www.panalpina.com/ar2012

Annual Report 2012

Panalpina at a glanceThe Panalpina Group is one of the world’s leading providers of supply chain solutions. The company combines its core products of Air Freight, Ocean Freight, and Logistics to de-liver globally integrated, tailor-made end-to-end solutions. Drawing on in-depth industry know-how and customized IT systems, Panalpina manages the needs of its customers’ supply chains, no matter how demanding they might be. The Panalpina Group operates a global network with some 500 offices in more than 80 countries, and it works with partner companies in a further 80 countries. Panalpina employs around 15,000 people worldwide who deliver a comprehensive service to the highest quality standards - wherever and whenever.

VisionWe deliver reliable supply chain solutions that provide valueto our customers – every time.

Core valuesPerformance – is our continuous commitment to long-termsustainable development and financial success: We aspire to out-play competition.Integrity – is the compass which drives our behavior and attitude towards each other and our customers: We keep our promises and comply with the rules.Professionalism – is how we create value for our customers through our solutions and by anticipating their business needs: We know our business and create value for our stakeholders.

Annual Report 2012

1Contents

Facts and Figures 2

Investing in Panalpina 4

Letter to Shareholders 6

Group Report

Strategy and Results 8

Regions 18

Product Divisions 20

Value Creation and Sustainability

Global Network 22

Industry Verticals 24

Compliance and Corporate Culture 27

Employees 28

Information Technology 30

Procurement 31

Quality, Health, Safety and Environment 32

Security 36

Corporate Governance and Responsibilities

Social Commitments 37

Corporate Management 38

A Passion for Solutions 52

Financial Report

Consolidated Financial Statements 68

Annual Financial Statements 138

GRI 146

Imprint 147

Facts and Figures

40,000

30,000

25,000

20,000

15,000

10,000

5,000

0HeatingElectricity Owned vehicles

CO2 emission by scope and activityTons of CO2 equivalent

280,000

240,000

200,000

160,000

120,000

80,000

40,000

0HeatingElectricity Owned vehicles

Energy balance by energy categoryGigajoule

47 % Air Freight

14 % Logistics

39 % Ocean Freight

Net forwarding revenue per product division2012

Indirect renewable energy

Indirect energy

Direct energy

Direct CO2 emission

Indirect CO2 emission

Annual Report 2012

2

47 % Europe, Middle East, Africa and CIS

18 % Asia Pacific

Net forwarding revenue per region2012

35 % Americas

Key figures Net forwarding revenue of CHF 6,617 million Gross profit of CHF 1,465 million Net work-ing capital intensity of 1.7% Forwarding volumes: 801,000 tons in Air Freight (–6% year on year) and 1,388,000 TEU in Ocean Freight (+6% year on year) Logistics: more than 1.2 million square meters warehous-ing space under management

242,

00

0

32,0

23

81,0

00

5,29

7

171,

00

0

12,3

62

Five-year development

Facts and Figures

9,000

7,500

6,000

4,500

3,000

1,500

0

1,900

1,750

1,600

1,450

1,300

1,150

1,000

Annual Report 2012

3

Net forwarding revenueMillion CHF

EBITMillion CHF

Shareholders’ equityMillion CHF

Gross profitMillion CHF

Consolidated profitMillion CHF

200

900

160

160

750

120

120

600

80

80

450

40

40

300

0

0

150

– 40

– 40

0

– 80

08

08

1,74

211

4

09

09

09

5,95

830

864

09

09

1,37

710

10

10

10

7,16

415

812

10

10

1,48

0– 2

6

11

11

11

6,50

017

491

5

11

11

1,47

712

7

6,61

7– 3

775

0

12

12

12

1,46

5– 7

0

12

12

08

08

08

8,87

819

387

1

Annual Report 2012

4 Investing in Panalpina

Solid and secure – With its robust financial health, Panalpina is able to cope with this moderate business year. Thanks to its asset-light business model and its worldwide network, Panalpina can quickly react to cus-tomer needs with first-class, customized supply chain solutions. Panalpina stands for value-creating continuity and can optimistically face the challenges in the global logistics market.

Share symbol PWTN

Reuters PWTN.S

Bloomberg PWTN SW

Trading exchange SIX

Fiscal year ends December 31

Valoren-Nr. 000216808

ISIN CH0002168083

Share register SIS Aktienregister AG, Olten, Switzerland

Share information

Share price development in comparison to SPI

Panalpina World Transport

Swiss Performance Index (SPI)

January 1 to December 31 Financial year

May 7, 2013 First-quarter results

May 15, 2013 Annual General Meeting

July 26, 2013 Half-year results

October 25, 2013 Third-quarter results

Financial calendar

Dec 31,2011

Mar 1 May 1 Jul 1 Sep 1 Nov 1 Dec 31,2012

120 %

110 %

100 %

90 %

80%

5

Annual Report 2012

Investing in Panalpina

2012 2011

Return on equity (ROE) % – 8.5 14.9

Return on capital employed (ROCE) % –19.1 43.2

Returns

2012 2011 Weighted average of outstanding shares

Basic EPS CHF 2.98 5.34 23,638

Diluted EPS CHF 2.98 5.33 23,666

Earnings per share

2012 2011

Last day of trading previous year CHF 96.20 120.50

High CHF 109.50 132.00

Low CHF 78.90 70.90

Last day of trading current year CHF 92.85 96.20

Average trading volume CHF 40,917 51,764

Total shareholder return % 0.6 –16.9

Market capitalization as per Dec 31 million CHF 2,205 2,405

Share price development

2012 2011 Change %

Net forwarding revenue million CHF 6,617 6,500 + 1.8

Gross profit million CHF 1,465 1,477 – 0.8

EBITDA million CHF 37 212 – 82.8

EBIT million CHF – 37 174 –121.5

Consolidated profit million CHF – 70 127 –155.1

Cash generated from operations million CHF – 40 229 –117.3

Key figures

2012 2011

Amount million CHF 47.3 47

Per share CHF 2.00* 2.00**

Ordinary gross dividend payments

* Proposal to the Annual General Meeting.** In addition to the dividend of CHF 2.00, CHF 1.90 per share were paid to shareholders through

a reduction of the nominal value per share from CHF 2.00 to CHF 0.10.

Annual Report 2012

6

Monika RibarChief Executive Officer

Rudolf W. Hug Chairman of the Board of Directors

Letter to Shareholders

Panalpina closed the year under review with a gross profit of CHF 1,465 million and a consolidated loss of CHF 70 mil-lion. In the Ocean Freight division, transport volume grew by 6 %, in comparison to the year before, to a record volume of 1,388,000 TEU, while in Air Freight volumes decreased by around 6 % to a total of 801,000 tons in the same period. Investments in Logistics proved to be successful and led to numerous new assignments.

All in all, the business result 2012 is disappointing. The goal to grow faster than the market was not achieved because progress in Ocean Freight and Logistics could not compen-sate setbacks in Air Freight. On the cost side, adaptations to the new market conditions have not been achieved fast enough and could only be recognized in the fourth quarter.The consolidated profits were additionally impacted by fines imposed by the European Union and Switzerland due to anti-competitive activity prior to 2008, the goodwill write-off for Grieg Logistics and provisions for termination benefits.

Going forward, Panalpina will adjust its sales focus to bene-fit from changes in world trade where traditional trade lanes between Europe and Asia as well as between North Amer-ica and Asia do no longer show the accustomed growth rates and some industries are rapidly changing their supply chains at the expense of air freight.

Panalpina has a carefully crafted corporate strategy in place which is built on the principles of performance, integrity and professionalism. Our most crucial assets include our in-depth know-how in key industries, an extensive global network comprising some 500 offices on six continents, a highly qualified and committed workforce, process-opti-mized information technology, outstanding compliance standards, and efficient and transparent procurement. Using these assets we have formed a global company which is no longer a pure freight forwarding company delivering

air and ocean freight. Today, value-added logistic services complemented by supply chain services are the third pillar of our business. By expertly combining these products and services, Panalpina offers door-to-door products closely geared to our customers’ supply chains. Thanks to our world-spanning network, these solutions can be imple-mented in all corners of the globe.

We are absolutely convinced that our corporate strategy together with continuous and proactive adjustments to the current structural changes in world trade will pay off again. Therefore we won’t stop to invest in our corporate platform – especially in value-added logistics and in customer-facing IT tools – to improve our service offerings.

Not only our high-quality and competitive service offerings but also our financial soundness reflected in a healthy balance sheet provides security and confidence for cus-tomers, employees and shareholders. Our Swiss roots stand for value-generating continuity on a solid and secure basis. These qualities enable us to look confidently into the future. Therefore – despite the consolidated loss – the Board of Directors is going to propose an unchanged divi-dend payment of CHF 2.00 per share to the Annual General Meeting. This is equivalent to an amount of CHF 47.3 million and a dividend yield (based on 2012 year-end share price) of 2.2 %. This proposal reflects our conviction to attain the objectives set in our strategy.

The continual adaptations of our business to the fast-chang-ing economic environment demand a great deal from Panal-pina’s employees. They deserve the highest recognition of the entire Board of Directors and the Executive Board. We thank our customers and suppliers for their trust in us and we thank our shareholders for their loyalty.

A challenging year – The volatile economy, the weak-ening air freight industry and some significant market changes marked Panalpina’s business development in the reporting year. Moreover, high costs due to invest-ments and various nonrecurring charges significantly impacted the results. Nevertheless, Panalpina plans a dividend payout to its shareholders as it pursues its strategy of sustainable, profitable growth in an industry with good long-term prospects.

Annual Report 2012

7Letter to Shareholders

Monika Ribar (CEO) and Rudolf W. Hug (Chairman of the Board of Directors)

Annual Report 2012

8

Disappointing results despite progress in Ocean Freight and Logistics – In a challenging market environ-ment, Panal pina kept its focus on delivering superior end- to-end solutions to its customers. Business growth failing to meet management’s expectations along with a further ex-panded cost base resulted in pressure on operating margins and overall unsatisfying profitability. In line with its strategy of sustainable, profitable growth, Panalpina commits to further improving productivity and operating margins.

Group ReportStrategy and Results

Market developmentThe growth of the global economy and world trade further slowed in the latest reporting year. The International Mone-tary Fund (IMF) estimates that global trade volumes rose approximately 3 % in 2012 – only half of the 6 % growth rate posted the year before, which in turn was only half of the 12 % growth rate achieved in 2010. Those forces pulling growth down in advanced economies are fiscal consoli-dation and a still-weak financial system. Low growth and uncertainty in advanced economies are also affecting emerging-market and developing economies. Growth is es-timated to have weakened appreciably in developing Asia, as activity in China slowed sharply with the economy grow-ing at the weakest rate since 1999, owing to a tightening of credit conditions and weaker external demand. Real GDP (gross domestic product) growth also decelerated in Latin America, largely due to Brazil. With inflation pressures on the decline all year in most countries, central banks around the globe responded to the slowing macroeconomic envi-ronment by further easing their monetary policies. There have been additional rounds of fresh stimulus every month of the year, with 40 countries embracing easier policy in 2012. In the United States, this was one of the main drivers behind the long-awaited housing recovery that emerged this year, with homebuilders’ confidence starting to rise in the year’s second half after years of stagnation.

With a negative growth rate of approximately 2 %, the amount of international cargo moved by air freight in 2012, measured in tons, declined for the second year in a row. In fact, the air freight market developed significantly worse than global GDP in both years, an untypical situation which Panalpina believes is reflective of mainly three, partly struc-tural, changes occurring in the market during this period. Firstly, after the restocking boom in 2010, manufacturers around the globe began to minimize inventories again in the

wake of the general economic uncertainties. Secondly, the widespread endeavor to lower supply chain costs led to certain product categories traditionally transported in the air shifting to other freight modes. While such a modal shift per se is not a new phenomenon, the trend appears to have gathered pace over the last two years. Thirdly – and presumably with the biggest impact on Panalpina’s busi-ness – the trend to smaller and lighter shipments greatly accelerated in 2012, particularly in the technology sector where the Company in the year before still generated more than a third of its Air Freight tonnage. While the Company in 2012 handled almost the same number of Air Freight ship-ments than in the year before, the flown tonnage – according to which customers are primarily invoiced – contracted by almost 6 %.

In comparison, 2012 marked a new record for the global ocean freight market with some 170 million TEU transported on the ocean globally, although with an increase of less than 3 %, growth was hardly inspiring. Nevertheless, the Company managed to grow its Ocean Freight volumes by 6 %. Similar to Air Freight, volume performance varied great-ly by geography, with the far east westbound – the Compa-ny’s largest trade lane – showing particular weakness with shrinking volumes for both the market and Panalpina. At the same time, the Company recorded double-digit growth in its second-, third-, fourth- and fifth-largest Ocean Freight trade lanes, namely on the transpacific eastbound, intra-Asia, the far east eastbound and the transatlantic west-bound.

1,388,000 TEU were transported by Panalpina in 2012.

Annual Report 2012

9Group ReportStrategy and Results

Executive Board: Robert Erni (CFO), Alastair Robertson (Chief Human Resources Officer), Karl Weyeneth (COO), Monika Ribar (CEO) and Christoph Hess (Chief Legal Officer and Corporate Secretary)

Annual Report 2012

10 Group ReportStrategy and Results

Serving customers effectively with second-to-none solutionsPanalpina’s strategy – which was reviewed and refined in 2011 – remains largely unchanged and stipulates that the Company provides comprehensive end-to-end supply chain solutions tailored to its customers by combining interconti-nental Air and Ocean Freight with Value-Added Logistics Services and Supply Chain Services. As a consequence, the Company kept its focus throughout the year on deliver-ing superior solutions to its customers and hence contin-ued to invest in its corporate platform. To facilitate the exe-cution of the corporate strategy, the Group complemented its organizational structure by setting up three regional cen-ters (effective July 1, 2012), each staffed with a regional CEO and a small team of dedicated regional resources with re-spective responsibility for Asia-Pacific, Europe and Middle East, and the Americas. With the new setup, a part of the decision-making power shifted from the corporate head-quarter closer to where decisions are made by the custom-er base, facilitating exploitation of regional and local growth opportunities in the various markets where Panalpina oper-ates. As a consequence of the regional setup, the Company also merged its regional reporting of “North America” and “Central and South America” to “Americas.” The final mile-stone in complementing the Group’s organizational struc-ture was achieved with the appointment of a Chief Informa-tion Officer, who took office in September. One of the most important tasks inherent to this new and central role will be to define and roll out the variety of industry-specific cus-tomer- facing IT solutions that the Company is planning to introduce in the years to come with the goal to enhance connectivity to customers.

On a product level, all three product divisions (Air Freight, Ocean Freight, Logistics) saw significant progress in terms of customer orientation through the introduction of a num-ber of innovative new products and services. In its biggest division, Air Freight, Panalpina extended its cool chain net-work which has been established in the past few years and which ensures a seamless door-to-door proactive monitor-ing, control and documentation for temperature-sensitive cargo. The Company’s new flagships, two brand new wet-leased Boeing 747-8 freighters, mark the latest and most apparent investment in building a global state-of-the-art cool chain network. Apart from providing double-digit improvements in fuel efficiency and CO2 emissions and a

noise footprint reduction of 30 %, the planes can maintain different determined temperature ranges at the same time. Panalpina also introduced SmartView technology, a RFID (radio-frequency identification) based temperature control system and award-winning solution for cool chain optimi-zation, which the Company uses within its own-controlled Air Freight network. The cool chain solution provides an in-tegrated control center to manage temperature-sensitive shipments throughout the supply chain. Furthermore, Panal pina continued to obtain GDP (Good Distribution Prac-tice) certifications at strategic airports in 2012. With phar-maceutical companies facing increasing challenges to com-ply with official and country-specific rules for storing and transporting their temperature-sensitive products, GDP ensures that medicinal products are distributed to retail pharmacists and other persons entitled to sell medicinal products to the general public without any alteration of their properties. In 2012, the Company became the first and only officially GDP-certified logistics service provider at Amsterdam’s Schiphol Airport, and later in the year was

also officially GDP certified at Brussels Airport. Panalpina currently operates 14 facilities (Centers of Excellence) worldwide and expects to have 22 by the end of 2014 where it is fully GDP compliant. The ongoing certification efforts are part of the Company’s strategy to service its growing customer base in the healthcare industry, which today accounts for around 5 % of Group revenues.

In Ocean Freight, in line with the corporate strategy to aggressively expand its Less than Container Load (LCL) business and to focus on emerging markets, Panalpina launched approximately 40 new LCL point-to-point servic-es in 2012, bringing the total number to more than 400. The new guaranteed weekly services mainly run out of Asia and Latin America and represent a reliable and cost-efficient option to Full Container Loads for smaller customer orders. Panalpina operates its own global LCL network consisting of numerous direct LCL services and strategically located

747-8F stands for the two new Boeing freighters exclusively on duty in Panalpina’s air freight network.

Annual Report 2012

11

hubs allowing to cut customers’ transit times and CO2 emissions. The Company provides to customers seamless door-to-door services with the highest level of schedule integrity increasing the flexibility and reliability within the end-to-end supply chain.

In the third product division, Logistics, the Group continued to invest in people and software and further broadened the Logistics offering into Value-Added Services (VAS). VAS is the collective term for Panalpina’s inbound, warehousing,

production, distribution and aftermarket activities. The objective is to build strategic, long-lasting relationships that bring added value to the customer. Some of the servic-es that the Group offers include Inbound to Manufacturer, Line Side Feeding, Vendor Managed Inventory, Fulfillment, Postponement, Re-Packing, Transformational Cross Dock-ing, Kitting, Light Assembly, Technical Services, Service and Spares Management and Reverse Logistics. Panalpina opened several new logistics centers in 2012, including two 10,000 m2 state-of-the-art facilities near Moscow (Russia) and São Paulo (Brazil), bringing total warehousing space under management to more than 1.2 million m2 . In 2012, Panalpina also established four new Logistics Competence Centers (LCCs) in Prague (Czech Republic), Singapore, Buenos Aires (Argentina) and New Jersey (USA) as well as a Supply Chain Solutions Center in Frankfurt (Germany). Local Panalpina teams can resort to the Logistics experts in the LCCs for support from pre-sales through implementa-tion to continuous improvement. The experts support the deployment of the best-in-class tools and techniques in terms of tender and bid management, logistics solutions design, operations modelling and optimization and lean logistics excellence. In this context, the Company also entered into a strategic partnership with RedPrairie as its standardized global logistics platform, which is just one of the growing number of applications to drive automation and efficiency within Panalpina’s Logistics product division. While the LCCs specifically look at finding and implement-ing the best solution for warehousing, the newly estab-

lished Supply Chain Solutions Center in Germany acts as an extension of the customers’ supply chain management for improving their supply chain end-to-end. The objective is not just about providing customers with strategic guidance in regards to supply chain design and execution but to put the identified optimization potential into practice.

The progress achieved in enhancing the products, the vari-ous investments in the business – particularly in the expan-sion of the Logistics know-how and footprint – and the im-plementation of the new regional setup during the year led to an expansion of the cost base which has not been met by a corresponding growth of the business for a number of reasons, including the economic factors outlined above. Operating margins thus saw an adverse development and the overall profitability was unsatisfying in the reporting year. To counteract, the Group started to take corrective actions during the year’s second half, including a selective reduction of staff.

OutlookThe IMF expects output in 2013 to remain sluggish in ad-vanced economies but still relatively solid in many emerg-ing-market and developing economies. Also, the organi-zation sees the crisis in the euro area as the most obvious threat to the global outlook. For the medium term, important questions remain about how the global economy will oper-ate in a world of high government debt and whether emerg-ing- market economies can maintain their strong expansion while shifting further from external to domestic sources of growth. Regardless of the economic environment and in line with its strategy of sustainable, profitable growth, Panalpina remains committed to further improving productivity and operating margins while continuing to invest selectively in the business platform, particularly in IT and Value-Added Logistics Services competence. To further increase sales effectiveness, the Company will adapt its sales strategy by shifting emphasis from an industry-focused to a trade- lane-focused sales approach, the exe cution of which will be managed and driven by the three regional centers given their physical proximity to the customer base. The Company will also undertake a thorough review of its customer portfo-lio in Air Freight given its relatively high exposure to cyclical industries and the trend to lighter shipments in certain prod-uct categories. Moreover, the Company is firmly committed to adjusting its cost base further and aligning it faster to

Group ReportStrategy and Results

1.2 million m2 of warehousing space are managed by Panalpina.

Annual Report 2012

12

Overall, in 2012, the translation of foreign currencies into the reporting currency (CHF) had no material impact on the Group’s financial results.

At regional level, net forwarding revenue in Europe, Middle East, Africa and CIS (EMEA) – the Group’s largest region in terms of turnover – decreased 2.5 % from CHF 3,170 million to CHF 3,091 million, suffering mainly from import weak-ness in many European economies. In North, Central and South America (Americas), NFR increased by 9 % from CHF 2,104 million to CHF 2,288 million, a result which is largely attributable to the performance of the U.S. business and rela tively healthy growth in many Latin American countries.

Compared to 2011, Panalpina’s NFR in 2012 in Asia Pacific increased 1 % from CHF 1,225 million to CHF 1,238 million. Weak exports to Europe were slightly more than offset by growth on the intra-Asian and transpacific trade lanes.

In 2012, the Panalpina Group generated 47 % of its net forwarding revenue in EMEA, 35 % in the Americas and 18 % in Asia Pacific.

On a divisional level, lower volumes in combination with fall-ing carrier freight rates led to a net forwarding revenue in Air Freight declining by 6 % from CHF 3,281 million to CHF 3,106 million. In contrast, in the Ocean Freight division, the Company increased its NFR by 13 % from CHF 2,313 million to CHF 2,615 million, driven by the new volume record

Group ReportStrategy and Results

changes in gross profit, which will be facilitated by the intro-duction of a new forecasting process with a focus on short-term business planning.

Overall, Group management expects world trade and the outsourcing of logistics services to expand further in the years to come, although the dynamics of growth will vary strongly by geography and with a bias towards the emerging economies – particularly in Asia, Latin America and Africa, which will continue to gain in relative importance. With its global and asset-light network, coupled with the ability to react swiftly to changing customer needs and to offer its clients first-class, tailor-made, end-to-end supply chain solutions, Panalpina is well prepared to take advantage of the growth opportunities ahead and to further enlarge its footprint in the global logistics market.

Net forwarding revenue (NFR)

Net forwarding revenue in 2012 amounted to CHF 6,617 million, an increase of 2 % compared to the CHF 6,500 mil-lion the year before. One part of this slight increase can be attributed to an overall positive volume effect (more vol-umes handled in Ocean Freight and Logistics, partly offset by fewer volumes handled in Air Freight). On the other hand, significantly higher average freight rates in ocean freight, although partly offset by lower air freight rates, also had an overall positive effect on net forwarding revenue.

Net forwarding revenue per region2012

47 % Air Freight

14 % Logistics

39 % Ocean Freight

Net forwarding revenue per product division2012

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

Net forwarding revenue per regionMillion CHF

Europe, Middle East, Africa and CIS

12 11

3,17

03,

091

Asia Pacific

12 11

1,22

51,

238

Americas

12 11

2,10

42,

288

Net forwarding revenue per product divisionMillion CHF

12 11

3,10

6

Air Freight

3,28

1

12 11

2,61

5

Ocean Freight

2,31

3

12 11

896

Logistics

906

47 % Europe, Middle East, Africa and CIS

18 % Asia Pacific

35 % Americas

Annual Report 2012

13Group ReportStrategy and Results

While imports to Europe were weak throughout the year, European exports and Middle East traffic were holding up well. In the Americas, gross profit grew by 3 % from CHF 432 million to CHF 444 million. Traffic into and out of Latin America and North American imports were able to outpace slowing exports out of North America. Asia Pacific record-ed a decrease of 3 % in GP from CHF 315 million to CHF 304 million, which management primarily attributes to the weak-ness in Air Freight exports in this region to the mature economies in Europe and North America in 2012.

In 2012, the Panalpina Group generated 49 % of its gross profit in EMEA, 30 % in the Americas, and 21 % in Asia Pacific.

In Air Freight, the market was affected by a general move to lean inventories and an accelerated and mostly cost-driven shift to alternative freight modes. Moreover, a rapidly declining weight per shipment was observed, particularly in technology-related industries to which Panalpina is highly exposed. This led to an adverse effect on the Group’s trans-ported tonnage, which declined by nearly 6 % to a total of 801,000 tons. Increasing competitive pressure led to gross profit per ton of Air Freight decreasing by 4 %, which togeth-er with the described volume effect resulted in a 9 % decline of gross profit realized through Air Freight forwarding services (CHF 627 million in 2012 versus CHF 688 million the year before). In the Ocean Freight division, GP saw an expansion of 5 % from CHF 439 million to CHF 460 million. With growth of almost 6 %, Panalpina’s volumes grew

achieved in 2012, as well as sharply higher freight rates which ocean freight carriers implemented during the year. In the third product division, Logistics, NFR saw a slight decrease of 1 % from CHF 906 million to CHF 896 million due to the end of the life cycle of certain projects during the year.

In 2012, the Panalpina Group generated 47 % of its net for-warding revenue with Air Freight, 39 % with Ocean Freight and 14 % with Logistics.

Gross profit (GP)

Panalpina considers gross profit a better measure of per-formance than net forwarding revenue as the former is less distorted by external factors such as significant movements in carrier freight rates and oil prices, which can materially inflate or deflate revenues although the impact on the Group’s business may be limited.

Gross profit of the Group declined slightly less than 1 % to CHF 1,465 million in 2012 (2011: CHF 1,477 million).

With respect to regional performance, EMEA is also the most important region for Panalpina in terms of gross prof-it generation, representing nearly half of the Group’s gross profit. In 2012, gross profit generated in the region de-creased by 2 % from CHF 730 million to CHF 717 million.

Gross profit per product division2012

Gross profit per regionMillion CHF

Gross profit per product divisionMillion CHF

Gross profit per region2012

800

700

600

500

400

300

200

100

0

800

700

600

500

400

300

200

100

0

Europe, Middle East, Africa and CIS

12 11

730

Asia Pacific

12 11

315

Americas

12 11

432

12 11Air Freight

688

12 11Ocean Freight

439

12 11Logistics

350

43 % Air Freight

26 % Logistics

31% Ocean Freight

49 % Europe, Middle East, Africa and CIS

21%Asia Pacific

30 % Americas

717

304

44

4

627

460

378

Annual Report 2012

14

antitrust violations related to isolated air freight surcharges for certain European trade lanes during limited periods of time prior to 2008. In addition, the Company expensed extra ordinary provisions of CHF 25.4 million during the reporting period related to accrued salaries for leaving em-ployees (contained in the category “personnel expenses”).

The Group’s EBITDA in 2012 amounted to CHF 36 million (2011: CHF 212 million), which resulted in an EBITDA/GP margin of 2.5 % (2011: 14.4 %). Excluding the two extraordi-nary charges above, Panalpina achieved an EBITDA before non-recurring items of CHF 121 million and an EBITDA/GP margin before non-recurring items of 8.3 % in the reporting year. Overall, the various investments in the business and sales structures during the reporting year were not compensated by corresponding increases in business. Moreover, the implementation of the regional structure led to cost increases which were not directly offset by related organizational cost synergies elsewhere in the reporting year. In light of the unsatisfying development of EBITDA and the EBITDA/GP margin, going forward, the Company is firm-ly committed to adjusting its cost base further and aligning it faster to changes in gross profit, which will be facilitated by the introduction of a new forecasting process focusing on short-term business planning.

approximately twice as fast as the market and reached a new all-time high of 1,388,000 TEU. Gross profit per TEU came in at roughly the same level as last year, despite several rounds of carrier freight rate increases during the year. Gross profit generated through the Logistics division increased by 8 % from CHF 350 million in 2011 to reach a total of CHF 378 million in 2012. The improved GP result was mainly driven by the Group’s further expansion and profit restoration in the Warehousing & Distribution activi-ties and Value-Added Logistics Services.

In 2012, the Panalpina Group generated 43 % of its gross profit with Air Freight, 31 % with Ocean Freight and 26 % with Logistics.

Earnings before interest, taxes, depreciation and amortization (EBITDA)

A useful measure for assessing the Group’s operating per-formance is earnings before interest, taxes, depreciation and amortization (EBITDA). The Group’s EBITDA was sub-stantially hit by a charge of CHF 59.2 million (contained in the category “other operating expenses”) which the Com-pany recognized to cover fines imposed by the EU Commis-sion and the Swiss Competition Commission for alleged

Group ReportStrategy and Results

EBITDA per region*Million CHF

90

70

80

50

60

30

10

20

40

0

–10

Overall developmentMillion CHF

EBITDA

EBITDA excluding non-recurring items

250

200

150

50

100

0

Europe, Middle East Africa and CIS

* Regional numbers do not add up to the adjusted Group result due to the omission of the corporate segment.

122012 112011

38– 2

Asia Pacific

12 11

9063

Americas

12 11

242

121

212

36

212

EBITDA/GP margin

EBITDA/GP margin excluding non-recurring items

16 %

14 %

12 %

8 %

4 %

10 %

2 %

6 %

02012 2011

8.3

%

14.4

%

2.5

%

14.4

%

Annual Report 2012

15

Note that the exceptional items mentioned in the preceding paragraph (totalling CHF 84 million) are excluded from the regional EBITDA results above as these charges were not allocated to any particular region.

Balance sheet

Current assetsPanalpina’s cash and cash equivalents amounted to CHF 393 million on December 31, 2012 and thus decreased by CHF 181 million from the year before (December 31, 2011: CHF 574 million). The cash reduction can mainly be attrib-uted to dividends paid to shareholders (CHF 47 million), an additional payment to shareholders totalling CHF 45 million through a reduction of the nominal value of the registered shares from CHF 2.00 to CHF 0.10, as well as various fines related to old and concluded legal cases totalling CHF 73 million paid to European and U.S. authorities during the reporting period.

Trade receivables and unbil led for warding ser vices increased by CHF 56 million, from CHF 1,062 million at the end of 2011 to CHF 1,118 million at the end of 2012. The increase can be mainly attributed to the increase of turn-over. The net working capital intensity (defined as net work-ing capital as a percentage of gross forwarding revenue) at the end of 2012 remained at a low level of 1.7 %, although it increased from the record-low level of 1.1 % achieved a year earlier due to the increasing pressure from customers for longer payment terms.

Noncurrent assetsPanalpina’s noncurrent assets decreased by CHF 28 million and amounted to CHF 362 million on December 31, 2012 (December 31, 2011: CHF 390 million). The decline can mainly be attributed to the decrease in investments as a result of the sale of the Company’s shares in Luxair SA and the afore mentioned impairment charges recognized during the reporting year.

Trade payables and accrued cost of servicesPanalpina’s trade payables and accrued cost of services at year-end stayed unchanged at CHF 773 million.

The two main items included in operating expenses – per-sonnel expenses and other operating expenses – devel-oped as follows:– Personnel expenses increased approximately 7 % to CHF

955 million in 2012 (2011: CHF 892 million). Excluding the aforementioned extraordinary provisions, personnel expenses increased 4 %.

– Other operating expenses amounted to CHF 473 million in 2012 (2011: CHF 372 million), equivalent to an increase of 27 % which was mainly driven by a further expansion of the Logistics footprint. Excluding the antitrust fines of CHF 59.4 million mentioned above, which have been paid to the respective authorities during the reporting year, other operating expenses increased 11 %.

Regional development

The segmental EBITDA provided in the financial accounts developed as follows in the reporting period:– EMEA: EBITDA in this region declined from CHF 38 million

in 2011 to a loss of CHF 2 million in 2012. The main rea-sons for this negative development were the difficult macroeconomic conditions in many European economies resulting in declining imports and a simultaneous growth of the cost base relating to investments in the new region-al structure.

– Americas: This region recorded a decline in EBITDA from CHF 24 million in 2011 to CHF 2 million in 2012. While good progress was achieved in further growing Panal-pina’s business in many Latin American countries, this region was impacted from the slowing U.S. economy. Moreover, apart from the rollout of the new regional structure, various investments in logistics facilities were made during the reporting period in order to appropriate-ly position this region to take advantage of future busi-ness opportunities.

– Asia Pacific: EBITDA recorded a contraction from CHF 90 million in 2011 to CHF 63 million in 2012. Exports from Asia to the mature markets in Europe and North America were declining throughout most of the year, and intra-Asian demand also stayed weak, particularly in Air Freight. At the same time, the cost base in Asia Pacific increased as new investments in personnel were undertaken and the new regional structure was implemented.

Group ReportStrategy and Results

Annual Report 2012

16

Net cash decreased by CHF 181 million during the year under review to CHF 393 million on December 31, 2012 (December 31, 2011: 574 million).

Cash flow Net cash from operating activitiesPanalpina’s net cash from operating activities in the report-ing period amounted to CHF – 72 million (2011: CHF 193 million). Major contributors to this adverse development were the negative net result for the period and the simultaneous increase of the net working capital caused by an increasing pressure from customers for longer pay-ment terms. The net result also includes the outflow of CHF 73 million during the reporting year related to the payment of aforementioned fines.

Cash flow from investing activitiesExpenditures on property, plant and equipment increased by CHF 20 million during the reporting year to CHF 51 mil-lion (2011: CHF 31 million) as the Company ramped up its investments in IT infrastructure and technical equipment in certain facilities it operates. Also, the Group received inflows of CHF 57 million due to the repayment of money market and time deposits and a further CHF 28 million mainly due to the sale of its investment of 12 % of Luxair SA’s shares. No cash was spent on acquisitions during the reporting year (2011: CHF 60 million). Overall, the net cash

Other liabilities Panalpina’s other liabilities decreased by CHF 13 million from CHF 447 million at year-end 2011 to CHF 434 million at year-end 2012 and can be mainly attributed to a reduction in provisions and a further reduction of borrowings to a nearly debt-free level of CHF 2 million.

Total equityTotal equity decreased by CHF 165 million during the reporting period, from CHF 915 million on December 31, 2011, to CHF 750 million on December 31, 2012. The decrease in shareholders’ equity on one hand reflects the aforementioned reduction of the nominal share capital which decreased from CHF 50 million at year-end 2011 to CHF 2 million at year-end 2012. On the other hand, retained earnings and reserves declined from CHF 1,053 million at year-end 2011 to CHF 748 million at year-end 2012 primar-ily due to the payment of the dividend and the negative development of the Group’s net result.

Net cash

CHF million Dec 31,

2012

Dec 31,

2011

Change%

Cash and cash equivalents 393.0 573.6 – 31.5

Other current financial assets 0.0 20.0 –100.0

Short-term debt –1.6 – 7.3 – 78.1

Long-term debt – 0.2 – 0.2 0.0

Net cash 391.2 586.1 – 33.3

Group ReportStrategy and Results

Total liabilities and equityMillion CHF

Equity

Other liabilities

Trade payables and accrued cost of services

Total assetsMillion CHF

Noncurrent assets

Other current assets

Trade receivables and unbilled forwarding services

Cash and cash equivalents

2,000

2,250

1,500

1,750

1,000

1,250

500

750

0

250

2,000

2,250

1,500

1,750

1,000

1,250

500

750

0

250 773

447

915

1212 1111

574

1,062

390

109362

75084

4341,118

393 773

Annual Report 2012

17

outflow from investing activities decreased substantially from CHF 152 million in 2011 to CHF 10 million in 2012.

Capital expenditures in 2012 amounted to 1.3 % of net for-warding revenue (2011: 0.8 %).

Free cash flowAs a result of aforementioned developments, the free cash flow, calculated as net cash from operating activities minus net cash flow from investing activities, decreased from CHF 42 million in 2011 to CHF – 82 million in 2012.

Cash flow from financing activitiesThe net cash used in financing activities increased signifi-cantly from CHF 4 million in 2011 to CHF 97 million in 2012. The largest part of this increase was related to the payment of a dividend to shareholders in the amount of CHF 47 mil-lion (2011: nil) and an additional payment to shareholders totalling CHF 45 million (2011: nil) via a reduction of the nominal value of the registered shares.

Group ReportStrategy and Results

Annual Report 2012

18

Americas

Areas: 5Andina, Canada, Mercosur, Middle America, USA

Market situationThe volatile market conditions in the key markets, USA, Canada, Mexico and Brazil, significantly impacted the regional results. Brazil, nevertheless, managed to develop into the world’s sixth-largest economy. Meanwhile, the Andean countries with Chile posted the greatest market growth in the region. Restrictive import and trade policies dampened foreign investment. The gross national product drop ped in comparison to the previous year and remained below expectations.

Highlights– Panalpina gained three large, global accounts in the USA

with top-ten freight volume.– Panalpina USA and Brazil completed development of

tailored end-to-end services on the highest complexity level and with future-oriented information technology for the aerospace industry.

– A large Healthcare customer honored Panalpina USA with awards, including “Most innovative carrier of the year” and “International forwarder of the year.”

– The Healthcare vertical developed very well in the USA. Cool-chain capabilities were significantly expanded in Chicago and San Juan, Puerto Rico through further invest-ments.

– Panalpina decisively grew its market share in automobile spare parts logistics in Brazil. A technologically state-of-the-art, 10,000 m2 logistics center was set up in Cajamar near São Paulo.

– Panalpina Mexico expanded the Consumer and Retail segment in its logistics business. The business units also profited from the prospering automobile industry, which grew by 20 % year on year.

OutlookVolatility in the marketplace will remain in 2013, which will primarily impact the air freight business. Panalpina remains cautiously optimistic because its regional structure will bring improved focusing and better regional coordination. The Company sees great growth potential for ocean freight in the key markets, USA, Mexico, Columbia, Brazil and Chile, as well as for logistics in developing markets such as Mexico and Brazil. In these areas, the challenges involving infrastructure and regulatory compliance offer logistics service providers numerous business opportunities.

Asia Pacific

Areas: 4 India, North Asia, Oceania, Southeast Asia

Market situationThe year 2012 was particularly difficult for the air freight industry in Asia. Both the generally low export volume and the switch to more inexpensive ocean freight increased pressure on air freight margins. Air freight rates dropped accordingly throughout the year. Many customers seized the opportunity and renewed their contracts with signi fi-cant rate reductions.

Highlights– Panalpina completed introduction of the entire ocean

freight SAP Transport Management System in Singapore. In addition, the “Less than Container” hub in Singapore was reorganised, which boosted its throughput by 30 %.

– The Asia Pacific Logistics Competence Center in Singa-pore opened to provide warehouse lean management support and driving logistics excellence in the region.

– In India, Panalpina broadened its market presence in the automobile and pharmaceutical industries.

– A new supplier invoice handling system was implemented

Major changes in all three regions – The varied eco-nomic development in the regions confirms the decen-tralization measures taken in 2012 and the implemen-tation of three regional CEOs. In this way, Panalpina reacted to the regionally differentiated needs of custom-ers. All regions aligned their new organizational structure essentially.

Group ReportRegions

Annual Report 2012

19

in India and Thailand, which will bring substantial im-provements delivering increased visibility.

– The Panalpina Service Center in Wuhan, China centralized ocean freight document processing for Chinese business, which resulted in cost savings and productivity improve-ments.

– The Chinese authorities granted Panalpina China a Whol-ly-Foreign-Owned Enterprise status for the office in Xi’An.

– Panalpina Logistics (Shanghai) Ltd. was awarded as an A-class company by the Chinese customs authorities, which simplifies and accelerates various customs proce-dures for Panalpina.

– Panalpina launched 24 new “Less than Container” services ex Asia.

OutlookThe Asian market is becoming ever more volatile and uncer-tainties are growing. Air freight volumes for exports from Asia to Europe will probably continue to decline in 2013, which will increase pressure on the airlines to increase rates or adjust their capacities. Panalpina optimistically views development of volumes on the Asia–America trading routes as well as for the intra-Asian market. The Company will concentrate more on the business potential of these two markets, both in the air freight and ocean freight sectors.

Europe, Middle East, Africa and CIS

Areas: 9Black and Caspian Sea, Central Europe, France and Maghreb, Iberia, Middle East, Northern Europe, Northwest Europe, Southwest Europe, Sub-Saharan

Market situationPressure on the margins and high volatility of rates made business difficult, primarily for ocean freight, but also for air freight. The generally poor economic situation and a drop in consumption led to negative development in air freight volumes with regard to the European routes. The only in-crease in market volume was recorded for air freight export, primarily through Panalpina’s own air freight products. Demand for warehousing and logistics remains strong.

Highlights– The region’s new marketing and sales strategy recorded

its first successes.

– Panalpina Norway restructured itself in order to integrate Grieg Logistics.

– Panalpina recorded above market growth in the region in logistics and increased its market share in ocean freight.

– The newly implemented road freight concept is func-tioning smoothly, whereby the distribution network was expanded to Poland and the Baltic states.

– New ocean freight products were implemented success-fully.

– The region integrated the flights of the two new Boeing 747-8 aircraft in the Luxembourg hub structure and the European freight market.

– Panalpina steadily expanded its network in the Middle East – with positive business development results.

– Panalpina increased its presence in the relevant markets in the oil and gas industry.

– Panalpina grew further in Turkey and established its logis-tics range in Gebze with a 12,000 m2 warehouse.

– Driven by continuously growing customer interest in busi-ness in Africa, Panalpina Sub-Saharan further expanded its long-term commitment on the continent.

OutlookThe Panalpina Europe, Middle East, Africa and CIS region will concentrate on growth in its markets in the Middle East, CIS, Turkey and Norway. The Company anticipates a further increase in productivity with the introduction of the first component of SAP TM and with an air freight network and gateway optimization. Greater cooperation between the areas should result in further synergies across national boundaries.

Group ReportRegions

Annual Report 2012

20 Group ReportProduct Divisions

Air Freight

Market situationThe Air Freight division felt the poor economic conditions most strongly and was unable to increase its freight vol-ume. Meanwhile, the growing supply of new cargo planes led to an imbalance of supply and demand. The cargo units sent grew steadily smaller, while fluctuating fuel prices negatively impacted air freight costs. Panalpina felt the decrease in turnover without exception on all main trade routes.

Highlights– Panalpina replaced both Atlas Air operated Boeing 747-

400 cargo planes with two of the latest 747-8 generation planes, which are more environmentally-friendly and inte-grated them into its own air freight network.

– Panalpina solidified its industry leadership for tempera-ture-controlled freight for the pharmaceutical industry with proactive door-to-door monitoring, control and doc-umentation. Additional central locations were certified for GDP (Good Distribution Practice) in 2012.

– The division equipped itself with its own screening facility to enable it to seamlessly handle air freight for the USA.

– Panalpina’s air freight division developed new markets such as the aerospace industry or orders from the public sector.

– Adaptations to the main systems now facilitates paper-less handling in line with the e-Freight initiative. At the same time, Panalpina attained top-ten e-Freight carrier status.

– The requirements for the Cargo-2000 certification have been further increased.

OutlookSince the global economy is not expected to recover in 2013, the prospects for the air freight business are slug-

gish. The overcapacities will continue to exist and the load factors will remain low. The Air Freight division will there-fore pursue focussed diversification, meet the challenges on the main trading routes and seek sales opportunities in emerging markets such as Southeast Asia, Southern Asia, the Middle East, Africa and Latin America. It will also focus on agile industries such as the high-tech or automotive industries, which seek shorter procurement channels. The cold-chain service range will be further expanded in order to more widely serve pharmaceutical industry customers.

Ocean Freight

Market situationThe uncertainty and volatility in the major east–west trad-ing routes continue unabated. The global demand for ocean freight was growing by approximately 2–3 % to an antici-pated 6–7 %. Capacities were also growing accordingly by 6–7 %. Noteworthy was the strong drop in the movement of goods westwards from Asia (to Europe) by 9 % year on year. This trading route has experienced continuous growth for the past 20 years.

Highlights– With a 6 % increase, ocean freight volume growth was well

above average market growth of 2–3 % in 2011.– For the Asia–Latin America trading route, Panalpina

increased volume by 24 % in comparison to the previous year. The intra-Asian connections developed extremely positively.

– Panalpina increased its volumes for LCL (Less than Con-tainer Load) and FCL (Full Container Load) services from Europe, particularly to destinations in Asia and North America.

– Panalpina launched over 40 new LCL services worldwide in 2012.

Three products, one solution – In order to offer inte-grated door-to-door solutions, Panalpina combines the intercontinental transport of air and ocean freight with comprehensive value-generating logistics. The three product divisions end the year 2012 with mixed results, since the economic conditions were very volatile and the freight market developed unfavorably.

Annual Report 2012

21Group ReportProduct Divisions

– The Ocean Freight division is making inroads into niche markets such as the transport of recycling materials from Europe to Asia.

– The LCL hub in Singapore was vastly enlarged.

OutlookMarket growth of 3–4 % is anticipated for ocean freight, compared to a 9 % increase in capacity. The volatility in tar-iffs shall continue to exist. The intra-Asian and Asia–Latin America trading routes, which grew strongly in 2012, will grow further. Panalpina generally anticipates a shifting from air freight to ocean freight, particularly in terms of ship-ments for the health and pharmaceutical industry. Panal-pina will continue to focus on and further develop the field of secondary raw materials.

Logistics

Market situationThe outsourcing of manufacturing and logistics operations continues to grow across a broad set of industries. Faced with increasing competition and a difficult economic envi-ronment, companies are increasingly turning to logistics providers as a key driver of both supply chain innovation and risk mitigation. And the benefits of outsourcing are convincing: it reduces operational costs, allows organi-zations to focus on their core competencies, and enables fast-growing companies to scale more easily.

Highlights– New warehouses in Brazil, France, Poland, Singapore, Tur-

key and the United Kingdom offer additional logistics space.

– Panalpina established four Logistics Competence Centers across the globe. Their experts support the deployment of best-in-class tools and techniques in terms of tender and bid management, logistics solutions design, opera-tions modeling and optimization and lean logistics excel-lence.

– Furthermore, Panalpina has a strategic partnership with Red Prairie as its standardized global logistics platform, including a warehouse management system.

– The application of the warehouse optimization tool set improved efficiency and ultimately reduced total cost of ownership.

– Logistics division introduced a global continuous improve-

ment process called Logex and rolled out its operational excellence program which ensures that all staff is trained in the latest processes and legislative requirements.

– Vendor managed inventory and post-sales services has extended its offers.

OutlookAs the logistics market is expected to grow, Panalpina is steadily increasing its footprint as a global provider of logis-tics services. The Logistics division is further developing its products and emphasizes continuous improvements to existing operations.

Annual Report 2012

22

Globally local – Panalpina operates a world-spanning network embracing some 500 branches. The compre-hensive service is backed by the expertise of local teams who apply their up-to-the-minute insights on local condi-tions to deliver any time door-to-door solutions tailored to Panalpina’s customers.

Value Creation and SustainabilityGlobal Network

AmericasNet forwarding revenue: CHF 2,288 millionFull-time equivalents: 4,823

Annual Report 2012

23Value Creation and SustainabilityGlobal Network

Europe, Middle East, Africa and CISNet forwarding revenue: CHF 3,091 millionFull-time equivalents: 6,852

Asia PacificNet forwarding revenue: CHF 1,238 millionFull-time equivalents: 3,492

Panalpina branches and partner companies in over 160 countries

Annual Report 2012

24

In partnership with the customers – Thorough indus-try know-how and a cooperative exchange with the cus-tomer are crucial for the provision of integrated end-to-end solutions for the customers supply chain. Panalpina has pooled this expertise in nine core industry sectors and meets the special demands of industrial projects with Panprojects.

Value Creation and SustainabilityIndustry Verticals

Panprojects

Panprojects meets the project forwarding requirements of the energy and resources sector, which often involves the transportation of very heavy and oversized loads. Panproj-ects entered 2012 with several mature petrochemical and liquefied natural gas projects in hand, but saw little real growth in this sector until later in the year. The Oil and Gas vertical was further boosted with the signing of two global agreements with major oil multinationals, which now places Panalpina on a good footing to proceed into 2013 and be-yond. Business in the mining sectors remained firm. The power sector also stayed strong with new contracts award-ed in Bangladesh and Australia being most noteworthy, plus renewable energy projects being undertaken in Brazil. Panprojects also enjoyed success in the transport and infrastructure sectors in Brazil with major train deliveries for the local metro. The key to much of this success is close cooperation within Panalpina’s network, a strong and com-mitted compliance program and the benefit of having its own internal transport engineering team.

Oil and Gas

Panalpina’s work focuses on the supply of goods and ser-vices for the upstream sector, also known as exploration and production. That sector involves the search for poten-tial underground or underwater oil and gas fields, drilling exploratory wells, and operating wells that recover and bring crude oil or raw natural gas to the surface. Over the decades, Panalpina has developed industry-leading infra-structure and processes to cover the entire oil and gas exploration, development and production cycle. It not only handles shipments of all kinds, but offers complete end- to-end supply chain solutions, from supplier and purchase order management to customs clearance. The latter, in

particular, is very complex when it comes to moving equip-ment for the oil and gas industry, especially into increasing-ly remote areas. Panalpina Oil and Gas managed to expand their market position despite a flat international exploration and production market in terms of global rig counts and projects . Panalpina’s values and the industry leadership in compliance, HSE and security are being recognized by the market as a clear differentiator to the competition. Service quality and on-time delivery in dif f icult environments will also continue to be crucial in the future, as oil and gas clients are engaged in a fierce battle in all markets.

Telecom

The growing importance of mobile high-bandwidth ser-vices, being connected anytime and anywhere, video com-munication, as well as media-driven entertainment, have stimulated and will continue to stimulate significant invest-ments in wireless telecommunications infrastructure. In developing and emerging markets, thousands of mobile subscribers are registered every day and drive basic mobile infrastructure investments, as well as sales of multimedia devices. Panalpina provides telecom customers with lean, effective and secure supply chain solutions that are flexible and dependable. Considering the highly vulnerable nature of telecom products, Panalpina has developed industry-specific solutions. Experienced security teams assess and improve transportation routes on a daily basis. This set-up guarantees low-risk exposure with regard to theft or dam-age to their valuable products combined with an unmatched time-to-market performance. Nevertheless, revenue de-creased in 2012 compared to the prior year as the industry wrestled with challenges of economic difficulties in key markets, impacting investment in infrastructure.

Annual Report 2012

25Value Creation and SustainabilityIndustry Verticals

Hi-tech

For many high-tech companies, supply chain services and logistics have become essential parts of the manufacturing and sales process. Considering the highly vulnerable nature of high-tech products, Panalpina serves companies oper-ating in this area through its Hi-tech Center of Expertise. Panalpina combines freight and logistics services between suppliers, manufacturers and distribution channels. Panal-pina is also increasingly handling activities such as reverse logistics and vendor managed inventory for its high-tech clients. The ever-shortening product life cycle requires fast and highly flexible supply chains that are able to evolve with changing market requirements. Hi-tech is Panalpina’s big-gest center of expertise in terms of turnover, accounting for approximately 17 % of the Company’s revenues. Panalpina continues to leverage its global footprint in this customer group.

Healthcare

Healthcare remains one of the Company’s fastest-growing business sectors, serving both pharmaceutical companies and medical device manufacturers. In addition to fast de-livery, customers in the healthcare industry want assured security and, for many shipments, continuous temperature control. New Good Distribution Practice (GDP) regulations were designed and came into effect in 2013, leading to greater regulatory control, particularly for temperature-sensitive products in all temperature ranges. Special inter-nal training programs and investments in infrastructure ensure that Panalpina is GDP compliant wherever health-care shipments are handled. Furthermore, the Healthcare vertical launched new products, including the Control Tower set-up and the PanCoopetition initiative, which brings customers in the healthcare industry together to save costs in their supply chains through cooperation, such as by sharing transport space.

Manufacturing

Panalpina provides transportation and logistics services that enable manufacturing companies to make their supply chains leaner and more agile. In return, the customers achieve the necessary flexibility to effectively manage their clients’ complex supply and demand. Panalpina’s market

position is very comfortable in this vertical because the big players are very open to new ideas and concepts. Therefore Panalpina developed specific industry value propositions focussing the aftermarket of its clients. All the traditional manufacturing markets are rather strong, particularly Latin America, with a primary focus on Brazil, while activities in Asia remain weak. In South America Panalpina strength-ened its footprint with several ample contracts. For in-stance, Panalpina is handling the distribution in and out of Brazil and Argentina for one of the largest providers of equipment for agriculture. The market conditions do not change very quickly in this segment, therefore the outlook will not change for the years to come. Panalpina has no-ticed a strong tendency to bring manufacturing back to the USA and to source domestically, but that is a slow process. Moreover, indications for the agriculture segment show very positive development over the next few years, espe-cially in emerging markets such as Africa.

Automotive

Panalpina’s operations in the automobile industry include the shipment of production materials and finished products across the globe. The vast majority of cargo is transported by sea, but the industry continues to rely on regular air freight services to handle special loads, spikes in demand or urgent shipments. In 2012, a sluggish economy and declining vehicle sales in Europe were compensated for by strong growth in Asia, Latin and North America, resulting in record profits for most of the major automobile companies. Most auto manufacturers and suppliers have optimized their supply chains through previous capacity adjustments, which entailed moving more products via ocean freight and reducing air freight costs. Rate volatility, especially in ocean freight, was successfully mitigated for the most part through proactive negotiations with key clients avoiding negative exposure per shipped unit. Brazil, Mexico, China, India, Japan, Korea and Russia will remain growth markets and drivers of the automobile industry with increased investments in additional production plants and capacity.

Chemicals

In the chemicals business environment, customers require dependable, on-time delivery from their suppliers. The chemical goods supply chain is very complex, leading to

Annual Report 2012

26

increased logistics and transport spending due to a tighten-ing of the security controls, environmental aspects, as well as increasing regulatory requirements. Customers are generally price sensitive and only switch their focus onto solutions once low prices are secured. This characteristic continued strongly in 2012. The chemical industry began to slow down at the end of 2012 and freight volumes decreased significantly. This decline was particularly felt in Europe and could not be offset by slight increases in North America and Asia. While Panalpina was able to slightly in-crease sea freight and substantially increase its logistics services, this combined growth was barely able to offset the significant drop in air freight. In addition, the lengthy six sigma implementations across multiple chemical com panies are having a significant impact by reducing air shipments.

Consumer and Retail

The consumer and retail industry is facing different chal-lenges: sourcing has become global, distances longer and the economy more fragile. Furthermore, the industry is characterized by new ways of channeling commodity, such as e-commerce, resulting in increasingly demanding and better informed consumers. In line with the multichannel retail development, visibility and ability to take early and fast decisions in the supply chain becomes critical. Existing e-commerce companies are starting to consider moving towards retail outlet environments and retailers are looking increasingly in the direction of online shopping. This ten-dency will open new business opportunities for Panalpina to offer sophisticated order management solutions. Market growth in the consumer and retail sector was more or less slow in all regions in 2012. Fast-moving consumer goods companies experienced slower growth and efforts were made to drastically decrease expensive transportation. Furthermore, global consumer goods companies are begin-ning to review their global air freight spend more often. By offering innovative solutions, Panalpina managed to achieve significant business win in this segment and achieved a modest growth of its overall Consumer and Retail volume.

Fashion

The fashion industry has sophisticated and demanding consumers who require multichannel offers, a brand expe-

rience, personalization and increased product differenti-ation. This leads to shorter product life and an increased need for innovation, flexibility and enhanced order fulfil-ment certainty. Market growth in the fashion vertical was slow in all regions in 2012. Less impact was seen on the high-end fashion brands. Multichannel development also enables consumers to more easily access consumption opportunities. High-end fashion is still dominated by time-to-market requirements, which is why air freight is still strong and growing. The diversity of retail channels has led to less loyal customers and therefore a complex environ-ment for retailers in which to balance supply and demand. The general transition from ocean to air freight continues, but quite a few fashion retailers have started to use air freight more strategically to achieve better time-to-market. Panalpina supported its fashion clients through all these challenges with appropriate solutions, which resulted in a slightly improved year-end result.

www.panalpina.com/iv

Value Creation and SustainabilityIndustry Verticals

Annual Report 2012

27

Performance, integrity and professionalism – The journey to fully realize Panalpina’s values has revealed that its culture is strong, unique, and differentiates the Company from its competition. Panalpina’s employees are proud to be a part of the Company’s mission and continually demonstrate their willingness to go above and beyond for both the good of the Company and its customers.

Compliance and Corporate Culture

Panalpina’s corporate culture embodies shared values, cross-cultural understanding, and ethical behavior based on fairness, respect and responsibility in all dealings with-in and outside the Company. Its Code of Conduct is central to Panalpina’s business success and enhances its repu-tation as a company that is taking ethics and compliance seriously.

Established Code of ConductRecognizing the importance of employees understanding how their actions contribute to the success of the Com-pany and the condition of their workplace, Panalpina extended its Code of Conduct in 2012 with the intention of making this document more representative of the premium it places on its employees always representing the highest standards of ethical conduct and acceptable behavior. This new version has been instrumental in supporting the goal to fully integrate Panalpina’s values across the Company and influence the actions of Panalpina’s employees. With an emphasis on commitments to performance, integrity and professionalism, the Code focuses not only on laws and regulations, but also on expectations of personal conduct. The Code covers detailed information on foster-ing a positive work environment through valuing diversity, rejecting discrimination and harassment, ensuring fair employment practices, and upholding health and safety measures. Additional chapters of the Code provide guid-ance on avoiding conflicts of interest, on conducting busi-ness with integrity (including information on anti-corrup-tion practices), on ensuring financial integrity, on managing the Company’s assets and information, and on protecting the environment.

Training for complianceAvailable in 27 languages, the Code is accessible to all employees through the intranet and on the corporate website. Additionally, each employee is trained on the Code of Conduct through a face-to-face session with their

supervisor. Upon completion of this review, it is requested that each employee provide a signature to affirm their un-derstanding and commitment to adhere to the standards therein. This structured training program was initiated in 2012 to guarantee all Panalpina employees were provided with adequate training on how to handle difficult situa-tions. When such circumstances arise, employees are encouraged to report breaches of the Code of Conduct to their Human Resources managers or to the Corporate Ethics and Compliance Department. Alternatively, employ-ees are free to report concerns to the Ethics and Com-pliance Hotline, which is a secure and confidential option for submitting reports at any time or at any location, either by phone or the internet.

Leading the industry with integrityAdhering to strict corporate ethics is a cornerstone to Panalpina’s organizational structure. The Ethics and Com-pliance Officer reports to the CEO and the Ethics and Com-pliance Committee of the Board of Directors. A program that was initiated in 2008 and continued in 2012 conducts training at various Panalpina locations on anti-corruption, trade regulation and anti-trust matters. As supplements, e-learning modules are available for quick and easy refer-encing. To ensure that these trainings and materials are making an impact, the Ethics and Compliance Department assessed Panalpina sites across 25 countries in 2012. In addition, Panalpina also strives to engage key suppliers in these matters. This effort to ensure honest practices throughout all aspects of the business is complemented by Panalpina’s involvement in the World Economic Forum Partnering Against Corruption Initiative (PACI) as a signa-tory member for the third consecutive year in 2012.

www.panalpina.com/culture

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Recruiting, retaining and developing talent – Pan alpina is committed to a transparent and respectful relationship with its employees. Through a culture of open communication, responsiveness and continuous improvement, the Company will continue to recruit, retain and develop the best and most capable team of employees in the logistics industry.

A the end of 2012, Panalpina had 15,224 employees in over 80 countries. Its global human resources function is responsible for enabling organizational development to secure the ongoing engagement and ef fectiveness of Pan alpina’s employees.

Keeping its four strategic priorities set in 2007, the core of the Human Resources transformation 2.0 strategy is currently being formulated to: 1 Create a more partnering role for Human Resources

within Panalpina2 Achieve flawless administration of HR services

across the Company3 Connect the organization to drive greater alignment

and collaboration across boundaries4 Measure HR performance in terms of effectiveness

and efficiency

Efficient human resource managementIn 2012, the implementation of PanLink as the integrated human resources information system solution continued for Panalpina. The system supports all standard human resource processes in the area of performance and talent management, and helps to align people to the Group’s strat-egy and goals. There are several other key elements to the PanLink system, such as the recruiting module that helps to quickly identify the best candidates for an open position, and the succession planning tool, which helps support the development and retention of Panalpina’s employees. In the upcoming year, to complement the recruiting modules, a job marketing platform will be deployed and the employee development programs will be supported by a Learning Management System (LMS). It is expected that by end of 2013 approximately 6,000 employees will be using the complete PanLink suite of tools and all employees will have access to some modules of the system.

Committed to employee engagementIn 2012, the Employee Engagement Survey results helped identify areas where Panalpina’s employees are generally satisfied, as well as areas where additional programming and resources may need to be allocated. Overall, there was an excellent response rate (84 %) to the survey, an increase of two points since 2009, demonstrating that a represen-tative sample of Panalpina’s employees participated.

Employees reported improved views on management’s ability to state objectives clearly, establish priorities, make decisions promptly, provide leadership and communicate with people. Employees reported being better informed of the Company’s strategy and performance. Management was seen to be doing a better job in communicating to peo-ple and employees reported that more effort was made to obtain their views. In the area of learning and development, more employees reported satisfaction with available train-ing opportunities, and they are more positive about Panal-pina doing a good job in developing talent and promoting colleagues based upon performance and merit.

It is also important to acknowledge where improvements need to be made. For example, employees reported a slightly lower willingness to stay with the organization. This was attributed to perceived shortcomings in the per-formance and succession programs, in addition to some concerns in the areas of learning and development and people management. Other categories highlighted in the survey where improvements are needed include operating conditions and efficiency, particularly on process efficien-cy, organization of work and physical working conditions. These have been highlighted as key areas for which Action Plans have been established company-wide. The manage-ment of Panalpina as well as the human resource teams take this feedback quite seriously, and are committed to seeking such feedback. Great strides have been made in recent years, but there is still much work remaining.

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Cultivating new leadersThe Company invests a great deal of time and resources in the development of its managers and leadership teams. Be-cause of its global nature and the demanding requirements for its management, Panalpina continually seeks the best possible candidates, either internal or external, for mana-gement and line roles, and thus does not have a policy to preferentially hire people who are living locally. Because of this, it has developed a strong commitment to leadership development to most efficiently leverage this investment and provide long-term employment opportunities to its employees. This is particularly true for its management and leadership development programs.

In 2012, 35 more participants graduated from the Navi-gating Our Future Program, Panalpina’s global program on collaborative strategic leadership skills. This program is offered to high-potential employees in mid-senior positions who are willing to pursue an international career. An addi-tional 35 candidates were selected to participate in 2013. Over 350 department heads, team leaders and supervisors participated in three modules of the Steering Success glob-al leadership and managerial skills program. This program is offered in Mandarin, German, French, Portuguese, Spanish, Italian, and English. The program has been strengthened with fresh content and a more refined focus to hone perfor-mance management skills.

Four new learning and development programs covering communications, empowerment, performance manage-ment and skills to help new managers were introduced in 2012: these programs fill a critical vacuum in the current portfolio and focus on skills building to support the devel-opment of management and leadership capability within middle management – a subject once again clearly high-lighted in the latest Employee Engagement Survey.

The virtual campus: PanAcademyThere are a variety of training opportunities in place for the staff, and all employees are encouraged to take advantage of these programs. In 2012, PanAcademy, Panalpina’s e-learning platform, expanded to include 50 learning units offered in over 15 languages. These learning units cover subjects such as the Company’s strategic environmental PanGreen initiative as well as operations, product compe-tence, compliance, and through the “core values journey,” refresher courses on anti-corruption.

Fair and transparent compensationIn 2012, compensation and reward schemes for all mana-gement positions were evaluated and benchmarked over dozens of countries. All senior and many mid-level mana-gement positions were reevaluated and benchmarked against global data, and the rewards policies and practices were fine-tuned. Additionally, the grading and assessment framework has been extended to include employees at lower levels in the organization in an effort to gradually standardize the grading framework across the entire corpo-ration. The intent of the exercise was to have better market insight and improve the human resources knowledge data-base to guide business and hiring decisions.

In order to align and improve the focus of Panalpina’s sales force, the key performance indicators used globally to mea-sure sales performance were evaluated, and a global frame-work was defined to which sales incentives schemes will be gradually aligned. The goal is to ensure that the sales force is incentivized and rewarded for achieving results that are in line with business objectives and that encourage behavior that is consistent with Panalpina’s values.

www.panalpina.com/jobs

Employees

Full-time equivalents (FTE)*

December 31,2012

Europe, Middle East, Africa and CIS 6,852

Americas 4,823

Asia Pacific 3,492

Corporate 441

Total 15,608

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

Number of employees 15,224

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IT is key – Modern, robust information technology systems are critical elements of modern businesses. The ability to collect, process, analyze and present large amounts of information quickly and accurately, helps Panalpina maximize its revenue, keep costs low, and most importantly provide world class service to its customers.

The information technology landscape is continuously and rapidly evolving. Ultimately however, information techno-logy needs are driven by the needs of customers and what is required to deliver the level of service they expect. There-fore, Panalpina’s IT team will focus on three core concepts over the next few years. First, IT resources will be deployed strategically to support the value proposition made to cus-tomers, which ultimately drives long term customer loyalty. Second, IT must be a tool that is used to drive improved efficiency and productivity across the business. Lastly, the IT infrastructure must enable constant innovation to support the development of the products and services that will drive future revenue growth and efficiencies.

Improving performance through ITThe IT team is in the process of completing the implementa-tion of a state-of-the-art and robust backbone of core infor-mation systems. Completing this program will enable the high-speed flow of information through the organization, facilitating decision making, innovation and revenue gener-ation.

A key component is the ongoing implementation of the Air and Ocean Freight Transportation Management system which is expected to be completed in 2016. However, the first benefits will be seen during the course of 2013. In addition, Panalpina is investing to support the growth in its Logistics business through the deployment of advanced Warehouse Management systems. This project has made significant progress with implementations in Latin and Central America, Europe and Asia Pacific, and continued global rollout expected over the next few years.

Hit the road with information securityInformation Security is an issue that is taken very seriously. In recent years, the IT infrastructure has been further strengthened by replacing and upgrading security tech-nology and by updating the Panalpina Information Security

Policy. A critical element in this effort is that Panalpina em-ployees are required to read and adhere to the IT security policy, and a program of awareness campaigns and manda-tory e-learning modules supports these efforts.

Panalpina also has invested considerably in the strategic upgrading of the datacenter facilities to signif icantly strengthen resilience and disaster recovery capabilities. Progress can be reported in the implementation of this “dual site” approach in the Asia Pacific, European and Americas regions.

Meeting customer’s expectationsAnother key element of Panalpina’s IT strategy is to improve the customer-facing systems to meet the information and data-related needs of today’s customers. This effort will initially focus on specific segments, including Oil and Gas, but ultimately will extend throughout the business. In addi-tion to this, Panalpina’s IT group is working to deploy an enhanced strategic Order Management solution, allowing substantially quicker and richer implementations of cus-tomer facing initiatives

In 2013, Panalpina will continue its strategy of investing in its IT systems to increase efficiency, support the needs of customers, and drive innovations. The deployment of the Transportation Management system is a central element in this effort, as is the development of the capacity to meet customers’ demands for data. Managing costs will be a focus in the coming year to ensure that the IT systems are operating as efficiently as possible. Lastly, the role of social media will be considered moving forward. In this era of increased connectivity and instantaneous communication, social media may provide new and exciting opportunities to connect with customers.

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Growing business through partnerships – The part-nerships Panalpina develops with suppliers is a crucial element of the Company’s overall success. Maintaining a collaborative, respectful relationship with its suppliers provides opportunities for continued knowledge exchange and provides the capacity to readily identify solutions to challenges that arise in an extremely dynamic industry.

Panalpina’s strong relationships with its partners directly impact its ability to maintain the competitive advantages it enjoys and to provide the highest value to its customers. Therefore the selection and management of subcontractors is a carefully managed process, to ensure that these rela-tionships reflect Panalpina’s own values, and will ultimately support the strategic objectives and growth of the Company.

Setting high standards As subcontractors play a crucial role in Panalpina’s day-to-day business, it is imperative that they represent Panalpina well and meet the Company’s high expectations regarding quality and ethical business practices. Therefore finding trustworthy partners who are technically qualified to meet the needs of Panalpina’s customers in a cost-effective man-ner is a high priority. Subcontractors must have a proven track record in ocean, air and logistics operations and have exceptional reputations for service and quality. Panalpina assesses potential suppliers based on strict criteria that reflect the Company’s expectations in the areas of ethics and compliance, credibility, pricing, quality of service, consistency and performance. Coupled with these distinct selection criteria, Panalpina also recognizes the right of subcontractors to be treated with complete fairness. To this end, the Company conducts its selection practices such that all subcontractors are provided an equal opportunity to be awarded contracts, regardless of nationality. Panalpina also does not have a policy to preferentially hire suppliers that are local to its operations. Regardless of a supplier’s location, its expected that all the Company’s rules and pol-icies are adhered to so that they may remain compliant with all applicable laws and regulations.

Growing togetherAs part of Panalpina’s commitment to hire the best part-ners, it is expected that these subcontractors are highly knowledgeable about the business and are capable of suggesting improvements to the Company’s products and

services. These partnerships hold significant potential to uncover opportunities that can lead to streamlining pro-cesses and leveraging shared experience in this fast-paced industry. One example of how these relationships present opportunities to grow together is the PanGreen program that Panalpina has been implementing since 2010. Part of this sustainability initiative assesses the energy and envi-ronmental impacts of subcontractors and calculates the carbon footprint of cargo shipments. The results of these calculations provide a source of data that may be used as reference for subcontractors considering their environmen-tal performance and weighing options for improving effi-ciency. Actively engaging suppliers in this way has fostered a culture grounded in collaboration and shared interests in improving overall performance and offering customers superior services.

Leading by example Panalpina considers compliance with all applicable laws and regulations as non negotiable for itself and for those with whom it does business. This is especially relevant in terms of national and international laws and regulations related to anti-corruption, environmental protection, and other legal conditions. Panalpina takes all necessary precautions to ensure full compliance with all laws, includ-ing conducting internal audits and compliance audits of subcontractors to ensure that there are no unknown legal risks or liabilities and that there are no actual or perceived violations of any laws or regulations where Panalpina does business.

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Commitment to sustainability management – A core element of Panalpina’s approach to driving customer satisfaction is based upon its commitment to employ disciplined and structured management systems for quality, health, safety and environmental issues. Such an approach facilitates continuous improvement efforts, allowing Panalpina to regularly assess its performance and make adjustments where necessary.

Panalpina’s robust quality, health, safety and environmental control processes greatly increase the value of its services and ultimately the satisfaction of its customers. These efforts, which extend throughout the organization, are the responsibility of the Corporate Quality, Health, Safety and Environmental team and are central to maintaining its culture of responsibility. Quality, health, safety and envi-ronment issues are also an important part of Panalpina’s Integrated Management System (IMS), where all relevant organizational and operational aspects of Panalpina are documented. This system reflects all of the aspects of the international standard ISO 9001, ISO 14001, OHSAS 18001 and complies with and reflects specific national or interna-tional legal requirements, such as C-TPAT, GDP (Good Dis-tribution Practice for pharmaceutical products), CSI/AMS and Aviation Security legislation. All of this is carried out with the goal of measuring and ensuring the quality of the operational service delivered to customers.

Global certification for Panalpina facilitiesPanalpina recognizes the value that structured management systems and certification schemes bring to a large compa-ny. They provide a common framework for training, auditing and assessment, and facilitate communication across wide geographic regions and cultural differences. The Company is delighted to have achieved in 2012 global certification ac-cording to the health and safety standard OHSAS 18001, the first logistics company to achieve this. Comprehensive and systematic environmental mana gement is also key to Panal pina’s success and credibility. To support this, Panal-pina has achieved certification for all offices worldwide according to the Environmental Management Standard ISO 14001:2004. This required integrating the Environmental Global Standards in compliance into the Panal pina IMS and subsequently applying this framework to all facil ities world-wide. In addition, all countries are required to identify all relevant local environmental legislation and ensure these laws are implemented and checked for com pliance.

Focused programs to mitigate risksAs part of its global health and safety certification process, Panalpina underwent an extensive global risk assessment to identify areas where risks existed, and to plan appropri-ate mitigation measures. Based on this, a number of target-ed programs were implemented to support healthy working conditions and hygienic workplaces, reduce risk exposure associated with the handling, storage and transportation of cargo, and enforce the use of personal protective equip-ment where conditions require it. Other topics covered by Panalpina’s health and safety programs include ensuring that qualified and competent personnel and appropriate equipment are safely deployed in potentially dangerous working conditions, enabling fast and appropriate respons-es to any sort of emergency situations, and a behavioral safety program that seeks to reduce incidents and mistakes caused by human error.

Quality, health, safety and environment in all levelsEmployees at all levels of the Panalpina Group are responsi-ble for upholding the quality, health, safety and environ-mental policies, principles, and objectives of Panalpina and its clients. The Quality, Health, Safety and Environmental Manager – Panalpina’s global Quality, Health, Safety and Environment (QHSE) representative – ensures the imple-mentation and maintenance of all processes needed for the QHSE system globally and reports the performance of the system to the Executive Board. Panalpina Management defines the overall goals of the HSE plan, appoints respon-sibilities, provides the authority and necessary resources for implementation, assesses performance against the goals, and takes corrective actions as appropriate.

No fatal accidentsIn 2012, Panalpina significantly expanded its health and safety data collection activities as part of its global OHSAS 18001 certification process. In 2012, zero fatal accidents and 365 nonfatal accidents which required some sort of

Value Creation and SustainabilityQuality, Health, Safety and Environment

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33Value Creation and SustainabilityQuality, Health, Safety and Environment

medical treatment were reported. As part of the Behavioral Safety Program, employees are also encouraged to report events with “near misses.” Here, 307 were reported com-pared to 73 in the previous year. The significant increase is attributable to more complete datasets and the inclusion of many additional facilities in the data collection process. 79 lost time injuries were reported, corresponding to a rate of 0.55 per 200,000 total working hours. Globally, there are more than 40 Health, Safety and Environment represen-tatives in place at Panal pina, who provide guidance and assistance to the senior management on HSE issues. Inter-nal audits are per formed by more than 100 trained auditors and 1,665 on-site inspections were carried out in 2012. All areas passed the ongoing surveillance audits com-pleted by an external certification firm.

Regular audits support performanceIn 2012, 220 QHSE internal and external audits were per-formed at Panalpina facilities. This willingness to submit to rigorous assessments of our performance on an ongoing basis helps to keep all staff members constantly alert to quality, health, safety and environmental issues. At the same time, Panalpina will be continuing to enhance its own skills regarding performing self-audits. While internal audits can be cumbersome and time consuming, they are an es-sential ingredient in effectively managing the wide range of issues under consideration.

Well-trained employees Panalpina’s employees are the focal point of all quality, health, safety and environment initiatives. Therefore their training is central to the success of these programs. Build-ing on Panalpina’s culture of training and development, three new e- learning modules were launched in 2012: Warehouse Safety, Office Safety and Health at Work. In addition to this, all Area QHSE Managers around the world were trained on OHSAS 18001, Work Site In spection, Risk Assessment and Accident Investigation. Two additional e-learning modules were deployed in 2012, one focused on increasing employee awareness of Panal pina’s IMS and the other regarding Incident Handling Awareness.

Awarded performanceIn 2012, Panalpina was recognized with several awards. At the 8th Annual SCM Logistics World Panalpina was present-ed with the coveted Asia Pacific 3PL excellence award. In the 11th competition of The Logistics Provider of the Year

2012 Panalpina Poland has received the special award of “basing the supply chain on the most flexible and best qual-ity service in the air and ocean freight forwarding market.” Panalpina Houston has achieved the rating of bronze status under the prestigious global continuous improvement pro-cess called LOGEX. From customer side Johnson & Johnson Pharmaceuticals honored Panalpina with the prestigious award as International Provider of the Year and from the healthcare company Covidien Panalpina was named 2012 Ocean Provider of the Year. The Chinese Construction ma-chinery manufacturer LiuGong has awarded Panalpina the Excellent FCL Ocean Freight Forwarder Award, and Panalpi-na received again the Logistics Supplier of the Year award from Huawei.

Environmental initiativesPanalpina’s global environmental program, PanGreen, con-tinued its activities in 2012. These initiatives, which ori g-inate from the Panalpina Executive Board and include all business units and departments, form the basis for Panal-pina’s ongoing commitment to reducing its environmental impacts worldwide. PanGreen is organized into four key areas: ISO certification, internal data collection and moni-toring, supplier outreach, and greenhouse gas calculations.

In addition to this, Panalpina’s efforts are supported by the Eco-Transport and Eco-Consumption programs. Eco-Trans-port is an effort to provide customers with ways that they can reduce the environmental impacts of the forwarding and logistics operations that Panalpina performs on their behalf, in order to continuously reduce and eliminate releases into the air, water and soil. The primary elements of this program are:– Modal Shift, a lower-emission distribution program that

promotes the combined use of alternative transportation modes with optional shifts from truck to more energy-effi-cient modes of transportation, such as rail and vessel;

– Cargo Consolidation, a program for eco-efficient cargo forwarding established by means of co-loading, joint delivery, full-load round trips and the efficient use of hubs and warehouses;

– HazMat (hazardous material) Handling, a program that en-sures compliance with international standards regarding hazardous material transport, including the ADR (Europe-an Agreement concerning the International Carriage of Dangerous Goods by Road), the IATA Dangerous Goods Regulations and the IMDG Code.

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34

Eco-Consumption is a portfolio of waste reduction, alterna-tive resource and other environmental initiatives designed to promote efficient and environmentally responsible per-formance of Panalpina and reinforce a resource-conserv-ing, reuse-oriented and recycling-based philosophy within the Company. In the coming years, these programs will be extended to include Panalpina’s primary subcontractors in order to understand more fully the various environmental impacts across its supply chain.

Environmental performance in 2012Panalpina has established a sophisticated and comprehen-sive process for the timely collection of energy, environ-ment, waste generation and material usage data from across the organization. By using an enterprise data collec-tion tool to measure and monitor key environmental data, the QHSE team is able to monitor a range of data on an an-nual, quarterly and monthly basis. Such data includes:– Electricity consumption– Fuel consumption– Heating consumption– Water consumption– Spillages– Business travel– Paper consumption– Toner cartridge consumption

In 2012, Panalpina continued its efforts to collect, compile, and monitor progress against key environmental impact in-dicators in a harmonized manner across all countries where it operates. With this commitment came the realization that in order to establish robust and credible goals for environ-mental performance improvements, it is necessary to have clear baseline data from which to measure and monitor im-pacts.

Over the past few years, significant fluctuations in the glob-al economy have made acquiring clear baseline environ-mental performance numbers difficult. However, with the global economic situation stabilizing, it is expected that clear and reliable trends will become apparent. In early 2013, Panalpina will establish new corporate-wide goals for various key performance indicators. These will include goals for materials (such as paper) consumption, electricity usage and fuel consumption by Panalpina’s fleet of vehi-cles. These goals will form the basis of company-wide greenhouse gas emission goals.

Compared to the previous year, total electricity consump-tion increased by 3 %, heating energy fell by 27 % and vehicle fuel consumption fell by 20 %. Overall CO2 emissions de-creased by 8 %, direct (Scope 1) CO2 emissions decreased by 23 % while indirect (Scope 2) emissions, mostly resulting from the generation of electricity, increased by 4 %. Scope 3 data relevant to business travel by air has been collected and showed a 15 % decrease over 2011 figures. In 2012, there were 3.9 tons of CO2 equivalent emissions per full-time equivalent. As discussed above, many of these chang-es can be primarily attributed to fluctuations in business due to the global economic situation, weather and other en-vironmental factors at Panalpina facilities and the improved data collection efforts. Panalpina is committed to improv-ing even further on its environmental monitoring and will continue to improve the coverage and quality of its data col-lection efforts in 2013.

The table on the next page gives an overview of the environ-mental performance figures collected in 2012 across Panal-pina’s global internal operations.

www.panalpina.com/qhse

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35

Activities*

Performance indicator Unit 2012

Energy and CO2

Electricity Consumption Terajoule 242

Heating Overall consumption Terajoule 81

– District heat Terajoule 9

Vehicle fuel Consumption (Panalpina-owned and lease vehicles only) Terajoule 171

CO2 emissions** Total emissions Tons 58,756

– Direct (Scope 1) Tons 16,510

– Indirect (Scope 2) Tons 33,172

– Indirect (Scope 3, business air travel) Tons 9,074

Relative emissions per FTE Tons 3.9

Materials

Paper Consumption Tons 1,048

Water Consumption m3/1000 366

* For each number, data accuracy from many contributing countries was improved compared to the previous year. There are some locations for which no data was available. For more details, see the GRI content index.

** CO2 emissions were calculated according to the guidelines of the Greenhouse Gas Protocol. Emission factors for direct emissions were taken from IPCC,2006. Emission factors for indirect emissions were taken from the International Energy Agency (IEA) and the UKDepartment for Environment, Food and Rural Affairs (DEFRA). For more details please refer to the GRI content index.

CO2 emission by scope and activityTons of CO2 equivalent

Energy balance by energy categoryGigajoule

30,000

40,000

25,000

20,000

15,000

10,000

5,000

0HeatingElectricity Owned vehicles

240,000

280,000

200,000

160,000

120,000

80,000

40,000

0HeatingElectricity Owned vehicles

Direct CO2 emission (Scope 1)

Indirect CO2 emission (Scope 2)

Indirect renewable energy

Indirect energy

Direct energy

Value Creation and SustainabilityQuality, Health, Safety and Environment

242,

00

0

32,0

23

81,0

00

5,29

7

171,

00

0

12,3

62

Annual Report 2012

36

In 2012, Panalpina strengthened its supply chain security efforts through a variety of process and technological en-hancements. These included proactive reviews of contracts and tender offers for security-related issues, in-depth supply chain network analyses, and increased scrutiny to subcontractor management processes. Additionally, Panal-pina introduced updates to its security-focused technology resources with a new incident management tool that streamlines the reporting, recording, and tracking of secu-r ity incidents on a global basis, while also updating the Company’s intranet and public websites with valuable security resources and information. The Company also en-hanced its risk-based approach to security management by investing in commercial, industry, and governmental se-curity data resources to ensure its supply chain network, employees, and customers’ products are safe and secure. Together these upgrades were aimed at integrating security into routine business, operational, and marketing/sales efforts, and are indicative of the commitment Panalpina has made to state-of-the-art security practices.

Global certificationsThis past year, Panalpina maintained, as well as expanded, its participation and certification in various global govern-ment customs and security programs, which include the Authorized Economic Operators (AEO) program in Europe, and the US Department of Homeland Security’s - US Cus-toms (CBP) Trade Partnership Against Terrorism (C-TPAT), and US Transportation Security Administration (TSA) cargo security initiatives. The Company increased the number of AEO certifications to 16, and continued its track record of 100% screening of cargo shipped via passenger aircraft from the US through its network of Certified Cargo Screen-ing Facilities (CCSF) and added X-ray screening capabilities at three locations.

Sharing experience and best practicesOther measures include proactive participation in the US

Department of Homeland Security’s Air Cargo Advanced Screening (ACAS) pilot program, which targets and pre-clears cargo, providing an added layer of supply chain secu-rity by assessing security risks for air cargo to the US. This acceptance to participate in the pilot will allow Panalpina to offer feedback to the US Government and assist in steering future ACAS program developments. Panalpina also con-tinues to actively participate with industry associations focused on protecting the supply chain, such as the Phar-maceutical Cargo Security Coalition (PCSC).

To ensure the Company’s presence and interests are well served, representatives from Panalpina’s Corporate Secu-rity team presented at industry conferences and partici-pated in working groups throughout the year with the ACAS pilot program, the World Economic Forum’s Supply Chain and Transport Risk Initiative, and at various related industry-sponsored conferences throughout the world.

Cooperations for further improvementsLooking forward, the Panalpina Security team will explore a wide variety of measures to further expand its capabilities and services. A central element to this effort is to build upon existing collaborations with customers and gov-ernment entities on enhancing supply chain security using effective and feasible security approaches. Possible mea-sures include deploying new technologies to automate existing risk assessment processes, providing security updates to training and existing security procedures, and continued cooperation and engagement with other Pan al-pina functions in supporting the integration of security consid erations into contract management, customer meet-ings/negotiations, operational initiatives, and subcontrac-tor oversight.

Enhanced security systems – To meet rapidly evolv-ing security challenges, Panalpina deploys a globally experienced team of security professionals equipped with state-of-the art tools and well-versed in interna-tional best practices for safe and secure logistics. This is a crucial component of Panalpina’s efforts to meet the exacting requirements of its customers and deliver reli-able and secure logistics services in an efficient manner.

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Corporate responsibility to society – Panalpina hon-ors its social responsibility at different levels. Panalpina has supported the Swiss Red Cross Vision First program for ten years. The program was set up in Ghana to com-bat preventable blindness through simple means. On top of this, Panalpina’s business units are involved in many local projects.

Regional commitmentPanalpina and its employees seek to make a difference. Their social commitment takes different forms, ranging from participation in fundraising drives to volunteer work at social facilities. A total of 1,600 employees participated in Earth Hour 2012, organized by the World Wide Fund for Nature (WWF), and for a full hour switched off all unneces-sary lamps and electronic devices. With its “One Transport, One Dollar” fundraising campaign, Panalpina China collect-ed funds to rebuild a school in Gansu province that was destroyed by an earthquake. The students moved into the new, earthquake-proof facilities in September 2012. On the school opening day, the Panalpina employees also sur-prised the students with lesson materials they collected.

Ten years of successful partnership with the Red CrossIn addition to regionally sponsored projects, Panalpina has been involved in a long-term partnership since 2003 with the Swiss Red Cross to combat poverty-related blindness in Northern Ghana. The organizations provide patients with access to basic eye care treatment, which prevents blindness in many cases. Cataracts are endemic in Ghana and throughout the region of West Africa on the southern edge of the Sahara. Eye disorders are rife due to vitamin defi ciencies, sandy desert wind and challenging hygienic con ditions. Poverty, coupled with a shortage of eye care professionals, makes it difficult for sufferers to find suitable treatment locally.

Vision First: combating preventable blindnessWith its Vision First program, the Red Cross set up 16 eye clinics in regions where none existed. A mobile team per-forms cataract operations in particularly remote villages, through which vision is restored for around 2,000 blind people each year. However, prevention is also important. Towards this end, the program relies on a network of volun-teers who examine school children for early detection of

eye disease. Children with vision impairments receive a pair of eyeglasses, which enable them to learn to read and write. In this way, the Red Cross helps make an important contri-bution to building a civil society.

Transition to independencePanalpina’s annual contribution to the Vision First program runs to CHF 200,000, equivalent to a quarter of the project costs. Panalpina has been involved throughout its pilot and on-the-ground implementation phases. The project has now entered the completion stage. The Swiss Red Cross will hand over the facilities to the local organization in 2013.

www.panalpina.com/society

Results of Vision First program

2012

Patients treated 181,966

Operations performed 2,371

Patients issued vision aids 1,395

Clinics/hospitals in operation 16

Persons provided with health education 486,922

Number of project participants

2012

Opticians and ophthalmologists 3

Nurses (trained to treat minor eye disorders) 28

Schoolteachers (with special training in healthcare issues) 345

Active Red Cross volunteers 1,120

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Corporate Governance and Compensation Report – Panalpina is committed to a transparent management struc ture that is governed by international principles. This Corporate Governance Report complies with the Directive of the SIX Swiss Exchange and therefore pro-vides investors with according key information. Section 5 of this report also serves as a Compensation Report as recommended by economiesuisse in its Swiss Code of Best Practice for Corporate Governance.

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1 Group structure and shareholders

1.1 Group structure 1.1.1 Operational group structure

Panalpina’s business activities are primarily region-ally oriented. The operating structure is divided into the following three regional segments: – EMEA (Europe, Middle East, Africa and CIS) – Americas (North, Central and South America)– Asia Pacific

Secondary, the business activities are subdivided into the following business segments: – Air Freight – Ocean Freight – Logistics (road, rail and warehousing)

Supplementary information can be taken from the segmental reporting section of the Consolidated Financial Statements (pages 89–91).

1.1.2 Listed companies within the scope of consolidation Panalpina World Transport (Holding) Ltd. (PWT), the ultimate holding company of the Panalpina Group, is the only listed company within the scope of consol-idation. PWT has its registered office in Basel, Swit-zerland. The PWT shares are exclusively listed on the SIX Swiss Exchange. The market capitalization on the closing date amounted to CHF 2.2 bil l ion (23,750,000 registered shares at CHF 92.85 per share).

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

1.1.3 Nonlisted companies within the scope of consolidation The main subsidiaries and associated companies are disclosed in the Consolidated Financial Statements (pages 128–130) itemized by registered office, nom-inal capital, equity interest in percent, investment and method of consolidation.

1.2 Significant shareholders Major percentage increases/changes are related to the capital reduction as explained under 2.1.

The Ernst Göhner Foundation, Zug, Switzerland, is the main shareholder of PWT, with an equity partici-pation of 45.9 %.

Cevian Capital II Master Fund LP held a share capital of 11.97 % on closing date. Other significant share-holders according to their most recent disclosure notices are Artisan Partners Limited Partnership (5.28 %) and Bestinver Gestión, S.G. SGIIC (5.32 %).With regard to other significant shareholders, during the reporting year no disclosures were made on the SIX online publication platform.

1.3 Cross-shareholdings No cross-shareholdings exist between PWT and any other company.

2 Capital structure

2.1 Capital On the closing date, the ordinary share capital of PWT amounted to CHF 2,375,000 and is divided into 23,750,000 registered shares, with a nominal value of CHF 0.10 each.

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2.2 Authorized and conditional share capital The extraordinary Shareholders’ Meeting of PWT held on August 23, 2005 agreed with 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 reg-istered shares with a nominal value of CHF 2.00 each. At the Shareholders’ Meeting of May 10, 2011 the authorized share capital was renewed at the same value until May 2013. At the Shareholders’ Meeting of May 8, 2012, the authorized share capital was reduced in conjunction with the reduction of the share capital (see section 2.3 below) to a maximum aggregate amount of CHF 300,000 by issuing a maximum of 3,000,000 registered shares with a nominal value of CHF 0.10 each.

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 yet made use of this authorization. No decision has been made regarding the creation of conditional capital.

2.3 Change in capital over the past three years In August 2007, the Board of Directors initiated a share buyback program. Under this program, shares amounting to 5 % of the share capital (1,250,000 shares) have been repurchased. The buyback pro-gram was concluded on September 2, 2008. At the Annual General Meeting of May 8, 2012, the share capital was reduced from CHF 50,000,000 to CHF 2,375,000 by way of cancellation of the repurchased 1,250,000 shares and further reduction of the nomi-nal value per share from CHF 2.00 to CHF 0.10 each.

2.4 Shares and participation certificates On the closing date, 23,750,000 fully paid-in PWT registered shares with a nominal value of CHF 0.10 each were issued. On this date, no participation cer-tificates were issued.

2.5 Dividend-right certificates On the closing date, no dividend-right certificates had been issued.

2.6 Limitations on transferability and nominee registrations

2.6.1 Limitations on transferability for each share category; indication of statutory group clauses and rules for granting exceptions Acquirers of PWT shares are entered into the share register as shareholders with voting rights upon provi-sion of proof of the acquisition of the shares and pro-vided that they expressly declare that they hold the shares in their own name and for their own account.

The Articles of PWT specify that any shareholder may exercise voting rights to a maximum of 5 % of the total number of shares recorded in the commercial register. This limitation for registration in the share register shall also apply to persons who hold shares fully or in part through nominees within the meaning of the Articles. Furthermore, this limitation for regis-tration in the share register also applies to regis-tered shares that are acquired through the exercis-ing 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 (so-called grandfathering).

2.6.2 Reasons for granting exceptions in the year under review No exceptions were granted during the reporting year.

2.6.3 Admissibility of nominee registrations; indication of any percent clauses and registration conditions The Articles of PWT specify that the Board of Direc-tors may register nominees with voting rights in the share register up to a maximum of 2 % of the share capital recorded in the commercial register. Nomi-nees 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.

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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 commer-cial register.

The Articles make provision for group clauses.

2.6.4 Procedure and conditions for cancelling statutory privileges and limitations on transferability A resolution of the General Shareholders Meeting of PWT on which at least two-thirds of the voting shares represented agree is required for any aboli-tion or change of the provisions relating to transfer limitations.

2.7 Convertible bonds, warrants and options There were no convertible bonds outstanding on the closing date.

The only issued options relate to the share and op-tion participation program (Management Incentive Plan, MIP) are for currently 511 senior managers of Panalpina. As of 2009, the Board of Directors and the Executive Board have been excluded from par-ticipation in this program. As of 2011, the options under the MIP program have been replaced by a free share ratio scheme. For further details please refer to section 5.1.

3 Board of Directors

3.1 Members of the Board of Directors At the Annual General Meeting of May 8, 2012, Rudolf W. Hug, Beat Walti, Lars Förberg, Chris E. Muntwyler, Roger Schmid, Hans-Peter Strodel and Knud Elmholdt Stubkjær were reelected to the Board of Directors for a one-year term.

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

Three members of the Board of Directors (Rudolf W. Hug, Roger Schmid and Beat Walti) are also mem-bers of the Board of Trustees (Stiftungsrat) of PWT’s main shareholder, the Ernst Göhner Foundation.

Lars Förberg is a member of the Board of Directors of Cevian Capital, the second-largest PWT share-holder.

The biographies of the members are as follows:

Rudolf W. Hug, Chairman. Swiss citizen. Born in 1944. Reelected in 2012 (until 2013).

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 to 1997, he ran the international division and served as a member of the Executive Board of Credit Suisse and Credit Suisse First Boston. Since 1998, Rudolf W. Hug has been active as an independent management consultant.

Rudolf W. Hug has been a member of the Board of Directors since 2005 and was appointed Chairman of the Board of Directors on May 15, 2007 following the retirement of his predecessor.

Beat Walti, Member of the Board of Directors since 2010. Swiss citizen. Born in 1968. Reelected in 2012 (until 2013).

Beat Walti holds a PhD in law from the University of Zurich. From 1998 to 2001 he was working as a con-sultant and engagement manager with McKinsey & Company in Zurich. In 2001, he was a co-founder and project manager of a start-up company in the healthcare sector. Since 2002, Beat Walti is a lawyer with Wenger & Vieli in Zurich specializing in corpo-rate, commercial, contract, competition and anti-trust law. He became partner with Wenger & Vieli in 2007 and is the firm’s managing partner since 2012.

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Lars Förberg, Member of the Board of Directors since 2011. Swedish citizen. Born in 1965. Reelected 2012 (until 2013).

Lars Förberg studied economics in Stockholm and Michigan and holds a M.Sc. in Economics and Busi-ness Administration from the Stockholm School of Economics. He started his career as an investment manager and partner at the private equity company Nordic Capital in Sweden. At the end of 1997 he moved to the former AB Custos, one of Sweden’s largest public limited investment companies, where he worked until September 2001, most recently as Chief Investment Officer. Since October 2001, Lars Förberg has been managing partner in Cevian Capi-tal, an investment company specializing in public limited companies, which he cofounded.

Chris E. Muntwyler, Member of the Board of Di-rectors since 2010. Swiss citizen. Born in 1952. Reelected in 2012 (until 2013).

Chris E. Muntwyler attended the School of Com-merce in Zurich and completed various executive programs at Harvard University, IMD in Lausanne and at the Wharton University. From 1972 to 1999 he held several positions at Swissair, until 1981 in vari-ous leadership functions in the Marketing Division, in 1982 as General Manager Marketing and Sales Scandinavia and from 1986 for North America. In 1990, he took over the responsibility for the global Price and Distribution Policy and was then leading the development and introduction of the new Group IT strategy. Before leaving Swissair at the beginning of 1999, he was Vice President Global Distribution. From 1999 to 2008, Chris E. Muntwyler held several executive positions at DHL Express, in 1999 as Man-aging Director Switzerland, in 2002 as Managing Director Germany, in 2003 as Chief Executive Cen-tral Europe, and in 2005 as Chief Executive United Kingdom.

Today Chris E. Muntwyler is President and CEO of the management consulting company Conlogic AG.

Roger Schmid, Member of the Board of Directors since 2003. Swiss citizen. Born in 1959. Reelected in 2012 (until 2013).

Roger Schmid holds a university degree in law as well as a PhD in law from the University of Zurich. From 1991 to 1995, he was Legal Counsel and Direc-tor at Bank Leu (today Credit Suisse). Roger Schmid works as an Executive Director of the Ernst Göhner Foundation.

Hans-Peter Strodel, Member of the Board of Di-rectors since 2010. Swiss citizen. Born in 1943. Reelected in 2012 (until 2013).

Hans-Peter Strodel holds a PhD in economics from the University of St. Gallen. From 1969 until 1974 he was an executive assistant at Maschinenfabrik Ben-ninger und Heberlein AG. From 1975 until 1994, he held several positions at the Oerlikon-Bührle Group, in 1975 as Head of Planning and Marketing in Italy, and from 1980 as Head of Finance at Werkzeugma-schinenfabrik Oerlikon-Bührle AG and Oerlikon-Con-traves. From 1995 until 2008, Hans-Peter Strodel was CFO at Schweizerische Post.

Knud Elmholdt Stubkjær, Member of the Board of Directors since 2011. Danish citizen. Born in 1956. Reelected in 2012 (until 2013).

Knud Elmholdt Stubkjær holds a shipping degree from the Mærsk International Shipping Academy, supplemented with various executive programs, e.g. from IMD and INSEAD. From 1977 through 2007, he held various positions within the A.P. Møller-Mærsk Group, including a number of postings in Asian and European countries. This included positions as Head of Mærsk Line United Kingdom, President of Mærsk K.K. Japan, CEO A.P. Møller-Mærsk Singapore and Regional Manager A.P. Møller Group Asia/Oceania/Middle East. In 1999, he became Head of Mærsk container business worldwide, based in Copenha-gen, and the same year became one of five partner in the A.P. Møller-Mærsk Group. In 2008, he became partner in the E.R. Capital Holding Group in Ham-burg, serving as CEO of one of its subsidiaries, E.R. Schiffahrt GmbH, a leading maritime service pro vider within container, bulk and offshore ship-ping. Since July 30, 2012, Knud Elmholdt Stubkjær is acting as CEO and CSO of Carrix Inc., Seattle, Washington.

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All the members of the Board are nonexecutive members and do not actively perform any manageri-al functions at PWT or any of the Group companies. Nor have they held any executive positions within the past three years prior to this reporting year. None of the members of the Board of Directors has a substantial business relationship with PWT or any of its group companies.

3.2 Other activities and vested interests Rudolf W. Hug, Member of the Board of Trustees (Stif tungsrat) of the Ernst Göhner Foundation, Zug (Switzerland), Vice Chairman of the Board of Di rectors of Deutsche Bank (Schweiz) AG, Geneva (Switzerland) and Member of the Board of Directors of Allreal Holding AG, Baar (Switzerland). Beat Walti, Chairman of the Board of Trustees of the Ernst Göhner Foundation, Zug (Switzerland).

Lars Förberg, Chairman of the Board of Directors of Cevian Capital AG, Pfäffikon (Switzerland), mem-ber of the Board of Directors of Cevian Capital Ltd., Jersey (Channel Islands) and Alent plc., Woking (UK), and member of the Nomination Committees of Metso, Helsinki (Finland), Tieto, Helsinki (Finland), Volvo, Gothenburg (Sweden).

Chris E. Muntwyler, Member of the Board of Di rec-tors of Austrian Post in Vienna (Austria) and of Na-tional Express Group PLC, London (United Kingdom).

Roger Schmid, Member of the Board of Trustees and Executive Director of the Ernst Göhner Founda-tion, Zug (Switzerland).

Hans-Peter Strodel, Member of the Board of Direc-tors of Skyguide, Meyrin (Switzerland).

Knud Elmholdt Stubkjær, Member of the Board of Directors of Unifeeder A/S, Aarhus (Denmark).

Other than these, the members of the Board of Directors do not hold other material offices, nor do they carry out any other principal activities that affect the Group.

3.3 Elections and terms of office 3.3.1 Principles of the election procedure and

limitations on the terms of office The Articles of PWT do not make provision for the general renewal of office for the Board of Directors. The members of the Board of Directors are elected at each General Meeting of Shareholders with a one-year period of office. They may be reelected at any time. The Organizational Regulations of PWT specify an age limit of 72 years for the members of the Board of Directors.

3.3.2 The first election and remaining term of office for each member of the Board of Directors The timing of the first election and the remaining term of office for each member of the Board of Di-rectors is specified under section 3.1.

3.4 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 exter-nally and is responsible for all matters which have not been transferred to another executive body of the Company by the Swiss Code of Obligations or the Articles. In line with the Articles, the Board of Di-rectors has established Organizational Regulations that transfer certain management responsibilities to the Executive Board.

3.4.1 Allocation of tasks within the Board of Directors The Board of Directors self-constitutes and appoints its Chairman and Vice Chairman. The Chairman (in his absence the Vice Chairman) directly supervises the business affairs and activities of the Executive Board and is entitled to regularly attend Executive Board meetings. The Corporate Auditor as well as the Corporate Secretary, in his capacity as secretary to the Board of Directors, are directly subordinated to the Chairman of the Board of Directors.

3.4.2 Member list, tasks and areas of responsibility for each committee of the Board of Directors Three committees exist under the Board of Directors.

The Audit Committee consists of the following mem-bers of the Board of Directors: Hans-Peter Strodel (Chairman), Lars Förberg and Roger Schmid. The Au-

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dit Committee supports the Board of Directors with the review of the Company’s financial statements, the supervision of the financial accounting standards and reporting, the review of the effectiveness of the Inter-nal Control System and with the efficiency of external and internal audit procedures, including risk manage-ment. The Audit Committee reviews the consolidated annual financial statements as well as the published interim financial statements and submits an applica-tion to the Board of Directors for approval. It regularly maintains contact with the Group Auditors and the Corporate Auditor. On this basis, it adopts the de-tailed reports of the Group Auditors and semi-annual reports of Corporate Audit. It is therefore in the posi-tion 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 Corporate Audit, adopts the internal audit charter and approves the an-nual planning and scope of internal audit.

In the field of risk management, the Audit Commit-tee approves the detailed and weighted risk map of the Executive Board, adopts the necessary mea-sures for risk control and risk mitigation and reports the respective outcome to the Board of Directors on a yearly basis. The risk map itself covers any strate-gic, financial, operational, legal and compliance risks that could significantly impact the Company’s ability to achieve its business goals and financial targets. Identified risks are weighted and prioritized by the Executive Board according to their significance and likelihood of occurrence. For each risk, specific risk mitigation measures – including their current status – are defined and responsibilities are allocated. The risk map, which is compiled by the Risk Review Com-mittee, chaired by the Corporate Secretary, for re-view by the Executive Board and subsequent approv-al by the Audit Committee, contains risks identified and assessed by the respective corporate functions, Regional management, Corporate Audit and the Group Auditors. The Group’s key risks are annually reported to the Board of Directors.

During the reporting year the Audit Committee held f ive half day meetings. During Audit Committee meetings, direct discussions took place with repre-

sentatives of the Group Auditors and Corporate Audit. Representatives from the Group Auditors were present at three of these meetings and the Corporate Auditor (being a permanent participant at the Audit Committee Meeting since August 2010) attended all of the above-mentioned meetings. At these meetings, the Executive Board was regularly represented by the CEO, the CFO/interim CFO and the Corporate Secretary.

The Compensation and Nomination Committee con-sists of the following members of the Board of Direc-tors: Rudolf W. Hug (Chairman), Chris E. Muntwyler and Knud Elmholdt Stubkjær. It monitors the selec-tion process for members of the Board of Directors, the Executive Board and other selected senior man-agement positions, determines the overall remuner-ation and terms of employment for members of the Board of Directors and the Executive Board as well as remuneration bands for highly compensated em-ployees. Regarding the compensation of the mem-bers of the Executive Board (overall remuneration, including target bonus), the Committee makes a de-cision subject to the final approval of the Board of Directors; applications for the compensation of the Board members are decided by the Committee and shared with the Board of Directors. Each year the Committee decides on the bonus compensation for the CEO and the other members of the Executive Board for the previous year, based on recommenda-tions of the Chairman (for the CEO) and the CEO (for other Executive Board members). Furthermore, the Committee regularly reviews the Board Stock Award Plan, the Executive Board Mid-Term and Long-Term Incentive plans and the Group’s Management Incen-tive Plan and submits proposals for final approval to the Board of Directors. Moreover, it approves con-cepts and policies for the Group’s management per-formance assessment, succession planning and ex-pat programs.

During the reporting year, the Compensation and Nomination Committee held three meetings of ap-proximately two hours each and two telephone con-ferences. The Executive Board was regularly repre-sented at these meetings by the CEO, the Chief HR Officer and the Corporate Secretary.

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The Ethics and Compliance Committee (former Legal and Compliance Committee) consists of the follow-ing members of the Board of Directors: Rudolf W. Hug (Chairman), Roger Schmid and Beat Walti. It oversees the Company’s Business Ethics Program and monitors Panalpina’s adherence to both, the Deferred Prosecution Agreement (DPA) with the US Department of Justice and the Administrative Agree-ment with the US Department of the Air Force. It further monitors the handling of major legal matters, including the pending anti-trust investigations and related proceedings as well as the development of the Company’s compliance policies and procedures. During the reporting year, the Committee has held four meetings and two telephone conferences. The Executive Board was represented at these meetings by the CEO and the Corporate Secretary.

The Committees generally meet prior to Board of Directors meetings. The chairmen of the committees inform and update the Board of Directors on the top-ics discussed and decisions made during such meet-ings. 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 the respective committees which are reviewed and adopted by the Board of Directors.

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

3.4.3 Working methods of the Board of Directors and its committees During the reporting year, the Board of Directors held three full-day meetings, one two-day meeting and one telephone conference. The Executive Board was represented by all its members at these meet-ings. In urgent cases, telephone conferences are organized in order for decisions to be taken.

At every meeting, the Executive Board updates the Board of Directors on business and key financial developments and main regional and segment devel-opments. On a quarterly basis, detailed consolidated financial statements on the Group, regional and busi-

ness segment levels are reported to the Board of Di-rectors in accordance with International Financial Reporting Standards (IFRS). The Board of Directors is furnished in time with an agenda, detailed meeting documentation related to topics on the agenda and minutes.

3.5 Definition of areas of responsibility In line with the law and the Articles, the Board of Di-rectors 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 govern the cooperation between the Board of Directors, the Chairman and the Execu-tive Board. They contain a detailed catalogue of du-ties and competencies which determine the financial thresholds within which the Board of Directors and the Executive Board can efficiently execute their dai-ly business. The Organizational Regulations, which are accessible on Panalpina’s website, also outline the reporting duties of the Executive Board on Group and Holding level.

The main responsibilities of the Board of Directors on Group level include the determination of the busi-ness strategy on the basis of the proposals of the Ex-ecutive Board, the approval of major Group policies and organizational structures, including topics relat-ed to Corporate Governance and Compliance, the approval of the annual operational and investment budgets, the approval of any extraordinary addi tional investment applications as well as financial planning. Further responsibilities include decisions regarding mergers and acquisitions and major human resourc-es and remuneration decisions following recommen-dations and preparatory work of its Compensation and Nomination Committee.

3.6 Information and control instruments vis-à-vis the senior management The Executive Board informs the Board of Directors of business developments in a written format on a monthly basis and a detailed update is provided at each Board of Directors meeting. Elements of this

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reporting include monthly financial reports, consoli-dated quarterly regional and business segment results according to IFRS (with actual figures, previ-ous years’ figures, quarter results and budget figures as well as a comparison with the financial guidance), the reporting of business development in all regions and business segments (including focus on problem-atic organizations), the development of shipments, volumes and tonnages, the debtors’ and creditors’ reports (including DSO and DPO) as well as the net working capital.

Further information regarding personnel and orga-nizational changes, extraordinary events and the activities of analysts, investors and competitors form part of the regular reporting. Moreover, the Board of Directors annually reviews and approves the Group’s targets for the individual regions and business segments and adopts the respective report of the Executive Board.

During the reporting year, the Chairman of the Board of Directors partly attended four Executive Board meetings and regularly receives the minutes of the Executive Board meetings. The members of the Executive Board regularly join meetings of the Board of Directors. In addition, individual senior executives attend specific topic discussions pertaining to their particular field of expertise when required. Further-more, specific meetings of the Board of Directors are dedicated to a detailed review of major markets, business segments and the Group’s strategy accord-ing to predefined schedule. For further details please refer to sections 3.4.2 and 3.4.3.

The Audit Committee of the Board of Directors mon-itors and assesses the activities of the Corporate Auditor as well as his cooperation with the Group Auditors.

The Audit Committee receives the Corporate Audi-tor’s half-year reports and also adopts the compre-hensive 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 and scope of the internal audit, which is also based on the Risk Map. For further details please refer to section 3.4.2.

4 Executive Board

4.1 Members of the Executive Board On the closing date, the Executive Board was com-posed of five persons.

Monika Ribar, Chief Executive Officer, ad interim CFO (August 1 until December 31, 2012), Swiss citi-zen. Born in 1959. Member of the Executive Board since 2000 and CEO since October 2006. Apart from her CEO function, Monika Ribar has special responsibilities for Corporate and Regional Devel-opment, Agent Relations, Corporate Ethics and Compliance, Corporate Information Technology (as of August 1, 2012), Corporate Communications and Panprojects.

Monika Ribar joined the Group in 1991. She held several positions within the Group’s controlling, IT and global project management departments. From 2000 to 2005, she held the position of the CIO (Chief Information Officer) of the Group and was member of the Executive Board. In 2005, Monika Ribar was appointed as CFO of the Group and her appointment as CEO was announced in June 2006. She officially took office as CEO in October 2006. She holds a university degree in Finance and Con-trolling from the University of St. Gallen. She par-ticipated in the Executive Program of the Graduate School of Business at Stanford University, Palo Alto, California in 1999.

Marco Gadola, Chief Financial Officer until July 31, 2012, Swiss citizen. Born in 1963. Joined Panalpina as a member of the Executive Board in September 2008. Responsible for Corporate Finance, Con-trolling, Investor Relations, Strategic Finance and Projects, Indirect Purchasing and Information Technology. As of August 1, 2012 Marco Gadola has taken over the role of Regional CEO Asia Pacific.

Marco Gadola is a finance and economics expert with many years’ experience in international compa-nies. Before joining Panalpina he was Group CFO and Executive Vice President Operations of Strau-mann Holding, a world-leading Swiss-based dental and oral technology company; prior to that he was Group CFO of the Swiss-based international con-

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sumer foods company Hero. He also held leading management positions at the Hilti Group, which manufactures and sells products for the construc-tion and building industries. Furthermore, both at Straumann and at Hero Marco Gadola oversaw pro-duction, logistics, investor relations and information technology worldwide, and played a leading part in the acquisition and integration of companies. Marco Gadola has a Masters Degree in Business Adminis-tration and Economics from the University of Basel (Switzerland). He also completed the Accelerated Management Development Program at the London School of Economics.

Christoph Hess, Chief Legal Officer and Corporate Secretary, Swiss citizen. Born in 1955. Member of the Executive Board since October 2006. Respon-sible for Corporate Legal Services and Insurance.

Christoph Hess joined the Group’s head office in 1994 as Secretary of the Board of Directors and the Executive Board. In this capacity he also manages both the Group’s Legal and Insurance departments. He also managed Corporate Communications until August 2008. Christoph Hess holds a degree in law from the University of Basel and has been admitted to the bar in Switzerland.

Alastair Robertson, Chief Human Resources Offi-cer, British citizen. Born in 1960. Member of the Executive Board since April 2008. Responsible for Human Resources.

Alastair Robertson joined the Group in 2007 as Head of Global Human Resources. Before joining Panal-pina, he had been a Vice President at Tetra Pak since 1996, where he held various positions in the field of Human Resources: between 1999 and 2001 as Vice President Human Resources Americas and from 2002 to 2004 as Vice President Human Resources Europe and Africa. From 1992 to 1996, he worked for W.H. Smith in the field of Personnel, Development and Training and between 1989 and 1992 he was with Graham Builders Merchants as Manager Human Resources Management, Training and Development. He previously served in the military, where he at-tained the rank of major and served in numerous countries. Alastair Robertson holds an MBA in Strat-

egy and Marketing from the University of Hudders-field, Bradford (United Kingdom). He also attended the Royal School of Military Engineering and the Royal Military Academy in the United Kingdom.

Karl Weyeneth, Chief Operating Officer, Swiss citi-zen. Born in 1964. Member of the Executive Board since April 2008. Responsible for Air Freight, Ocean Freight, Logistics, Marketing and Sales, Quality and Operations Transformation.

Karl Weyeneth joined the Group in 2007 as Regional CEO for North America, where he was responsible for the development and results of the subsidiaries in USA and Canada. He is a professional with pro-found leadership and management experience in logistics, including freight management, 3PL and contract logistics. Before joining Panalpina, he was President and CEO Americas of Hellmann Worldwide Logistics, Inc. (USA) and prior to this he was Execu-tive Vice President and CFO of Danzas Management Latin America (USA), where he attained profound ex-perience in all finance matters. He holds a Bachelor in Economics and Business Administration from the University of Berne, Switzerland.

4.2 Other activities and vested interestsMonika Ribar: Member of the Board of Directors of Logitech International SA, Romanel/Morges (Switzerland), Sika AG, Baar (Switzerland) and Swiss International Air Lines AG, Basel (Switzerland).

Marco Gadola: Member of the Board of Directors of Calida Holding AG, Sursee (Switzerland).

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

5 Compensation, shareholdings and loans

5.1 Content and method of determining the com-pensation and the share-ownership programs The compensation and principles governing the Board of Directors Stock Award Plan, the Executive Board and Executive Committee mid- and long-term

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incentive plans and the Management Incentive Plan for other senior management (excluding the Execu-tive Board and Executive Committee) are deter-mined and approved by the Board of Directors based on the proposal of the Compensation and Nomina-tion Committee. Further, the Committee regularly updates the Board of Directors during the Board of Directors meetings, applies for changes in the remu-neration system as required and annually reports the bonus allocation of individual Executive Board mem-bers. Members of the Executive Board do not attend respective discussions regarding decisions related to their own remuneration.

Remuneration of Executive Board members is benchmarked against regular market data surveys compiled through leading Executive Compensation consultants. The benchmark custom peer group is consisting of some of Panalpina’s main competitors completed with some Swiss multinational compa-nies with comparable size and geographical network reach in order to make the sample substantial enough.

The members of the Board of Directors receive a fixed annual compensation. Moreover and intro-duced in 2009, part of each Board member’s remu-neration is in free shares of the Company to the value of CHF 50,000. The corresponding number of shares is based on the share’s closing price on April 30, and has a one-year restriction period.

The salary package for the members of the Executive Board consists of a fixed basic salary, lump sum ve-hicle and general expense allowances, additional pension contributions and a target bonus. 50 % of the target bonus depends on budgeted Group EBITDA and the achievement of the external financial guid-ance for the respective business year, whereas 50 % depends on the achievement of measurable individ-ual performance targets. Individual performance targets are defined for the CEO by the Chairman and for other Executive Board members by the CEO. Each Executive Board member is subject to a formal performance appraisal process. For each reporting year, performance targets are jointly determined and a year-end performance assessment is carried out. The maximum target bonus of the CEO equals 100 %

of the annual basic salary, whereas maximum target bonuses of other Executive Board members equal between 67 % and 80 % of their respective annual basic salaries depending on their function. Bonus payments are cut if the respective Group or indivi-dual performance targets have not been reached.

The Compensation and Nomination Committee annually reports to the Board of Directors on bonus payments to the members of the Executive Board.

In 2009, the bonus scheme for Executive Board members was adjusted to focus on the Company’s sustainable mid- and long-term success. Only 60 % of the bonuses – which continue to be set by the achievement of annually reviewed Group KPIs and in-dividual performance targets as outlined above – are paid out in cash, whereas the remainder is converted into PWTN shares with a one-year restriction period. The applicable share price for such deferred bonus shares is the PWTN closing price on April 30, in the first year of a three-year cycle (2012 to 2014) which was CHF 88.50. The deferred bonus share price will thus be redefined on April 30, 2015. In addition, the number of such allocated deferred bonus shares is matched by the Company after twelve months (qualifying period during which the Executive Board member must remain with the Company) with a free PWTN share award which also has a one-year restriction period.

Furthermore, each Executive Board member is par-ticipating in a Long-Term Incentive Plan Pool which rewards long-term value creation measured by eco-nomic profit. Under this plan, each year (as of 2009) 5 % of the year on year change in economic profit is added to the pool, whereas negative economic prof-it is deducted from the pool. At the end of a five-year plan cycle (2013) each Executive Board member is entitled to be paid out in cash an equal share of such pool. Vesting of this plan occurs after three years at 25 %, after four years at 50 % and 100 % after five years.

Due to the introduction of a new share program for the members of the Board of Directors and the Exec-utive Board in 2009, neither the members of the Board of Directors nor the members of the Executive

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48

Board are eligible to participate in the Company’s Management Incentive Plan.

Employment agreements with Executive Board mem-bers stipulate a notice period (in case of termination by the Company) of twelve months. They do not con-tain “golden parachutes” in case of a change of con-trol nor severance payments after termination of employment.

Further information related to both overall and indi-vidual remuneration of the Board of Directors and Executive Board members as well as shares and options held by these persons at the closing date including a comparison with the previous year are reflected in the audited Notes to the Consolidated Financial Statements (pages 94–99 and 122–124) according to article 663bbis of the Swiss Code of Obligations.

Total remuneration of the Board of Directors de-creased compared to the previous year due to the fact that the Restricted Stock Award was not applied for business year 2012. In the reporting year overall remuneration of the CEO decreased due to the bonus cut and also com-pensation for the other Executive Board members significantly declined compared to the previous year due to reduced bonus/share based payments as a result of missed financial targets. Further a former Executive Board member has taken over a new posi-tion during the reporting year which also impacted annual salaries.

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 exer-cising 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 (Organver-treter) as well as the independent proxy holder of voting rights (unabhängiger Stimmrechtsvertreter). In order to facilitate the exercise of voting rights of deposited shares, the Board of Directors is entitled to enter into agreements with banks which deviate from the voting restrictions.

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 vot-ing restrictions (grandfathering).

Any abolition or change of the provisions relating to the restrictions on voting rights requires a resolution of the General Meeting of Shareholders on which at least two-thirds of the voting shares represented agree.

A written proxy entitles a shareholder to be repre-sented at the General Meeting of Shareholders by his or her legal representative, or by another share-holder with the right to vote, or by the representative of the corporate body (Organvertreter), or by the in-dependent proxy holder of voting rights (unabhän-giger Stimmrechtsvertreter) or by the proxy holder of deposited shares (Depotvertreter).

6.2 Statutory quorums In principle, the legal rules on quorums apply. Sup-plementary to the quorums legally listed, a two-thirds majority of the shares represented at the Gen-eral 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; – the dissolution of the Company by way of liquida-

tion; – the removal of two or more members of the Board

of Directors; – the abolition of the respective provision in the Arti-

cles as well as the repeal or relief of the stated quorum. A resolution to increase the quorum as

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49

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 or at least 10 % of the ordinary share capital may request that an item be placed on the agenda. Such a request must be made in writing to PWT at least 60 days prior to the General Meeting of Shareholders.

6.5 Inscriptions into the share registerRegistered shares can only be represented by share-holders (or nominees) who have been entered into the PWT share register. Shareholders (or registered nominees) who cannot personally attend the Gener-al 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 upon which the General Meeting of Shareholders has been called (date of invitation) until the day after the General Meeting of Shareholders has taken place.

7 Changes of control and defense measures

7.1 Duty to make an offer No opting-out or opting-up provisions exist.

7.2 Clauses on changes of control Neither the contracts of the members of the Board of Directors nor of the Executive Board have a change-of-control clause.

8 Auditors

8.1 Duration of the mandate and term of office of the lead auditor The mandate to act as statutory and Group Auditors is assumed by KPMG, Zurich on a yearly basis. The lead auditor, Regula Wallimann, took up office on May 6, 2008 for a seven-year term.

8.2 Auditing fees According to financial accounting, invoices for audit-ing fees for the financial year amounted to CHF 3,396,000. Further KPMG invoiced CHF 61,000 for audit-related services.

8.3 Additional fees The auditors KPMG were compensated with an addi-tional amount of CHF 962,000 for further services rendered in the financial year. KPMG was mandated in the reporting year in particular for tax consulting (CHF 868,000) and other non-audit related work (CHF 94,000).

8.4 Informational instruments pertaining to the external audit The Group Auditors are supervised and controlled by the Audit Committee. The Group Auditors report to the Audit Committee and periodically the auditors participates in the meetings. During these meetings, the Group Auditors present a detailed audit plan for the current year including risk-based audit priorities, the audit scope, proposals regarding audit fees, orga-nization and timing as well as updates and status of the results of the Internal Control System. In subse-quent meetings they present interim audit findings with respective statements and recommendations later followed by a detailed audit report. Presenta-tions also contain references to upcoming changes in legislation and IFRS. The main criteria for the selection of Group Auditors include independence, network capabilities, industry and IT experience of the audit team, a risk-based audit approach, a cen-tral process management as well as the integration of Corporate Audit and risk management functions. The Audit Committee annually assesses the perfor-mance of the Group Auditors and determines the audit fees (refer to section 3.5).

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9 Information policy

Panalpina regularly updates its website at www.panal pina.com, informing the public of any major events, organizational changes and (quarterly) fi-nancial results. Press releases are accessible to all visitors to the website; alternatively, subscriptions can be made so that the latest press releases are automa tically forwarded via e-mail. Furthermore, all publications such as the Annual Report (including the Corporate Governance and Compensation Re-port), 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). The minutes of shareholder meetings are available online.

www.panalpina.com/corpgov

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51

Board of Directors

Chairman Rudolf W. HugVice Chairman Beat Walti

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

Chief Executive OfficerMonika Ribar

www.panalpina.com/organization

Chief Financial OfficerMarco Gadola (until 31/7/12)Monika Ribar (until 31/12/12)Robert Erni (since 1/1/13)

Chief Human Resources OfficerAlastair Robertson

Chief Legal Officer /Corporate SecretaryChristoph Hess

Chief Operating OfficerKarl Weyeneth

Corporate Audit Compensation and Nomination Committee

Audit Committee

Ethics and ComplianceCommittee

RegionsPanprojects

Group Management Structure

Corporate Governance and ResponsibilitiesCorporate Management

Corporate Development, Agent Relations

Corporate Information Technology

Corporate Communications

Corporate Accounting

Corporate Taxes

Corporate Controlling

Investor Relations

Indirect Purchasing

Strategic Finance and Projects

Group Treasury

HR Processes and Projects

International Compensation and Benefits

HR Operations

Capability Development and PanAcademy

Corporate Legal Services

Corporate Insurance Management

Air Freight

Ocean FreightLogistics

Marketing and Sales

Quality and Operations Transformation

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Corporate Ethics and Compliance

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52

A Passion for Solutions

Annual Report 2012

53A Passion for Solutions

In the increasingly connected and globalized economy, it is no longer enough to deliver the right goods at the right time and in the right place. That is why Panalpina goes far beyond the industry standard. Three things make Panalpina into one of the world’s most advanced lo gis-tics service providers: first, the consulting skills of Panalpina’s staff in its globe-spanning network with unique tools and technology for efficiency enhancement throughout the entire value chain; second, its custom-ized value-adding logistics services, and third, its asset-light strategy in the freight business.

Annual Report 2012

54 Overview Panalpina solutions

Supply chain services

A think tank for customers. Value chain diagno-ses and analyses with an evaluation of improve-ment potential for direct and indirect costs. Use of the latest technologies and innovative tools for the improvement of processes and structures. What’s more, skilled customer- and industry- oriented consultation as a distinctive feature of Panalpina’s market services.

A global network, presence in over 80 coun-tries, customer-oriented industry know-how,

local experts and a “passion for solutions”: these form the core of Panalpina’s market services.

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55

Air and ocean freight

Air and ocean freight including overland trans-port, industry projects and standard warehous-ing: Panalpina combines a global logistics net-work with value-generating logistics services. With the proven collaboration of best-of-class partners and its own air freight network, Panal-pina offers available capacities at any time and at the best conditions. Panalpina is, and makes its customers flexible: globally, regionally and locally.

Value-added logistics services

Warehouse, inbound, packaging, production, dis-tribution and after-sales services customized to meet industry, production and customer require-ments: here is where optimization potential is realized for the customer and added value gener-ated, so that the customer can concentrate on the core business that leads to success.

Industry verticals

Expertise through focussing. Panalpina concen-trates its industry know-how on nine clearly de-fined core industries: Automotive, Consumer and Retail, Fashion, Chemicals, Hi-tech, Manufactur-ing, Oil and Gas, and Telecom. It brings together customers’ industry experts with those at Panal-pina in the process.

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56 Far more than logistics

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57

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58

Beyond Logistics

A Passion for SolutionsFar more than logistics

The aim of any company that uses logistics services is to achieve delivery reliability with maximum efficiency and profitability. The outsourcing of non-core business activities is growing increasingly important in the course of the global networking of markets and ongoing glo-balization. Success comes to those who can respond quickly, in a focussed manner and with lean structures.

That is precisely where Panalpina focuses: with its supply chain services for optimization of the value chain. With industry-specific know-how and innovative diagnosis tools, Panalpina provides comprehensive insights into the entire delivery chain process and cost structure, identifies the optimization potential and then develops customized solutions for its customers. The result: lean processes and maximum value creation through the understanding of customer needs and industries, but most of all, through the expertise of its staff. Panalpina is logistics, supported by people who are passionate and enthusiastic.

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59A Passion for SolutionsFar more than logistics

20 % lower costs

These are the average cost-savings achieved through implementation of the optimization sce-narios identified through the end-to-end diagno-

sis of the value chain. With Panalpina Supply Chain Services, logistics become not only more efficient, but also measurably less expensive.

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Far more than service

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61

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62

Industry and more

A Passion for SolutionsFar more than service

Panalpina offers customized and market-specific logis-tical value-added services to its customers worldwide for the optimization of process and cost efficiencies.

From complex warehousing to value-generating services such as repacking, kitting, assembly, packaging, control-ling, returns and spare parts handling to door-to-door transport via air or ocean freight. In addition, Panalpina offers a comprehensive IT platform for planning and car-go flow management with real-time traceability and 3D models of warehouses. In this way, Panalpina ensures high merchandise circulation and low storage costs. Panalpina’s logistics value-added services provide en-hanced efficiency, greater transparency, shorter time-to-market and optimized operating costs. These are market advantages that can be decisive for customers.

Annual Report 2012

63 A Passion for SolutionsFar more than service

Everywhere and anytimePanalpina customers profit from valued-added lo-gistics services thanks to the proven experts in the Panalpina Competence Centers for Logistics, which are situated in strategically important locations around the globe.

Buenos Aires

Prague

Singapore

New Jersey

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64

Far more than freight

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65

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66

Freight and more

A Passion for SolutionsFar more than freight

Panalpina is the world’s fourth-largest ocean and air freight service provider. Whether air or ocean freight, a combination of both or supplemented with road or rail cargo, Panalpina offers the right transport solution: time-, cost-, industry- and needs-oriented.

Punctuality, security and efficiency are our top priorities. Customized services ensure comprehensive flexibility. Full, less than, or non-container load, door-to-door, port- to-port, airport-door deliveries are all options that opti-mize the ratio between transport time and costs. Added to this are services to cover all the necessary formalities and, last but not least, everything that valuable, temper-ature-sensitive, dangerous, sensitive or oversized goods need in terms of special handling. Panalpina focuses on nine industry segments with experts who are specialized in those areas to undertake the most complex assign-ments: we understand our customers because we under-stand both their business and ours, and can combine the best state-of-art practices on both sides.

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67A Passion for SolutionsFar more than freight

More freight, less fuel

Panalpina’s two new Boeing 747-8F are among today’s most advanced cargo planes. Despite their larger freight capacity, they feature the low-est fuel usage in their class and are far quieter: their noise footprint is 30 % smaller. The two car-

go planes represent an additional element of the PanGreen program, which is aimed at a continu-ous reduction of the environmental impact of the entire operation.

Consolidated Financial Statements 2012

Financial Report68

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Financial ReportConsolidated Financial Statements

69

Consolidated Income Statement 70

Consolidated Statement of Comprehensive Income 71

Consolidated Statement of Financial Position 72

Consolidated Statement of Changes in Equity 73

Consolidated Statement of Cash Flows 75

Notes to the Consolidated Financial Statements 76

Principal Group Companies and Participations 128

Report of the Group Auditor 131

Key Figures in CHF (five-year review) 132

Consolidated Statement of Financial Position in CHF (five-year review) 134

Key Figures in EUR (five-year review) 135

Consolidated Statement of Financial Position in EUR (five-year review) 137

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70 Financial ReportConsolidated Financial Statements

in thousand CHF Notes 2012 2011

Forwarding services 8,065,745 7,925,993

Customs, duties and taxes (1,449,115) (1,426,345)

Net forwarding revenue 5 6,616,630 6,499,648

Forwarding services from third parties 5 (5,151,586) (5,022,599)

Gross profit 5 1,465,044 1,477,049

Personnel expenses 6 (955,011) (892,421)

Other operating expenses 9 (473,437) (372,438)

(Losses) on sales of non-current assets 10 (114) (106)

EBITDA 36,482 212,084

Depreciation of property, plant and equipment 14 (31,151) (28,484)

Amortization / impairment of intangible assets 15 (24,694) (9,383)

Goodwill impairment 15 (18,034) 0

Operating result (EBIT) (37,397) 174,217

Finance income 11 14,665 6,268

Finance costs 11 (19,178) (11,903)

(Loss)/profit before income tax (EBT) (41,910) 168,582

Income tax expenses 12 (28,275) (41,169)

Consolidated (loss)/profit (70,185) 127,413

Consolidated (loss)/profit attributable to:

Owners of the parent (70,456) 126,294

Non-controlling interests 24 271 1,119

Earnings per share (in CHF per share)

Basic 13 (2.98) 5.34

Diluted 13 (2.98) 5.33

The notes on pages 76 to 130 are an integral part of these consolidated financial statements.

Consolidated Income Statement for the years ended December 31, 2012 and 2011

Annual Report 2012

71Financial ReportConsolidated Financial Statements

Consolidated Statement of Comprehensive Incomefor the years ended December 31, 2012 and 2011

in thousand CHF Notes 2012 2011

Consolidated (loss)/profit (70,185) 127,413

Other comprehensive income

Available-for-sale financial assets 16 (478) 3,994

Amounts recognized in equity for defined benefit post-employment plans

– Actuarial gains (losses) 7 (1,649) (23,297)

– Exchange difference 7 86 1,163

Exchange difference on translations of foreign operations (2,773) (11,238)

Income tax on components of other comprehensive income 12 981 5,296

Other comprehensive income for the period, net of tax (3,833) (24,082)

Total comprehensive income for the period (74,018) 103,331

Attributable to owners of the parent (74,223) 102,416

Attributable to non-controlling interests 24 205 915

The notes on pages 76 to 130 are an integral part of these consolidated financial statements.

Annual Report 2012

72 Financial ReportConsolidated Financial Statements

Consolidated Statement of Financial Positionas at December 31, 2012 and 2011

Assetsin thousand CHF Notes 2012 2011

Non-current assets

Property, plant and equipment 14 130,209 113,180

Intangible assets 15 134,135 141,743

Investments 16 31,636 72,256

Derivative financial instruments 21 0 459

Deferred income tax assets 27 65,792 62,313

Total non-current assets 361,772 389,951

Current assets

Other receivables and other current assets 19 81,052 84,997

Unbilled forwarding services 85,227 77,346

Trade receivables 20 1,032,995 984,404

Derivative financial instruments 21 2,948 5,045

Other current financial assets 22 0 20,000

Cash and cash equivalents 22 393,061 573,579

Total current assets 1,595,283 1,745,371

Total assets 1,957,055 2,135,322

Equity and liabilitiesin thousand CHF Notes 2012 2011

Equity

Share capital 23 2,375 50,000

Treasury shares 23 (10,018) (197,278)

Retained earnings and reserves 748,221 1,053,086

Total equity attributable to owners of the parent 740,578 905,808

Non-controlling interests 24 9,241 9,082

Total equity 749,819 914,890

Non-current liabilities

Borrowings 25 257 231

Provisions 26 73,081 85,032

Post-employment benefit liabilities 7 49,629 47,151

Deferred income tax liabilities 27 16,211 14,492

Total non-current liabilities 139,178 146,906

Current liabilities

Trade payables 572,825 588,104

Other payables and accruals 149,459 144,354

Accrued cost of services 200,226 184,519

Borrowings 25 1,611 7,296

Derivative financial instruments 21 1,256 4,648

Provisions and other liabilities 28 124,479 125,420

Current income tax liabilities 18,202 19,185

Total current liabilities 1,068,058 1,073,526

Total liabilities 1,207,236 1,220,432

Total equity and liabilities 1,957,055 2,135,322

The notes on pages 76 to 130 are an integral part of these consolidated financial statements.

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73Financial ReportConsolidated Financial Statements

Consolidated Statement of Changes in Equityfor the year ended December 31, 2012

Attributable to the owners of the parent

Non- controlling

interests

Total equity

in thousand CHF

Notes

Share capital

Treasury shares

Other reserves

Transla-tion

reserveRetained earnings

Total

Balance on January 1, 2012 50,000 (197,278) (121,706) (162,103) 1,336,895 905,808 9,082 914,890

Consolidated loss (70,456) (70,456) 271 (70,185)

Available-for-sale financial assets 16 (478) (478) (478)

Amounts recognized in equity for defined benefit post-employment plans

– Actuarial gains (losses) 7 (1,649) (1,649) (1,649)

– Exchange difference 7 86 86 86

Exchange difference on translations of foreign operations (2,707) (2,707) (66) (2,773)

Income tax on components of other comprehensive income 12 981 981 981

Total comprehensive income for the period 0 0 (1,060) (2,707) (70,456) (74,223) 205 (74,018)

Dividends paid 23, 24 (47,239) (47,239) (46) (47,285)

Capital repayment 23 (45,125) (45,125) (45,125)

Share-based payments employee share plan 8 1,946 1,946 1,946

Share-based payments option plan 8 263 263 263

Changes in treasury shares, net 23 2,299 (651) 1,648 1,648

Annihilation of shares repurchased 23 (2,500) 184,961 (184,961) (2,500) (2,500)

Balance on December 31, 2012 2,375 (10,018) (122,766) (164,810) 1,035,797 740,578 9,241 749,819

The notes on pages 76 to 130 are an integral part of these consolidated financial statements.

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74 Financial ReportConsolidated Financial Statements

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

Attributable to the owners of the parent

Non- controlling

interests

Total equity

in thousand CHF

Notes

Share capital

Treasury shares

Other reserves

Transla-tion

reserveRetained earnings

Total

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

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

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

Amounts recognized in equity for defined benefit post-employment plans

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

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

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

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

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

Dividends paid 24 0 0 (46) (46)

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

Share-based payments option plan 8 662 662 662

Changes in treasury shares, net (1,275) (1,530) (2,805) (2,805)

Acquired non-controlling interests 24 0 0 323 323

Balance on December 31, 2011 50,000 (197,278) (121,706) (162,103) 1,336,895 905,808 9,082 914,890

The notes on pages 76 to 130 are an integral part of these consolidated financial statements.

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75Financial ReportConsolidated Financial Statements

in thousand CHF Notes 2012 2011

Consolidated (loss)/profit (70,185) 127,413

Income tax expenses 12 28,275 41,169

Depreciation of property, plant and equipment 14 31,151 28,484

Amortization / impairment of intangible assets 15 24,694 9,383

Goodwill impairment 15 18,034 0

Impairment of financial assets 11 4,691 0

Finance income and dividend on available-for-sale financial assets 11 (4,754) (6,268)

Interest expenses 11 1,958 5,932

Exchange differences 11 7,380 2,840

Loss on sales of property, plant and equipment 10 114 106

Gain on sales of financial assets 11 (9,890) 0

Share-based payment transactions 8 45 2,936

Other non-cash expenses 176 (869)

31,689 211,126

Working capital adjustments:

(Increase)/decrease receivables and other current assets (17,212) (21,893)

Increase/(decrease) payables, accruals and deferred income (33,847) 89,262

(Decrease)/increase long-term provisions (3,643) (15,508)

(Decrease)/increase short-term provisions and other liabilities (16,631) (33,915)

Cash generated from operations (39,644) 229,072

Interest paid (1,958) (2,577)

Income taxes paid (29,945) (32,996)

Net cash from operating activities (71,547) 193,499

Interest received 4,181 4,695

Dividends received 11 573 172

Proceeds from sales of property, plant and equipment 1,077 1,633

Proceeds from investments 27,937 12

Repayments of loans and receivables 56,570 1,148

Repayments of other financial assets 798 1,927

Purchase of property, plant and equipment (50,715) (30,715)

Acquisition of subsidiary, net of cash acquired 30 0 (59,986)

Purchase of intangible assets and other assets (34,291) (19,648)

Purchase of investments (9,275) (13,840)

Purchase of other financial assets (7,226) (36,954)

Net cash used in investing activities (10,371) (151,556)

Free cash flow (81,918) 41,943

Proceeds of short- and long-term borrowings 0 142

Repayment of short- and long-term borrowings (2,120) 0

Dividends paid (47,239) 0

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

Share capital paid back 23 (45,125) 0

Purchase of treasury shares 23 (3,981) (8,617)

Sale of treasury shares 1,873 4,685

Net cash used in financing activities (96,638) (3,836)

Effect of exchange rate changes on cash and cash equivalents (1,962) 6,536

Net increase (decrease) in cash and cash equivalents (180,518) 44,643

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

Cash and cash equivalents at the end of the year 22 393,061 573,579

The notes on pages 76 to 130 are an integral part of these consolidated financial statements.

Consolidated Statement of Cash Flows for the years ended December 31, 2012 and 2011

General information

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

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

The consolidated financial statements for the year ending December 31, 2012, were authorized for issuance in accordance with a resolution by the Board of Directors on March 1, 2013.

Summary of significant accounting policies

Basis of preparation of the consolidated financial statements

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. The consolidated financial statements of the Company as at and for the year ended December 31, 2012, comprise the Company and its affiliates (together referred to as the Group and individually as Group entities).

Statement of compliance

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

Basis of measurement

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

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

Presentation currency

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

Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect application of accounting policies and the reported amounts of assets, liabilities, income and expenses. It requires management to exercise its judgments and assumptions in the process of applying the Group’s accounting policies. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Deviations from estimates are recognized in the period in which the estimates are revised and in any future periods affected.

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

1

2

Notes to the Consolidated Financial Statements

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Significant accounting policies

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

Effective from January 1, 2012, the Group adopted the amendments to IFRS 7 “Disclosures – Transfer of Financial Assets” as well as the amendments to IAS 12 “Deferred Tax – Recovery of Underlying Assets”.

IFRS 7 (amendment) “Disclosures – Transfer of Financial Assets” In October 2010 the IASB issued “Disclosures – Transfer of Financial Assets” (amendments to IFRS 7) with an effective date of July 2011. The adoption of this amendment did no have any impact on the consolidated financial statements of the Group.

IAS 12 (amendment) “Deferred Tax – Recovery of Underlying Assets”In December 2010 the IASB issued Deferred Tax: “Recovery of Underlying Assets” – Amendments to IAS 12. The Amendment offers a partial clarification of the treatment of timing differences arising in connection with the application of the fair-value model of IAS 40. In the case of real estate held for investment purposes, it is often difficult to assess whether existing differences will reverse through continued use or as a result of a sale. The amendment to IAS 12 provides that reversal in principle occurs as a result of a sale. As a consequence of the amendment, SIC 21 “Income Taxes – Recovery of Revalued Depreciable Assets” shall no longer be effective for real estate held for investment purposes measured at fair value. The adoption of this amendment did not have any impact on the consolidated financial statements of the Group.

The following new or revised standards, amendments to standards and interpretations that have been published are mandatory for the future accounting periods but the Group has not early adopted them:

IFRS 9 “Financial instruments: Measurement and Classification”, IFRS 10 “Consolidated Financial Statements”, IFRS 11 “Joint Arrangements”, IFRS 12 “Disclosure of interests in other entities”, IFRS 13 “Fair value measurement” as well as IAS 1 (amended) “Presentation of Financial Statements”, IAS 27 “Consolidated and Separate Financial Statments”, IAS 28 (amended) “Investments in Associates”, IAS 32 (amended) “Financial Instruments – Presentation” and IFRS 7 “Financial Instruments – Offsetting of Financial Assets and Financial Liabilities”, IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine” as well as IAS 19 “Employee benefits”.

Appart of IAS 19 there are no other new or revised standards, amendments to the standards and interpretations that are not yet effective that would be expected to have a material impact on the Group.

IAS 19 “Employee benefits” was amended in June 2011. As the Group already eliminated the corridor approach and recognized all actuarial gains and losses in Other Comprehensive Income (OCI) as they occured and already recognized all past services cost the impact on Group level will be the replacement of interest costs and the expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability (asset). The management expects that, by using the net interest cost the costs will increase by approximately CHF 3 million. In addtion the amendments require additonal disclosures at year end.

In additon in May 2012, the IASB issued amendments to its standards, primarily with a view to remove inconsistencies and clarifying the wording. The transitional provisons for each standard are different. The Group has not yet analyzed in detail the changes to the accounting policies and the impact on the financial position or performance.

Basis of consolidation

Consolidation policy The subsidiaries are those companies controlled, directly or indirectly, by Panalpina World Transport (Holding) Ltd., where control is defined as the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. This control is normally evidenced when the Group owns, either directly or indirectly, more than one half of the voting rights or currently exercisable potential vot-ing rights of a company’s share capital. The existence and effect of potential voting rights that are currently exercisable or convertible are con-sidered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by de-facto control.

Defacto control may arise in circumstances where the size of the Group’s voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and they are de-consolidated from the date that control ceases.

The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acqui-sition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are mea-sured initially at fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquistion basis, at fair value of the recognized amounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date, any gains or losses arising from such re-measurement are recognized in profit or loss.

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Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognized in accordance with IAS 39 in profit or loss. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the sub-sidiary acquired, the difference is recognized in profit or loss.

Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses resulting from intercompany transactions that are recognized in assets are also eliminated.

Changes in ownership interest in subsidiaries without change of control

Transactions with non-controlling interest that do not result in loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interest are also recorded in equity.

Disposal of subsidiaries

When the Group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. Amounts previously recognized in other comprehensive income are reclassified to profit or loss.

Operating segment informationManagement has determined the operating segments based on the reports reviewed by the Exceutive Board that are used to make strategic decisions. The Executive Board considers the business from a geographic perspective, as the Group’s operations are predominantly man-aged by the geographical location. In the period under review, the regional management as well as the new reporting structure became effective. Since July 2012 North as well as Central and South America are no longer reported separately. To be in line with the internal report-ing structure, the operating segment reporting now shows only combined figures for Americas.

The Executive Board assesses performance of the operating segments based on a measure of adjusted EBIT. This measurement basis excludes the effect on non-recurring expenditure from the operating segments such as restructuring costs and related legal expenses, reor-ganization costs as well as fines recognized. The measurement also excludes the unrealized gains and losses on financial instruments as well as interest income and expenditure, as this type of activitiy is driven by the central treasury function, which manages the cash position of the Group. Income tax expenses are not assessed by segment.

Headquarter activities are reported as Corporate. These consist of corporate headquarters, including the Corporate Executive Committee, Corporate Communications, Corporate Operations, Corporate Human Resources, Corporate Finance including Treasury, Taxes and Pension Fund Management.

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

Foreign currency

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

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

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

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

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

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

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

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

2012 2011

Statement of financial

position1

Income

statement2

Statement of financial

position1

Income

statement2

EUR 1.20795 1.20525 EUR 1.21628 1.23080

USD 0.91435 0.93821 USD 0.94082 0.88478

HKD 0.11796 0.12095 HKD 0.12114 0.11366

CNY 0.14658 0.14869 CNY 0.14950 0.13690

CAD 0.91906 0.93851 CAD 0.92165 0.89488

GBP 1.47523 1.48651 GBP 1.45278 1.41844

BRL 0.44698 0.48190 BRL 0.50413 0.52987

1 Year-end rate2 Average rate

Revenue recognition

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

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

Net forwarding revenue is recognized at the time the services are performed. Logistics projects with a longer period of delivery are recog-nized at the stage of completion of the services on the reporting date. The stage of completion is assessed in 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. Where necessary, single transactions are split into separately identifiable components to reflect the substance of the transaction. Conversely, two or more trans-actions may be considered together for revenue recognition purposes, where the commercial effect cannot be understood without reference to the series of transactions as a whole.

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

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

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

Forwarding services from third parties

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

Employee benefits

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

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

Pension obligationGroup companies operate various pension schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or contractual obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relat-ing to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.

Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustment for unrecognized past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rate of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

Past service costs are recognized immediately in income, unless the changes to the pension plan are conditional on the employees remain-ing in service for a specified period of time. In this case, the past-service costs are amortized on a straight-line basis over the vesting period.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obiligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.

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

Share-based compensationThe Group operates a number of equity-settled, share-based compensation plans under which the entity receives services from employees as consdideration for equity or equity instruments (options) of the Group. The fair value of the employee services received in exchange for the granting of the options and the discount on the shares granted is estimated at the grant date and recorded as an expense over the vesting period. The expense is recognized as other employee benefits in the income statement within the operating result of Corporate. For equity-settled plans, an increase in equity is recorded for this expense and any subsequent cash flows from exercises of vested awards are recorded as changes in equity. For cash-settled plans, a liability is recorded, which is measured at fair value at each reporting date with any move-ments in fair value being recorded in the income statement. Any subsequent cash flows from exercise of vested awards are recorded as a reduction of the liability.

Other operating expenses

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

Finance income and costs

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

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

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Current and deferred income tax expenses

The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appro-priate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary differ-ence will not reverse in the foreseeable future.

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

Property, plant and equipment

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

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

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

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

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

Years

Warehouse and office buildings 25 – 40

Warehouse and transportation equipment 3 – 10

Office furnishings and equipment 5 – 10

EDP hardware 3

Trucks, trailers and special vehicles 3 – 10

Automobiles 3 – 5

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

Leases

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

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

Intangible assets

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

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

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

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

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

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

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

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

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

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

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

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

Impairment of property, plant and equipment and intangible assets

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

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

Impairment of goodwill

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstance indicate a potential impair-ment. When the recoverable amount of the cash-generating units, being the higher of its fair value less costs to sell or its value in use, is less, then the carrying value of the goodwill is reduced to its recoverable amount. The reduction is reported in the income statement as an impairment loss. The methodology used in the impairment testing is further described in note 15.

Financial assets

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

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

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

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

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

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

Fair value of financial instruments

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

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Amortized cost of financial instruments

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

Impairment of financial assets

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

Derecognition of financial assets

A financial asset is derecognized when:

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

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

Derivatives

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

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

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

Hedge accounting

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

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

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

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

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

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

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

Cash flow hedgesThe effective portion of the gain or loss on the hedging instrument is recognized directly in equity, while any ineffective portion is recognized in the income statement. Amounts taken to equity are transferred to the income statement when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognized or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognized in equity are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognized in equity remain in equity until the forecast transaction or firm commitment occurs.

Hedges of a net investmentHedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a manner similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized directly in equity while any gains or losses relating to the ineffective portion are recognized in the income statement. Upon disposal of the foreign operation, the cumulative value of any such gains or losses recognized directly in equity is transferred to the income statement.

Hedging activities and derivative financial instrumentsThe Group uses foreign-currency-denominated borrowings and forward contracts to manage its transaction exposures. These currency for-ward contracts are not designated as cash flow, fair value or net investment hedges and are entered into for periods consistent with currency transaction exposure (generally one to six months). Such derivatives do not qualify for hedge accounting.

At year-end, the contract value is calculated on the total volume of individual contracts using the fair value at this time. The positive replacement value represents the theoretical profit if the open currency contracts were closed out as of December 31. Correspondingly, the negative replacement value represents the theoretical loss on closing the currency transactions open as of December 31.

Trade receivables

Trade receivables are carried at the original invoice amount less valuation adjustments for impairment, trade discounts, volume rebates and similar allowances. Subsequently, accounts receivable are measured at amortized cost using the effective interest method. An allowance for doubtful accounts trade receivables is recorded when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is rec-ognized in the income statement within other operating expenses. When a trade receivable is uncollectible, it is written off against the allow-ance account for trade receivables. Subsequent recoveries of amounts previously written off or 100 % impaired are credited against operating expenses in the income statement. Trade discounts, volume rebates and similar allowances are recorded on an accrual basis consistent with the recognition of the related sales, using estimates based on existing contractual obligations, historical trends and the Group’s experience. Long-term accounts receivable are discounted to take into account the time value of money.

Unbilled forwarding services

Unbilled forwarding services represent the gross unbilled amount expected to be collected from customers for forwarding services in prog-ress for which costs are incurred but not yet invoiced. For logistics projects and other services with a longer period of delivery, recognized profits are included.

Cash and cash equivalents and other current financial assets

Cash and cash equivalents included in the statement of financial position and statement of cash flows represent cash on hand, bank and postal checks, bills of exchange net, current balance with banks and similar institutions less bank overdraft as well as time deposits and highly liquid money market papers with a maturity period of less than three months from the date of acquisition. Such balances are only reported as cash if they are readily convertible to known amounts of cash and are subject to insignificant risk of change in value.

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Other current financial assets include time deposits and highly liquid money market papers with a maturity period between three months and one year.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are recognized in equity as a deduction, net of tax effects, from the proceeds.

Treasury shares

When share capital recognized as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, is net of any tax effects and is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are pre-sented as a deduction from total equity. Where such shares are subsequently reissued, any consideration received, net of any directly attrib-utable incremental transaction costs and the related income tax effects, the resulting surplus or deficit on the transaction is transferred to retained earnings.

Retained earnings and other reserves

Retained earnings and other reserves contain legal reserves which are not distributable to the shareholders pursuant to Swiss law, cumula-tive translation adjustments of all foreign currency differences arising from the translation of the financial statements of foreign operations as well as cumulative actuarial gains and losses from defined benefit post-employment plans net of taxes and accumulated difference in available-for-sales assets.

Financial liabilities

Financial liabilities are either classified as financial liabilities at fair value through profit or loss, financial liabilities at amortized cost or as derivatives designated as hedging instruments in an effective hedge as appropriate. The Group determines the classification of its financial liabilities at initial recognition. Financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, directly attrib-utable transaction costs. The Group’s financial liabilities include trade and other payables, loans and borrowings and derivative finan-cial instruments.

Subsequent measurementFinancial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial rec-ognition as at fair value through profit or loss. This category includes derivative financial instruments entered into by the Group that do not meet the hedge accounting criteria. Gains or losses on liabilities at fair value through profit or loss are recognized in the income statement.

BorrowingsAfter initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost. Any discount between the net proceeds received and the principal value due on redemption is amortized over the duration of the debt instruments and is recognized as part of financing costs using the effective interest rate method.

Derecognition of financial liabilitiesFinancial liabilities are derecognized when the obligation under the liability is discharged or cancelled or expired. Where a financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability. The recognition of a new liability and the difference in the respective carrying amounts is recognized in the income statement.

Provisions

Provisions are recognized where a legal or constructive obligation has been incurred and if an outflow of resources is probable and can be estimated reliably. Provisions are recorded for the estimated ultimate liability that is expected to arise, taking into account foreign currency effects arising from their translation from their functional currency into Swiss francs and the time value of money where material, deter-mined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost. Provisions are established in particular for accrued costs of services, freight forwarding claims, short-term employee benefits, termination and other long-term employee benefits, post-employment benefit liabilities and decommissioning provisions. Provisions for restructuring are recognized only when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating costs are not provided for.

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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 estimations and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liablilities within the next financial year are addressed below.

Impairment of goodwillThe Group tests periodically whether goodwill has suffered any impairment in accordance with the Group’s accounting policy and details are disclosed in note 15 – Intangible assets, section: Impairment test for goodwill. The recoverable amounts of cash-generating units (CGUs) have been determined based on value-in-use calculations. The underlying calculations require the use of estimates.

An impairment charge of CHF 18.0 million arose in the Norwegian CGU during the course of the year 2012, resulting in the carrying amount of the CGU being written down to its recoverable amount. If the estimated cost of capital used in determining the pre-tax discount rate for the CGU Norway had been 2.5 % higher than management’s proposal, the group would have recognized further impairment against goodwill of CHF 12.8 million.

Pension and other post-employment benefitsThe expense of defined benefit pension plans and other post-employment medical benefits as well as the present value of the pension obli-gation are determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return of assets, future salary increases, mortality rates and future pension increases. All assumptions are reviewed at each reporting date. When determining the appropriate discount rate, management considers the interest rates on high-quality corporate bonds (with an AAA or AA rating) in the respective country and appropriate duration. The mortality rate is based on publicly available mortality tables for the specific country. Future salary increases and pension increases are based on expected future inflation rates for the specific country. Such differences are recognized in full directly in other comprehensive income in the period in which they occur without affecting the income statement. At December 31, 2012 the Group had a deficit of the fair value of plan assets below the present value of funded obligations of CHF 4.3 million (2011: CHF 9.5 million) for funded plans and a negative present value of unfunded plans of CHF 45.3 million (2011: CHF 37.7 mil-lion). The actuarial assumptions used may differ materially from actual results due to changes in market and economic conditions, higher or lower withdrawal rates, longer or shorter life spans of participants and other changes in the factors assessed. These differences could impact the assets or liabilities recognized in the statement of financial position in future periods. Additional information is disclosed in note 7.

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

The Group has established a captive reinsurance company that insures a dedicated risk portion of its errors and omissions, transporter operator and commercial general liability programs. The exposure of its captive reinsurance company is limited by a third-party insurer that covers losses exceeding an amount of CHF 1 million on a single-case basis and a total aggregate limit of CHF 9 million annually for claims exceeding CHF 50,000 per incident. In a consolidated view, the Group, through its captive reinsurance company, bears the risks insured with its captive reinsurance company up to the limit as if such risks were not insured at all. Furthermore, as third-party coverage is subject to a considerable deductible and a total aggregated limit per year, the Group, in effect, bears the risk of damages, losses and claims that are above such aggregated limits as well. The Group used for the above-mentioned provision an actuarial calculation method, which requires for the calculation of the “incurred but not reported reserves” (IBNR), among other estimations, the overall circumstances which may impact the future losses, such as the growth of business. At December 31, 2012 the recognized liability for claims amounts to CHF 35.6 million (2011: CHF 33.0 million). If the management decided to use the optimal actuarial calculation method, which only takes into consider-ation the linear loss development according to historical figures, the carrying amount of claim provisions would be approximately CHF 5.1 million lower (2011: CHF 2.3 million). Using a more conservative percentile, the carrying amount of claim provisions would be approximately CHF 1.9 million higher (2011: CHF 1.7 million).

The Group is also subject to legal and regulatory proceedings and government investigations in various jurisdictions. These proceedings are related to the area of competition law. Such proceedings may result in criminal or civil sanctions, penalties or damages against the Com-pany. Regulatory and legal proceedings, as well as government investigations, involve complex legal issues, the outcome of which is diffi-cult to predict. Accordingly, management’s judgment is affected in determining whether it is more likely or not that such a proceeding will result in an outflow of resources and whether the amount of the obligation can be reliably estimated. These judgments are subject to change as new information becomes available. Upon resolution of any legal or regulatory proceeding or government investigation, the Group may incur a provision for such matters. It cannot be ruled out that the financial condition or results of operations of the Group will be materially affected. For additional information see note 31 – Additional inforamtion, section Pending legal claims. Related legal costs are recognized when incurred.

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Deferred income tax assetsDeferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be rec-ognized, based on the likely timing and level of future taxable profits.

The carrying value of recognized tax loss carry-forwards amounts to CHF 97.7 million (2011: CHF 98.0 million) and unrecognized tax loss carry-forwards to CHF 191.1 million (2011: CHF 100.1 million). Further details are provided in note 27.

If the Group were able to recognize all unrecognized deferred tax assets, consolidated profit would increase by CHF 59.3 million (2011: CHF 31.6 million). If the Group failed to achieve the expected future taxable profits, the consolidated profit would decrease by CHF 33.3 million (2011 CHF 31.9 million) but the management believes that the full amount of the recognized deferred tax assets are recoverable in the foreseeable future.

Income taxesAt December 31, 2012, the net liability for current income taxes amounts to CHF 18.2 million (2011: CHF 19.2 million). As the Group is sub-ject to income taxes in numerous jurisdictions, significant judgments are required in determining worldwide provisions for income taxes.

Some of these estimates are based on interpretations of existing tax laws or regulations. Management believes that the estimates are rea-sonable and that the recognized liabilities for income-tax-related uncertainties are adequate. Various external factors may have favorable or unfavorable effects on income taxes. These factors include, but are not limited to, changes in tax law regulations and/or rates, changing interpretation of existing tax laws or regulations and changes in management estimations. Such changes that arise could affect the assets and liabilities recognized in the statement of financial position in future periods.

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Operating segment information

Management has determined the operating segments based on the reports reviewed by the Executive Board that are used to make strategic decisions. The Executive Board considers the business from a geographic perspective, as the Group’s operations are predominantly man-aged by the geographical location. The Executive Board assesses performance of the operating segments based on a measure of adjusted EBIT. This measurement basis excludes the effects on non-recurring expenditure from the operating segments such as restructuring expenses, reorganization costs as well as fines recognized and related legal expenses. The measurement also excludes the unrealized gains / losses on financial instruments as well as interest income and expenses, as this type of activity is driven by the central treasury function, which manages the cash position of the Group. Income and deferred income taxes are not assessed by segment.

In the period under review, the regional management as well as the new reporting structure became effective. Since July 2012 North as well as Central and South America are no longer reported separately. To be in line with the internal reporting structure, the consolidated segment reporting shows only combined figures for Americas. For comparative analysis the previous year operating segment has been aligned to conform to the current period’s presentation.

2012 (in thousand CHF)

Europe, Middle

East, Africa, CIS

Americas

Asia Pacific

Total

operating segment

Elimi- nations

Corporate

Total Group

External forwarding services 3,091,314 2,287,734 1,237,582 6,616,630 0 6,616,630

Intra-group forwarding services 1,518,635 637,758 1,494,733 3,651,126 (3,651,126) 0

Net forwarding revenue 4,609,949 2,925,492 2,732,315 10,267,756 (3,651,126) 0 6,616,630

Forwarding services from third parties (3,893,203) (2,481,743) (2,427,766) (8,802,712) 3,651,126 (5,151,586)

Gross profit 716,746 443,749 304,549 1,465,044 0 0 1,465,044

Personnel expenses (451,227) (266,490) (139,880) (857,597) (71,974) (929,571)

Other operating expenses (267,161) (175,665) (101,973) (544,799) 130,480 (414,319)

Adjusted EBITDA (1,642) 1,594 62,696 62,648 0 58,506 121,154

Depreciation, amortization and impairment (29,855) (9,586) (6,665) (46,106) (9,739) (55,845)

Goodwill impairment (18,034) 0 0 (18,034) 0 (18,034)

Adjusted operating result (Segment EBIT) (49,531) (7,992) 56,031 (1,492) 0 48,767 47,275

Fines EU and WEKO (see note 9) 0 0 0 0 (59,232) (59,232)

Termination benefits (see note 6) (11,165) (6,294) (4,138) (21,597) (3,843) (25,440)

Reported EBIT (60,696) (14,286) 51,893 (23,089) 0 (14,308) (37,397)

Financial result

– Finance income 14,665

– Finance costs (19,178)

Loss before income tax (EBT) (41,910)

Income tax expenses (28,275)

Consolidated loss (70,185)

Information about segment assets and liabilities:

2012 (in thousand CHF)

Europe, Middle

East, Africa, CIS

Americas

Asia Pacific

Total

operating segment

Non-

segment assets

Non-

segment liabilities

Total Group

Segment assets 723,406 480,433 342,874 1,546,713 410,342 1,957,055

Segment liabilities 532,683 271,469 219,076 1,023,228 184,008 1,207,236

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Net forwarding revenue and segment assets from the country of domicile (Switzerland) and major countries within afore-mentioned segments:

2012 (in thousand CHF)

Switzerland

Germany

United States of America

Brazil

Republic of

China

Net forwarding revenue 860,291 1,282,793 1,545,194 427,496 1,102,812

Segment assets 59,767 175,515 207,732 95,008 116,459

2011 (in thousand CHF)

Europe, Middle

East, Africa, CIS

Americas

Asia Pacific

Total

operating segment

Elimi- nations

Corpo- rate

Total Group

External forwarding services 3,169,935 2,104,281 1,225,432 6,499,648 0 0 6,499,648

Intra-group forwarding services 1,573,571 645,319 1,547,501 3,766,391 (3,766,391) 0 0

Net forwarding revenue 4,743,506 2,749,600 2,772,933 10,266,039 (3,766,391) 0 6,499,648

Forwarding services from third parties (4,013,993) (2,317,217) (2,457,780) (8,788,990) 3,766,391 0 (5,022,599)

Gross profit 729,513 432,383 315,153 1,477,049 0 0 1,477,049

Personnel expenses (444,681) (245,847) (125,341) (815,869) 0 (76,552) (892,421)

Other operating expenses (246,778) (162,225) (99,602) (508,605) 0 136,061 (372,544)

Adjusted EBITDA 38,054 24,311 90,210 152,575 0 59,509 212,084

Depreciation, amortization and impairment (16,976) (8,570) (5,883) (31,429) 0 (6,438) (37,867)

Adjusted operating result (Segment EBIT) 21,078 15,741 84,327 121,146 0 53,071 174,217

Financial result

– Finance income 6,268

– Finance costs (11,903)

Profit before income tax (EBT) 168,582

Income tax expenses (41,169)

Consolidated profit 127,413

Information about segment assets and liabilities:

2011 (in thousand CHF)

Europe, Middle

East, Africa, CIS

Americas

Asia Pacific

Total

operating segment

Non-

segment assets

Non-

segment liabilites

Total Group

Segment assets 755,385 456,264 371,554 1,583,203 552,119 2,135,322

Segment liabilities 542,139 263,952 233,979 1,040,070 180,362 1,220,432

Net forwarding revenue and segment assets from the country of domicile (Switzerland) and major countries within above-mentioned segments:

2011 (in thousand CHF)

Switzerland

Germany

United States of America

Brazil

Republic of

China

Net forwarding revenue 905,425 1,375,681 1,446,271 412,544 1,182,612

Segment assets 70,659 188,624 194,664 85,426 130,898

Neither in 2012 nor 2011 the Group did have sales in excess of 10 % of the total net forwarding revenues to any single external customer.

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Information by business

The Group’s business can be divided into three divisions: Air Freight, Ocean Freight and Logistics.

2012 (in thousand CHF)

Air Freight

Ocean Freight

Logistics

Total Group

Net forwarding revenue 3,105,334 2,615,024 896,272 6,616,630

Forwarding services from third parties (2,478,361) (2,155,165) (518,060) (5,151,586)

Gross profit 626,973 459,859 378,212 1,465,044

2011 (in thousand CHF)

Air Freight

Ocean Freight

Logistics

Total Group

Net forwarding revenue 3,280,851 2,313,158 905,639 6,499,648

Forwarding services from third parties (2,592,750) (1,873,935) (555,914) (5,022,599)

Gross profit 688,101 439,223 349,725 1,477,049

Personnel expenses

in thousand CHF 2012 2011

Wages and salaries 739,268 695,473

Compulsory social security contributions 91,968 84,421

Contributions to defined contribution plans 53,654 49,166

Expenses related to defined benefit plans (note 7) 8,072 987

Staff training 9,446 8,823

Share-based compensation (note 8)

Equity-settled compensation plan 2,209 1,917

Cash-settled compensation plan (2,164) 1,019

Other personnel-related expenses 52,558 50,615

Total personnel expenses 955,011 892,421

Number of employees 15,224 15,051

thereof in Switzerland 759 775

During the period under review, the Group recognized CHF 25.4 million termination benefits within wages and salaries. The termination ben-efits concern headcount reductions in all three regions and on a corporate level (see note 28 provisions and other liabilities).

Post-employment benefit obligations

Panalpina’s objective is to provide attractive post-employment benefits to employees, while at the same time ensuring that the various plans are appropriately financed, while managing any potential impacts on the Group’s long-term financial position. The nature of such plans varies according to legal regulations and fiscal requirements in the countries in which the employees are employed. Other post-employment benefits consist mostly of post-retirement schemes. Post-employment benefit plans are classified for IFRS as “defined contribution plans” if the Group pays fixed contributions in a separate fund or to a third-party financial institution and will have no further legal or constructive obliga-tion to pay further contributions. All other plans are classified as defined benefit plans. The Group’s major defined benefit plans are located in Switzerland, Germany, Japan, Taiwan and France. Plans are usually established as trusts independent of the Group and are funded by payments from the Group and by employees. In some cases, notably for the major defined benefit plans in Germany and Japan, the plans are unfunded and the Group pays pensions to retired employees directly from its own financial resources.

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Current and past services as well as expected returns on plan assets and interest expenses are charged to the income statement as person-nel expenses. Actuarial gains and losses are recorded directly in other comprehensive income. The recognition of pension assets is limited to the total of the present value of any future refunds from the plans or reduction in future contributions to the plans and any cumu-lative unrecognized past service costs. Adjustments arising from the limit on the recognition of assets for defined benefit plans are recorded directly in other comprehensive income.

Qualified independent actuaries carry out valuations on a regular basis and for major plans annually as at the reporting date. For funded plans, which are usually trusts independent of the Group’s finances, the net asset / liability recognized on the Group’s statement of finan-cial position corresponds to the over-/underfunding of the plan, adjusted for unrecognized past service costs. For unfunded plans, where the Group meets the pension obligations directly from its own financial resources, a liability for the defined benefit obligation is recorded in the Group’s statement of financial position. Pension assets and liabilities in different defined benefit plans are not offset.

The amounts recognized in the statement of financial position are determined as follows:

in thousand CHF 2012 2011

Fair value of plan assets 231,706 211,525

Present value of funded obligation (236,030) (221,002)

Surplus (deficit) (4,324) (9,477)

Present value of unfunded obligations (45,305) (37,674)

(Net liability) net asset recognized in statement of financial position (49,629) (47,151)

thereof recognized as liability (49,629) (47,151)

The following amounts relating to defined benefit pension plans were recorded in the income statement:

in thousand CHF 2012 2011

Net pension costs for year ending

Current service costs (16,322) (13,488)

Recognized past service costs 0 3,448

Interest expenses (6,564) (7,232)

Expected return on plan assets 8,489 10,226

Employee contribution 5,148 4,960

Settlements 961 922

Curtailments 216 177

Expenses for defined benefit plans (8,072) (987)

The movement in the defined benefit obligation over the year is as follows:

in thousand CHF 2012 2011

Changes in defined benefit obligation (DBO)

DBO at beginning of year (258,676) (248,015)

Current service costs (16,322) (13,488)

Recognized past service costs 0 3,448

Interest expenses (6,564) (7,232)

Actuarial (losses) gains recognized in OCI (11,133) (10,777)

Benefits paid 10,672 16,196

Curtailments 216 177

Liabilities extinguished on settlement 0 29

Currency impact 472 986

DBO at end of year (281,335) (258,676)

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92 Financial ReportConsolidated Financial Statements

The movement in the fair value of plan assets of the year is as follows:

in thousand CHF 2012 2011

Changes in fair value of plan assets

Fair value at beginning of year 211,525 217,656

Employer contributions 6,018 6,167

Employee contributions 5,148 4,960

Expected return on plan assets 8,489 10,226

Actuarial gains (losses) recognized in OCI 9,484 (12,520)

Benefits paid (8,962) (14,943)

Currency impact 4 (21)

Fair value at end of year of plan assets 231,706 211,525

The fair value of the plan assets includes none of the Group’s shares for either 2012 or 2011.

An analysis of the amounts recognized in other comprehensive income is shown in the table below:

in thousand CHF 2012 2011

Analysis of amounts recognized in other comprehensive income

Recognized in other comprehensive income on January 1 126,735 104,601

Actuarial (gains) losses plan assets (9,484) 12,520

Actuarial losses (gains) DBO 11,133 10,777

Currency impact (86) (1,163)

Recognized in other comprehensive income on December 31 128,298 126,735

Plan assets are comprised as follows:

in thousand CHF 2012 2011

in CHF in % in CHF in %

Major categories of plan assets

Cash and cash equivalents 1,186 0.51 % 3 0.0088 %

Equity investments 80,941 34.93 % 61,021 28.85 %

Bonds 115,857 50.00 % 117,765 55.68 %

Hedge funds and private equity 0 0.00 % 6,500 3.07 %

Real estate funds 27,120 11.71 % 22,893 10.82 %

Others 6,602 2.85 % 3,343 1.58 %

Total 231,706 100.00 % 211,525 100.00 %

Actuarial assumptionsActuarial assumptions are unbiased and mutually compatible estimates of variables that determine the ultimate cost of providing past employment benefits. They are set on an annual basis by local management and actuaries and are subject to approval by corporate man-agement. Actuarial assumptions consist of demographic assumptions on matters such as mortality and employee turnover, and financial assumptions on matters such as salary and benefit level, interest rates and return on investments. The Group operates defined benefit plans in many countries and the actuarial assumptions vary based upon local economic and social conditions.

Demographic assumptionsThe most significant demographic assumptions relate to mortality rates. The Group’s actuaries use mortality tables which take into account historic patterns and expected changes, such as further increases in longevity. The mortality tables used for the major schemes are:

Switzerland: BVG 2010 Periodic table and adjustment Germany: tables 2005 G from Klaus Heubeck France: table INSEE TV / TD 2008 / 2010

Rates of employee turnover, disability and early retirement are based on historical behavior within the Group companies.

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93Financial ReportConsolidated Financial Statements

Financial assumptionsThese are based on market expectations for the period over which the obligations are to be settled. The assumptions used in the actuarial valuations with stable currencies and interest are shown below:

2012 2011

Discount rate 2.01 % 2.57 %

Expected return on pension plan assets 1.75 % 3.99 %

Future salary increase 1.75 % 1.75 %

Future pension increase 1.15 % 1.25 %

Discount rates, which are used to calculate the discounted present value of the defined benefit obligation, are determined with reference to market yields on high-quality corporate bonds.

Expected returns on plan assets are based on market expectations of expected returns on the assets in funded plans over the duration of the related obligation. This takes into account the split of the plan assets between equities, bonds, properties and other investments. The calculation includes assumptions concerning expected dividend and interest income and realized and unrealized gains on plan assets. Due to the long-term nature of the obligations, the assumptions used for matters such as returns on investments may not necessarily be consis-tent with recent historical patterns. The expected return on plan assets included in the income statement is calculated by multiplying the expected rate of return by the fair value of plan assets. The difference between the expected return and the actual return in any twelve-month period is an actuarial gain/loss and recorded directly in other comprehensive income. In 2012, the actual return on plan assets was CHF 18.0 million (2011: CHF – 2.3 million).

Expected rates of salary increases, which are used to calculate the defined benefit obligation and the current service cost included in the income statement, are based on the latest expectation and historical behavior within Group entities.

A five-year summary of the Group’s defined benefit plans is shown in the table below:

in thousand CHF 2012 2011 2010 2009 2008

DBO 281,335 258,676 248,015 232,899 256,441

Plan assets (231,706) (211,525) (217,656) (208,217) (213,520)

Net liability recognised in statement of financial position 49,629 47,151 (30,359) (24,682) (42,921)

Experience adjustments arising on:

plan liability (2,007) 8,974 (2,858) 3,149 (7,692)

plan asset 9,484 (12,510) 1,042 20,539 (40,859)

Share and option ownership program

The Group operates several share and option ownership programs. The members of the Board of Directors, the members of the Executive Board as well as selected preferential employees had the option of voluntarily participating in the share and option ownership program intro-duced in 2005 and continued in a modified program in the following years.

Management Incentive Program II (MIP II)

In June 2006, the Group introduced the Management Incentive Program II. Participants in this program had the right to purchase shares with a discount of 25 % based on the share price corresponding to the average closing price of one share at the SIX Swiss Exchange dur-ing the months January to May in the respective year of purchase. The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares. The shares are subject to a one-year lock-up period. For every purchased share under this plan, the Group granted one option free of charge to the par-ticipant. The options have a contractual term of six years and a vesting period of one to three years. Each option entitles the participant to obtain one share of Panalpina World Transport (Holding) Ltd. at a predetermined strike price which equals the average closing price of one share at the SIX Swiss Exchange during the months January to May in 2006. The share options cannot be settled in cash. In May 2007, the Board of Directors decided to divide the Management Incentive Program II into an “International Management Incentive Plan” and a “United States Management Incentive Plan.” Beneficiaries of the “United States Management Incentive Plan” are selected preferential employees of the subsidiary in the United States of America and members of the Board of Directors with residence in the United States of America. The conditions of this plan do not differ from those of the “International Management Incentive Plan” except for the strike price, which equals the closing price of one share at the SIX Swiss Exchange on the date of disbursement. Under this changed program, beneficiaries of the “United States Management Incentive Plan” holding options to purchase shares of the Group’s capital stock were given the opportunity to exchange their existing options for new options to purchase an equal number of shares. 3,550 options with a strike price of CHF 111.30 were tendered pursuant to the “United States Management Incentive Plan.” In May 2007, those options were accepted and cancelled by the Group. The Group undertook to grant new options on a one-for-one basis, in lieu of the tendered options, to the affected employees. The new options, which totaled 5,350, were granted with a strike price of CHF 114.00.

8

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94 Financial ReportConsolidated Financial Statements

The following table lists the parameters based on which the option valuation of both plans was performed:

in CHF

International Management

Incentive Plan II

United States Management

Incentive Plan II

Market price of share 114.00 114.00

Exercise price of option 111.30 114.00

Expected volatility (in %) 30.00 30.00

Option life (in years) 5 5

Dividend yield (in %) 1.78 1.78

Risk-free interest rate based on Swiss government bonds (in %) 2.670 2.670

Strike price adjustment

In accordance with the decision of the Annual General Meeting 2012, in July 2012 Panalpina reduced the nominal value of its shares by CHF 1.90 to new CHF 0.10. According to the calculation of SIX this reduction in nominal value had an effect of CHF 0.97976571 on the share price. Therefore the share price after this transaction sank to 97.976571 % of the share price directly before the reduction of the nominal value. As the granted free options of the Management Incentive Plans had not anticipated the nominal value reduction in the moment of their subscription, the Executive Board of Panalpina decided to reduce the strike price of the related options by the same factor 97.976571 %. The strike price reduction was applied for MIP III, IV, 08/09 and 09/10 and is already included in the following plans:

Management Incentive Program III (MIP III)

The third share and option program was introduced in June 2007, which conceptually completely mirrors the modified program of 2006. Par-ticipants of the “International Management Incentive Plan III” subscribed for 38,921 options with a strike price of CHF 197.05. Participants in the “United States Management Incentive Plan III” subscribed for 4,096 options with a strike price of CHF 245.90. The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares.

The following table lists the parameters based on which the option valuation of both plans was performed:

in CHF

International Management

Incentive Plan III

United States Management

Incentive Plan III

Market price of share 90.40 90.40

Exercise price of option 197.05 245.90

Expected volatility (in %) 28.11 28.11

Option life (in years) 5 5

Dividend yield (in %) 3.53 3.53

Risk-free interest rate based on Swiss government bonds (in %) 0.490 0.490

Management Incentive Program IV (MIP IV)

A fourth share and option program was introduced in June 2008. The conditions of this share and option program are identical to the Man-agement Incentive Program II of the Group except for the purchase price of the shares, which equals 75 % of the closing price of one share at the SIX Swiss Exchange on April 30, 2008. The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares. The plan is also divided into an “International Management Incentive Plan” and a “United States Management Incentive Plan.” The exercise price of options of the “International Manage-ment Incentive Plan” is equal to the closing price of one share at the SIX Swiss Exchange on April 30, 2008. The exercise price of options of the “United States Management Incentive Plan” is equal to the share price at the SIX Swiss Exchange on the grant date. Participants in the “International Management Incentive Plan IV” subscribed for 32,436 options with a strike price of CHF 129.35. Participants in the “United States Management Incentive Plan IV” subscribed for 4,689 options with a strike price of CHF 119.90.

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95Financial ReportConsolidated Financial Statements

The following table lists the parameters based on which the option valuation of both plans was performed:

in CHF

International Management

Incentive Plan IV

United States Management

Incentive Plan IV

Market price of share 90.40 90.40

Exercise price of option 129.35 119.90

Expected volatility (in %) 28.11 28.11

Option life (in years) 5 5

Dividend yield (in %) 3.53 3.53

Risk-free interest rate based on Swiss government bonds (in %) 0.490 0.490

Management Incentive Plan 08 / 09 (MIP 08 / 09)

In 2009, management introduced a new plan. The terms of this share and option program are identical to the Management Incentive Pro-gram IV as described above apart from the strike price of the “International Management Incentive Plan,” which equals the closing price of the share on the cut-off day at the SIX Swiss Exchange. Under this program participants of the “International Management Incentive Plan” received 65,921 options with a strike price of CHF 61.25 and participants of the “United States Management Incentive Plan” received 5,132 options with a strike price of CHF 81.35.

The following table lists the parameters based on which the option valuation of both plans was performed:

in CHF

International Management

Incentive Plan 08/09

United States Management

Incentive Plan 08/09

Market price of share 90.40 90.40

Exercise price of option 61.25 81.35

Expected volatility (in %) 28.11 28.11

Option life (in years) 5 5

Dividend yield (in %) 3.53 3.53

Risk-free interest rate based on Swiss government bonds (in %) 0.490 0.490

Management Incentive Plan 09 / 10 (MIP 09 / 10)

In 2010 an additional management incentive plan was set up. Apart from the strike price of the “International Management Incentive Plan” which equals the closing price of the share on the cut-off day at the SIX Swiss Exchange, the terms of this share and option program are identical to the Management Incentive Program 08/09. Under this program participants of the “International Management Incentive Plan” received 12,099 options with a strike price of CHF 95.65 and participants of the “United States Management Plan” received 1,354 options with a strike price of CHF 87.75.

The weighted average fair value of the share options granted during the reporting period is determined using the binominal valuation model, applying the following significant inputs into the model:

in CHF

International Management

Incentive Plan 09/10

United States Management

Incentive Plan 09/10

Market price of share 90.40 90.40

Exercise price of option 95.65 87.75

Expected volatility (in %) 28.11 28.11

Option life (in years) 5 5

Dividend yield (in %) 3.53 3.53

Risk-free interest rate based on Swiss government bonds (in %) 0.490 0.490

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96 Financial ReportConsolidated Financial Statements

The following table summarizes the movements in the number of share options outstanding and their related average exercise prices:

2012 2011

Average ex-ercise price

per share (in CHF)

Options

(number)

Average ex-ercise price

per share (in CHF)

Options

(number)

Options outstanding on January 1 119.80 148,452 115.72 173,692

Exercised 65.40 (14,621) 74.52 (16,065)

Forfeited 90.27 (1,844) 71.62 (3,367)

Expired 117.28 (34,337) 150.92 (5,808)

Options outstanding on December 31 126.74 97,650 119.80 148,452

Options exercisable on December 31 127.75 93,166 132.57 115,799

During the reporting year the following numbers of options were exercised with the respective exercise prices:

2012 2011

Exercise price

of option (in CHF)

Number of exercised

options

Exercise price

of option (in CHF)

Number of exercised

options

International Management Incentive Plan II 0.00 0 111.30 3,435

International Management Incentive Plan 08/09 62.50 11,156 62.50 11,781

International Management Incentive Plan 08/09 61.25 1,974 0.00 0

United States Management Incentive Plan 08/09 83.05 476 83.05 226

International Management Incentive Plan 09/10 97.60 949 97.60 501

United States Management Incentive Plan 09/10 89.55 66 89.55 122

Weighted average exercise price of options exercised

during the year 65.40 74.52

The average exercise prices and the expiry date of the outstanding options at period-end are as follows:

2012

Average exercise price per share (in CHF)

Number of options expiring at year-end

2013 202.61 28,312

2014 127.95 29,636

2015 63.91 29,640

2016 94.77 10,062

Total 126.74 97,650

Management Incentive Plan 10 / 11 (MIP 10 / 11)

In 2011 a new management incentive plan was set up. Participants in this program had the right to purchase shares with a discount of 10 % based on the share price equal to the closing price on the SIX Swiss Stock Exchange at the cut-off day. The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares. The shares are subject to a one-year lock-up period. For every purchased share under this plan, the Group granted a number of free shares according to a “Free Share Ratio” which is annually set by the Compensation and Nomination Committee. For the current year the ratio was set to 1:4 (one free share per four shares bought). The free shares have a vesting period of one to three years. On non-vested free shares, no dividends are paid and there is no entitlement for dividends. The shares cannot be settled in cash. The fair value of the free shares corresponds to the market price of the shares at the grant date.

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97Financial ReportConsolidated Financial Statements

2012 Management

Incentive Plan 10/11

2011 Management

Incentive Plan 10/11

Fair value of free share (in CHF) 119.30 119.30

Outstanding free shares on January 1 6,961 0

Granted free shares 0 7,124

Vested free shares (3,230) (138)

Forfeited free shares (392) (25)

Free shares outstanding on December 31 3,339 6,961

Management Incentive Plan 11 / 12 (MIP 11 / 12)

As in previous years an additional management incentive plan was set up in 2012. Participants in this program had the right to purchase shares with a discount of 10 % based on the share price equal to the closing price on the SIX Swiss Stock Exchange at the cut-off day. The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares. The shares are subject to a one-year lock-up period. For every purchased share under this plan, the Group granted a number of free shares according to a “Free Share Ratio” which is annually set by the Compensation and Nomina-tion Committee. For the current year the ratio was set to 1:4 (one free share per four shares bought). The free shares have a vesting period of one to three years. On non-vested free shares, no dividends are paid and there is no entitlement for dividends. The shares cannot be settled in cash. The fair value of the free shares corresponds to the market price of the shares at the grant date.

2012 Management

Incentive Plan 11/12

Fair value of free share (in CHF) 87.30

Granted free shares 2,816

Vested free shares (75)

Forfeited free shares (179)

Free shares outstanding on December 31 2,562

The Group holds its own shares in order to meet its obligations under the Management Incentive Programs. These own shares are deducted from equity (note 23).

The members of the Executive Board and the Boards of Directors did not participate in the above-mentioned incentive plans.

Executive Board Mid-Term Incentive Plan

The Mid-Term Incentive Plan has been set up such that only 60 % of the bonuses, which continue to be set by the achievement of annually reviewed Group key performance indicators (KPIs) and individual performance targets, are paid out in cash, whereas the remainder is paid out in shares with a restriction period of one year. This number of shares will be matched by the Company after this restriction period. In addition, the members of the Executive Board will receive the corresponding number of shares, based on the share’s closing price on April 30 of CHF 88.52 (previous year: CHF 62.50). These shares will thereafter be subject to a further one-year restriction period. In the reporting period under review Executive Board members received 40 % of the bonus in Company shares totaling 11,930 shares (previous year: 13,528 shares) with a restriction period of one year. This number of shares will, additionally, be matched by the Company after this restriction period. These additional shares are also subject to a further one-year restriction period.

During the period under review management received matched shares totaling 13,528 (2011: 4,155) shares reflecting the 40 % bonus paid in the previous year.

Executive Board Long-Term Incentive Plan

The Long-Term Incentive Plan rewards long-term value creation measured by economic profit. Under this plan, which has a five-year cycle, the individual Executive Board member is entitled to an equal share of the respective pool after the expiry of the five-year plan period. This plan can be cash-settled. The carrying amount of the liability at December 31, 2012 amounts to CHF 363 thousand (2011: CHF 2,527 thousand), which is also the intrinsic value.

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98 Financial ReportConsolidated Financial Statements

Board of Directors Restricted Stock Award Plan

The Restricted Stock Award Plan for the Board of Directors was introduced in 2009. Part of the remuneration of each Board member is settled in free shares of the Company. The corresponding number of shares per member will be based on the share’s closing price at the assignment date. The shares have a one-year restriction period. During the period under review the Board of Directors received 3,948 shares (2011: 2,562 shares).

Costs of share-based compensation

Recognized costs of share-based compensation were as follows:

in CHF 2012 2011

Employee share plan (217,945) 2,273,801

Option plan 263,101 662,587

Total cost of share-based payments 45,156 2,936,388

Share-based compensation expenses are not reported in operating segments. They are reported under Corporate.

Other operating expenses

in thousand CHF 2012 2011

Administrative expenses 37,694 37,905

Communications expenses 71,238 64,949

Rent and utilities expenses 214,253 183,294

Travel and promotion expenses 38,749 42,717

Insurance expenses and claims 15,529 6,352

Fines EU and WEKO 59,232 0

Bad-debt and collection expenses 10,086 6,558

Other 26,656 30,663

Total other operating expenses 473,437 372,438

Rent and utilities expenses include rentals amounting to CHF 123.5 million (2011: CHF 103.6 million) and lease of machinery, equipment and vehicles of CHF 22.9 million (2011: CHF 20.2 million). Bad-debt and collection expenses include CHF 1.5 million (2011: CHF 1.4 mil-lion) of credit insurance premiums.

Gains and losses on sales of non-current assets

in thousand CHF 2012 2011

Gains on sales of property, plant and equipment 899 618

Losses on sales of property, plant and equipment (1,013) (724)

Total net (losses) on sales of non-current assets (114) (106)

9

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Finance income and costs

in thousand CHF 2012 2011

Interest income

Interest income on current bank accounts 3,624 3,986

Interest income on financial assets at fair value through profit or loss 10 11

Interest differential on forwards and swaps 127 1,741

Interest income on loans 2 7

Cash discount income 418 351

Subtotal interest income 4,181 6,096

Guarantee fees income 21 0

Dividend on available-for-sale financial assets 573 172

Gain on sale of financial investments 9,890 0

Total finance income 14,665 6,268

Interest expenses

Interest expenses on loans (78) (242)

Interest expenses on current bank accounts (750) (760)

Interest differential on forwards and swaps (566) (4,345)

Interest expenses on financial leasing (68) (71)

Cash discount expenses (496) (514)

Subtotal interest expenses (1,958) (5,932)

Bank charges (2,703) (2,277)

Exchange differences (7,380) (2,840)

Guarantee fees expenses (852) (529)

Other financial expenses (422) (303)

Impairment on financial assets (4,691) 0

Fair value adjustments on financial assets (1,172) (22)

Total finance costs (19,178) (11,903)

Net finance costs (4,513) (5,635)

In 2012, Panalpina sold its 12 % of Luxair SA’s shares to the state of Luxembourg with a gain on sale of assets of CHF 9.9 million.

During the period under review the Group assessed the recoverable amount of another financial asset with the conclusion that the recover-abiliaty is no longer given. Therefore an impairment charge in the amount of CHF 4.7 million was recognized in the financial result.

Income tax expenses

in thousand CHF 2012 2011

Current income taxes

Current period 30,521 37,064

Adjustments for prior periods 252 1,566

Total income taxes 30,773 38,630

Deferred income taxes (note 27)

Origination and reversal of taxes on temporary differences and on tax loss carry forwards (2,423) 1,931

Effect of changes in the tax rate on temporary differences (0) 980

Utilization of non-recognized tax loss carry-forwards (75) (372)

Total deferred income taxes (2,498) 2,539

Total income tax expenses 28,275 41,169

11

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Management decided to calculate the applicable standard tax rate as in the previous year based on the standard tax rate in its Basel head-quarters’ domicile.

The Group’s effective tax rate can be reconciled to the Group’s average expected tax rate as follows:

in thousand CHF 2012 2011

(Loss)/profit before income tax (41,910) 168,582

Tax at the applicable tax rate of 22.48 % (2011: 23.37 %) (9,421) 39,398

Effect of differing national tax rates 5,448 (17,375)

Utilization of not yet recognized tax loss carry-forwards (75) (372)

Recognition of deferred tax assets from previous periods 0 (2,835)

Not yet recognized tax loss carry-forwards 28,365 13,510

Adjustment of previous year tax provision 252 1,566

Effect of changes in the tax rate on temporary differences (70) 980

Withholding tax on dividends received 2,657 3,339

Expenses not deductible for tax purposes and non-taxable income 690 1,840

Miscellaneous 429 1,118

Actual tax charge 28,275 41,169

The following table shows the reconciliation for 2012 in percent:

2012 2011

Tax at the applicable tax rate of 22.48 % (2011: 23.37 %) 22.48 % 23.37 %

Effect of differing national tax rates 13.00 % (10.31 %)

Utilization of not yet recognized tax loss carry-forwards (0.18 %) (0.22 %)

Recognition of deferred tax assets from previous periods 0.00 % (1.68 %)

Not yet recognized tax loss carry-forwards 67.68 % 8.01 %

Adjustment of previous year tax provision 0.60 % 0.93 %

Effect of changes in the tax rate on temporary differences (0.17 %) 0.58 %

Withholding tax on dividends received 6.34 % 1.98 %

Expenses not deductible for tax purposes and non-taxable income 1.65 % 1.09 %

Miscellaneous 1.02 % 0.66 %

Actual tax charge 67.47 % 24.42 %

Income tax recognized in the consolidated statement of comprehensive income:

2012 2011

in thousand CHF

Before tax

Tax benefit (expense)

Net of tax

Before tax

Tax benefit (expense)

Net of tax

Translation and exchange differences (2,773) (2,773) (11,238) 0 (11,238)

Available-for-sale financial assets (478) (478) 3,994 0 3,994

Other taxes directly recognized in equity 0 (130) (130) 0 (123) (123)

Actuarial gains/(losses) on defined benefit plans (1,563) 1,111 (452) (22,134) 5,419 (16,715)

Total (4,816) 981 (3,835) (29,378) 5,296 (24,082)

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101Financial ReportConsolidated Financial Statements

Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding (total shares less treasury shares) during the period.

in thousand CHF 2012 2011

Consolidated (loss)/profit attributable to owners of the parent (70,456) 126,294

Weighted average number of ordinary shares outstanding 23,638 23,639

Basic earnings per share (in CHF) (2.98) 5.34

Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group only has share options outstanding that can be categorized as dilutive potential ordinary shares. For the share options, a calculation is made to determine the number of shares that could have been acquired at fair value based on the mon-etary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is com pared with the number of shares that would have been issued assuming the exercise of the share options.

in thousand CHF 2012 2011

Consolidated (loss)/profit attributable to owners of the parent (70,456) 126,294

Weighted average number of ordinary shares outstanding 23,638 23,639

Adjustments for share options 10 17

Adjustments for share ownership program 18 20

Weighted average number of ordinary shares for diluted earnings per share 23,666 23,676

Diluted earnings per share (in CHF) (2.98) 5.33

At December 31, 2012, 66,884 options (2011: 103,125 options) were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti dilutive.

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102 Financial ReportConsolidated Financial Statements

Property, plant and equipment

During the period under review, the Group acquired mainly machinery and equipment.

2012 (in thousand CHF)

Land and buildings

Machinery and

equipment

Vehicles

Construction

in progress

Total

Acquisition costs

Balance on January 1 134,660 230,286 36,309 37 401,292

Translation differences (1,009) (2,005) (442) 0 (3,456)

Additions 12,189 32,121 3,394 2,290 49,994

Disposals (1,519) (22,545) (904) 0 (24,968)

Reclassifications 187 222 (409) 0 0

Balance on December 31 144,508 238,079 37,948 2,327 422,862

Accumulated depreciation

Balance on January 1 74,592 184,967 28,553 0 288,112

Translation differences (649) (1,752) (432) 0 (2,833)

Additions 7,132 21,121 2,898 0 31,151

Disposals (1,409) (21,655) (713) 0 (23,777)

Reclassifications 187 222 (409) 0 0

Balance on December 31 79,853 182,903 29,897 0 292,653

Net book value on January 1 60,068 45,319 7,756 37 113,180

Net book value on December 31 64,655 55,176 8,051 2,327 130,209

Of which net book value of assets acquired under finance leases 2,101 36 838 230 3,205

2011 (in thousand CHF)

Land and buildings

Machinery and

equipment

Vehicles

Construction

in progress

Total

Acquisition costs

Balance on January 1 130,222 215,619 39,669 5 385,515

Translation differences (1,962) (4,008) (326) 0 (6,296)

Acquisition of subsidiaries, net of cash acquired 39 258 147 0 444

Additions 8,874 20,902 1,512 37 31,325

Disposals (2,518) (2,485) (4,693) 0 (9,696)

Reclassifications 5 0 0 (5) 0

Balance on December 31 134,660 230,286 36,309 37 401,292

Accumulated depreciation

Balance on January 1 70,694 170,418 30,570 0 271,682

Translation differences (894) (2,926) (277) 0 (4,097)

Additions 6,344 19,280 2,860 0 28,484

Disposals (1,552) (1,805) (4,600) 0 (7,957)

Balance on December 31 74,592 184,967 28,553 0 288,112

Net book value on January 1 59,528 45,201 9,099 5 113,833

Net book value on December 31 60,068 45,319 7,756 37 113,180

Of which net book value of assets acquired under finance leases 245 51 1,138 0 1,434

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Intangible assets

2012 (in thousand CHF)

Goodwill

Software

Brands/ Customer

lists

Other intangible

assets

Total

Acquisition costs

Balance on January 1 82,717 88,919 37,518 708 209,862

Translation differences 1,009 (630) 1,521 (16) 1,884

Additions 0 33,900 0 260 34,160

Disposals 0 (2,045) 0 (15) (2,060)

Balance on December 31 83,726 120,144 39,039 937 243,846

Accumulated amortization and impairment losses

Balance on January 1 1,338 44,878 21,290 613 68,119

Translation differences 553 (557) 948 (20) 924

Additions (including impairment losses) 18,034 9,671 14,848 175 42,728

Disposals 0 (2,045) 0 (15) (2,060)

Balance on December 31 19,925 51,947 37,086 753 109,711

Net book value on January 1 81,379 44,041 16,228 95 141,743

Net book value on December 31 63,801 68,197 1,953 184 134,135

2011 (in thousand CHF)

Goodwill

Software

Brands/ Customer

lists

Other intangible

assets

Total

Acquisition costs

Balance on January 1 44,549 72,724 22,763 656 140,692

Translation differences (2,701) (901) (1,172) (54) (4,828)

Acquisition of subsidiaries, net of cash acquired 40,869 0 15,927 0 56,796

Additions 0 19,731 0 106 19,837

Disposals 0 (2,635) 0 0 (2,635)

Balance on December 31 82,717 88,919 37,518 708 209,862

Accumulated amortization and impairment losses

Balance on January 1 1,598 41,499 18,891 613 62,601

Translation differences (260) (670) (250) (50) (1,230)

Additions 0 6,684 2,649 50 9,383

Disposals 0 (2,635) 0 0 (2,635)

Balance on December 31 1,338 44,878 21,290 613 68,119

Net book value on January 1 42,951 31,225 3,872 43 78,091

Net book value on December 31 81,379 44,041 16,228 95 141,743

The net book value of software is comprised of accumulated, internally generated, capitalized software development costs of CHF 47.2 million (2011: CHF 33.4 million). All intangible assets with estimable useful lives are amortized over the period of their respective estimated use-ful lives to their estimated residual values, and reviewed for impairment. Due to the loss of a major customer in Norway, the Group reviewed the goodwill and customer lists acquired with Norwegian-based Grieg Logistics in 2011. Based on the expected business development in Norway over the coming years, the Group considers that the intangible assets of its Norwegian operations have to be partially written off. In the period under review the Group recognized an impairment charge of CHF 11.6 million on the customer lists acquired and a goodwill impairment charge of CHF 18.0 million (2011: none).

Impairment test for goodwill

Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to the country of operation. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets ap proved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.

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A summary of the goodwill allocation per CGU is presented below:

in thousand CHF 2012 2011

Air Freight division (CGU Airfreight) 31,151 31,151

Grampian International Freight Aberdeen & Beverwijk (CGU Grampian) 6,492 6,393

Panalpina World Transport (Singapore) Pte. Ltd. (CGU Janco) 4,104 3,981

Panalpina World Transport (Pty) Ltd. (CGU Australia) 3,584 3,606

Grieg Logistics AS (CGU Norway) 18,470 36,248

Total goodwill 63,801 81,379

The following key assumptions have been used for the value-in-use calculations of each CGU:

2012

CGU Norway

CGU Australia

CGU Airfreight

CGU Grampian

CGU Janco

Growth rate1 10.38 % 5.30 % 3.25 % 5.31 % 4.00 %

Operating expenses in % of forwarding revenues2 99.00 % 99.40 % 98.03 % 91.63 % 97.46 %

WACC3 7.76 % 11.32 % 8.15 % 9.72 % 8.59 %

2011

CGU Norway

CGU Australia

CGU Airfreight

CGU Grampian

CGU Janco

Growth rate1 9.25 % 6.75 % 3.50 % 7.25 % 4.50 %

Operating expenses in % of forwarding revenues2 97.62 % 98.73 % 98.19 % 99.83 % 98.73 %

WACC3 7.57 % 11.18 % 6.65 % 8.08 % 6.85 %

1 Weighted average growth rate used to extrapolate cash flows beyond the one year budgeting period2 Budgeted operating expenses in % of forwarding revenues3 Pre-tax discount rate applied to the cash flow projections

The management determined budgeted growth rates based on past performance and its expectations of market development. The oper-ating expenses, as a percentage of forwarding revenues, are consistent with the forecasts and past experience. The weighted average cost of capital (WACC) used are pre-tax and reflect specific risks relating to the relevant CGUs. For the impairment testing procedure the planning assumptions of prior years were critically reviewed. The impairment testing procedure assumes that the CGU would achieve sales growth at market growth for the planning period. It was also assumed that the percentage of operating expenses as a percentage of for-warding revenue will remain stable.

For the CGU Norway a decrease in the assumptions of the growth rate of the gross profit by yearly 5 percentage points would cause the carrying value of goodwill to exceed the recoverable amount to CHF 10.4 million. The same applies for CGU Australia for which a change in the assumptions of the growth rate of the gross profit (1.2 percentage points) or the WACC (0.9 percentage points) would also cause the carrying value of goodwill to exceed the recoverable amount.

For other CGUs the carrying value of goodwill would only exceed the recoverable amount if following changes in the key assumptions gross profit growth or WACC would occur:

CGU Airfreight Gross profit growth rate – 47.9 percentage points WACC + 34.0 percentage pointsCGU Janco Gross profit growth rate – 56.0 percentage points WACC + 16.5 percentage pointsCGU Grampian Gross profit growth rate – 17.0 percentage points WACC + 9.4 percentage pointsCGU Australia Gross profit growth rate – 1.2 percentage points WACC + 0.9 percentage pointsCGU Norway Gross profit growth rate – 0.0 percentage points WACC + 0.0 percentage points

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105Financial ReportConsolidated Financial Statements

Investments

in thousand CHF 2012 2011

Available-for-sale investments 2,025 19,670

Fair value through profit or loss investments 8,574 775

Loans receivable 213 311

Long-term receivables 15,857 47,975

Other 4,967 3,525

Total investments 31,636 72,256

Long-term receivables primarily include rental and guarantee deposits of CHF 15.9 million (2011: CHF 13.7 million).

Available-for-sale investments – unquoted equity shares

in thousand CHF 2012 2011

Balance on January 1 19,670 15,625

Translation differences 115 (13)

Additions 94 69

Disposals (17,840) (5)

Fair value adjustments recognized in statement of comprehensive income (14) 3,994

Balance on December 31 2,025 19,670

Less: non-current portion 2,025 19,670

Current portion 0 0

In 2012, disposals include an amount of CHF 464 thousand which has been recycled from comprehensive income to the income statement due to the sale of Luxair SA shares.

Fair value through profit or loss investments

in thousand CHF 2012 2011

Balance on January 1 775 816

Translation differences (3) (12)

Additions 9,180 0

Disposals (206) (7)

Fair value adjustments recognized in profit or loss (1,172) (22)

Balance on December 31 8,574 775

Less: non-current portion 8,574 775

Current portion 0 0

Group risk management

In the field of risk management, the Audit Committee approves the detailed and weighted risk map of the Executive Board. It adopts the necessary measures for risk control and risk mitigation and reports the respective outcome to the Board of Directors on an annual basis. The risk map itself covers any strategic, financial, operational, legal and compliance risks that could significantly impact the Company’s ability to achieve its business goals and financial targets. Identified risks are weighted and prioritized by the Executive Board according to their sig-nificance and likelihood of occurrence. For each risk, specific risk-mitigation measures – including their current status – are defined and responsibilities are allocated. The risk map, which is compiled by the Risk Review Committee, chaired by the Corporate Secretary, for review by the Executive Board and the Audit Committee and subsequently approved by the Audit Committee, contains risks iden tified and assessed by the respective corporate functions, selected country management, Corporate Audit and the Group auditors. The annual risk map also fea-tures risks which have increased or decreased in the course of the reporting year. Financial risk management specifically is described in fur-ther detail below.

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Financial risk management

The Group’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to raise funds for Group operations. The Group has trade and other receivables, loans, cash, short- and long-term deposits that arise directly from its operations. The Group also holds available-for-sale investments and enters into derivative transac-tions.

The Group is exposed to market risk, credit risk, liquidity risk and capital risk. The Group’s senior management oversees the management of these risks. It is supported by a financial risk committee that advises on financial risks and the appropriate financial risk governance frame-work for the Group. The financial risk committee provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accor-dance with Group policies and Group risk appetite. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Group’s policy that no trading in derivatives for speculative purposes shall be undertaken.

The Board of Directors reviews and agrees on policies for managing each of these risks, which are summarized below.

Financial risk factors

Carrying amount and fair value of financial assets by asset classes

2012 (in thousand CHF)

Cash

Available- for-sale

Fair value through profit or

loss held for trading

Loans and

receivables

Carrying amount

Total (fair value)

Trade receivables and other receivables 1,044,487 1,044,487 1,044,487

Unbilled forwarding services 85,227 85,227 85,227

Accrued interest income 18 18 18

Cash and cash equivalents 1,081 391,980 393,061 393,061

Derivative financial instruments 2,948 2,948 2,948

Investments:

Bonds and debentures 398 398 398

Shares 2,025 8,176 10,201 10,201

Third-party loans 237 237 237

Rental and guarantee deposits 15,857 15,857 15,857

Other 4,967 4,967 4,967

Total on December 31, 2012 1,081 2,025 11,522 1,542,773 1,557,401 1,557,401

2012 (in thousand CHF)

Financial liabilities at

fair value through profit or

loss

Financial liabilities

measured at amortized

cost

Carrying amount

Total (fair value)

Payables and accruals 922,510 922,510 922,510

Borrowings 1,395 1,395 1,395

Finance lease liabilities 473 473 473

Derivative financial instruments 1,256 1,256 1,256

Provisions and other liabilities 124,479 124,479 124,479

Total on December 31, 2012 1,256 1,048,857 1,050,113 1,050,113

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2011 (in thousand CHF)

Cash

Available- for-sale

Fair value through profit or

loss held for trading

Loans and

receivables

Carrying amount

Total (fair value)

Trade receivables and other receivables 1,002,163 1,002,163 1,002,163

Unbilled forwarding services 77,346 77,346 77,346

Accrued interest income 757 757 757

Cash and cash equivalents 1,693 571,886 573,579 573,579

Other current financial assets 20,000 20,000 20,000

Derivative financial instruments 5,504 5,504 5,504

Investments:

Bonds and debentures 171 171 171

Shares 19,670 379 20,049 20,049

Other investments 225 225 225

Third-party loans 373 373 373

Rental and guarantee deposits 47,975 47,975 47,975

Other 3,525 3,525 3,525

Total on December 31, 2011 1,693 19,670 6,279 1,724,025 1,751,667 1,751,667

2011 (in thousand CHF)

Financial liabilities at

fair value through profit or

loss

Financial liabilities

measured at amortized

cost

Carrying amount

Total (fair value)

Payables and accruals 915,529 915,529 915,529

Borrowings 6,921 6,921 6,921

Finance lease liabilities 606 606 606

Derivative financial instruments 4,648 4,648 4,648

Provisions and other liabilities 50,852 50,852 50,852

Total on December 31, 2011 4,648 973,908 978,556 978,556

Fair value hierarchy The table below analyzes financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (ie, as prices) or indirectly (ie, derived from prices)

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

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108 Financial ReportConsolidated Financial Statements

2012 (in thousand CHF) Level 1 Level 2 Level 3 Total

Available-for-sale financial assets 0 1,885 0 1,885

Financial assets at fair value through profit or loss held for trading 8,574 0 0 8,574

Derivative financial assets 0 2,948 0 2,948

Available-for-sale financial assets at cost 140

Total 13,547

Derivative financial liabilities 0 1,256 0 1,256

Total 1,256

2011 (in thousand CHF) Level 1 Level 2 Level 3 Total

Available-for-sale financial assets 0 1,715 17,640 19,355

Financial assets at fair value through profit or loss held for trading 663 112 0 775

Derivative financial assets 0 5,504 0 5,504

Available-for-sale financial assets at cost 315

Total 25,949

Derivative financial liabilities 0 4,648 0 4,648

Total 4,648

The fair value of financial instruments traded in active markets is based on quoted market prices at the statement of financial position date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s-length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely, as little as possible, on entity-specific estimates. If all significant inputs required to fair-value an instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

The Group used the discounted cash flow method to determine the fair value of level 3 financial instruments.

The following table presents the changes in level 3 instruments for the year ended December 31, 2012:

in thousand CHF

Available- for-sale

financial assets

Total

Balance on January 1 17,640 17,640

Sale of availiable-for-sale financial assets (18,104) (18,104)

Fair value adjustments recognized in income statement 464 464

Balance on December 31 0 0

Total gains or losses for the period included in the statement of comprehensive income for assets held at the end of the reporting period 0 0

In 2012, CHF 464 thousand have been recycled from comprehensive income to the income statement due to the sale of Luxair SA shares. Neither in 2012 nor in 2011 did the Group transfer financial instruments into another level.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market price. Market prices entail three types of risk: foreign currency risk, interest rate risk and other price risk such as equity risk.

The Group’s activities expose it primarily to financial risk due to changes in foreign currency exchange rates.

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

Management has set up a policy to require Group companies to manage their foreign exchange risk against their functional currency. The Group companies are required to hedge their entire foreign exchange risk exposure with the Group Treasury, if possible. To manage foreign exchange risks arising from future commercial transactions or recognized assets and liabilities, entities in the Group use forward contracts. For-eign exchange risk arises when future commercial transactions or recognized assets and liabilities are denominated in a currency that is not the Group entity’s functional currency. The Group Treasury is responsible for managing the net position using external derivative con-tracts. For segment reporting purposes, each subsidiary designates contracts with the Group Treasury as fair value hedges. External for-eign exchange contracts are designated at the Group level as hedges of foreign exchange risk on specific assets and liabilities on a gross basis.

At December 31, 2012, the Group’s net foreign currency risk exposure amounted to CHF 161.9 million (2011: CHF 9.4 million). The fol-lowing table demonstrates the sensitivity to a reasonable possible change of 10 % in the USD, EUR and HKD exchange rate, with all other variables held constant, of the Group’s profit before income tax (due to changes in the fair value of monetary assets and liabilities).

Profit before income tax

Effect in thousand CHF 2012 2011

US dollar 23,871 (105)

Euro (5,211) (1,648)

Hong Kong dollar (3,398) (947)

Total effect 15,262 (2,700)

The movement in the pre-tax effect results from the change in the fair value of derivative financial instruments not designated in a hedging relationship and monetary assets and liabilities denominated in USD, EUR and HKD, in which the functional currency of the entity is a cur rency other than USD, EUR or HKD. Although the derivatives have not been designated in a hedge relationship, they act as a commercial hedge and will offset the underlying transactions should they occur. If the exchange rates of all currencies changed by 10 %, the total maximum net effect would amount to CHF 16.2 million (2011: CHF – 0.9 million).

Interest rate riskThe Group has a clear funding policy that prohibits affiliates from borrowing in foreign currency and has a clear preference for intragroup financing. Affiliates are also required to repatriate their excess cash. Liquidity is mainly managed at the corporate level by using money market products. Derivative instruments are used to manage the duration of financial instruments in a prudent manner.

As the Group generally has no significant interest-bearing liabilities, and given their short-term nature, the Group has a limited exposure to inter-est rate risk. Consequently the Group’s expense and operating cash flows are substantially independent of changes in market interest rates.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a finan-cial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and other financial institutions, foreign exchange transactions and other financial instruments.

Credit risk related to trade receivablesCustomer credit is managed by each business unit and subject to the Group’s established policy, procedures and control relating to cus-tomer credit risk management. Credit limits are established for all customers based on external ratings or, if not available, according to internal rating criteria. The customer’s credit quality is assessed based on an extensive credit rating scorecard. Outstanding customer receivables are regularly monitored. The objective of the management of trade receivables is to sustain the growth and profitability of the Group by optimizing asset utilization while maintaining risks at an acceptable level. There is no significant concentration of counterparty credit risk due to the Group’s large number of customers and their wide geographical spread. Risk limits and exposures are continuously monitored by country and by the nature of counterparties. Additionally, the Group obtains credit insurance and similar enhancements when appropriate to protect the collection of trade receivables.

Credit risk related to financial instruments and cash deposit Credit risk from balances with banks and financial institutions is managed by the Group Treasury in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and with credit limits assigned to each counterparty with a mini-mum rating of A. Counterparty credit limits are reviewed by senior management on a regular basis. The limits are set to minimize the concentra tion of risks and therefore mitigate financial loss through potential counterparty failure.

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The table below shows the Group’s maximum exposure to credit risk:

in thousand CHF 2012 2011

Cash and cash equivalents (without cash in hand) 391,980 571,886

Derivative financial instruments 2,948 5,504

Trade receivables and other receivables 1,169,404 1,106,317

Loans and other financial assets 29,635 49,123

Total financial assets shown in statement of financial position subject to credit risk 1,593,967 1,732,830

Guarantees 537,605 242,045

Total credit risk 2,131,572 1,974,875

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group’s approach to managing liquidity is to ensure, to the extent possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts, bank loans, de bentures, finance leases and hire purchase contracts. The Group’s liquidity is reported to the management on a monthly basis.

To secure liquidity, the Group holds a net cash position of CHF 391.2 million (2011: CHF 586.1 million) and credit lines with various finan cial institutions totaling CHF 621.5 million (2011: CHF 515.9 million). Of this total, CHF 201.7 million (2011: CHF 179.8 million) is allocated to bank guarantees and foreign exchange lines.

The table below summarizes the maturity profile of the Group’s financial liabilities on December 31, 2012/2011 based on contractual un discounted payments.

2012 (in thousand CHF)

between

1 and 3 months

between 3 months and

1 year

between

1 and 5 years

Total remaining contractual

payments

Borrowings (note 25) 1,442 169 257 1,868

Trade and other payables 465,441 188,941 0 654,382

Accruals 214,641 52,409 0 267,050

Other liabilities 6,656 26,569 0 33,225

Foreign exchange contracts

Cash inflow 314,945 9,854 0 324,799

Cash outflow (162,728) (5,496) 0 (168,224)

Total 840,397 272,446 257 1,113,100

2011 (in thousand CHF)

between

1 and 3 months

between 3 months and

1 year

between

1 and 5 years

Total remaining contractual

payments

Borrowings (note 25) 2,838 4,457 232 7,527

Trade and other payables 633,436 29,545 0 662,981

Accruals 223,462 29,086 0 252,548

Provisions and other liabilities 21,193 8,051 0 29,244

Foreign exchange contracts

Cash inflow (800,997) (15,204) (6,115) (822,316)

Cash outflow 765,705 15,558 5,723 786,986

Total 845,637 71,493 (160) 916,970

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111Financial ReportConsolidated Financial Statements

Capital risk management

The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern so as to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts.

Capital is monitored on the basis of the equity ratio, which is calculated as equity (including non-controlling interests) as a percentage of total assets. This is reported to the management as part of the Group’s regular internal management reporting.

The Group’s capital and equity ratio is shown in the table below:

in thousand CHF 2012 2011

Capital and reserves attributable to Panalpina shareholders 740,578 905,808

Equity attributable to non-controlling interests 9,241 9,082

Total equity 749,819 914,890

Total assets 1,957,055 2,135,322

Equity ratio 38.3% 42.8%

The Group is not subject to regulatory capital adequacy requirements.

Other receivables and other current assets

in thousand CHF 2012 2011

Taxes (VAT, withholding tax) 50,651 41,949

Accrued income 3,288 6,092

Accrued interest income 18 757

Personnel advances 2,506 1,405

Social security and payroll taxes 20 0

Prepaid rent expenses 4,983 5,371

Prepaid communication and IT expenses 3,370 3,325

Supplier rebates 10,612 16,912

Short-term loans 880 847

Others 4,724 8,339

Total other receivables and other current assets 81,052 84,997

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Trade receivables

in thousand CHF 2012 2011

Commercial clients 1,041,681 990,839

Agents 17,162 17,684

Total trade receivables (gross values) 1,058,843 1,008,523

Individual allowance (219) (282)

Overall allowance (25,629) (23,837)

Total trade receivables (net) 1,032,995 984,404

Europe, Middle East, Africa, CIS 489,763 479,358

thereof European Union 197,299 380,646

thereof Switzerland 40,313 42,185

Americas 360,312 335,168

Asia Pacific 182,920 169,878

Total trade receivables (net) 1,032,995 984,404

There is no concentration of credit risk with regard to trade receivables as the Group has a large number of customers that are dispersed internationally.

Provisions for impaired trade receivables are collectively assessed and represent the impairment that has been incurred but not identified. Panalpina establishes its provisions for doubtful trade receivables based on its historical loss experiences. Significant financial difficulties of the debtor are individually impaired. The maximum exposure to credit risk on the reporting date is the carrying amount of net trade receivables mentioned above. Based on past experience, the Group does not anticipate writing off not-past-due nor unprovided trade receivables. The creation and usage of provisions for impaired trade receivables have been included in other operating expenses in the income statement.

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

in thousand CHF 2012 2011

Balance as of January 1 24,119 27,313

Receivables written off during the year as uncollectible (5,550) (7,470)

Changes in provision for doubtful accounts 7,279 4,276

Balance as of December 31 25,848 24,119

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The following table provides details about the aging of trade receivables that are not overdue as the payment terms specified in the terms and conditions established with Panalpina customers have not been exceeded, as well as an analysis of overdue amounts and related provi-sions for doubtful trade receivables:

in thousand CHF 2012 2011

Commercial clients 1,041,681 990,839

Agents 17,162 17,684

Total trade receivables (gross values) 1,058,843 1,008,523

Allowance for bad debt (25,848) (24,119)

Total trade receivables (net) 1,032,995 984,404

of which:

Not overdue 745,579 734,894

Past due not more than 30 days 201,118 182,956

Past due more than 30 days up to 180 days 102,776 83,667

Past due more than 180 days up to 360 days 16,525 12,932

Past due more than 360 days 6,903 10,137

Prepayment (14,058) (16,063)

Total trade receivables (gross) 1,058,843 1,008,523

Allowance for bad debt (25,848) (24,119)

Total trade receivables (net) 1,032,995 984,404

Derivative financial instruments

Contract value

Positive replacement value

Negative replacement value

in thousand CHF 2012 2011 2012 2011 2012 2011

Forward foreign exchange contracts 492,876 728,316 2,948 5,504 (1,256) (4,648)

Forward trading hedges 492,876 728,316 2,948 5,504 (1,256) (4,648)

Contract value

Positive replacement value

Negative replacement value

in thousand CHF 2012 2011 2012 2011 2012 2011

Terms of the forward foreign exchange contracts 492,876 728,316 2,948 5,504 (1,256) (4,648)

0 – 3 months 492,876 675,587 2,948 4,540 (1,256) (3,945)

4 – 12 months 0 46,614 0 505 0 (703)

13 – 18 months 0 6,115 0 459 0 0

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Derivative financial instruments are spread over the following currencies:

Forward foreign exchange contracts

in thousand CHF 2012 2011

EUR 290,009 214,650

HKD 45,242 7,511

CNY 36,810 0

USD 21,286 443,673

CHF 19,950 520

MXN 19,024 2,353

SGD 8,972 24,222

MYR 6,875 0

BRL 6,230 0

TWD 6,179 0

KRW 5,774 0

VND 4,161 0

JPY 3,984 0

CAD 3,293 6,452

SEK 3,098 2,261

CZK 2,594 6,456

ZAR 1,776 0

PEN 1,513 0

UYU 1,019 0

GBP 0 10,618

NZD 0 4,725

NOK 0 2,342

Other 5,087 2,533

Total 492,876 728,316

Cash and cash equivalents

in thousand CHF 2012 2011

Cash on hand 1,081 1,693

Cash at bank 391,252 569,983

Checks and bills of exchange in transit 728 1,903

Total cash and cash equivalents 393,061 573,579

Net cash (debt) is comprised as follows:

in thousand CHF 2012 2011

Cash and cash equivalents 393,061 573,579

Other current financial assets 0 20,000

Short-term borrowings (1,611) (7,296)

Long-term borrowings (257) (231)

Net cash 391,193 586,052

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115Financial ReportConsolidated Financial Statements

Share capital and treasury shares

in thousand CHF

Outstanding number of shares

(numbers)

Ordinary

shares

Treasury

shares

Total

Balance on January 1, 2012 23,631,908 50,000 (197,278) (147,278)

Capital repayment 0 (45,125) 199 (44,926)

Treasury shares

Purchased (42,000) 0 (3,981) (3,981)

Sold under employee share plan 17,578 0 1,787 1,787

Sold under employee option plan 26,238 0 2,679 2,679

Bonus settled with own shares 15,878 0 1,615 1,615

Annihilation of shares repurchased 0 (2,500) 184,961 182,461

Balance on December 31, 2012 23,649,602 2,375 (10,018) (7,643)

The share capital is presented by 23,750,000 issued shares of CHF 0.10 par value (2011: 25 million of CHF 2.00 par value), fully paid in.

On December 31, 2012, the number of outstanding shares amounted to 23,649,602 shares (2011: 23,631,908) and the number of treas ury shares to 100,398 (2011: 1,368,092). Treasury shares have been deducted from equity attributable to owners of the parent. All shares issued by the Company were fully paid in.

The Shareholders’ Meeting held on May 8, 2012 approved a dividend of CHF 2.00 per share that will be distributed in respect of the busi-ness year 2011. The total dividend paid in 2012 amounted to CHF 47.2 million (2011: none). In addition to the dividend payment the share-holders approved the cancellation of the 1,250,000 repurchased shares. This resulted in a total remaining share capital of CHF 47.5 million (23,750,000 shares). Furthermore, the Annual Meeting of Shareholders approved a reduction of the nominal value of the remaining 23,750,000 shares by CHF 1.90 per share. Therefore, the share capital further decreased by CHF 45.125 million to CHF 2.375 million.

The Shareholders’ Meeting also authorized the Board of Directors to create authorized capital to the maximum amount of CHF 0.3 million by issuing a maximum of 3,000,000 registered shares with a nominal value of CHF 0.10 each at any time until May 10, 2013. The Board of Directors has not made use of this au thorization. The Company has no conditional share capital.

The amount available for dividend distribution is based on the available distributable retained earnings of Panalpina World Transport (Hold-ing) Ltd. determined in accordance with the legal provisions of the Swiss Code of Obligations. The Board of Directors has proposed divi-dends for the fiscal year 2012 of CHF 2.00 per share. This is subject to approval at the Annual Meeting of Shareholders on May 15, 2013.

23

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116 Financial ReportConsolidated Financial Statements

Non-controlling interests

in thousand CHF 2012 2011

Balance on January 1, (net) 9,082 7,890

Translation differences (66) (204)

Interest in profit 271 1,119

Dividend paid (46) (46)

Acquisition Grieg 0 279

Capital increase Panalpina Vietnam 0 44

Total net non-controlling interests 9,241 9,082

In 2011, non-controlling interest increased by CHF 44 thousand due to the capital increase of Panalpina World Transport (Vietnam) Com-pany Ltd. In addition, the Grieg acquisition included non-controlling interests of CHF 279 thousand for the participation in Grieg Triangle Logistics B.V., Netherlands.

24

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117Financial ReportConsolidated Financial Statements

Borrowings

This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortized cost. For more information about the Group’s exposure to foreign currency and liquidity risk, see note 18.

in thousand CHF 2012 2011

Current liabilities

Overdraft 1,395 2,681

Current portion of secured bank loans 0 4,233

Unsecured bank facility 0 4

Current portion of finance lease liabilities 216 378

Total current liabilities 1,611 7,296

Non-current liabilities

Non-current portion of finance lease liabilities 257 228

Other loans 0 3

Total non-current liabilities 257 231

Terms and repayment schedule

2012 2011

in thousand CHF

Currency

Nominal interest rate

Year of maturity

Carrying amount Fair value

Carrying amount Fair value

Current liabilities

Secured bank loan USD 2.74% 2012 0 0 4,233 4,233

Unsecured bank facility COP 8.48% 2012 0 0 4 4

Total current liabilities 0 0 4,237 4,237

Non-current liabilities

Other loans SGD n / a 2013 0 0 3 3

Total interest-bearing

liabilities 0 0 4,240 4,240

Finance lease liabilities

2012 2011

in thousand CHF

Future minimum

lease payments

Interest

Present value of minimum

lease payments

Future minimum

lease payments

Interest

Present value of minimum

lease payments

Less than 1 year 222 6 216 429 51 378

Between 1 and 5 years 263 6 257 255 27 228

Total interest-bearing liabilities 485 12 473 684 78 606

The weighted average interest rate of bank borrowings and other financing liabilities is 5.80 % (2011: 3.90 %). The carrying amounts of short-term bank borrowings approximate their fair value.

25

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118 Financial ReportConsolidated Financial Statements

The maturity of the Group’s long-term financial debts (excluding lease liabilities) is shown in the following table:

2012 2011

in thousand CHF

2013 0 3

Total 0 3

The carrying amounts of the Group’s borrowings are denominated in the following currencies:

in thousand CHF 2012 2011

EUR 1,393 2,741

PLN 380 250

GBP 34 296

COP 2 4

USD 1 4,179

Others 58 57

Total 1,868 7,527

Long-term provisions

2012 (in thousand CHF)

Employee

benefits

Claims and other provisions

Total provisions

Balance on January 1 37,869 47,163 85,032

Translation differences (316) 1,226 910

Addition 6,636 13,154 19,790

Reversal of unused amount (8,637) (4,231) (12,868)

Charged in income statement (2,001) 8,923 6,922

Utilization (1,455) (1,215) (2,670)

Transfers 0 (17,113) (17,113)

Balance on December 31 34,097 38,984 73,081

2011 (in thousand CHF)

Employee

benefits

Claims and other provisions

Total provisions

Balance on January 1 34,450 78,129 112,579

Translation differences (587) 14 (573)

Change in scope of consolidation 267 414 681

Addition 8,904 5,086 13,990

Reversal of unused amount (1,948) (14,778) (16,726)

Charged in income statement 6,956 (9,692) (2,736)

Utilization (3,217) (5,106) (8,323)

Transfers 0 (16,596) (16,596)

Balance on December 31 37,869 47,163 85,032

26

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119Financial ReportConsolidated Financial Statements

Employee provisions mostly relate to certain employee benefit obligations, such as “anniversary” benefits, termination payments and long service benefits, mainly in Switzerland, Germany, Austria, Italy, France and the USA. The timings of these cash outflows can be reasonably estimated based on past performance. In addition, employee provisions include the liability of CHF 363 thousand (2011: CHF 2,527 thousand) for the cash-settled compensation plan. Significant provisions are discounted by using the corresponding discount rate applicable in the respective countries where the obligation occurs.

The balance for claims represents a provision for certain claims brought forward against the Group by customers and forwarding agents. The balance as of December 31, 2012 is expected to be utilized within the next two to five years. Long-term claims include an additional provi-sion for probable potential future payments in connection with transport damages of CHF 5.3 million (2011: CHF 1.5 million). In addition CHF 7.7 million was recognized for personnel tax exposure in 2012. Furthermore, in 2010, a long-term provision in the amount of CHF 38.0 million was recorded to cover the fines, legal penalties and compliance consultancy fees relating to the settlement of the US Foreign Corrupt Prac-tices Act (FCPA). In the period under review the current portion of CHF 17.1 million (2011: CHF 16.6 million) has been reclassified to provi-sions and other liabilities as it is expected to be utilized within one year. The management determined the provision based on past perfor-mance and its expectation of the funds needed for the future settlement of the claims which are not yet reported (see also note 4 Critical accounting estimates and judgments).

The current portion of employee provisions and claim provisions are disclosed in note 28.

Deferred income taxes

Deferred taxes are related to the following statement of financial position items:

in thousand CHF

Balance January 1,

2011

Recog- nized

translation differ- ences

Recog-

nized in income statement

Recog- nized

in OCI

Balance Decem- ber 31,

2011

Recog- nized

translation differ- ences

Recog-

nized in income statement

Recog- nized

in OCI

Balance Decem- ber 31,

2012

Deferred tax assets

Receivables 1,263 (4) 1,278 0 2,537 16 726 0 3,279

Fixed assets 3,195 (10) 180 0 3,365 22 260 0 3,647

Provisions 18,673 (56) 1,195 (410) 19,402 123 2,047 (2,264) 19,308

Other statement of financial position captions 11,456 (35) (6,305) 0 5,116 33 1,079 0 6,228

Deductible loss carry-forwards 31,284 (94) 703 0 31,893 204 1,233 0 33,330

Total deferred tax assets 65,871 (199) (2,949) (410) 62,313 398 5,345 (2,264) 65,792

Deferred tax liabilities

Receivables (509) 0 104 0 (405) (1) (806) 0 (1,212)

Fixed assets (9,738) 7 (2,152) 0 (11,883) (20) (3,507) 0 (15,410)

Provisions (2,107) 1 (5,563) 5,829 (1,840) (3) 3,147 1,153 2,457

Other statement of financial position captions (8,391) 6 8,021 0 (364) (1) (1,681) 0 (2,046)

Deductible loss carry-forwards 0 0 0 0 0 0 0 0 0

Total deferred tax liabilities (20,745) 14 410 5,829 (14,492) (25) (2,847) 1,153 (16,211)

Net deferred tax assets

(liabilities) 45,126 (185) (2,539) 5,419 47,821 373 2,498 (1,111) 49,581

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120 Financial ReportConsolidated Financial Statements

The gross movement in the deferred income tax account is as follows:

in thousand CHF 2012 2011

Balance January 1 47,821 45,126

Translation differences 373 (185)

Income statement charge 2,498 (2,539)

Tax charged to equity due to IAS 19 (1,111) 5,419

Balance December 31 49,581 47,821

In 2012, temporary differences in the amount of CHF 0.5 million (2011: CHF 3.6 million) were not capitalized because it was not probable that they could be offset against future profits.

Year of expiry of unrecognized tax loss carry-forwards (in thousand CHF) 2012 2011

2012 – 16,702

2013 13,499 15,399

2014 7,523 7,884

2015 15,709 768

2016 3,785 674

2017 0 –

Later 150,534 58,672

Total unrecognized tax loss carry-forwards 191,050 100,099

The total increase of CHF 91.0 million (2011: increase of CHF 19.8 million) derived mainly from unrecognized tax loss carry-forwards in Austria, Brazil, the Netherlands and the USA . During the period under review, tax loss carry-forwards expired mainly in Finland and Den-mark, Angola and Venezuela. Tax loss carry-forwards of CHF 0.2 million (2011: CHF 13.4 million) were utilized mainly in China. During the period under review the Group reassessed the recoverability of the deferred tax assets. As a result the Group derecognized capitalized deferred tax assets amounting to CHF 7.1 million mainly in the USA, the Netherlands and Austria.

Provisions and other liabilities

2012 (in thousand CHF)

Employee benefits and

others

Outstanding vacation

entitlement

Claims

Restruc-

turing

Total

Balance on January 1 73,107 22,420 29,244 649 125,420

Translation differences (695) (404) (1,094) (7) (2,200)

Addition 65,864 2,260 70,692 23,352 162,168

Reversal of unused amounts (40,269) (922) (7,722) (1,836) (50,749)

Charged in income statement 25,595 1,338 62,970 21,516 111,419

Utilization (46,422) (1,116) (75,008) (4,727) (127,273)

Transfers 0 0 17,113 0 17,113

Balance on December 31 51,585 22,238 33,225 17,431 124,479

28

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121Financial ReportConsolidated Financial Statements

2011 (in thousand CHF)

Employee benefits and

others

Outstanding vacation

entitlement

Claims

Restruc-

turing

Total

Balance on January 1 64,737 19,449 56,028 839 141,053

Translation differences (1,001) (571) (177) (20) (1,769)

Change in scope of consolidation 259 1,004 0 0 1,263

Addition 66,003 6,348 11,917 0 84,268

Reversal of unused amounts (15,043) (3,075) (23,399) 0 (41,517)

Charged in income statement 50,960 3,273 (11,482) 0 42,751

Utilization (41,848) (735) (31,721) (170) (74,474)

Transfers 0 0 16,596 0 16,596

Balance on December 31 73,107 22,420 29,244 649 125,420

Apart from outstanding vacation entitlement and the current portions of provisions as disclosed in note 26, provisions and other liabilities include personnel profit participation and related social security costs and payroll taxes as well as compliance consultancy fees. During the period under review, CHF 62.9 million of personnel profit participation was made, thereof CHF 39.8 million was reversed again in December. In 2012, CHF 41.7 million of personnel profit participation (2011: CHF 30.8 million) was paid out. For the current year, a total amount of CHF 32.0 million (2011: CHF 51.2 million) including related social security costs and payroll taxes was recognized for personnel profit participation.

As disclosed in notes 3 and 26, claim provisions include the current portion of certain claims brought forward against the Group by cus-tomers and forwarding agents as well as a short-term provision of approximately CHF 17.1 million to cover the fines, legal penalties and compliance consultancy fees relating to the settlement of both the US Foreign Corrupt Practices Act (FCPA) and the US anti-trust investiga-tions. The addition for claim provision includes CHF 59.2 million to settle the penalties from WEKO and EU anti-trust claim provision. The CHF 56.0 for the EU anti-trust claim was paid within the third quarter 2012 whereas the CHF 3.2 million for WEKO are still included in the total claim provision. The expenses for the WEKO and EU anti-trust claim provision are incuded in other operating expenses. During the period under review, the provision for FCPA recognized in previous year within long-term provisions was reclassified to provisions and other liabilities and paid out.

The balance as of December 31 is expected to be utilized within one year.

The restructuring provision newly added in 2012 concerns headcount reductions in all functions mainly in marketing and sales and in operations in various countries with the largest amount incurred in Europe and North America as well as on corporate level. The previous year’s balance was initially recognized for the restructuring plan announced 2009. The timings of these cash outflows are expected to occur within one year.

Related parties

Key management personnel compensation

Key management personnel consists of the Board of Directors and the Executive Board. The members of the Board of Directors receive a fixed annual compensation and participate in certain equity compensation plans (see note 8). In 2012, there were 7 (2011: 7) members of the Board of Directors.

The compensation of the Executive Board consists of a fixed portion and a variable portion, which depends on the course of business and the individual manager’s performance. In addition, members of the Executive Board receive indirect benefits and are able to participate in certain equity compensation plans (see note 8). In 2012, there were 5 (2011: 5) members of the Executive Board.

29

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122 Financial ReportConsolidated Financial Statements

The following table shows the compensation of key management personnel:

2012 (in thousand CHF)

Annual salary1

Bonus

Termi- nation

benefits

Other benefits2

Share- based

payment3

Social

security contribution

Total compen-

sation 2012

Board of Directors

Rudolf W. Hug, Chairman 453 60 513

Beat Walti, Vice Chairman 153 28 181

Lars Förberg, Member 154 25 179

Chris E. Muntwyler, Member 153 28 181

Roger Schmid, Member* 167 0 167

Hans-Peter Strodel, Member 155 24 179

Knud Elmholdt Stubkjær, Member 153 0 153

Total remuneration of Board of Directors 1,388 0 0 0 0 165 1,553

Executive Board

Monika Ribar, Chief Executive Officer 950 0 44 373 205 1,572

Members of the Executive Board 1,620 216 257 616 438 3,147

Executive Management leaving 325 0 21 204 95 645

Total remuneration of Executive Board 2,895 216 0 322 1,193 738 5,364

Total remuneration of key management personnel 4,283 216 0 322 1,193 903 6,917

2011 (in thousand CHF)

Annual salary1

Bonus

Termi- nation

benefits

Other benefits2

Share- based

payment3

Social

security contribution

Total compen-

sation 2011

Board of Directors

Rudolf W. Hug, Chairman 453 50 63 566

Beat Walti, Vice Chairman 153 50 22 225

Lars Förberg, Member 79 50 11 140

Chris E. Muntwyler, Member 153 50 22 225

Roger Schmid, Member* 155 50 205

Hans-Peter Strodel, Member 155 50 17 222

Knud Elmholdt Stubkjær, Member 77 50 12 139

Board of Directors leaving

Günter Rohrmann 102 102

Total remuneration of Board of Directors 1,327 0 0 0 350 147 1,824

Executive Board

Monika Ribar, Chief Executive Officer 913 570 125 380 145 2,133

Members of the Executive Board 2,246 1,014 144 1,157 555 5,116

Executive Management leaving 113 9 16 138

Total remuneration of Executive Board 3,272 1,584 0 278 1,537 716 7,387

Total remuneration of key management personnel 4,599 1,584 0 278 1,887 863 9,211

1 Salaries incl. fixed remuneration, salary and discount on shares granted2 Other benefits incl. expense allowance and fringe benefits3 This disclosure item has been amended to reflect current year treatment to disclose benefits to the Board of Directors* Remuneration respectively shares have been transferred to Ernst Göhner Stiftung (employer of respective board member)

During the period under review Panalpina Welttransport GmbH in Germany leased from an affiliate of Ernst Göhner Stiftung two buildings one in Stuttgart and one in Nuerenberg. The lease paid in the fiscal year 2012 amounts to CHF 3.6 million. There were no contributions or donations to close members of the families of the key management.

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123Financial ReportConsolidated Financial Statements

The following table shows the equity holdings in Panalpina World Transport (Holding) Ltd. (PWT) of key management personnel and their related parties in line with article 663bbis and 663c of the Swiss Code of Obligations.

Number of PWT nominal shares

Number of options (End of vesting period)

2013 2014

Board of Directors

Rudolf W. Hug, Chairman 8,926 1,325 2,020

Beat Walti, Vice Chairman 991 0 0

Lars Förberg, Member 564 0 0

Chris E. Muntwyler, Member 991 0 0

Roger Schmid, Member* 9,375 1,325 0

Hans-Peter Strodel, Member 991 0 0

Knud Elmholdt Stubkjær, Member 564 0 0

Total on December 31, 2012 22,402 2,650 2,020

Executive Board

Monika Ribar, Chief Executive Officer 35,596 1,325 2,020

Christoph Hess, General Counsel and Corporate Secretary 5,423 600 1,000

Karl Weyeneth, Chief Operating Officer 4,922 497 303

Alastair Robertson, Chief Human Resources 5,314 0 200

Total on December 31, 2012 51,255 2,422 3,523

Total on December 31, 2012 73,657 5,072 5,543

Number of PWT nominal shares

Number of options (End of vesting period)

2012 2013 2014

Board of Directors

Rudolf W. Hug, Chairman 8,362 1,200 1,325 2,020

Beat Walti, Vice Chairman 427 0 0 0

Lars Förberg, Member 0 0 0 0

Chris E. Muntwyler, Member 427 0 0 0

Roger Schmid, Member* 9,375 1,800 1,325 0

Hans-Peter Strodel, Member 427 0 0 0

Knud Elmholdt Stubkjær, Member 0 0 0 0

Total on December 31, 2011 19,018 3,000 2,650 2,020

Executive Board

Monika Ribar, Chief Executive Officer 26,183 1,800 1,325 2,020

Christoph Hess, General Counsel and Corporate Secretary 4,208 600 600 1,000

Karl Weyeneth, Chief Operating Officer 9,044 0 497 303

Marco Gadola, Chief Financial Officer 3,858 1,800 1,325 2,020

Alastair Robertson, Chief Human Resources 4,050 0 0 200

Total on December 31, 2011 47,343 4,200 3,747 5,543

Total on December 31, 2011 66,361 7,200 6,397 7,563

* Remuneration respectively shares have been transferred to Ernst Göhner Stiftung (employer of respective board member)

Shareholders, pension funds, associated companies and all subsidiaries are defined as parties related to the Group. Apart from the trans-actions with related parties mentioned above, we refer to notes 7 and 8.

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124 Financial ReportConsolidated Financial Statements

Business combinations/disinvestments

In 2012 there were no business combinations, nor were any significant subsidiaries sold.

In 2011, Panalpina World Transport (Pty) Ltd. in Sydney announced the purchase of defined tangible and intangible assets and the busi-ness of Apollo Forwarding in Perth. Apollo and Panalpina have been close partners for more than ten years. During that time, Apollo Perth has acted as an agent of Panalpina. The purchase enables Panalpina to further enlarge the geographical office coverage in Oceania and widen the customer base. In addition to being a well-established customs broker, Apollo Perth also provides international freight forwarding services to its Australia-based customers who now gain access to Panalpina’s global network. The acquisition has been settled for a final cash consideration of CHF 2.9 million.

As per April 1, 2011 the Group acquired 100 percent of the issued share capital of Grieg Logistics AS, a company today encompassing freight forwarding, domestic transportation, warehousing, distribution and customs clearance with operations in fourteen locations. Grieg Logistics, established in 1969, is a leading logistics provider to the Norwegian oil and gas, shipping and maritime industries. It has a broad product portfolio including logistics, freight forwarding and project development. In Norway, Grieg Logistics serves the national market with offices throughout the country. Businesses will add approximately NOK 400 million (CHF 67.0 million) to the Panalpina Group’s annual turnover. Grieg Logistics, with its strategic locations throughout Norway, has built up a strong reputation for providing customers with tailor-made services to meet their needs. The acquisition was settled for a final cash consideration of CHF 60.3 million. The acquired business contributed net forwarding revenue of CHF 49.4 million and net profit of CHF 0.2 million to the Group for the period from April 1 to December 31, 2011.

Tangible assets acquired in 2011 include mainly office equipment and vehicles. Intangible assets include customer relationships.

Details of net assets acquired and goodwill are as follows:

in thousand CHF 2011

Purchase consideration

– Cash paid 63,160

Total purchase consideration 63,160

Fair value of net assets acquired (22,570)

Non-controlling interest 279

Goodwill 40,869

The goodwill is attributable to market knowledge and experience of the acquired employees, the profitability of the acquired business and the synergies expected to arise after the Group’s acquisition.

The assets and liabilities arising from the acquisition are the following:

in thousand CHF

Fair value

2011

Cash and cash equivalents 3,174

Property, plant and equipment 444

Intangible assets 15,927

Other non-current assets 279

Trade receivables 10,322

Other current assets 357

Total acquired assets 30,503

Payables (2,501)

Provisions (333)

Other current liabilities (5,099)

Total acquired liabilities (7,933)

Net assets acquired 22,570

Non-controlling interests (279)

Less acquired liquidity (3,174)

Goodwill 40,869

Total cash used in acquisition of businesses 59,986

30

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125Financial ReportConsolidated Financial Statements

Additional information

Contractual commitments on non-cancellable operating lease contracts 2012 2011

in thousand CHF

Less than one year 185,965 139,128

Between one and five years 382,343 261,044

More than five years 102,558 99,459

Total residual commitments 670,866 499,631

Pledged assets

As of the statement of financial position date 2012 and 2011, the Group does not have any pledged assets.

Pending legal claims

IntroductionIn addition to the matters discussed in note 4, section Provisions, from time to time the Group is involved in legal proceedings in the ordinary course of its business. Other than as noted below, the Group is not a party to any legal, administrative or arbitration proceedings which could significantly harm the Group’s business, financial condition and results of operations taken as a whole, and it does not know of any such pro-ceedings which may currently be contemplated by governmental or third parties.

Claim against Pantainer Ltd.In a case which originated in 2004, it is alleged that a fire occurred on a container vessel due to containers shipped under Pantainer bills of lading containing chemicals that were not declared as hazardous cargo. As a consequence the vessel has declared general average. Claimants may seek compensation of general average contributions, damage and loss of cargo and potential damages to the vessel. Formal legal proceedings were launched in Tokyo in 2005 against the shipper which, in turn, commenced third-party proceedings against Pantainer Ltd. and other companies of the Group. Neither Pantainer nor any other Panalpina Group companies are named defendants in the Tokyo litigation. In July 2010, the court dismissed all claims of the plaintiffs and plaintiffs have appealed the judgment. The value in dispute amounts to approximately CHF 25 million.

Business practices investigationIn November 2010, Panalpina entered into a Deferred Prosecution Agreement (DPA) with the US Department of Justice (DOJ) to resolve claims against it arising from an investigation by the DOJ and the US Securities and Exchange Commission (SEC) for violations of the US Foreign Corrupt Practices Act (FCPA). Under the DPA, the DOJ has agreed to defer any criminal prosecution for three years. Panalpina has accepted certain obligations under the DPA, such as further strengthening its compliance policies and procedures and providing regular reports to the DOJ on the Company’s progress. If Panalpina satisfies its obligations under the DPA, the DOJ has agreed to release the Company from criminal liability at the end of the three-year term.

Freight forwarding antitrust investigationIn October 2007, Panalpina’s headquarters in Switzerland and the USA were visited by the respective competition authorities. Further, a request for information was served by the New Zealand Commerce Division and a document retention notice by the Competition Bureau Canada.

In April 2008, the Australian Competition and Consumer Commission served a notice on the Australian subsidiary requesting information and documents and in June 2008, Panalpina’s UK subsidiary was the recipient of a request for information issued by the European Commis-sion requesting certain information and records relating to alleged antitrust violations in the freight forwarding industry.

In August 2010, Brazilian authorities announced preliminary investigations against the freight forwarding industry.

These activities were part of an investigation of several competition authorities against various major freight forwarding companies for alleged anti-competitive behavior.

In 2009, the Competition Bureau Canada closed its investigation into alleged anti-competitive activity due to a lack of evidence substantiat-ing an undue lessening of competition. In January 2010, the Australian Competition and Consumer Commission also discontinued its investigation.

In October 2010, Panalpina announced a settlement with the DOJ over violations of the Sherman Antitrust Act related to the sale of interna-tional air freight forwarding services. Under the terms of the settlement, which has been approved by the competent court, Panalpina has agreed to pay a fine of approximately USD 12 million.

In 2011 Panalpina completed settlement negotiations with the New Zealand Commerce Commission and the agreed penalty has been approved by the competent court.

31

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In February 2010, Panalpina was served with a Statement of Objections by the European Commission, alleging anti-competitive behavior in the freight forwarding industry. In March 2012, the EU Commission has fined various major freight forwarding companies for anti-trust viola-tions prior to 2008 related to isolated air freight surcharges on certain European trade lanes. Panalpina was ordered to pay a penalty of EUR 46.5 million. Panalpina has appealed the European Commission’s decision to the European General Court. Nevertheless the penalty was paid in the period under review.

Further Panalpina has signed a settlement agreement with competition authorities in Switzerland, which was formally approved by the Swiss Competition Commission in December 2012. A provision for the respective penalty and related costs of CHF 3.2 million was booked in 2012.

Regarding the Brazilian proceedings, Panalpina’s Holding company has in the reporting year been served with a preliminary investigation notice by the Brazilian competition authority (SDE) alleging anti-trust violations.

In November 2012 Panalpina received a notice from the Competition Commission Singapore requiring the provision of specified information related to the airfreight surcharges which have been subject of the previous and meanwhile completed investigations by other competition authorities. Panalpina has provided this information in December 2012.

It is not possible to predict the outcome of the pending anti-trust proceedings in Brazil and Singapore at this stage. They may, however, result in penalties being imposed on Panalpina. As Panalpina is not yet in a position to assess its exposure and the potential financial con-sequences in these proceedings, no related provisions have been made as of December 31, 2012.

Furthermore, in 2008 a civil class action lawsuit was filed in the USA against Panalpina and a number of its major competitors as a direct consequence of these investigations, alleging a conspiracy in the pricing of freight forwarding services. In July 2009, plaintiffs filed an amended complaint adding additional defendants and claims. In November 2009, the Company, along with other defendants, filed motions to dismiss the amended complaint for failure to state a claim and for lack of subject matter jurisdiction. Oppositions to the motions were filed in January 2010. In August 2012 the judge dismissed the claims with leave for plaintiffs to replead. A third amended complaint was filed in November 2012. In February 2013 Panalpina jointly with other defendants filed a motion to dismiss the complaint with prejudice. Defendants in particular argue that plaintiffs have again failed to allege facts showing they have antitrust standing. At this stage, Panalpina is unable to express an opinion as to the probable outcome of this litigation and thus to estimate the potential payments, if any.

Subsequent events

Since the statement of financial position date, no events have become known for which a disclosure is required.

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127Financial ReportConsolidated Financial Statements

Principal Group companies and participations

Company

Registered

Currency

Nominal capital

in 1,000

Equity interest

in %

Invest-

ment

Method of con-

solidation

Europe

Panalpina World Transport (Holding) Ltd. Basel CHF 2,375 K

Panalpina Management Ltd. Basel CHF 2,500 100 1 K

Panalpina Ltd. Basel CHF 600 100 1 K

Pantainer Ltd. Basel CHF 100 100 1 K

Panalpina Insurance Broker Ltd. Basel CHF 100 100 1 K

Panalpina International Ltd. Basel CHF 1,000 100 1 K

Hausmann Transport Ltd. Basel CHF 100 100 1 K

Panalpina Air & Ocean Ltd. Basel CHF 2,700 100 1 K

Panalpina Global Employment Services Ltd. Basel CHF 100 100 1 K

Panalpina Welttransport (Deutschland) GmbH Mörfelden EUR 10,226 100 1 K

Panalpina Welttransport GmbH Vienna EUR 36 100 1 K

Panalpina Welttransport GmbH Höchst EUR 36 100 1 K

Panalpina France Transports Internationaux S.A.S. Paris-Roissy EUR 2,000 100 1 K

Panalpina Trasporti Mondiali S.p.A. Milan EUR 2,000 100 1 K

Panalpina Transportes Mundiales S.A. Madrid EUR 451 100 1 K

Panalpina Transportes Mundiais Lda Lisbon EUR 50 100 1 K

Panalpina World Transport Ltd. London GBP 12,350 100 1 K

Panalpina World Transport (Ireland) Ltd. Dublin EUR 25 100 1 K

Panalpina World Transport N.V. Antwerp EUR 19,050 100 1 K

Panalpina Luxembourg S.A. Luxembourg EUR 31 100 1 K

Panalpina World Transport B.V. Amsterdam EUR 4,091 100 1 K

Grieg Triangel Spijkenisse EUR 50 51 1 K

Grampian International Freight B.V. Beverwijk EUR 18 100 1 K

Panalpina Czech Sro. Prague CZK 1,000 100 1 K

Panalpina Croatia d.o.o. Rijeka HRK 400 100 1 K

Panalpina Slovakia S.R.O. Bratislava EUR 23 100 1 K

Panalpina Magyarorszag Kft. Budapest HUF 528,000 100 1 K

Panalpina Romania S.R.L. Oradea RON 72 100 1 K

Panalpina Polska Sp. z o.o. Wroclaw PLN 1,500 100 1 K

Panalpina AB Gothenburg SEK 1,000 100 1 K

Panalpina A / S Oslo NOK 75,060 100 1 K

Panalpina World Transport Nakliyat Ltd. Srk. Istanbul TRY 7,408 100 1 K

Panalpina World Transport ZAO Moscow RUB 2,100 100 1 K

Panalpina CIS Helsinki OY Vantaa EUR 8 100 1 K

Panalpina Logistics LLC Moscow RUB 240 100 1 K

Panalpina World Transport Ltd. Kiev UAH 376 100 1 K

32

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128 Financial ReportConsolidated Financial Statements

North, Central and South America

Panalpina Inc. Jersey USD 83,000 100 1 K

Panalpina FMS, Inc. (Washington) Jersey City USD 1 100 1 K

International Claims Handling Services Inc. Miami USD 1 100 1 K

Panalpina Inc. Toronto CAD 100 100 1 K

Panalpina Transportes Mundiales, S.A. de C.V. Mexico City MXN 35,834 100 1 K

Panalpina S.A. Panama City USD 1,250 100 1 K

Almacenadora Mercantil S.A. Panama City USD 25 100 1 K

Panalpina S.A. de C.V. San Salvador SVC 100 100 1 K

Panalpina Transportes Mundiales S.A. San José CRC 2,500 100 1 K

Las Fronteras S.A. San José CRC 1,590 100 1 K

Panalpina Uruguay Transportes Mundiales S.A. Montevideo UYU 4,093 100 1 K

Panalpina S.A. Santa Fé de Bogotá COP 7,450,838 100 1 K

DAPSA Depositos Aduaneros Panalpina S.A. Santa Fé de Bogotá COP 2,815,208 100 1 K

Panalpina C.A. Caracas VEF 7,299,297 100 1 K

Panalpina Ecuador S.A. Quito USD 1 100 1 K

Panalpina Aduanas S.A. Lima PEN 732 100 1 K

Panalpina Transportes Mundiales S.A. Lima PEN 4,008 100 1 K

Panalpina Ltda São Paulo BRL 127,317 100 1 K

Panalpina Chile Transportes Mundiales Ltd.a Santiago CLP 1,593,521 100 1 K

Panalpina Transportes Mundiales S.A. Buenos Aires ARS 25,050 100 1 K

Panalpina Logistics S.R.L. Buenos Aires ARS 16,662 100 1 K

Panalpina Transportes Mundiales S.A. de C.V. Santo Domingo DOP 1,000 100 1 K

Mondi Reinsurance Ltd. Hamilton CHF 1,000 100 1 K

Asia and Australia

Panalpina World Transport (Singapore) Pte. Ltd. Singapore SGD 2,500 100 1 K

PT Panalpina Nusajaya Transport Jakarta IDR 1,500,000 100 1 K

Panalpina China Ltd. Hong Kong HKD 1,000 100 1 K

Panalpina World Transport (PRC) Ltd. Shanghai CNY 13,500 100 1 K

Panalpina Logistics (Shanghai) Ltd. Shanghai CNY 5,000 100 1 K

Panalpina Logistics (Wuhan) Ltd. Wuhan CNY 10,000 100 1 K

Panalpina Logistics (Chengdu) Limited Chengdu CNY 5,000 100 1 K

Panalpina Asia-Pacific Services Ltd. Hong Kong HKD 500 100 1 K

Panalpina World Transport Ltd. Hong Kong HKD 500 100 1 K

Pantainer (H. K.) Limited Hong Kong HKD 100 100 1 K

International Claims Handling Services Ltd. Hong Kong HKD 10 100 1 K

Panalpina Taiwan Ltd. Taipei TWD 15,500 100 1 K

Panalpina IAF (Korea) Ltd. Seoul KRW 500,000 100 1 K

Panalpina World Transport (Thailand) Ltd. Bangkok THB 27,000 100 1 K

Panalpina Asia-Pacific Services (Thailand) Ltd. Bangkok THB 10,000 100 1 K

Panalpina Macao Ltd. Macao HKD 1,000 100 1 K

Panalpina World Transport (Vietnam) Company Ltd. Ho Chi Minh City VND 6,360,145 49 2 K

Panalpina Transport (Malaysia) Sdn. Bhd. Kuala Lumpur MYR 4,215 100 1 K

Panalpina World Transport (Japan) Ltd. Tokyo JPY 50,000 100 1 K

ASB Air Japan Ltd. Tokyo JPY 10,000 100 1 K

Panalpina World Transport (India) Pvt. Ltd. Delhi INR 100,050 100 1 K

Panindia Cargo Private Ltd., Delhi Delhi INR 100 100 1 K

Panalpina World Transport (Philippines) Inc. Manila PHP 10,000 100 1 K

Panalpina World Transport (Pty) Ltd. Sydney AUD 15,000 100 1 K

Panalpina World Transport LLP Almaty KZT 1,252,395 100 1 K

Company

Registered

Currency

Nominal capital

in 1,000

Equity interest

in %

Invest-

ment

Method of con-

solidation

Annual Report 2012

129Financial ReportConsolidated Financial Statements

Middle East and Africa

Panalpina Gulf LLC Dubai AED 1,000 49 2 K

Panalpina Jebel Ali Ltd. Jebel Ali AED 100 100 1 K

Panalpina World Transport (Dubai) DWC-LLC Dubai AED 300 100 1 K

Panalpina World Transport (Kuwait) WLL Kuwait KWD 20 49 2 K

Panalpina (Bahrain) WLL Manama BHD 20 100 1 K

Panalpina Central Asia EC Manama USD 17,020 100 1 K

Alpha for General Transportation LLC. Baghdad IQD 11,000 100 1 K

Panalpina Georgia LLC Tbilisi GEL 11 100 1 K

Panalpina Azerbaijan LLC Baku AZN 1 100 1 K

Panalpina Turkmenistan LLC Turkmenbashi TMT 62 100 1 K

Qatar Shipping Company (Panalpina Qatar) WLL Doha QAR 200 49 2 K

Panalpina World Transport (Saudi Arabia) Ltd. Al Khobar SAR 500 100 1 K

Panalpina Transports Mondiaux Cameroun S.A.R.L. Douala XAF 150,000 100 1 K

Panalpina Transports Mondiaux Algérie EURL Hassi Messaoud DZD 128,039 100 1 K

Panalpina Transports Mondiaux Congo S.A.R.L. Pointe-Noire XAF 70,000 100 1 K

Panalpina Transports Mondiaux Gabon S.A. Port-Gentil XAF 50,000 90 1 K

Panalpina (Ghana) Ltd. Accra GHS 10 100 1 K

Panalpina Transportes Mundiais Navegãçao e Trânsitos S.A.R.L. Luanda AOA 18 92 1 K

K = fully consolidated1 = capital participation 50 – 100 %2 = controlling influence over management

Company

Registered

Currency

Nominal capital

in 1,000

Equity interest

in %

Invest-

ment

Method of con-

solidation

Annual Report 2012

130 Financial ReportConsolidated Financial Statements

Report of the Statutory Auditor on the Consolidated Financial Statements to the General Meeting of Shareholders of

Panalpina World Transport (Holding) Ltd., Basel

As statutory auditor, we have audited the accompanying consolidated financial statements of Panalpina World Transport (Holding) Ltd., which comprise the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity, consolidated statement of cash flows and notes on pages 70 to 130 for the year ended December 31, 2012.

Board of Directors’ ResponsibilityThe board of directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The board of directors is further responsible for selecting and applying appropri-ate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards as well as International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial state-ments. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal con-trol system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit proce-dures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of account-ing estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evi-dence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements for the year ended December 31, 2012 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.

Report on Other Legal RequirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the board of directors.

We recommend that the consolidated financial statements submitted to you be approved.

KPMG AG

Regula Wallimann Martin RohrbachLicensed Audit Expert Licensed Audit ExpertAuditor in Charge

Zurich, March 1, 2013

Annual Report 2012

131Financial ReportConsolidated Financial Statements

in million CHF 2012 2011 2010 2009 2008

Forwarding services 8,066 7,926 8,676 7,340 10,597

Change in % 1.77 (8.64) 18.19 (30.73) 0.47

Net forwarding revenue 6,617 6,500 7,164 5,958 8,878

Change in % 1.80 (9.27) 20.25 (32.89) 2.74

Gross profit 1,465 1,477 1,480 1,377 1,742

Change in % (0.81) (0.21) 7.49 (20.94) (3.43)

in % of net revenue 22.14 22.72 20.66 23.11 19.62

Consolidated (loss)/profit (70.2) 127.4 (26.0) 10.4 113.8

Change in % (155.10) (590.06) (348.94) (90.82) (45.98)

in % of gross profit (4.79) 8.63 (1.76) 0.76 6.53

EBITDA 36.5 212.1 62.4 79.7 240.7

Change in % (82.79) 240.09 (21.78) (66.88) (33.29)

in % of gross profit 2.49 14.36 4.21 5.79 13.82

EBITA 5.3 183.6 23.5 42.5 204.7

Change in % (97.11) 682.11 (44.77) (79.23) (34.13)

in % of gross profit 0.36 12.43 1.59 3.09 11.75

EBIT (37.4) 174.2 15.4 29.9 193.0

Change in % (121.47) 1,033.97 (48.64) (84.50) (35.54)

in % of gross profit (2.55) 11.79 1.04 2.17 11.08

Cash generated from operations (39.6) 229.1 75.3 311.8 274.5

Change in % (117.29) 204.35 (75.86) 13.58 (1.58)

in % of gross profit (2.70) 15.51 5.09 22.64 15.76

Net cash from operating activities (71.5) 193.5 37.0 259.8 193.2

Change in % (136.95) 422.45 (85.74) 34.45 (7.78)

in % of gross profit (4.88) 13.10 2.50 18.87 11.09

Free cash flow (81.9) 41.9 6.2 225.9 170.2

Change in % (295.47) 570.94 (97.24) 32.73 (23.20)

in % of gross profit (5.59) 2.84 0.42 16.41 9.77

Net working capital 134.1 85.2 143.0 132.2 351.6

Change in % 57.39 (40.42) 8.20 (62.42) (27.92)

Capital expenditure on fixed assets 84.2 51.2 40.0 41.8 58.4

Change in % 64.45 27.87 (4.31) (28.34) 14.90

in % of gross profit 5.75 3.47 2.71 3.04 3.35

Net capital expenditure on fixed assets 83.9 108.7 28.5 29.4 25.6

Change in % (22.79) 281.81 (3.24) 14.81 (43.56)

in % of gross profit 5.73 7.36 1.92 2.14 1.47

Key Figures in CHFFive-year review

Annual Report 2012

132 Financial ReportConsolidated Financial Statements

in million CHF 2012 2011 2010 2009 2008

Depreciation and amortization 73.9 37.9 47.0 49.8 47.8

Change in % 94.99 (19.37) (5.65) 4.33 (22.33)

in % of gross profit 5.04 2.57 3.18 3.62 2.74

Personnel expenses 955.0 892.4 890.9 879.1 992.5

Personnel

Number of employees at year-end (world) 15,224 15,051 14,136 13,570 14,804

Number of employees at year-end (Switzerland) 759 775 749 737 778

Productivity ratios (CHF)

Net sales per average employee 434,643 425,226 503,703 429,864 582,867

Gross profit per average employee 96,229 96,624 104,062 99,343 114,356

Personnel expenses per average employee 62,730 58,380 62,641 63,430 65,163

Personnel cost in % of gross profit 65.19 60.42 60.20 63.85 56.99

Leverage (liabilities / equity) 1.63 1.35 1.46 1.24 1.27

Net interest-bearing liabilities (391) (591) (546) (535) (381)

Gross gearing (interest-bearing liabilities / equity) 0.00 0.01 0.01 0.02 0.02

Net gearing (net interest-bearing liabilities / equity) (0.53) (0.65) (0.68) (0.63) (0.44)

ROCE (EBIT less tax / capital employed) in % (19.10) 43.22 (5.40) 6.14 23.03

Current cash debt coverage ratio (net operating cash flow / average current liability) (0.05) 0.19 0.04 0.27 0.19

Cash debt coverage ratio (net operating cash flow / average total liability) (0.06) 0.16 0.03 0.24 0.16

Return on equity in % (8.5) 14.9 (3.1) 1.2 12.1

Change in % (157.05) (575.95) (360.88) (89.97) (42.92)

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133Financial ReportConsolidated Financial Statements

in million CHF 2012 2011 2010 2009 2008

ASSETS 1,957 2,135 1,989 1,925 1,971

Change in % (8.36) 7.34 3.36 (2.35) (13.48)

Current assets 1,595 1,745 1,686 1,599 1,679

Change in % (8.60) 3.50 5.48 (4.78) (12.64)

Liquid funds 393 599 555 548 401

Change in % (34.39) 7.77 1.30 36.69 12.00

Receivables and other current assets 1,202 1,147 1,131 1,050 1,278

Change in % 4.80 1.41 7.66 (17.80) (18.28)

Non-current assets 362 390 303 326 292

Change in % (7.18) 28.72 (7.04) 11.66 (18.00)

Property, plant and equipment 130 113 114 141 148

Change in % 15.04 (0.57) (19.42) (4.35) (11.89)

Financial assets 97 135 111 113 70

Change in % (28.15) 21.62 (1.53) 60.07 (31.29)

Intangible assets 134 142 78 72 74

Change in % (5.63) 81.51 8.65 (2.52) (14.06)

LIABILITIES AND EQUITY 1,957 2,135 1,989 1,925 1,971

Change in % (8.32) 7.34 3.36 (2.35) (13.48)

Liabilities 1,207 1,220 1,177 1,061 1,100

Change in % (1.08) 3.68 10.93 (3.50) (12.18)

Payables, accruals and deferred income 1,008 1,002 914 878 912

Change in % 0.60 9.71 4.05 (3.69) (13.65)

Borrowings 2 8 10 13 20

Change in % (75.00) (22.70) (24.43) (36.49) (39.38)

Provisions 197 210 254 170 167

Change in % (6.19) (17.02) 49.17 1.54 2.91

Non-controlling interests 9 9 8 7 8

Equity 741 906 804 857 864

Change in % (18.19) 12.62 (6.10) (0.83) (15.25)

Share capital 2 50 50 50 50

Change in % (96.00) 0.00 0.00 0.00 0.00

Treasury shares (10) (197) (196) (193) (198)

Change in % (94.93) 0.65 1.78 (2.62) 95.03

Translation reserves (165) (162) (151) (136) (146)

Change in % 1.85 7.30 10.70 (6.51) 96.03

Retained earnings and other reserves 914 1,215 1,101 1,136 1,157

Change in % (24.77) 10.34 (3.02) (1.89) 1.09

Consolidated Statement of Financial Position in CHFFive-year review

Annual Report 2012

134 Financial ReportConsolidated Financial Statements

Key Figures in EURFive-year review

in million EUR 2012 2011 2010 2009 2008

Forwarding services 6,692 6,440 6,293 4,861 6,677

Change in % 3.91 2.34 29.46 (27.20) 3.99

Net forwarding revenue 5,490 5,281 5,196 3,945 5,594

Change in % 3.96 1.64 31.71 (29.48) 6.35

Gross profit 1,216 1,200 1,074 912 1,097

Change in % 1.33 11.73 17.76 (16.86) (0.09)

in % of net revenue 22.15 22.72 20.67 23.12 19.61

Consolidated (loss)/profit (58.2) 103.5 (18.9) 6.9 71.7

Change in % (156.23) (647.62) (373.91) (90.38) (44.07)

in % of gross profit (4.79) 8.63 (1.76) 0.76 6.54

EBITDA 30.3 172.3 45.2 52.8 151.7

Change in % (82.41) 281.19 (14.39) (65.19) (30.95)

in % of gross profit 2.49 14.36 4.21 5.79 13.83

EBITA 4.4 149.2 17.0 28.1 129.0

Change in % (97.05) 777.65 (39.50) (78.22) (31.78)

in % of gross profit 0.36 12.43 1.58 3.08 11.76

EBIT (31.0) 141.5 11.1 19.8 121.6

Change in % (121.91) 1,174.77 (43.94) (83.72) (33.26)

in % of gross profit (2.55) 11.79 1.03 2.17 11.08

Cash generated from operations (32.9) 186.1 54.6 206.5 172.9

Change in % (117.68) 240.84 (73.56) 19.43 (25.51)

in % of gross profit (2.71) 15.51 5.08 22.64 15.76

Net cash from operating activities (59.3) 157.2 26.9 172.0 121.7

Change in % (137.72) 484.39 (84.36) 41.33 (4.55)

in % of gross profit (4.88) 13.10 2.50 18.86 11.09

Free cash flow (68.0) 34.0 4.5 149.6 107.2

Change in % (300.00) 655.56 (96.99) 39.55 27.47

in % of gross profit (5.59) 2.83 0.42 16.40 9.77

Net working capital 111.0 70.0 114.3 89.0 236.1

Change in % 58.57 (38.76) 28.43 (62.30) (19.45)

Capital expenditure on fixed assets 69.7 42.1 32.0 28.2 39.2

Change in % 65.56 31.56 13.48 (28.06) 28.52

in % of gross profit 5.73 3.51 2.98 3.09 3.57

Net capital expenditure on fixed assets 69.5 89.4 22.8 19.8 17.2

Change in % (22.26) 292.11 15.15 15.12 (37.00)

in % of gross profit 5.72 7.45 2.12 2.17 1.57

Annual Report 2012

135Financial ReportConsolidated Financial Statements

in million EUR 2012 2011 2010 2009 2008

Depreciation and amortization 61.3 30.8 34.1 33.0 30.1

Change in % 99.03 (9.68) 3.33 9.63 (19.52)

in % of gross profit 5.04 2.57 3.18 3.62 2.74

Personnel expenses 792.4 725.1 646.2 582.2 625.4

Personnel

Number of employees at year-end (world) 15,224 15,051 14,136 13,570 14,804

Number of employees at year-end (Switzerland) 759 775 749 737 778

Productivity ratios (in EUR)

Net sales per average employee 360,615 345,480 365,324 284,632 367,277

Gross profit per average employee 79,874 78,503 75,511 65,801 72,024

Personnel expenses per average employee 52,049 47,436 45,433 42,006 41,061

Personnel cost in % of gross profit 65.16 60.43 60.17 63.84 57.01

Leverage (liabilities / equity) 1.63 1.35 1.46 1.24 1.27

Net interest-bearing liabilities (323) (486) (436) (361) (256)

Gross gearing (interest-bearing liabilities / equity) 0.00 0.01 0.01 0.02 0.02

Net gearing (net interest-bearing liabilities / equity) (0.53) (0.65) (0.68) (0.63) (0.44)

ROCE (EBIT less tax / capital employed) in % (19.10) 43.22 (5.40) 6.14 23.03

Current cash debt coverage ratio (net operating cash flow / average current liability) (0.05) 0.19 0.04 0.27 0.19

Cash debt coverage ratio (net operating cash flow / average total liability) (0.06) 0.16 0.03 0.24 0.16

Return on equity in % (8.6) 14.9 (3.1) 1.2 12.1

Change in % (157.05) (575.95) (360.88) (89.97) (42.92)

Annual Report 2012

136 Financial ReportConsolidated Financial Statements

Consolidated Statement of Financial Position in EURFive-year review

in million EUR 2012 2011 2010 2009 2008

ASSETS 1,620 1,756 1,590 1,297 1,323

Change in % (7.74) 10.44 22.59 (1.97) (3.36)

Current assets 1,320 1,435 1,348 1,077 1,127

Change in % (8.01) 6.45 25.16 (4.44) (2.42)

Liquid funds 325 492 444 369 269

Change in % (33.94) 10.81 20.33 37.17 25.12

Receivables and other current assets 995 943 904 708 858

Change in % 5.52 4.31 27.68 (17.48) (8.72)

Non-current assets 300 321 242 220 196

Change in % (6.54) 32.64 10.00 12.24 (8.41)

Property, plant and equipment 108 93 91 95 99

Change in % 16.13 2.20 (4.21) (4.04) (1.98)

Financial assets 81 111 89 76 47

Change in % (27.03) 24.72 17.11 61.70 (24.19)

Intangible assets 111 117 62 48 49

Change in % (5.13) 88.71 29.17 (2.04) (5.77)

LIABILITIES AND EQUITY 1,620 1,756 1,590 1,297 1,323

Change in % (7.74) 10.44 22.59 (1.97) (3.36)

Liabilities 999 1,003 941 715 738

Change in % (0.40) 6.59 31.61 (3.12) (1.86)

Payables, accruals and deferred income 834 824 730 592 612

Change in % 1.09 12.88 23.31 (3.27) (3.47)

Borrowings 2 6 8 9 14

Change in % (66.67) (25.00) (11.11) (35.71) (30.00)

Provisions 163 173 203 115 112

Change in % (5.78) (14.78) 76.52 2.68 14.29

Non-controlling interests 8 7 6 5 5

Equity 613 745 643 577 580

Change in % (17.72) 15.86 11.44 (0.52) (5.23)

Share capital 2 41 40 34 34

Change in % (95.12) 2.50 17.65 0.00 13.33

Treasury shares (8) (162) (157) (130) (133)

Change in % (95.06) 3.18 20.77 (2.26) 118.03

Translation reserves (137) (133) (121) (92) (98)

Change in % 3.01 9.92 31.52 (6.12) 117.78

Retained earnings and other reserves 756 999 880 765 777

Change in % (24.32) 13.52 15.03 (1.54) 12.94

Annual Report 2012

137Financial ReportConsolidated Financial Statements

Annual Report 2012

138 Financial Report

Annual Financial Statements 2012Panalpina World Transport (Holding) Ltd.

Annual Report 2012

139Financial Report Annual Financial Statements

Income Statement 140

Balance Sheet as of December 31 (before profit appropriation) 141

Notes to the Financial Statements 142

Appropriation of Available Earnings 144

Report of the Statutory Auditor 145

Annual Report 2012

140 Financial ReportAnnual Financial Statements

in thousand CHF Notes 2012 2011

Income

Income from participations 1 106,887 87,737

Financial income 2 11,631 41,728

Royalties income 3 37,490 49,577

Release of valuation allowance on loans to Group companies 0 47,268

Total income 156,008 226,310

Expenses

Personnel expenses 4 11,999 13,357

Fines 5 59,232 0

Other administrative expenses 6 6,710 12,973

Financial expenses 7 13,969 10,357

Depreciation and value adjustments on investments 8 60,487 168,740

Total expenses 152,397 205,427

Taxes 839 1,817

Profit for the year 2,772 19,066

Income Statementfor the years ended December 31, 2012 and 2011

Annual Report 2012

141Financial ReportAnnual Financial Statements

Balance Sheetas of December 31 (before profit appropriation)

Assets

in thousand CHF Notes 2012 2011

Current assets

Cash 1,340 303,247

Cash pool receivables from Group companies 37,920 101,647

Receivables:

– from Group companies 224 3,340

– from third parties 64 242

Financial receivables from Group companies 9 0 167,895

Marketable securities 10 0 20,000

Prepaid expenses and deferred charges 39,029 53,176

Total current assets 78,577 649,547

Non-current assets

Participations 11 405,158 161,361

Loans to Group companies1 308,329 161,378

Financial assets 7,721 34,234

Treasury shares 12 8,079 84,128

Total non-current assets 729,287 441,101

Total assets 807,864 1,090,648

1 Thereof subordinated CHF 0.0 million (2011: CHF 68.0 million)

Liabilities and Equity

in thousand CHF Notes 2012 2011

Current liabilities

Cash pool payables to Group companies 24,095 105,152

Payables:

– due to Group companies 264 2,528

– due to third parties 590 1,424

Financial liabilities to Group companies 42,783 79,702

Accrued expenses 13,391 11,977

Total current liabilities 81,123 200,783

Non-current liabilities

Loans due to Group companies 946 0

Provisions 3,577 4,306

Total non-current liabilities 4,523 4,306

Total liabilities 85,646 205,089

Equity

Share capital 13 2,375 50,000

Legal reserve 14 475 10,000

Reserve for own shares 10,018 197,277

Special reserve 256,107 130,573

Retained earnings:

– balance brought forward from previous year 450,471 478,643

– profit for the year 2,772 19,066

Total equity 722,218 885,559

Total liabilities and equity 807,864 1,090,648

Annual Report 2012

142 Financial ReportAnnual Financial Statements

General

The Group’s consolidated financial statements must be considered for an appropriate financial and economic assessment of the Panalpina Group. The statutory financial statements of Panalpina World Transport (Holding) Ltd. were prepared in accordance with the requirements of the Swiss Code of Obligations (SCO).

Valuation methods and translation of foreign currencies

Treasury shares are valued at the lower of cost and market value. Marketable securities are reported at market value. All other assets including participations are reported at cost less appropriate value adjustments. 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. Resulting exchange gains and losses are recognized in the income statement with the exception of unrealized gains which are deferred. Transactions during the year which are denominated in foreign currencies are translated at exchange rates effective at the relevant transaction dates.

1 Income from participations

The increase of CHF 19,150 thousand compared to the prior year is mainly due to a capital gain achieved by the sale of the 12 % investment of Luxair SA’s shares to the state of Luxembourg.

2 Financial income

The decrease of CHF 30,097 thousand compared to the prior year is attributable to lower foreign exchange gains of CHF 19,085 thousand, less interest income of CHF 10,306 thousand and reduced income of CHF 1,576 thousand on financial assets.

3 Royalties income

Since 2009, Panalpina World Transport (Holding) Ltd. receives a fee from its subsidiaries for usage of the Panalpina network and trademark. This fee decreased in 2012 by CHF 12,087 thousand compared to the prior year.

4 Personnel expenses

In accordance with the stipulations of the Transparency law, the compensation of the key management personnel is disclosed in note 29 of the Group’s financial statements.

5 Fines

The amount of CHF 59,232 thousand represents the penalties from WEKO and EU anti-trust claims (see note 28 of the Group’s consolidated financial statements).

6 Other administrative expenses

The reduction of CHF 6,263 thousand in other administrative expenses is mostly attributable to a decline in project costs (CHF 2,462 thou-sand) and CHF 2,622 thousand higher settlement repayments from airlines.

7 Financial expenses

The increase in financial expenses of CHF 3,612 thousand is mainly due to higher FX losses of CHF 3,740 thousand.

8 Depreciation and value adjustments on investments

In 2012, valuation adjustments to participations in subsidiaries amounting to CHF 60,487 thousand were debited to the income statement.

9 Financial receivables and loans to Group companies

In 2012 a new Group company, Panalpina International Ltd., was established. This company ensures the financing of the whole Panalpina Group by granting loans and establishing cash pool structures in each region. All financing activities were transferred from Panalpina World Transport (Holding) Ltd. to Panalpina International Ltd. Therefore all related balances (cash, cash pool receivables and payables, financial receivables and payables from group companies and loans to and from group companies) are not directly comparable with the prior year.

10 Marketable securities

In the year under review, no investment was made in fixed-term deposits.

11 Participations

The principal direct and indirect subsidiaries of Panalpina World Transport (Holding) Ltd. are listed under the heading “Principal Group com-panies and participations” on pages 128 to 130.

Notes to the Financial Statements

Annual Report 2012

143Financial ReportAnnual Financial Statements

12 Treasury shares

In the year under review, treasury shares purchased totaled 42,000 shares (2011: 79,042 shares) with an average purchase price per share of CHF 94.77 (2011: CHF 109.02) and treasury share sales totaled 59,694 shares (2011: 68,492 shares) with an average sale price of CHF 34.70 (2011: CHF 68.40). All shares (2011: 118,092) are held to be used for the employee option plan.

The Annual Meeting of Shareholders held on May 8, 2012 approved the proposal of the Board of Directors to cancel the 1,250,000 repur-chased shares as well as the reduction of the nominal value of the remaining 23,750,000 shares by CHF 1.90 per share. After the cancella-tion and the nominal value reduction of the shares, the share capital amounts to CHF 2.375 million.

Due to the reduction of the share capital, the Annual Meeting of Shareholders approved the proposal of the Board of Directors to adjust the authorized capital on May 8, 2012. The Board of Directors is therefore authorized to create authorized capital to the maximum amount of CHF 300,000 by issuing a maximum of 3,000,000 registered shares with a nominal value of CHF 0.10 each at any time until May 10, 2013.

The number of treasury shares held by Panalpina World Transport (Holding) Ltd. meets the definitions and requirements of art. 659, 659a, 663b para 10 and 671a SCO.

Number of shares

31/12/2012

31/12/2011

Movement in year

31/12/2010

Total Panalpina World Transport (Holding) Ltd. shares issued 23,750,000 (1,250,000) 25,000,000 0 25,000,000

Total treasury shares held by Panalpina World Transport (Holding) Ltd. 100,398 (1,267,694) 1,368,092 10,550 1,357,542

in % 0.42 5.47 5.43

13 Share capital

The fully paid-in share capital on December 31, 2012 amounts to CHF 2.375 million consisting of 23.75 million registered shares at a par value of CHF 0.10 each. With regard to the authorized capital increase we refer to note 23 in the Group’s financial statements.

in % 2012 2011*

Shareholders

Ernst Göhner Stiftung, Switzerland 45.94 43.58

Cevian Capital II Master Fund L.P. 11.97 11.37

Bestinver Gestión, S.G. SGIIC, Spain 5.32 5.05

Artisan Partners Limited Partnership, USA 5.28 5.01

Portfolio investment (according to the share register, there are no more shareholders with holdings of more than 3 % or 5 %) 31.07 29.52

Panalpina World Transport (Holding) Ltd. 0.42 5.47

* restated considering own shares of Panalpina

14 Legal reserves

The legal reserve must be at least 20 % of the share capital of Panalpina World Transport (Holding) Ltd. in order to comply with the SCO. Panalpina World Transport (Holding) Ltd. has met the legal requirements for legal reserves under art. 671 SCO.

15 Guarantees

in thousand CHF 2012 2011

Guarantees in favor of third parties

Guarantees and indemnity liabilities, SCO, art. 663b para 1 486,529 198,780

Additionally, Panalpina World Transport (Holding) Ltd., Basel, has issued letters of awareness in favor of various banks concerning liabilities due from subsidiaries amounting to CHF 0.1 million (previous year: CHF 2.7 million).

16 Contingent liabilities

In 2008, Panalpina World Transport (Holding) Ltd. has signed a letter of indemnity as a security for the intraday cash pool overdraft limits over a maximum amount of CHF 64,000 thousand (2011: CHF 60,000 thousand).

Panalpina World Transport (Holding) Ltd. carries joint liability to the federal tax authorities for value-added tax of all Swiss subsidiaries.

17 Pending legal claimsThe status of the proceedings are disclosed under “pending legal claims“ in the consolidated financial statements 2012 (pages 126 and 127).

18 Risk management

The detailed disclosures regarding risk management/assessment that are required by Swiss law are included in note 17 and 18 of the Group’s consolidated financial statements on pages 106 to 112.

Annual Report 2012

144 Financial ReportAnnual Financial Statements

Appropriation of Available EarningsThe Board of Directors proposes the following appropriation of available earnings of total CHF 453,242,840 at the Annual General Meeting:

in CHF 2012

Distribution of an ordinary dividend of CHF 2.00 gross per share* 47,299,204

To be carried forward 405,943,636

Total 453,242,840

* It is not planned to pay dividends on own shares held by the Group.

Annual Report 2012

145Financial ReportAnnual Financial Statements

Report of the Statutory Auditor on the FinancialStatements to the General Meeting of Shareholders of

Panalpina World Transport (Holding) Ltd., Basel

As statutory auditor, we have audited the accompanying financial statements of Panalpina World Transport (Holding) Ltd., which comprise the balance sheet, income statement and notes on pages 140 to 144 for the year ended December 31, 2012.

Board of Directors’ ResponsibilityThe board of directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system rele-vant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The board of direc-tors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The pro-cedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriate-ness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements for the year ended December 31, 2012 comply with Swiss law and the company’s articles of incorporation.

Report on Other Legal RequirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the board of directors.

We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorpora-tion. We recommend that the financial statements submitted to you be approved.

KPMG AG

Regula Wallimann Martin RohrbachLicensed Audit Expert Licensed Audit ExpertAuditor in Charge

Zurich, March 1, 2013

Annual Report 2012

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Annual Report 2012

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Project managementHeidi Stöckli, Corporate Communication, PanalpinaConcept and designRamstein Ehinger Associates AG, ZurichPortraitsJulian Salinas, BaselPhotography «A Passion for Solutions»Peter Hebeisen, ZurichTranslations and editingWord + Image, Zufikon and Rotstift, Basel LithographyBlue Horizon, WinterthurPrinted byNeidhart + Schön AG, ZurichConsultant on sustainabilitysustainserv, Zurich and Boston

Disclaimer Certain sections of this Annual Report may contain for-ward-looking statements that are based on management’s expectations, estimates, projections and assumptions. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are diffi-cult to predict. Therefore, future developments and trends may differ materially from what is forecast in forward-look-ing statements.

All forward-looking statements speak only as of the date of their publication or, in the case of any document incorporat-ed by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on the Company’s behalf are qualified by the cautionary statements. The Company does not undertake any obligation to update or publicly re-lease any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report.

Panalpina World Transport(Holding) Ltd.Viaduktstrasse 42P.O. BoxCH-4002 BaselPhone +41 61 226 11 11Fax +41 61 226 11 01info@panalpina.comwww.panalpina.com

The Panalpina Annual Report is published in German and English.

For additional copies please refer to the above addresses.

An electronic version is available at: www.panalpina.com/ar2012

Panalpina World Transport(Holding) Ltd.Viaduktstrasse 42P.O. BoxCH-4002 BaselPhone +41 61 226 11 11Fax +41 61 226 11 01info@panalpina.comwww.panalpina.com