that used to be the largest and forces them onto less important routes, where – in their turn – they have the effect of in creasing capacity. In these difficult market conditions Panalpina succeeded in supporting both shipping lines and customers by means of cooperative approaches.

Improvements to service and organization

A closer focus on the lessthancontainerload (LCL) market segment brought Panalpina several significant items of new business in 2006, mainly because of the heavy demand for its own consolidated containers. The Group is thus well placed to continue to increase its market shares in this area in 2007. Taking account of all regional needs and market potential, the Group intends to broaden its existing range of services significantly in 2007. Preliminary work on this progressed well during 2006. As a sideeffect of the successful restructuring in North America in 2005, ocean freight also benefited in 2006 from the initial increases in efficiency and productivity – as well as from improved customer service. Further progress in these areas is expected in 2007.

Rapid tonnage growth: one million TEUs exceeded for the first time everThanks to a 17.4% increase in volume – significantly ahead of market growth – to 1,084,000 TEU Panalpina remains the world’s fourth largest ocean freight provider. Its attractive range of services has been further expanded.

www.panalpina.com/ocean

Estimated ocean freight container growth 2005–2009

Noram

Source: Drewry Container Market Review, 2005/2006

Growth in percent

Oceania

Far East

East Europe

Southeast Asia

10.5

11.7

6.9

10.9

10.2

10.79.1

7.07.7

19.7

LatamAfrica South Asia

MiddleEast

West Europe


IT backed monitoring of the entire supply chain

Nowadays, realtime monitoring of freight across the whole supply chain is essential, not only in complex directtomarket contracts but also in more straightforward logistics operations. This is why Panalpina’s sophisticated IT systems are responsible for roughly half of customer contracts being clinched. The Group offers Internetbased consignment tracking, reporting and logistics management software plus integrated applications for order and warehouse management. Any discrepancy in the transport chain, however slight, causes the event management system to send an automatic message to the client. Transparency is enhanced by stock control and supply chain management visibility applications.

Lead logistics provider vs. contract logistics

Assetlight flexibility rather than highrisk infrastructureUnlike its chief competitors, who use their own infrastructure to provide most of their contract logis-tics and are often forced into risky investments, Panalpina consciously minimizes the amount of resources tied up by its supply chain management operations. As lead logistics provider, it focuses on the service aspects of these complex contracts, delegating subtasks, wherever possible, to a select group of firstclass supply partners. In successfully implementing this strategy, the Company draws on many years of experience in subcontractor management across all geographical regions. Not only does this flexible approach minimize capitalintensive investments in warehouses, truck fleets etc., it also affords Panalpina a competitive edge by enabling the Company to respond swiftly to marketdriven shifts in demand.

Core Activities


The unbroken trend towards outsourcing is making production and supply chains ever more complex. Against this backdrop, net forwarding revenue in supply chain management has surged forward again in the year under review thanks to a large number of new contracts (see Reporting Regions).

Broad range of logistics services from a single source

Panalpina offers comprehensive solutions in the field of logistics and supply chain management, but only in conjunction with air freight and ocean freight. This interlinking of its three core activities is a central element in Panalpina’s strategy. Experience has shown that this approach promotes customer loyalty, generates synergies and taps into new sources of potential for all three areas of activity. The logistics services offered comprise warehousing, secondary distribution, justintime and justinsequence delivery, along with addedvalue services such as order management, re packaging, order picking, labelling and reverse logistics.

Innovative directtomarket solutions

In 2006, Panalpina scored resounding successes with a number of new approaches, offering clients more flexible freight distribution while reducing their working capital. With this “directtomarket” concept, clients can dispense with highrisk warehousing because Panalpina looks after the delivery of the products right through to the endcustomer while “storing” and controlling stocks “on the way”, i.e. during the transportation flow. This approach is proving to be highly popular in the hitech and retail and fashion sectors in particular. For example, the Group delivers a computer manufacturer’s products right to the consumer’s front door in Europe, and ships bulky hospital scanners weighing several tons each straight to American and Australian hospitals, where it also supervises the laborious task of installation.

Logistics revenues boosted by attractive solutionsThe net revenue growth of 4.7% to CHF 1,196 million, is proof that Panalpina’s logistics services enjoy great popularity among customers. And thanks to new and innovative approaches, the Group still sees considerable potential for the future.

www.panalpina.com/logistics


“The balance between large, medium and smaller customers enables Panalpina to pursue sustained growth.”


Customer Groups


Market Focus Oil and GasUSD 6.2 trillion investments until 20�0

“Total investment in the global oil industry will amount to almost USD 3.1 trillion over the period 2001– 30, with 72% of this devoted to exploration and development for conventional oil. Cumulative investment in the natural gas supply chain over this period will also be USD 3.1 trillion, more than half of it in exploration and development. A substantial proportion of all this energy investment is required simply to maintain the present level of supply. Oil and gas wells are de pleting, power stations are becoming obsolescent and transmission and distribution lines need replacing. Much of the new production capacity brought on stream in the early years of the projection period will itself need to be replaced before 2030. Extraction costs, including those incurred in exploring for reserves, will account for most of the investment in the fossilfuel industry.”

International Energy Agency: World Energy Investment Outlook

The key industries in which Panalpina has sector experience, that in some cases goes back several decades, are hitech, automotive, healthcare and retail and fashion. Additionally, the Group has for years been the world market leader in the field of logistics solutions for the global oil and gas industry’s supply chain. What all these sectors have in common are complex, largely outsourced production processes, and distribution channels that are broadly diversified on a global scale. They therefore offer market potential that will grow in the medium to long term, and, as such, they are crucially important to Panalpina.

Balanced customer structure for sustained growth

Panalpina’s clients include companies ranging in size from internationally active small or midsized to major global corporations, many of which are world market leaders in their respective sectors. This balance between smaller, medium and large customers is strategically important to the Group and has been successfully maintained for a number of years. It enables Panalpina to pursue balanced, sustained growth.

Based on this balanced structure, the customers, in turn, can often profit from valueadded knowledge transfers which Panalpina offers from its broad experience in all areas of freight transport and supply chain management. Thus also smaller to mediumsized companies make regular use of the knowhow and the infrastructure which Panalpina has built and successfully implemented in the course of challenging, tailormade and often groundbreaking logistics solutions for its global key customers.

Customer GroupsThroughout the world, Panalpina serves diverse customers in a broad range of sectors. At the same time, it focuses on a number of highly globalized key industries with special requirements in terms of forwarding and logistics.


Customer Groups

Oil and Gas HiTech

Having been concentrating on the oil and gas industry for four decades, Panalpina is today’s global market leader in supply chain solutions for this sector.

The transportation needs of the oil and gas industry require highly complex solutions and specialist skills. Based on its leading market share and solid customer relationships, its 40 years track record and reputation as well as its sector capabilities (e.g. specialist engineers), Panalpina is in a uniquely strong position globally to provide freight forwarding services for this industry. In 2005, the Group has further strengthened its position through two bolton acquisitions in Singapore and Norway.

Panalpina’s oil and gas offering is managed through a global industryfocused structure via its dedicated competence center. The Group’s range of services is predominantly covering the upstream, i. e. explorationrelated activities. These highquali ty, safe, and environmentally responsible services go well beyond traditional freight movement and include complex supply chain solutions as required by customers serving the industry.

The continued high level of oil prices, geopolitical constraints, new technologies and rising concession costs have led many oil companies to make enormous longterm investments and commitments, which positively impacts Panalpina’s growth opportunities in the oil and gas sector. The management believes that further growth opportunities will come from the relatively untapped markets such as Russia, Central Asia, and North Africa, where Panalpina has already established its presence in order to capitalize on these developments.

Within the hitech segment, Panalpina’s global reach and industry competence offers complete supply chain integration and management.

Adoption of new technologies and universally growing broadband and mobile connectivity have meant that shorter product life cycles have become inevitable realities. These, in turn, require more complex and sophisticated transportation and supply chain services by the carriers. Typically, the hitech industry requires logistics chains linking the industry’s key EastAsian production sites with distribution operations in the rest of the world.

Panalpina is capable to meet the needs of hitech industry customers mainly due to its global reach and industry competence. It offers them not only transport services ensuring timely delivery of parts and products, but also integrated logistics solutions, from procurement to warehousing and distribution, with TAPA (Technology Asset Protection Association) certification for Panalpinaoperated warehouses and logistics centers.

Unabated technological innovations combined with the increasing potential of the world’s emerging markets to catch up with the global leaders cause solid growth rates in most fields of the hitech industry.

Selected hi-tech market segments

www.panalpina.com/oil www.panalpina.com/hi-tech

2005 2010

136

9 m

illio

n

937

mill

ion

+4

6%

210

mill

ion 4

60

mill

ion

+11

9%

190

mill

ion

44

0 m

illio

n+

131

%

Compute

rs in

use

worldwid

e

Source: e

TForeca

sts

Broad

band c

onnectiv

ity

of house

holds

Source: D

eloitt

e Res

earc

h

Mobile

phones

GSM

-

broad

band s

ubscrib

ers

Source: I

nform

a Te

lcom

s & M

edia

Mobile

ent

erta

inm

ent

mar

ket p

otent

ial (

in USD)

Source: I

nform

a Te

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s & M

edia

15 b

illio

n

42 b

illio

n+

180

%

Forecast of worldwide development 2005– 2010


Customer Groups

www.panalpina.com/healthcare www.panalpina.com/automotive

Focus on the marketMedical technology – a growth sector

“From a global perspective, medical technology is an extremely highpotential sector of industry for various reasons. In developed economies, by far the most important driver is the aging of population and the associated increase in demand for medical care and services. (…) The extra demand generated by the aging of the population, coupled with technological advances, adds up to almost inexhaustible demand potential for medtech products. (…) Fast developing emerging economies – such as China and SouthEast Asia – constitute enormous growth markets for the medical technology.”

UBS Outlook 2 / 2005

Healthcare

To its customers from the healthcare sector, Panalpina provides justintime delivery to globally located destinations and the highest standards for safeguarding the integrity of pharmaceutical products in transport.

The healthcare industry is facing increasing pressure to grow profits by bringing new products to the market in a faster and more efficient way. Growing research and development efforts and the need to maintain product integrity and security lead to rising logistics and transport costs. Panalpina considers this to be an interesting business opportunity, also because of the boom to be expected as the developing economies increase the percapita spending on healthcare facilities.

Panalpina offers flexible transportation and logistics solutions by giving the customer the choice of mode of transportation depending on urgency and consignment size: air freight, ocean freight, road and courier services. Panalpina also offers valueenhanced services, such as order confirmation, consignment documentation and forwarding procedures that meet the industry’s hygiene, temperature and pressure requirements through the entire supply chain.

Automotive

Panalpina renders its automotive industry customers with transportation and logistics services that enable them to optimize their supply chains, to meet tighter production schedules and to operate on the basis of a lean inventory management.

The challenges of the automotive industry are justinsequence and justintime supply systems, where the delivery of components from a variety of companies based in different countries must be carefully coordinated to ensure a smooth manufacturing and assembly process. This challenging task requires expertise in information design, process planning and operations efficiency.

Panalpina’s services aim to deliver quality solutions at the lowest costs with the flexibility demanded by the world’s leading vehicle manufacturers and their suppliers. The Group offers the development and implementation of finetuned supply chain solutions with integrated air and ocean freight services to the automotive industry to ensure the proper functioning of such complex supply chains. It also offers automotive companies comprehensive service packages for the operation of distribution centers and warehouses, thus optimizing the customers’ supply processes and data transfer.


www.panalpina.com/retail

Customer Groups

www.panalpina.com/projects

Focus on the market Accelerated growth forecasted

“The global apparel, accessories and luxury goods market is forecast to accelerate its expansion, with an annual growth of 4.4% for the period 2004 – 09 set to carry the market to a value of USD 1.3 billion by the end of 2009. This enhanced performance will be derived from the increasing strength of the menswear sector, added to the improving consumer spending patterns in Europe. Further growth will stem from the AsiaPacific’s developing markets. The performance of the global textiles market is forecast to accelerate, with a growth rate of 3.6% for the period 2005 –10 expected to drive the market to a value of USD 290 billion by the end of 2010. Comparatively, the European and AsiaPacific markets will grow with 1.7% and 4.2% respectively over the same period, to reach values of 74 billion and 140 billion in 2010.”

Datamonitor Market Research Profiles: Global Apparel, Accessories & Luxury Goods Market Overview, May 2005, and Global Textiles Market Overview, October 2006

Retail and Fashion

Panalpina provides transport and logistics services tailored to the needs of the retail and fashion industry, which is characterized by constantly changing trends, seasonal demands and short delivery periods.

Few industries are as dynamic or energetic as the retail and fashion sector with its shortlived waves and trends, its fast changing demands and its ever tighter deadlines. This exceedingly globalized industry needs timedefinite delivery from manufacturing sites predominantly located in Asia to Europe and America.

Panalpina’s retail and fashion competence center provides a large global customer base of both suppliers and retailers. The Group’s tailormade transport and logistics services address the special requirements of this industry by ensuring time definite delivery and allowing customers to track the progress of their shipments at all times. As an experienced provider of complex supply chain management concepts, Panalpina’s solutions include services such as warehouse management, orderpicking, packaging and repackaging, labelling, vendor and order management and inventories.

Industrial Projects

Based on its worldwide organization and its air and ocean freight transportation capabilities, Panalpina offers integrated logistics turnkey project forwarding and management services to various industries on a global scale.

The construction of plants and other big projects as well as the manufacturing of bulky equipment and modules may present very challenging and complex logistics and forwarding problems as they often require the transportation of very heavy and oversized loads.

Panalpina’s dedicated project competence center under the name of Panprojects is based in Bremen (Germany) and encompasses more than 150 specialists worldwide. They develop transportation solutions that allow fast and secure shipment of plant parts and other bulky and oversized goods used in a great variety of projects.

Panprojects provides its tailormade services to various engineering procurement and construction companies. It also specializes in serving the mining industry and their suppliers on mining emplacements and extensions. To the power and energy sector, Panprojects provides solutions for the supply of large generating plants and wind parks. Moreover, it offers its services to miscellaneous manufacturers and suppliers of other industrial plants, heavy and overdimensional equipment and modules.


Sustainable Growth “Panalpina sees entrepreneurial responsibility as an all-embracing obligation that becomes part of the daily lives of both management and employees.”


Sustainable Growth


Sustainable Growth

Panalpina sees no contradiction between an entrepreneurial attitude and sustainable action. The Group bases its operations on economic, securityfocused and ecological principles that foster its longterm business success in as comprehensive a way as possible. Panalpina sees entrepreneurial responsibility as an allembracing obligation that becomes part of the daily lives of both management and employees. The company’s organizational structures and processes are therefore defined with a view to meeting these demands, particularly in terms of quality, security, health, safety and environmental protection.

Quality for satisfied customers

Panalpina is singleminded about ensuring customer satisfaction by boosting the efficiency and quality of its services; the quality system is therefore one of the Group’s key management tools. Panalpina is constantly checking its processes as part of a proactive strategy to ensure compliance with the latest industry standards in the face of changing market conditions and to secure operational excellence in all areas.

The Groupwide quality standards, applied uniformly to all business processes, are enshrined in Panalpina’s integrated management system. Geared chiefly to customers’ needs, this system details the organizational and operational aspects of the company’s activities and specifies standards and guidelines for all parties involved. In order to give employees even more rapid access to all documents in the management system (and in the firm’s comprehensive intranet) that are relevant to their work, Panalpina in 2006 was one of the first companies in Switzerland to introduce a search application based on the latest Google technology.

The integrated management system also forms the basis for Panalpina’s certification to ISO 9001 standards. Following the upgrade of the quality label to an acrosstheboard Group certificate for all primary markets throughout the world in 2005, the Group has in the year under review developed a multiphase internal audit training program for all of its quality managers worldwide.

The outstanding quality of Panalpina’s services is receiving acclaim from a growing number of bodies around the world. Among the awards it regularly receives, the Group is particularly proud of those given by customers or the international trade media. Ten awards were received in the year under review. For example, the global audience of three leading trade journals chose Panalpina as “Project Forwarder of the Year 2006”.

Security of entrusted goods

Panalpina has always directed particular efforts towards risk minimization, damage prevention and the maintenance of stable and predictable operational procedures. An integral approach is adopted in tackling the key issue of security, which is systematically addressed in all processes and departments to guarantee the smoothest possible completion of contracts and the safety of goods entrusted to Panalpina.

Quality, Security, HSE: Key factors for robust development

2006

2005

2004

Awards: High-profile prizes awarded to Panalpina

by customers and trade media

10

5

3


Sustainable Growth

The Group regards its investments in security as a means to protecting its business base in the long term and as a foundation for sustainable development. Panalpina’s security structure is based on national and regional security officers, whose cen

tral management reports directly to the Executive Board. A broadbased raft of measures relating to infrastructure, information systems, service providers, personnel and clients ensures compliance with the most stringent security standards.

Panalpina supports various national and international security initiatives, including AMS, AirAMS and the new EU directives, while observing numerous voluntary standards such as TAPA, BASC, CTPAT, CSI and FAST. The company also collaborates on all forwardingrelated crime prevention and antiterrorism schemes. The warehouses operated by Panalpina at its hubs meet stringent TAPA requirements, while those used for storing food and pharmaceutical products are even FDAcertified. Moreover, through its subcontractor management system, Panalpina takes every precaution to ensure that its numerous agents and service providers also abide by the stringent security requirements. The annual assessment of their safety regime is one of the key criteria for their classification as a preferred Panalpina service partner.

The intensive efforts made as part of the Groupwide loss prevention program were rewarded with success once again in the year under review. Consignment loss and claim figures, which for years have been in the fractions of thousandths, fell once again relative to the steadily rising number of shipments.

Health, safety and environment

As a responsible transport and logistics firm, Panalpina regards health protection, safety at work and environmentally responsible action (HSE) as factors of strategic importance in the context of sustainable growth. The Group therefore gives a high priority to defining, implementing and monitoring relevant guidelines and standards as well as ensuring that its staff receives continuous training. These initiatives are implemented at national level by HSE managers, who instruct their colleagues, oversee compliance and promote an HSE culture within the company.

As a founder member of Freight Forward International (FFI), Panalpina painstakingly applies the association’s ecological guidelines in order to minimize the environmental impact resulting from its business operations. From the very outset, Panalpina played an active role in the creation and refinement of the FFI Environmental Code of Practice.

Further progress has been made at various levels in this area during the 2006 financial year. For example, the national organizations in West Africa North were granted ISO 14001 and OHSAS 18001 certification: a great achievement considering the highly demanding transport projects and the rudimentary infrastructure in these countries. The same certificates were also awarded throughout the Middle East, UK and Ireland as well as in Central Asia. Many of the countries throughout the world which already hold certificates passed surveillance audits by external auditing bodies.

HSE is particularly important in the oil and gas sector, which has for many years imposed the tightest safety and environmental protection requirements on its suppliers. As a rule, compliance with these requirements is the key criterion when contracts are awarded. Panalpina’s firstclass reputation in this area was confirmed by its success in winning various contracts in 2006. For example, a dominant world player in supplying the oil and gas industry handed over the entire operation of its hub center in Moerdijk (Netherlands) to Panalpina, and also commissioned it to carry out other logistics and distribution activities – not least because of Panalpina’s convincing HSE programs. The Group also was awarded the contract for an Egyptian project being undertaken by one of the world’s largest oil companies. In this case the client went out of its way to praise Panalpina, describing the HSE plan it had submitted as by far the best that it had ever seen in any of its worldwide projects.

www.panalpina.com/quality

www.panalpina.com/security

www.panalpina.com/hse


Sustainable Growth

In spite of the latest computer and transport technologies, forwarding and logistics remains a people business. That is why Panalpina regards its employees as its most important capital, and as crucial to its success. Panalpina’s firstclass reputation with its customers is based on the passionate determination of its staff to find and implement the very best solution to any transportation and logistics problem, however difficult it might be – true to the company’s motto: “A passion for solutions”.

The workforce is a decisive competitive advantage

Panalpina’s lean, assetlight business model means that our services are largely based on purchased freight capacities and rented infrastructure. This makes the international coordination and supervision of our selected subcontractors a complex and demanding task, requiring experience, creativity and a sense of responsibility at all hierarchical levels. Panalpina has the necessary qualified, motivated employees who are adept at nurturing good customer relations – and who also have the ability to react quickly and flexibly. They guarantee operational excellence, thus making a decisive contribution to our corporate development.

Natural diversity thanks to equal opportunities

Diversity and equality of opportunity at Panalpina are the natural consequences of the firm principle that posts are only filled by the bestqualified candidate. The old cliché, for example, that haulage is a classic “male sector” is refuted by the Group’s high proportion of female staff, and by the fact that Panalpina is the first global transport and logistics company to have a female CEO. Group management has a broad international base with 15 nationalities represented in the top management (Executive Committee, Regional CEOs and Managing Directors), of which twothirds are nonSwiss nationals. Four fifths of the total workforce are aged between 25 and 45, while the rest are about equally divided between under25 and over45. Half of the employees can look back on over five years’ service with the Group.

Employees Number Women Men

Europe / Africa / Middle East / CIS 7,529 38% 62%

North America 2,241 56% 44%

Central and South America 1,988 52% 48%

Asia / Pacific 2,546 50% 50%

Total 14,�04 45% 55%

Employees: At Panalpina, people use their brain power to move the freight


Sustainable Growth

Fostering further training at all levels…

About one third of all Panalpina staff hold managerial functions, in which they are supported by guidelines and tools that are uniform throughout the world. These standards include annual meetings with all employees to discuss their progress and their careers, as well as the active encouragement of initiatives to stimulate feedback and suggestions from the workforce. Under the name Panacademy, the Group has for many years offered a widely diversified range of professional training courses, enabling its employees to bring their expertise up to the highest industry levels.

… including management

It’s not only employee training that Panalpina takes seriously: it also offers its many talented managers a program designed to develop their potential. During the year under review, 172 managers completed the first module of this triedandtested training package, while 56 completed the second. The launch of a third module is scheduled for 2007. This will offer supplementary courses to top managers, from managing director level up.

Sustainable development of management potential

In addition, 2006 saw the initiation of a structured, qualitycontrolled program to groom the successors to the Group’s current generation of managers. With the assistance of an external assessment company, this is designed to ensure that wherever possible, key managerial positions can be filled even more successfully with suitable internal candidates. This places the retention of internal expertise and the sustained development of experienced middle and senior managers on a sound longterm footing.

Performancerelated salary models

Panalpina is seen as an attractive employer within the sector, not least because due to its willingness to reward aboveaverage performance. Panalpina’s competitive salary models are based on performance incentives linked to the operating targets

of the Group, the region and the relevant business unit, while also taking account of individual performance targets. Senior managers were allocated share options at the time of the Group’s flotation in 2005 to enable them to participate in its success, and in 2006 this was followed by a similar program for managers on the next level down (see page 65). This also met with great interest.

Number

Nationalities in top management

Switzerland

Germany

USA

Netherlands

18

10

France 3

China

Canada, Columbia, Denmark, Italy, Panama, Sweden, Spain, South Africa, United Kingdom

2111 1 1 1 1 1 1

5

3

38%

12%

19%

14%

17%

Participants in training programs for managers

North America


Asia / Pacific

Europe /Africa / Middle East / CIS

Head office (Basel)

www.panalpina.com/jobs


Sustainable Growth

Efficient forwarding and logistics operations would be impossible without rapid global transmission of in formation. In this field too, Panalpina is recognized as a leader and continues to invest in expanding its market position. Smooth transportation flows save costs, reduce environmental pollution and help optimize the use of employees’ competence. Panalpina’s leading position in developing and implementing logistics software is an important pillar of sustained growth and fosters longterm added value for its shareholders. For decades, Panalpina has been one of the principal players in the use of information technology in the transport and supply chain management industry. Since the middle of 2005, the Group has been gradually replacing its legacy systems with the latest software, based on serviceoriented architecture (SOA), in the interests of sustainable development. This gives the Company the flexibility it needs to map specialized services and product requirements in the context of modern logistics.

A common platform for air and ocean freight data

The worldwide launch of the two systems Airwarder and Seawarder (for air and ocean freight respectively) that Panalpina has developed for an efficient handling of purchasing, managing and billing of freight capacities, took place on schedule in 2006. This was the start of a “new era” for Panalpina, which plans to continue gradually replacing some older IT systems with software that operates on a new open architecture. Using the FOS forwarding system, another inhouse creation, all information flowing in from operational application systems (air, ocean and land transport plus logistics) is stored and linkedup in a central database. This technology enables parallel developments and the rapid, secure and productive use of new applications. Following the global launch in 2005, a new FOS

release with additional features was rolledout worldwide in the year under review, offering further improvements to productivity, data quality and customer service.

Sectorspecific logistics solutions

Panalpina offers supply chain management systems based on modern IT solutions to meet the complex logistics requirements of hitech, automotive as well as the retail and fashion industries among others. The number of customers using this opportunity to control purchasing processes and stock levels in real time by means of automated electronic data exchange rose again in 2006. Panalpina’s webbased applications enable all interested parties (customers, suppliers and subcontractors) to access data relevant to them, whenever and wherever they wish. This complete overview allows customers to consolidate their goods for dispatch more efficiently, thereby reducing shipping costs, decreasing pollution and increasing process quality.

More comprehensive and transparent reports

The success the company has had in recent years with SAP software (Business Data Warehouse) for accounting activities led it to decide to use this software for all of its reports in 2007. As a result, important key figures and statistics from operations and sales (particularly customer relationship management data) will be made available for reporting purposes, more rapidly and in a more transparent form.

More reliable and secure data centers

Work on consolidating the company’s original 70 data centers, which were spread throughout the world, started in 2005. Progress in the year under review was good, and the process is set for completion on schedule by 2008. At the six new locations, longterm leases have been taken out for computing center sites that meet the highest security standards and offer complete disaster recovery in an emergency. Further substantial investments have been made to protect central IT services and regional networks.

Information technology: Powerful, modern and secure systems


Sustainable Growth

Since 2003, in collaboration with the Swiss Red Cross, Panalpina has made substantial financial contributions to a longterm program to combat povertyrelated blindness in Ghana – with visible success. Besides its direct commercial obligations to all stakeholders, every company also bears social re sponsibilities that extend much further. A globally active group must ask itself how and where it should commit itself to improving humanity. Panalpina decided at an early stage to focus its social sponsorship on a single sustainable program to deliver effective, measurable aid. To Panalpina, it is of additional importance to contribute to the development of a region in which it is active and knows the local conditions well.

Since 2003, the Group has therefore been supporting a longterm program to combat povertyrelated blindness in Ghana. This initiative is part of the Vision 2020 – Right to Sight global commitment, through which the World Health Organization (WHO) aims to eliminate povertyrelated eye diseases throughout the world by the year 2020. Having been active in West Africa – where these diseases are widespread – for several decades, Panalpina wishes to make an effective contribution to the campaign.

Conducted by the Ghanaian and Swiss Red Cross, the program has the longterm objective of providing full, effective basic eye care at regional and local levels as part of Ghana’s healthcare system. Panalpina’s aim as a partner is to help to achieve the ambitious intermediate objective of halving, by 2010, the number of patients suffering illnesses

leading to blindness. Since the project began, three regional eye clinics with local outstations have been set up in collaboration with the Ghana Health Service (GHS). By the end of 2005, these clinics had already treated 193,000 patients, while outreach teams had examined another 80,000 people in rural areas, and 56,000 children in schools. Medical treatment was provided for those who required it.

While the infrastructure was successfully established over the past period, with specialist medical personnel being given basic and advanced training and healthcare programs being set up, the year under review saw a substantial rise in the number of examinations conducted. In 2006, a total of 243,242 Ghanaians received treatment: 88,938 in 22 static clinics, 71,714 by specialists visiting rural areas and 82,590 children during visits to schools. In the same time, 1,533 cataract and 1,141 other operations were conducted, and 555 volunteers and school health teachers were trained. 2006 therefore marked another major milestone on the road to achieving the objectives of Vision 2020 in Ghana.

www.panalpina.com/society

Social commitment: Helping people see the future


Sustainable Growth

Panalpina sees entrepreneurial responsibility as a multifaceted obligation that must be part of the daily lives of both management and employees. The Group defines its organization, processes and internal guidelines in such a way as to ensure that the company is in a position to meet this obligation at any time. The activity of a global forwarding and logistics group is particularly closely connected with all aspects of advancing globalization. Panalpina’s activities are therefore conducted in accordance with economic, social and cultural principles that are, in the most comprehensive sense possible, conducive to sustained business success.

The success of the Group is based on the contributions of all employees, and on cooperation amongst the most diverse personalities and talents to generate new, creative business opportunities. Panalpina therefore maintains a healthy, attractive working environment in which every individual feels responsible for the company’s reputation and its success. Panalpina attaches great importance to a corporate culture in which the rights and dignity of all employees are respected – regardless of their origins, beliefs or lifestyle.

At Panalpina, however, the importance of mutual respect and fairness is not limited to internal relations. Wherever they transact business, representatives of the company are also required to uphold ethical standards in their daytoday contact with customers, suppliers, competitors, official bodies and the public in general.

During the year under review, preexisting internal policies were consolidated into a groupewide Code of Business Conduct. This comprehensive set of regulations contains guidelines that are mandatory for all employees. Topics covered include how to handle conflicts of interest, the avoidance of insider transactions, fair competition and dealing, the prohibition of bribery, the prevention of discrimination and harassment in the workplace, health and safety regulations and much more. Conforming to the latest standards and based on a mission statement from the Board of Directors and the Executive Board, the code of conduct increases transparency within the company – as well as the riskawareness of every individual employee. In a number of ways, it reinforces the corporate culture that is already a traditional part of the company’s operations.

www.panalpina.com/culture

Corporate culture: Taking responsibility is part of daytoday business


Panalpina is committed to a transparent management structure which is governed by international Corporate Governance principles. This Corporate Governance Report complies with the Directive of the SWX Swiss Exchange and therefore serves to provide investors with key information regarding Corporate Governance in an accessible format.

Corporate Governance: Committed to a transparent management structure

1. Group structure and shareholders

1.1 Group structure

1.1.1 Operational group structurePanalpina’s business activities are primarily regionally oriented. The operating structure is divided into the following four regional units:

• Europe / Africa / Middle East / CIS

• Asia / Pacific

• North America (USA and Canada)

• Central and South America

For strategic and organizational reasons the region Europe / Africa / Middle East / CIS has been divided into two subregions with Europe on the one side and Africa / Middle East / CIS on the other side. A similar regional split also exists in Asia / Pacific as China / Taiwan forms an independent subregion. Each of the aforementioned regions is managed by its own Regional CEO.

Secondary, the business activities are subdivided into the following business segments:

• Air Freight

• Ocean Freight

• Supply Chain Management (logistics and overland transportation activities)

Supplementary information can be extracted from the segmental reporting section of the Consolidated Financial Statements (page 69).

1.1.2 Listed companies within the scope of consolidationPanalpina 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 SWX Swiss Exchange. The market capitalization on the closing date amounted to CHF 4,155 million (25,000,000 registered shares at CHF 166.20 per share).

On the closing date

• The free float consisted of 14,340,000 registered shares (= 57.36% of the share capital) and thereof

• PWT held treasury stock consisting of 177,783 registered shares (= 0.71% of the share capital).

The PWT shares are traded under Valor no. 216808 / ISIN CH0002168083, symbol PWTN.

1.1.� Non-listed companies within the scope of consolidationThe main subsidiaries and associated companies are disclosed in the Consolidated Financial Statements (page 107) 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 42.64%.

1.3 Crossshareholdings

Crossshareholding between PWT and any other company does not exist.


Corporate Governance

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 23 August 2005 agreed to the Board of Directors’ proposal to create an authorized share capital up to a maximum aggregate amount of CHF 6,000,000 by issuing a maximum of 3,000,000 registered shares with a nominal value of CHF 2.00 each at any time until 22 August 2007. The Board of Directors is authorized to exclude the preemptive 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 made use of this authorization as yet.

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, there has been no change in the share capital structure during the years 2004 until 2006.

2.4 Shares and participation certificates

On the closing date, 25,000,000 fully paidin PWT registered shares with a nominal value of CHF 2.00 each were issued. On this date, no participation certificates were issued.

2.5 Dividendright certificates

On the closing date no dividendright 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 exceptionsAcquirers of PWT shares are entered into the share register as shareholders with voting rights upon providing proof of the acquisition of the shares and providing that they expressly declare to 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 which are acquired through the exercising of preemptive 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 (socalled grandfathering).

2.6.2 Reasons for granting exceptions in the year under reviewNo exceptions were granted during the reporting year.

2.6.� Permissibility of nominee registrations; indication of any percent clauses and registration conditionsThe Articles of PWT specify that the Board of Directors may register nominees with voting rights in the share register up to a maximum of 2% of the share capital re corded 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 recorded in the commercial register as long as the respective nominees inform PWT of the names, addresses, nationalities (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 commercial register.

The Articles make provision for group clauses.

2.6.4 Procedure and conditions for canceling statutory privileges and limitations on transferabilityA resolution of the General Shareholders Meeting of PWT on which at least twothirds of the voting shares represented agree is required for any abolition or change of the provisions relating to transfer limitations.

2.7 Convertible bonds and warrants / options

There were no convertible bonds outstanding on the closing date.

The only issued options relate to the share and option participation program for members of the Board of Directors, the Executive Board and a further 124 senior managers of Panalpina. For further particulars please refer to point no. 5.6.



3. Board of Directors

3.1 Members of the Board of Directors

On the closing date the Board was composed of seven persons.

Three members of the Board of Directors (Gerhard Fischer, Wilfried Rutz and Roger Schmid) are also members of the Board of Trustees (Stiftungsrat) of PWT’s main shareholder, the Ernst Göhner Foundation. The biographies of the members are as follows:

Gerhard Fischer, Chairman. Swiss citizen. Born in 1933. Elected 1991 (until 2007).

Gerhard Fischer, who has a commercial education, joined the Group in 1964 when he started working for Hans Im Obersteg Ltd., Zurich, at that time a Panalpina subsidiary. He was later nominated as delegate for the Group’s Airfreight Far East division. From 1973 to 1978 he headed Air Sea Broker (today CPC Air). In 1978, he moved to the head office, where he led the air freight business of the entire Group. In 1980, he became managing director of Panalpina Nigeria. From 1986 to 1987, he was the Group’s COO. In spring 1987, he was appointed CEO of the Group, and in 1991 he was elected as a member of the Board of Directors. In 1995, Gerhard Fischer was also elected Chairman of the Board of Directors in addition to his CEO function. In 1998, he handed over the CEO function to his successor.

On 3 January 2006, Gerhard Fischer took over the presidency of the Executive Board on an ad interim basis in addition to his mandate as Chairman. Since then he is an executive member of the Board of Directors of the Group. In June 2006, the Board of Directors announced the ap pointment of Monika Ribar as CEO and she assumed this function in October 2006. Due to Gerhard Fischer reaching retirement age, he will step down from the Board of Directors at the General Meeting of Shareholders in 2007.

Wilfried Rutz, Vice Chairman. Swiss citizen. Born in 1939. Elected 2003 (until 2007).

Wilfried Rutz holds a university degree in economics as well as a PhD from the University of St. Gallen. From 1992 until 2004 he acted as CEO of the Debrunner Koenig Group where he still is a member of its Board of Directors. He has been a member of the board of several Swiss companies in the private and the public sector. Since 2003, he has been a member of the Board of Directors of PWT and in 2005 he was elected as Vice Chairman.

Günther Casjens, member of the Board of Directors. German citizen. Born in 1950. Elected 2005 (until 2008).

Günther Casjens is a trained forwarding and shipping merchant. From 1974 until 2004 he held several positions at HapagLloyd, in 1983 as deputy director of Europe / Far East Services, in 1987 as managing director North America Services and in 1988 as managing director North and South America Services. In 1990, Günther Casjens became deputy member of the executive board of HapagLloyd and from 1991 until 2004 he was member of the

executive board of HapagLloyd. In 2004, Günther Casjens became managing partner and chief executive officer of Nordcapital Holding GmbH & Cie KG.

Rudolf W. Hug, member of the Board of Directors. Swiss citizen. Born in 1944. Elected 2005 (until 2008).

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 Schweizerische Kreditanstalt (today Credit Suisse). During the period from 1987 until 1997, he ran the international division and served as 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 will be appointed as Chairman of the Board of Directors subsequent to the 2007 General Meeting of Shareholders following the official retirement of Gerhard Fischer.

Yuichi Ishimaru, member of the Board of Directors. Japanese citizen. Born in 1939. Elected 2005 (until 2008).

Yuichi Ishimaru holds a bachelor degree in economics from Keio University. He has worked for the Marubeni Corporation since 1963. From 1995 until 1998, Yuichi Ishimaru has been member of the board of directors of Marubeni Corporation and served as COO for Marubeni America Corporation, New York. From 1998 until 2000, Yuichi Ishimaru served as CEO for Europe and Africa for Marubeni Europe PLC, London. Since 2001, he also holds a position as executive vice president of Marubeni Corporation and since 2003 he has been acting as special advisor to Marubeni Corporation.

Glen R. Pringle, member of the board of Directors. American citizen. Born in 1947. Elected 2005 (until 2008).

Glen R. Pringle holds a Bachelor of Arts degree from the University of Alabama (College of Arts and Sciences). After his studies Glen R. Pringle worked as state director of sales for CENCO Instrument Company. Thereafter he worked at WVMI / WBIL Radio Station as a manager of sales. As from 1986, Glen R. Pringle held the position of development director for the Alabama Development Office until 1995, when he became the development director of Retirement Systems of Alabama.

Roger Schmid, member of the Board of Directors. Swiss citizen. Born in 1959. Elected 2003 (until 2007).

Roger Schmid holds a university degree in law as well as a PhD in law from the University of Zurich. From 1991 until 1995, he was legal counsel and director at Bank Leu, a subsidiary of Credit Suisse. Since 2003, he has been a member of the Board of Directors. Roger Schmid works as an executive director of the Ernst Göhner Foundation.

All the members of the Board, excluding Gerhard Fischer during the period from January to October 2006, are nonexecutive members and do not actively perform any managerial functions at PWT or any of the Group companies. They have also not 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

Gerhard W. Fischer, Vice Chairman of the board of trustees (Stiftungsrat) of the Ernst Göhner Foundation, Zug.

Wilfried Rutz, Chairman of the board of trustees (Stiftungsrat) of the Ernst Göhner Foundation, Zug, member of the board of directors of Debrunner Koenig Holding AG, St. Gallen, and Alba Management AG, Olten.

Günther Casjens, member of the advisory board at Deutsche Bank AG, Hamburg, member of the advisory board at Deutsche Schiffsbank, Bremen, corporate adviser of Temasek Group, Singapore.

Rudolf W. Hug, member of the board of directors of the following companies: Swiss Post, Berne, Orell Füssli Holding AG, Zurich; Micronas Semiconductor Holding AG, Zurich; Deutsche Bank (Schweiz) AG, Geneva; Allreal Holding AG, Baar.

Roger Schmid, member of the board of trustees and executive director of the Ernst Göhner Foundation, Zug, member of the board of directors of Verwaltungs und Privatbank (Schweiz) AG, Zurich and AIG Private Equity Ltd., Zug.

Other than these, the members of the Board of Directors do not hold other material offices or do not carry out any other principal activities that affect the Group.

3.3 Crossinvolvement

No crossinvolvement exists between board memberships at PWT and other listed companies.

3.4 Elections and terms of office

�.4.1 Principles of the election procedure and limitations on the terms of officeThe Articles of PWT do not make provision for the general renewal of office for the Board of Directors. The period of office shall be individually determined for each member at the time of his election. The members of the Board of Directors are elected at the General Meeting of Shareholders with a 3years period of office. They may be reelected at any time. The Organizational Regulations of PWT specify an age limit of 72 years for the members of the Board of Directors. In exceptional circumstances, the Board of Directors may however decide to extend this age limit up to the year of their 74th birthday.

�.4.2 The first election and remaining term of office for each member of the Board of DirectorsThe timing of the first election and the remaining term of office for each member of the Board of Directors is specified under item no. 3.1.

3.5 Internal organizational structure

The Board of Directors is responsible for the ultimate management of the company and monitoring of the Executive Board. It represents the company externally and is responsible for all matters which have not been transferred to another executive body of the Company by the Swiss Code of Obligations respectively the Articles. In line with the Articles, the Board of Directors has established Organizational Regulations which transfer certain management responsibilities to the Executive Board.

�.5.1 Allocation of tasks within the Board of DirectorsThe Board of Directors is selfconstituting and appoints, from among its members, its Chairman and Vice Chairman. The Chairman (in his absence the Vice Chairman) directly supervises the business affairs and activities of the Executive Board and is entitled to regularly attend Executive Board meetings. The Internal Auditor as well as the Corporate Secretary, in his capacity as secretary to the Board of Directors, is directly subordinated to the Chairman of the Board of Directors.

�.5.2 Member list, tasks and areas of responsibility for each committee of the Board of DirectorsTwo committees exist under the Board of Directors.

The Audit Committee consists of the following members of the Board of Directors: Wilfried Rutz (Chairman), Rudolf Hug and Roger Schmid. The Audit Committee supports the Board of Directors with the supervision of the financial accounting, financial reporting and the efficiency of external and internal audit procedures including risk management. The Audit Committee reviews the consolidated annual financial statements as well as the published interim financial statements. In addition, it regularly maintains contact with the Group Auditor and the Internal Auditor. Based on this, it adopts the detailed reports of the Group Auditors and semiannual reports of Internal 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 proposed measures and to monitor their implementation. The Audit Committee determines the organization of the internal audit, adopts the internal audit charter and approves the annual planning / scope of internal audit. In the field of risk management, the Audit Committee approves the detailed and weighted risk map of the Executive Board and adopts the necessary measures for risk control and risk mitigation. During the reporting year the Audit Committee held seven halfday meetings. At one of the aforementioned meetings the sole topic on the agenda was the review of the booking manipulations, which have been discovered in December 2005 at the subsidiary Panalpina Airfreight Management Ltd. (now Panalpina Air & Ocean Ltd.). During Audit Committee meetings direct discussions took place with representatives of the Group Auditors and Internal Audit. Representatives from the Group Auditors were present at four of these meetings and at three of these meetings the Internal Auditor attended. At these meetings the Executive Board was



regularly represented by the CEO, the CFO and the Corporate Secretary.

The Compensation & Nomination Committee consists of the following members of the Board of Directors: Gerhard Fischer (Chairman), Wilfried Rutz and Roger Schmid. It monitors the selection process for members of the Board of Directors and the Executive Board and determines the overall remuneration and terms of employment for members of the Board of Directors and the Executive Board as well as for highly compensated em ployees. Furthermore, the Committee regularly reviews the proposed management share and option programs of the Group and submits proposals to the Board of Directors. During the reporting year, the Compensation & Nomination Committee held six meetings with a duration of approximately two hours each. The Executive Board was regularly represented at these meetings by the CEO, the Chief Administrative Officer and the Corporate Secretary.

As a rule, both Committees 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 taken during such meetings. They submit proposals 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 Reference of 24 August 2005.

The overall responsibility of the Board of Directors is not affected by these committees.

�.5.� Work methods of the Board of Directors and its committees During the reporting year, the Board of Directors held six halfday meetings and two telephone conferences. The Executive Board was represented by the CEO, the CFO and the Corporate Secretary 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 is updating the Board of Directors on business and key financial developments, as well as information on debtor management. On a quarterly basis, detailed consolidated financial statements on group, regional and business segment level are reported to the Board of Directors. The Board of Directors 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 supervise business and financial development of the Group’s subsidiaries to the Executive Board.

The Organizational Regulations adopted by the Board of Directors on 27 October 2006 govern the cooperation

between the Board of Directors, the Chairman and the Executive Board. It contains a detailed catalogue of duties and competencies which determine the financial thresholds in which the Board of Directors and the Executive Board can efficiently execute their daily business. The Organizational Regulations also outline the reporting duties of the Executive Board on Group and Holding level.

3.7 Information and control instruments visàvis the senior management

The Executive Board regularly informs the Board of Directors of business developments. Elements of this reporting include monthly financial reports, consolidated quarterly regional and business segment results (with actual figures, previous years’ figures and budget figures), the reporting of business development in all regions and business segments (including focus and problematic organizations), the debtors’ and creditors’ reports (including DSO / DPO) as well as the net working capital.

The Chairman of the Board of Directors occasionally attends Executive Board meetings and regularly receives the minutes of the Executive Board meetings. The CEO and individual members of the Executive Board regularly joins meetings of the Board of Directors as well as meetings of its committees. For further details please refer to items 3.52 and 3.5.3.

The Audit Committee of the Board of Directors monitors and assesses the activities of the Internal Auditor as well as his cooperation with the Group Auditor. The Audit Committee receives the Internal Auditor’s halfyear reports and also adopts the comprehensive annual Risk Map of the Executive Board. The Audit Committee approves the proposed risk control and risk mitigation measures as well as the annual planning / scope of the internal audit, which also is also based on the Risk Map. For further detail please refer to item 3.5.2.

4. Executive Board

4.1 Members of the Executive Board

The biographies of the Executive Board members are as follows:

Monika Ribar, CEO, Swiss citizen. Born in 1959. Member of the Executive Board since 2000 and CEO since October 2006.

Monika Ribar joined the Group in 1991. She held several positions within the Group’s controlling, IT and global project management departments. From 2000 until 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 in June 2006 her appointment as CEO was announced. She officially took over the CEO function in October 2006. She holds an university degree in Finance and Controlling from the University of St. Gall. She participated in the Executive Program of the Graduate School of Business at Stanford University, Palo Alto, California, in 1999.



Jörg Eggenberger, Chief Operations Officer, Swiss citizen. Born in 1961. Member of the Executive Board since 2000. Responsible for Air & Ocean Operations, Air & Ocean Procurement, Business Processes & Quality, Agent Relations, Security and Panprojects.

Jörg Eggenberger joined Panalpina in 1977 and has held several positions. From 1981 until 1982, he held a management position at Panalpina London, after which he returned to the marketing and sales department at the Swiss company. From 1985 until 1988, he held another management position with Panalpina in Melbourne. In 1989, he was assigned for a management position in Taipei and in 1990 he held the position of a branch manager at Panalpina Melbourne. From 1990 until 1991 he worked as manager Far East with Air Sea Broker (today CPC Air). In 1991, he became director of the Ocean Freight division at the corporate head office. In 1998, Jörg Eggenberger became managing director of the West Africa Division of Air Sea Broker. In 2000, Jörg Eggenberger became a member of the Executive Board as COO Eastern Hemisphere. In 2002, he was appointed Regional CEO of the Africa / Middle East / Central Asia / CIS division. In 2005, he was appointed as COO of the Group, and held this position until October 2006, when he was appointed as Chief Operations Officer and John Klompers was announced as the Chief Marketing & Sales Officer. Jörg Eggenberger is a trained forwarding merchant. In 2004, he participated in a senior management course at Columbia University, New York.

Christoph Hess, General Counsel & Corporate Secretary, Swiss citizen. Born in 1955. Member of the Executive Board since 2006. Responsible for Corporate Legal Services, Insurances and Corporate Communications.

Christoph Hess joined the Group’s head office in 1994 as General Counsel and Secretary of the Board of Directors and the Executive Board. In his capacity he also manages both the Group’s Legal / Insurance and Communications departments.

Christoph Hess holds a degree in law from the University of Basel and has been admitted to the bar in Switzerland.

Jürg Honegger, Chief Financial Officer (CFO), Swiss citizen. Born in 1964. Member of the Executive Board since October 2006. Responsible for Financial Reporting, Tax Management, Corporate Treasury, Controlling and Credit Control as well as Investor Relations.

Jürg Honegger started his career as Controller and Auditor for companies in Mexico and Switzerland. From 1994 to 2004, he was employed by the Volcafe Group, initially as Assistant to the Group CFO at their Headquarters, thereafter as Head of Finance in Colombia and later as Managing Director for its subsidiary in Uganda. In 1999, he was promoted to Group CFO and member of the Executive Board. He held this position until 2004. Subsequent to the acquisition of the Volcafe Group in 2004 by the new owner ED & F MAN Holdings Ltd., he held the position of Group Treasurer and Divisional Finance Director, based in London, until 2006.

Jürg Honegger has a degree in Business Administration (lic. oec. HSG) from the University of St. Gall.

John Klompers, Chief Marketing & Sales Officer, Dutch citizen. Born in 1964. Member of the Executive Board since October 2006. Responsible for Marketing & Sales, Key Account Management, Industry Verticals, Supply Chain Management and Oil & Gas.

John Klompers joined ChartAir Europe in 1995 (a company acquired by Panalpina in 1996) as Marketing & Sales Executive. In 1997, he was appointed as Branch Manager of Panalpina Eindhoven and Global Account Manager for a leading electronics company. In 1999, he became Managing Director of Panalpina Netherlands and in 2003 Managing Director of the Benelux area, which includes Panalpina country organizations in the Netherlands, Belgium and Luxembourg. In 2005, he was nominated as Regional Chief Executive Officer for Europe.

John Klompers holds bachelor degrees in Economics, Supply Chain Management and Marketing from universities in Eindhoven and Utrecht.

Roland Wider, Chief Administrative Officer, Swiss citizen. Born in 1959. Member of the Executive Board since 2002. Responsible for Human Resources, Corporate Information Technology, Project Management and Management Information System.

Roland Wider joined Panalpina in 2002 as CFO of the Group and member of the Executive Board. In 2005, he was appointed as Chief Administrative Officer of the Group. Prior to Panalpina, he held several management positions at different companies in Switzerland and in Asia. From 1996 until 1999 he was working for Kühne + Nagel in Hong Kong as the regional CFO for the AsiaPacific region. Roland Wider holds a certificate in economics from the Höhere Wirtschafts und Verwaltungsschule Zürich as well as a degree as certified public accountant from the Schweizerische Treuhand and Revisionskammer.

Roland Wider has left the Company in April 2007.

4.2 Other activities and vested interests

Monika Ribar, member of the board of directors of Bank Julius Bär Ltd., Zurich. Member of the board of directors of Logitech International SA, Romanel / Morges.

John Klompers, member of the board of directors of Luxair SA, Luxembourg (subject to his election at the Luxair Annual General Meeting 2007).

4.3 Management contracts

No management contracts exist with any third party outside of the Group.



5. Compensation, shareholdings and loans

5.1 Content and method of determining the compensation and the shareownership programs

Both the compensation and principles governing the share ownership and option programs for Board of Directors and the Executive Board are determined and approved by the Board of Directors based on the proposal of the Compensation and Nomination Committee.

The members of the Board of Directors receive a fixed annual compensation. The salary package for the members of the Executive Board is made up of a fixed basic salary, expense allowance and a bonus, which depends on the Group’s result (normalized EBIT) and on achievement of individual performance targets. The target bonus of the individual EB member equals between 50% and 100% of the individual annual basic salary.

The members of the Board of Directors as well as the members of the Executive Board had the possibility to voluntarily participate in the share and option program introduced in 2005 and continued in a modified program in the reporting year. Details are outlined in item 5.6.

The Executive Board contracts stipulate that as from reporting year 2007, 50% of the respective bonuses will be paid in cash and 50% in the form of shares according to the applicable share and option program.

5.2 Compensation for acting members of governing bodies (Board of Directors and senior management)

The total amount of compensation paid to the Board of Directors and the Executive Board during the financial year equaled CHF 7,877,000*, of which CHF 1,240,000* were paid to the (nonexecutive) members of the Board of Directors and CHF 6,637,000* to the Executive Chairman and the members of the Executive Board.

During the reporting year an Executive Board member received a severance payment of CHF 2,709,000.

5.3 Compensation to former members of the Board of Directors and the Executive Board

During the reporting year no compensation was paid to former members of the Board of Directors and Executive Board.

5.4 Share allotment in the year under review

Excluding the share and option program disclosed in item 5.6, no further shares or share options are allocated to the members of the Board of Directors or the Executive Board or any of its associated persons.

5.5 Share ownership

The following shares were registered in the name of the members of the Board of Directors, respectively the Executive Board (or associated persons) on closing date:

Members of the Board of Directors including associated persons held the following shares on closing date:

Name Number of PWT nominal sharesGerhard Fischer 8,180Wilfried Rutz 8,250Günther Casjens 8,950Rudolf W. Hug 4,450Yuichi Ishimaru 8,050Glen R. Pringle 3,000Roger Schmid 10,550Total 51,4�0

Members of the Executive Board including associated persons held the following shares on closing date:

Name Number of PWT nominal sharesMonika Ribar 5,550Jörg Eggenberger 5,626Christoph Hess 1,250John Klompers 2,500Roland Wider 2,800Total 1�,�26

5.6 Options

During 2005, PWT introduced a share and option ownership program whereas members of the Board of Directors were offered a total of 26,250 PWT registered shares and the members of the Executive Board were offered a total of 15,000 PWT registered shares. The members of the Board of Directors purchased a total of 23,700 registered shares and the members of the Executive Board at that time purchased a total of 15,000 registered shares at the offering price of CHF 80.00 each. The sale of the shares purchased under this program was restricted to 16 September 2006. For every purchased share, the subscribers of this program have been allocated two options, each option entitling them to purchase one further share at the offering price. The option could be exercised from 17 September 2006 and for a period of two years i.e. until 16 September 2008, the option will lapse after the expiry of the aforementioned period.

In June of the reporting year, a slightly modified share and option program was introduced. Members of the Board of Directors were offered a total of 12,600 PWT register ed shares and the members of the Executive Board were offered a total of 5,400 PWT registered shares. Within the scope of this program, the members of the Board of Directors purchased a total of 12,600 PWT registered shares and the members of the Executive Board purchased a total of 5,400 PWT registered shares at a purchase price of 75% of the average closing price of the shares at the SWX from January to May 2006 (CHF 111.30).

* Amounts rounded to the nearest CHF 1000.



The sale of the subscribed shares was restricted for one year i.e. up to 11 June 2007. With every subscribed share one option is attained, which is allocated to the extent of 1/3 after a vesting period of one, two, respectively three years and entitles the participant to purchase to a share at the price of CHF 111.30. Options may be exercised after allocation until 11 June 2012 after which they expire.

Members of the Board of Directors including associated persons held the following options on closing date (subject to allocation).

Year of NumberName allocation of options Term

Gerhard Fischer 2005 7,500 2005 – 2008 2006 1,800 2006 – 2012 Wilfried Rutz 2005 4,500 2005 – 2008 2006 1,800 2006 – 2012 Günther Casjens 2005 0 2005 – 2008 2006 1,800 2006 – 2012 Rudolf W. Hug 2005 0 2005 – 2008 2006 1,800 2006 – 2012 Yuichi Ishimaru 2005 5,000 2005 – 2008 2006 1,800 2006 – 2012 Glen R. Pringle 2005 2,400 2005 – 2008 2006 1,800 2006 – 2012 Roger Schmid 2005 7,500 2005 – 2008 2006 1,800 2006 – 2012 Total ��,500

Members of the Executive Board as well as associated persons held the following options on closing date (subject to allocation):

Year of NumberName allocation of options TermMonika Ribar 2005 7,500 2005 – 2008 2006 1,800 2006 – 2012Jörg Eggenberger 2005 3,750 2005 – 2008 2006 1,800 2006 – 2012Christoph Hess 2005 2,000 2005 – 2008 2006 600 2006 – 2012John Klompers 2005 5,000 2005 – 2008Roland Wider 2005 2,500 2005 – 2008 2006 1,800 2006 – 2012Total 26,�50

5.7 Additional fees and remunerations

None of the members of the Board of Directors respectively the Executive Board including their associated persons received any additional fees or remuneration during the reporting year.

5.8 Loans granted by governing bodies

No loans were granted to any members of the Board of Directors or to any members of the Executive Board.

5.9 Highest total compensation

The highest total amount received by a single member of the Board of Directors during the reporting year amounted to CHF 1,664,000. This member purchased 1,800 PWTN registered shares during the reporting year according to the terms of the company’s share and option program as stipulated in item 5.6. Consequently a total of 1,800 options were allocated that may be exercised after the restriction period until 2012, entitling this member to purchase one share per option at the price of CHF 111.30.

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 representatives of the corporate body (Organvertreter) as well as the independent proxy holder of voting rights (Unab-hängiger 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.

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 (socalled 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 twothirds of the voting shares represented agree.

A written proxy entitles a shareholder to be represented at the General Meeting of Shareholders by his 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. Supplementary to the quorums legally listed, a twothirds majority of the shares represented at the General Meeting of Shareholders is required for the following resolutions:

• any abolition or change of the provisions relating to transfer restrictions;

• any abolition or change of the provisions relating to the restriction of voting rights;

• the transformation of registered shares into bearer shares;



www.panalpina.com/corpgov

• the dissolution of the Company by way of liquidation;

• the removal of two or more members of the Board of Directors;

• the abolition of the respective provision in the Articles as well as the repeal or relief of the stated quorum. A resolution 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 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 provisions 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 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 defence measures

7.1 Duty to make an offer

No optingout or optingup 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 changes 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 was taken over by PricewaterhouseCoopers AG, Basel, (PwC) for the first time for the 1972 financial year by a declaration of acceptance of May 1972.

The lead auditor, Thomas Brüderlin, who is responsible for the mandate, commenced duties in 2001.

8.2 Auditing fees

According to financial accounting, invoices for auditing fees for the financial year amounted to CHF 2,895,000.

8.3 Additional fees

The auditors PwC were compensated an additional amount of CHF 765,000 for further services rendered in the financial year.

8.4 Supervisory and control instruments pertaining to the audit

The Group Auditors are supervised and controlled by the Audit Committee. The Group Auditors also report to the Audit Committee and periodically the lead auditor participates at the meetings (refer to item 3.5).

9. Information policyPanalpina regularly updates its Internet website www.panalpina.com, informing the public of any major events, organizational changes and (quarterly) financial results. Press releases are accessible there to all visitors to the website; alternatively subscriptions can be made so that all latest press releases are automatically forwarded via email. Furthermore, all publications such as the Annual 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 quarterly financial results are printed in the Annual Report and appear in the Financial Calendar on the website (under Investor Relations).



Contents

Consolidated Financial Statements 2006

Consolidated Income Statement 70

Consolidated Balance Sheet 71

Consolidated Statement of Recognized Income and Expenses 72

Consolidated Statement of Changes in Equity 73

Consolidated Cash Flow Statement 74

Notes to the Consolidated Financial Statements 75

Principal Group Companies and Participations 107

Report of the Group Auditors 111

Key Figures 5years review in CHF 111

Balance Sheet 5years review in CHF 113

Key Figures 5years review in EUR 114

Balance Sheet 5years review in EUR 116

Annual Financial Statements 2006 of Panalpina World Transport (Holding) Ltd.

Income Statement 119

Balance Sheet as of 31 December (before profit appropriation) 120

Notes to the Financial Statements 122

Appropriation of Available Earnings 124

Report of the Statutory Auditors 125

Information for Investors 126



Consolidated Income Statement for the years ended 31 December 2006 and 2005

in thousand CHF Notes 2006 20051

Forwarding services 9,301,215 8,280,285

Customs, duties and taxes (1,565,979) (1,331,620)

Net forwarding revenue 5 7,735,236 6,948,665

Forwarding services from third parties 5 (6,144,403) (5,540,997)

Contribution margin (gross profit) 5 1,590,833 1,407,668

Personnel expenses 6 (886,857) (843,717)

Other operating expenses 7 (391,208) (361,735)

Gains (losses) on sales of non-current assets 8 (99) 11,954

Depreciation of property, plant and equipment 14 (34,777) (36,242)

Amortization of intangible assets 15 (16,383) (12,121)

Impairment of financial assets 15 (511) (174)

Operating result (Ebit) 260,998 165,633

Financial income 9 12,230 15,638

Financial expenses 9 (33,157) (23,389)

Earnings before taxes 240,071 157,882

Taxes on income 10 (56,561) (37,576)

Consolidated net earnings 183,510 120,306

Attributable to:

Equity holders of the Company 181,599 117,355

Minority interests 21 1,911 2,951


Earnings per share for profit attributable to equity holders

of the Company during the year (expressed in CHF per share)

– basic 11 7.34 4.71

– diluted 11 7.33 4.70

1 Certain comparatives have been reclassified to conform with the current period’s presentation.



Consolidated Balance Sheet as of 31 December 2006 and 2005


Current assets

Cash and cash equivalents 371,352 224,829

Financial assets held for trading 2,524 5,384

Trade receivables 12 1,185,459 1,108,443

Unbilled forwarding services 135,393 82,459

Other receivables and other current assets 13 77,974 64,482

Total current assets 1,772,702 1,485,597

Non-current assets

Property, plant and equipment 14 161,548 152,450

Financial and other assets 15 44,365 43,041

Intangible assets 15 102,358 108,792

Deferred tax assets 18 27,286 29,999

Total non-current assets 335,557 334,282

Total assets 2,108,259 1,819,879


Current liabilities

Trade payables 501,051 437,375

Other payables and accruals 157,029 146,115

Accrued cost of services 220,620 157,592

Borrowings 19 24,239 18,799

Other liabilities 16 76,442 67,916

Current income tax liabilities 30,707 27,685

Total current liabilities 1,010,088 855,482

Non-current liabilities

Borrowings 19 3,248 1,644

Provisions 17 101,344 83,733

Deferred tax liabilities 18 15,873 21,170

Total non-current liabilities 120,465 106,547

Total liabilities 1,130,553 962,029

Equity

Share capital 20 50,000 50,000

Treasury shares 20 (15,022) (20,000)

Reserves 934,708 820,893

Issued share capital and reserves available to Panalpina shareholders 969,686 850,893

Minority interests 21 8,020 6,957

Total equity 977,706 857,850

Total liabilities and equity 2,108,259 1,819,879


Assets

Liabilities and equity



Consolidated Statement of Recognized Income and Expenses for the years ended 31 December 2006 and 2005


Amounts recognized in equity for pension plan

Defined benefit post-employment plans

– Actuarial gains (losses) 23 (14,724) 21,825

– Effect of impact of limit in paragraph 58b 23 2,527 (24,709)

– Exchange difference 23 (2,146) (75)

Other long-term employee benefits

– First time adoption (295) (722)

Income taxes on items recognized in equity 18 4,281 983

Exchange difference on translations of foreign operations (8,114) 35,676

Net earnings recognized directly in equity (18,471) 32,978


Total recognized earnings for the year 165,039 153,284

Attributable to equity holders of the Company 163,128 150,333

Attributable to minority interests 1,911 2,951



Consolidated Statement of Changes in Equity for the years ended 31 December 2006 and 2005

Attributable to equity holders of the Company Minority interests

Total equity

in thousand CHF

Notes

Share capital

Treasury shares

Other reserves

Trans- lation

reserveRetained earnings

Total

Restated balance on 1 January 2005 50,000 0 (87,950) (87,264) 909,639 784,425 3,484 787,909


– Actuarial gains (losses) 23 21,825 21,825 21,825

– Effect of impact of limit in paragraph 58b 23 (24,709) (24,709) (24,709)

– Exchange difference 23 (75) (75) (75)


– First time adoption in France (722) (722) (722)

Exchange difference on translating foreign operations 29,994 29,994 618 30,612

Income taxes on items recognized in equity 18 983 983 983

Net earnings recognized directly in equity 0 0 (2,698) 29,994 0 27,296 618 27,914

Consolidated net earnings 117,355 117,355 2,951 120,306

Total recognized earnings for the year 0 0 (2,698) 29,994 117,355 144,651 3,569 148,220

Dividends paid 20 (60,000) (60,000) (96) (60,096)

Share-based payments 24 1,817 1,817 1,817

Changes in treasury shares, net 20 (20,000) (20,000) (20,000)

Balance on 31 December 2005 50,000 (20,000) (90,648) (57,270) 968,811 850,893 6,957 857,850

Balance on 1 January 2006 50,000 (20,000) (90,648) (57,270) 968,811 850,893 6,957 857,850


– Actuarial gains (losses) 23 (14,724) (14,724) (14,724)

– Effect of impact of limit in paragraph 58b 23 2,527 2,527 2,527

– Exchange difference 23 (2,146) (2,146) (2,146)


– First time adoption in Indonesia (295) (295) (295)

Exchange difference on translating foreign operations (8,114) (8,114) (750) (8,864)

Income taxes on items recognized in equity 18 4,281 4,281 4,281

Net earnings recognized directly in equity 0 0 (10,357) (8,114) 0 (18,471) (750) (19,221)

Consolidated net earnings 181,599 181,599 1,911 183,510

Total recognized earnings for the year 0 0 (10,357) (8,114) 181,599 163,128 1,161 164,289

Dividends paid 20 (49,384) (49,384) (98) (49,482)

Share-based payments 24 1,767 1,767 1,767

Changes in treasury shares, net 20 4,978 (1,696) 3,282 3,282

Balance on 31 December 2006 50,000 (15,022) (101,005) (65,384) 1,101,097 969,686 8,020 977,706



Consolidated Cash Flow Statement for the years ended 31 December 2006 and 2005


Total cash flow from operating activities 26 338,264 214,571

Interest received 11,688 7,753

Interest paid (23,334) (18,194)

Taxes paid (52,884) (37,409)

Other liabilities utilized (18,651) (21,359)

Long-term provisions utilized 17 (14,150) (3,496)

Net cash flow from operating activities 240,933 141,866

Cash flow from investing activities

Property, plant and equipment 14 (48,219) (45,081)

Investments (incl. goodwill) in consolidated subsidiaries 0 (11,658)

Investments held for trading 0 (73)

Other financial investments 15 (4,477) (6,942)

Intangible assets 15 (8,761) (14,810)

Total investments (61,457) (78,564)

Proceeds from sales of property, plant and equipment 2,767 39,010

Proceeds from sales of investments 47 0

Loan repayments 212 1,498

Proceeds from sales of securities 2,720 11,158

Repayment of other financial assets 735 6,395

Sale of intangible assets 91 47

Total cash flow from investing activities (54,885) (20,456)

Cash flow from financing activities

Proceeds from (repayment of) short-term borrowings 5,680 (2,896)

Proceeds from long-term borrowings 1,613 1,246

Dividends paid 20 (49,384) (60,000)

Dividends paid to minority interests 21 (98) (96)

Treasury shares 3,282 (20,000)

Total cash flow from financing activities (38,907) (81,746)

Effect of exchange rate changes on cash and cash equivalents (618) (23,793)

Increase (decrease) in cash and cash equivalents 146,523 15,871

Cash and cash equivalents at the beginning of the year 224,829 208,958

Cash and cash equivalents at the end of the year 371,352 224,829




1 General

The consolidated financial statements of Panalpina World Transport (Holding) Ltd. (“the Company”) were authorized for issuance in accordance with a resolution of the Board of Directors on 14 March 2007.

Panalpina World Transport (Holding) Ltd. is a limited company incorporated and domiciled in Basel. The registered address is Viaduktstrasse 42, 4002 Basel, Switzerland.

The Company shares are publicly traded and its primary listing is on the SWX Swiss Exchange in Zurich.

The Company and its subsidiaries (together “the Group”), are one of the world’s leading logistics and forwarding companies specialized in international air and ocean transports.

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are listed below. These policies have been consistently applied to all the years, unless stated otherwise.

Basis of preparation of the consolidated financial statements

The consolidated financial statements of the Group are based on the accounts of the individual subsidiaries on 31 December, which have been drawn up according to uniform Group accounting principles. The consolidated financial statements for 2006 and 2005 are presented in Swiss francs (CHF). All values are rounded to the nearest thousand CHF except where otherwise indicated. The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) and interpretation thereof adopted by the International Accounting Standards Board (IASB).

The consolidated financial statements have been prepared under the historical cost convention. Exceptions, if any, are disclosed in the accounting policies below. Certain items, including derivatives financial instruments and available-for-sale investments, are recorded at fair value.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas in which assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 4.

Changes in accounting policies

Apart from IAS 19 Employee Benefits, which the Group decided to early adopt in 2004, the following new standards, amendments to standards and interpretations are published by the International Accounting Standards Board (IASB) and adopted by the Group. A description of changes in 2006 and their effect on the consolidated financial statements is provided below.

IAS 21 (amendment) The Effects of Changes in Foreign Exchange RatesAs of 1 January 2006, the Group adopted the amendments of IAS 21. As a result, all exchange differences arising from a monetary item that forms part of the Group’s net investment in a foreign operation are recognized in a separate component of equity in the consolidated financial statements regardless of the currency in which the monetary item is denominated. This change has had no significant impact as of 31 December 2006 or 31 December 2005.

IAS 39 Financial Instruments: Recognition and MeasurementAmendment for financial guarantee contracts (issued August 2005), amended the scope of IAS 39 to require financial guarantee contracts that are not considered to be insurance contracts to be recognized initially at fair value and to be remeasured at the higher of the amount determined in accordance with IAS 37 Provision, Contingent Liabilities and Contingent Assets and the amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with IAS 18 Revenue. This amendment did not have an effect on the financial statements.

Amendment for hedges of forecast intra-group transactions (issued April 2005). This amendment to IAS 39 permits the foreign currency risk of a highly probable intra-group forecast transaction to qualify as the hedged item in a cash flow hedge, provided that the transaction is denominated in a currency other than the functional currency of the entity entering into that transaction and that the foreign currency risk will affect the consolidated income statement. As the Group currently has no such transactions, the amendment did not have an effect on the financial statements.

Amendment for the fair value option (issued June 2005). This amendment changes the definition of financial instruments classified as fair value through profit or loss and restricts the ability to designate financial instruments as part of this category. The Group believes that this amendment should not have a significant impact on the classification of financial instruments as the Group should be able to comply with the amended criteria for the designation of financial instruments at fair value through profit and loss.

Notes to the Consolidated Financial Statements



IFRIC 4 Determining Whether an Arrangement contains a LeaseThe Group adopted IFRIC interpretation 4 as of 1 January 2006, which provides guidance in determining whether arrangements contain a lease to which lease accounting must be applied. This change in accounting policy has not had a significant impact on the Group as of 31 December 2006 or 31 December 2005.

IFRIC 5 Right to Interests Arising from Decommissioning, Restoration and Environment Rehabilitation FundsThe amendment with effect for periods beginning from 1 January 2006 establishes the accounting treatment for funds established to help finance decommissioning for a company’s assets. As the entity does not operate in a country where such funds exist, this interpretation has had no impact on the financial statements.

IFRIC 8 Scope of IFRS 2The Group early adopted IFRIC interpretation 8 as of 1 January 2006, which requires IFRS 2 to be applied to any arrangements where equity instruments are issued for consideration which appears to be less than fair value. As equity instruments are only issued to employees in accordance with the employee share scheme, the interpretation had no impact on the financial position of the Group.

The following standards, amendments and interpretations are mandatory for accounting periods beginning on or after 1 January 2006 but are not relevant to the Group’s operations:

• IFRS 1 (amendment) First-time Adoption of International Financial Reporting Standards and IFRS 6 (amendment) Exploration for an Evaluation of Mineral Resources

• IFRS 6 Exploration for and Evaluation of Mineral Resources

• IFRIC 6 Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment

The following standard and interpretations to existing standards have been published which are mandatory for the Group’s accounting periods beginning on or after 1 May 2006 or later periods, but which the Group has not early adopted.

IFRS 7 Financial Instruments (Disclosures) and a complementary amendment to IAS 1 Presentation of Financial Statements (Capital Disclosures) (effective from 1 January 2007)IFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information regarding exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including a sensitivity analysis of market risk. It replaces IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions and disclosure requirements in IAS 32 Financial Instruments: Disclosure and Presentation. It is applicable to all entities reporting under IFRS. The amendment to IAS 1 introduces disclosures about the level of an entity’s capital and how it manages capital. The Group assessed the impact of IFRS 7 and the amendment to IAS 1 and concluded that the main additional disclosures will be the sensitivity analyses to market risk and the capital disclosures required by the amendment of IAS 1. The Group will apply IFRS 7 and the amendment to IAS 1 to annual periods beginning 1 January 2007.

IFRS 8 Operating Segments was published in November 2006, and will be effective for accounting periods beginning on or after 1 Janaury 2009.IFRS 8 replaces IAS 14 Segmental Reporting. IFRS 8 requires entities to define operating segments and segment performance in the financial statements based on information used by the chief operating decision-maker. This new requirements could have an impact on the segments presented, the items reported and their respective measurement. The Group has not undergone a careful analysis and therefore no final assessment of the impact can presently be made.

IFRIC 10 Interim Financial Reporting and Impairment The interpretation prohibits the impairment losses recognized in an interim period on goodwill, investments in equity instruments and investments in financial assets carried at cost to be reversed at a subsequent balance sheet date. The Group will apply IFRIC 10 as of 1 January 2007, but it is not expected to have any impact on the next year Group’ accounts.

IFRIC 7 Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies(Effective from 1 March 2006). IFRIC 7 provides guidance on how to apply the requirements of IAS 29 in a reporting period in which an entity identifies the existence of hyperinflation in the economy of its functional currency, when the economy was not hyperinflationary in the prior period.

IFRIC 9 Reassessment of Embedded DerivativesIFRIC 9 was issued in March 2006, and becomes effective for financial years beginning on or after 1 June 2006. This interpretation establishes that the date to assess the existence of an embedded derivative is the date an entity first becomes a party to the contract, with reassessment only if there is a change to the contract that significantly modifies the cash flows. The Group is still evaluating the effect of this interpretation and expects that the adoption of this interpretation will have no impact on the Group’s financial statements when implemented in 2007.



ComparativesThe format of the consolidated balance sheets, the consolidated cash flow statement, the consolidated income statement and the segmental reports of these consolidated financial statements has been adjusted. In 2006, bills of exchange (commitments) in transit have been reclassified to cash and cash equivalents. Suppliers’ discounts have been reclassified from forwarding services (revenue) to forwarding services from third parties. Where necessary, the comparatives have been reclassified to take into account these presentational changes.

Scope and method of consolidation

SubsidiariesThe consolidated financial statements include the financial statements of all subsidiaries that are directly or indirectly controlled (including special purpose entities) by the Group. “Control” is defined as the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date control ceases.

The purchase method of accounting is used for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired as well as liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the acquisition date, irrespective of the extent of any minority interest. The excess of the costs of acquisition over the Group’s share of the fair value of the acquired subsidiary’s identifiable net assets is recorded as goodwill. If the cost of acquisition is less than the Group’s share of the fair value of the net asset of the subsidiary acquired, the difference is recognized directly in the income statement. Subsidiaries acquired or disposed during the year are included in the consolidated financial statements from the date of acquisition or up to the date of disposal.

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognized in assets are fully eliminated. Unrealized losses are considered as an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies by the Group.

Minority interests and associatesInvestments in associated companies are those entities in which the Group has significant influence, but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights.

Minority interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the income statement and within equity in the consolidated balance sheet, separately from parent shareholders’ equity. Acquisitions of minority interests are accounted for using the parent entity extension method, whereby, the difference between the consideration and the book value of the share of the net assets acquired is recognized as goodwill. Disposals to minority interests result in gains and losses for the Group and are recorded in the income statement.

Associates are accounted using the equity method of accounting and are initially recognized at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.

The majority of Group companies and equity investments are listed on page 107 ff.

Segment reportingThe Group is primarily organized by regions. The risks and returns of the Group’s operations are primarily determined by the geographical location of the Group’s operations. This is reflected by the Group’s management and organizational structure.

The determination of the Group’s geographic and business segments is based on the organization units for which information is reported to the Group’s management. The Group has four regions, Europe / Africa / Middle East / CIS, North America, Central and South America and Asia / Pacific. The two sub-regions Africa / Middle East / CIS and China / Taiwan are managed separately, but they are reported within their respective main regions and are not considered as separately reportable geographical segments.

Transfer prices between segments are established on an arm’s length basis. Segment assets and liabilities consist of current assets and liabilities, and of property, plant and equipment, goodwill, intangible assets, pension assets / liabilities and provisions. Non-segment assets and liabilities mainly include deferred income tax balances and financial assets. Capital expenditure comprises additions minus disposals to goodwill, intangible assets and property, plant and equipment, including those arising from acquisitions.

A segment is engaged in providing services within a particular economic environment that are subject to risks and returns which are different from those of segments operating in other economic environments.



Foreign currencies translation

Functional and presentation currency The consolidated financial statements of Panalpina Group are presented in Swiss francs (CHF). The financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (functional currency), which is generally the local currency.

Foreign currency transactionsEach entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using this functional currency. Transactions in foreign currencies are initially translated into the functional currency using the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the balance sheet date using the period-end exchange rate. All differences are taken to profit or loss with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognized in profit or loss. Tax charges and credits attributable to exchange differences on those borrowings are also dealt with in equity. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as of the dates of the initial transaction. Any goodwill arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analyzed between translation differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in the amortized cost are recognized in profit or loss, and others in the carrying amounts are recognized in equity.

Translation of Group companiesThe results and financial positions of all Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet.

• Income and expenses for each income statement are translated at average exchange rates.

• All resulting exchange differences are recognized as a separate component of equity.

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

Revenue recognition

Net forwarding revenue includes services for forwarding performed to third parties after deducting trade discounts and volume rebates and excluding sales taxes and value added taxes less charges for customs, duty and taxes. Trade discounts and volume rebates are recorded on an accrual basis consistent with recognition of the related revenue recorded as a deduction for accounts receivables or as accrued liabilities or provisions. Such estimates are based on analyses of existing contractual or legislatively-mandated obligation, historical trends and the Group’s experience.

Net forwarding revenue is recognized at the time the services are performed. Logistics projects and other services with a longer period of delivery are recognized in the accounting period in which the service is rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.

Forwarding services from third parties includes the corresponding direct production costs excluding the related production overheads for services rendered.

Contribution margin (gross profit) includes net forwarding revenue from services rendered less related expenses for services provided by third parties net of customs, duty and taxes.

Other revenues, e.g. dividends, interest, licenses, etc., are accrued as they arise. For the financial statements, they are recorded in the appropriate period, to the extent that a legal right to receive the payment has been established.

2006 2005

Balance Sheet

Income Statement

Balance Sheet

Income Statement

EUR 1.60762 1.57776 EUR 1.55665 1.55095

USD 1.22030 1.24152 USD 1.31230 1.24631

GBP 2.39887 2.31830 GBP 2.26542 2.26783



Taxes

Current income taxesCurrent income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Current income tax relating to items recognized directly in equity is recognized in equity and not in the income statement.

Deferred income taxDeferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences, except:

• where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in regard to taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized except:

• where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, upon the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in regard to deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred income tax relating to items recognized directly in equity is recognized in equity and not in the income statement.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to offset current tax assets against current income tax liabilities and the deferred income relate to the same taxable entity and the same taxation authority.

Value added tax and sales taxRevenues, expenses and assets are recognized net of the amount of value added tax or sales tax except:

• where the value added tax or sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• receivables and payables that are stated with the amount of value added tax or sales tax included.

The net amount of value added tax or sales tax recoverable from, or payable, to the taxation authority is included as part of receivables or payables in the balance sheet.

Cash and cash equivalents

Cash and cash equivalents included in the balance sheet and cash flow statement represent cash in hand, bank and postal checks, bills of exchange net, bank current account balances and time deposits and highly liquid money market paper with an original maturity period of less than three months. Bank current account liabilities are included under short-term borrowings.



Trade receivables

Accounts receivable from third parties represent invoiced amounts less valuation adjustments for impairments. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows. The change of the provision is recognized in the income statement within other operating expenses.

Unbilled forwarding services

Unbilled forwarding services represents the deferred expenses and accrued income gross amount due from customers for forwarding services in progress for which costs incurred exceed progress billings or services are not yet rendered. For logistics projects and other services with a longer period of delivery, recognized profits are included.

Property, plant and equipment

Property, plant and equipment are stated at cost including expenditures that are directly attributable to the acquisition of the items, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment in value. Such costs include the cost of replacing part of the property, plant and equipment when that cost is incurred, if the recognition criteria are met.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and if the cost of the item can be measured reliably.

Land and buildings are measured at fair value less depreciation on buildings and impairments charged subsequent to the date of the revaluation. Depreciation is calculated on a straight line method to allocate their costs over their estimated useful lives, as follows:

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset, calculated as the difference between the net disposal proceeds and the carrying amount of the asset, is included in the income statement in the year the asset is derecognized.

The asset’s residual values, useful life and method of depreciation are reviewed and adjusted if appropriate, at each financial year-end.

Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies:

• there is a change in contractual terms, other than a renewal or extension of the arrangement;

• a renewal option is exercised or extension granted, unless the term of the renewal or extension was initially included in the lease term;

• there is a change in the determination of whether fulfillment is dependent on a specified asset; or there is a substantial change to the asset.

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



Where a reassessment is made, lease accounting shall commence or cease from the date on which the change in circumstances gave rise to the reassessment for the first, third or forth above mentioned scenarios and at the date of renewal or extension period for the second scenario.

For arrangements entered into prior to 1 January 2005, the date of inception is deemed to be 1 January 2005 in accordance with the transitional requirements of IFRIC 4.

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Charged finance costs are reflected in the income statement.

Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognized as an expense in the income statement on a straight line basis over the lease term.

Business combinations and goodwill

Business combinations are accounted for using the acquisition accounting method. This involves recognizing identifiable assets and liabilities of the acquired business at fair value.

Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, as of the acquisition date, allocated to each of the Group’s cash generating units, or groups of cash generating units, that are expected to benefit from the synergies of the combination, respective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units represents the lowest level within the Group at which the goodwill is monitored for internal management purposes and is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format determined in accordance with IAS 14 Segment Reporting.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

When subsidiaries are sold, the difference between the selling price and the net assets plus cumulative translation differences and unamortized goodwill is recognized in the income statement.

Intangible assets

Brands, trademarks, customer lists and relationship, software licenses and other intangible assets are initially recorded at cost. The cost of intangible assets acquired in a business combination is the fair value as of the date of acquisition. Acquired intangible assets other than a business combination, the initial fair value will be recorded. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the income statement in the period in which the expenditure is incurred.

Intangible assets are amortized on a straight-line basis beginning from the point when they are available for use and over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The estimated useful life for software licenses is three to five years; all other intangible assets a maximum of ten years. The amortization period for an intangible asset with a finite useful life is reviewed at least at each financial year-end. Changes in the expected useful life of future economic benefits embodied in the asset is accounted for by changing the amortization period, as appropriate, and treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the income statement.

Computer software developed internally is capitalized only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the software and the ability to measure reliably the expenditure during the development. During the period of development, the asset is tested for impairment annually. Following the initial recognition of the development expenditure, the capitalized software development costs are amortized over their estimated useful life (not exceeding three years) and carried at cost less any accumulated amortization and accumulated impairment losses. Amortization begins when development is complete and the asset is available for use. Costs of maintaining and modifying existing programs are charged to the income statement.



Impairment of assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. 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 assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborating by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. Impairment losses are recognized in the income statement.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of recoverable amount.

The following criteria are also applied in assessing impairment of specific assets:

Goodwill

Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of the cash-generating unit, to which the goodwill relates. Where the recoverable amount to the cash-generating unit is less than the carrying amount of the cash-generating unit to which the goodwill has been allocated, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods. The Group performs its annual impairment test of goodwill as of 31 December.

Intangible assets

Intangible assets with indefinite useful lives are tested for impairment annually as of 31 December either individually or at the cash generating unit level, as appropriate.

Financial assets

The Group classifies its financial assets into the following categories: at fair value through profit and loss, loans and receivables and available-for-sale. The Group does not classify any financial instruments as held-to-maturity. The classification depends on the nature of the asset and the purpose of the transaction. The management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date. The Group considers whether a contract contains an embedded derivative when the entity first becomes a party to it. The embedded derivatives are separated from the original contract which is not measured at fair value through profit or loss when the analysis shows that the economics characteristics and risks of embedded derivatives are not closely related to those of the host contract.

All normal purchases and sales of financial assets are recognized on the trade date, which is the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by convention in the marketplace or regulation.

Financial assets at fair value through profit or lossThe category is subdivided in two categories: Financial assets held for trading and those designated at fair value through profit or loss at inception. A financial asset is classified if acquired principally for the purpose of generating a profit from short-term fluctuations in price. The Group’s investments in marketable securities are classified as held-for-trading. Such investments are included in current assets in the balance sheet. Marketable securities comprise only exchange-traded and readily realizable investments.

Derivative financial instruments are generally categorized as held-for-trading unless they are designated and qualified as hedging instruments (the treatment of derivative financial instruments is outlined in the section Financial risk management).

ReceivablesReceivables 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 not originated with the intent to be sold immediately or in the near-term. Receivables are presented in current assets for maturities up to twelve months; other receivables are presented in non-current assets.

Loans and receivables are included in the following line items of the balance sheet: Trade receivables (treatment of the trade receivables is outlined in more details in section Trade receivables), other receivables and other current assets include: short-term active loans and other receivables and financial and other assets.



Available-for-sale financial assetsAll non-derivative financial assets that are not categorized as held-for-trading or as originated loans and receivables are classified as available-for-sale. Available-for-sale financial assets which include equity securities are presented as non-current assets, unless they are expected to be sold within twelve months after the balance sheet date.

Purchases and sales of investments are recognized on the settlement date. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit and loss are initially recognized at fair value and transaction costs are expensed in the income statement. Investments are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has substantially transferred all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Originated loans and receivables are subsequently carried at amortized cost using the effective interest method.

Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category, including interest and dividend income, are charged to the income statement in the period in which they arise.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analyzed between translation differences resulting from changes in amortized cost of the security and other changes in the carrying amount of the security. The translation differences are recognized in profit and loss, and other changes in carrying amount are recognized in equity. Changes in the fair value of other monetary securities classified as available- for-sale and non-monetary securities classified as available-for-sale are recognized in equity.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognized in equity are included in the income statement as gains and losses from investments. Interest on available-for-sale investments calculated using the effective interest method is recognized in the income statement. Dividends on available-for-sale equity instruments are recognized in the income statement when the Group’s right to receive payments is established.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value less any impairment loss on that financial asset previously recognized in profit or loss – is removed from equity and recognized in the income statement. Impairment losses of equity instruments recognized in the income statement are not reversed through the income statement. Impairment testing of trade receivables is described in sections the Trade receivables and Impairment of financial assets.

Fair valuesThe fair value of investments is based on quoted bid prices for exchange traded instruments. For unlisted securities or over-the-counter transactions, the Group determines the fair value using appropriate valuation techniques (such as net present value or option pricing models). Those equity investments for which fair values cannot be measured reliably are recognized at cost less impairment. The Group’s impairment policy is outlined in greater detail in section Impairment of assets.

Impairment of financial assets

The Group assesses at each balance sheet date whether a financial asset or a group of financial assets is impaired.

Assets carried at amortized cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through use of an allowance account. The amount of the loss shall be recognized in the period of loss.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and the group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment.

If within a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in profit or loss, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.



In relation to trade receivables, individual provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of the amounts due under the original terms of the invoice. For trade receivables not individually impaired the Group implemented a policy to determine the best estimation of the fair values. Such estimates are based on analyses of historical trends, the Group’s experience and markets observations. The estimates are reviewed, and adjusted if appropriate, at each financial year-end. The carrying amount of the receivables is reduced through use of an allowance account. Impaired debts are derecognized when they are assessed as uncollectible.

Available-for-sale financial investments

If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortization) and its current fair value, less any impairment loss previously recognized in the income statement, is transferred from equity to the income statement. Reversals in regard to equity instruments classified as available-for-sale are not recognized in the income statement. Reversals of impairment losses on debt instruments are reversed through the income statement; if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognized in the income statement.

Borrowings and interest-bearing loans

All borrowings and loans are initially recognized at fair value of the consideration received less directly attributable transaction cost.

All initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in the income statement when the liabilities are derecognized also through the amortization process. Borrowing and interest bearing loan costs are recognized as an expense when incurred.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as of fair value through profit and loss.

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognized in profit and loss.

Where a contract contains one or more embedded derivatives, the entire hybrid contract may be designated as a financial liability at fair value through profit or loss, except where the embedded derivative does not significantly modify the cash flows or it is clear that separation of the embedded derivative is prohibited.

Derecognition of financial assets and liabilities

Financial assets A financial asset is derecognized when the rights to receive cash flows from the asset have expired and when the Group has transferred its rights to receive cash flow for the asset and either has substantially transferrred all the risks and rewards of the asset or has transferred control of the asset.

Financial liabilities A financial liability is 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.

Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) resulting from a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimation can be made of the amount of the obligation. The expense relating to any provision is recorded in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

Provisions are established in particular for:

• employees’ pension fund balances, and

• claims from freight forwarding.



Employee benefits

Short-term benefits, such as salaries and wages, contributions to compulsory social security schemes, vacation accruals and bonuses, are accrued periodically and recognized when the employee provides related services. All costs are recognized to the income statement together with an increase in other payables and accruals in the balance sheet.

In order to provide long-term employee benefits, such as pensions, the Group operates legally separate pension funds, providing benefits under defined benefit or defined contribution schemes. The plan assets funding the benefits are managed and invested outside the Group in accordance with legal requirements. Where necessary, provisions for the unfunded portion of pension benefits, including termination gratuities are recorded in the individual subsidiaries’ balance sheets. The pension funds are usually financed by contributions from employees and subsidiaries.

A review of subsidiaries’ pension plans in Germany, Taiwan, Japan and Switzerland has shown that they are defined benefit schemes. They are assessed using the projected unit credit actuarial valuation method. Costs of providing pensions are recognized in the income statement to spread the regular cost over the service period of employees. The past service cost is recognized as an expense on a straight line basis over the average period until the benefits becomes vested. If the benefits are already vested immediately following the introduction of, or changes to, a pension plan, past service costs are recognized immediately.

The defined benefit obligation for past employee service is measured as the present value of the estimated future cash outflows using appropriate discount rates. The past post-employment benefits obligation are reviewed annually by independent actuaries. All actuarial gains and losses are recognized in the periods in which they occur outside the income statement in the consolidated statement of recognized income and expenses.

Share-based compensationThe Group operates equity-settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options and the discount on the shares granted are recognized as an expense, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting date). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. On each balance sheet date, the Company revises its estimates of the number of options that are expected to become exercisable. The impact of the revision of original estimates, if any, is recognized in the income statement, with a corresponding adjustment to equity. Other long-term employee benefits exist in the form of anniversary gifts, long service benefits and health costs. The provisions necessary to provide the benefits are determined and recorded actuarially (cf. projected unit credit method) with actuarial gains and losses and past service costs, if any, recognized immediately in the income statement.

3 Financial risk management

The Group is aware that in conducting the core business, various financial risks may impact the financial performance. Financial risk management is therefore considered an integral part of managing the business. The Group’s activities expose it primarily to the following financial risk factors: foreign exchange, interest rates, credit, settlement and liquidity. The Group attempts to minimize potential adverse effects on the financial performance.

The Executive Board defines financial policies and related risk management objectives. A Risk Committee, under the direct supervision of the Chief Executive Officer, meets on a regular basis and is responsible for establishing financial strategies which are executed by Corporate Treasury.

There is a clear segregation of duties between front, middle and back office. The middle office is in charge of independently monitoring compliance of the strategies with reference to the approved Risk Committee decisions. Operational risk and independent performance calculation are also under middle office supervision.

Clear treasury management guidelines define approved financial transactions and products, counterparty limits and minimum creditworthiness and transaction limits.

In line with the above-mentioned policy, the Group only enters into derivatives transactions that are directly linked to underlying recognized and anticipated exposures arising from operating and / or financial assets or liabilities.



Financial risk factors

Currency riskThe Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily in regard to the USD. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities as well as net investments in foreign operations.

To manage foreign exchange risks arising from future commercial transactions or recognized assets and liabilities, entities in the Group use forward contracts, transacted generally with Group Treasury. 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 measurement currency. Group Treasury is responsible for managing the net position using external derivatives contracts.

Interest rate riskThe absence of significant interest bearing liabilities in general and their short-term nature limit exposure to interest rate risk. The Group has a clear funding policy that forbids affiliates from borrowing in foreign currency and has a clear preference for intra-group financing. Affiliates are also required to repatriate their excess cash. Liquidity is mainly managed at corporate level by using money market products. Derivative instruments are used to manage duration of financial instruments in a prudent way.

Credit riskCredit risk stems from a counterparty’s failure to meet its obligation. The Group is exposed to credit risk on financial instruments mainly with its liquid assets, derivatives assets and trade receivables. Credit risk is managed in accordance with clear and established guidelines.

Liquid assets are invested with highly rated borrowers and there is no exposure of credit risk.

Trade receivables are strictly monitored and clear guidelines are established in order to set credit limits, approval procedures, and procedures to monitor overdue items. Concentration of credit risk in trade receivables is immaterial.

Settlement riskThis risk is managed by monitoring counterparty activity, settlement limits and by fixing clear limits.

Liquidity riskThe Group holds highly liquid securities. Liquid assets and marketable securities usually have a short-term horizon in order to match any funding needs.

Insurance riskThe Group has established a captive reinsurance company, Mondi Reinsurance Ltd., Hamilton, Bermuda, that insures a dedicated risk portion of its errors and omissions, transport-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 has supplemented its insurance program with a claims management and a claims handling system that ensure transparency of the Group’s risk profile and the proper handling of any claim.

Accounting for derivative financial instruments and hedging activities

Derivative financial instruments are used to hedge foreign currency and interest rate risk. All derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at fair value. The method of recognizing the resulting gain or loss depends on whether the derivative qualifies as a hedging instrument, and if so, the nature of the item being hedged.

To qualify for hedge accounting, the hedging relationship must meet several strict conditions regarding documentation, probability of occurrence, hedge effectiveness and reliability of measurement. If these conditions are not met, then the financial 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 (expenses).

For qualifying fair value hedges, the derivative financial instruments are carried at fair value and gains or losses are recognized in profit or loss. Additionally, the fair value gain or loss on the hedged item attributable to the hedged risk is recognized in profit or loss.



Normally, the Group consciously decides not to designate derivative instruments for hedge accounting according to IAS 39 (although they all are hedging-instruments from an economic point of view). Otherwise, the Group can designate individual derivatives as either:

• a hedge of the exposure to changes in the fair value of a recognized asset or liability (fair value hedge),

• a hedge of the exposure to variability in cash flows associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedges) or

• a hedge of net investments in a foreign operation.

For qualifying cash flow hedges, the derivative hedging instrument is recorded at fair value. The portion of any change in fair value that is an effective hedge is included in equity, and any remaining ineffective portion is reported in income (expense). If a hedged forecast transaction results in the recognition of a non-financial asset or liability, the cumulative change in fair value of the hedging instrument that has been recorded in equity is included in the initial carrying value of that asset or liability at the time it is recognized. For all other qualifying cash flow hedges, the cumulative changes in fair value of the hedging instrument that have been recorded in equity are included in income (expense) at the time when the forecasted transaction affects net income.

For qualifying hedges of net investments in foreign operations, the hedging instruments are accounted in a manner similar to cash flow hedges. The foreign exchange portion of any change in fair value that is an effective hedge is included in equity as translation reserve. Any remaining ineffective portion is recorded in income (expense). If the hedged subsidiary is disposed of, then the cumulative amounts that have been recorded in equity are included in income (expense) at the time of the disposal.

4 Critical accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptionsThe Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. 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.

Estimated impairment of goodwillThe Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in the note Intangible assets, section Goodwill. The recoverable amounts of cash-generating units (CGU) have been determined based on value-in-use calculations. These calculations require the use of estimates.

A sensitivity analysis shows that a reduction of free cash flow of the tested CGU of up to 10% at most would not result in an impairment of goodwill.

Claim provisionsA number of subsidiaries are subject to litigation arising out of the normal conduct of their businesses, as a result of which claims could be raised against them.

The Group used for the above mentioned provision the conservative actuarial calculation, which requires for the calculation of the “incurred but not reported reserves (IBNR)”, among other estimations, the overall circumstances which may impact the future losses, such as the growth of business. If the management decided to use the optimum actuarial calculation method, which takes only into consideration the linear loss development according to historical figures, the carrying amount of claim provision would be approximately CHF 2.7 million lower. If the used actuarial calculation would differ by 10% from the management’s estimates, the carrying amount of claim provision would be approximately CHF 1.8 million higher.

Income taxesThe Group is subject to income taxes in numerous jurisdictions. Significant judgments are required in determining the current and deferred assets and liabilities 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 internal and external factors may have favorable or unfavorable effects on the income tax assets. These factors include, but are not limited to, changes in tax laws regulations and / or rates, changing interpretation of existing tax laws or regulations and changes on management estimations. Such changes that arise could affect the assets and liabilities recognized in the balance sheet in future periods.



Segmental reporting

Reporting by geographical segments

The Group organizes its business primarily by regions. Segment information is prepared on the basis of the location of the assets. Usually, the location of the customers does not differ from the location of the assets in the particular region. Intersegmental services are charged at market rates. Segment expenses are shown after elimination of intra-group transactions.

Reporting by business segments

The Group’s business can be divided into three divisions: Air Freight, Ocean Freight and Supply Chain Management. The assets allocated to the divisions mainly comprise trade receivables, work in progress, accruals, tangible fixed assets and intangible assets. Cash, financial investments and assets related to the central management functions are not allocated.

55


North America


in million CHF 2006 2005 2006 2005 2006 2005

External forwarding services 4,418 3,929 1,699 1,536 670 662

Intra-group forwarding services 2,585 2,407 492 455 184 130

Net forwarding revenue 7,003 6,336 2,191 1,991 854 792

Forwarding services from third parties (6,087) (5,535) (1,884) (1,718) (717) (672)

Segment contribution margin (gross profit) 916 801 307 273 137 120

Other segment expenses (753) (719) (296) (270) (118) (109)

Segment operating result (Ebit) 163 82 11 3 19 11

Financial result

Earnings before taxes

Taxes on income

Consolidated net earnings


North America


in million CHF 2006 2005 2006 2005 2006 2005

Additional information

Segment assets 1,328 1,084 322 339 140 123

Segment liabilities 702 602 152 144 48 40

Capital expenditure 35 37 9 (10) 5 3

Depreciation of property, plant and equipment 22 24 6 6 2 2

Amortization of intangible assets 10 8 1 1 1 1

Impairment of financial assets 0 0 0 0 0 0

Air freight

Ocean freight


in million CHF 2006 2005 2006 2005 2006 2005

Net forwarding revenue 3,713 3,408 2,826 2,399 1,196 1,142

Forwarding services from third parties (3,026) (2,772) (2,334) (1,996) (784) (773)

Segment contribution margin 687 636 492 403 412 369

Total assets 838 788 510 536 210 262

Capital expenditure 20 13 11 11 8 17



Asia / Pacific

Eliminations

Total

2006 2005 2006 2005 2006 2005

948 821 7,735 6,948

821 577 (4,082) (3,569) 0 0

1,769 1,398 (4,082) (3,569) 7,735 6,948

(1,538) (1,184) 4,082 3,569 (6,144) (5,540)

231 214 0 0 1,591 1,408

(163) (144) (1,330) (1,242)

68 70 261 166

(21) (8)

240 158

(56) (38)

184 120

Asia / Pacific

Total

Non segment assets

Non segment liabilities

Group

2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

259 215 2,049 1,761 59 59 2,108 1,820

180 117 1,082 903 48 59 1,130 962

7 16 56 46

5 4 35 36

4 2 16 12

0 0 0 0

Unallocated

Total

2006 2005 2006 2005

0 0 7,735 6,949

0 0 (6,144) (5,541)

0 0 1,591 1,408

550 234 2,108 1,820

17 5 56 46



Personnel expenses

Other operating expenses

Gains and losses on sales of non-current assets

In the current year, there were no material net losses from the sale of assets. In 2005, the net gains from the sale of assets resulted essentially from the sale of operational property in the USA and Canada.

Financial result

66

77

88

99

in thousand CHF 2006 2005

Interest income 11,553 8,781

Other financial income 677 1,026

Exchange differences 0 5,831

Financial income 12,230 15,638

Interest expenses (24,362) (18,247)

Exchange differences (3,825) 0

Bank charges (3,786) (3,787)

Other financial expenses (1,184) (1,355)

Financial expense (33,157) (23,389)

Net financial result (20,927) (7,751)


Gains on sales of investments 47 36

(Losses) gains on sales of property, plant and equipment (146) 11,918

Total net (losses) gains on sales of non-current assets (99) 11,954


Administrative expenses 27,038 24,287

Communication expenses 71,114 65,321

Rent and utilities expenses 173,472 155,667

Travel and promotion expenses 54,291 48,102

Insurance expenses and claims 30,045 30,202

Bad debt and collection expenses 1,973 7,061

Other operating expenses 33,275 31,095

Total operating expenses 391,208 361,735


Salaries and wages 698,415 665,691

Cost of defined contribution plans 43,396 41,591

Cost of defined benefit plans (Note 23) 4,438 3,876

Social security costs 75,785 70,463

Share based compensation (Note 24) 1,767 1,817

Other personnel related expenses 63,056 60,279

Total personnel expenses 886,857 843,717

Number of employees (unaudited) 14,304 13,583



Taxes on income

The following table reconciles expected and disclose the actual tax expenses. The expected tax expenses are determined by multiplying the result before income taxes and the tax rate applicable in Switzerland.

Expenses not deductible for tax purposes were primarily in Indonesia, Columbia, Argentina, Belgium, the USA and Italy (2005: in Australia, Germany, Russia, UK, Venezuela, the USA and Italy).

Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the net earnings attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year, excluding ordinary shares purchased by the Company and held as treasury shares (see note 20).

1010

1111


Current income taxes 56,123 42,598

Deferred income taxes 438 (5,022)

Total taxes on income 56,561 37,576


Earnings before taxes 240,071 157,882

Tax at the applicable tax rate of 25% (2005: 25%) 60,018 39,471

Effect of differing national tax rates (8,921) (14,294)

Utilization of non-capitalized tax loss carry-forwards (559) (1,854)

Capitalization of deferred tax assets from previous periods 0 (1,794)

Not recognized loss carry-forwards 4,934 4,557

Effect of changes in the tax rate on temporary differences (349) 2,872

Withholding tax on dividends received 1,257 1,233

Expenses not deductible for tax purposes and non taxable income 1,303 4,317

Miscellaneous (1,122) 3,068

Actual tax charge 56,561 37,576


Consolidated net earnings attributable to equity holders of the Company 181,599 117,355

Weighted average number of ordinary shares outstanding 24,744 24,932

Basic earnings per share (in CHF) 7.34 4.71



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 has only share options outstanding, which 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 compared with the number of shares that would have been issued assuming the exercise of the share options.

Trade receivables

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.

The creation and usage of provisions for impaired trade receivables have been included in other operating expenses in the income statement.

The following summarizes the movement in the provision for impairment of trade receivables:

As of 31 December 2006, management decided, based on analyses of historical trends, the Group’s experience and market observations to adjust the estimates for allowance of trade receivables not individually impaired. The effect of this change in accounting estimate has resulted in approximately CHF 11 million for the year under review.

1212


Commercial clients 1,174,898 1,105,723

Agents 38,757 39,336

Total trade receivables (gross) 1,213,655 1,145,059

Provision for impairment (28,196) (36,616)

Total trade receivables (net) 1,185,459 1,108,443


Balance on 1 January 36,616 34,838

Receivables written off during the year as uncollective (7,658) (10,638)

Changes in provision for doubtful accounts (762) 12,416

Balance on 31 December 28,196 36,616


Consolidated net earnings attributable to equity holders of the Company 181,599 117,355

Weighted average number of ordinary shares outstanding 24,744 24,932

Adjustments for share options 21 43

Weighted average number of ordinary shares for diluted earnings per share 24,765 24,975

Diluted earnings per share (in CHF) 7.33 4.70



Other receivables and other current assets

Property, plant and equipment

Rentals amounting to CHF 84.2 million (2005: CHF 77.2 million) and CHF 17.1 million (2005: CHF 16.0 million) relate to the lease of machinery, equipment and vehicles, respectively and are included in the income statement.

1313

1414


Office supplies 1,478 1,335

Taxes (VAT, withholding tax) 31,991 22,226

Accrued income 845 1,300

Accrued interest income 785 42

Personnel advances 6,160 1,477

Social security and payroll taxes 0 3,672

Short term deposits 4,734 3,335

Prepaid rent expenses 424 3,845

Supplier rebates 11,346 8,598

Others 20,211 18,652

Total other receivables and other current assets 77,974 64,482

in thousand CHF

Land and buildings

Machinery and

equipment

Vehicles

Construc- tion in

progress

Total 2006

Total 2005

Acquisition costs

Balance on 1 January 141,314 227,159 48,047 108 416,628 419,467

Translation differences 317 (3,564) (896) (8) (4,151) 29,852

Change in the scope of consolidation 0 141

Additions 5,833 26,951 13,326 2,109 48,219 45,081

Disposals (2,040) (14,571) (3,226) (29) (19,866) (76,462)

Reclassifications 1,029 51 (1,029) 51 (1,451)

Balance on 31 December 146,453 236,026 57,251 1,151 440,881 416,628

Accumulated depreciation

Balance on 1 January 61,337 176,469 26,372 0 264,178 260,235

Translation differences 118 (2,554) (286) (2,722) 18,985

Additions 8,055 22,920 3,802 34,777 36,242

Disposals (1,135) (13,309) (2,507) (16,951) (49,833)

Reclassifications 0 51 51 (1,451)

Balance on 31 December 68,375 183,577 27,381 0 279,333 264,178

Net book value on 1 January 79,977 50,690 21,675 108 152,450 159,232

Net book value on 31 December 78,078 52,449 29,870 1,151 161,548 152,450

Of which net book value of assets acquired under finance leases 71 1,593 1,664 80



Financial, other and intangible assets

Available-for-sale investments are only equity investments for which no active market with publicly quoted market values exist. Therefore, it has been impossible to determine the market value of these equity investments and the investments are carried at historical cost less identified impairment.

In 2006, impairment charges of CHF 0.5 million (2005: CHF 0.2 million) were recorded to net available-for-sale investments relating to the valuation of an equity investment. No additional impairment charge was necessary for 2006.

The fair values of unlisted securities are based on discounted cash flows using a rate based on the market interest rate and the risk premium specific to the unlisted securities.

Receivables include third party loans of CHF 1.9 million (2005: CHF 0.8 million) and mainly rental and guarantee deposits of CHF 8.2 million (2005: CHF 10.1 million).

The net book value of other intangible assets comprises:

• Software in the amount of CHF 18.9 million (2005: CHF 26.4 million). Software includes internally generated capitalized software development costs of CHF 15.0 million (2005: CHF 3.4 million).

• Other intangible assets consist mainly of acquired brands and customer relations of CHF 22.0 million (2005: CHF 21.4 million).

Impairment test for goodwill

Goodwill is allocated to the Group’s cash-generating units (CGUs) identified 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 approved 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.

1515

Financial and other assets

Intangible assets

Available- for-sale

investmentsReceiv-

ables

Pension plan

asset

Goodwill

Other intangible

assets

Total 2006

Total 2005

Acquisition costs

Balance on 1 January 26,173 10,945 13,448 60,203 91,423 202,192 215,252

Translation differences (31) (389) 771 3,057 3,408 8,972

Change in the scope of consolidation 0 11,206

Additions 121 4,477 8,761 13,359 23,880

Disposals (102) (878) (1,404) (1,526) (3,910) (11,875)

Reclassifications 0 (45,243)

Balance on 31 December 26,161 14,155 12,044 60,974 101,715 215,049 202,192

Accumulated depreciation or impairment losses

Balance on 1 January 7,525 0 0 0 42,834 50,359 83,580

Translation differences (9) 2,549 2,540 3,661

Additions 511 16,383 16,894 12,295

Disposals (32) (1,435) (1,467) (3,934)

Reclassifications 0 (45,243)

Balance on 31 December 8,004 (9) 0 0 60,331 68,326 50,359

Net book value on 1 January 18,648 10,945 13,448 60,203 48,589 151,833 131,672

Net book value on 31 December 18,157 14,164 12,044 60,974 41,384 146,723 151,833



A summary of the goodwill allocation per CGU is presented below:

The following key assumptions have been used for the value-in-use calculations of each CGU:

The management determined budgeted growth rate based on past performance and its expectations for market development. The operating expenses in % of forwarding revenues are consistent with the forecasts and past experience. The WACC used are pre-tax and reflect specific risks relating to the relevant CGUs.

Based on the impairment tests of the listed goodwill positions, there was no need for the recognition of any impairment losses in fiscal year 2006.

Other liabilities

Other liabilities include, apart from outstanding vacation entitlement, personnel profit participation, social security and payroll taxes, and current portion of short-term claims payables.

1616


Panalpina Air & Ocean AG 31,151 31,151

Panalpina World Transport (Nigeria) Ltd. 12,316 12,316

Grampian International Freight Aberdeen & Beverwijk 13,136 12,395

Panalpina World Transport (Singapore) Pte. Ltd. (JANCO acquisition) 4,371 4,341

Total goodwill 60,974 60,203

Switzerland Europe Africa Asia

Growth rate 1 1.50% 3.50% 4.85% 4.29%

Operating expenses in % of forwarding revenues 2 96.43% 90.74% 92.87% 96.87%

WACC 3 8.56% 9.34% 32.40% 10.24%

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

in thousand CHF

Outstanding vacation

entitlement

Claims

Employee benefits and

others

Total 2006

Total 2005

Other liabilities

Balance on 1 January 24,504 21,165 22,247 67,916 61,221

Translation differences (275) 79 (196) 2,717

Change in scope of consolidation 0 237

Additional accruals 5,046 1,472 27,038 33,556 30,309

Reversals of other liabilities (6,182) (6,182) (5,209)

Charged in income statement 5,046 1,472 20,856 27,374 25,100

Amount paid (4,647) (14,005) (18,652) (21,359)

Balance on 31 December 24,628 22,637 29,177 76,442 67,916



Provisions

Employee benefits provisions include the current portion of net liabilities relating to defined benefit plans of CHF 42.1 million (2005: CHF 29.8 million).

The balance for claims represents a provision for certain claims brought forward against the Group by customers and forwarding agents. The balance as at 31 December is expected to be utilized within the next two to three years.

Long-term claims include an additional provision for probable potential future payments in connection with transport damages.

The management determined the provision based on past performance and its expectation of the funds needed for the future settlement of the claims for the past delivered services which are not yet reported.

Deferred taxes

Deferred taxes are related to the following balance sheet items:

In this summary, deferred tax assets and liabilities are shown gross by balance sheet captions. For balance sheet disclosure purposes, the liabilities and assets are reported net by each subsidiary, resulting in the following balance sheet presentation:

1717

1818

in thousand CHF

Employee

benefits

Claims and other

provisions

Total 2006

Total 2005

Long-term provisions

Balance on 1 January 59,104 24,629 83,733 69,722

Translation differences 610 166 776 2,007

Addition 17,207 16,197 33,404 17,006

Reversal of unused amount (1,253) (1,166) (2,419) (1,506)

Charged in income statement 15,954 15,031 30,985 15,500

Utilized during the year (3,209) (10,941) (14,150) (3,496)

Balance on 31 December 72,459 28,885 101,344 83,733

Deferred tax assets Deferred tax liabilities

in thousand CHF 2006 2005 2006 2005

Receivables 8,385 10,290 (1,204) (1,044)

Fixed assets 2,936 2,524 (16,870) (14,018)

Provisions 12,885 7,365 (1,887) (3,952)

Other balance sheet captions 11,023 18,880 (8,348) (15,902)

Deductible loss carry forwards 4,493 4,686 0 0

Total 39,722 43,745 (28,309) (34,916)

Net deferred tax assets (liabilities) 11,413 8,829


Deferred tax assets 27,286 29,999

Deferred tax liabilities (15,873) (21,170)

Net deferred tax assets (liabilities) 11,413 8,829



The gross movement on the deferred income tax account is as follows:

During the year being reported, all deferred tax assets on taxable temporary differences were recognized. In 2006, the amount of CHF 182,000 was not capitalized because it was not probable that it can be set off against future profits.

Unrecognized tax loss carry-forwards increased in Switzerland, Austria, Brazil, Ireland, Kazakhstan, Turkey and Australia. The tax loss carry-forwards expired in Ecuador and Equatorial Guinea.

On 31 December 2006, undistributed earnings of CHF 382.6 million (2005: CHF 303.0) have been retained by subsidiary companies for reinvestment. No provision is made for income taxes that would be payable upon the distribution of such earnings. If the earnings were remitted, an income tax charge could result based on the tax statutes currently in effect.

Borrowings

The weighted average interest rate of bank borrowings and other financing liabilities is 5.97% (2005: 5.05%). The carrying amounts of short term bank borrowings approximate their fair value.

1919


Balance on 1 January 8,829 594

Translation differences (1,259) 3,669

Change in the scope of consolidation 0 (1,439)

Income statement charge (438) 5,022

Tax charged to equity due to IAS 19 4,281 983

Balance on 31 December 11,413 8,829

Year of expiry of unrecognized tax loss carry-forwards (in thousand CHF) 2006 2005

2006 0 5,143

2007 2,305 3,336

2008 971 279

2009 1,673 138

2010 971 3,502

2011 971 0

Later 47,478 28,475

Total unrecognized tax loss carry-forwards 54,370 40,873

Short-term borrowings (in thousand CHF) 2006 2005 1

Bank borrowings 20,185 15,307

Finance lease liabilities 496 0

Other loans 3,558 3,492

Total short-term borrowings 24,239 18,799

Long-term borrowings (in thousand CHF) 2006 2005

Finance lease liabilities 1,032 44

Other loans 2,216 1,600

Total long-term borrowings 3,248 1,644




The carrying amounts of the Group’s borrowings are denominated in the following currencies:

Share capital

The share capital is presented by 25 million issued shares (2005: 25 million) of CHF 2.00 par value, fully paid-in.

As of 31 December 2006, the number of outstanding shares amounted to 24,822,217 shares (2005: 24,750,000) and the number of treasury shares to 177,783 (2005: 250,000). Treasury shares have been deducted from shareholders’ equity. All shares issued by the Company were fully paid-in.

The extraordinary Shareholders’ Meeting, held on 23 August 2005, authorized the Board of Directors to create an authorized capital in 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 22 August 2007. The Board of Directors has not yet made use of this authorization. The Company has no conditional share capital.

2020

Maturity of long-term financial debts (excluding lease liabilities) 2006 2005

in thousand CHF

2006 0 2

2007 19 1,598

2008 2,197 0

2009 0 0

Later 0 0

Total 2,216 1,600

in thousand CHF 2006 2005 1

USD 17,113 8,830

XAF 6,225 4,054

GBP 1,494 1,342

PLN 752 0

AUD 499 44

SGD 364 1,614

MYR 333 143

SKK 265 0

CHF 240 205

NGN 141 1,250

Others 61 2,962

Total 27,487 20,443


in thousand CHF

Outstanding number of shares

(numbers)

Ordinary

shares

Treasury

shares

Total

On 1 January 2006 24,750,000 50,000 (20,000) 30,000

Treasury shares

Sold 30,610 5,627 5,627

Purchased (102,810) (12,392) (12,392)

Sold under employee share plan 54,520 4,551 4,551

Sold under employee option plan 89,897 7,192 7,192

On 31 December 2006 24,822,217 50,000 (15,022) 34,978



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. In 2006, the dividend paid was CHF 49 million (2005: CHF 60 million). Except for 308,200 treasury shares, all shares were dividend-bearing.

Minority interests

Derivative financial instruments

The year-end contract value is calculated on the total volume of individual contracts using the fair value at year-end. The positive replacement value represents the theoretical profit if the open currency contracts had been closed out as of 31 December. Correspondingly, the negative replacement value represents the theoretical loss on closing the currency transactions open as of 31 December. The change in the fair value has been recognized in the income statement because the instruments did not fulfill the conditions for hedge accounting.

2121

2222


Balance on 1 January (net) 6,957 3,484

Translation differences (750) 618

Interest in net earnings 1,911 2,951

Dividend paid (98) (96)

Total net minority interests 8,020 6,957

Contract Value

Positive Replacement Value

Negative Replacement Value

in thousand CHF 2006 2005 2006 2005 2006 2005

Forward foreign exchange contracts 812,909 1,073,294 2,456 1,995 (3,888) (6,643)

Forward trading hedges 693,904 879,290 2,435 1,922 (3,500) (6,157)

Foreign exchange options 119,005 194,004 21 73 (388) (486)

Contract Value

Positive Replacement Value

Negative Replacement Value

in thousand CHF 2006 2005 2006 2005 2006 2005

Terms of the forward foreign exchange contracts 812,909 1,073,294 2,456 1,995 (3,888) (6,643)

0 – 3 months 807,460 1,054,206 2,343 1,813 (3,710) (6,537)

4 – 12 months 5,449 19,088 113 182 (178) (106)



Derivative financial instruments are spread over the following currencies:

Employee benefit obligations

The Group has numerous pension funds. Retirement benefits vary from plan to plan, reflecting applicable local practices and legal requirements. Defined benefit pension plans are predominantly in Switzerland and Germany. The cost of the defined contribution plans is charged to personnel expenses. For defined benefit plans, the plans domiciled in Switzerland have an excess of assets over liabilities. The part of the surplus that the management estimates to generate an economic benefit to the Group in form of reductions in future contributions is capitalized. The amounts recognized in the balance sheet are determined as follows:

The following amounts were recorded in the income statement relating to defined benefit plans:

2323

Forward foreign exchange contracts


USD 446,553 597,260

EUR 186,510 234,260

GBP 62,514 36,133

HKD 34,152 89,599

AUD 20,956 16,120

CAD 18,046 12,290

SEK 16,114 6,147

SGD 10,322 56,600

JPY 8,530 12,707

NZD 1,014 418

Other 8,198 11,760

Total 812,909 1,073,294


Fair value of plan assets 266,449 261,744

Defined benefit obligation (DBO) funded (224,170) (216,412)

(Deficit) surplus 42,279 45,332

Unrecognized surplus due to paragraph 58b (33,398) (35,925)

Defined benefit obligation (DBO) unfunded (38,981) (25,725)

(Liability) / asset recognized in balance sheet (30,100) (16,318)


Net pension cost for year ending

Current service cost (13,507) (14,432)

Recognized past service cost 0 2,729

Interest cost (8,582) (9,068)

Expected return on assets 11,764 10,660

Member contributions 5,180 5,568

Settlements / curtailments 707 667

Net periodic pensions (cost) credit (4,438) (3,876)



The movement in the defined benefit obligation over the year is as follows:

The movement in the fair value of plan assets of the year is as follows:

The actual return on plan assets was CHF 22.7 million (2005: CHF 10.9 million).

An analysis of the amounts recognized in equity is shown in the table below:

Plan assets are comprised as follows:


Changes in defined benefit obligation (DBO)

DBO beginning of year (242,137) (242,836)

Current service cost (13,507) (14,432)

Recogized past service cost 2,729

Interest cost (8,582) (9,068)

Actuarial gains (losses) recognized in equity (14,210) 9,832

Benefit paid 17,746 11,990

Liabilities extinguished on settlement (1,412) 0

Currency impact (1,049) (352)

DBO end of year (263,151) (242,137)


Changes in fair value of plan asset

Fair value beginning of year 261,744 237,033

Employer contributions 6,068 7,720

Member contributions 5,180 5,568

Expected return on assets 11,764 10,660

Actuarial gains (losses) recognized in equity (514) 11,993

Benefit paid (17,729) (11,323)

Currency impact (64) 93

Fair value end of year of plan asset 266,449 261,744


Analysis of amounts recognized in equity

Recognized equity on 1 January 79,160 76,201

Actuarial gains (losses) plan assets 514 (11,993)

Actuarial gains (losses) DBO 14,210 (9,832)

Effect of impact of limit in paragraph 58b (2,527) 24,709

Currency impact 2,146 75

Recognized equity on 31 December 93,503 79,160


Major Categories of plan assets

Cash and cash equivalents 10,823 10,932

Equity Investments 81,509 77,247

Bonds 143,111 142,550

Investment funds 24,448 24,218

Insurance contracts 6,558 6,797



The following weighted parameters have been chosen as the actual basis:

The overall expected return of plan assets is based on country-specific long-term market expectations at the beginning of the period.

A 5-years summary of the Group’s defined benefit plans is shown in the table below:

Share options

Share and option ownership programs are offered to members of the Board of Directors, members of the Executive Board and selected preferential employees. The Group operates the following programs:

Management Incentive Program I (MIP I)Participants of the program were offered a certain amount of registered shares at the offering price of CHF 80.00 each with a lock-up period of one year. For every purchased share, the subscribers of the program had been allocated two options, each option entitling them to purchase one further share at the offering price. The options can not be settled in cash. The options are exercisable unconditionally starting one year from the grant date. The options have a remaining contractual option term of two years.

Management Incentive Program II (MIP II)Participants 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 SWX Swiss Exchange during the months January to May in the respective year of purchase. The difference between the discounted share price at grant date and the share price paid by the participants is recognized as personnel expenses at the date of the issue of the shares. The shares are subject to a 1-year lock-up period. During the reporting period, participants of the program subscribed 54,520 of those shares.

For every purchased share under this plan, the Group grants one option free of charge to the participants. 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 SWX Swiss Exchange during the months January to May in 2006. The share options cannot be settled in cash.

2424

2006 2005

Discount rate 3.45% 3.45%

Expected return on pension plan assets 3.08% 3.30%

Salary increase 1.50% 1.70%

Rate in pension increase 0.50% 0.40%

in thousand CHF 2006 2005 2004 2003 2002

DBO 263,151 242,137 242,836 222,789 206,247

Plan assets (266,449) (261,744) (237,033) (226,302) (205,822)

(Deficit) surplus (3,298) (19,607) 5,803 (3,513) 425

Experienced gains (losses) on plan liability (14,210) 9,832 (10,692) (2,756) 9,178

Experienced gains (losses) on plan assets (514) 11,993 874 10,360 (39,724)



The weighted average fair value of the share options granted during the reporting period is determined using the Black-Scholes valuation model, applying the following significant inputs into the model:

Movements in the number of share options outstanding and their related average exercise prices are as follows:

Out of the 163,645 outstanding options (2005: 199,242 options), 109,345 options (2005: 0 options) were exercisable. In 2006 89,897 options were exercised (2005: 0 options) at a strike price of CHF 80.00.

Share options outstanding at the end of the year have the following expiry date and exercise prices:

The Group holds own shares in order to meet its obligations under the Management Incentive Programs. These own shares are deducted from equity.

Management Incentive

Program II

Management Incentive

Program I

in CHF 2006 2005

Market price of share 114.00 80.00

Exercise price of option 111.30 80.00

Expected volatility (in %) 30.00 22.59

Option life (in years) 5 2

Dividend yield (in %) 1.78 2.05

Risk-free interest rate based on Swiss government bonds (in %) 2.670 1.103

2006 2005

Average ex-ercise price

per share (in CHF)

Options (number)

Average ex-ercise price

per share (in CHF)

Options (number)

Options outstanding at on 1 January 80.00 199,242 0.00 0

Granted 111.30 54,520 80.00 199,242

Exercised 80.00 (89,897)

Forfeited options 111.30 (220)

Expired options

Options outstanding on 31 December 90.39 163,645 80.00 199,242

Options exercisable on 31 December 80.00 109,345 0.00 0

2006

Exercise price per share (in CHF)

Number of options

expiring at year-end

2008 80.00 109,345

2009

2010

2011

2012 111.30 54,300

Total 90.39 163,645



The cost of share-based payments was as follows:

Related parties

Board of Directors and management compensation

The members of the Board of Directors receive a fixed compensation and participate in certain equity compensation plans.

Compensation to the management consists of a fixed portion and a variable portion, which depends on the course of business and the individual manager’s performance. In addition management receives indirect benefits and is able to participate in certain equity compensation plans.

In the normal course of business the following remuneration was paid:

There were no contributions or donations to members of their families.

In 2006 the Group paid the following social insurance and pension contributions in regard to the Executive Board.

Shareholders, pension funds, associated companies and all subsidiaries are defined as parties related to the Group. Apart from the transactions with related parties mentioned here, we refer to note 23.

In 2006, the Group paid contributions to pension funds of CHF 5.9 million (2005: CHF 7.5 million).

2525

Numbers of persons

Annual salary 1

Termi- nation

benefits

Other benefits 2

Value of options at grant

date

Total Compen-

sation 2006

Total Compen-

sation 2005

in thousand CHF

Remuneration of members

of the Board of Directors 6 1,189 0 0 51 1,240 2,960

Remuneration of the

Executive Board 8 6,404 2,709 197 36 9,346 5,942

Total remuneration 14 7,593 2,709 197 87 10,586 8,902

1 Salaries incl. fixed remuneration, salary, bonus and discount on shares granted. 2 Other benefits incl. expense allowance and fringe benefits. 3 Executive Board remuneration includes the compensation of the executive member of the Board of Directors.

Social insurance

Pensions

in thousand CHF

Remuneration of the

Executive Board 201 366

Total social contributions 201 366

in CHF 2006 2005

Employee share plan 1,311,052 0

Option plan 456,183 1,817,312

Total cost share-based payments 1,767,235 1,817,312



Cash flow statement

Business combinations / disinvestments

In 2006, there were no business combinations nor were any significant subsidiaries sold.

Additional information

Included in the residual lease commitments is an operating lease contract for an aircraft (total CHF 18.5 million), leased by Panalpina Air & Ocean Ltd. The contract with a yearly notice period expires in August 2009.

2626

2727

2828

Cash flow from operating activities (in thousand CHF) 2006 2005

Consolidated net income before taxes 240,071 157,882

Depreciation of property, plant and equipment (Note 14) 34,777 36,242

Impairment of financial investments (Note 15) 511 174

Amortization of intangible assets (Note 15) 16,383 12,121

(Decrease) increase in long-term provisions 18,722 12,493

Loss (gain) on sales of fixed assets (Note 8) 146 (11,918)

Loss (gain) on sales of investments (Note 8) (47) (36)

Adjustment of net periodic pension costs (3,868) (1,888)

Interest income (Note 9) (11,553) (8,781)

Interest expense (Note 9) 24,362 18,247

Share-based payments (Note 24) 1,767 1,817

Cash flow before interest and taxes 321,272 216,353

Decrease (increase) receivables and other current assets (153,835) (100,614)

(Decrease) increase payables, accruals and deferred income 143,453 73,683

(Decrease) increase other liabilities 27,374 25,149

Total cash flow from operating activities 338,264 214,571

Contractual commitments on non-cancellable operating lease contracts 2006 2005

in thousand CHF

2006 0 112,674

2007 120,959 60,745

2008 72,005 49,593

2009 58,638 42,279

2010 51,827 36,823

2011 40,829 0

Later 115,681 94,525

Total residual commitments 459,938 396,639

Obligations under finance lease contracts 2006 2005

in thousand CHF

2007 496 44

2008 462 0

2009 462 0

2010 108 0

Total residual commitments 1,528 44



Pledged assets

The value of pledged assets amounts to CHF 13,000 (prior year CHF 12,000).

Pending legal claims

In addition to the matters discussed under insurance risk, 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.

Pantainer Ltd., the Group’s NVOCC (Non-Vessel Operating Common Carrier), is facing lawsuits concerning liability claims in an unspecified amount in connection with two incidents in which it is alleged that fires occurred, allegedly due to containers shipped under Pantainer bills of lading, containing chemicals that were not declared as hazardous cargo. In the first case, the container ship was seriously damaged and the extent of damage to other cargo on board the vessel is understood to be significant. Legal proceedings in connection with this aforementioned case have been initiated against Pantainer Ltd. The pending lawsuits in London and Rotterdam contain actions for damages in an unspecified amount and for a declaratory judgment against Pantainer Ltd. In addition, a formal payment demand in an amount of approximately USD 130 million has been filed against Pantainer Ltd. in Basel to interrupt the statute of limitations.

Part of this unquantified claim against Pantainer is for an indemnity in regard to cargo claims brought against other parties involved in the carriage of the containers. The amount of these claims is limited to approximately USD 11 million, in accordance with a limitation decree obtained by one of those parties. This is likely to reduce the overall amount of the claim in regard to loss of or damage to cargo, but it is not yet clear how substantial the reduction may be. The limit does not apply in relation to damage to the vessel.

In the second case, as a consequence of a fire – which was able to be extinguished shortly after it broke out – the vessel has declared general average. The operation of the vessel was deliberately stopped for safety reasons, the fire was extinguished and the operation of the vessel continued. Claimants may seek compensation of general average contributions and damage /loss of cargo respectively potential damages to the vessel. Formal legal proceedings have been launched in Tokyo against the shipper, which in turn has opened third party proceedings against Pantainer Ltd. and other companies of the Group. The value in dispute amounts to approximately CHF 7 million.

In both cases, Pantainer Ltd. has received information from the shippers of the cargo that the chemicals were not dangerous. Furthermore, Pantainer Ltd. has filed/prepared recovery actions against certain other parties involved.

These cases will raise complex issues as to the exact chemical composition of the cargo, its characteristics and the likely cause of the fires. To date, the proceedings have not progressed far enough for Pantainer to reach a definitive view of its potential liability exposure, the insurance coverage actually available or the realistic prospects of a recovery from other parties. However, in the first case, evidence has recently emerged which indicates that the fire may have been caused by the fault of the vessel and / or the crew. This evidence is currently being evaluated and tested.

In an initial reaction in June 2005, the insurance company has denied coverage for the first case, but accepted coverage for the second case. To date, no specific provisions have been made.

Subsequent events

Since the balance sheet date, no events have become known for which a disclosure is required.



Principal group companies and participations 2929

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 AG Basel CHF 2,500 100 1 K

Panalpina Finance Ltd. Jersey CHF 10,000 100 1 K

Panalpina AG Basel CHF 600 100 1 K

ASB Air Sea Broker AG Basel CHF 3,000 100 1 K

Pantainer AG Basel CHF 100 100 1 K

Panalpina Insurance Broker AG Basel CHF 100 100 1 K

Hausmann Transport AG Reinach CHF 100 100 1 K

Panalpina Air & Ocean AG Basel CHF 2,700 100 1 K

Jacky Maeder international forwarding Ltd. Basel CHF 2,000 100 1 K

Panalpina Welttransport (Deutschland) GmbH Mörfelden EUR 10,226 100 1 K

Panalpina Welttransport GmbH Düsseldorf EUR 154 100 1 K

Panalpina Welttransport GmbH Hamburg EUR 153 100 1 K

Panalpina Welttransport GmbH Kehl EUR 153 100 1 K

Panalpina Welttransport GmbH Mörfelden EUR 153 100 1 K

Panalpina Welttransport GmbH Nürnberg EUR 3,937 100 1 K

Panalpina Welttransport GmbH Stuttgart EUR 153 100 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 4,500 100 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 500 100 1 K

Panalpina World Transport (Ireland) Ltd. Dublin EUR 25 100 1 K

Grampian International Freight Ltd. Aberdeen GBP 97 100 1 K

Panalpina World Transport N.V. Antwerp EUR 3,750 100 1 K

Panalpina Luxembourg S.A. Luxembourg EUR 31 100 1 K

Panalpina World Transport B.V. Amsterdam EUR 91 100 1 K

Grampian International Freight B.V. Beverwijk EUR 18 100 1 K

Panalpina Czech Sro. Prague CZK 100 100 1 K

Panalpina Slovakia S.R.O. Bratislava SKK 700 100 1 K

Panalpina Magyarorszag Kft. Budapest HUF 300 100 1 K

Panalpina Romania S.R.L. Oradea ROL 72 100 1 K

Panalpina Polska Sp. z. oo. Wroclaw PLN 50 100 1 K

Panalpina AB Gothenburg SEK 1,000 100 1 K

Panalpina Overseas Shipping A / S Oslo NOK 1,000 100 1 K

Panalpina World Transport Nakliyat Ltd. Srk. Istanbul YTL 300 100 1 K

Panalpina World Transport ZAO Moscow RUB 2,100,176 100 1 K

Panalpina CIS Helsinki OY Vantaa EUR 8 100 1 K

Panalpina World Transport Ltd. Kiev USD 220 100 1 K

Luxair S.A. Luxembourg EUR 13,744 12 4 N



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 4,000 100 1 K

Hensel, Bruckmann & Lorbacher, Inc. Farmingdale N.Y. USD 50 100 1 K

Panalpina Inc. Toronto CAD 100 100 1 K

Panalpina Transportes Mundiales, S.A. de C.V. Mexico City MXN 8,900 100 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

Panalpina Uruguay Transportes Mundiales S.A. Montevideo UYU 4,500 100 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 VEB 180,000 100 1 K

Inversiones Ortac C.A. Caracas VEB 6,000 100 1 K

Panalpina Ecuador S.A. Quito ECS 20,000 100 1 K

Panalpina Aduanas S.A. Lima PEN 333 100 1 K

Panalpina Transportes Mundiales S.A. Lima PEN 1,460 100 1 K

Panalpina Ltda. São Paulo BRL 9,115 100 1 K

Panalpina Chile Transportes Mundiales Ltda. Santiago USD 102 100 1 K

Panalpina Transportes Mudiales S.A. Buenos Aires ARS 20 100 1 K

Panalpina Transportes Mundiales S.A. de C.V. Santo Domingo USD 1 100 1 K

Mondi Reinsurance Ltd. Hamilton CHF 2,000 100 1 K

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 9,500 100 1 K

Panalpina Asia-Pacific Services Ltd. Hong Kong HKD 500 100 1 K

Panalpina World Transport Ltd. Hong Kong HKD 100 100 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 14,000 40 2 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 Transport (Malaysia) Sdn. Bhd. Kuala Lumpur MYR 4,215 100 1 K

Panalpina World Transport (Japan) Ltd. Tokyo JPY 50,000 100 1 K

Panalpina World Transport (India) Pvt. Ltd. Delhi INR 1,667 100 1 K

Panindia Cargo Private Ltd., Dehli 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 2,500 100 1 K

Panalpina Kazakhstan LLP Almaty USD 1 100 1 K



Company

Registered

Currency

Nominal capital

in 1,000

Equity interest

in %

Invest-

ment

Method of con-

solidation

Africa and Middle East

Panalpina Gulf LLC Dubai AED 1,000 49 3 K

Panalpina Jebel Ali Ltd. Jebel Ali AED 100 100 1 K

Panalpina Worldtransport (Dubai) DWC-LLC Dubai AED 300 100 1 K

Panalpina (Bahrain) WLL Manama BHD 20 100 1 K

Panalpina Central Asia EC Manama USD 300 100 1 K

Panalpina Georgia LLC Tbilis USD 5 100 1 K

Panalpina Azerbaijan LLC Baku USD 1 100 1 K

Panalpina Turkmenistan LLC Turkmenbashi USD 60 100 1 K

Qatar Shipping Company (Panalpina Qatar) WLL Doha QAR 200 49 3 K

Panalpina Transports Mondiaux Cameroon S.A.R.L. Douala XAF 150,000 100 1 K

Panalpina Transportes Mundiales Guinea Equatorial Sarl. Malabo XAF 10,000 100 1 K

Panalpina Transports Mondiaux Algeria EURL Hassi Messaoud DZD 5,000 100 1 K

Panalpina Transports Mondiaux Congo SARL Pointe Noire XAF 70,000 100 1 K

Panalpina Transports Mondiaux Gabon S.A. Port-Gentil XAF 50,000 90 1 K

Panalpina World Transport (Nigeria) Ltd. Apapa NGN 100,000 69 2 K

Panalpina (Ghana) Ltd. Accra GHC 100,000 100 1 K

Panalpina Transportes Mundiais Navegaçao e Transitos, S.A.R.L. Luanda AON 18,000,000 92 1 K

K = fully consolidated N = not consolidated

1 = capital participation 91–100% 2 = capital participation 50 – 90% 3 = controlling influence over management 4 = capital participation less than 50%



To the General Meeting of Panalpina World Transport (Holding) Ltd., Basel

As auditors of the Group, we have audited the consolidated financial statements (income statement, balance sheet, statement of recognized income and expenses, statement of changes in equity, statement of cash flows and notes / pages 70 to 109) of Panalpina World Transport (Holding) Ltd. for the year ended 31 December 2006.

These consolidated financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.

Our audit was conducted in accordance with Swiss Auditing Standards and with the International Standards on Auditing, which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position, the results of operations and the cash flows in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.

We recommend that the consolidated financial statements submitted to you be approved. PricewaterhouseCoopers AG Th. Brüderlin O. Zell Auditor in charge

Basel, 14 March 2007

Report of the Group Auditors



in million CHF 2006 2005 2004 2003 2002

Forwarding services 9,301 8,280 7,452 6,561 6,364

Change in % 12.33 11.10 13.58 3.10 (5.26)

Net forwarding revenue 7,735 6,949 6,120 5,362 5,175

Change in % 11.32 13.54 14.14 3.61 (3.92)

Gross profit (contribution margin) 1,591 1,408 1,327 1,239 1,248

Change in % 12.99 6.10 7.10 (0.72) (2.48)

in % of net revenue 20.57 20.26 21.68 23.11 24.12

Consolidated net earnings 183.5 120.3 100.0 97.7 115.6

Change in % 52.54 20.31 2.35 (15.48) 3.52

in % of gross profit 11.54 8.54 7.54 7.89 9.26

Ebitda 312.7 214.2 198.1 195.4 211.2

Change in % 45.99 8.11 1.38 (7.48) (5.68)


Ebita 277.9 177.9 160.5 152.6 164.5

Change in % 56.18 10.86 5.18 (7.23) (22.86)


Ebit 261.0 165.6 139.0 138.1 151.7

Change in % 57.58 19.16 0.65 (8.97) (2.64)


Cash flow before interest and taxes 321.3 216.4 198.4 194.9 220.4

Change in % 48.49 9.05 1.80 (11.57) 2.07


Net cash flow from operating activities 240.9 141.9 33.9 89.6 71.9

Change in % 69.83 318.48 (62.17) 24.62 (77.99)


Free cash flow 186.0 121.4 (77.7) 47.5 19.5

Change in % 53.24 (256.25) (263.58) 143.59 (90.06)

in % of gross profit 11.69 8.62 (5.86) 3.83 1.56

Net working capital 413.0 418.7 356.2 263.1 220.0

Change in % (1.37) 17.55 35.39 19.59 25.57

Capital expenditure on fixed assets 57.0 59.9 77.1 51.1 67.0

Change in % (4.86) (22.32) 50.88 (23.73) (47.26)


Net capital expenditure on fixed assets 54.0 33.2 61.6 39.7 48.6

Change in % 62.50 (46.08) 55.16 (18.31) (57.43)


Key Figures in CHF 5-years review



in million CHF 2006 2005 2004 2003 2002

Depreciation 51.7 48.5 59.1 57.4 59.5

Change in % 6.54 (17.94) 3.04 (3.53) (12.76)


Personnel expenses 886.9 843.7 782.4 734.8 725.9

Personnel

Number of employees at year-end (world) 14,304 13,583 13,224 12,344 14,463

Number of employees at year-end (Switzerland) 755 659 669 755 813

Yearly average (world) 13,342 13,031 12,784 12,404 12,253

Productivity ratios (CHF)

Net sales per average employee 579,766 533,241 478,723 432,280 422,346

Gross profit per average employee 119,235 108,050 103,802 99,887 101,853

Personnel expenses per average employee 66,471 64,747 61,202 59,236 59,243

Personnel cost in % of gross profit 55.75 59.92 58.34 59.30 58.17

Leverage (liabilities / equity) 1.17 1.13 0.97 1.01 1.10

Net interest bearing liabilities (372) (221) (231) (311) (282)

Gross gearing (interest bearing liabilities / equity) 0.03 0.02 0.02 0.03 0.03

Net gearing (net interest bearing liabilities / equity) (0.38) (0.26) (0.28) (0.41) (0.40)

ROCE (Ebit less tax / capital employed) in % 31.96 20.95 23.67 26.03 27.76

Current cash debt coverage ratio (net operating cash flow / average current liability) 0.26 0.18 0.05 0.14 0.11

Cash debt coverage ratio (net operating cash flow / average total liability) 0.23 0.16 0.04 0.12 0.10

Return on equity in % 20.2 14.6 13.8 17.3 18.3

Change in % 38.07 5.81 (20.21) (5.58) 4.00



in million CHF 2006 2005 2004 2003 2002

Assets 2,108 1,820 1,487 1,431 1,404

Change in % 15.85 22.39 3.89 1.93 2.86

Current assets 1,773 1,486 1,263 1,211 1,137

Change in % 19.08 4.25 6.50 7.82 (0.94)

Liquid funds 374 230 246 332 301

Change in % 62.40 (6.60) 10.38 20.46 51.52

Receivables and other current assets 1,399 1,255 1,017 879 837

Change in % 11.43 23.45 5.10 3.90 (10.56)

Fixed assets 336 334 311 275 292

Change in % 0.38 7.49 13.09 (5.82) 16.33

Tangible assets 162 152 159 154 167

Change in % 5.97 (4.12) (8.05) (12.80) (2.54)

Financial assets 72 73 61 68 66

Change in % (1.90) 19.74 3.67 (23.38) 1.18

Intangible assets 102 109 91 53 59

Change in % (5.91) 19.55 (10.42) (16.57) 294.44

Liabilities and shareholders’ equity 2,108 1,820 1,574 1,487 1,431

Change in % 15.85 15.62 3.89 1.93 2.86

Liabilities 1,131 962 774 747 748

Change in % 17.52 24.29 3.61 (0.13) (5.11)

Payables, accruals and deferred income 1,002 858 646 616 616

Change in % 16.77 32.79 4.87 0.00 7.94

Borrowings 27 20 37 32 36

Change in % 34.46 (44.75) (11.58) 29.86 (75.22)

Provisions 101 84 91 99 96

Change in % 21.03 (7.99) (8.08) (33.44) 2.13

Minorities 8 7 3 3 3

Equity 970 851 797 737 680

Change in % 13.96 6.76 8.49 3.27 17.08

Share capital 50 50 50 50 50

Change in % 0.00 0.00 0.00 0.00 0.00

Treasury shares (15) (20) 0 0 0

Change in % (24.89) 100.00 0.00 0.00 0.00

Translation differences (65) (57) (87) (67) (55)

Change in % 14.17 (34.17) 29.85 21.82 0.00

Retained earnings 1,000 878 834 754 685

Change in % 13.88 5.30 10.14 12.61 18.75

Balance Sheet in CHF 5-years review



Key Figures in EUR 5-years review

in million EUR 2006 2005 2004 2003 2002

Forwarding services 5,895 5,339 4,827 4,328 4,335

Change in % 10.42 10.60 11.54 (0.18) 26.43

Net forwarding revenue 4,903 4,480 3,964 3,537 3,525

Change in % 9.43 13.02 (1.79) 10.52 27.75

Gross profit (contribution margin) 1,008 908 860 817 850

Change in % 11.07 5.62 5.18 (3.87) 23.49

in % of net revenue 20.57 20.26 21.68 23.11 24.12

Consolidated net earnings 116.3 77.6 64.8 64.4 78.7

Change in % 49.94 19.75 0.52 (18.17) 26.47


Ebitda 198.2 138.1 128.3 128.9 143.9

Change in % 43.51 7.61 (0.44) (10.42) 22.35


Ebita 176.1 114.7 104.0 100.7 112.1

Change in % 53.53 10.35 3.29 (10.18) 22.35


Ebit 165.4 106.8 90.0 91.1 103.3

Change in % 54.90 18.61 (1.15) (11.85) 24.84


Cash flow before interest and taxes 203.6 139.5 128.5 128.6 150.1

Change in % 45.97 8.55 (0.03) (14.38) 61.45


Net cash flow from operating activities 152.7 91.5 22.0 59.1 49.0

Change in % 66.95 316.56 (62.84) 20.66 (25.17)


Free cash flow 117.9 78.3 (50.3) 31.3 13.3

Change in % 50.64 (255.54) (260.64) 135.86 (83.82)


Net working capital 256.9 269.0 230.9 168.8 151.3

Change in % (4.49) 16.50 36.81 11.55 44.92

Capital expenditure on fixed assets 35.4 38.5 50.0 32.8 46.1

Change in % (7.88) (23.01) 52.47 (28.86) (33.60)


Net capital expenditure on fixed assets 33.6 21.3 39.9 25.5 33.4

Change in % 57.35 (46.56) 56.80 (23.80) 12.53




in million EUR 2006 2005 2004 2003 2002

Depreciations 32.7 31.3 38.3 37.9 40.5

Change in % 4.73 (18.31) 1.11 (6.59) 16.40


Personnel expenses 562.1 544.0 506.8 484.6 494.5

Personnel

Number of employees at year-end (World) 14,304 13,583 13,224 12,344 14,463

Number of employees at year-end (Switzerland) 755 659 669 927 869

Yearly average (World) 13,342 13,031 12,784 12,404 12,253

Productivity ratios

Net sales per average employee 367,461 343,816 310,092 325,433 298,097

Gross profit per average employee 75,572 69,667 67,947 71,308 68,882

Personnel expenses per average employee 42,130 41,747 39,073 39,071 61,997

Personnel Cost in % of gross profit 55.75 59.92 58.34 54.79 58.59

Leverage (liabilities / equity) 1.17 1.13 0.97 1.01 1.10

Net interest bearing liabilities (231) (142) (150) (199) (194)

Gross gearing (interest bearing liabilities / equity) 0.03 0.02 0.02 0.03 0.03

Net gearing (net interest bearing liabilities / equity) (0.38) (0.26) (0.28) (0.41) (0.40)

ROCE (Ebit less tax / capital employed) in % 31.96 20.95 23.67 26.03 27.76

Current cash debt coverage ratio (net operating cash flow / average current liability) 0.26 0.18 0.05 0.14 0.11

Cash debt coverage ratio (net opereating cash flow / average total liability) 0.23 0.16 0.04 0.12 0.10

Return on equity in % 20.2 14.6 13.8 17.3 18.3

Change in % 38.07 5.81 (20.21) (5.58) 4.00



Balance Sheet in EUR 5-years review

in million EUR 2006 2005 2004 2003 2002

Assets 1,311 1,169 1,021 953 983

Change in % 12.17 14.56 7.09 (3.03) 1.86

Current assets 1,103 954 819 777 782

Change in % 15.54 16.54 5.45 (0.69) 7.82

Liquid funds 233 148 160 213 207

Change in % 57.26 (7.43) (24.91) 2.91 20.46

Receivables and other current assets 870 806 659 564 575

Change in % 7.89 22.35 16.91 (1.98) 3.90

Fixed assets 209 215 202 176 201

Change in % (2.80) 6.53 14.28 (12.15) (16.18)

Tangible assets 100 98 103 99 115

Change in % 2.61 (4.98) 4.33 (13.98) (12.80)

Financial assets 45 47 40 44 45

Change in % (5.01) 18.67 (9.35) (3.90) (23.38)

Intangible assets 64 70 59 34 41

Change in % (8.90) 18.48 73.51 (16.21) (16.57)

Liabilities and shareholders’ equity 1,311 1,169 1,021 953 983

Change in % 12.17 14.48 7.18 (3.08) 2.66

Liabilities 703 618 502 479 514

Change in % 13.79 23.18 4.71 (6.85) 0.75

Payables, accruals and deferred income 623 551 419 395 424

Change in % 13.07 31.61 5.98 (6.72) 7.95

Borrowings 17 13 24 21 25

Change in % 30.19 (45.24) 16.84 (17.09) 29.86

Provisions 63 54 59 64 66

Change in % 17.19 (8.81) (7.11) (3.81) (33.44)

Minorities 5 4 2 2 2

Equity 603 547 518 472 467

Change in % 10.35 5.60 9.72 1.10 4.87

Share capital 32 32 32 32 32

Change in % 0.00 0.00 0.00 0.00 0.00

Treasury shares (1.0) (13) 0 0 0

Change in % (26.17) 100.00 0.00 0.00 0.00

Translation differences (41) (37) (55) (44) (36)

Change in % 11.45 (33.46) 25.96 20.69 0.00

Retained earnings 622 564 541 484 471

Change in % 10.27 4.35 11.78 2.67 12.61


Financial Statements 2006Panalpina World Transport (Holding) Ltd.

Annual Financial Statement



Income Statement


Income

Income from participations 150,698 141,500

Financial income 64,067 38,235

Rental income 350 350

Other income 2 0

Total income 215,117 180,085

Expenses

Personnel expenses 1,859 951

Other administrative expenses 6,118 4,696

Financial expenses 47,422 20,369

Depreciation and value adjustments 9,075 70,551

Total expenses 64,474 96,567

Taxes 1,257 1,326

Profit for the year 149,386 82,192



Balance Sheet as of 31 December (before profit appropriation)


Current assets

Cash 227,366 80,638

Receivables:

– from Group companies 7,106 3,175

– from third parties 353 689

Financial receivables from Group companies 271,506 166,648

Prepaid expenses and deferred charges 4,458 8,231

Total current assets 510,789 259,381

Long-term assets

Buildings and real estate p.m. p.m.

Participations 97,701 97,801

Loans to Group companies 211,367 294,341

Own shares 15,022 20,000

Total long-term assets 324,090 412,142

Total assets 834,879 671,523

Assets




Short-term liabilities

Cash pool Group companies 174,446 105,726

Payables:

– due to Group companies 486 232

– due to third parties 51 1,020

Financial liabilities to Group companies 41,841 33,913

Accrued expenses 5,157 6,917

Total short-term liabilities 221,981 147,808

Long-term liabilities

Provisions 29,713 39,916

Total long-term liabilities 29,713 39,916

Total liabilities 251,694 187,724

Equity

Share capital 50,000 50,000

General legal reserve 10,000 10,000

Reserve for own shares 15,022 20,000

Special reserve 312,828 307,850

Accumulated earnings:

– balance brought forward from previous year 45,949 13,757

– profit for the year 149,386 82,192

Total equity 583,185 483,799

Total liabilities and equity 834,879 671,523

Liabilities and equity



Notes to the Financial Statements

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., which serve as a supplement to the consolidated financial statements, were prepared in accordance with the accounting principles prescribed by Swiss company law.

Valuation methods and translation of foreign currencies

Marketable securities are reported at the lower of cost or 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. 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.

Financial income

The increase in the reporting year is predominantly attributable to increased earnings from supplemental loans granted as well as to higher bank interest payments and an improved foreign exchange result.

Financial expenses

The increase in financial expenses is predominantly the result of a strong increase in loss coverage paid to subsidiaries.

Depreciation and value adjustments

In the year under review, value adjustments totaling CHF 9.1 million were debited to the income statement. This refers to depreciation on loans to subsidiaries and value adjustments to participations in subsidiaries.

Financial receivables from Group companies

Financial receivables increased by CHF 104.9 million compared with the previous year. This increase is mainly a result of a debt restructuring from long-term loans to short-term loans.

Participations

The principal direct and indirect subsidiaries of Panalpina World Transport (Holding) Ltd. are shown on pages 107 to 109.

Loans to Group companies

Loans to Group companies decreased by CHF 83.0 million in the year under review. This decrease is primarily due to debt restructuring.

Own shares

In the year under review, treasury share purchases totaled 102 810 shares (2005: 250,000 shares) with an average purchase price per share of CHF 120.53 (2005: CHF 80.00) and treasury share sales totaled 175,027 shares with an average sale price of CHF 99.24 (2005: no sales). These shares are held for serving the employee option plan.

Number of shares

31/12/2006

Movement in year

31/12/2005

Movement in year

31/12/2004

Total Panalpina World Transport (Holding) Ltd. shares 25,000,000 0 25,000,000 0 25,000,000

Total Treasury shares held by Panalpina World Transport (Holding) Ltd. 177,783 (72,217) 250,000 250,000 0



Provisions

These include provisions relating exclusively to foreign exchange risks.

Financial liabilities to Group companies

Compared to the previous year, financial liabilities to Group companies increased by CHF 7.9 million. This increase is mainly due to additionally granted loans by subsidiaries.

Share capital

The fully paid-in share capital on 31 December 2006 amounts to CHF 50 million consisting of 25 million registered shares at a par value of CHF 2.00 each.


Guarantees in favor of third parties

Guarantees and indemnity liabilities, Code of Obligations, article 663b 117,977 138,794

In addition, Panalpina World Transport (Holding) Ltd., Basel, has issued letters of comfort in favor of various banks concerning liabilities due from subsidiaries amounting to CHF 16.9 million (previous year: CHF 29.2 million).

Fire insurance value of buildings and real estate 3,039 1,823

Shareholders

Ernst Göhner Stiftung, Zug 42.60% 42.60%

Portfolio investment (according to the share register, there are no shareholders with holdings of more than 5%) 57.40% 57.40%



Appropriation of Available Earnings

in CHF 2006

Distribution of an ordinary dividend of CHF 3.00 gross per share * 75,000,000

To be carried forward 120,335,287

Total 195,335,287

* It is not planned to pay dividends on own shares held by the Group.

The Board of Directors proposes the following appropriation of available earnings of total CHF 195,335,287 at the Annual General Meeting:



To the General Meeting of Panalpina World Transport (Holding) Ltd., Basel

As statutory auditors, we have audited the accounting records and the financial statements (income statement, balance sheet and notes / pages 119 to 123) of Panalpina World Transport (Holding) Ltd. for the year ended 31 December 2006.

These financial statements are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.

Our audit was conducted in accordance with the Swiss Auditing Standards, which require that an audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed the accounting principles used, significant estimates made and the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the accounting records and financial statements and the proposed appropriation of available earnings comply with Swiss law and the Company’s articles of incorporation.

We recommend that the financial statements submitted to you be approved.

PricewaterhouseCoopers AG Th. Brüderlin O. Zell

Auditor in charge

Basel, 14 March 2007

Report of the Statutory Auditors


Information for Investors

Key figures

in million CHF 2006 2005 change in %

Net forwarding revenue 7,735 6,949 12.3


Ebitda 313 214 46.0

Ebit (operating result) 261 166 57.6

Net earnings 184 120 52.5

Cashflow from operating activities 241 142 69.8

Net capital expenditure 54 21 257.1

Balance sheet 2,108 1,831 15.1

Equity 970 851 14.0

Employees 14,304 13,583 5.3

Gross profit per employee (in CHF) 111,227 103,645 7.3

5years development

(in million CHF)

Share information

Share symbol PWTNReuters PWTN.SBloomberg PWTN SWTrading exchange SWX

Fiscal year ends 31 DecemberValoren 000216808ISIN CH0002168083Share register SIS Aktienregister AG, Olten, Switzerland

7,500

6,250

5,000

3,750

2,500

1,250

0

2002 2003 2004 2005 2006

Net forwarding revenue

180

150

120

90

60

30

0

2002 2003 2004 2005 2006

Net earnings

1,600

1,500

1,400

1,300

1,200

1,100

1,000

2002 2003 2004 2005 2006


900

800

700

600

500

400

300

200

100

0

2002 2003 2004 2005 2006

Shareholders’ equity

260

240

220

200

180

160

140

120

100

80

2002 2003 2004 2005 2006

Ebit


Information for Investors

Key figures

in million CHF 2006 2005 change in %

Net forwarding revenue 7,735 6,949 12.3


Ebitda 313 214 46.0

Ebit (operating result) 261 166 57.6

Net earnings 184 120 52.5

Cashflow from operating activities 241 142 69.8

Net capital expenditure 54 21 257.1

Balance sheet 2,108 1,831 15.1

Equity 970 851 14.0

Employees 14,304 13,583 5.3

Gross profit per employee (in CHF) 111,227 103,645 7.3

5years development

(in million CHF)

Panalpina World TransportSPI Swiss Performance IX

60%

40%

20%

0%

–20%1 Jul1 Jan 1 Mar 1 May 1 Sep 1 Nov 1 Jan

Financial calendar

1 January to 31 December Business Year

15 March 2007 2006 full year results

10 May 2007 Q1 results

15 May 2007 Annual General Meeting

22 May 2007 Dividend distribution

9 August 2007 Q2 results

1 November 2007 Q3 results

13 March 2008 2007 full year results

6 May 2008 Annual General Meeting

Ordinary gross dividend payments

Dividend yearAmount

(in million CHF)*Per share

(in CHF)

2007 75 3.00

2006 50 2.00

2005 60** 2.40

2004 30 1.20

2003 30 1.20

2002 20 0.80

2001 10 0.40

* Based on 25,000,000 shares. ** Included a special onetime jubilee dividend of CHF 20 million declared at the ordinary Shareholders’ Meeting

of 20 May 2005.

Earnings per share in 2006

Number of shares 2006 2005 change in %

Basic EPS 24,743,622 CHF 7.34 CHF 4.71 55.8

Diluted EPS 24,764,704 CHF 7.33 CHF 4.69 56.3

Share price development

High in CHF 166.90

Low in CHF 94.30

Average trading volume 126,679

Share price development in comparison to SPI 1 January to 31 December 2006


AlgeriaAlgiers, Hassi Messaoud

AngolaCabinda, Lobito, Luanda, Soyo

ArgentinaBuenos Aires, Ezeiza

AustraliaBrisbane, Melbourne, Sydney

AustriaGraz, Hoechst, Innsbruck, Linz, Salzburg, Vienna

AzerbaijanBaku

BahrainManama

BangladeshChittagong, Dhaka

BelgiumAntwerp, Brussels, Liège

BrazilBelo Horizonte, Campinas, Curitiba, Guarulhos, Joinville, Macaé, Manaus, Porto Alegre, Rio de Janeiro, Santos, São Paulo, Viracopos

CameroonDouala

CanadaCalgary, Edmonton, Fort Erie, Kitchener, London, Montreal, Ottawa, Quebec City, Richmond, Toronto, Vancouver, Windsor, Winnipeg

ChileIquique, Santiago, Valparaiso

Panalpina – Main Offices Worldwide

ChinaBeijing, Chengdu, Dalian, Dongguan, Fuzhou, Guangzhou, Haikou, Hangzhou, Hong Kong, Macau, Nanjing, Ningbo, Qingdao, Shanghai, Shekou, Shenyang, Shenzhen, Suzhou, Tianjin, Urumqi, Weihai, Wuhan, Wuxi, Xiamen, Xi’an, Zhongshan

ColombiaBarranquilla, Bogotá, Buenaventura, Cali, Cartagena, Medellín, Pereira

CongoPointeNoire

Costa RicaSan José

Czech RepublicBrno, Prague

DenmarkCopenhagen

Dominican RepublicSanto Domingo

EcuadorGuayaquil, Quito

EgyptCairo

El SalvadorSan Salvador

Equatorial GuineaMalabo

FinlandHelsinki

FranceLille, Lyon, Marseille, Nantes, Paris, Strasbourg

GabonLibreville, Port Gentil

GeorgiaPoti, Tbilisi

GermanyBad Waldsee, Berlin, Bremen, Cologne, Dortmund, Dresden, Dusseldorf, Frankfurt, Hamburg, Hanover, Kassel, Kehl, Leipzig, Mannheim, Munich, Muenster / Osnabrueck, Nuremberg, Stuttgart

GhanaAccra, Takoradi, Tema

HungaryBudapest

IndiaBangalore, Chennai, Cochin, Coimbatore, Hyderabad, Kolkata, Mumbai, New Delhi, Pune, Tirupur

IndonesiaJakarta, Semarang, Surabaya

IrelandDublin, Shannon

ItalyBergamo, Biella, Bologna, Brescia, Como, Florence, Genoa, Milan, Reggio Emilia, Rome, Turin, Varese, Vicenza

JapanNagoya, Osaka, Tokyo

KazakhstanAksai, Aktobe, Almaty, Aqtau, Atyrau

KoreaBusan, Daegu, Iksan, Incheon, Seoul

LibyaTripoli

LuxembourgLuxembourg


MalaysiaJohor Bahru, Kuala Lumpur, Penang

MexicoCancún, Guadalajara, México City, Monterrey, Queretaro, Villahermosa

NetherlandsAmsterdam, Eindhoven, Maastricht, Moerdijk, Rotterdam

New ZealandAuckland

NigeriaAbuja, Apapa (Lagos), Ikeja, Kaduna, Kano, Port Harcourt, Warri

NorwayOslo

PanamaColón, Panamá

PeruCallao, Lima

PhilippinesCebu, Manila

PolandGdynia, Warsaw, Wroclaw

PortugalLisbon, Porto

Puerto RicoSan Juan

QatarDoha

RomaniaOradea

RussiaMoscow, Nakhodka, Noyabrsk, St. Petersburg, Usinsk, Yekaterinburg, YuzhnoSakhalinsk

Saudi ArabiaAl Khobar, Jeddah, Riyadh

Serbia MontenegroBelgrade

SingaporeSingapore

SlovakiaBratislava

SloveniaKoper

South AfricaCape Town, Durban, East London, Johannesburg, Port Elizabeth, Richards Bay

SpainBarcelona, Bilbao, Madrid, Valencia

Sri LankaColombo

SwedenGothenburg, Stockholm

SwitzerlandBasel, Berne, Geneva, Lugano, St. Gall, Zurich

TaiwanHsinChu, Kaohsiung, Taichung, Taipei

ThailandBangkok

TurkeyIstanbul, Izmir

TurkmenistanAshgabat, Turkmenbashi

UkraineBorispol, Kiev

United Arab Emirates (UAE)Dubai, Sharjah

United Kingdom (UK)Aberdeen, Birmingham, Glasgow, London, Manchester, Prestwick

United States of America (USA)Anchorage, Atlanta, Baltimore, Boston, Bradley / Hartford, Charleston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, El Paso, Greenville, Houston, Huntsville, Laredo, Los Angeles, Memphis, Miami, Milwaukee, Minneapolis, Montgomery, Nashville, New Orleans, New York, Norfolk, Otay Mesa, Philadelphia, Phoenix, Portland, San Diego, San Francisco, Seattle, Saint Louis, Tulsa, Washington DC

UruguayMontevideo

VenezuelaCaracas, Maiquetía / La Guaira, Maracaibo, Puerto Cabello, Puerto La Cruz, Puerto Ordaz, San Antonio del Táchira, Valencia

VietnamHanoi, Ho Chi Minh City

Panalpina – Main Offices Worldwide

1�0 Panalpina Annual Report 2006

Imprint

Panalpina World Transport (Holding) Ltd. Viaduktstrasse 42 P.O. Box CH4002 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 address or send us an email.

An electronic version can be downloaded from: www.panalpina.com

Editor Panalpina World Transport (Holding) Ltd. Corporate Communications

Concept / Design Wirz Corporate AG, Zurich

Lithography Lithoteam, Allschwil / Basel

Printed by NZZ Fretz AG, Schlieren

Consultant on sustainability chapter sustainserv, Zurich and Boston

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

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