Annual Report 2010 (PDF, 5.2MB) - Panalpina Annual Report 2012

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Annual Report 2010 (PDF, 5.2MB) - Panalpina Annual Report 2012

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Annual Report 2010

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A passion for solutions

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2010 at a glance

Gross profit for the Group increased by 7.5 %

Strict cost management

Net working capital intensity at all-time low of 1.6 %

In comparison to 2009, Panalpina’s transport volumes increased

by 22 % to 892,000 tons in Air Freight and 13 % to 1,241,000 tons in

Ocean Freight in 2010

Net forwarding revenue per per segment (2010)

Net forwarding revenue per per region region (2010)

Air Freight

49%

Europe /Middle East/Africa and CIS

51%

North America

20%

Ocean Freight

39%

Logistics

12%

Central and South America

12%

Asia Pacific 17%

Returns

in percent 2010 2009

Share price development in comparison to SPI

Panalpina World Transport

SPI Swiss Performance Index

200

Return on equity (ROE) – 3.1 1.2

Return on capital employed (ROCE) – 5.4 6.14

175

150

125

100

75

50

1 Jan 10 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 11


Glossary

Tonnage

A ship’s freight capacity (in metric tons, or “tonnes”)

TEU (twenty-foot equivalent unit)

Unit of measurement based on a 20-foot ISO container

(6.10 meters long)

Full Container Load (FCL)

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

unloaded by the recipient at the destination.

Less than Container Load (LCL)

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

and transported in containers throughout the transport chain.

The containers are unloaded when they reach the various recipients

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

shipped as ocean freight.

Ocean freight and air freight: a comparison of freight capacity

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

1,000 Boeing 747 cargo planes.

The English version takes precedence over the German version.


Five-year development

in million CHF

Net forwarding revenue

Gross profit

10,500

2,050

9,000

1,900

7,500

6,000

4,500

3,000

1,500

7,735

8,641

8,878

5,958

7,164

1,750

1,600

1,450

1,300

1,150

1,591

1,803

1,742

1,377

1,480

0

1,000

2006 2007 2008 2009 2010

2006 2007 2008 2009 2010

EBIT

Consolidated profit

1,327

1,408

320

245

280

240

200

261

299

210

175

140

184

211

160

120

193

161*

105

70

114

80

40

95*

35

0

10

–26

0

30

15

–35

2006 2007 2008 2009 2010

*adjusted

2006 2007 2008 2009 2010

Shareholders’ equity

1,000

875

750

625

500

375

250

125

0

978

1,026

871

864

812

2006 2007 2008 2009 2010


Contents

Introduction 4

An Interview with the Chairman and the CEO 4


Reports of the Board of Directors and

the Executive Board 10

Report of the Board of Directors 10

Report of the Executive Board 12


Group Management Structure 20


Reporting Regions 22

Europe / Middle East / Africa and CIS 24

North America 26

Central and South America 27

Asia Pacific 28


Core Activities 30

Air Freight 32

Ocean Freight 33

Logistics 34


Customer Groups 36

Automotive 38

Healthcare and Chemicals 40

Hi-tech 42

Oil and Gas 44

Retail and Fashion 46

Telecom 48

Panprojects 49

Sustainable Growth 50

CEO Statement 52

Quality, Security and HSE 53

Employees 58

Corporate Culture 60

Information Technology 62

Social Commitment 63

Corporate Governance 64

Global Reporting Initiative 75


Consolidated and Annual

Financial Statements 2010 76

Consolidated Financial Statement 78

Annual Financial Statement 143


Appendix 154

Information for Investors 154

Main Offices Worldwide 156

Pictures 158

Imprint 159

3

Panalpina Annual Report 2010


Introduction

An Interview with the Chairman and the CEO

4

Sustainable and profitable growth

An Interview with the Chairman of the Board of Directors and the Chief Executive

Officer of the Panalpina Group about the past financial year, how the Group has

adjusted its management structures in response to current market conditions, and the

challenges it will face in the future.

What sort of market environment has Panalpina been

confronted with during the past year? Was Panalpina

able to take advantage of new developments?

Rudolf W. Hug: A strong recovery took place following the

financial and global economic crisis suffered by most countries,

and our industry recorded major growth in volumes,

especially in the first half of 2010. However, growth slowed

in the third quarter. This was partly because the baseline

was higher, and partly because inventories were not being

built up so fast. In addition, we noticed changes in the

normal industry cycles, with ocean freight, for example,

experiencing an unusually short high season.

Our focus on profitability, our customer and product- oriented

organization, together with our customer-focused growth

strategy, allowed us to benefit from this growth more than

most. At the same time, we kept costs under control.

The positive impact on our share price was very obvious:

our share has risen 83 % in the past twelve months.

We have reached our targets

and again won significant market

shares.

contracts gained. Our strategy proved itself to be effective,

since our productivity increased by 12 % in 2010.

You mention a customer-focused organization and growth

strategy – what do these mean for Panalpina Group?

Rudolf W. Hug: In line with our strategy we are steadily

developing from a product-oriented company principally

focused on air freight, ocean freight, road freight and

other logistics services into an organization that focuses

primarily on appropriate solutions for different customer

segments. Our longterm objective, however, is to provide

global supply chain management: that is, to assist our

customers throughout the supply chain and meet their

changing needs. Naturally, our products remain an important

component of this supply chain, but they are being

complemented with a whole series of value-adding

supplementary services that benefit us as well as our

customers.

Monika Ribar: We adjusted our organizational structure in

the second quarter of 2010 in order to be able to react

to changing market conditions faster and more decisively

in future. Another reason for making this adjustment was

to boost growth in all product areas and industry segments.

Sales, procurement and operational functions were therefore

brought together under the direction of the COO.

Monika Ribar: We have reached our targets and again

won significant market shares. Overall, we posted strong

volume growth of 22 % year on year for Air Freight and

13 % for Ocean Freight. We thus beat market growth in both

these segments. Profitability per freight unit also improved.

Gross profits increased by 7.5 %, or 11.4 % after adjusting

for currency effects. Costs rose only moderately and were

consistent with the higher volumes shipped.

The number of people employed went up, mainly in Asia

and North America, to cope with the larger freight volumes

handled on behalf of existing customers and with the new

We have also differentiated or expanded our customer

segments, known as “industry verticals”, with the result

that the solutions we offer our customers throughout

the world now fall into ten specialist areas: automotive,

hi-tech, telecom, consumer and retail, fashion, manufacturing,

healthcare, chemicals, oil and gas, and Panprojects

(for large industrial projects). When we speak of customers,

we are of course referring to all of them: not just the global

players but also companies in the medium and smallersized

segment. We strive to achieve a balanced customer

mix, and we focus on interesting niche routes with growth

potential as well as on the major trade routes.

Panalpina Annual Report 2010


Our products continue to play a major role, as is evident

from the way we have appointed managers with industrywide

reputations to the relevant key positions in air freight,

ocean freight and logistics (which also includes road

haulage). It is clear that our focus on customers, key industries

and strengthening the product areas is steadily helping

to boost our market share and profits.

Were there any other factors that improved Panalpina’s

position?

Rudolf W. Hug: We were finally able to close the chapter on

two lawsuits that had kept not only us, but also many of

our competitors, very busy in recent years. In October we

announced that an agreement had been reached with the

US Department of Justice (DOJ) on proceedings in connection

with violations of US antitrust law (the Sherman Antitrust

Act). Under the terms of this agreement, Panalpina

entered into what is known as a “plea agreement” with the

DOJ. The plea agreement releases the company from

prosecution for any conduct related to the sale of air freight

forwarding services.

Administrative competition proceedings related to such

conduct – which, in our view, did not affect the price

structure for customers – are still ongoing in the European

Union, Switzerland and New Zealand. The Brazilian competition

authorities announced an investigation into the

international freight forwarding and logistics industry in

mid-August 2010, but similar cases in Canada and Australia

were dropped.

Our focus on customers, key

industries and strengthening our

product areas is helping boost

our market share and profits.

The second case involved proceedings related to violations

of the US Foreign Corrupt Practices Act (FCPA).

Under the terms of a plea agreement, Panalpina entered

into a deferred prosecution agreement with the DOJ, which

agreed to defer any criminal prosecution of the company

for three years. In return, Panalpina undertook to continue

to improve its compliance policies and procedures and

provide regular reports on the company’s progress. If the

obligations with regard to compliance are met in future,

all charges against the company will be dropped at the end

of the three-year period.

In addition, the US subsidiary of Panalpina World Transport

(Holding) Ltd., Panalpina Inc., agreed to enter a guilty plea

Panalpina Annual Report 2010


to charges brought by the DOJ and the US Securities and

Exchange Commission (SEC) relating to violations of the

accounting provisions of the FCPA. This resulted in a fine.

Cooperation with the oil and gas customer group

suffered as a direct result of the investigations –

are positive signals from these customers resulting

in new investment in this business area?

Our new management culture and

the substantial improvements in

our compliance systems make us

a significantly stronger company.

Monika Ribar: The DOJ praised Panalpina’s exemplary

cooperation and extensive remediation efforts, and the

dramatic change in its management culture and business

conduct, particularly in countries with a high risk of corruption.

Panalpina has established an industry-leading compliance

structure and programs aimed at ensuring rigorous

adherence to the FCPA and other anti-bribery laws. We are

now in a position to build on the strong and sustainable

compliance culture we have put in place. Our new management

culture and the substantial improvements in our

compliance systems make us a significantly stronger company

today. We are also finding that our business relationships

with customers that had discontinued or scaled back

business activities with Panalpina during the investigations

are now starting to revive again.

Rudolf W. Hug: We are still the global market leader in forwarding

and logistics services for the oil and gas industry –

nothing has changed in that respect. We are constantly

investing in this segment – as an asset light company we

are investing in our highly trained employees in particular,

as well as in specific oil and gas terminals, for example. In

August of the year under review, for instance, we brought

an oil and gas logistics terminal into operation in Singapore.

This was the first logistics center of any global transport

company in Singapore to specialize in the very latest supply

chain management solutions for the oil and gas industry.

Monika Ribar: This modern facility is a prime example of

Panalpina’s commitment to the oil and gas sector in Singapore

and elsewhere. The southeast Asian markets are

of central importance to us. Singapore represents a major

strategic center for boosting Panalpina’s market share

on the transpacific route. The new logistics hub supports

our global upstream network and connects the region

with other major oil and gas centers in Houston, Aberdeen

and Dubai.

Panalpina Annual Report 2010


Talking of Dubai, there have been interesting developments

there and elsewhere, haven’t there?

Monika Ribar: Indeed. In June, Panalpina’s new,

42,000 square meters, state-of-the-art logistics hub in

Dubai came into operation. Situated in the Dubai Logistics

City free trade zone next to the new Al Maktoum International

Airport and the Jebel Ali seaport between Dubai

city center and Abu Dhabi, this unique infrastructure will

provide Panalpina’s customers with improved cost and

service efficiencies in the United Arab Emirates and across

the Persian Gulf region.

In the third quarter of the year under review, we also

launched our own additional air freight service linking

Luxembourg with the new Dubai World Central Al Maktoum

International Airport. This was the first all-freighter service

to fly to the new, ultra-modern airport. Panalpina now runs

regular services to Dubai as part of its new, round-theworld

route linking Luxembourg, Dubai, South Africa, Hong

Kong, North America and Latin America. As a result,

we can now offer our customers a unique and very flexible

solution for time-definite air freight consignments with short

transit times between arrival and final delivery.

We are still the global market

leader in forwarding and logistics

services for the oil and gas

industry – nothing has changed

in that respect.

Panalpina also introduced a new express service to Brazil.

An extremely short transit time from Hong Kong to São

Paulo via Huntsville, Alabama allows Panalpina to meet the

buoyant demand for fast, reliable connections between

Asia and Brazil. These activities also show that we are striving

to exploit growth in the emerging markets in particular.

The crisis, and the subsequent rapid recovery in some

areas, has pushed the themes of environmental protection

and sustainability into the background for many

companies – does this also apply to Panalpina?

Monika Ribar: Quite the contrary! We have stuck determinedly

to our environmental targets, and the results speak

for themselves: experts from SGS, the leading inspection

and certification company, audited our 80 national organizations.

Following a thorough audit process, SGS awarded

Panalpina’s environmental management systems global

Panalpina Annual Report 2010


8

certification to ISO 14001:2004 at the beginning of the year

under review. Achieving certification was part of our ambitious

PanGreen program, the aim of which is to reduce CO 2

emissions. Panalpina was the first company in the industry

to receive global certification to ISO 14001: 2004 for its

global activities within the framework of a single integrated

management system and certification structure – a milestone

for the PanGreen program.

water consumption. We are thus minimizing our use of

global resources and reducing our internal CO 2 emissions.

In addition, we aim to keep on reducing the ecological

impact of our business activities. This involves consolidating

consignments, the judicious use of all transport modes,

and handling hazardous goods safely. Other initiatives are

to follow, such as measuring CO 2 emissions by customers,

partners, and subcontractors.

The emerging markets, and the

BRIC countries in particular,

will have a different role to play

in the structure of the future

world economy.

Rudolf W. Hug: Both as individuals and as employees of

a globally active company, we have a moral and social

responsibility to do everything in our power to ensure that

our business activities have the smallest possible impact

on the environment. PanGreen is a major element in our

strategy. We have made explicit commitments to reducing

our paper consumption, recycling, waste management,

limiting business trips by air, and cutting electricity and

How do you see business developing over the medium

to long term?

Monika Ribar: The environment remains volatile, but

we have learned that constant change is the new normal

and we have adjusted our organization and processes

accordingly. We are now able to react in a considerably

faster and more targeted manner to market fluctuations,

such as freight rates or capacity adjustments by our freight

partners, as well as to the increasingly rapid changes in

safety regulations.

Rudolf W. Hug: We foresee a second wave of globalization

over the longer term. The emerging markets, and the

BRIC countries (Brazil, Russia, India and China) in particular,

will have a different role to play in the structure of the

world economy in future. Of the 500 largest companies in

the world, 70 are already based in the BRIC countries.

Today, an increasing number of hi-tech products are being

Panalpina Annual Report 2010


9

exported by these firms, instead of simply commodities

and bulk goods. In the coming decades, a new middle

class with high purchasing power will arise in the emerging

countries: the number of new consumers falling into the

medium income bracket is forecast to rise by 70 million

each year from now onwards.

As a provider of supply chain management solutions present

in 80 countries – and rep resented by agents in 80 more –

we are ideally positioned to take advantage of this trend

alongside our customers and to continue to build on our

expertise.

Panalpina Annual Report 2010


Reports of the Board of Directors and the Executive Board

Report of the Board of Directors

10

Growth strategy pays off

Panalpina achieved operational turnaround in the second quarter of the year under

review. The company significantly exceeded market growth in the two main segments,

air and ocean freight, and won back the confidence of investors. Organizational

streamlining and the consistent focus on strategic customer segments clearly paid off.

The US antitrust lawsuit and the plea agreement in connection with violations of the

US Foreign Corrupt Practices Act (FCPA) were concluded. Panalpina’s cooperation

with the US authorities, own internal investigations and vigorous efforts to remedy

shortcomings, along with its commitment to an effective compliance program, led to

significant concessions in the final resolution of the case.

Results and business performance

Board of Directors and Executive Board

In 2010, Air Freight forwarding volumes grew by 22 % to

892,000 tonnes. Ocean Freight recorded growth of 13 %

to 1,241 million TEUs. Supply Chain Management saw net

revenues rise by 20 % to CHF 7,164 million. New and additional

contracts were acquired in all customer segments,

particularly however in the Telecom, Automotive and Retail

and Fashion segments. Overall, Panalpina gained significant,

and above-average, market shares.

In the year under review, Panalpina posted a gross profit

of CHF 1,480 million (+7.5 %), EBITDA of CHF 62 million

(– 22.5 %) and consolidated earnings of CHF – 26 million.

The following changes were made to the composition of

the Board of Directors in the year under review: Dr Wilfried

Rutz, Yuichi Ishimaru and Glen R. Pringle stood down at

the Annual General Meeting in May 2010. Chairman of the

Board Dr Rudolf W. Hug thanked the departing board

members for their valuable services to the company. Chris

E. Muntwyler, Dr Hans-Peter Strodel and Dr Beat Walti

were elected to the Board of Directors by a significant

majority. (For details of the new members of the Board of

Directors, see page 66 onwards.) Guenter Rohrmann was

elected as the new Vice-Chairman of the Board, thus succeeding

Dr Wilfried Rutz.

The flexible asset-light business model, together with the

emphasis on profitability and a product-oriented organization

focused on the specific customer segments, proved

its worth. The expansion of the original seven customer

groups to ten, and the additional focus on up-and-coming

markets in the emerging countries, bears witness to

the company’s strategic orientation towards markets with

growth potential.

Shareholder structure

Günther Casjens resigned from the Board of Directors in

December owing to other time-consuming commitments.

The election of a new board member to replace him will

be held at the Annual General Meeting on May 10, 2011.

Günther Casjens joined the Board of Directors in 2005, the

year in which Panalpina went public. The Panalpina Board

of Directors would like to express its sincere thanks to

Günther Casjens for his many years of collaboration and

his valuable contribution, which was characterized by his

entrepreneurial vision and vast industry experience.

Ernst Göhner Stiftung remains Panalpina’s main shareholder,

with a stake of 43.58 %. On the cut-off date,

three investors each held over 5 % of the share capital (for

details, see page 64). At this point in time, the company

itself held 5.5 % of all shares. Cevian Capital established

itself as the second-biggest shareholder, with 10.31% of

the share capital. (For details see Corporate Governance

Report on page 64.)

So that it can react to changing market conditions faster

and more decisively in future, and to boost growth in all

product areas and industry segments, Panalpina adjusted

its Executive Board structure in March of the year under

review. Since then, sales, procurement and operational

functions have been united under the direction of the Chief

Operations Officer.

Panalpina Annual Report 2010


Reports of the Board of Directors and the Executive Board

Legal proceedings concluded

In October of the year under review, Panalpina World

Transport (Holding) Ltd. announced that it had reached an

agreement with the US Department of Justice (DOJ) on

proceedings in connection with violations of US antitrust law

(the Sherman Antitrust Act). Under the terms of this agreement,

Panalpina entered into a plea agreement with the DOJ.

Under the terms of the plea agreement, Panalpina entered

guilty pleas to three counts of conspiring to violate the

Sherman Act and paid a fine. The plea agreement releases

the company from prosecution for any conduct related

to the sale of international air freight forwarding services.

A class-action lawsuit under civil law in the USA is still

pending against Panalpina and several of its biggest

competitors.

Administrative proceedings related to the conduct in question

are still ongoing in the European Union, Switzerland

and New Zealand. The Brazilian competition authorities

announced an investigation into the international freight

forwarding industry in mid-August 2010, but similar investigations

in Canada and Australia were discontinued.

In November Panalpina announced the resolution of the

proceedings against the company by the US Department

of Justice (DOJ) and the US Securities and Exchange

Commission (SEC) in relation to violations of the US Foreign

Corrupt Practices Act (FCPA). Under the terms of a plea

agreement, Panalpina World Transport (Holding) Ltd. entered

into a deferred prosecution agreement (DPA) with the DOJ,

which agreed to defer any criminal prosecution of the company

for three years. In return, Panalpina undertook to

continue to improve its compliance policies and procedures

and to provide regular reports to the DOJ on the company’s

progress. If the obligations with regard to compliance

are met in future, the DOJ will drop all charges against the

company at the end of the three-year period. In addition, the

US subsidiary of Panalpina World Transport (Holding) Ltd.,

Panalpina Inc., agreed to enter a guilty plea to charges

brought by the DOJ relating to the violation of the accounting

provisions of the FCPA. This resulted in a fine. The

company also consented to the judgment in a civil action

brought by the SEC and paid an additional financial penalty.

The DOJ praised Panalpina’s cooperation extensive

compliance efforts, and the far-reaching changes in its

management culture.

36 countries. In addition, Panalpina’s compliance department

undertook comprehensive and systematic risk

assessments in 33 countries, most of which were high-risk

emerging markets.

These assessments included a review of third-party business

relationships. Panalpina subsequently terminated

relationships with third parties which did not meet the company’s

high compliance standards. Operations were also

closed down in three countries, including Nigeria, where

compliance risks were seen as insurmountable in the company’s

opinion.

Panalpina has established an industry-leading compliance

structure and programs aimed at ensuring rigorous adherence

to the FCPA and other anti-bribery laws. The most

important measures taken by the company included designing

state-of-the-art compliance policies with the assistance

of the highly regarded Basel Institute on Governance and

establishing a dedicated global compliance organization to

work with Panalpina’s internal audit department on assessing

the group’s activities in all countries in which it operates.

Panalpina appointed an external compliance consultant to

ensure that it meets the compliance and reporting obligations

set out in the DPA. Panalpina’s Legal and Compliance

Committee will oversee the compliance undertakings to

which the company has agreed under the terms of the DPA.

The Legal and Compliance Committee was therefore

expanded to include an extra board member, Dr Beat Walti.

Now that these lawsuits have been settled, it is time to build

on the strong and sustainable compliance culture that

Panalpina has put in place. The company is confident that

it will be able to re-establish business relationships with

customers that had discontinued or scaled back their business

activities with Panalpina during the investigations.

Dividends

Based on the results for fiscal 2010, the Board of Directors

of Panalpina World Transport (Holding) Ltd. proposes to

the Annual General Meeting that no dividend shall be paid.

Rudolf W. Hug

Chairman of the Board of Directors

www.panalpina.com/bod

11

During the period of the investigation, Panalpina conducted

comprehensive internal investigations in nine countries

and reviewed transactions and operations in a further

Panalpina Annual Report 2010


Reports of the Board of Directors and the Executive Board

Report of the Executive Board

12

Market share gains and significant improvement

of underlying profitability and margins

After the unprecedented decline during 2009, world trade bounced back in 2010

driven by strong economic growth in most markets and global restocking of

inventories – and led to a significant recovery of business volumes in Panalpina’s

core activities. The Company posted double-digit volume growth in both its Air and

Ocean Freight businesses and managed to solidify its position within the industry.

Apart from gaining back market share, Panalpina was also able to capitalize on

various profitability improvement initiatives and posted a significant increase in underlying

operating margins.

2010 saw a significant recovery of the world economy and

a strong rebound of world trade. The International Monetary

Fund estimates that global trade volumes rose 11% in 2010,

with China and other emerging markets leading the way but

also the “old economies” in North America and Europe

gaining significant traction. As a result, the global air freight

market – which tends to react more volatile than other

modes of transportation to short-term economic fluctuations

– grew nearly 20 % and caught up a large part of

the volumes lost during 2009. The ocean freight market,

which also fell sharply in 2009, saw a volume increase

in the range of 10 % in the reporting year and thus almost

reached the volume record set in 2008.

Air Freight, Ocean Freight and Logistics, all of whom assume

their responsibilities during the first quarter of 2011.

The year under review was also characterized by leveraging

the real-time visibility derived from the global roll-out

of the Company’s new management information system

(MIS) which took place in the last quarter of 2009. The

new system, which was developed in-house, dramatically

improved the granularity of financial information down to

the individual customer, business unit and trade lane, and

thus greatly enhanced and supported the decision-making

processes from top management down to department

heads throughout 2010.

During 2010, apart from benefiting from the favorable economic

climate and market share gains which had a positive

impact on the volumes transported on behalf of its customers,

Panalpina started to reap the benefits from several

measures which were implemented early in the year. Back

in March, the Company changed its organizational structure

to speed up the reaction time to changes in market

conditions by unifying the responsibilities for its buying and

selling decisions and Operations under the Chief Operating

Officer (COO). The adapted organization – which has the

COO directly overseeing Sales and the three product divisions

Air Freight, Ocean Freight and Logistics – is productdriven

and has a strong industry-specific sales focus. It

allows the Company to rapidly and consistently implement

industry vertical and product specific strategies and to

take critical decisions in a timely manner, which is essential

considering today’s volatile markets with respect to both

customers’ volumes and carriers’ freight rates. As part of the

reorganization, the number of Executive Board members

was reduced from seven to five, and the Company appointed

three industry experts to globally lead its core products

Costs continued to be tightly managed during the reporting

year. While the steep volume increases handled during

the year needed to be accommodated through additional

personnel, the hiring of new employees took place at

a much slower pace, leading to a substantial increase of

labor productivity. The amount of average shipments

handled per month across all business divisions, which

serves as a good indicator of the Company’s overall business

activity, rose 14 % in 2010 versus the year before.

At the same time, the average monthly number of employees,

expressed in terms of full-time equivalents (FTE),

increased by only 2 %. As a result, the Company’s productivity,

measured as the average number of shipments

handled per FTE during the reporting period, increased by

12 % compared to the respective prior year period.

In the second half of the year under review, the Company

announced a settlement with US authorities over violations

of the Sherman Antitrust Act as well as the final resolution

of claims against it for violations of the US Foreign Corrupt

Practices Act. In particular the settlement of the latter case

Panalpina Annual Report 2010


Reports of the Board of Directors and the Executive Board

marked the closing of an extremely burdensome chapter in

the Company’s history and the end of a very demanding

three-year effort to address and eliminate serious compliance

concerns. The Company is now looking forward to

strengthen relationships with customers who have ceased

or reduced business activities with Panalpina due to the

investigation. To cover all costs related to the resolution of

both cases, including expenses for ongoing compliance

consulting, as well as for an internal reorganization project,

the Company recognized costs totaling CHF 128 million

in the year under review. Panalpina has also established an

industry-leading compliance organization and ongoing

programs aimed at ensuring rigorous adherence to country

specific anti-bribery and anti-trust laws. Designing stateof-the-art

compliance policies and programs with the support

of the highly-regarded Basel Institute on Governance,

establishing a dedicated global compliance organization,

conducting anti-corruption training both in-person and webbased,

implementing systematic third-party due diligence

and developing a whistleblowing program were among the

specific measures implemented by the company.

The world economy and financial markets offer a picture

marked by contradictions that points to opportunities and

risks in 2011. The consensus view is that the global economy

will probably continue its recovery in 2011 although

at a patchy pace and at a less dynamic global growth rate.

Tighter fiscal policy may have a dampening effect in many

industrialized countries. There is also a gap between countries

that have emerged from the crisis relatively unscathed

and are now on the road to recovery and those that have

their backs to the wall. Overall, world trade and global outsourcing

look set to expand further in 2011 and beyond

albeit with a bias to the emerging economies – particularly

in Asia and Latin America – which will continue to gain in

relative importance. With its global and asset-light network,

coupled with the ability to offer its customers value-add,

first-class supply chain management 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)

In 2010, Panalpina’s net forwarding revenue (NFR) amounted

to CHF 7,164 million, up 20 % from the CHF 5,958 million

the year before. This substantial increase can be attributed

to a variety of factors, including significantly higher freight

volumes fueled by the rebound in world trade and market

share gains, as well as higher average freight rates prevailing

in the market as freight capacity remained tight

throughout a large part of the year. Moreover, the booming

world economy resulted in rising oil prices which translated

into higher fuel surcharges which Panalpina passed

through to its customers.

At regional level, net forwarding revenue saw doubledigit

growth in all four reporting regions, led by Asia

Pacific (APAC) where NFR in 2010 increased by 43 % to

CHF 1,270 million. The booming Chinese economy

and the growing importance of intraregional traffic in the

region were the main drivers behind this growth.

In Europe / Middle East / Africa and CIS (EMEA), NFR

increased 14 % to CHF 3,640 million. This region remains

Panalpina’s largest in revenue terms, contributing to

slightly over half of the Group’s turnover. The export-oriented

German eco nomy benefited from the weak euro,

and together with Panalpina’s strong footprint in this

market greatly supported growth in this reporting region.

On the other hand, the substantial depreciation of the

euro (– 9 %) and also the British pound (– 5 %) vs. the Swiss

franc adversely affected net forwarding revenue in

this region (translated into Swiss francs) by nearly 8 %.

In North America (NORAM), NFR rose by 20 % to

CHF 1,409 million, a large part of which can be attributed

to the substantial volume increases on both the transatlantic

and the transpacific trade lanes which benefited

particularly from the strong growth in the Automotive

and Hi-Tech sectors. The US dollar, which depreciated 4 %

vs. the Swiss franc during the reporting period, had

a negative translation effect of approximately 3 % on this

region’s turnover.

13

Compared to 2009, the Group’s NFR in 2010 in Central

and South America (LATAM) rose 20 % to CHF 845 million,

which is a reflection of the strong economies and

Panalpina’s increased focus on the main growth markets

in this region, particularly Brazil.

Panalpina Annual Report 2010


Reports of the Board of Directors and the Executive Board

14

In 2010, the Panalpina Group generated 51 % of its net

forwarding revenue in Europe / Middle East / Africa and CIS,

20 % in North America, 17 % in Asia Pacific and 12 % in

Central and South America.

Net forwarding revenue per region

2010 2009

in million CHF

5,000

4,000

3,000

2,000

1,000

0

3,640

3,189

Europe/Middle East/

Africa and CIS

1,409

1,176

North

America

845

702

Central and

South America

Net forwarding revenue per region (2010)

1,270

891

Asia Pacific

As a result of these developments, the Group’s NFR generated

with air freight activities increased by 29 % to

CHF 3,503 million and was the segment which saw the

greatest rebound. In the Ocean Freight segment, NFR

advanced by 17 % to CHF 2,771 million. In the third segment,

Logistics (which the Group renamed from the

previously used term “Supply Chain Management”), NFR

saw an increase of 1 % to CHF 890 million. Next to consolidating

and globally standardizing the various activities

in this segment (mainly warehousing and distribution services)

during 2010, demand remained weak in the Group’s

oil and gas and projects business where the market was

lagging the general economic recovery, which slowed progress

in this segment.

In 2010, the Panalpina Group generated 49 % of its net

forwarding revenue with Air Freight, 39 % with Ocean

Freight and 12 % with Logistics.

Europe /Middle East/Africa and CIS

North America

20%

51%

Net forwarding revenue per segment

2010 2009

in million CHF

4,000

3,500

Central and South America

12%

Asia Pacific 17%

Preliminary estimates of the International Air Transport Association

(IATA) show that international air freight volumes

(measured in freight ton kilometers) grew by approximately

20 % in 2010. At the same time, global volumes handled in

the ocean container market rose in excess of 10 % according

to various market sources and nearly reached or even

exceeded (in Asia and North America) the 2008 record level.

Against this backdrop, together with the Group’s ability to

gain market share, the Group’s Air Freight and Ocean Freight

segments, which jointly contribute 88 % to Group NFR,

both recorded strong increases in net forwarding revenue

in 2010. The tightness of carrier capacity that was prevalent

for a large part of the year led to substantial freight rate

hikes, which additionally helped increase the Group’s NFR

due to the pass-through character of freight rates for an

asset-light service provider like Panalpina. Moreover, average

jet fuel and bunker prices in 2010 were more than

20 % above 2009 levels, resulting in distinctly higher fuel

and bunker surcharges (essentially also items with

a pass-through character) which the Group invoiced to

its customers.

3,000

2,500

2,000

1,500

1,000

500

0

3,503

2,714

2,771

2,360

890

884

Air Freight Ocean Freight Logistics

Net forwarding revenue per segment (2010)

Air Freight

49%

Ocean Freight

39%

Logistics

12%

Panalpina Annual Report 2010


Reports of the Board of Directors and the Executive Board

Gross profit (GP)

Gross profit, a better measure for actual sales performance

than net forwarding revenue in the forwarding industry,

increased by 7 % from CHF 1,377 million in 2009 to

CHF 1,480 million in 2010. In local currencies, the increase

was 11 %. This 4 % difference, which had a negative impact

on GP of CHF 54 million, is largely due to the adverse

movement of the euro and the US dollar against the Swiss

franc. In addition to the strong rebound of world trade

which boosted global trade volumes, Panalpina’s market

share gains were another important factor behind the

increase in the Group’s gross profit. The unit profitability

(gross profit per ton of air freight and per TEU of ocean

freight), a measure of the pricing power of a freight forwarder,

also showed a sequential improvement every quarter

(in currency neutral terms), although the 2010 average

remained below the prior year levels which were distorted

by an unusually high volatility of carrier freight rates.

The gross profit margin (gross profit as a percentage of net

forwarding revenue) decreased from 23 % to 21 %, mostly

due to the markedly higher average fuel surcharges and

freight rates, which had a positive effect on net forwarding

revenue while having a relatively neutral effect on gross

profit as these are normally pass-through items (subject to

a certain time lag) for freight forwarders.

Europe / Middle East /Africa and CIS (EMEA) is also the

most important region within Panalpina in terms of

gross profit generation, representing more than half of the

Group’s gross profit. In 2010, gross profit generated in

EMEA increased by 4 % to CHF 760 million, supported by

higher freight volumes on all major trade lanes. Similar

to net forwarding revenue, the currency development in

this region adversely affected gross profit, mainly due to

the euro but also the British pound, with both significantly

depreciating against the Swiss franc.

In North America (NORAM), gross profit rose 4 % to

CHF 266 million, which is a reflection of the higher volumes

handled in this region on the back of the recovering

North American economies and restocking which additionally

boosted global trade flows. In this region, particularly

the weakness of the US dollar adversely impacted

the Group’s gross profit when translated into Swiss francs.

Asia Pacific (APAC) and Central and South America (LATAM)

recorded the highest increases in GP, which management

attributes to the relatively better economic development

of these regions in 2010 that manifested itself in strong

intraregional and interregional trade flows in and between

these parts of the world. In LATAM gross profit rose 8 %

to CHF 156 million, while gross profit in APAC increased

22 % to a total of CHF 298 million and thereby overtaking

NORAM as the Group’s second largest region in terms of

gross profit.

In 2010, the Panalpina Group generated 51 % of its gross

profit in Europe / Middle East / Africa and CIS, 18 % in North

America, 20 % in Asia Pacific and 11% in Central and

South America.

Gross profit per region

2010 2009

in million CHF

1,000

800

600

400

200

760

731

0

Europe/Middle East/

Africa and CIS

266

256

North

America

Gross profit per region (2010)

Europe /Middle East/Africa and CIS

North America

Central and South America

Asia Pacific

156

145

Central and

South America

18%

11%

51%

298

245

Asia Pacific

20%

The varying volume and pricing dynamics in the Group’s

core business segments during the reporting year becomes

evident when looking at the development of gross profit.

The air freight market recorded the strongest growth rate

of all transport modes in 2010, resulting in relatively stronger

volume growth for Panalpina in this segment. In addition,

despite the tight carrier capacity which led to rising

freight rates for a large part of the year, the Group managed

to restore a significant fraction of its gross profit per transported

cargo unit during the course of the year which started

at very depressed levels. The Group’s gross profit realized

through air freight forwarding services increased by 19 %

in 2010, reaching CHF 667 million versus CHF 562 million

the year before.

In the Ocean Freight segment, GP saw a slight contraction

of 1% to CHF 453 million. Panalpina’s volume growth rate

was above that of the global ocean freight market which

15

Panalpina Annual Report 2010


Reports of the Board of Directors and the Executive Board

16

registered strong volume growth during the first half of the

year, before cooling off in the second half in the absence

of a peak season. Until late summer, many ocean carriers

were successful in implementing several rounds of considerable

rate increases, making it more difficult for the Group

to lift its unit profitability more rapidly from the historically

low levels at the beginning of the year due to the time lags

involved in passing on rate increases to customers.

Gross profit generated through the Group’s Logistics

activities posted a small growth of 1% to reach a total of

CHF 360 million. While this segment was also able to

benefit from higher transported volumes, particularly the

oil and gas and projects businesses were still lagging

the recovery.

In 2010, the Panalpina Group generated 45 % of its gross

profit with Air Freight, 31% with Ocean Freight and 24 %

with Logistics.

Gross profit per segment

2010 2009

in million CHF

700

600

500

400

300

200

100

0

667

562

453

458

360

357

Air Freight Ocean Freight Logistics

Gross profit per segment (2010)

Air Freight

45%

Ocean Freight

31%

Earnings before interest, taxes,

depreciation and amortization (EBITDA)

The Group’s EBITDA was substantially hit by a charge of

CHF 128 million (contained in the category “other operating

expenses”) which the Company recognized to cover all

costs arising from the settlement of the two legal claims in

the United States (FCPA, anti-trust) and associated compliance

consulting costs as well as from an internal reorganization

project. The Group’s EBITDA decreased by 22 %

at actual exchange rates (– 18 % in local currencies) from

CHF 80 million in 2009 to CHF 62 million in 2010. Apart

from these non-recurring costs, operating expenses which

directly influence EBITDA developed as follows:

• Personnel expenses increased modestly by 1%

(5% currency adjusted) from CHF 879 million in 2009 to

CHF 891 million in 2010. With the freight markets being

in full swing and business volumes increasing strongly,

the Group moderately increased its headcount to accommodate

the growth in shipments. At the same time, as

described in more detail above, productivity of the existing

workforce rose substantially, thus the increase in

headcount (and hence personnel expenses) took place

at a much smaller rate than the increase in shipments,

leading to a reduction in the personnel expenses-to-grossprofit

ratio from 64% in 2009 down to 60% in 2010.

• Other operating expenses increased by 26 %

(30% currency adjusted), from CHF 419 million in 2009

to CHF 527 million in 2010. The main reasons for the

increase were the aforementioned charges included in

this cost category, out of which fines in the amount of

CHF 27 million were paid to US authorities during 2010.

Furthermore, expenses for the fiscal years 2010 and

2009 comprise non-recurring legal and consulting fees

mainly related to the FCPA investigation by the US

Department of Justice, which amounted to CHF 18 million

in 2010 and CHF 55 million in 2009.

Overall development

Logistics

24%

Adjusted EBITDA

in million CHF

Adjusted operating expenses

2010

2009

135

208

1,272

1,242

Figures adjusted for non-recurring charges as described above.

Panalpina Annual Report 2010


Reports of the Board of Directors and the Executive Board

Regional development

The Company assesses segmental operating performance

primarily from a geographical perspective, as the Group’s

operations are predominantly managed by geographical

location. A useful measure to assess the operating performance

by region is EBITDA. The segmental EBITDA provided

in the financial accounts excludes the non-recurring

charges incurred in 2010 related to fines and related

expenses as well as reorganization costs in order to make

a comparison with prior year more meaningful. Moreover,

the following extraordinary costs had an influence on the

EBITDA per region during the reporting period:

• North America booked CHF 6 million in extraordinary

legal and consulting fees in 2010 (2009: CHF 22 million).

• The region labeled “Corporate” absorbed extraordinary

legal and consulting fees of CHF 12 million in 2010

(2009: CHF 33 million).

• There were no other material non-recurring charges

incurred in any of the other reporting regions during the

reporting year.

Adjusted EBITDA per region

2010 2009

in million CHF

100

Balance sheet

Current assets

The Group’s cash and cash equivalents amounted to

CHF 529 million on December 31, 2010 and thus remained

virtually unchanged from the CHF 532 million on December

31, 2009. The substantial recovery of business volumes

resulted in an increase of the net working capital, which

was largely offset by the increase in profitability of the

operating business.

Trade receivables and unbilled forwarding services

increased by CHF 93 million, from CHF 940 million at

the end of 2009 (equivalent to 49 % of total assets) to

CHF 1,033 million at the end of 2010 (equivalent to 52 %

of total assets). The increase in trade receivables can

mainly be attributed to the strong increase in turnover.

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

capital as a percentage of gross forwarding revenue)

ended the reporting year with a record low level of 1.6 %.

Other current assets remained relatively stable and

amounted to CHF 125 million at the end of the reporting

period 2010 compared to CHF 127 million at the end

of the reporting period 2009.

Non-current assets

17

80

60

40

20

0

–20

–40

78

43

Europe/

Middle East/

Africa and CIS

–17

–27

North

America

Figures adjusted for non-recurring charges as described above.

19

15

Central

and South

America

92

64

Asia Pacific

18

–15

Corporate

The Group’s non-current assets declined slightly from

CHF 326 million on December 31, 2009 to CHF 303 million

on December 31, 2010. The reduction is primarily a result

of the decrease in property, plant and equipment due to a

lower level of capital expenditures and the strength of the

Swiss franc versus major foreign currencies.

Total assets

Cash and cash equivalents

Trade receivables and unbilled forwarding services

in million CHF

Other current assets

Non-current assets

2010

2009

529 1,033 125 303 1,990

532 940 127 326 1,925

Trade payables and accrued cost of services

The Group’s trade payables and accrued cost of services,

which jointly comprised 59 % of total liabilities

on December 31, 2010, increased to CHF 696 million,

compared to CHF 679 million on December 31, 2009.

Panalpina Annual Report 2010


Reports of the Board of Directors and the Executive Board

18

This favorable development can mostly be attributed to

the increase in cost of goods sold during the reporting

period and a further improved payment discipline and renegotiation

of payment terms with various vendors.

Borrowings (short-/long-term)

Total borrowings were further reduced from CHF 13 million

at year-end 2009 to CHF 10 million at year-end 2010.

Other liabilities

The Group’s other liabilities increased significantly from

CHF 369 million at year-end 2009 to CHF 471 million at

year-end 2010. The major reasons for the increase are

provisions remaining on the balance sheet at the end of

the year amounting to CHF 94 million in connection with

the charges arising from the settlement of the two legal

claims in the United States (FCPA, anti-trust) and associated

compliance consulting costs as well as for an

internal reorganization project.

Total equity

The most significant change in shareholders’ equity is

the change in reserves which – as a result of the negative

net result for the reporting year, an adverse currency

translation effect as well as recognized actuarial losses

on pension valuation amounting to CHF 11 million –

declined from CHF 999 million on December 31, 2009

to CHF 950 million on December 31, 2010. Total equity

decreased by CHF 52 million during the reporting

period, from CHF 864 million on December 31, 2009 to

CHF 812 million on December 31, 2010.

Cash flow

Net cash from operating activities

The Group’s net cash from operating activities in the

reporting period amounted to CHF 37 million, CHF 223 million

below last year (2009: CHF 260 million). Although

the Group expanded its net profit for the period (before the

CHF 128 million special charges) substantially, the growth

in business led to a sizeable increase of the net working

capital, whereas in the comparable prior-year period, net

cash from operating activities was boosted significantly

due to the severe drop in business volumes and the related

reduction in net working capital. In addition, net cash from

operating activities includes an outflow of CHF 27 million

during the reporting year due to the payment of certain fines

to US authorities.

Cash flow from investing activities

The largest part of investing cash outflows in 2010 was

for expenditures on property, plant and equipment in the

amount of CHF 28 million (mainly IT equipment), which

were lower than in the year before (2009: CHF 33 million).

On the other hand, the interest received on the current

cash holdings declined from CHF 15 million in 2009 to

CHF 5 million in 2010, as interest rates in the latest reporting

period were close to zero. Overall, the net cash flow

from investing activities improved slightly from minus

CHF 34 million in 2009 to minus CHF 31 million in 2010.

Capital expenditures in 2010 amounted to a historically low

0.6 % of net forwarding revenue and thus underlined

the asset-light character of Panalpina’s business model.

Total liabilities and equity

Trade payables and accrued cost of services

Short- and long-term borrowings

in million CHF

2010

2009

10

696

679

13

369

471

Other liabilities

Equity

812 1,989

864 1,925

Free cash flow

The free cash flow, calculated as net cash from operating

activities and adding the net cash flow from investing

activities, accordingly decreased from CHF 226 million in

2009 to CHF 6 million in 2010.

Cash flow development

Free cash flow

in million CHF

Net cash from

operating activities

2010

6

36

2009

226

260

Panalpina Annual Report 2010


Reports of the Board of Directors and the Executive Board

Cash flow from financing activities

19

The net cash used in financing activities improved significantly

from minus CHF 57 million in 2009 to minus

CHF 8 million in 2010. The largest part of this improvement

relates to the suspension of dividend payments in 2010,

based on the minimal net profit that the Group had generated

in fiscal year 2009. Dividends paid in 2009 (for fiscal

year 2008) amounted to CHF 45 million.

Net cash

in million CHF Dec 31

2010

Dec 31

2009

%

change

Cash and cash equivalents 528.9 531.8 –1

Other current financial assets 6.1 10.8 – 44

Short-term debt – 9.3 –12.0 – 23

Long-term debt – 0.4 – 0.9 – 56

Net cash 525.3 529.7 –1

Net cash decreased by CHF 4 million during 2010 to

CHF 525 million on December 31, 2010.

Employees

Full time equivalents (FTEs)

as at December 31

Region 2010 2009

%

change

Europe / Middle East / Africa

and CIS 6,485 6,007 8

North America 2,423 2,237 8

Central and South America 2,294 2,202 4

Asia Pacific 3,259 2,951 10

Corporate 415 376 10

Total 14,876 13,773 8

During 2010, in order to handle the significant growth in

shipments, the Group increased the number of FTEs

by 8 %, from 13,773 on December 31, 2009 to 14,876 on

December 31, 2010. The increase took place in all reporting

regions, and was in proportion to the respective volume

growth.

Panalpina Annual Report 2010


Group Management Structure

20

Group Management Structure

As at December 31, 2010

Corporate Audit

Chairman

Rudolf W. Hug

Vice Chairman

Guenter Rohrmann

Board of Directors

Chris E. Muntwyler

Roger Schmid

Hans-Peter Strodel

Beat Walti

Chief Executive Officer

Monika Ribar

Compensation and

Nomination Committee

Audit Committee

Legal and Compliance

Committee

Corporate and Regional

Development, Agent Relations

Corporate Communications

Corporate Compliance

Chief Operating Officer

Karl Weyeneth

Chief Financial Officer

Marco Gadola

Chief HR Officer

Alastair Robertson

Chief Legal Officer /

Corporate Secretary

Christoph Hess

Air Freight

Corporate Accounting

HR Processes and Projects

Corporate Legal Services

Ocean Freight

Logistics

Supply Chain Solutions

Sales and Marketing

BPQ

Corporate Taxes

Corporate Controlling

Investor Relations

Indirect Purchasing

Strategic Finance and Projects

International Compensation and

Benefits

HR Operations

Capability Development and

Panalpina Academy

Government Affairs

Corporate Insurance Management

Group Treasury

Corporate Information Technology

Areas

Panprojects

www.panalpina.com / organization

Panalpina Annual Report 2010


21

Executive Board

From the left:

Marco Gadola (Chief Financial Officer)

Monika Ribar (President and CEO)

Christoph Hess (Corporate Secretary and General Counsel)

Alastair Robertson (Chief Human Resources Officer)

Karl Weyeneth (Chief Operating Officer)

Panalpina Annual Report 2010


urope Africa Middle East CIS North America Central and S

merica Central and South America Asia Pacific Europe Afr

a Asia Pacific Europe Africa Middle East CIS North Americ

ast CIS North America Central and South America Asia Pa

outh America Asia Pacific Europe Africa Middle East CIS N

frica Middle East CIS North America Central and South Am

a Central and South America Asia Pacific Europe Africa M

acific Europe Africa Middle East CIS North America Centra

IS North America Central and South America Asia Pacific

Reporting Regions

America Asia Pacific Europe Africa Middle East CIS Nort

ca Middle East CIS North America Central and South Ame

entral and South America Asia Pacific Europe Africa Midd

ific Europe Africa Middle East CIS North America Central a

orth America Central and South America Asia Pacific Euro

merica Asia Pacific Europe Africa Middle East CIS North A

iddle East CIS North America Central and South America


outh America Asia Pacific Europe Africa Middle East CIS N

ica Middle East CIS North America Central and South Am

a Central and South America Asia Pacific Europe Africa M

cific Europe Africa Middle East CIS North America Centra

orth America Central and South America Asia Pacific Eur

erica Asia Pacific Europe Africa Middle East CIS North Am

iddle East CIS North America Central and South America A

l and South America Asia Pacific Europe Africa Middle Ea

Europe Africa Middle East CIS North America Central and

h America Central and South America Asia Pacific Europe

rica Asia Pacific Europe Africa Middle East CIS North Ame

le East CIS North America Central and South America Asia

nd South America Asia Pacific Europe Africa Middle East

pe Africa Middle East CIS North America Central and Sou

merica Central and South America Asia Pacific Europe Af

Asia Pacific Europe Africa Middle East CIS North America


Reporting Regions

Europe / Middle East / Africa and CIS

24

Positive results amid market challenges in EMEA

In the largest reporting region, some countries and sub-regions are in the midst

of strong recovery while others still reel from the significant drop in oil prices

and a delayed impact of the economic crisis. Despite the variable economic situation,

Panalpina achieved important milestones in the region and continued to win

new contracts.

Areas: 11

Benelux, Central Europe, Eastern Europe, France,

Iberia, Northern Europe, Northwest Europe,

Southwest Europe, Sub-Saharan, Black and

Caspian Sea, Arabian Belt

Net revenue: CHF 3,640 million

Headcount: 6,745

Europe: growing volumes and improved market

conditions

In April of the year under review, Panalpina was the first

forwarder to transport air freight into Europe after several

days of aircraft grounding due to the ash cloud which

befell the continent following the eruption of the Eyjafjallajökull

volcano in Iceland. With transatlantic customers

under pressure to ship their goods during the extended

period of closed air space, Panalpina pulled out all the

stops to secure temporary landing rights in southern Spain

so that the Dixie Jet could fly back to Europe. This made

Panalpina the first and only freighter to continuously service

Europe with four rotations during the crisis week.

After getting off to a slow economic start, most of Europe

began to expe rience economic recovery starting in the

second quarter of the reporting year. However, market

conditions were very competitive and despite recovering

volumes, margins remained under heavy pressure.

In the United Kingdom, the downturn in the oil and gas

sector continued with customers maintaining tight control

on spending and investment. The market continued to

shrink as did volumes and the failing Irish economy restricted

opportunities. As the reporting year drew to a close, there

were some positive signs that the oil and gas industry was

in the early stages of an upswing.

On the positive side in the UK, Panalpina continued to build

on its promising retail and fashion success of the previous

year winning a significant supply chain management contract

with a leading global design house.

In Germany and Poland, market confidence was much

better than in 2009 with the automotive industry contributing

significantly to the upswing. Panalpina Germany

also tremendously expanded its LCL volumes as well

as its Buyers Consolidation business in 2010. The cornerstone

of this growth was the 30,000 square meters logistics

facility located in Hamburg’s harbour. The modern facility

guarantees the secure consolidation and loading of goods

where all processes are fully controlled by Panalpina.

In 2010, Panalpina Germany and Poland won a number of

new logistic contracts for customers in the hi-tech, retail and

fashion, automotive and telecom industries including the

implementation of a logistics concept to ship highly sensitive

fibre optic parts from Germany to Russia.

Conditions improved significantly in Northern Europe in

the year under review. Panalpina secured its first logistics

contract in the region and carried out the first trial train

shipment from China to Europe for a major fashion retailer.

The region also profited from its strict commitment to compliance,

enabling a retail and fashion business win with

a customer who cited compliance as a major decisionmaking

factor.

Panalpina France continued to grow its presence in the

retail and fashion sector; now counting most major brands

among its customers. Plans are in place to initiate regular

direct air freight transport between Paris and China to support

market growth.

In Southwest Europe, Panalpina Italy achieved a major

end-to-end supply chain management win with a leading

fashion house. Throughout the reporting year, the focus

remained strongly on maintaining the company’s high

Panalpina Annual Report 2010


Reporting Regions

market share in Switzerland and further strengthening its

position in Italy.

Belgium and the Netherlands achieved major logistics

wins in the automotive, healthcare and chemical segments

during 2010.

On the macroeconomic level in Eastern Europe, Austria,

Slovakia and the Czech Republic recorded positive

market trends while Romania, Hungary and the former

Yugoslavia continued to underperform as they faced

high inflation and serious liquidity problems. Panalpina

closed its underperforming operations in Slovenia during

the reporting year.

Africa: diversification across sectors

Middle East: pivotal role between continents

The global financial crisis and the drop in oil prices had

a delayed impact in the Middle East. It slowed the recovery

of the regionally dominant oil and gas industry which is

the main revenue generator in the region. The real estate

credit crunch also overshadowed the region.

Panalpina set several milestones in its regional expansion

plans during the year. In June, it began operations from

its new multimodal transit and logistics hub in Dubai.

In September, Panalpina successfully launched its own

controlled air freight service to the Dubai World Central

(DWC) Al Maktoum International Airport with the first ever

scheduled freighter service calling at the new state-ofthe-art

facility.

25

Of all the countries in the reporting region, Angola,

Cameroon, the Republic of the Congo, Gabon, Ghana

and South Africa, only South Africa has seen a strong

recovery in volumes to pre-crisis levels.

Within Panalpina’s traditional area of operation, the oil and

gas sector, recovery continued to lag. Lower oil prices

and the reduced revenues resulted in new projects remaining

on hold. Despite the slow market recovery in the

region, Panalpina successfully signed contracts to provide

support to one of the biggest oil exploration projects in

West Africa.

Panalpina also took advantage of a number of opportunities

in other sectors such as telecom, healthcare and in the

mining business. The successful launch of the supply chain

management service for the nationwide distribution of telecommunications

goods in Libreville is serving as a model

for other West African countries. The rollout of the national

logistics services for telecommunications goods in Rwanda

and the launch of inbound air freight transport of telecom

goods in South Africa are further examples of Panalpina’s

growing diversity in the region.

Panalpina also continued to optimize the utilization of its

own-operated shipping vessels (Merlin II and III) along

the West African coast, signing contracts with a number

of suppliers. In September 2010, Panalpina expanded

its own-controlled air freight service to a round-the-world

route which includes a Europe (Luxembourg) – South

Africa (Johannesburg) leg. Since its launch, the service has

experienced a solid increase in volumes.

Against this challenging economic backdrop, Panalpina

clinched a number of important deals in the automotive

and telecommunications sectors in the region. With a

warehouse and distribution contract for telecom goods in

the United Arab Emirates, the company began providing

time-definite delivery services for telecom companies

throughout the UAE. In the automotive sector, Panalpina

won a complete air freight import contract, including an

end-to-end time-definite solution, for automotive parts from

Europe through its own-controlled flight service into its

new hub facility.

CIS: increased optimism in all segments

In comparison to 2009, ocean freight volume in Russia

experienced strong growth during the reporting year.

air freight also experienced a modest rate of growth that

was above expectations. The Russian market started

to pick-up again, enabling Panalpina Russia, through concentrated

sales actions, to outperform the market. Other

countries and respective markets in the region lagged

behind in expected market recoveries.

The increased optimism in the market was reflected in

Panalpina’s securing a number of important freight forwarding

and supply chain management contracts throughout

the reporting year in the retail and fashion, oil and gas, automotive

and healthcare sectors and in the project business.

The CIS region also experienced the positive effects of

Panalpina’s settlement with the US Department of Justice

and its strict commitment to compliance as it successfully

expanded its partnership with major oil and gas and telecom

companies. It is also now part of the European Business

Organization within Russia fighting against corruption.

Panalpina Annual Report 2010


Reporting Regions

North America

26

Customized solutions help to drive growth

Panalpina recorded strong volume growth for Air and Ocean Freight in the United

States and Canada. Market growth was exceeded in both segments.

Areas: 2

Canada, USA

Net revenue: CHF 1,409 million

Headcount: 2,295

The Group’s North America region recorded strong volume

growth in both segments – Air and Ocean Freight – in the

first half of the year in particular. However, growth slowed

in the third quarter, mainly because inventories were being

less well stocked and there was an alteration in the cycles

normally observed within the sector. Ocean freight, for

example, experienced an unusually short high season.

Panalpina is increasingly changing from a product-oriented

company to an organization that focuses on offering appropriate

solutions to different customer segments. This trend

attests to the rising demand from Panalpina customers

for complex logistics solutions that combine products such

as Air Freight, Ocean Freight and Road Freight with a series

of value-adding supplementary services to create an individual

solution. The fact that Panalpina recruited additional

staff during the period under review is also attributable to

the growing need for customized logistics solutions.

Flexible response to natural disasters

Panalpina is not only able to react flexibly when developing

new service offerings, it can also do so when existing routes

have to be changed in response to natural disasters. The

Icelandic volcanic ash cloud did not only affect passenger

flights: cargo planes were also grounded in the spring of

2010. However, Panalpina was able to arrange the very first

flight by a freighter aircraft to Europe following the closure

of airspace, using its own-controlled air freight network.

The Dixie Jet took off at midnight on Sunday, April 18, from

Huntsville, Alabama and landed safely in Zaragoza, southern

Spain, instead of Luxembourg (its usual destination) on

the afternoon of Monday, April 19.

Focus on emerging markets as a growth opportunity

The rapid development of the emerging markets, especially

the BRIC countries (Brazil, Russia, India and China), will

result in a significant shift of trading volumes in their direction

over the next twenty years. The new trade routes now

coming into existence are set to gain market share in the

future and alter the global supply chain. This situation presents

major opportunities for international logistics companies.

Panalpina is focusing on fast-growing logistics markets

and has developed new services in response. One example

is a fast and reliable new connection between Asia and

Brazil. With an airport-to-airport transit time of thirty hours,

the new express service connects Hong Kong, Huntsville,

Alabama and São Paulo.

The new globe-spanning route connecting Luxembourg,

Dubai, Johannesburg, Hong Kong and Huntsville is evidence

of Panalpina’s determination to tap the new emerging

markets. Additional own-controlled freight capacity

ensures maximum flexibility in terms of flight schedules and

routes. Panalpina is thus able to adjust freight movements

to market and customer requirements while at the same

time exploiting synergies with the existing Dixie Jet transatlantic

service. The latter has offered regular flights between

Panalpina’s air freight hubs in Luxembourg and Huntsville

since 1990. There are several frequencies a week serving

the southern, south-eastern and central regions of the USA

via an exclusive road feeder service. The service connects

Luxembourg with Huntsville and also serves Mexico City,

Guadalajara and London Stansted.

Panalpina Annual Report 2010


Central and South America

Promising developments on the continent

of South America

27

A number of countries, particularly Brazil, Chile, Peru and Colombia, are currently

experiencing growth, having been considerably less affected by the global

economic and financial crisis than many other industrialized nations. Panalpina

substantially strengthened its market position and held its own as a supplier

of integrated logistics solutions.

Brazil: increased demand for logistics solutions

It did not take Latin America’s largest economy long to

bottom out of the economic crisis. Consumer spending

and foreign investment both continued strong, thus giving

the Brazilian economy a boost. The investments also led

to the currency appreciating, however, which had an immediate

impact on the Brazilian export economy by making

its goods more expensive. Imports rose almost twice as

much as exports in the year under review. This trend had

an impact on Panalpina: the company noted a significant

rise in import traffic. In the area of supply chain management,

Panalpina observed a big increase in demand for

customized logistics solutions. Panalpina’s strategy is to

offer its customers solutions for their entire supply chain.

It is therefore complementing its air, ocean and road freight

products with a series of value-adding supplementary services.

In the case of a globally active company in the automotive

industry, for example, Panalpina does not simply

transport all its incoming consignments from the arrival

gate to the warehouse, but also handles all the import

clearance formalities.

Its innovative solutions have enabled Panalpina to extend

its exclusive contract with a multinational company for the

export of sugar from the Santos container port (state of São

Paulo) to India, the Mediterranean region and the Middle

East. The contract is in keeping with Panalpina’s strategy

of expanding its presence in the commodities segment.

In Campinas, a major industrial and trading center 100 kilometers

north of São Paulo, Panalpina won the Fenix prize

for 2010 as the best forwarder at Viracopos airport. The

trophy is awarded on the basis of the results of a market

survey undertaken among customers and foreign trade

representatives, the two main criteria being customer satisfaction

and general recognition of the company.

In October of the year under review Panalpina launched

a new express service to Brazil. This connects Hong Kong,

Areas: 3

Andina, Mercosur, Middle America

Net revenue: CHF 845 million

Headcount: 1,757

Huntsville and São Paulo in a transit time of 30 hours

(airport to airport). The dynamic economic development

of the emerging countries, which will fundamentally alter

world trade, indicates the strategic importance of this

service for Panalpina. China is already trading heavily

with Brazil.

Market growth in Argentina

In Argentina Panalpina has succeeded in gaining further

market shares overall. The company was able to expand

its presence significantly, particularly in the Tierra del Fuego

region in the south of the country.

Panalpina now seeks to make its mark in Argentina as

a supplier of integrated logistics solutions. The company

is therefore planning to establish itself in the heart of the

country, too. Panalpina intends to open a new subsidiary

in the conurbation of Córdoba, Argentina’s second largest

city with a population of 1.4 million. The city is a center

for the automobile industry and is often referred to as the

“capital of the interior”.

Major contract in Chile

A globally active company in the toy industry has appointed

Panalpina to undertake the warehouse management and

distribution of its goods. The contract involves handling over

18,000 items monthly and distributing around 90 consolidated

consignments all over Chile each month. Panalpina

is also making office space at its new premises available

for technical support.

Panalpina Annual Report 2010


Reporting Regions

Asia Pacific

28

Expanding again

The Group’s Asia Pacific region, with its outstanding growth potential, represents

one of Panalpina’s most important future markets. The company boosted its market

share significantly and met its targets.

Areas: 5

India, East Asia, Southeast Asia,

Greater China, Oceania

Net revenue: CHF 1,270 million

Headcount: 3,063

China: Growth in all segments

As the global economy recovered, Chinese companies

saw their order books fill up again from the end of 2009.

This trend was also evident from the volume of goods

forwarded. Both Air Freight and Ocean Freight recorded

significant rises in volume.

China’s economic activity is increasingly shifting away from

the major coastal cities towards the interior of the country.

Panalpina is adjusting to this change and to the associated

logistical challenges. The company’s strategy does

not focus on individual products such as Air Freight, Ocean

Freight or Road Freight, but rather on putting together tailored

end-to-end solutions. Indeed, Panalpina has observed

growing demand for integrated logistics solutions in the

Chinese hinterland itself.

New subsidiary in Chongqing

In keeping with its “Go West” strategy, Panalpina opened

a subsidiary in Chongqing, a major economic center for

motor vehicle production and heavy industry, in November

of the year under review. The city, which has a population

of 31.4 million, is situated at the confluence of the Jialing

and Yangtze rivers and forms the heart of an extensively

industrialized region. Its location at the hub of the waterways

from eastern China and the trade routes from Tibet

and Myanmar makes the port exceptionally important

economically. In the future, Panalpina intends to meet the

rapidly expanding demand for single-source logistics services

in this region by providing seamless transport chains

that make increased use of rail and ship.

China – Taiwan: Trade relations normalizing

In June 2010, China and Taiwan finalized a landmark trade

agreement designed to strengthen their economic cooperation.

When implemented, the Economic Cooperation Framework

Agreement (ECFA) is expected to help institutionalize

and normalize trade relations between Taiwan and China.

The ECFA, which is a kind of free trade agreement, envisages

the abolition of import and export duties on hundreds

of products traded between the two countries. In addition,

the agreement guarantees Taiwanese suppliers access to

the Chinese services sector.

Strategic partnership with the Shanghai Lingang Group

In November 2010, Panalpina signed a strategic partnership

with the Shanghai Lingang Group. This partnership

is designed to provide a comprehensive bonded warehouse

solution that includes pick and pack, order picking quality

checks and U-turn shipments.

As a first step on the way to offering one-stop logistics

services for customers in the Yangshan free trade port area,

Panalpina had already reached agreement with Lingang

on the rental of 20,000 square meters of warehouse space.

The Shanghai Yangshan business location will play a central

role in Panalpina’s plans to expand its logistics services.

Developing road haulage

Panalpina is steadily changing from a product-oriented

company to an organization that focuses on offering

appropriate solutions to different customer segments. Its

longterm goal is to offer global supply chain management.

Panalpina therefore wishes to expand its presence

in growth markets, and the granting of trucking licenses

in Shanghai is already smoothing the way for Panalpina’s

efforts in this direction. The company does not seek

to procure trucks, but rather – in line with the asset-light

strategy – to cooperate with local carriers.

Panalpina Annual Report 2010


Reporting Regions

Express air freight service from Hong Kong to São Paulo

Oceania: Panalpina strengthens its network in Australia

29

Panalpina has responded to high demand for fast, reliable

connections from Asia to Brazil by introducing an express

air freight service. From Hong Kong via Huntsville, Alabama,

to São Paulo in Brazil, the goods reach their destination

in an airport-to-airport transit time of thirty hours. Additional

own-controlled freight capacity ensures maximum flexibility

in terms of flight schedules and routes, as is already the

case for the tried-and-tested Dixie Jet transatlantic service.

Panalpina is thus able to adjust freight movements to market

and customer requirements as efficiently as possible.

Panalpina has expanded its activities in South Australia

by acquiring Apollo Forwarding in Adelaide. The two

companies have been close partners for ten years. The

acquisition allows Panalpina to benefit from Apollo Forwarding’s

customer relationships and local know-how, and

confirms the Group’s commitment to further growth in the

Oceania region. Thanks to this takeover, Panalpina has

been able to increase the density of its network in Oceania

and widen its customer base.

Southeast Asia: New oil and gas logistics terminal

in Singapore

The southeast Asian markets are of central importance to

Panalpina. Singapore represents a major strategic center

for boosting Panalpina’s market share on the transpacific

route. In August of the year under review, Panalpina brought

an oil and gas logistics terminal into operation in Singapore.

This was the first logistics center of any global transport

company in Singapore to specialize in the very latest supply

chain management solutions for the oil and gas industry.

The customized oil and gas complex is situated inside the

Luoyang Offshore Supply Base in Singapore. It has over

1,100 square meters of office space, 7,000 square meters

of covered warehousing and 14,000 square meters of

open yard space. Furthermore, the facility is in close proximity

to the base jetty, providing natural deep water conditions

that facilitate the handling of floating installations and

oilfield supply and service vessels. The new logistics hub

supports the global upstream network and connects the

region with other major oil and gas centers in Houston,

Aberdeen and Dubai.

Panalpina offers its customers in the oil and gas industry a

full portfolio of services including air, ocean and overland

transportation management with a specific focus on the oil

and gas business. This includes charters, port agency for

supply vessels and rigs, husbandry services, multimodal

solutions, customs clearance, packing, warehousing and

other supply chain management solutions. Well equipped

with “intelligent” technologies, the Singapore hub strengthens

Panalpina’s industry-specific competence.

Freight volumes between Asia and the western world are

booming and intra-Asian trade is forecast to grow by

6.2 % annually. Panalpina, with its innovative supply chain

management solutions and new logistics hub in Singapore,

is poised to exploit this growth potential.

Panalpina Annual Report 2010


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Core Activities

Air Freight

32

Panalpina boosts freight volumes and launches

new air freight services

In 2010 Panalpina boosted its air freight volumes significantly compared with the

previous year: the rise of plus 22 % considerably exceeded market growth of 19 %.

The company thus emerged stronger from the crisis that triggered an unprecedented

drop in global volumes in the air freight market in 2009. Panalpina launched new

regular services within its “own-controlled” network in the autumn.

The increase in freight volumes confirmed that consistent

emphasis on a product-oriented structure with the focus

on defined, sector-specific customer segments has paid

off. The company gained market share and posted aboveaverage

volume growth for air freight. Major advances were

made on the procurement and sales side, which – along

with strict cost discipline – contributed to improving profitability.

The second quarter was very gratifying for Panalpina,

which recorded its best-ever June volume figures.

New appointments to key positions

In September Panalpina announced the appointment of

Henrik Lund as Global Head of Air Freight. A Danish citizen

with over 28 years of experience in the international

air freight business, he has worked for major companies

such as Samson Transport, Avia Cargo, Shipco Transport,

Exel Logistics (now DHL) and DHL Global Forwarding.

At Panalpina he runs the global air freight business as an

integrated part of the supply chain management strategy.

His area of responsibility includes overall air freight product

management, including Panalpina’s “own-controlled”

network, global trade lane management, procurement and

operations.

New air freight services and anniversary celebration

In 2010 Panalpina celebrated the 20th birthday of its

legendary Dixie Jet service. It was in September 1990 that

Panalpina launched this service to run between the air

freight hubs in Luxembourg and Huntsville.

In the year under review, Panalpina also introduced additional

regular air freight services as part of its own-controlled

network, connecting Luxembourg with destinations

such as South Africa, Dubai and Hong Kong. The company

also expanded the existing Dixie Jet service with the addition

of a transpacific route to Huntsville, Alabama (USA).

Panalpina entered into a partnership agreement with Atlas

Air, which operates the new service. This covers key

routes such as Luxembourg to Johannesburg (South

Africa) and Luxembourg to Hong Kong via Dubai, as well

as Hong Kong to Luxembourg and Hong Kong to Huntsville.

Panalpina is thus offering its customers another

regular service to the most important trading centers and

economic regions around the world.

Express service to Brazil

As part of this arrangement, Panalpina also introduced a

new express service to Brazil in cooperation with Atlas Air.

This connects Hong Kong, Huntsville and São Paulo in

a journey time of 30 hours (airport to airport). The company

is thus responding to high demand for fast, reliable connections

between Asia and Brazil.

Successful heavy-lift transport to China

Panalpina’s air-freighting of two high-tech machines from

Hamburg to Shijiazhuang in China caused something of

a stir in April. The company chartered an Antonov AN 225,

the largest commercially used transport plane and the

sole aircraft of this type in the world. The consignment

dispatched by Panalpina consisted of a laser strip welding

machine and a laser beam welding machine. The cargo

weighed around 150 tons altogether. The Charter and

Emergency department of Panalpina’s Air Freight division

was in charge of the project. This department specializes

in the ad hoc chartering of aircraft of all kinds for particularly

urgent shipments and heavy or oversize loads.

www.panalpina.com/air

Panalpina Annual Report 2010


Core Activities

Ocean Freight

Panalpina holds its own during a difficult year

33

In 2010 the global ocean freight market recovered after a year of unprecedented

drama in 2009. Panalpina’s transport volumes rose steadily, beating market growth.

Freight rates remained relatively stable, having fluctuated massively during 2009.

Panalpina won new customers and launched numerous new LCL services.

In the first quarter, freight volumes in the international

ocean freight business remained well below pre-crisis

levels. However, Panalpina grew faster than the market

over the year as a whole, thus winning back market share.

The total number of containers forwarded by Panalpina

rose significantly faster than the overall market, although

market growth slowed from the third quarter onwards.

This was partly owing to the fact that inventories were

being less well stocked, and partly because of an unusually

short peak season for ocean freight. The return to

growth, along with rising profitability, can be attributed –

among other factors – to Panalpina’s strategy of focusing

clearly on customers and products, as well as changes

to the management structure that brought sales and procurement

under one roof.

New Global Head of Ocean Freight

One element in this reorganization was the appointment of

Frank Hercksen as the new Global Head of Ocean Freight.

Hercksen is a German citizen with 26 years’ international

experience at Kühne + Nagel. He has worked in Hong Kong,

Canada, the United Kingdom, Germany, and most recently

the USA. He began his career at Panalpina Germany in

the late 1970s. In his new role, he focuses on strategic

growth and gaining market share for ocean freight. He has

full responsibility for product management in the areas of

FCL (full container load) and LCL (less than container load)

services, trade lane management, procurement and

operations.

Panama and from factories in Asia and North America

(including Mexico) to Central and South America.

Wide range of new LCL services

In the year under review, Panalpina launched numerous new

grouped (LCL) services in response to growing customer

demand. Panalpina introduced new services on a wide range

of routes throughout the world. LCL is an area with enormous

growth potential and Panalpina attaches great importance

to it. The company will continue to introduce rapid,

flexible services wherever its customers require. Demand

for networked LCL services is rising steadily. Customers

whose orders are not suited to full container loads attach

great importance to having their products handled by the

smallest possible number of participants in the transport

chain, whether they are road haulage, handling or warehousing

companies or shipping lines. Pantainer Express Line –

a subsidiary of Panalpina – is a non-vessel operating common

carrier (NVOCC) and one of the largest providers of

end-to-end LCL services within the global Panalpina ocean

freight network. For many customers, the company is

therefore the natural first point of contact for single-source

ocean freight services.

www.panalpina.com/ocean

New contracts

In the year under review, Panalpina concluded new ocean

freight contracts throughout the world, including for the

transport of sugarcane in containers to India, the Mediterranean

region and the Middle East. The signing of this

contract demonstrates that Panalpina has innovative solutions

to offer in the commodities field, too. Another major

contract was won from a well-known Asian hi-tech provider

for the forwarding of container freight from Asia-Pacific to

Panalpina Annual Report 2010


34

Logistics

Important changes in the logistics business area

In the year under review, Panalpina strengthened its organizational structure in the

logistics business area, introducing some important changes. The company expanded

its logistics infrastructure and again supported the internationally recognized 3PL Study.

At the beginning of the year, Panalpina adjusted its organizational

structure in order to be able to react even faster and

more decisively to changing market conditions and boost

growth in all product areas and industry segments. Uniting

sales, procurement and operational functions under the

direction of the Group COO created optimum conditions

for expanding Panalpina’s presence as a leading logistics

provider. The new structure reflects Panalpina’s product

focus and its objective of expanding the range of end-to-end

supply chain management services on offer to customers

in the core industries.

New appointments to key positions

As part of the structural reorganization, Mike Wilson, a top

specialist, was appointed to the post of Global Head of

Logistics. A British citizen, he has over 20 years’ experience

in global supply chain and technology management. He

has worked for major companies such as Celestica Ltd,

Exel Logistics (now DHL), Deutsche Post DHL and most

recently Timex Group. Mike Wilson has global responsibility

for logistics, including road and rail, warehousing and

distribution. He is also in charge of product and network

management, procurement and operations. Continuing to

develop the logistics offering is a key part of Panalpina’s

supply chain management strategy.

Panalpina Annual Report 2010


Core Activities

Overland haulage is an important element in the logistics

business area. Panalpina therefore appointed Thomas

Niederer as new Global Head of Road and Rail during the

year under review. He, too, has many years of experience

in top positions. In his new post at Panalpina he is responsible

for the successful end-to-end direction and further

development of the Road and Rail subproducts, ensuring

optimal procurement of core capacity and subcontractor

management.

Additional logistics space

Panalpina has increased its logistics space in Los Angeles

by over 50 % since moving into a new warehousing facility.

The expansion responds to the needs of the large number

of customers who outsource logistics activities that do

not form part of their core business and who make use of

Panalpina’s comprehensive service offering.

A state-of-the-art logistics hub also came into operation

in the Dubai free trade zone during the year under review.

Situated in the Dubai Logistics City free trade zone next

to the new Al Maktoum International Airport and the Jebel

Ali seaport and between Dubai city center and Abu Dhabi,

this unique infrastructure will provide Panalpina’s customers

with improved cost and service efficiencies in the United

Arab Emirates and across the entire Persian Gulf region.

Panalpina offers the full range of multimodal freight services

combined with logistics products including VMI (vendor

managed inventory), postponement, customization, pick and

pack and warehousing.

In China, Panalpina signed a strategic partnership with

the Shanghai Lingang Group. This includes pick and pack,

order picking quality checks and U-turn shipments.

The two partners concluded a contract for the rental of

20,000 square meters of warehouse space. This agreement

is a first step on the way to offering one-stop logistics

services to customers in the Yangshan free trade port

area (YSFTPA).

WHO guidelines. The company thus offers its healthcare

customers integrated access to numerous destinations

throughout the world and guarantees optimum product

protection within the cold chain and during transport at

ambient air temperatures.

Main findings of the 3PL study

As in the previous year, Panalpina again actively supported

the 3PL study prepared under the direction of Professor

C. John Langley in cooperation with Capgemini Consulting.

Dr Langley and his team examined current trends

associated with the range of outsourced logistics services

available and how they are used. They also analyzed

market potential, customer expectations and service quality

from the point of view of shippers. Service providers

were included in the study to determine their opinions with

regard to the customer concerns explored in the surveys.

The latest study placed particular emphasis on the overall

logistics costs incurred by a product from manufacture

to delivery: these are known as the “total landed costs”.

The study concluded that providers need to be integrated

even more closely into the chain if the potential for savings

and efficiency improvements is to be fully exploited.

The new structure reflects

Panalpina’s objective to expand

its range of end-to-end supply

chain management services on

offer to customers.

www.panalpina.com/scm

35

Important certification awarded to Luxembourg

The Good Distribution Practice (GDP) certification of the

World Health Organization (WHO) is a major pillar of the

program to meet all the standards and specific requirements

of the pharmaceutical and medicinal product industry.

Panalpina’s air freight hub in Luxembourg was awarded this

certification by the inspection and testing company SGS.

Panalpina has installed the Ambient Systems ® measuring

and monitoring system there, and has aligned all its

operating processes with the GDP standards based on

Panalpina Annual Report 2010


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dustrial Projects Telecom Hi-tech Automotive Healthcare

tailor-made customer specific solutions.

s Telecom Hi-tech Automotive Healthcare The Annual Report 2010 reports and on the seven Chemicals Industry Verticals R

which were in effect until the end of the reporting year.

tech Automotive Healthcare and Chemicals Retail and Fas

Healthcare and Chemicals Retail and Fashion Oil and Gas


38

Automotive

The automotive industry experienced an overall economic

recovery in 2010 with nearly all sectors (OEM, tier and

aftermarket segments) showing impressive recoveries

throughout the year. This environment has fuelled trade

and produced a generally strong growth of transported

units, primarily in air freight but also in ocean freight.

Within this dynamic market, Panalpina is a strong

performer who has been able to retain its service level

commitments and excellence towards its clients (large

and small). Panalpina provides its automotive customers

with transportation and logistics services that enable

them to optimize their supply chains, to meet increasing

tight production schedules and to operate successfully

on the basis of lean inventory management. The automotive

industry’s just-in-time and just-in-sequence supply

systems, where the delivery of components from numerous

companies in different countries must be carefully coordinated

to ensure a smooth manufacturing and assembly

process, requires expertise in information design, process

planning and operations efficiency. Panalpina’s services

deliver quality solutions at the lowest possible cost and yet

with the flexibility demanded by the world’s leading vehicle

manufacturers and their suppliers.

By linking its core forwarding activities with targeted and

integrated logistics services for its customers, Panalpina

is looking forward to significant growth potential in its Automotive

Industry Vertical.

Panalpina Annual Report 2010


Customer Groups

Customer case Cooper Standard

39

The customer

The challenge

Cooper Standard, headquartered in Novi, Michigan, is

a leading global supplier of systems and components for

the automotive industry. Products include body sealing

systems, fluid handling systems and anti-vibration systems.

Cooper Standard employs approximately 19,000 people

globally and operates in 17 countries around the world.

The recession that began in 2008 significantly impacted

many industries, but hit the automotive sector particularly

hard. Like many suppliers in the sector, Cooper Standard

was impacted by the recession, but took swift action to

offset the downturn and position the company for long-term

success. The company first streamlined operating costs

and then went through a successful financial restructuring

in less than 12 months during 2009 – 2010 to reduce debt.

These actions combined with improving vehicle sales and

production volumes positioned the company for further

growth and expansion.

Starting in 2004, Cooper Standard began growing through

strategic acquisitions and now has a global presence in

all major automotive markets including the USA, Canada,

Brazil, Mexico, Germany, China, and India. The company

is consistently listed in the top 100 largest global automotive

suppliers.

Cooper Standard’s global growth has also created challenges.

When a company becomes global quickly through

acquisitions, it must become highly adept at integrating

multiple IT platforms, consolidating plants, locations and

equipment. To accomplish all of this, Cooper Standard

needed an ideal logistics partner who understood the company,

industry dynamics and was able keep pace with

rapid expansion to meet customer needs.

The solution

It was clearly evident that Panalpina understood that specific

industry knowledge within a vertical structure was

essential and launched the Automotive Industry vertical

segmentation in mid 2007. Cooper Standard became

a partner with Panalpina for the first time in August of 2007.

Panalpina’s unique ability to handle oversized freight,

assembly line moves and intercontinental FLASH support

on Cooper Standard’s dominant trade lanes has turned

Panalpina into Cooper Standard’s primary forwarding solution

provider in just three years time. With over 60 regular

and sporadic lane pairs, Panalpina provides the entire palette

of services to Cooper Standard including buyer consolidations,

air freight, ocean freight and supply chain design.

“To have a partner that truly understands our products and needs may not be that rare.

To find a partner who is always available and executes its service with passion is rare,

and that is why we use Panalpina.”

Mike Silvio, Director, Supply Chain Management, Cooper Standard

Panalpina Annual Report 2010


40

Healthcare and Chemicals

The healthcare and chemicals industry experienced a

strong recovery during 2010. A number of important trends

and regions are positively impacting the industry. The

swiftly aging population has a budget for pharmaceuticals

and is therefore pushing up the demand for life science

chemicals. India and China are two emerging economies

who are not only producing chemicals and chemical products

to meet global demand; their growing populations are

also major consumers. In the BRIC countries in general,

burgeoning middle class prosperity is boosting per-capita

spending on healthcare. US healthcare reform is also

set to ensure millions of consumers and further increase

market demand. However, the healthcare industry is under

immense cost pressure, particularly from the increase in

generic pharmaceuticals and due to new or amended health

regulations across the globe including the US and the

European Union.

Added to this is an increasing environmental awareness

among consumers coupled with increased environmental

regulations and concerns. Increasing global quality requirements

such as the Good Distribution and Manufacturing

Practice impact customers supply chain processes and lead

to rising logistics and transport costs. Panalpina considers

this to be an interesting business opportunity and offers its

customers flexible forwarding and logistics solutions and

a choice of transportation mode – air freight, ocean freight,

road or courier services – depending on urgency and consignment

size. Panalpina also offers value-added services

including an end-to-end cool chain infrastructure and forwarding

procedures which meet the industry’s hygiene,

temperature and pressure requirements through the entire

supply chain.

Panalpina Annual Report 2010


Customer Groups

Customer case ConvaTec

41

The customer

The solution

For more than 30 years, ConvaTec has created innovative

medical technologies and offered unique services that

enhanced the lives of millions of patients’ worldwide. Its four

key business divisions – Ostomy Care, Wound Therapeutics,

Continence and Critical Care and Infusion Devices –

support health care professionals from the hospital to the

community health setting. ConvaTec brands have global

recognition and are formidable competitors in the global

marketplace. The company is devoted to creatively solving

problems and improving people’s lives – every single day.

The challenge

As one of the world’s largest suppliers of ostomy and

wound care products, ConvaTec faced unique logistics

challenges when it put its international air, ocean and

brokerage business for its Oxygen and Aerosol therapy

products out to tender. ConvaTec was looking for a partner

who would support its goals of improved customer

service combined with optimized supply chain management

processes and overall cost reduction. ConvaTec wanted

to consolidate its cross dock warehousing activities as well

as its domestic and international transportation under one

service provider.

ConvaTec wanted a partner not only to effectively manage

their cross dock operations in the short term, they wanted

a partner who understood their business model and could

work with them to optimize their supply chain management

process. Panalpina had already been providing freight

forwarding services to ConvaTec’s global logistics for over

a year and had already established a good working relationship

with the company when ConvaTec put its brokerage

business out to tender. Panalpina’s overall capabilities in

supply chain management and its growing presence in the

healthcare markets both in the USA and rest of the world

enabled the company to develop a long term vision consisting

of a modern, complete warehousing, distribution and

pick and pack process which will help ConvaTec with their

internationally growing business. The close proximity of

the Panalpina facility in McAllen, Texas, right across the

international bridge from the ConvaTec facility in Reynosa,

Mexico, offered cleaner warehousing and higher ceilings

which allow both higher racking systems and 50,000 square

feet (4,645 square meters) of space for future growth as

business increases.

The very competitive solution Panalpina offered, included

a caged area for high-value cargo, tailored customer service

including domestic shipment tracking, cross docking facilities

and the management of international air and ocean

export orders.

Panalpina Annual Report 2010


42

Hi-tech

In the hi-tech sector, Panalpina continues to utilize its

global reach and industry competence to create end-to-end

supply chain management solutions for its customers.

The short lifecycle of hi-tech products requires a very flexible

supply chain design from point-of-sourcing to the end

consumer. Therefore direct-to-market or postponement

solutions are important enablers which help customers cope

with customer demand in dynamic, volatile markets. With

its global presence and industry know-how, Panalpina is

able to offer the hi-tech industry the increasingly complex

and sophisticated transportation and supply chain services

it requires.

Panalpina has recognized that contract equipment manufacturers

(CEMs) are moving their production sites into

the western part of China and as a consequence of this

trend, Panalpina has established successful operations in

China’s western region including locations in Chongqing

and Chengdu. Panalpina is able to provide its hi-tech customers

a strategic mix of transport services and logistics

solutions ranging procurement to warehousing and distribution.

In the fast-moving hi-tech market, Panalpina helps

customers drive productivity improvements throughout

their supply chains with integrated logistics solutions and

transport services ensuring the timely delivery of parts

and products.

Panalpina Annual Report 2010


Customer Groups

Customer case Toshiba

43

The customer

The solution

Toshiba is a world leader and innovator in pioneering high

technology and a diversified manufacturer and marketer

of advanced electronic and electrical products spanning

information and communications systems, digital consumer

products, electronic devices and components, power

systems, including nuclear energy, industrial and social

infrastructure systems and home appliances. Toshiba

was founded in 1875, and today operates a global network

of more than 740 companies, with 199,000 employees

worldwide.

The challenge

In the rapidly growing Russian computer market, Toshiba

is facing multiple logistic challenges which require short

end-to-end transit times of direct deliveries to distribution

partners, management of customs clearance, communication

focal points, as well as full visibility and transparency

with end-to-end web tracking. The majority of the cargo is

transported by truck from Germany to Moscow. The initial

freight volume is approximately 200 trucks ex. Regensburg,

Germany with cross-docking activities of 11,000 pallets

including local distribution to more than ten locations

within Russia.

Toshiba’s cargo is consolidated by Panalpina in Regensburg,

Germany, where one of Toshiba’s European distribution

bases is located, and is subsequently shipped to

Moscow in Russia by overland truck route. Panalpina was

able to offer Toshiba extensive experience transporting

hi-tech cargo in Russia and important value-added services

for future end-to-end logistics solutions.

Panalpina is building on its successful cooperation between

Toshiba Europe and Panalpina Nuremberg. For the past

three years, Panalpina has been managing total warehouse

operations and kitting and packing operations for this

product group of Toshiba in Dubai to supply Toshiba customers

in the Middle East and African regions.

“This is a good example of how Panalpina, a strategic global partner, has created an

innovative solution based on Toshiba’s specific needs to ensure effective freight management.

As our logistics network evolves, Panalpina continues to focus on productivity

improvements to reduce cost, time and handling thus allowing us to increase customer

satisfaction while additionally reducing our supply chain costs.”

Ludwig Simmel, Senior Manager, Supply Chain Management, Toshiba Europe GmbH

Panalpina Annual Report 2010


44

Oil and Gas

Despite a remarkably stable oil price in 2010, the impact

of the severe economic downswing in 2009 continued

to be felt in this sector into 2010. The events in the Gulf of

Mexico in early 2010 had a negative impact on oilfield

service companies (OFS) and rig operators this year but

as a result, additional investments in equipment and

resources to improve safety and reliability of offshore and

onshore operations are now being made with a positive

effect on equipment manufacturing and supply.

position is built on strong pillars that include a strong commitment

to the industry, a global network covering the

horizontal industry axis (Houston, Aberdeen, Singapore),

a presence in all major oil and gas exploration and production

sites of the world, a dedicated management structure

with profound industry and materials know-how,

logistic solutions that comply with the industry high HSE

and compliance standards, and of course customer

recognition among them the industry’s best of the best.

With over four decades’ experience in the oil and gas

industry, Panalpina is perfectly positioned to support

the industry in its recovery. Panalpina’s leading market

Panalpina Annual Report 2010


Customer Groups

Customer case Saxon Energy Services

45

The customer

Saxon Energy Services Inc. is a growing international oilfield

services company that operates a well-established contract

drilling and well-servicing business. Saxon is focused

on providing contract drilling and workover services to

major and intermediate multinational and national oil and

gas exploration and production companies with technologically

advanced, high-performance drilling applications.

Saxon has a substantial presence in Canada, Colombia,

Ecuador, Mexico, Peru, the USA and Venezuela, with new

operations starting in Australia in early 2011. The company

headquarters is located in Calgary, Canada.

Saxon began 2005 with just nine rigs in a single market –

Ecuador. Saxon has now transformed into a truly international

drilling company with a fleet of 68 rigs in 7 countries

and expects their rig count to go up to 150 by 2014.

Since it began in 2005, Saxon has grown to employ over

1,700 people.

Saxon is a privately held company with strong and recognized

ownership within the energy sector and with aggressive

plans for expansion in existing and new markets.

The challenge

Saxon is focused on delivering superior value to our customers

through its ability to apply technology, deploy rapidly,

and operate efficiently. Optimal, transparent supply chain

management is crucial to ensuring rapid deployment of

material to Saxon’s global network of rigs and to ensuring

their ongoing, efficient operations.

Saxon has to provide supplies and materials to their growing

rig operations around the world and they therefore

source products from numerous suppliers throughout the

USA (mostly Texas). As Saxon’s rig network expanded,

so did their shipping volumes and logistic costs. The company

was drop shipping freight directly to each rig in locations

such as Mexico, Venezuela, Brazil, Colombia, Ecuador

and Peru. Saxon required a logistics partner who would

help them optimize their supply chain and provide visibility

throughout the entire supply chain process.

The solution

As Saxon Energy’s logistics partner, Panalpina’s Oil and

Gas division in Houston, Texas plays a pivotal role not

only optimizing Saxon’s supply chain operations but also

to identifying further cost efficiency possibilities. Panalpina

manages Saxon’s supply chain management business

including the receiving / packing / warehousing / distribution,

air and sea transport, domestic transportation as well

as customs clearance and delivery at some destinations

for all of the supplies for Saxon’s rigs on a global basis.

Panalpina receives all Saxon orders in its Houston facility,

consolidates them by destination and packs and ships

on a regularly scheduled basis to each rig destination. This

approach has reduced the number of shipments required,

thus resulting in cost savings for Saxon. Further, Panalpina

is working with Saxon technology, using its in-house system

for shipment tracking and information. Panalpina shares

Saxon’s focus on delivering superior value and this is the

cornerstone for a strong logistics partnership.

“We required a logistics partner who shared our dedication to customer service and

who would proactively work to achieve the optimal supply chain management our

growing business demands. As our global network of rigs continues to grow, we want

to be able to closely manage costs while maintaining maximum efficiency and visibility.

Panalpina’s industry experience combined with its logistics solutions makes it the ideal

partner to service our SCM needs.”

Juan Castillo, Director of Global Supply Chain Management, Saxon Energy Service Inc.

Panalpina Annual Report 2010


46

Retail and Fashion

The retail and fashion industry recovered well in 2010. The

growth of the market in the BRIC countries, in particular

Russia (consumption) and China (sourcing and consumption)

has been very positive. Panalpina’s commitment to

the retail and fashion sector combined with its customer

focus and global team of experts enabled it to respond

to these market developments with tailored solutions that

met the customers’ needs while providing end-to-end solutions

that deliver cost savings and value-adding benefits.

Going forward it will be critical to continue working jointly

with customers to improve their forecasting processes to

minimize peaks and troughs in the global market that create

additional costs. With its dedicated Retail and Fashion

industry specialists who have extensive experience and

in-depth industry know-how in supply chain design,

implementation and execution, Panalpina can offer its

customers access to best-in-class added-value solutions.

Panalpina’s people are strategically located in key areas

around the world, depending on customer requirements.

Many of the world’s leading retail and fashion companies

recognize Panalpina as a first-class logistics service provider

because of its dedicated, experienced and passionate

employees, its global network and the value and flexibility

of the solutions it delivers.

Panalpina Annual Report 2010


Customer Groups

Customer case Duty Free Shops

47

The customer

The solution

DFS – the duty free shops – is an established leader among

luxury retailers catering to the international traveling public.

It continues to be an innovative retailer, expanding into offairport

duty free stores and large downtown gallerias and

it has grown to become the world’s largest and most progressive

travel retailer.

The challenge

In order to meet the diverse expectations of today’s traveler,

DFS sources products from some of the world’s leading

brands. It delivers high fashion and other goods that cater

to travel and luxury consumers across the world. With

more than 40 sourcing countries and over 2000 suppliers,

DFS is present with stores and gallerias in 14 countries.

The challenge facing the global DFS logistics team is that

they must ensure the goods, whether fashion from Italy

or apparel from Peru, are delivered on time to the global

markets. Key factors to success include high security

and a high service level, as well as IT integration and seamless

communication.

Panalpina and DFS have worked together for 15 years and

have devised an integrated global solution that provides

DFS the flexibility and certainty it needs to run its global

business. The solution is based on pre-shipment checks

to ascertain product readiness, documentation completeness

and overall compliance from the shippers, as well

as physical checks to ensure that shipments, which are

arranged via air or ocean, are based on the needs of

the different destinations, are complete and error free.

Panalpina has worked with DFS for over 15 years. During this time we have

continued to grow the business together. Panalpina understands our needs

and requirements, they offer us competitive solutions and have always had an

account management team built around our local needs but based on a very

global approach.”

Marcel Tschudin, Director of Logistics, DFS

Panalpina Annual Report 2010


48

Telecom

The demand for high-bandwidth mobile services, being

connected anytime and anywhere, video communication

as well as media-driven entertainment continued to grow

in 2010. The trend towards converged or unified communications

was a major driver in the fast moving telecom

industry requiring companies to rapidly upgrade their networks

and adapt their mobile devices.

In developing and emerging markets, mobile subscriptions

are added in the millions on a daily basis, thus pushing up

sales of end devices and helping the industry recover from

its economic challenges. Asia remains the “factory” for the

world as companies continue to concentrate their operations

in China. The shift occurring currently within China

itself is the move from traditional coastal centers to newer

inland locations.

Panalpina’s tailored solutions for the diverse requirements of

its telecom customers – which include many of the world

market leaders in this sector – range from global forwarding

and logistics solutions for the manufacture and distribution

of premium fast-moving consumer goods to complex

transport projects for the construction of large-scale mobile

communications infrastructure covering extensive and

sometimes remote areas. Panalpina has industry-specific

competence centers at its disposal, particularly in the

key strategic markets of Scandinavia, South Africa, Brazil,

India and China.

Panalpina Annual Report 2010


Customer Groups

49

Panprojects

The project market in 2010 was relatively flat as many

companies delayed or cancelled project plans because of

economic uncertainty. Panalpina successfully secured a

number of significant project wins during 2010 and had an

advantageous project base due to the volume of projects

it was already involved and therefore continued into 2010.

In the second half of 2010, the project sector began

showing signs of revival as confidence began to return to

the market.

By their very nature, projects have a start and end date.

It is the continuation of service quality throughout the life of

the project that inspires customers with the knowledge that

they can trust and rely on Panprojects. With its worldwide

organization and its air and ocean freight transportation

capabilities, Panalpina’s dedicated project competence

center, Panprojects, offers integrated turn-key project

forwarding and logistics management services to various

industries on a global scale.

Based in Bremen, Germany and employing some

300 specialists at 37 strategic locations around the world,

Panprojects develops transportation solutions that are

tailor-made for each project and allow fast and secure

shipment of plant parts as well as bulky and oversized

goods for a great variety of projects. Panprojects provides

its services mainly to companies involved in constructing

refineries, LNG and petrochemical plants, mining emplacements

or extensions, and power plants, as well as working

directly for suppliers of other industrial plants, heavy and

oversized equipment and modules.

Panalpina Annual Report 2010


Sustainable Growth

Ecology Corporate Governance Sustainability Social Comm

Environment Ecology Corporate Governance Sustainability

of Conduct Environment Ecology Corporate Governance S

Culture Code of Conduct Environment Ecology Corporate

Corporate Culture Code of Conduct Environment Ecology

lity Security Corporate Culture Code of Conduct Environm

mitment Quality Security Corporate Culture Code of Condu

Social Commitment Quality Security Corporate Culture Co

Sustainability Social Commitment Quality Security Corpora

Governance Sustainability Social Commitment Quality Sec

Corporate Governance Sustainability Social Commitment Q

ment Ecology Corporate Governance Sustainability Social

duct Environment Ecology Corporate Governance Sustaina


itment Quality Security Corporate Culture Code of Condu

Social Commitment Quality Security Corporate Culture C

ustainability Social Commitment Quality Security Corporat

Governance Sustainability Social Commitment Quality Sec

Corporate Governance Sustainability Social Commitment

ent Ecology Corporate Governance Sustainability Social C

ct Environment Ecology Corporate Governance Sustainab

de of Conduct Environment Ecology Corporate Governanc

te Culture Code of Conduct Environment Ecology Corpora

urity Corporate Culture Code of Conduct Environment Eco

uality Security Corporate Culture Code of Conduct Enviro

Commitment Quality Security Corporate Culture Code of C

bility Social Commitment Quality Security Corporate Cultu


Sustainable Growth

CEO Statement

52

Sustainable business built on principles and values

In 2010, Panalpina overcame significant challenges related to corporate

culture and general economic conditions and, as a result, emerged stronger in

and market positioning.

A key factor in overcoming these obstacles was the company’s

redefined core values, built around the three principles

of Performance, Integrity, and Professionalism. These

principles were developed through a bottom-up process

that included workshops throughout the company and they

have been adopted by the Executive Board. The core values

have been translated into leadership competencies which

will form an integral part of performance agreements and

reviews with individual employees. With a global roll-out

poised to take place, these core values and principles will

support Panalpina in operating as a responsible and sustainable

company while further strengthening the culture we

are all proud of.

A key element of Performance is being profitable. Although

profitability is a goal that most businesses take for granted,

the actual pursuit of this goal requires the ability to source

the right information and make choices that can be difficult.

By increasing internal transparency of timely and accurate

information, Panalpina is objectively able to clearly assess

which business units, products, trading routes and client

relationships are profitable. The company has started to

make conscious choices to turn down activities and relationships

that dilute profitability and to make productivity

improvements in order to focus more intently on areas where

real value can be created both for its customers and for

Panalpina itself.

Practicing integrity includes ensuring compliance with rules

and regulations for ethical behavior. In 2010, Panalpina was

able to turn a new page in this regard after settling cases

resulting from past actions. Corruption and anti-trust cases

were settled with US authorities and anti-trust cases in

other regions are nearing closure. As a result, collaboration

with key customers has already strengthened significantly.

provide environmental solutions, such as low-carbon

shipping legs and detailed environmental impact information

for customers.

While professionalism is ensured through established,

in-depth training and education initiatives at Panalpina, in

the current market additional emphasis has to be placed

on flexibility. In the logistics industry in particular, the management

of change and uncertainty has become a clear

factor for success. Panalpina’s employees receive focused

support to help them understand and handle changes

such as the emergence of earlier, shorter, and flatter peak

seasons in freight transport and changing economic

patterns such as more volatile economic swings and the

partial decoupling of business cycles between economies

in transition and more mature markets.

Panalpina has conducted a focused internal and external

communication initiative to make all of its partners aware

of its enhanced positioning, which is the result of both

improving economic conditions and of strengthened values

and principles. While the rate of growth historically experienced

by Panalpina and the entire industry may remain

elusive in the immediate future, there is a clear opportunity

to forge a path of sustainable growth depending on the

respective region.

Monika Ribar

Chief Executive Officer

However, integrity means much more to Panalpina than just

ensuring compliance. It also includes respecting diversity,

which Panalpina clearly understands as an asset in its workforce

and in its ongoing commitment to the employees in

its network. It encompasses respect for the environment.

The PanGreen program addresses both Panalpina’s own

operations and its collaboration with contractors in order to

Panalpina Annual Report 2010


Sustainable Growth

Quality, Security and HSE

Sustainability on 6 continents

53

Panalpina approaches its commitment to quality, service and environmental

performance with a focus on continual improvement, to always meet and exceed its

customer’s expectations.

Quality of service is paramount

Panalpina’s success depends on how well it serves its

customers. This responsibility extends throughout the

organization and across the globe and is embodied in its

employee training and development programs, its culture

of responsibility and accountability and its close cooperation

with its vendors and subcontractors. The Business

Processes & Quality team facilitates and monitors the

implementation of global standards for measuring and

ensuring the quality of the operational service delivered

to customers. In 2010, a total of 132 internal and 76 external

audits were carried out in support of the corporate

quality initiative.

Panalpina enhanced its focus on quality services by implementing

Six Sigma methodologies in key countries of

our network, leading to significant time and cost savings

by virtually eliminating the waiting for packing processes

at a US warehouse, and in another example a 50 % reduction

of the cycle time for cargo at an air freight warehouse

in China.

Another element of Panalpina’s approach to quality management

is the continued expansion and improvement

of the Integrated Management System (IMS) – a repository

for information regarding its business processes and

standards. There are regular audits of Panalpina’s facilities

around the world to ensure compliance with its global

Quality Management System. In 2010, the facilities in over

ten countries received ISO 9001:2008 certification. All

Panalpina locations across the globe are now ISO certified.

Embracing a unified project management methodology

In order to further improve our management of customer

on-boarding and large business projects, a formal project

management system, PanPM, was designed in 2010 and

will be implemented across the company in 2011. An enterprise-wide

view recognizes that in most instances customer

projects as well as internal projects are cross-functional,

affecting multiple organization units. Of course, Panalpina

already has a high number of experienced project managers,

and this initiative is designed not only to support a common

project management culture among them, but also to

broaden awareness among other stakeholders and project

participants. There is also a particular focus on the effective

control of project-related costs, time and resources

in order to minimize risks and at the same time improve

performance.

Engaging with customers

Engaging with customers and obtaining feedback on

Panalpina’s performance continued to play a central role

in 2010. A set of standard questions were included in

more than 20 local surveys, allowing a comparison between

countries and setting a baseline for future trend

analysis. This approach will be continued and expanded

in 2011.

Initial results show that quality and speed of service are

the two most important factors for Panalpina’s customers.

The company takes pride in the fact that its customers

generally rated Panalpina better than the market for both

of these criteria and also recognized the outstanding attitude

of our staff.

Recognitions for outstanding performance

In 2010, a number of different units were recognized with

awards. Panalpina Brazil was awarded the Fenix trophy

for 2010, as the best forwarder at Viracopos Airport – VCP.

The trophy is awarded based on a survey undertaken

among customers and foreign trade local representatives.

It also received two awards from Infraero – the governmental

agency controlling Brazilian airports – for leading

the rankings as most efficient company in two industry

sectors. In Colombia, Panalpina was certified for its HSE

management system by the Colombian Safety Council

(CCS). Panalpina Singapore received a plaque of appreciation

for its excellent logistics services in the years 2008

and 2009. In late 2010 in Madrid, Spain, Panalpina Spain

was recognized for its outstanding cooperation in logistics

services during the 2010 edition of the Huawei Partner

Conference. In Switzerland, Panalpina ranked 19 out of

Panalpina Annual Report 2010


Sustainable Growth

54

250 of the largest Swiss companies, and first place in the

logistics sector, that were assessed for their sustainability

reporting with special emphasis on transparency.

A focus on global security

Security threats are taken very seriously and dealt with

immediately. When these situations are encountered or

anticipated, Panalpina adopts a proactive stance, dedicating

people and financial resources to ensure that its customers

can continue to do business safely and securely.

In 2010, Panalpina continued to enhance and expand its

security capabilities, providing its customers with a range

of options for the secure shipment and storage of valuable

goods and cargo across the globe. Driven by experienced

leadership and dedicated resources worldwide, Panalpina’s

global security team applies its expertise in transportation

security, risk management, infrastructure protection and

regulatory compliance to the complex and demanding challenges

of the globalized supply chain. In 2010, Panalpina

continued the process of deploying additional security personnel

to cover Panalpina’s Operational Areas around the

world. These key individuals, including the new Head of

Security for Central and South America, the Head of Security

for the EMEA and the Head of Global Account Security,

will act as key points of contact for customers’ security

requirements or specific concerns about the security and

integrity of their shipments. Panalpina’s operations as

well as those of its subcontractors are routinely subject to

rigorous audits, including the carriers of Highly Vulnerable

Cargo (HVC).

Panalpina provides its customers with supply chain solutions

that comply with and, at times, exceed many global security

standards and regulations. Panalpina’s network of facilities

includes Certified Cargo Screening Facilities (CCSF)

to ensure that Panalpina shipments will be thoroughly

screened when transiting via the United States. This accomplishes

two important goals: it gives confidence to shippers

that their product will be handled smoothly, efficiently

and securely and it provides assurance to the global community

that Panalpina is committed to the highest standards

of safety and security. Panalpina’s security team and customers

regularly interact through established channels,

such as the requests for quotation, the statements of work,

security addendum and the quarterly business review processes.

Additionally, the Corporate Security team engages

in various customer workshops mapping out solutions

to challenges.

Panalpina continued to secure certification in European

Union countries as an Authorized Economic Operator (AEO)

and has been re-certified and validated in the Customs-

Trade Partnership Against Terrorism (C-TPAT) since 2003.

In 2010, 100 % of cargo shipped via passenger aircraft

from the US was screened, in accordance with the US

Transportation Security Administration requirements.

Commitment to health, safety and the environment

The health and safety of Panalpina’s employees is critically

important. The company’s efforts in this area include

ensuring a safe and hygienic workplace, instilling a culture

of responsibility and risk mitigation, and communicating

with employees, contractors and vendors on issues of

health risks, preventive measures, hygiene and proper medical

care. Employees at all levels of the Panalpina Group

working on any client project are responsible for upholding

the health, safety and environmental policies, principles

and objectives of both the client as well as Panalpina.

The global Panalpina HSE representative is the Corporate

Business Sustainability & Improvement Manager who

ensures the implementation and the maintenance of all

processes needed for the HSE system globally and

reports the performance of the system to the Board Members.

Panalpina Management defines the overall goals

of this HSE plan, appoints responsibilities, provides the

authority and necessary resources for implementation,

assesses performance against the goals and takes corrective

actions as appropriate.

In 2010, Panalpina reported no fatal accidents and 93 nonfatal

accidents. As part of the Behavioral Safety Program,

employees are also encouraged to report events which

might have led to an accident. As a result, in 2010, 82 “near

misses” were reported (previous year: 102). The rate of

lost working day incidents in the certified areas decreased

further, to 7.6 (in days lost per 200,000 / total working hours)

compared to 11.4 in the previous year. Globally, there are

42 health, safety and environment representatives in place

at Panalpina. These representatives are responsible for

providing guidance and advice regarding HSE issues to the

senior management team. Internal audits are performed

by more than 100 trained auditors and 736 on-site inspections

were carried out in 2010 (previous year: 696). In 2010,

ongoing surveillance audits were also carried out by an

external firm, reflecting Panalpina’s commitment to the

highest level of environmental responsibility. All areas

passed the audits.

Panalpina Annual Report 2010


55

Environmental initiatives

Panalpina is well on track to improve its environmental performance

and will continue to strengthen its efforts, both

internally and in support of its customers. To accomplish

this, it pilots new projects, programs and technologies to

further reduce or even eliminate releases of pollutants to air,

water or soil.

Green buildings: Panalpina Germany has launched several

initiatives at its offices in Stuttgart, Nuremberg, and Munich

over the last years. Examples include installations of daylight

sensors to turn off lights automatically when enough

natural light is available. Geothermal energy is used to

reduce fossil energy demand for heating and air conditioning.

Additionally, automated sun-blinds keep the unnecessary

heat out of buildings in the first place.

Eco-friendly transport: In 2010, Panalpina US has qualified

as a SmartWay transport partner, a distinction given to

third-party logistics (3PL) companies who utilize a certain

level of efficient and eco-friendlier transportation. In order

for a trucker to achieve SmartWay approval, they are subject

to reducing and reporting carbon reduction through

various initiatives. Panalpina achieved the required level by

selecting SmartWay-approved subcontractors and also

by encouraging existing providers to apply for and achieve

approval. SmartWay is a cooperative effort of the US

Department of Environmental Protection (EPA) and transport

industry groups.

Helping develop renewable energy: Panalpina was recently

awarded a contract by Siemens T & D in Grenoble to handle

the logistics for the turnkey construction of one of the

largest solar power stations in Europe covering 66 hectares

in the southern French Alps. Once completed, this photovoltaic

park will produce nearly 30 MW, enough to provide

sustainable power to more than 12,000 households.

The path to CO 2-neutral shipping: With its Eco-Consumption

and Eco-Transport programs, Panalpina emphasizes

its commitment to minimizing its own environmental footprint

and to helping its customers find ways to minimize the

impact of their shipments. In the coming years, these programs

will be extended to include Panalpina’s primary

subcontractors in order to understand more fully the various

environmental impacts across its supply chain.

Calculating CO 2 emissions for our customers

In 2010, Panalpina developed a new tool that calculates

CO 2 emissions from transportation via air, sea and road.

The tool is linked to Panalpina’s own operational data

warehouse where information on each shipment regarding

its origin, destination, weight and mode of transport is

consolidated and centrally stored. The output is a concise

Panalpina Annual Report 2010


Sustainable Growth

56

report that shows Panalpina’s customers on a quarterly

basis their total CO 2 emissions by mode of transport, KPIs

for the overall CO 2 efficiency, statistics on total tonnage and

transport performance and analyses of the top ten lanes

utilized. Panalpina’s customers may use this tool for their

own carbon reporting requirements and also to identify

opportunities where they can reduce carbon emissions.

Environmental performance in 2010

In 2009, Panalpina reached an important milestone in

terms of its environmental monitoring. For the first time, key

indicators of the environmental impacts of the company’s

internal operations could be collected in a systematic, harmonized

manner across 80 countries in all regions where

Panalpina operates. Based on the collected environmental

data, Panalpina defined several key performance indicators

and at the beginning of 2010 it set initial internal twoyear

targets to be achieved by the end of 2011.

For the first time, Panalpina has calculated greenhouse

gas emissions from air business travel to further extend

the scope and transparency of its greenhouse gas reporting.

With over 8,000 tons of CO 2 emissions, air business

travel is a significant source of the company’s emissions.

Panalpina will therefore continue to closely monitor these

emissions and develop targets for reduction. In 2010,

Panalpina has also introduced a relative performance metric

in terms of tons of CO 2 emissions per employee (in full time

equivalents).

The table at right gives an overview of the environmental

performance figures collected in 2010 across Panalpina’s

global internal operations.

In 2010, Panalpina continued its systematic monitoring

of environmental impacts. Compared to the previous

year, total electricity consumption has increased by 9 %,

while both heating energy and vehicle fuel consumption

increased by 22 %. Similarly, direct (Scope 1) CO 2 emissions

increased by 21 % while indirect (Scope 2) emissions increased

by 13 %. There are two key drivers for the reported

changes in energy consumption and CO 2 emissions. The

first driver is the growth of Panalpina’s business, which has

resulted in a higher demand for energy resources compared

to the previous year. The second driver is the improvement

in data quality, which involves both more accurate measurements

as well as better coverage of emission sources.

Panalpina is committed to even further improve on its environmental

monitoring and is going to invest in a sophisticated

data management system in 2011.

Panalpina Annual Report 2010


Sustainable Growth

Activities 1 Performance indicator Unit 2010

57

Energy and CO 2

Electricity Consumption Terajoule 191

Heating Overall consumption Terajoule 75

– District heat Terajoule 16

Vehicle fuel Consumption (Panalpina-owned and lease vehicles only) Terajoule 238

CO 2 emissions 2 Total emissions Tons 52,322

– Direct (Scope 1) Tons 21,322

– Indirect (Scope 2) Tons 22,888

– Indirect (Scope 3, business air travel) Tons 8,113

– Relative emissions per FTE Tons / FTE 3.7

Materials

Paper Consumption Sheets / 10E6 226

Toner cartridges Consumption Number 14,745

Water Consumption m 3 /1000 335

Spillages 3 Incident Number 8

Notes:

1

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

countries for which no data was available. For more details, see GRI content index.

2

CO 2 emissions were calculated according to guidelines of the Greenhouse Gas Protocol. Emission factors for direct emissions

were taken from IPCC, 2006. Emission factors for indirect emissions were taken from the International Energy Agency (IEA) and the

UK Department for Environment, Food and Rural Affairs (Defra). For more details, please refer to the GRI Content Index.

3

There was no case with significant damage.

Energy balance by energy category

Indirect

Renewable Energy

in GJ

Indirect

Energy

Direct

Renewable Energy

Direct Energy

CO2 emission by scope and activity

Scope 1 Scope 2

in t CO2

250,000

25,000

200,000

20,000

150,000

15,000

100,000

10,000

50,000

5,000

0

Electricity Heating Owned

vehicles

0

Electricity Heating Owned

vehicles

www.panalpina.com / quality

www.panalpina.com / security

www.panalpina.com / hse

Panalpina Annual Report 2010


Sustainable Growth

Employees

58

Core values, development and assessments support

successful corporate strategy execution

Panalpina’s global Human Resource processes contribute to the successful execution

of the company’s strategic goals by focusing on organizational capabilities, individual

competencies and employee engagement.

At the end of 2010, Panalpina had 14,136 employees in

80 countries. Committed employees have the opportunity

to grow with Panalpina, which enhances the services

provided to customers. To support Panalpina’s employees

in providing these high-quality services, the company’s

Human Resource processes are continuously refined.

Human Resource transformation already delivering

The Human Resource transformation process that started

three years ago continued into 2010. In the year under

review, increasing organizational support for the global

Human Resource strategic priorities involved, namely, (1)

identifying, attracting, managing, and deploying required

talent; (2) propagating a sustainable high-performance

organization and workforce; (3) developing leadership and

other capability requirements; and (4) designing, implementing,

and optimizing Human Resource processes, policies,

service delivery and resources to be “fit for purpose”.

During 2010, a series of workshops were conducted to

focus on core values and actions were initiated based on

the results from the global Employee Engagement Survey

conducted in 2009. Leadership and employee competencies

were redefined to more closely align with Panalpina’s

core values and to respond to the Employee Engagement

Survey results.

In the Business Areas, focus was on the implementation

of Human Resources processes and policy. A newly introduced

dashboard supported the collective assessment

of the progress of the transformation efforts in a systematic

and transparent way. The dashboard will support the company

in validating and prioritizing needed actions and costs.

System support for strategic performance and talent

management

PanLink, a web-based Human Resources management

system, combines tools and processes that allow both

management and employees to realize the true benefit of

Panalpina’s Performance and Talent Management practices.

PanLink is designed to help individuals, teams and the

overall organization to consistently implement these practices

and to deliver transparency, accountability and results

at each and every stage of the company’s Performance

and Talent Management processes. PanLink will also automate

and globally centralize objective and performance

management as well as talent management, succession

planning and compensation.

The global launch of PanLink was supported by systems

and process trainings rolled out to over 650 employees.

While the initial focus was on the senior management,

the system, which went live in December 2010, can be

adopted on a much larger scale quite rapidly.

Re-tooling and re-skilling for enhanced employee

engagement

In response to the results of the Employee Engagement

Survey, Panalpina reinforced its commitment to providing

learning opportunities for all its employees. The Panalpina

Academy coordinated a systematic launch of multi-language

eLearning units. The investment in eLearning is now

rich and encompasses over 25 learning units. These cover

the company’s strategic environmental PanGreen initiative

as well as operations, product competence and compliance

and aim to reach all employees.

Business Areas will have another chance to receive feedback

on their efforts with the next full employee survey

scheduled for 2011.

Discovering and developing leadership talent

In 2010, the Company’s global high-potential program on

collaborative strategic leadership skills, Navigating our

Future, enrolled an additional 48 candidates. The program

is offered to mid-senior high-potential employees who are

willing to pursue an international career.

Panalpina’s re-launched global leadership and managerial

skills program, Steering Success, in its second year, now

includes over 330 department heads, team leaders and

supervisors who will undergo three modules of this program

Panalpina Annual Report 2010


59

over the course of the next twelve months in Mandarin,

German, French, Portuguese, Spanish and English.

Assessment centers for the leaders of tomorrow

More than ever before, the leadership pipeline remained in

focus. A record number of assessments were completed

in 2010 to successfully select, promote and develop candidates

for leadership positions. Assessment centers were

newly opened in North America and in Asia Pacific to help

strengthen our global Human Resource network’s assessment

capabilities in helping us build a high-performance

organization.

Assessment centers are currently offered to selected senior

management staff members to evaluate and nurture talent.

Their goals include accelerated employee development and

improved succession planning.

Building further on the foundations established in 2009 for

annual global cost transparency in relation to cross-border

transfers, 2010 saw the creation of a monthly reporting

process providing further and more frequent cost visibility.

The company predicts that this cutting-edge tool will

support quick and accurate cost-strategic decisions in what

is clearly seen as a high-cost process.

Employees

Number

Europe / Middle East / Africa and CIS 6,745

North America 2,295

Central and South America 1,757

Asia Pacific 3,063

Corporate 276

Total 14,136

www.panalpina.com / jobs

Benchmarking for fair, transparent, and motivational

compensation

As planned, compensation benchmarking played an

important role in ensuring best competitive practices and

to maintain a competitive edge in retaining and motivating

employees.

Panalpina Annual Report 2010


Sustainable Growth

Corporate Culture

60

Strong values, clear compliance

Panalpina is known for a strong culture that nurtures its global footprint like no other

freight forwarder. Strong corporate values are lived daily and are supported by clear

compliance processes.

From 2009 to 2010, Panalpina invested in a journey to

rediscover its core values. An Employee Engagement

Survey was conducted in 2009, and follow-up measures

based on the survey’s results were implemented in

2010. The motivation for this was to reignite the spirit and

strengthen the culture of the company.

Clear values

Panalpina’s aim is to strengthen awareness of the company’s

longterm values, and to ensure that all employees

understand how their individual work contributes to the

company’s success. Cultivating strong values and a

healthy corporate culture is a long process that takes the

commitment and investment of all stakeholders.

These newly refined corporate values are now being prepared

for roll-out throughout the organization via a variety

of channels: interactive eLearning, games, workshops,

and written communications. The new values have also

triggered a change in Panalpina’s leadership competencies

for both managers and employees, and these new

versions will also be rolled out during 2011.

Strong global exchange

With approximately 500 own representative offices in over

80 countries, and close collaboration with partner companies

in 80 more countries, Panalpina’s global network

is the backbone of its business, fostering the way it collaborates

across boundaries to create a global footprint.

Living the Code of Conduct

Derived from the United Nations’ Universal Declaration of

Human Rights and from internationally recognized environmental

standards and labor laws, Panalpina’s Code of

Conduct continues to reflect its commitment to integrity

and responsibility across all operations and divisions.

The Panalpina Code of Conduct encompasses binding

rules on health, safety, and environment; on employee

relations (including protection from discrimination and

harassment); on ethical business conduct (including fair

competition and antitrust and trade regulations); on

the strict prohibition of bribery and corruption (including

a prohibition on political contributions by the company);

and on responsibility for company assets as well as financial

integrity.

The Code of Conduct is available in 30 languages and is

readily accessible by all employees via the intranet (for more

details, see www.panalpina.com / culture). Since 2008, it

applies consistently and rigorously throughout the company;

all Panalpina employees without exception are required to

sign the Code of Conduct. Staff members are encouraged

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

HR managers, or directly to the Corporate Compliance

Office. However, if employees are unwilling or unable to do

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

a confidential report via the internet.

Resources and training for compliance

To strengthen cross-border understanding and collaboration,

Panalpina offers an extensive internal exchange program.

During the year under review, 42 employees from over

eight countries took advantage of this program, allowing

them to spend an average of three months abroad within

the company. This remains a priority for 2011. Participation

was particularly high amongst employees from China,

North America, Germany, and the UK.

In 2010, Panalpina signaled its unwavering commitment to

corporate compliance matters by doubling the compliance

team. The Corporate Compliance Officer, who reports

directly to the CEO and to the Legal and Compliance

Committee of the Board of Directors, is now assisted by a

team of seven full-time Corporate Compliance Managers.

Furthermore, in the year under review, the compliance team

visited Panalpina operations in more than 30 countries

for one to two weeks each in order to ensure that Code of

Conduct and Compliance programs were implemented

Panalpina Annual Report 2010


61

fully and correctly. The selection of the countries was based

in part on the Corruption Perceptions Index of Transparency

International, a global civil society organization focused on

the fight against corruption.

Training remained a focal point in Panalpina’s overall Compliance

Program. The robust eLearning platform (launched

in 2008), which enables employees to familiarize themselves

with the Code of Conduct and various aspects of compliance,

was enhanced with an additional module in the anticorruption

curriculum. Moreover, an antitrust regulations

module is being put together for general release next year.

team has made a concerted effort to engage its key

suppliers in direct discussions.

Panalpina was admitted as a signatory member to the World

Economic Forum Partnering Against Corruption Initiative

(PACI) in 2009. The PACI requires CEO commitment to zero

tolerance for bribery as well as a commitment to implement

a practical and effective anticorruption program within

the company, benchmarked against the PACI Principles.

www.panalpina.com / culture

Panalpina also conducted over 90 on-site compliance

training sessions, incorporating over 800 Panalpina employees

worldwide. This in-house instruction was extended

to non-managerial staff as well, particularly in countries

deemed critical.

Sharing compliance initiatives with suppliers, customers,

and peers

Panalpina continues to strive for and enjoy long-term relationships

with its customers, enabling regular, direct,

and sector-specific presentations and discussions on compliance

issues. In 2010, Panalpina also increased its compliance

discourse with its supplier base. Besides routine

supplier certification activities, the Panalpina compliance

Panalpina Annual Report 2010


Sustainable Growth

Information Technology

62

Information Technology: Driving change at Panalpina

As a global company, Panalpina sees its IT platform as a tool to drive productivity

and quality. By utilizing state-of-the-art technologies, Panalpina’s customers

can be serviced with greater transparency, speed and a higher level of data quality,

which ultimately results in greater value to them.

System integration across a global company

Outlook for 2011

A key challenge for any global company is the management

of information across different locations, time zones, languages

and perhaps most importantly, IT systems. With its

dependence on a global network of subcontractors who

perform essential services on behalf of the company, this

management is particularly crucial for Panalpina. The company

has deployed systems worldwide to enhance collaboration

and the integration of data with its subcontractors.

Much of Panalpina’s IT strategy has focused on building

an IT platform that can efficiently collect, compile, and

integrate the vast amounts of data that drive its operations,

in a manner that improves operational efficiencies and

increases productivity. Examples of this include the worldwide

rollout of a Documentation Management System

that is fully integrated into Panalpina’s application landscape

and operational processes. Other examples include

systems that integrate cross-docking processes into

Panalpina’s core business applications, speeding the flow

of materials through warehouses and ensuring that customers

receive high-quality, efficient service.

In 2011, Panalpina will continue to implement a new standard

release of the SAP Transportation Management (TM)

platform that will include the “Ocean Freight” system, a

state-of-the-art enterprise freight-forwarding and logistics

system. SAP TM will be rolled out throughout the Panalpina

Group in the coming years.

Also in 2011, a global standard Event Management System

will be developed, replacing existing legacy applications.

This will further expand the company’s ability to proactively

support all business scenarios brought forward

by Panalpina’s customers and will enable the expansion of

new services that can be offered. A key goal of this new

system is to increase the transparency and quality of data,

reduce the need to manage data manually and increase the

supply chain visibility for customers in a real-time manner.

Another focal point is the ongoing development of the

supply chain management application suite which aims

to provide Panalpina’s industry verticals with tailor-made

supply chain solutions.

At the end of 2009, a new Management Information System

was implemented to provide Panalpina’s business units,

partners, and customers easier access to data and improve

the control mechanisms for data quality and security. The

objective was to consolidate financial reporting, shipment

information, customer-relevant information, and the measuring

and monitoring of key performance indicators into

one integrated infrastructure, enabling integrated management

from the level of the individual business units all the

way up to the corporate head office. In 2010, this system

was rolled out further, and worldwide training was carried

out for all business areas.

Lastly, collaboration, content management, and knowledge

management is a huge challenge for all companies due

to the intrinsically heterogeneous technology landscape.

To address this, Panalpina will implement a Integrated

Standard Business Platform (ISBP) with the goal of improving

internal and external collaboration, facilitating the

exchange of information, and building up a centralized

knowledge management platform.

Panalpina Annual Report 2010


Sustainable Growth

Social Commitment

Continued determination to fight poverty-induced

blindness

63

Over the past seven years, Panalpina has consistently demonstrated genuine passion

in supporting the Vision First program, which strives to eliminate avoidable blindness

in Ghana through providing timely clinical and surgical eye care to people who would

normally not have access to treatment of any kind.

In order to make a real impact, Panalpina has fully committed

itself to one key initiative: the fight against avoidable

blindness in Ghana. The Vision First initiative is trying to

attain the goal of eliminating avoidable blindness by 2020.

Over 25 million people in Africa are estimated to be living

with visual impairment. One child goes blind every minute

and has a 50 % risk of dying within two years of the onset of

blindness. In Ghana alone, about a quarter million people –

or more than 1% of its estimated 22 million inhabitants –

are blind. Over 80 % of these cases are caused by preventable

and curable diseases such as cataract, trachoma

and nutritional blindness.

International and local resources for measurable progress

As part of its battle plan, Panalpina works in partnership

with the Swiss International and Ghana Red Cross Societies,

as well as the Ghana Ministry of Health. The Vision

First program has a three-pronged approach: treating eye

disorders that can lead to blindness, training specialized

medical personnel, and expanding the infrastructure and

technology base. This is made possible by a combination

of external funding, such as Panalpina’s support and local

resources. A key contribution to the program is the maintenance

of a network of volunteers that provide awareness

for eye care in remote village communities. These trained

volunteers conduct visual acuity checks, support the

affected in receiving glasses or treatment in the nearest

clinic and offer vital information on eye care that helps many

to avoid blindness in the first place. In 2009 Panalpina

again extended its commitment to Vision First for another

three years by pledging to contribute a total of CHF 600,000

over this period to help finance the fight against avoidable

blindness.

Some of the initiatives launched in 2010 were: the adaptation

of mobile surgical clinics to reach patients at subdistrict

and out-of-partnership areas; working with student

doctors and nurses to generate interest in ophthalmology

and the inclusion of Mothers’ Club leaders in volunteer

training to utilize their collective experiences with Red

Cross activities.

Detailed quarterly reporting on the Vision First program

and its planned annual initiatives and deliverables in

particular, allows for active engagement by all parties

involved – including Panalpina.

2010 results

Patients treated (clinics / in the field / schools) 154.482

Surgeries performed 2,135

Patients issued vision aids 1,275

Clinics / hospitals in operation 14

Persons reached by Red Cross volunteers for health

education

Number of personnel

www.panalpina.com / society

466,217

Ophthalmologists 1

Opticians 2

Nurses (trained to treat minor eye diseases) 27

Schoolteachers (with special training on healthcare

matters)

325

Active Red Cross volunteers 918

Fourteen clinics attend to over 38,000 individuals each

quarter. School screening activities are given particular

attention, as are optical services, cataract surgery and

community outreach activities reaching additional people.

Panalpina Annual Report 2010


Sustainable Growth

Corporate Governance

64

Corporate Governance and Remuneration Report:

committed to a transparent management structure

Panalpina is committed to a transparent management structure that is governed

by international corporate governance principles. This Corporate Governance Report

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

to provide investors with key information regarding corporate governance in an

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

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

Governance guidelines.

1 Group structure and shareholders

1.1 Group structure

1.1.1 Operational group structure

Panalpina’s business activities are primarily regionally

oriented. The operating structure is divided into the following

four regional units:

• Europe / Middle East / Africa and CIS

• Asia Pacific

• North America (USA and Canada)

• Central and South America

In 2009, Panalpina integrated the regional management

layer into its Head Office structure.

Secondary, the business activities are subdivided into the

following business segments:

• Air Freight

• Ocean Freight

• Logistics (road and rail, warehousing and distribution)

Supplementary information can be taken from the segmental

reporting section of the Consolidated Financial

Statements (pages 97 – 99).

1.1.2 Listed companies within the scope of

consolidation

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

holding company of the Panalpina Group, is the only listed

company within the scope of consolidation. PWT has its

registered office in Basel, Switzerland. The PWT shares are

exclusively listed on the SIX Swiss Exchange. The market

capitalization on the closing date amounted to CHF 3,0 billion

(25,000,000 registered shares at CHF 120.50 per

share).

The PWT shares are traded under Valor no. 216808,

ISIN CH0002168083, symbol PWTN.

1.1.3 Non-listed companies within the scope of

consolidation

The main subsidiaries and associated companies are

disclosed in the Consolidated Financial Statements

(pages 133 –135) itemized by registered office, nominal

capital, equity interest in percent, investment and method

of consolidation.

1.2 Significant shareholders

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

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

Panalpina World Transport (Holding) Ltd., Basel, Switzerland,

held a share capital of 5.5 % on closing date. The

respective treasury shares were purchased as a result of

PWT’s share buyback program (referenced in section 2.3)

and its share and option programs (referenced in section 5.1).

With regard to other significant shareholders, during the

reporting year various disclosures were made on the

SIX online publication platform. The various notifications

(listed by shareholder and transaction date) are summarized

as follows:

Cevian Capital II Master Fund L.P.

27. 01. 2010 increase of share capital to 3.77 %

23. 02. 2010 increase of share capital to 5.19 %

07. 07. 2010 increase of share capital to 10.31%

FIL Ltd. (Fidelity International) Hamilton, Bermuda

28. 01. 2010 decrease of share capital to less than 3 %

Panalpina Annual Report 2010


Sustainable Growth

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 50,000,000 and is divided into

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

CHF 2.00 each.

2.2 Authorized and conditional share capital

The extraordinary Shareholders’ Meeting of PWT held

on August 23, 2005 agreed with the Board of Directors’

proposal to create an authorized share capital up to a

maximum aggregate amount of CHF 6,000,000 by issuing

a maximum of 3,000,000 registered shares with a nominal

value of CHF 2.00 each. At the Shareholders’ Meeting of

May 15, 2007 and subsequently at the meeting of May 5,

2009 the authorized share capital was renewed at the

same value until May 2011.

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

With the exception of the share split introduced at the IPO,

there has been no change in the share capital structure

during the years 2005 through 2009.

In August 2007, the Board of Directors initiated a share

buyback program. Under this program, shares amounting

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

been repurchased. The buyback program was concluded

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

Directors to the Annual General Meeting to reduce the

share capital and cancel the repurchased shares has

been postponed with the explicit consent of the Swiss

Takeover Board.

2.4 Shares and participation certificates

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

shares with a nominal value of CHF 2.00 each

were issued. On this date, no participation certificates

were issued.

2.5 Dividend-right certificates

On the closing date, no dividend-right certificates had

been issued.

2.6 Limitations on transferability and nominee

registrations

2.6.1 Limitations on transferability for each share

category; indication of statutory group clauses and

rules for granting exceptions

Acquirers of PWT shares are entered into the share register

as shareholders with voting rights upon provision of

proof of the acquisition of the shares and provided that

they expressly declare that they hold the shares in their

own name and for their own account.

The Articles of PWT specify that any shareholder may

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

number of shares recorded in the commercial register. This

limitation for registration in the share register shall also

apply to persons who hold shares fully or in part through

nominees within the meaning of the Articles. Furthermore,

this limitation for registration in the share register also

applies to registered shares that are acquired through the

exercising of pre-emptive rights, warrants and conversion

rights. The Board of Directors is empowered to allow

exemptions from the limitation for registration in the share

register in particular cases.

The Articles make provision for group clauses.

The limitations on transferability do not apply to the shares

held by the Ernst Göhner Foundation because it held

PWT shares prior to the implementation of the limitations

(so-called grandfathering).

2.6.2 Reasons for granting exceptions in the year

under review

No exceptions were granted during the reporting year.

2.6.3 Admissibility of nominee registrations; indication

of any percent clauses and registration conditions

The Articles of PWT specify that the Board of Directors may

register nominees with voting rights in the share register

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

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commercial register. Nominees are persons who do not

expressly declare in their application that they hold the

shares for their own account and with whom the company

has entered into an agreement to this effect.

The Board of Directors is empowered to register nominees

with voting rights exceeding 2 % of the share capital

recorded in the commercial register as long as the respective

nominees inform PWT of the names, addresses, nationalities

(registered office in the case of legal entities) and

the shareholdings of those persons for whose account

they hold 2 % or more of the share capital recorded in the

commercial register.

The Articles make provision for group clauses.

2.6.4 Procedure and conditions for 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 abolition or change of the

provisions relating to transfer limitations.

2.7 Convertible bonds and warrants / options

There were no convertible bonds outstanding on the

closing date.

The only issued options relate to the share and option

participation program (Management Incentive Plan, MIP)

for 470 senior managers of Panalpina. As of 2009, the

Executive Board has been excluded from participation in

this program. 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 4, 2010, Chris

E. Munt wyler, Hans-Peter Strodel and Beat Walti were

elected and Rudolf W. Hug, Günther Casjens, Guenter

Rohr mann and Roger Schmid were re-elected to the Board

of Directors for a one-year term whereas Wilfried Rutz,

Yuichi Ishimaru and Glen R. Pringle stepped down from the

Board. In December 2010, Günther Casjens tendered his

resignation due to other commitments.

On the closing date, the Board was composed of

six persons.

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

Roger Schmid and Beat Walti) are also members of the

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

the Ernst Göhner Foundation.

The biographies of the members are as follows:

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

Re-elected in 2010 (until 2011).

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.

Guenter Rohrmann, Vice Chairman of the Board of

Directors. German citizen. Born in 1939. Re-elected in

2010 (until 2011).

Guenter Rohrmann is a trained forwarding and shipping

merchant. He started his forwarding career at Seaboard

World Airline in 1961. From 1962 to 1982, he held several

positions at Air Express International (AEI) and in 1982,

he became the Vice President Operations USA. From 1985

to 1989, he was COO and the following year he became

the CEO of the AEI Group. From 2000 to 2002, he was the

Vice Chairman of Danzas AEI Inc. Guenter Rohrmann

became COO DHL GCS Global Customer Solutions from

2002 to 2005. In 2005, he was appointed as CEO DHL

Emerging Markets and in 2007, he became a consultant for

DHL Emerging Markets. Since the beginning of 2008, he

has been an independent management consultant working

on a variety of industry projects.

Guenter Rohrmann has been a member of the Board of

Directors since 2008.

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

Swiss citizen. Born in 1952. Elected in 2010 (until 2011).

Chris E. Muntwyler attended the School of Commerce

in Zürich and completed various executive programs

at Harvard University, IMD and at the Wharton University.

From 1972 to 1999 he held several positions at Swissair,

until 1981 in various Leadership functions in the Marketing

Division, in 1982 as General Manager Marketing and Sales

Scandinavia and from 1986 for North America. In 1990,

he took over the responsibility for the global Price- and

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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 Managing Director

Switzerland, in 2002 as Managing Director Germany,

in 2003 as Chief Executive Central Europe, and in 2005 as

Chief Executive United Kingdom.

Today Chris E. Muntwyler is President and CEO of the

management consulting company Conlogic AG.

Roger Schmid, Member of the Board of Directors. Swiss

citizen. Born in 1959. Re-elected in 2010 (until 2011).

Roger Schmid holds a university degree in law as well as

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

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

a subsidiary of Credit Suisse. Roger Schmid works as

an Executive Director of the Ernst Göhner Foundation.

Roger Schmid has been a member of the Board of Directors

since 2003.

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

Swiss citizen. Born in 1943. Elected in 2010 (until 2011).

Hans-Peter Strodel holds a PhD in economics from the

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

executive assistant at Maschinenfabrik Benninger und

Heberlein AG. From 1975 until 1994, he held several positions

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

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

Finance at Werkzeugmaschinenfabrik Oerlikon-Bührle AG

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

Strodel was CFO at Schweizerische Post.

Beat Walti, Member of the Board of Directors. Swiss citizen.

Born in 1968. Elected in 2010 (until 2011).

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

In 1998, he became a consultant with McKinsey & Co. in

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

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

2002, Beat Walti has been a lawyer with Wenger & Vieli

in Zurich specializing in corporate, commercial, contract,

competition / antitrust law. He became partner with

Wenger & Vieli in 2007.

All the members of the Board are non-executive members

and do not actively perform any managerial functions at

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

any executive positions within the past three years prior to

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

Directors has a substantial business relationship with PWT

or any of its group companies.

3.2 Other activities and vested interests

Rudolf W. Hug, Member of the Board of Trustees

(Stiftungs rat) of the Ernst Göhner Foundation, Zug, and

Member of the Board of Directors of the following

companies: Orell Füssli Holding AG, Zurich; Deutsche

Bank (Schweiz) AG, Geneva; Allreal Holding AG, Baar.

Chris Muntwyler, Senior Associate of Nyras Capital

Group in London and member of the Board of Directors

at Austrian Post in Vienna.

Roger Schmid, Member of the Board of Trustees and

Executive Director of the Ernst Göhner Foundation, Zug.

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

Skyguide, Meyrin (Switzerland) since 2007.

Beat Walti, Member of the Board of Trustees of the Ernst

Göhner Foundation, Zug.

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.

3.4 Elections and terms of office

3.4.1 Principles of the election procedure and limitations

on the terms of office

The Articles of PWT do not make provision for the general

renewal of office for the Board of Directors. The members

of the Board of Directors are elected at each General

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

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

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

members of the Board of Directors.

3.4.2 The first election and remaining term of office for

each member of the Board of Directors

The timing of the first election and the remaining term of

office for each member of the Board of Directors is specified

under section 3.1.

3.5 Internal organizational structure

The Board of Directors is responsible for the ultimate management

of the company and monitoring of the Executive

Board. It represents the company externally and is responsible

for all matters which have not been transferred to

another executive body of the Company by the Swiss Code

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

Board of Directors has established Organizational Regulations

that transfer certain management responsibilities to

the Executive Board.

3.5.1 Allocation of tasks within the Board of Directors

The Board of Directors self-constitutes and appoints its

Chairman and Vice Chairman. The Chairman (in his absence

the Vice Chairman) directly supervises the 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.

3.5.2 Member list, tasks and areas of responsibility for

each committee of the Board of Directors

Three committees exist under the Board of Directors.

The Audit Committee consists of the following members of

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

Günther Casjens (until December 2010) and Roger Schmid.

The Audit 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 Internal Control System

(ICS) and with the efficiency of external and internal audit

procedures including risk management. The Audit Committee

reviews the consolidated annual financial statements as

well as the published interim financial statements and submits

an application to the Board of Directors for approval.

It regularly maintains contact with the Group Auditors and

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

reports of the Group Auditors and semi-annual reports of

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

quality, effectiveness and interaction between the control

systems, to determine the audit priorities, to introduce proposed

measures and to monitor their implementation. The

Audit Committee determines the organization of Corporate

Audit, adopts the internal audit charter and approves the

annual planning / scope of internal audit.

In the field of risk management, the Audit Committee

approves the detailed and weighted risk map of the Executive

Board, adopts the necessary measures 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 strategic, financial, operational,

legal and compliance risks that could significantly impact

the company’s ability to achieve its business goals and

financial targets. Identified risks are weighted and prioritized

by the Executive Board according to their significance

and likelihood of occurrence. For each risk, specific risk

mitigation measures – including their current status – are

defined and responsibilities are allocated. The risk map,

which is compiled by the Risk Review Committee, chaired

by the Corporate Secretary, for review by the Executive

Board and subsequent approval by the Audit Committee,

contains risks identified and assessed by the respective

corporate functions, selected country management, Corporate

Audit and the Group Auditors. The group’s key

risks are annually reported to the Board of Directors.

During the reporting year the Audit Committee held five halfday

meetings. During Audit Committee meetings, direct

discussions took place with representatives of the Group

Auditors and Corporate Audit. Representatives from the

Group Auditors were present at three of these meetings

and the Corporate Auditor (being a permanent participant

of the Audit Committee as of August 2010) attended four

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

Executive Board was regularly represented by the CEO,

the CFO and the Corporate Secretary.

The Compensation and Nomination Committee consists

of the following members of the Board of Directors:

Rudolf W. Hug (Chairman), Chris E. Muntwyler, Guenter

Rohrmann and Beat Walti. It monitors the selection process

for members of the Board of Directors, the Executive

Board and other selected senior management positions,

determines the overall remuneration and terms of employment

for members of the Board of Directors and the Executive

Board as well as remunerations ranges for highly

compensated employees. Regarding the compensation of

the members of the Executive Board (overall remuneration

including target bonus), the Committee makes a decision

subject to the final approval of the Board of Directors;

applications for the compensation of the Board members

is decided by the Committee and shared with the Board of

Directors. The Committee each year decides on the bonus

compensation for the CEO and the other members of the

Executive Board for the previous year based on recommendations

of the Chairman (for the CEO) and the CEO

(for other Executive Board members). Furthermore, the

Committee regularly reviews the Board Stock Award Plan,

the Executive Board Mid-term and Long-Term Incentive

plans and the Group’s management share and option program

(MIP) and submits proposals for final approval to the

Board of Directors. Moreover, it approves concepts and

policies for the Group’s management performance assessment,

succession planning and expat programs.

During the reporting year, the Compensation and Nomination

Committee held four meetings of approximately two

hours each. The Executive Board was regularly represented

Panalpina Annual Report 2010


Sustainable Growth

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

the Corporate Secretary.

The Legal and Compliance Committee consists of the following

members of the Board of Directors: Rudolf W. Hug

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

company’s handling of major legal matters, in particular,

the governmental investigations against the company (which

have largely been completed in the reporting year) and

related proceedings as well as the development of the company’s

compliance policies and procedures. In particular,

the Committee oversees the compliance undertakings to

which the Company has agreed with the US Department

of Justice under a Deferred Prosecution Agreement in

November 2010. During the reporting year, the Committee

has held four meetings and seven telephone conferences

with the participation of outside counsel. The Executive

Board was represented at these conferences by the CEO

and the Corporate Secretary.

The Committees generally meet prior to Board of Directors

meetings. The chairmen of the committees inform and

update the Board of Directors on the topics discussed and

decisions made during such meetings. They submit 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.

3.5.3 Working methods of the Board of Directors and

its committees

During the reporting year, the Board of Directors held four

full-day meetings and one two-day meeting as well as

one one-hour meeting and three telephone conferences.

The Executive Board was represented by all its members

at these meetings. In urgent cases, telephone conferences

or decisions by circular may be organized in order for

decisions to be taken.

At every meeting, the Executive Board updates the Board

of Directors on business and key financial developments

and main regional development. On a quarterly basis,

detailed consolidated financial statements on the group and

regional and business segment levels are reported to

the Board of Directors in accordance with IFRS standards.

The Board of Directors is furnished in time with an agenda,

detailed meeting documentation related to topics on the

agenda and minutes.

3.6 Definition of areas of responsibility

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

has transferred the responsibility to develop and implement

the group strategy, as well as the responsibility to supervise

business and financial development of the Group’s subsidiaries,

to the Executive Board.

The Organizational Regulations adopted by the Board

of Directors govern the cooperation between the Board

of Directors, the Chairman and the Executive Board. It

contains a detailed catalogue of duties and competencies

which determine the financial thresholds within which the

Board of Directors and the Executive Board can efficiently

execute their daily 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 business strategy

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

approval of major Group policies and organizational structures

including topics related to Corporate Governance

and Compliance, the approval of the annual operational and

investments budgets, the approval of any extraordinary

additional investment applications as well as financial planning.

Further responsibilities include decisions regarding

mergers and acquisitions and major human resources and

remuneration decisions following recommendations and

preparatory work of its Compensation and Nomination

Committee.

3.7 Information and control instruments

vis-à-vis the senior management

The Executive Board informs the Board of Directors of

business developments in a written format on a monthly

basis and a detailed update is provided at each Board

of Directors meeting. Elements of this reporting include

monthly financial reports, consolidated quarterly regional

and business segment results according to IFRS (with

actual figures, previous years’ figures, quarter results and

budget figures as well as a comparison with the financial

guidance), the reporting of business development in all

regions and business segments (including focus on problematic

organizations), the development of shipments,

volumes and tonnages, the debtors’ and creditors’ reports

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

Further information regarding personnel and organizational

changes, extraordinary events and the activities of analysts,

investors and competitors form part of the regular reporting.

Moreover, the Board of Directors annually reviews and

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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 three Executive Board meetings

and regularly receives the minutes of the Executive Board

meetings. The CEO and individual members of the Executive

Board regularly join meetings of the Board of Directors

as well as meetings of its committees. In addition, individual

Executive Board members and other senior executives

attend specific topic discussions pertaining to their particular

field of expertise when required. Furthermore, specific

meetings of the Board of Directors are dedicated to a

detailed review of major markets, business segments and

the Group’s development according to predefined schedule.

For further details please refer to sections 3.5.2 and

3.5.3. The Audit Committee of the Board of Directors monitors

and assesses the activities of the Corporate Auditor

as well as his cooperation with the Group Auditors.

The Audit Committee receives the Corporate Auditor’s

half-year reports and also adopts the comprehensive

annual risk map of the Executive Board. The Audit Committee

approves the proposed risk control and risk mitigation

measures as well as the annual planning / scope of

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

For further details please refer to section 3.5.2.

4 Executive Board

4.1 Members of the Executive Board

Further to a restructuring of its organization by combining

the sales, procurement and operations functions under

the leadership of the Chief Operating Officer, both Dominik

Tichelkamp (former Chief Product and Procurement Officer)

and Sandro Knecht (former Chief Marketing and Sales

and Supply Chain Management Officer) retired from their

Executive Board positions in March 2010.

On the closing date, the Executive Board was composed

of five persons.

Monika Ribar, Chief Executive Officer, Swiss citizen. Born

in 1959. Member of the Executive Board since 2000 and

CEO since October 2006. Apart from her CEO function,

Monika Ribar has special responsibilities for Corporate and

Regional Development, Corporate Compliance, Corporate

Communications, Panprojects and Agent Relations.

Monika Ribar joined the Group in 1991. She held several

positions within the Group’s controlling, IT and global

project management departments. From 2000 to 2005,

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

of the Group and was member of the Executive Board.

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

and her appointment as CEO was announced in June

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

She holds a university degree in Finance and Controlling

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

Executive Program of the Grad uate School of Business at

Stanford University, Palo Alto, California in 1999.

Marco Gadola, Chief Financial Officer, Swiss citizen.

Born in 1963. Joined Panalpina as a member of the

Executive Board in September 2008. Responsible for

Corporate Finance, Controlling, Investor Relations,

Strategic Finance and Projects, Indirect Purchasing and

Information Technology.

Marco Gadola is a finance and economics expert with

many years’ experience in international companies. Before

joining Panalpina he was Group CFO and Executive Vice

President Operations of Straumann Holding, a world-leading

Swiss-based dental and oral technology company;

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

consumer foods company Hero. He also held

leading management positions at the Hilti Group, which

manufactures and sells products for the construction and

building industries. Furthermore, both at Straumann and

at Hero Marco Gadola oversaw production, logistics, investor

relations and information technology worldwide, and

played a leading part in the acquisition and integration of

companies. Marco Gadola has a Masters Degree in Business

Administration and Economics from the University

of Basel (Switzerland). He also completed the Accelerated

Management Development Programme 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. Responsible for Corporate

Legal Services and Insurance.

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

Secretary of the Board of Directors and the Executive

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

Legal and Insurance departments. He also managed

Corporate Communications until August 2008. Christoph

Hess holds a degree in law from the University of Basel

and has been admitted to the bar in Switzerland.

Alastair Robertson, Chief Human Resources Officer, British

citizen. Born in 1960. Member of the Executive Board since

April 2008. Responsible for Human Resources.

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Sustainable Growth

Alastair Robertson joined the Group in 2007 as Head of

Global Human Resources. Before joining Panalpina, he

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

he held various positions in the field of Human Resources:

between 1999 and 2001 as Vice President Human

Resources Americas and from 2002 to 2004 as Vice 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 attained the rank

of Major and served in numerous countries. Alastair Robertson

holds an MBA in Strategy and Marketing from the

University of Huddersfield, Bradford (UK). He also attended

the Royal School of Military Engineering, UK and the Royal

Military Academy, UK.

Karl Weyeneth, Chief Operating Officer, Swiss citizen.

Born in 1964. Member of the Executive Board since April

2008. Responsible for Air Freight, Ocean Freight, Logistics,

Supply Chain Solutions, Industry Verticals, Sales and

Marketing and Business Processes and Quality.

Karl Weyeneth joined the Group in 2007 as Regional CEO

for North America, where he was responsible for the

development and results of the subsidiaries in USA and

Canada. He is a professional with 15 years’ 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

Executive Vice President and CFO of Danzas Management

Latin America (USA), where he attained profound experience

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 interests

Monika Ribar: Member of the Board of Directors of Logitech

International SA, Romanel /Morges.

4.3 Management contracts

No management contracts exist with any third party

outside the Group.

5 Compensation, shareholdings and loans

5.1 Content and method of determining the

compensation and the share-ownership programs

The compensation and principles governing the Board of

Directors Stock Award Plan, the Executive Board mid- and

long-term incentive plans and the share and option program

for other senior management (excluding the Executive

Board) are determined and approved by the Board of

Directors based on the proposal of the Compensation and

Nomination Committee. Further, the Committee regularly

updates the Board of Directors during the Board of Directors

meetings, applies for changes in the remuneration

system as required and annually reports the bonus allocation

of individual Executive Board members. Members of

the Executive Board do not attend respective discussions

regarding decisions related to their own remuneration.

Remuneration of the Executive Board members and other

500 executive positions is based on a job and salary banding

which is itself the result of multiple market data surveys

compiled through four leading global HR consultants from

a normative group of companies comparable by size and

geographical reach. The identities of these companies are

not disclosed to Panalpina.

The members of the Board of Directors receive a fixed

annual compensation. Moreover and introduced in 2009

(reflecting fiscal 2008), part of each Board member’s

remuneration is in free shares of the company to the value

of CHF 50,000. The corresponding number of shares is

based on the share’s closing price on April 30, and has a

one-year restriction period. This Stock Award Plan has

replaced the former share and option program for Board

members.

The salary package for the members of the Executive Board

consists of a fixed basic salary, lump sum vehicle 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 guidance for the respective business year,

whereas 50 % depends on the achievement of measurable

individual 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 50 % and 67 % of their respective annual

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72

basic salaries depending on their function. All bonus payments

are cut if the respective group or individual performance

targets have not been reached.

The Compensation and Nomination Committee annually

reports to the Board of Directors on bonus payments to

the members of the Executive Board.

In 2009, the bonus scheme for Executive Board members

was adjusted to focus on the Company’s sustainable midand

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

continue to be set by the achievement of annually reviewed

Group KPIs and individual performance targets as outlined

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

converted into PWTN shares. The applicable share price

for such deferred bonus shares is the PWTN closing price

on April 30, in the first year of a three-year cycle (2009

to 2011) which was CHF 62.50. The deferred bonus share

price will thus be redefined on April 30, 2012. In addition,

the number of such allocated deferred bonus shares is

matched by the Company after 12 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 participating

in a Long-Term Incentive Plan Pool which rewards longterm

value creation measured by economic profit. Under

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

change in economic profit is added to the pool, whereas

negative economic profit is deducted from the pool. At the

end of a five-year plan cycle (2013) each Executive Board

member is entitled to be paid out in cash an equal share of

such pool.

Due to the introduction of a new share program for the

members of the Board of Directors and the Executive Board

in 2009, neither the members of the Board of Directors

nor the members of the Executive Board are eligible to participate

in the company’s share and option program (MIP).

Employment agreements with Executive Board members

stipulate a notice period of 12 months. They do not contain

“golden parachutes” in case of a change of control nor

severance payments after termination of employment.

Further information related to both overall and individual

remuneration of the Board of Directors and Executive Board

members as well as shares and options held by these

persons at the closing date including a comparison with

the previous year are reflected in the audited Notes to

the Consolidated Financial Statements (pages 128 – 130)

according to article 663 bbis CO.

Compared to the previous year, the annual compensation

of the Board of Directors remained unchanged. The Board

Stock Award Plan, which was introduced in 2009, has

been applied for the business year 2010 whereas it was

not applied for 2009.

Bonus payments to the members of the Executive Board

were increased as the full achievement of the Group KPI’s

in 2010 resulted in full group bonus, whereas group bonus

for the previous year was cut to zero for all Executive

Board members.

As two Executive Board members have left the company

during the reporting year, annual salary paid to Executive

Board members decreased compared to 2009.

6 Shareholders’ participation

6.1 Voting rights and representationrestrictions

Each share carries one vote at the General Meeting of

Shareholders. The Articles state that when exercising voting

rights, no shareholder may directly or indirectly represent

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

for own and represented shares.

The Articles provide for group clauses.

The voting right restrictions are not applicable to representatives

of the corporate body (Organvertreter) as well as

the independent proxy holder of voting rights (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 voting restrictions

(grandfathering).

Any abolition or change of the provisions relating to the

restrictions on voting rights requires a resolution of

the General Meeting of Shareholders on which at least

two-thirds of the voting shares represented agree.

A written proxy entitles a shareholder to be represented

at the General Meeting of Shareholders by his / her legal

representative, or by another shareholder with the right to

vote, or by the representative of the corporate body

(Organvertreter), or by the independent proxy holder of

voting rights (unabhängiger Stimmrechtsvertreter) or

by the proxy holder of deposited shares (Depotvertreter).

Panalpina Annual Report 2010


Sustainable Growth

6.2 Statutory quorums

In principle, the legal rules on quorums apply. Supplementary

to the quorums legally listed, a two-thirds majority

of the shares represented at the General Meeting of Shareholders

is required for the following resolutions:

• any abolition or change of the provisions relating to

transfer restrictions;

• any abolition or change of the provisions relating to the

restriction of voting rights;

• the transformation of registered shares into bearer

shares;

• the dissolution of the company by way of liquidation;

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

Directors;

• the abolition of the respective provision in the Articles as

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

to increase the quorum as set forth in the Articles

must be based on the consent of the increased quorum.

6.3 Convocation of the General Meeting of

Shareholders

There are no provisions deviating from the law.

6.4 Agenda

Shareholders who individually or together with other

shareholders represent shares in the nominal value of

CHF 1 million may request that an item be placed on

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

PWT at least 60 days prior to the General Meeting of

Shareholders.

6.5 Inscriptions into the share register

Registered shares can only be represented by shareholders

(or nominees) who have been entered into the PWT

share register. Shareholders (or registered nominees) who

cannot personally attend the General Meeting of Shareholders

are entitled to nominate a representative according

to the 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 defence 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-ofcontrol

clause.

8 Auditors

8.1 Duration of the mandate and term of office

of the lead auditor

The mandate to act as statutory and Group Auditors is

assumed by KPMG, Zurich.

The lead auditor, Regula Wallimann, took up office on

May 6, 2008 for a seven-year term.

8.2 Auditing fees

According to financial accounting, invoices for auditing

fees for the financial year amounted to TCHF 3,464.

Additionally KPMG invoiced TCHF 44 for audit-related

services.

8.3 Additional fees

The auditors KPMG were compensated an additional

amount of TCHF 265 for further services rendered in the

financial year. KPMG was mandated in the reporting

year in particular for tax consulting (TCHF 224) and other

non audit related work (TCHF 41).

8.4 Informational instruments pertaining

to the external audit

The Group Auditors are supervised and controlled by the

Audit Committee. The Group Auditors report to the Audit

Committee and periodically the lead auditor participates in

the meetings. During these meetings, the Group Auditors

present a detailed audit plan for the current year including

risk-based audit priorities, the audit scope, proposals

regarding audit fees, organization and timing as well as

updates and status of the results of the Internal Control

System (ICS). In subsequent meetings they present interim

audit findings with respective statements and recommendations

later followed by a detailed audit report. Presentations

also contain references to upcoming changes in

legislation and IFRS standards. The main criteria for the

73

Panalpina Annual Report 2010


74

selection of Group Auditors include independence, network

capabilities, industry and IT experience of the audit team,

a risk-based audit approach, a central process management

as well as the integration of Corporate Audit and risk

management functions. The Audit Committee annually

assesses the performance of the Group Auditors and determines

the audit fees (refer to section 3.5).

9 Information policy

Panalpina regularly updates its Web site at

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

events, organizational changes and (quarterly) financial

results. Press releases are accessible to all visitors to the

Web site; alternatively, subscriptions can be made so

that the latest press releases are automatically forwarded

via email. Furthermore, all publications such as the

Annual Report (including the Corporate Governance and

Compensation Report), customer magazine and sales

brochures are available online. The dates of the General

Meeting of Shareholders as well as dates of publication of

the quarterly financial results are printed in the Annual

Report and appear in the Financial Calendar on the Web

site (under Investor Relations). The minutes of shareholder

meetings are available online.

www.panalpina.com / corpgov

Panalpina Annual Report 2010


Sustainable Growth

75

www.panalpina.com / gri

Panalpina Annual Report 2010


875638045761203467129348723964463723929284776

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Consolidated and Annual

023874683276454837652938478383929299220001827

Financial Statements 2010

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Contents

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983470239482956486523947927342094870123039182

11101010000011101010

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0001010111110101011010101010101010101011101101

Consolidated Financial Statements 2010

7656529923837476536282083619375629277283929202

110101010001011001100000111100100101011100111

Consolidated Income Statement 78

Consolidated Statement of Comprehensive Income 79

1110110101001101010011100010101011000101010

298347023948295648652394792734209487012303918

11

Consolidated Statement of Financial Position 80

Consolidated Statement of Changes in Equity 81

3409287346563456789876721098082103287492781230

Consolidated Statement of Cash Flows 83

Notes to the Consolidated Financial Statements 84

7765652992383747653628208361937562927728392920

Principal Group Companies and Participations 133

298347023948295648652394792734209487012303918

Report of the Group Auditors 136

Key Figures five-year review in CHF 137

3409287346563456789876721098082103287492781230

Consolidated Statement of Financial Position in CHF 139

Key Figures five-year review in EUR 140

7765652992383747653628208361937562927728392920

Consolidated Statement of Financial Position in EUR 142

298347023948295648652394792734209487012303918


Annual Financial Statements 2010 of

3409287346563456789876721098082103287492781230

Panalpina World Transport (Holding) Ltd.

Income Statement 144

7765652992383747653628208361937562927728392920

Statement of Financial Position as of December 31

(before profit appropriation) 145

298347023948295648652394792734209487012303918

Notes to the Financial Statements 147

Appropriation of Available Earnings 151

3409287346563456789876721098082103287492781230

Report of the Statutory Auditors 153


Information for Investors 154


Consolidated and Annual Financial Statements 2010

Consolidated Income Statement

for the years ended 31 December 2010 and 2009

78

in thousand CHF Notes 2010 2009

Forwarding services 8,675,826 7,340,327

Customs, duties and taxes (1,511,665) (1,382,414)

Net forwarding revenue 5 7,164,161 5,957,913

Forwarding services from third parties 5 (5,684,084) (4,581,020)

Gross profit 5 1,480,077 1,376,893

Personnel expenses 6 (890,937) (879,142)

Other operating expenses 9 (527,051) (418,518)

Gains on sales of non-current assets 10 277 495

EBITDA 62,366 79,728

Depreciation of property, plant and equipment 14 (38,891) (37,224)

Amortization of intangible assets 15 (8,113) (10,771)

Goodwill impairment 15 0 (1,823)

Operating result (EBIT) 15,362 29,910

Finance income 11 6,248 6,612

Finance costs 11 (15,488) (22,653)

Profit before income tax (EBT) 6,122 13,869

Income tax expenses 12 (32,119) (3,426)

Consolidated profit (25,997) 10,443

Consolidated profit attributable to:

Owners of the parent (27,350) 8,492

Non-controlling interests 24 1,353 1,951

Earnings per share (in CHF per share)

Basic 13 (1.16) 0.36

Diluted 13 (1.16) 0.36

The notes on pages 84 to 135 are an integral part of these consolidated financial statements.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Consolidated Statement of Comprehensive Income

for the years ended 31 December 2010 and 2009

in thousand CHF Notes 2010 2009

79

Consolidated profit (25,997) 10,443

Other comprehensive income

Available-for-sale financial assets 16 (1,828) (943)

Amounts recognized in equity for defined benefit post-employment plans

– Actuarial gains (losses) 7 (11,347) 18,908

– Exchange difference 7 751 6

Exchange difference on translations of foreign operations (15,027) 9,416

Income tax on components of other comprehensive income 12 5,289 (4,465)

Other comprehensive income for the period, net of tax (22,162) 22,922

Total comprehensive income for the period (48,159) 33,365

Attributable to owners of the parent (49,082) 31,498

Attributable to non-controlling interests 24 923 1,867

The notes on pages 84 to 135 are an integral part of these consolidated financial statements.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Consolidated Statement of Financial Position

as at 31 December 2010 and 2009

80

Assets

in thousand CHF Notes 2010 2009

Non-current assets

Property, plant and equipment 14 113,833 141,273

Intangible assets 15 78,091 71,877

Investments 16 34,843 37,404

Derivative financial instruments 21 0 5,561

Post-employment benefit assets 7 10,312 14,444

Deferred income tax assets 27 65,871 55,339

Total non-current assets 302,950 325,898

Current assets

Other receivables and other current assets 19 97,957 110,422

Unbilled forwarding services 74,742 83,103

Trade receivables 20 958,114 856,872

Derivative financial instruments 21 20,454 5,725

Other current financial assets 22 6,089 10,809

Cash and cash equivalents 22 528,936 531,803

Total current assets 1,686,292 1,598,734

Total assets 1,989,242 1,924,632

Liabilities and equity

in thousand CHF Notes 2010 2009

Equity

Share capital 23 50,000 50,000

Treasury shares 23 (196,003) (192,567)

Reserves 950,282 999,131

Total equity attributable to owners of the parent 804,279 856,564

Non-controlling interests 24 7,890 7,015

Total equity 812,169 863,579

Non-current liabilities

Borrowings 25 403 891

Provisions 26 112,579 66,658

Post-employment benefit liabilities 7 40,671 39,126

Derivative financial instruments 21 539 0

Deferred income tax liabilities 27 20,745 21,915

Total non-current liabilities 174,937 128,590

Current liabilities

Trade payables 521,207 519,596

Other payables and accruals 134,264 122,823

Accrued cost of services 174,840 159,712

Borrowings 25 9,335 11,995

Derivative financial instruments 21 4,993 2,233

Provisions and other liabilities 28 141,053 103,371

Current income tax liabilities 16,444 12,733

Total current liabilities 1,002,136 932,463

Total liabilities 1,177,073 1,061,053

Total equity and liabilities 1,989,242 1,924,632

The notes on pages 84 to 135 are an integral part of these consolidated financial statements.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Consolidated Statement of Changes in Equity

for the year ended 31 December 2010

in thousand CHF

Notes

Share

capital

Attributable to the owners of the parent

Treasury

shares

Other

reserves

Translation

reserve

Retained

earnings

Total

Noncontrolling

interests

Total

equity

81

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

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

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

Amounts recognized in equity for

defined benefit post-employment plans

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

– Exchange difference 7 751 751 751

Exchange difference on translations

of foreign operations (14,597) (14,597) (430) (15,027)

Income tax on components

of other comprehensive income 12 5,289 5,289 5,289

Total comprehensive income

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

Dividends paid 23 0 0 (52) (52)

Share-based payments

employee share plan 8 676 676 676

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

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

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

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

The notes on pages 84 to 135 are an integral part of these consolidated financial statements.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Consolidated Statement of Changes in Equity

for the year ended 31 December 2009

82

in thousand CHF

Notes

Share

capital

Attributable to the owners of the parent

Treasury

shares

Other

reserves

Translation

reserve

Retained

earnings

Total

Noncontrolling

interests

Total

equity

Balance on 1 January 2009 50,000 (197,753) (117,423) (145,973) 1,274,865 863,716 7,632 871,348

Consolidated profit 8,492 8,492 1,951 10,443

Available-for-sale financial assets 16 (943) (943) (943)

Amounts recognized in equity for

defined benefit post-employment plans

– Actuarial gains (losses) 7 18,908 18,908 18,908

– Exchange difference 7 6 6 6

Exchange difference on translations

of foreign operations 9,500 9,500 (84) 9,416

Income tax on components

of other comprehensive income 12 (4,465) (4,465) (4,465)

Total comprehensive income

for the period 0 0 13,506 9,500 8,492 31,498 1,867 33,365

Dividends paid 23 (44,895) (44,895) (290) (45,185)

Share-based payments

employee share plan 8 2,461 2,461 2,461

Share-based payments option plan 8 1,793 1,793 1,793

Changes in treasury shares, net 5,186 (5,389) (203) (203)

Acquired non-controlling interests 24 2,194 2,194 (2,194) 0

Balance on 31 December 2009 50,000 (192,567) (101,723) (136,473) 1,237,327 856,564 7,015 863,579

The notes on pages 84 to 135 are an integral part of these consolidated financial statements.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Consolidated Statement of Cash Flows

for the years ended 31 December 2010 and 2009

in thousand CHF Notes 2010 2009

83

Profit for the period (25,997) 10,443

Income tax expenses 12 32,119 3,426

Depreciation of property, plant and equipment 14 38,891 37,224

Amortization of intangible assets 15 8,113 10,771

Goodwill impairment charge 15 0 1,823

Finance income and dividend on available-for-sale financial assets 11 (6,078) (6,612)

Interest expenses 11 5,516 15,192

Exchange differences 11 609 2,153

Gain on sales of property, plant and equipment 10 (277) (495)

Adjustment of net expenses for defined benefit plans 7 4,946 996

Equity-settled share-based payment transactions 8 2,281 5,697

Other non-cash expenses 4,845 1,338

64,968 81,956

Working capital adjustments:

(Increase)/decrease receivables and other current assets (208,859) 219,800

Increase/(decrease) payables, accruals and deferred income 133,890 (5,784)

Increase/(decrease) long-term provisions 48,980 (8,728)

Increase short-term provisions and other liabilities 36,287 24,516

Cash generated from operations 75,266 311,760

Interest paid (5,198) (8,937)

Income taxes paid (33,031) (43,060)

Net cash from operating activities 37,037 259,763

Interest received 5,206 14,977

Dividends received 11 99 228

Proceeds from sales of PPE and assets held for sale 3,009 3,883

Proceeds from sales of securities 150 239

Loan and receivables repayments 7,586 2,643

Repayment of other financial assets 1,345 4,834

Purchase of property, plant and equipment (28,173) (33,263)

Acquistion of subsidiary, net of cash acquired 30 (2,384) 0

Purchase of intangible assets and other assets (13,967) (9,420)

Purchase of investments held for trading 0 (10,906)

Purchase of other financial assets (3,663) (7,086)

Net cash flows from investing activities (30,792) (33,871)

Free cash flow 6,245 225,892

Proceeds of short- and long-term borrowings 2,831 862

Repayment of short- and long-term borrowings (5,228) (12,705)

Dividends paid 0 (44,895)

Dividends paid to non-controlling interests 24 (52) (290)

Purchase of non-controlling interests 0 (268)

Purchase of treasury shares (10,540) (3,259)

Sale of treasury shares 4,865 3,331

Net cash used in financing activities (8,124) (57,224)

Effect of exchange rate changes on cash and cash equivalents (988) 726

Net increase (decrease) in cash and cash equivalents (2,867) 169,394

Cash and cash equivalents at the beginning of the year 22 531,803 362,409

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

The notes on pages 84 to 135 are an integral part of these consolidated financial statements.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Notes to the Consolidated Financial Statements

84

1

General information

Panalpina World Transport (Holding) Ltd. (referred to hereafter as the “Company”) and its subsidiaries is one of the world’s leading suppliers

of forwarding and logistics services, specializing in end-to-end supply chain management solutions and intercontinental air freight and

ocean freight shipments. Thanks to its in-depth industry know-how and state-of-the-art IT systems, Panalpina provides globally integrated

door-to-door forwarding solutions tailored to its customers’ individual needs.

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

42, 4002 Basel, Switzerland. The Company shares are publicly traded and is listed on the SIX Swiss Exchange in Zurich.

The consolidated financial statements for the year ending 31 December 2010 were authorized for issuance in accordance with a resolution

by the Board of Directors on 3 March 2011.

2

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 31 December 2010 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 31 December, 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) and all values are rounded to the nearest thousand except

where otherwise indicated.

Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and

assumptions that affect application of accounting policies and the reported amounts of assets, liabilities, income and expenses. It requires

management to exercise its judgments and assumptions in the process of applying the Group’s accounting policies. Actual results may

differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Deviations from estimates and

judgments are recognized in the period in which the estimates are revised and in any future periods affected.

The areas involving a higher degree of judgment or complexity, or areas in which assumptions and estimates are significant to the consolidated

financial statements, are disclosed in note 4.

Going concern

As a result of the funding activities undertaken and the increased focus on working capital the Group has improved both its short-term and

medium-term liquidity position. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance,

show that the Group should be able to operate within the level of its current financing.

After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational

existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial

statements.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

3 Significant accounting policies

85

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 1 January 2010, the Group adopted the newly issued IFRIC 17 “Distribution of Non-cash Assets to Owners” and IFRIC 19

“Extinguishing Financial Liabilities with Equity Instruments” and the revised standard IFRS 1 “First-Time Adoption of IFRSs” as well

as the amendments to IFRS 1 “First-Time Adoption of IFRSs – Additional Exemptions”, IFRS 2 “Group’s Cash-settled and Share-based

Payment Transactions”, IFRS 5 “Measurement on Non-current Assets (or Disposal Group) Classified as Held for Sale” and IAS 1

“Presentation of Financial Statements”.

IFRS 2 (amendment) “Group’s Cash-settled and Share-based Payment Transactions”

In addition to incorporating IFRIC 8 “Scope of IFRS” and IFRIC 11 “IFRS 2: Group and Treasury Share Transactions” the amendments

expand on the guidance in IFRIC 11 to address the classification of Group arrangements that were not covered by that interpretation.

The change did not result in any changes in the financial statements.

IFRS 5 (amendment) “Measurement of Non-current Assets (or Disposal Groups) Classified as Held for Sale”

The amendment provides classification that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal

groups) classified as held for sale or discontinued operations. It also clarifies that the general requirements of IAS 1 still apply,

particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1. The adoption

of this amendment did not have an impact on the financial position as the Group does not have any qualifying assets.

IAS 1 (amendment) “Presentation of Financial Statements”

The amendment provides clarification that the potential settlement of a liability by the issue of equity is not relevant to its classification

as current or non-current. By amending the definition of current liability, the amendment permits a liability to be classified as noncurrent

(provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months

after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any

time. The amendment did not have any impact on the financial position or the performance of the Group.

IFRIC 17 “Distributions of Non-cash Assets to Owners”

The interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders

either as a distribution of reserves or as dividends. The Group is not impacted by applying IFRIC 17 as the Group did not, or does not

intend to distribute non-cash assets to owners.

Panalpina is not impacted by applying the other above-mentioned new, revised or amended standards or interpretations. In addition,

the IASB issued amendments to its standards in April 2009, primarily with a view to remove inconsistencies and clarifying the wording.

There are separate transitional provisions for each standard. The adoption of the amendments resulted in changes to the accounting

policies but did not have any significant impact on the financial position or performance of the Group.

The following new standards, amendments to standards and interpretations that have been published are mandatory for the Group’s

accounting period beginning on 1 January 2011 or later periods, but the Group has not early adopted them:

IFRS 9 “Financial Instruments: Measurement and Classification”, issued in November 2009

This standard is the first step in the process of replacing IAS 39 “Financial Instruments: Recognition and Measurement”. IFRS 9

introduces new requirements for classifying and measuring financial assets and is likely to affect the Group’s accounting for its financial

assets. The standard is not applicable until 1 January 2013 but is available for early adoption. The impact on the consolidated financial

statements cannot yet be determined with sufficient reliability.

IAS 24 (revised), “Related Party Disclosures”, issued in November 2009

The revised standard supersedes IAS 24, “Related Party Disclosures”, issued in 2003. IAS 24 (revised) is mandatory for periods

beginning on or after 1 January 2011. The revised standard provides a simplified definition of related parties by clarifying its intended

meaning and eliminating inconsistencies from the definition. Panalpina is in the process of analyzing whether IAS 24 (revised) will

impact the composition of related parties. The Company will apply IAS 24 (revised) for the financial year 2011.

IAS 32 (amended) “Financial Instruments: Presentation – Classification of Rights Issues”, issued in October 2009

The amendment applies to annual periods beginning on or after 1 February 2010. The amendment addresses the accounting for rights

issues that are denominated in a currency other than the functional currency of the issues. Provided certain conditions are met, such

rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues

had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8 “Accounting Policies,

Changes in Accounting Estimates and Errors”. Panalpina will apply IAS 32 (amended) for periods beginning on 1 January 2011. As

Panalpina has no rights issues, no impact is expected on the consolidated financial statements.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

86

IFRIC 14 (amended) “The Limit on a Defined Benefit Asset, Minimum Funding Requirement and Their Interaction – Prepayment of

a Minimum Funding Requirement”

The amendment corrects an unintended consequence of IFRIC 14, “IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding

Requirements and Their Interaction”. Without the amendment, entities are not permitted to recognize some voluntary prepayments

for minimum funding contributions as an asset. With this amendment this has been revoked and should be applied retrospec -

tively to the earliest comparative period presented. The Group will apply the amendment for the financial reporting period commencing

on 1 January 2011. The impact on the consolidated financial statements of the Group has not yet been analyzed in detail but it is not

expected to be material, if any.

Improvement to IFRSs

In May 2010, the IASB issued amendments to its standards, primarily with a view to remove inconsistencies and clarifying the wording.

The transitional provisions 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 voting rights of a company’s share capital. Inter-company balances, transactions and resulting unrealized income are eliminated

in full. Changes in ownership interests in subsidiaries are accounted for as equity transactions if they occur after control has already been

obtained and if they do not result in a loss of control.

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition

of a subsidiary is determined by the fair values of the assets transferred, the liabilities incurred to previous owners and the equity

interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent

consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities assumed in a

business combination are measured initially at their fair value at acquisition date. On an acquisition by acquisition basis, the Group recognizes

any non-controlling interest in the acquiree either at fair value or at the non-controlling interest in the acquiree either at fair value or at

the non-controlling interest’s proportionate share of the acquiree’s net assets. Investments are accounted for at cost less impairment. Cost

is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable

costs of investment.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value

of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded

as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of bargain purchase, the difference is

recognized directly in the statement of comprehensive income.

The Group treats transactions with non-controlling interests as transactions with equity owner of the Group. For purchases from noncontrolling

interest, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the

subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

When the Group ceases to have significant influence, any retained interest in the entity is remeasured to its fair value, with the change in

carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequent accounting for the

retained interest as an associate, joint venture or financial asset. Any amounts previously recognized in other comprehensive income in

respect of that entity are accounted for as if the Group had directly disposed the related assets or liabilities. The amounts previously recognized

in other comprehensive income are reclassified to profit or loss.

Associates are all entities over which the Group has significant influence, but where it does not have control, generally accompanying a

shareholding of business between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method

of accounting and are initially recognized at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of

any accumulated impairment losses.

The Group’s share of its associates’ post-acquisition profits or losses is recognized in the income statement, and its share of post-acquisition

movements is recognized in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the

investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured

receivables, the Group does not recognize further losses unless it has incurred obligations or made payments on behalf of the associate.

Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates.

Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Dilution

gains and losses arising in investments in associates are recognized in the income statement.

Operating segment information

The determination of the Group’s operating segments is based on the organization units for which information is reported to the Group’s

management. The Group is primarily organized by regions and has four reportable segments, “Europe / Africa / Middle East / CIS”, “North

America”, “Central and South America” and “Asia / Pacific.” Each reportable segment offers the same products and services. The Executive

Board reviews monthly the Group’s internal reporting in order to assess performance and allocate resources. Performance is measured

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

based on gross profit and operating result (EBIT). Income tax expenses, finance income and costs as well as special items are not

assessed by segment. Certain headquarter activities are reported as “Corporate”. These consist of corporate headquarters, including the

Corporate Executive Committee, corporate communications, corporate operations, corporate human resources, corporate finance,

including treasury, taxes and pension fund management.

87

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 currency

Most Group companies use their local currency as their functional currency. Certain Group companies use other currencies (such as US

dollars or euros) as their functional currency where this is the currency of the primary economic environment in which the entity or branch

operates.

Transactions and balances

Local transactions in other currencies are initially reported using the exchange rate at the date of the transaction or reporting date. Gains

and losses from the settlement of such transactions and gains and losses on transactions of monetary assets and liabilities denominated

in other currencies are included in the income statement, except when they arise on monetary items that, in substance, form part of the

Group’s net investment in a foreign entity. In such cases the gains and losses are deferred into other comprehensive income.

Non-monetary items that are measured in terms of historical cost in foreign currency are translated using the exchange rate as of the dates

of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates on the

date on which the fair value is determined.

Changes in fair value of securities denominated in foreign currency classified as available-for-sale are split into components resulting from

changes in the amortized cost of the security and other changes in the carrying amount of the security. Foreign exchange remeasurement

differences related to changes in amortized cost are recognized in profit or loss, and other changes in the carrying amount are recognized

in equity.

Presentation currency

Upon consolidation, assets and liabilities of Group companies using functional currency other than Swiss francs are translated into Swiss

francs using a year-end rate of exchange. Income, expenses and net income and cash flows are translated at the average rates of

exchange for the year. Translation differences due to the changes in exchange rates between the beginning and the end of the year and

the difference between net incomes translated at the average and year-end exchange rates are recognized as a separate component

of other comprehensive income.

The income and expenses of foreign operations in hyperinflationary economies are translated to Swiss francs at the exchange rate on the

reporting date. Prior to translating the financial statement of foreign operations in hyperinflationary economies, their financial statements

are restated to account for changes in the general purchasing power of the local currency. The restatement is based on relevant price indices

on the reporting date. Foreign currency differences are recognized directly in comprehensive income in the foreign currency translation

reserve.

On disposal of a foreign entity, the identified cumulative currency translation differences within equity relating to that foreign entity are

recognized in the income statement as part of the gain or loss on divestment.

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

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

Statement of

Financial

Position

2010 2009

Income

Statement

Statement of

Financial

Position

Income

Statement

EUR 1.25134 1.37870 EUR 1.48429 1.51006

USD 0.93670 1.04137 USD 1.02940 1.08465

HKD 0.12049 0.13403 HKD 0.13274 0.13992

CNY 0.14177 0.15385 CNY 0.15078 0.15877

CAD 0.93820 1.01107 CAD 0.97917 0.95269

GBP 1.45170 1.60781 GBP 1.66053 1.69541

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

88

Revenue recognition

Net forwarding revenue represents amounts received, receivables and unbilled forwarding services for forwarding performed for customers

after deducting trade discounts and volume rebates and excluding sales taxes and value-added taxes less charges for customs and duty.

Trade discounts and volume rebates are recorded on an accrual basis consistent with recognition of the related revenue recorded as a

deduction for accounts receivable or as accrued liabilities. Such estimates are based on analyses of existing contractual obligations,

historical trends and the Group’s experience.

Net forwarding revenue is recognized at the time the services are performed. Logistics projects with a longer period of delivery are

recognized to 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 transactions 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

customs, duty and taxes.

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

income statement.

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

Forwarding services from third parties

Forwarding services from third parties includes the corresponding direct services costs and related services costs rendered by a third

party. Trade discounts and volume rebates are recorded on an accrual basis consistent with the recognition of the related services.

Employee benefits

Wages, salaries, social security contributions, paid annual leave, sick leave and other benefits are paid or accrued undiscounted in the

year in which the associated services are rendered by employees of the Group. Legal or constructive obligations such as bonus or profitsharing

plans are recognized for the amount expected to be paid in the year in which the services are provided.

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 12 months after

the reporting date, then they are discounted to their present value.

Pension obligation

Most employees are covered by defined benefit and defined contribution post-employment plans sponsored by the Group companies.

The schemes are generally funded through payments to insurance companies or trustee-administrated funds. The Group’s contributions to

defined contribution plans are recognized in the income statement within the operating results when they are due. The Group has no legal

or constructive obligation to pay further contributions.

The asset and liability recognized in the statement of financial position in regard to defined benefit pension plans is the present value of the

defined benefit obligation at the statement of financial position date less the fair value of plan assets, together with adjustments for unrecognized

past-services costs. The accounting and reporting of defined benefit plans are based on recent actuarial valuations. The defined

benefit obligations and service costs are calculated using the projected unit credit method. This reflects service rendered by employees

to the date of valuation and incorporates actuarial assumptions primarily regarding discount rates used in determining the present value of

benefits, projected rates of remuneration growth and long-term expected rates of return for plan assets using the interest rates of highquality

corporate bonds that are denominated in the currency in which the benefits will be paid and which have maturity dates approximating

the terms of the related pension liability. Past services costs are recognized immediately in the income statement, unless the changes

to the pension plans are conditional on the employees remaining in service for a specified period of time. In this case post service costs

are amortized on a straight-line basis over the vesting period.

Actuarial gains and losses, which consist of differences between assumptions and actual experiences and the effects of changes in

actuarial assumptions, are recorded in equity in other comprehensive income in the period in which they arise.

Pension assets and liabilities in different defined benefit plans are not offset against each other unless the Group has a legally enforceable

right to use the surplus in one plan to settle obligations in the other plan. The recognition of pension assets is limited to the present value

of any future refunds from the plans or reductions in future contributions to the plans and any cumulative unrecognized past service costs.

Adjustments arising from the limit on the recognition of assets for defined benefit plans are charged in equity in other comprehensive

income.

Other long-term employee benefits

Net 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

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

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.

89

Share-based compensation

Certain employees of the Group participate in share-based compensation plans. The fair value of the employee services received in exchange

for the granting of the options and the discount on the shares granted is estimated at the grant date and recorded as an expense over

the vesting period. The expense is recognized as other employee benefits in the income statement within the operating result of “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 movements in fair value being recorded in the income statement. Any subsequent cash flows from exercise of vested

awards are recorded as a reduction of the liability.

Other operating expenses

Other operating expenses primarily include administrative expenses, communication expenses, rent and utilities expenses, travel and

promotion expenses, insurance expenses and claims, changes in provisions from impairments of trade receivables and collection

expenses and other operating expenses necessary to render forwarding revenue to third parties. The expenses are recognized when

the expenses recorded on an accrual basis have been incurred.

Finance income and costs

Finance income comprises interest income on funds invested, dividend income, cash discounts, gains on disposals of available-for-sale

financial assets, changes in the fair value of financial assets at fair value through profit or loss, and gains on derivatives that are recognized

in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, cash discounts, changes in the fair

value of financial assets at fair value through profit or loss, impairment losses recognized on financial assets, losses on hedging 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.

Income tax expenses

Income taxes include all taxes based upon the taxable profits of the Group, including withholding taxes payable on the distribution of

retained earnings within the Group. Other taxes not based on income, such as capital taxes, are included within other operating expenses.

Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively

enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred income tax assets and liabilities are recognized on temporary differences between the carrying amounts and the tax bases of

assets and liabilities for financial statement. Deferred income taxes assets relating to the carry-forward of unused tax losses are recognized

to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilized.

Deferred income tax is not recognized for the initial recognition of assets and liabilities in a transaction that is not a business combination

and that affects neither accounting nor taxable profit nor loss, and differences relating to investments in subsidiaries and jointly controlled

entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred income tax is not recognized

for taxable temporary differences arising on the initial recognition of goodwill.

Deferred income tax assets and liabilities are offset when the income taxes are levied by the same taxation authority and when there is a

legally enforceable right to offset them. Deferred income tax is measured based on the currently enacted tax rates applicable in each tax

jurisdiction where the Group operates.

Current income tax and deferred income tax are recognized in profit or loss except to the extent that they relate to a business combination,

or items recognized directly in equity or in other comprehensive income.

Property, plant and equipment

Property, plant and equipment are measured at cost, net of accumulated depreciation and / or accumulated impairment losses, if any. Initially

property, plant and equipment are recorded at cost of purchase or construction and include all cost directly attributable to bringing the

asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Interest and other

borrowing costs for long-term construction projects are capitalized and included in the carrying value of the assets. All other repair and

maintenance costs of the day-to-day servicing are recognized in the income statement as incurred. The present value of the expected cost

for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision

are met. When components of an item of property, plant and equipment have different useful lives, they are accounted for as separate

items of property, plant and equipment.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

90

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

property, plant and equipment. If there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the

asset is depreciated over the shorter of the lease term based on the effective interest rate method. Leases where substantially all of the

risk and rewards of ownership are not transferred to the Group are classified as operating leases. Payments made under operating

leases are charged against the income statement on a straight-line basis over the period of the lease.

The corresponding leasing obligations, net of finance charges, are included in borrowings. The interest element of the finance cost is

charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of

the liability for each period.

Intangible assets

Business combination and goodwill

Business combinations are accounted for using the acquisition method of accounting. The consideration transferred in a business combination

is measured at fair value at the date of acquisition and includes the cash paid plus the fair value at the date of exchange of assets

given, liabilities incurred or assumed and equity instruments issued by the Group. The fair value of the consideration transferred also includes

contingent consideration arrangements at fair value. Directly attributable acquisition-related costs are expensed in the income statement.

At the date of acquisition the Group recognizes the identifiable assets acquired and the liabilities assumed at fair value. Where the Group

does not acquire 100 % ownership of the acquired business, non-controlling interests are recorded as the proportion of the fair value of

the acquired net assets attributable to non-controlling interest. Goodwill is recorded as the surplus of the consideration transferred over

the Group’s interest in the fair value of acquired net assets. Any goodwill and fair value adjustments are recorded as assets and liabilities

of the acquired business in the functional currency of that business. When the initial accounting for a business combination is incomplete

at the end of a reporting period, provisional amounts are used. During the measurement period, the provisional amounts are retrospec -

tively adjusted and additional assets and liabilities may be recognized, to reflect new information obtained about the amounts recognized

at that date, had they been known. Goodwill is not amortized but assessed for possible impairment at each reporting date and is 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 licences

Separately acquired trademarks and licences are shown at historical cost. Trademarks and licences acquired in a business combination

are recognized at fair value at the acquisition date. Trademarks and licences 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 to allocate the cost of

trademarks and licences over their estimated useful lives of five to ten years.

Customer relationships

Customer 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.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Computer software

Development 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:

91

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

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

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

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

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

and

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

Directly attributable costs that are capitalized as part of the software product include software development costs, employee costs and an

appropriate portion of relevant overhead costs. Other development expenditures that do not meet these criteria are recognized as an

expense as incurred. Development costs previously recognized as expenses are not recognized as an asset in a subsequent period. Costs

associated with maintaining computer software programs are recognized as an expense as incurred. Computer software development

costs recognized as assets are amortized over their estimated useful life, which does not exceed three to five years.

Other intangible assets

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

accumulated impairment losses.

Impairment of property, plant and equipment and intangible assets

An impairment assessment is carried out when there is evidence that an asset may be impaired. In addition, intangible assets that are not

yet available for use are tested for impairment annually. If any such indication exists, or when annual impairment testing for an asset is

required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or

cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does

not generate cash inflows that are largely independent of those from other assets or asset groups. Where the carrying amount of an asset

exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in

use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market 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 indicators. Impairment losses are recognized in the income statement. When an impairment loss arises, the useful life of the

asset in question is reviewed and, if necessary, the future depreciation / amortization charge is accelerated.

Impairment of goodwill

Goodwill is assessed for possible impairment at each reporting date and is additionally tested annually for impairment. When the 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 the goodwill is reduced to its recoverable amount. The reduction is reported in the income statement as an impairment loss. The

methodology used in the impairment testing is further described in note 15.

Financial assets

Financial assets, including cash and marketable securities, short- and long-term deposits, trade and other receivables, loans and other

receivables, quoted and unquoted financial instruments and derivative financial instruments, are classified either as fair value through profit

or loss, loans and receivables, available-for-sale or in exceptional cases as held to maturity. The classification depends on the purpose

for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. All financial

assets are initially recognized at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable

transaction costs. All purchases and sales are recognized on the settlement date.

Subsequent measurement

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial

recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling

in the near term. This category includes derivative financial instruments entered into by the Group that do not meet the hedge accounting

criteria. Derivatives, including separately embedded derivatives, are also classified as held for trading unless they are designated as effective

hedging instruments. Financial assets at fair value through profit or loss are carried on the statement of financial position at fair value with

gains or losses recognized in the income statement.

Loans and receivables

Loans 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.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

92

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 not originated with the intention to be sold immediately or in the near term. Receivables are presented in

current assets for maturities up to 12 months (accounting treatment of trade receivables is outlined in more detail in the section: Trade

receivables).

Held to maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the Group

has the positive intention and ability to hold them until maturity. After initial measurement, held-to-maturity investments are measured at

amortized cost using the effective interest method. This method uses an effective interest rate that exactly discounts estimated future cash

receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Gains and losses are recognized

in the income statement when the investments are derecognized or impaired, as well as through the amortization process. The Group did

not have any held-to-maturity investments during the periods under review.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the

three preceding categories. After initial measurement, available-for-sale financial assets are measured at fair value with unrealized gains

or losses recognized in comprehensive income until the investment is derecognized, at which time the cumulative gain or loss recorded in

comprehensive income is recognized in the income statement, or determined to be impaired, at which time the cumulative loss recorded

in comprehensive income is recognized in the income statement.

Fair value of financial instruments

Fair value is the amount for which a financial asset, liability or instrument could be exchanged between knowledgeable and willing parties

in an arm’s-length transaction. It is determined by reference to quoted market prices or by the use of established valuation techniques

such as option pricing models and the discounted cash flow method if quoted prices in an active market are not available. Valuation

tech niques will incorporate observable market data about market conditions and other factors that are likely to affect the fair value of

a financial instrument. Valuation techniques are typically used for derivative financial instruments. The fair values of financial assets and

liabilities at the reporting date are not materially different to their reported carrying value unless specifically mentioned in the notes to the

consolidated financial statements. Information on fair value hierarchy is included in note 18 on risk management.

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 then 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 then 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. 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 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.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Derivatives

93

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Derivative financial instruments

are initially recognized and subsequently carried at fair value on the date a derivative contract is entered into. Apart from those

derivatives designated as qualifying cash flow hedging instruments in the “hedging” policy below, all changes in fair value are recorded as

financial income in the period in which they arise. Embedded derivatives are recognized separately if not closely related to the host

contract and where the host contract is carried at amortized cost. Attributable transaction costs are recognized in the income statement

when incurred.

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

The fair value of forward currency contracts is the difference between the forward exchange rate and the contract rate. The forward

exchange rate is referenced to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest swap

contracts is determined by reference to market value for similar instruments.

Hedge accounting

For the purpose of hedge accounting, hedging relationships may be of three types. A fair value hedge is a hedge of the exposure to changes

in fair value of a recognized asset or liability, or an unrecognized commitment, or an identified portion of such an asset, liability or 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 profit or loss. A “hedge of a net investment in a foreign operation” is a hedge of the foreign currency exposure on a net

investment in a foreign operation.

To qualify for hedge accounting, the hedging relationship must meet several strict conditions on documentation, probability of occurrence

(for cash flow hedges), hedge effectiveness and reliability of measurement. If these conditions are not met, then the derivative instrument

does not qualify for hedge accounting. In this case, the hedging instrument and the hedged item are valued independently of one another.

The derivative hedging instrument is reported at fair value with the changes in fair value included in income or expenses. Where the Group

will hold a derivative as an economic hedge for a period beyond 12 months after the statement of financial position date, the derivative is

classified 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 attributable to

the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed

on an ongoing basis to determine whether they actually have been highly effective throughout the financial reporting periods for which

they were designated.

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

Fair value hedges

The change in the fair value of hedging derivatives is recognized in the income statement. The change in the fair value of the hedged item

attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the income statement.

For fair value hedges relating to items carried to amortized cost, the adjustment to carrying value is amortized through the income statement

over the remaining term to maturity. Amortization may begin as soon as an adjustment exists and shall begin no later than when the hedge

item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedge item is derecognized, the 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 hedges

The 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 investment

Hedges 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.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

94

Hedging activities and derivative financial instruments

The Group uses foreign-currency-denominated borrowings and forward contracts to manage its transaction exposures. These currency

forward contracts are not designated as cash flow, fair value or net investment hedges and are entered into for periods consistent with currency

transaction exposure (generally one to six months). Such derivatives do not qualify for hedge accounting.

At year-end, the contract value is calculated on the total volume of individual contracts using the fair value at this time. The positive

replacement value represents the theoretical profit if the open currency contracts were closed out as of 31 December. Correspondingly, the

negative replacement value represents the theoretical loss on closing the currency transactions open as of 31 December.

Trade receivables

Trade receivable are carried at the original invoice amount less valuation adjustments for impairment, trade discounts, volume rebates and

similar allowances. Subsequently, accounts receivable are measured at amortized cost using the effective interest method. An allowance

for doubtful accounts trade receivables is recorded when there is objective evidence that the Group will not be able to collect all amounts

due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter 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 recognized in the income statement within other operating expenses. When a trade receivable is uncollectible, it is written off

against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off or 100 % impaired are credited

against operating expenses in the income statement. Trade discounts, volume rebates and similar allowances are recorded on an

accrual basis consistent with the recognition of the related sales, using estimates based on existing contractual obligations, historical

trends and the Group’s experience. Long-term accounts receivable are discounted to take into account the time value of money.

Unbilled forwarding services

Unbilled forwarding services represent the gross unbilled amount expected to be collected from customers for forwarding services in

progress for which costs are incurred but not yet invoiced. For logistics projects and other services with a longer period of delivery,

recognized profits are included.

Cash and cash equivalents and other current financial assets

Cash and cash equivalents included in the statement of financial position and statement of cash flows represent cash on hand, bank

and postal checks, bills of exchange net, current balance with banks and similar institutions less bank overdraft as well as time deposits

and highly liquid money market papers with a maturity period of less than three months from the date of acquisition. Such balances are

only reported as cash if they are readily convertible to known amounts of cash and are subject to insignificant risk of change in value.

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

and one year.

Non-current assets held for sale

Non-current assets or disposal groups are classified as assets held for sale when their carrying amount is to be recovered principally through

a sales transaction and a sale is considered highly probable. Before classification as held for sale, the assets or components of a disposal

group are remeasured in accordance with the Group’s accounting policies. Thereafter, generally the assets or disposal groups are

measured at the lower of their carrying amount and fair value less costs. Any impairment loss on a disposal group is allocated first to

goodwill, and then to remaining assets and liabilities on a pro rata basis, except that no loss is allocated to financial assets, deferred tax

assets and employee benefit assets, which continue to be measured. Impairment losses on initial classification as held for sale and

subsequent gains or losses on remeasurement are recognized in the income statement. Gains are not recognized in excess of any cumulative

impairment loss.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are recognized in equity

as a deduction, net of tax effects, from the proceeds.

Treasury shares

When share capital recognized as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs,

is net of any tax effects and is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are

presented as a deduction from total equity. Where such shares are subsequently reissued, any consideration received, net of any directly

attributable incremental transaction costs and the related income tax effects, the resulting surplus or deficit on the transaction is transferred

to retained earnings.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Retained earnings and other reserves

95

Retained earnings and other reserves contain legal reserves which are not distributable to the shareholders pursuant to Swiss law, cumulative

translation adjustments of all foreign currency differences arising from the translation of the financial statements of foreign operations

as well as cumulative actuarial gains and losses from defined benefit post-employment plans net of taxes and accumulated difference in

available-for-sales assets.

Financial liabilities

Financial liabilities are either classified as financial liabilities at fair value through profit or loss, financial liabilities at amortized cost or as

derivatives designated as hedging instruments in an effective hedge as appropriate. The Group determines the classification of its financial

liabilities at initial recognition. Financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, directly

attributable transaction costs. The Group’s financial liabilities include trade and other payables, loans and borrowings and derivative

financial instruments.

Subsequent measurement

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

recognition as at fair value through profit or loss. This category includes derivative financial instruments entered into by the Group that

do not meet the hedge accounting criteria. Gains or losses on liabilities at fair value through profit or loss are recognized in the income statement.

Loans and borrowings

After 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 liabilities

Financial 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 that can be estimated

reliably. Provisions are recorded for the estimated ultimate liability that is expected to arise, taking into account foreign currency effects

arising from their translation from their functional currency into Swiss francs and the time value of money where material determined by

discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and

the risks specific to the liability. The unwinding of the discount is recognized as finance cost. Provisions are established in particular for

accrued costs of services, freight forwarding claims, short-term employee benefits, termination and other long-term employee benefits,

post-employment benefit liabilities and decommissioning provisions. Provisions for restructuring are recognized only when the Group has

approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future

operating costs are not provided for.

4 Critical accounting estimates and judgments

The preparation of the Group’s consolidated financial statements in conformity with IFRS requires management to make estimates and judgments

that affect the application of policies and reported amounts of assets, liabilities, income, expenses and related disclosures. Estimates

and the underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the

circumstances. The results of which form the basis for making the judgments about carrying values of assets and liabilities that are not

readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed

on an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate

was based, or as a result of new information or more experience. Such changes are recognized in the period in which the estimate is revised.

The estimations and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities

within the next financial year are discussed below.

Estimated impairment of goodwill

The Group tests periodically whether goodwill has suffered any impairment in accordance with the Group’s accounting policy and details

disclosed in note 15 – Intangible assets, section: Impairment test for goodwill. The recoverable amounts of cash-generating units (CGUs)

have been determined based on value-in-use calculations. The underlying calculations require the use of estimates.

Fair value of financial instruments

Where the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from future

markets, it is determined using the valuation technique including the discounted cash flow model. The inputs to these models are taken

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

96

from observable markets where possible, but where this is not feasible, a degree of judgment is required to establish fair value. The judgments

include considerations of inputs such as credit risk, liquidity risk and volatility. Changes in assumptions concerning these factors

could affect the reported fair value of financial instruments.

Pension and other post-employment benefits

The cost of defined benefit pension plans and other post-employment medical benefits as well as the present value of the pension obligation

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 equity in the period in which they occur without affecting the income statement. At

31 December 2010 the Group had a surplus of the fair value of plan assets over the present value of funded obligations of CHF 7.6 million

(2009: CHF 11.9 million) for funded plans and a negative present value of unfunded plans of CHF 37.9 million (2009: CHF 36.6 million)

for unfunded plans (see note 7). The actuarial assumptions used may differ materially from actual results due to changes in market and

economic conditions, higher or lower withdrawal rates, longer or shorter life spans of participants and other changes in the factors assessed.

These differences could impact the assets or liabilities recognized in the statement of financial position in future periods.

Provisions

A 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, transportoperator

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 31 December 2010 the recognized liability for claims

amounts to CHF 52.5 million (2009: CHF 47.6 million). If the management decided to use the optimal actuarial calculation method, which

only takes into consideration the linear loss development according to historical figures, the carrying amount of claim provisions would

be approximately CHF 0.8 million lower (2009: CHF 0.5 million). Using a more conservative percentile, the carrying amount of claim provisions

would be approximately CHF 1.3 million higher (2009: CHF 0.3 million).

The Group is also subject to legal and regulatory proceedings and government investigations in various jurisdictions. These proceedings

are related to the area of competition law. Such proceedings may result in criminal or civil sanctions, penalties or damages against the

Company. Regulatory and legal proceedings as well as government investigations involve complex legal issues, the outcome of which is

difficult to predict. Accordingly, management’s judgment is affected in determining whether it is more likely or not that such a proceeding

will result in an outflow of resources and whether the amount of the obligation can be reliably estimated. These judgments are subject to

change as new information becomes available. Upon resolution of any legal or regulatory proceeding or government investigation, the

Group may incur a provision for such matters. It cannot be ruled out that the financial condition or results of operations of the Group will be

materially affected. For additional information see note 31 – Pending legal claims. Related legal costs are recognized when incurred.

Deferred income tax assets

Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which

the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be

recognized, based upon the likely timing and level of future taxable profits.

The carrying value of recognized tax loss carry-forwards amounts to CHF 96.0 million (2009: CHF 87.0 million) and unrecognized tax loss

carry-forwards to CHF 80.3 million (2009: CHF 55.0 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 25.2 million

(2009: CHF 15.0 million). If the Group failed to achieve the expected future taxable profits, the consolidated profit would decrease by

CHF 31.3 million (2009 CHF 26.7 million) but the mangement believes that the full amount of the recognized deferred tax assets are

recoverable in the foreseeable future.

Income taxes

At 31 December 2010, the net liability for current income taxes amounts to CHF 16.4 million (2009: CHF 12.7 million). As the Group is

subject to income taxes in numerous jurisdictions, significant judgments are required in determining worldwide provisions for income taxes.

Some of these estimates are based on interpretations of existing tax laws or regulations. Management believes that the estimates are

reasonable and that the recognized liabilities for income-tax-related uncertainties are adequate. Various external factors may have favourable

or unfavourable 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.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

5 Operating segment information

97

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

managed by the geographical location. The Executive Board assesses performance of the operating segments based on a measure of

adjusted EBIT. This measurement basis excludes the effects on non-recurring expenditure from the operating segments such as restructuring

costs, legal expenses, reorganization costs as well as fines recognized and related expenses. The measurement also excludes

the unrealized gains / losses on financial instruments as well as interest income and expenditure, as this type of activity is driven by the central

treasury function, which manages the cash position of the Group. Income and deferred income taxes are not assessed by segment.

2010 (in million CHF)

Europe /

Africa /

Middle

East / CIS

Central

North and South

America America

Asia /

Pacific

Total

operating

segment

Eliminations

Corporate

Total

Group

External forwarding services 3,640 1,409 845 1,270 7,164 0 7,164

Intra-group forwarding services 1,432 421 147 1,954 3,954 (3,954) 0

Net forwarding revenue 5,072 1,830 992 3,224 11,118 (3,954) 0 7,164

Forwarding services from third parties (4,312) (1,564) (836) (2,926) (9,638) 3,954 (5,684)

Gross profit 760 266 156 298 1,480 0 0 1,480

Personnel expenses (432) (181) (76) (121) (810) (81) (891)

Other operating expenses (250) (102) (61) (85) (498) 99 (399)

Segment EBITDA 78 (17) 19 92 172 0 18 190

Depreciation and amortization (25) (6) (4) (7) (42) (5) (47)

Segment operating result (Segment EBIT) 53 (23) 15 85 130 0 13 143

Fines and related costs (112)

Reorganization costs (14) (2) (16)

Financial result

– Finance income 6

– Finance costs (15)

Profit before income tax (EBT) 6

Income tax expenses (32)

Consolidated profit (26)

Information about segment assets and liabilities:

2010 (in million CHF)

Europe /

Africa /

Middle

East / CIS

Central

North and South

America America

Asia /

Pacific

Total

operating

segment

Nonsegment

assets

Nonsegment

liabilities

Total

Group

Segment assets 728 219 168 311 1,426 563 1,989

Segment liabilities 517 144 75 233 969 208 1,177

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

segments:

2010 (in million CHF)

Switzerland

Germany

United

States of

America

Brazil

Republic of

China

Net forwarding revenue 931 1,425 1,495 358 1,653

Segment assets 70 176 170 58 124

The Group does not have sales in excess of 10% of the total net forwarding revenues to any single external customer.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

98

2009 (in million CHF)

Europe /

Africa /

Middle

East / CIS

Central

North and South

America America

Asia /

Pacific

Total

operating

segment

Eliminations

Corporate

Total

Group

External forwarding services 3,189 1,176 702 891 5,958 0 0 5,958

Intra-group forwarding services 1,281 349 121 1,279 3,030 (3,030) 0 0

Net forwarding revenue 4,470 1,525 823 2,170 8,988 (3,030) 0 5,958

Forwarding services from third parties (3,739) (1,269) (678) (1,925) (7,611) 3,030 0 (4,581)

Gross profit 731 256 145 245 1,377 0 0 1,377

Personnel expenses (453) (173) (74) (104) (804) 0 (75) (879)

Other operating expenses (235) (110) (56) (77) (478) 0 60 (418)

Segment EBITDA 43 (27) 15 64 95 0 (15) 80

Depreciation and amortization (26) (6) (4) (7) (43) 0 (5) (48)

Goodwill impairment (2) 0 0 0 (2) 0 0 (2)

Segment operating result (Segment EBIT) 15 (33) 11 57 50 0 (20) 30

Financial result

– Finance income 7

– Finance costs (23)

Profit before income tax (EBT) 14

Income tax expenses (4)

Consolidated profit 10

Information about segment assets and liabilities:

2009 (in million CHF)

Europe /

Africa /

Middle

East / CIS

Central

North and South

America America

Asia /

Pacific

Total

operating

segment

Nonsegment

assets

Nonsegment

liabilities

Total

Group

Segment assets 735 201 158 304 1,398 525 1,925

Segment liabilities 439 149 61 219 868 193 1,061

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

segments:

2009 (in million CHF)

Switzerland

Germany

United

States of

America

Brazil

Republic of

China

Net forwarding revenue 900 1,176 1,251 251 1,047

Segment assets 73 176 164 38 129

Information by business

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

2010 (in million CHF) Air Freight

Ocean

Freight Logistics Unallocated Total Group

Net forwarding revenue 3,503 2,771 890 0 7,164

Forwarding services from third parties (2,836) (2,318) (530) 0 (5,684)

Gross profit 667 453 360 0 1,480

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

2009 (in million CHF) Air Freight

Ocean

Freight Logistics Unallocated Total Group

99

Net forwarding revenue 2,714 2,360 884 0 5,958

Forwarding services from third parties (2,152) (1,902) (527) 0 (4,581)

Gross profit 562 458 357 0 1,377

6

Personnel expenses

in thousand CHF 2010 2009

Wages and salaries 694,834 678,514

Compulsory social security contributions 85,304 87,706

Contributions to defined contribution plans 47,649 47,059

Expenses related to defined benefit plans (note 7) 4,946 6,632

Staff training 7,561 5,852

Share-based compensation (note 8)

Equity-settled compensation plan 2,216 4,254

Cash-settled compensation plan 65 1,443

Other personnel-related expenses 48,362 47,682

Total personnel expenses 890,937 879,142

Number of employees 14,136 13,570

thereof in Switzerland 749 737

7 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 and managing any potential impacts on the Group’s long-term financial position. The nature of such plans

varies according to legal regulations and fiscal requirements in the countries in which the employees are employed. Other post-employment

benefits consist mostly of post-retirement schemes. Post-employment benefit plans are classified for IFRS as “defined contribution plans”

if the Group pays fixed contributions in a separate fund or to a third-party financial institution and will have no further legal or constructive

obligation to pay further contributions. All other plans are classified as defined benefit plans. The Group’s major defined benefit plans are

located in Switzerland, Germany, Japan, Taiwan and France. Plans are usually established as trusts independent of the Group and are

funded by payments from the Group and by employees. In some cases, notably for the major defined benefit plans in Germany and Japan,

the plans are unfunded and the Group pays pensions to retired employees directly from its own financial resources.

Current and past services as well as expected returns on plan assets and interest costs are charged to the income statement as personnel

expenses. Actuarial gains and losses are recorded directly in equity. The recognition of pension assets is limited to the total of the

present value of any future refunds from the plans or reduction in future contributions to the plans and any cumulative unrecognized past

service costs. Adjustments arising from the limit on the recognition of assets for defined benefit plans are recorded directly in equity.

Qualified independent actuaries carry out valuations on a regular basis and for major plans annually as at the reporting date. For funded

plans, which are usually trusts independent of the Group’s finances, the net asset / liability recognized on the Group’s statement of

financial position corresponds to the over / underfunding of the plan, adjusted for unrecognized past service costs. For unfunded plans,

where the Group meets the pension obligations directly from its own financial resources, a liability for the defined benefit obligation is

recorded in the Group’s statement of financial position. Pension assets and liabilities in different defined benefit plans are not offset.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

100

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

in thousand CHF 2010 2009

Fair value of plan assets 217,656 208,217

Present value of funded obligation (210,094) (196,307)

Surplus (deficit) 7,562 11,910

Present value of unfunded obligations (37,921) (36,592)

(Net liability) net asset recognized in statement of financial position (30,359) (24,682)

thereof recognized as asset 10,312 14,444

thereof recognized as liability (40,671) (39,126)

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

in thousand CHF 2010 2009

Net pension cost for year ending

Current service cost (12,259) (12,568)

Recognized past service cost 0 (50)

Interest cost (8,046) (8,510)

Expected return on plan assets 9,842 8,828

Employee contribution 4,369 4,518

Settlements 950 976

Curtailments 198 174

Expenses for defined benefit plans (4,946) (6,632)

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

in thousand CHF 2010 2009

Changes in defined benefit obligation (DBO)

DBO at beginning of year (232,899) (256,441)

Current service cost (12,259) (12,568)

Recognized past service cost 0 (50)

Interest cost (8,046) (8,510)

Actuarial (losses) gains recognized in equity (12,297) (2,422)

Benefits paid 11,786 46,686

Curtailments 198 174

Currency impact 5,502 232

DBO at end of year (248,015) (232,899)

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

in thousand CHF 2010 2009

Changes in fair value of plan assets

Fair value at beginning of year 208,217 213,520

Settlement with DBO 0 0

Employer contributions 5,060 5,504

Employee contributions 4,369 4,518

Expected return on plan assets 9,842 8,828

Actuarial gains (losses) recognized in equity 950 21,330

Benefits paid (10,733) (45,485)

Currency impact (49) 2

Fair value at end of year of plan assets 217,656 208,217

The fair value of the plan assets includes none of the Group’s shares for either 2010 or 2009.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

An analysis of the amounts recognized in equity is shown in the table below:

101

in thousand CHF 2010 2009

Analysis of amounts recognized in equity

Recognized in equity on 1 January 94,005 112,919

Actuarial (gains) losses plan assets (950) (21,330)

Actuarial losses (gains) DBO 12,297 2,422

Currency impact (751) (6)

Recognized in equity on 31 December 104,601 94,005

Plan assets are comprised as follows:

in thousand CHF 2010 2009

in CHF in % in CHF in %

Major categories of plan assets

Cash and cash equivalents 1,016 0.47 % 3,814 1.83 %

Equity investments 66,922 30.75 % 65,522 31.47 %

Bonds 115,128 52.89 % 106,866 51.33 %

Hedge funds and private equity 3,130 1.44 % 2,878 1.38 %

Real estate funds 24,042 11.04 % 23,484 11.28 %

Others 7,418 3.41 % 5,653 2.71 %

Actuarial assumptions

Actuarial assumptions are unbiased and mutually compatible estimates of variables that determine the ultimate cost of providing pastemployment

benefits. They are set on an annual basis by local management and actuaries and are subject to approval by corporate management.

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 assumptions

The 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 2005 and adjustment

Germany: tables 2005G from Klaus Heubeck

France: table INSEE TV / TD 2004 / 2006

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

Financial assumptions

These 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:

2010 2009

Discount rate 2.99 % 3.56 %

Expected return on pension plan assets 4.74 % 4.74 %

Future salary increase 2.97 % 1.78 %

Future pension increase 1.24 % 1.22 %

Discount rates, which are used to calculate the discounted present value of the defined benefit obligation, are determined with reference to

market yields on high-quality corporate bonds.

Expected returns on plan assets are based on market expectations of expected returns on the assets in funded plans over the duration of

the related obligation. This takes into account the split of the plan assets between equities, bonds, properties and other investments.

The calculation includes assumptions concerning expected dividend and interest income and realized and unrealized gains on plan assets.

Due to the long-term nature of the obligations, the assumptions used for matters such as returns on investments may not necessarily be

consistent with recent historical patterns. The expected return on plan assets included in the income statement is calculated by multiplying

the expected rate of return by the fair value of plan assets. The difference between the expected return and the actual return in any

12–month period is an actuarial gain / loss and recorded directly to equity. In 2010, the actual return on plan assets was CHF 10.8 million

(2009: CHF 30.2 million).

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

102

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 behaviour within Group entities.

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

in thousand CHF 2010 2009 2008 2007 2006

DBO 248,015 232,899 256,441 268,675 263,151

Plan assets (217,656) (208,217) (213,520) (255,989) (266,449)

Deficit (surplus) 30,359 24,682 42,920 12,686 (3,298)

Experienced gains (losses) on plan liability 12,297 2,422 10,070 (8,325) (14,210)

Experienced gains (losses) on plan asset 950 21,330 (45,239) (9,378) (514)

8 Share and option ownership program

The Group operates several share and option ownership programs. The members of the Board of Directors, the members of the Executive

Board as well as selected preferential employees had the option of voluntarily participating in the share and option ownership program

introduced in 2005 and continued in a modified program in the following years.

Management Incentive Program II (MIP II)

In June 2006, the Group introduced the Management Incentive Program II. Participants in this program had the right to purchase shares

with a discount of 25% based on the share price corresponding to the average closing price of one share at the SIX Swiss Exchange during

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 participant.

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 totalled 5,350, were granted with a strike price of CHF 114.00.

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

in CHF

International

Management

Incentive

Plan II

United States

Management

Incentive

Plan II

Market price of share 114.00 114.00

Exercise price of option 111.30 114.00

Expected volatility (in %) 30.00 30.00

Option life (in years) 5 5

Dividend yield (in %) 1.78 1.78

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

Management Incentive Program III (MIP III)

The third share and option program was introduced in June 2007 which conceptually follows in its entirety the modified program of 2006.

Participants of the “International Management Incentive Plan III” subscribed 38,921 options with a strike price of CHF 201.10. Participants

in the “United States Management Incentive Plan III” subscribed 4,096 options with a strike price of CHF 251.00. The difference between

the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expense on the date

of the issue of the shares.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

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

103

in CHF

International

Management

Incentive

Plan III

United States

Management

Incentive

Plan III

Market price of share 251.00 251.00

Exercise price of option 201.10 251.00

Expected volatility (in %) 22.74 22.74

Option life (in years) 5 5

Dividend yield (in %) 1.20 1.20

Risk-free interest rate based on Swiss government bonds (in %) 4.250 4.250

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 Management

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 30 April 2008. The difference between the discounted share price on the grant date and the share price

paid by the participants is recognized as personnel expense 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

Management Incentive Plan” is equal to the closing price of one share at the SIX Swiss Exchange on 30 April 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 32,436 options with a strike price of CHF 132.00. Participants in the

“United States Management Incentive Plan IV” subscribed 4,689 options with a strike price of CHF 122.40.

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 122.40 122.40

Exercise price of option 132.00 122.40

Expected volatility (in %) 50.28 50.28

Option life (in years) 5 5

Dividend yield (in %) 2.39 2.39

Risk-free interest rate based on Swiss government bonds (in %) 3.408 3.408

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

In 2009, the management introduced a new plan. The terms of this share and option program are identical to the Management Incentive

Program IV as described above apart from the strike price of the “International Management Incentive Plan”, which equals the closing

price of the share on the cut-off day at the SIX Swiss Exchange. Under this program participants of the “International Management Incentive

Plan” received 65,921 options with a strike price of CHF 62.50 and participants of the “United States Management Incentive Plan”

received 5,132 options with a strike price of CHF 83.05.

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 83.05 83.05

Exercise price of option 62.50 83.05

Expected volatility (in %) 56.91 56.91

Option life (in years) 5 5

Dividend yield (in %) 2.84 2.84

Risk-free interest rate based on Swiss government bonds (in %) 2.360 2.360

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

104

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

In the period under review 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 97.60 and participants of the “United States Management

Plan” received 1,354 options with a strike price of CHF 89.55.

The weighted average fair value of the share options granted during the reporting period is determined using the binominal valuation

model, applying the following significant inputs into the model:

in CHF

International

Management

Incentive

Plan 09 / 10

United States

Management

Incentive

Plan 09 / 10

Market price of share 89.55 89.55

Exercise price of option 97.60 89.55

Expected volatility (in %) 45.32 45.32

Option life (in years) 5 5

Dividend yield (in %) 1.63 1.63

Risk-free interest rate based on Swiss government bonds (in %) 1.552 1.552

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

Average exercise

price

per share

(in CHF)

2010 2009

Options

(number)

Average exercise

price

per share

(in CHF)

Options

(number)

Options outstanding on 1 January 114.79 179,369 148.39 113,002

Granted 96.79 13,453 63.98 71,053

Exercised 72.09 (11,196) 0.00 0

Forfeited 92.70 (3,993) 154.99 (2,570)

Expired 155.97 (3,941) 154.34 (2,116)

Options outstanding on 31 December 115.72 173,692 114.79 179,369

Options exercisable on 31 December 140.20 99,454 141.48 68,062

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

Exercise

price

of option

(in CHF)

2010 2009

Number of

exercised

options

Exercise

price

of option

(in CHF)

Number of

exercised

options

International Management Incentive Plan II 111.30 2,152 0.00 0

International Management Incentive Plan 08 / 09 62.50 8,930 0.00 0

United States Management Incentive Plan 08 / 09 83.05 114 0.00 0

Weighted average exercise price of options exercised

during the year 72.09 0.00

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

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

105

Average

exercise price

per share (in CHF)

2010

Number of options

expiring at year-end

2012 111.63 34,500

2013 206.23 32,089

2014 130.79 34,857

2015 64.12 58,793

2016 96.79 13,453

Total 115.72 173,692

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.

In 2009, the target bonus scheme for Executive Board members as well as the remuneration of the Board of Directors was adjusted to focus

on the company’s sustainable mid- and long-term success:

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

30 April 2009 of CHF 62.50. These shares will thereafter be subject to a further one-year restriction period. In the reporting period under

review Executive Board member received 40 % of the bonus in company shares totalling to 4,155 shares (previous year: 11,740 shares)

with a restriction period of one year. This number of shares will additionally be matched by the company after this restriction period. These

additional shares are also subject to a further one-year restriction period.

During the period under review the management received matched shares totalling 11,740 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 31 December 2010 amounts to CHF 1,508 thousand, which is also

the intrinsic value.

Board of Directors Restricted Stock Award Plan

The restricted stock award plan for the Board of Directors has been 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.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

106

Costs of share-based compensation

Recognized costs of share-based compensation were as follows:

in CHF 2010 2009

Employee share plan 740,818 3,903,988

Option plan 1,540,175 1,793,041

Total cost of share-based payments 2,280,993 5,697,029

Share-based compensation costs are not reported in operating segments. They are reported under “Corporate”.

9

Other operating expenses

in thousand CHF 2010 2009

Administrative expenses 61,786 79,051

Communications expenses 65,346 65,037

Rent and utilities expenses 185,815 182,468

Travel and promotion expenses 38,222 34,773

Insurance expenses and claims 131,632 8,283

Bad debt and collection expenses 10,353 11,046

Other 33,897 37,860

Total other operating expenses 527,051 418,518

Rent and utilities expenses include rentals amounting to CHF 100.0 million (2009: CHF 97.5 million) and lease of machinery, equipment

and vehicles of CHF 23.9 million (2009: CHF 20.8 million). Bad debt and collection expenses include CHF 2.2 million (2009:

CHF 1.4 million) of credit insurance premiums. In the period under review the Group recognized fines amounting to CHF 104.0 million as

claim expenses.

10 Gains and losses on sales of non-current assets

in thousand CHF 2010 2009

Gains on sales of property, plant and equipment 1,103 972

Losses on sales of property, plant and equipment (826) (477)

Total net gains on sales of non-current assets 277 495

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

11

Finance income and costs

107

in thousand CHF 2010 2009

Interest income

Interest income on current bank accounts 3,795 2,622

Interest income on financial assets at fair value through profit or loss 13 16

Interest differential on forwards and swaps 1,750 2,127

Interest income on loans 5 1,502

Cash discount income 416 81

Subtotal interest income 5,979 6,348

Guarantee fees income 16 0

Dividend on available-for-sale financial assets 99 228

Fair value adjustments on financial assets 154 36

Total finance income 6,248 6,612

Interest expenses

Interest expenses on loans (642) (7,717)

Interest expenses on current bank accounts (1,041) (635)

Interest differential on forwards and swaps (3,493) (6,675)

Interest expenses on financial leasing (86) (120)

Cash discount expenses (254) (45)

Subtotal interest expenses (5,516) (15,192)

Bank charges (2,958) (3,424)

Exchange differences (609) (2,153)

Guarantee fees expenses (760) (848)

Other financial expenses (886) (1,036)

Impairment on financial assets (4,759) 0

Total finance costs (15,488) (22,653)

Net finance costs (9,240) (16,041)

12 Income tax expenses

in thousand CHF 2010 2009

Current income taxes

Current period 43,457 23,392

Adjustments for prior periods 883 4,310

Total income taxes 44,340 27,702

Deferred income taxes (Note 27)

Origination and reversal of taxes on temporary differences and on tax loss carry forwards (12,384) (25,145)

Effect of changes in the tax rate on temporary differences 305 987

Utilization of non-recognized tax loss carry-forwards (142) (118)

Total deferred income taxes (12,221) (24,276)

Total income tax expenses 32,119 3,426

Management decided to calculate the applicable standard tax rate as in the previous year based on the standard tax rate in Basel headquarters

domicile.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

108

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

in thousand CHF 2010 2009

Profit before income tax 6,122 13,869

Tax at the applicable tax rate of 23.37 % (2009: 23.37 %) 1,431 3,241

Effect of differing national tax rates (6,479) (12,152)

Utilization of not yet recognized tax loss carry-forwards (142) 0

Recognition of deferred tax assets from previous periods (259) (118)

Not yet recognized tax loss carry-forwards 13,434 157

Adjustment of previous year tax provision 883 4,310

Effect of changes in the tax rate on temporary differences 305 987

Withholding tax on dividends received 4,907 480

Expenses not deductible for tax purposes and non taxable income 17,298 6,254

Miscellaneous 741 267

Actual tax charge 32,119 3,426

Income tax recognized in the consolidated statement of comprehensive income:

2010 2009

in thousand CHF

Before tax

Tax

benefit

(expense) Net of tax Before tax

Tax

benefit

(expense)

Net of tax

Translation and exchange differences (15,027) 0 (15,027) 9,416 0 9,416

Available-for-sale financial assets (1,828) 0 (1,828) (943) 0 (943)

Other taxes directly recognized in equity 0 (123) (123) 0 (127) (127)

Actuarial gains (losses)

on defined benefit plans (10,596) 5,412 (5,184) 18,914 (4,338) 14,576

Total (27,451) 5,289 (22,162) 27,387 (4,465) 22,922

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

13 Earnings per share

109

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 2010 2009

Consolidated profit attributable to owners of the parent (27,350) 8,492

Weighted average number of ordinary shares outstanding 23,668 23,657

Basic earnings per share (in CHF) (1.16) 0.36

Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion

of all dilutive potential ordinary shares. The Group only has share options outstanding that can be categorized as dilutive potential ordinary

shares. For the share options, a calculation is made to determine the number of shares that could have been acquired at fair value based

on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared

with the number of shares that would have been issued assuming the exercise of the share options.

in thousand CHF 2010 2009

Consolidated profit attributable to owners of the parent (27,350) 8,492

Weighted average number of ordinary shares outstanding 23,668 23,657

Adjustments for share options 7 7

Adjustments for share ownership program 4 15

Weighted average number of ordinary shares for diluted earnings per share 23,679 23,679

Diluted earnings per share (in CHF) (1.16) 0.36

At 31 December 2010, 66,946 options (2009: 113,923 options) were excluded from the diluted weighted average number of ordinary shares

calculation as their effect would have been anti-dilutive.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

110 14 Property, plant and equipment

During the period under review, the Group acquired mainly machinery and equipment. The reclassification of CHF 14.3 million (2009:

CHF 0 million) from construction in progress mainly to buildings refers to the commissioning of a new warehouse in Dubai. In 2010, the net

assets of two barges were revalued. As the recoverable amount of these assets does not exceed the carrying amount, an impairment of

CHF 4.7 million (2009: CHF 0 million) was recognized.

2010 (in thousand CHF)

Land and

buildings

Machinery

and

equipment

Vehicles

Construction

in

progress

Total

Acquisition costs

Balance on 1 January 133,833 239,225 41,401 15,749 430,208

Translation differences (16,261) (20,515) (3,740) (1,418) (41,934)

Change in the scope of consolidation 1 68 65 0 134

Additions 5,169 18,062 3,109 2 26,342

Disposals (4,310) (23,068) (1,857) 0 (29,235)

Reclassifications 11,790 1,847 691 (14,328) 0

Balance on 31 December 130,222 215,619 39,669 5 385,515

Accumulated depreciation

Balance on 1 January 76,401 189,162 23,372 0 288,935

Translation differences (9,248) (17,260) (3,133) 0 (29,641)

Additions 6,756 20,757 11,378 0 38,891

Disposals (3,215) (22,240) (1,048) 0 (26,503)

Reclassifications 0 (1) 1 0 0

Balance on 31 December 70,694 170,418 30,570 0 271,682

Net book value on 1 January 57,432 50,063 18,029 15,749 141,273

Net book value on 31 December 59,528 45,201 9,099 5 113,833

Of which net book value of assets

acquired under finance leases 304 44 1,236 0 1,584

2009 (in thousand CHF)

Land and

buildings

Machinery

and

equipment

Vehicles

Construction

in

progress

Total

Acquisition costs

Balance on 1 January 132,264 229,115 40,384 12,541 414,304

Translation differences 2,148 2,733 (114) (326) 4,441

Additions 5,555 19,708 3,621 3,534 32,418

Disposals (6,134) (12,331) (2,490) 0 (20,955)

Balance on 31 December 133,833 239,225 41,401 15,749 430,208

Accumulated depreciation

Balance on 1 January 74,529 174,451 17,628 0 266,608

Translation differences 517 2,054 99 0 2,670

Additions 7,248 22,300 7,676 0 37,224

Disposals (5,893) (9,643) (2,031) 0 (17,567)

Balance on 31 December 76,401 189,162 23,372 0 288,935

Net book value on 1 January 57,735 54,664 22,756 12,541 147,696

Net book value on 31 December 57,432 50,063 18,029 15,749 141,273

Of which net book value of assets

acquired under finance leases 432 0 2,226 0 2,658

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

15 Intangible assets

111

2010 (in thousand CHF) Goodwill Software

Brands /

Customer

lists

Other

intangible

assets

Total

Acquisition costs

Balance on 1 January 44,315 63,879 23,651 688 132,533

Translation differences (1,170) (3,831) (1,732) (44) (6,777)

Change in the scope of consolidation 1,404 2 844 0 2,250

Additions 0 13,677 0 21 13,698

Disposals 0 (1,003) 0 (9) (1,012)

Balance on 31 December 44,549 72,724 22,763 656 140,692

Accumulated depreciation or impairment losses

Balance on 1 January 1,823 39,570 18,755 508 60,656

Translation differences (225) (3,453) (1,433) (45) (5,156)

Additions 0 6,385 1,569 159 8,113

Disposals 0 (1,003) 0 (9) (1,012)

Balance on 31 December 1,598 41,499 18,891 613 62,601

Net book value on 1 January 42,492 24,309 4,896 180 71,877

Net book value on 31 December 42,951 31,225 3,872 43 78,091

2009 (in thousand CHF) Goodwill Software

Brands /

Customer

lists

Other

intangible

assets

Total

Acquisition costs

Balance on 1 January 43,546 63,101 22,392 15,754 144,793

Translation differences 769 713 1,253 188 2,923

Additions 0 9,270 6 149 9,425

Disposals 0 (9,205) 0 (15,403) (24,608)

Balance on 31 December 44,315 63,879 23,651 688 132,533

Accumulated depreciation or impairment losses

Balance on 1 January 0 40,865 14,774 15,421 71,060

Translation differences 0 415 858 337 1,610

Additions 1,823 7,495 3,123 153 12,594

Disposals 0 (9,205) 0 (15,403) (24,608)

Balance on 31 December 1,823 39,570 18,755 508 60,656

Net book value on 1 January 43,546 22,236 7,618 333 73,733

Net book value on 31 December 42,492 24,309 4,896 180 71,877

The net book value of software is comprised of accumulated internally generated capitalized software development costs of CHF 22.6 million

(2009: CHF 4.8 million). All intangible assets with estimable useful lives are amortized over the period of their respective estimated

useful lives to their estimated residual values, and reviewed for impairment. Neither in 2010 nor 2009 there were any impairment charges

on these intangible assets.

Impairment test for goodwill

Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to the country of operation. The recoverable amount

of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets

ap proved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth

rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

112

A summary of the goodwill allocation per CGU is presented below:

in thousand CHF 2010 2009

Air freight division (CGU Airfreight) 31,151 31,151

Grampian International Freight Aberdeen & Beverwijk (CGU Grampian) 6,388 7,307

Panalpina World Transport (Singapore) Pte. Ltd. (CGU Janco) 4,008 4,034

Panalpina World Transport (Pty) Ltd. (CGU Australia) 1,404 0

Total goodwill 42,951 42,492

The following key assumptions have been used for the value-in-use calculations of each CGU:

2010 CGU Australia CGU Airfreight CGU Grampian CGU Janco

Growth rate 1 4.50 % 2.25 % 4.63 % 3.13 %

Operating expenses in % of forwarding revenues 2 96.87 % 98.37 % 98.62 % 97.74 %

WACC 3 15.53 % 10.44 % 12.60 % 10.51 %

2009 CGU Airfreight CGU Grampian CGU Janco

Growth rate 1 2.25 % 3.13 % 3.13 %

Operating expenses in % of forwarding revenues 2 98.90 % 98.71 % 95.84 %

WACC 3 9.32 % 12.25 % 9.41 %

1 Weighted average growth rate used to extrapolate cash flows beyond the budget period

2 Budgeted operating expenses in % of forwarding revenues

3 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 operating

expenses as a percentage of forwarding revenues are consistent with the forecasts and past experience. The weighted average

cost of capital (WACC) used are pre-tax and reflect specific risks relating to the relevant CGUs. For the impairment testing procedure the

planning assumptions of prior years were critically reviewed. The impairment testing procedure assumes that the CGU would achieve

sales growth at market growth for the planning period. It was also assumed that the percentage of operating expenses as a percentage of

forwarding revenue will remain stable.

The CGU Grampian is still critical. A minimal change in the assumptions of the growth rate of the gross profit (1.25 percentage points) or the

WACC (0.2 percentage points) would 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

WACC

CGU Janco

Gross profit growth rate

WACC

CGU Australia

Gross profit growth rate

WACC

– 61.9 percentage points

+ 31.8 percentage points

– 37.9 percentage points

+ 19.8 percentage points

< – 100.0 percentage points

+ 418.1 percentage points

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

16 Investments

113

in thousand CHF 2010 2009

Available-for-sale investments 15,625 17,794

Fair value through profit or loss investments 816 618

Loans receivable 208 166

Long-term receivables 14,061 15,250

Other 4,133 3,576

Total investments 34,843 37,404

Long-term receivables primarily include rental and guarantee deposits of CHF 12.8 million (2009: CHF 14.9 million).

Available-for-sale investments – unquoted equity shares

in thousand CHF 2010 2009

Balance on 1 January 17,794 18,629

Translation differences (78) 71

Additions 5 42

Disposals (142) (5)

Fair value adjustments recognized in statement of comprehensive income (1,702) (943)

Reclassifications (252) 0

Balance on 31 December 15,625 17,794

Less: non-current portion 15,625 17,794

Current portion 0 0

During the period under review, shares of CHF 252 thousand were transferred from available-for-sale investments to fair value through

profit or loss. Fair value adjustments amounting to CHF 126 thousand previously recorded in comprehensive income are recognized in the

income statement.

Fair value through profit or loss investments

in thousand CHF 2010 2009

Balance on 1 January 618 818

Translation differences (85) (2)

Additions 0 0

Disposals (8) (234)

Fair value adjustments recognized in profit or loss 39 36

Reclassifications 252 0

Balance on 31 December 816 618

Less: non-current portion 816 618

Current portion 0 0

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

114

17

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 a yearly basis. The

risk map itself covers any strategic, financial, operational, legal and compliance risks that could significantly impact the Company’s ability

to achieve its business goals and financial targets. Identified risks are weighted and prioritized by the Executive Board according to their

significance and likelihood of occurrence. For each risk, specific risk-mitigation measures – including their current status – are de fined

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 features risks which have increased or decreased in the course of the reporting year. Financial risk management specifically

is described in further detail below.

18 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 the Group operations. The Group has trade and other receivables, loans, cash, shortand

long-term deposits that arise directly from its operations. The Group also holds available-for-sale investments and enters into derivative

transactions.

The Group is exposed to market risk, credit risk and liquidity risk. The Group’s senior management oversees the management of these risks.

It is supported by a financial risk committee that advises on financial risks and the appropriate financial risk governance framework for the

Group. The financial risk committee provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are

governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accor dance with

Group policies and Group risk appetite. All derivative activities for risk management purposes are carried out by specialist teams that have

the appropriate skills, experience and supervision. It is the Group’s policy that no trading in derivatives for speculative purposes shall

be undertaken.

The Board of Directors reviews and agrees on policies for managing each of these risks, which are summarized below.

Financial risk factors

Carrying amount and fair value of financial assets by asset classes

2010 (in thousand CHF) Cash

Availablefor-sale

Fair value

through

profit or

loss held

for trading

Loans

and

receivables

Carrying

amount

Total

(fair value)

Trade receivables and other receivables 1,055,438 1,055,438 1,055,438

Unbilled forwarding services 74,742 74,742 74,742

Accrued interest income 340 340 340

Cash and cash equivalents 1,423 527,513 528,936 528,936

Other current financial assets 6,089 6,089 6,089

Derivative financial instruments 20,454 20,454 20,454

Investments:

Bonds and debentures 181 181 181

Shares 15,625 394 16,019 16,019

Other investments 241 241 241

Third-party loans 354 354 354

Rental and guarantee deposits 12,849 12,849 12,849

Total on 31 December 2010 1,423 15,625 21,270 1,677,325 1,715,643 1,715,643

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

2010 (in thousand CHF)

Financial

liabilities at

fair value

through

profit or

loss

Financial

liabilities

measured

at amortized

cost

Carrying

amount

Total

(fair value)

115

Payables and accruals 830,310 830,310 830,310

Borrowings 8,858 8,858 8,858

Finance lease liabilities 879 879 992

Derivative financial instruments 5,532 5,532 5,532

Provisions and other liabilities 120,451 120,451 120,451

Total on 31 December 2010 5,532 960,498 966,030 966,143

2009 (in thousand CHF) Cash

Availablefor-sale

Fair value

through

profit or

loss held

for trading

Loans

and

receivables

Carrying

amount

Total

(fair value)

Trade receivables and other receivables 959,436 959,436 959,436

Unbilled forwarding services 83,103 83,103 83,103

Accrued interest income 524 524 524

Cash and cash equivalents 3,215 528,588 531,803 531,803

Other current financial assets 10,809 10,809 10,809

Derivative financial instruments 11,286 11,286 11,286

Investments:

Bonds and debentures 212 212 212

Shares 17,794 114 17,908 17,908

Other investments 292 292 292

Third-party loans 5,542 5,542 5,542

Rental and guarantee deposits 15,250 15,250 15,250

Total on 31 December 2009 3,215 17,794 11,904 1,603,252 1,636,165 1,636,165

2009 (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 802,131 802,131 802,131

Borrowings 11,226 11,226 11,226

Finance lease liabilities 1,660 1,660 1,875

Derivative financial instruments 2,233 2,233 2,233

Provisions and other liabilities 78,268 78,268 78,268

Total on 31 December 2009 2,233 893,285 895,518 895,733

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

(i.e., as prices) or indirectly (i.e., derived from prices)

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

116

2010 (in thousand CHF) Level 1 Level 2 Level 3 Total

Available-for-sale financial assets 0 1,074 14,228 15,302

Financial assets at fair value through profit or loss held for trading 691 125 0 816

Derivative financial assets 0 20,454 0 20,454

Available-for-sale financial assets at cost 323

Total 36,895

Derivative financial liabilities 0 5,532 0 5,532

Total 5,532

2009 (in thousand CHF) Level 1 Level 2 Level 3 Total

Available-for-sale financial assets 252 1,068 15,963 17,283

Financial assets at fair value through profit or loss held for trading 463 155 0 618

Derivative financial assets 0 11,286 0 11,286

Available-for-sale financial assets at cost 511

Total 29,698

Derivative financial liabilities 0 2,233 0 2,233

Total 2,233

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 31 December 2010:

in thousand CHF

Available-for-sale

financial assets

Total

Balance on 1 January 15,963 15,963

Fair value adjustments in the statement of comprehensive income (1,735) (1,735)

Balance on 31 December 14,228 14,228

Total gains or losses for the period included in the statement of comprehensive income for assets

held at the end of the reporting period (1,735) (1,735)

Neither in 2010 nor in 2009 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.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Foreign currency risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily in regard

to the US dollar and the euro. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities as well as

net investments in foreign operations.

117

Management has set up a policy to require Group companies to manage their foreign exchange risk against their functional currency. The

Group companies are required to hedge their entire foreign exchange risk exposure with the Group Treasury, if possible. To manage foreign

exchange risks arising from future commercial transactions or recognized assets and liabilities, entities in the Group use forward contracts.

Foreign exchange risk arises when future commercial transactions or recognized assets and liabilities are denominated in a currency that

is not the Group entity’s functional currency. The Group Treasury is responsible for managing the net position using external derivative

con tracts. For segment reporting purposes, each subsidiary designates contracts with the Group Treasury as fair value hedges. External

foreign exchange contracts are designated at the Group level as hedges of foreign exchange risk on specific assets and liabilities on a

gross basis.

At 31 December 2010, the Group’s net foreign currency risk exposure amounted to CHF 31.6 million (2009: CHF 52.2 million). The

following table demonstrates the sensitivity to a reasonable possible change of 10 % in the USD, EUR and HKD exchange rate, with all

other variables held constant, of the Group’s profit before income tax (due to changes in the fair value of monetary assets and liabilities).

Profit before income tax

Effect in thousand CHF 2010 2009

US dollar (2,286) 5,753

Euro 371 704

Hong Kong dollar (896) (482)

Total effect (2,811) 5,975

The movement in the pre-tax effect is a result of 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, where 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 3.2 million (2009: CHF 5.2 million).

Interest rate risk

The 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 interest

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 receivables

Customer credit is managed by each business unit and subject to the Group’s established policy, procedures and control relating to customer

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. The maximum exposure is the carrying amount as disclosed in note 20 – 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 minimum

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.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

118

The table below shows the Group’s maximum exposure to credit risk:

in thousand CHF 2010 2009

Cash and cash equivalents (without cash on hand) 527,513 528,588

Derivative financial instruments 20,454 11,286

Receivables 1,057,090 985,327

Loans and other financial assets 18,547 20,792

Total financial assets shown in statement of financial position subject to credit risk 1,623,604 1,545,993

Guarantees 134,169 144,509

Total credit risk 1,757,773 1,690,502

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 525.3 million (2009: CHF 529.7 million) and credit lines with various finan cial

institutions totaling CHF 520.9 million (2009: CHF 530.9 million). Of this total, CHF 190.9 million is allocated to bank guarantees and

foreign exchange lines.

The table below summarizes the maturity profile of the Group’s financial liabilities on 31 December 2010 / 2009 based on contractual

un discounted payments.

2010 (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) 2,884 6,451 403 9,738

Trade and other payables 557,671 24,372 9,971 592,014

Accruals 217,396 14,821 6,080 238,297

Provisions and other liabilities 80,311 40,142 0 120,453

Foreign exchange contracts

Cash inflow (750,894) (65,039) (7,025) (822,958)

Cash outflow 737,807 63,495 7,541 808,843

Total 845,175 84,242 16,970 946,387

2009 (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) 193 11,802 891 12,886

Trade and other payables 579,619 0 0 579,619

Accruals 159,712 62,800 0 222,512

Provisions and other liabilities 0 78,268 0 78,268

Foreign exchange contracts

Cash inflow 1 (627,978) (16,440) (57,675) (702,093)

Cash outflow 1 623,461 17,362 51,470 692,293

Total 735,007 153,792 (5,314) 883,485

1 Certain prior year figures have been reassessed to conform with the current period’s presentation.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Capital risk management

119

The Group’s objectives when managing capital are to safeguard its ability to continue as an ongoing concern in order to provide returns

for shareholders and benefits for other stakeholders and to maintain an optimal capital structure in order 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 2010 2009

Capital and reserves attributable to Panalpina shareholders 804,279 856,564

Equity attributable to non-controlling interests 7,890 7,015

Total equity 812,169 863,579

Total assets 1,989,242 1,924,632

Equity ratio 40.8 % 44.9 %

The Group is not subject to regulatory capital adequacy requirements.

19 Other receivables and other current assets

in thousand CHF 2010 2009

Office supplies 1,721 1,958

Taxes (VAT, withholding tax) 42,660 40,308

Accrued income 1,391 528

Accrued interest income 340 524

Personnel advances 2,559 4,687

Social security and payroll taxes 0 5,504

Prepaid rent expenses 6,829 6,943

Prepaid communication and IT expenses 3,039 4,084

Supplier rebates 21,535 12,034

Short-term loans 146 5,376

Others 17,737 28,476

Total other receivables and other current assets 97,957 110,422

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

120 20 Trade receivables

in thousand CHF 2010 2009

Commercial clients 962,919 872,556

Agents 22,508 19,164

Total trade receivables (gross values) 985,427 891,720

Individual allowance (1,864) (5,104)

Overall allowance (25,449) (29,744)

Total trade receivables (net) 958,114 856,872

Europe / Africa / Middle East / CIS 518,859 478,716

thereof European Union 419,529 365,974

thereof Switzerland 38,370 41,936

North America 179,090 159,681

Central and South America 102,248 85,048

Asia / Pacific 157,917 133,427

Total trade receivables (net) 958,114 856,872

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 established based upon the difference between the receivable value and the estimated net

collectible amount. 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 2010 2009

Balance as of 1 January 34,848 33,791

Receivables written off during the year as uncollectible (9,684) (8,875)

Changes in provision for doubtful accounts 2,149 9,932

Balance as of 31 December 27,313 34,848

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

The following table provides details about the age of trade receivables that are not overdue as the payment terms specified in the terms and

conditions established with Panalpina customers have not been exceeded, as well as an analysis of overdue amounts and related provisions

for doubtful trade receivables:

121

in thousand CHF 2010 2009

Commercial clients 962,919 872,556

Agents 22,508 19,164

Total trade receivables (gross values) 985,427 891,720

Allowance for bad debt (27,313) (34,848)

Total trade receivables (net) 958,114 856,872

of which:

Not overdue 708,293 624,809

Past due not more than 30 days 189,671 171,315

Past due more than 30 days up to 180 days 82,139 79,236

Past due more than 180 days up to 360 days 8,052 8,370

Past due more than 360 days 10,153 19,110

Prepayment (12,881) (11,120)

Total trade receivables (gross) 985,427 891,720

Allowance for bad debt (27,313) (34,848)

Total trade receivables (net) 958,114 856,872

21 Derivative financial instruments

Contract value

Positive

replacement value

Negative

replacement value

in thousand CHF 2010 2009 2010 2009 2010 2009

Forward foreign exchange contracts 805,302 692,239 20,454 11,286 (5,532) (2,233)

Forward trading hedges 805,302 692,239 20,454 11,286 (5,532) (2,233)

Contract value

Positive

replacement value

Negative

replacement value

in thousand CHF 2010 2009 2010 2009 2010 2009

Terms of the forward foreign

exchange contracts 805,302 692,239 20,454 11,286 (5,532) (2,233)

0 – 3 months 734,333 623,408 18,579 5,681 (4,890) (1,409)

4 – 12 months 63,428 17,361 1,875 44 (103) (824)

13 – 18 months 7,541 51,470 0 5,561 (539) 0

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

122

Derivative financial instruments are spread over the following currencies:

Forward foreign

exchange contracts

in thousand CHF 2010 2009

USD 399,245 271,313

EUR 278,063 263,523

CAD 25,097 29,375

HKD 17,074 21,762

AUD 15,002 194

COP 11,228 17,105

GBP 11,178 15,167

DKK 8,259 1,097

SEK 8,154 45,651

PEN 5,157 6,242

HUF 4,712 0

CHF 4,100 1,600

MYR 3,072 1,028

JPY 2,762 7,029

MXN 2,211 0

SGD 2,001 2,572

CLP 1,696 0

NZD 1,452 6,734

NOK 1,361 0

ARS 1,130 0

CZK 998 954

Other 1,350 893

Total 805,302 692,239

22 Cash and cash equivalents

in thousand CHF 2010 2009

Cash on hand 1,423 3,215

Cash at bank 531,658 536,788

Checks and bills of exchange in transit (4,145) (8,200)

Total cash and cash equivalents 528,936 531,803

Net cash (debt) is comprised as follows:

in thousand CHF 2010 2009

Cash and cash equivalents 528,936 531,803

Other current financial assets 6,089 10,809

Short-term borrowings (9,335) (11,995)

Long-term borrowings (403) (891)

Net cash (debt) 525,287 529,726

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

23

Share capital and treasury shares

123

in thousand CHF

Outstanding

number of shares

(numbers)

Ordinary

shares

Treasury

shares

Total

On 1 January 2010 23,667,477 50,000 (192,567) (142,567)

Treasury shares

Sold 25,700 0 3,073 3,073

Purchased (94,142) 0 (10,540) (10,540)

Sold under employee share plan 18,774 0 1,731 1,731

Sold under employee option plan 24,649 0 2,300 2,300

On 31 December 2010 23,642,458 50,000 (196,003) (146,003)

The share capital is presented by 25 million issued shares (2009: 25 million) of CHF 2.00 par value, fully paid-in.

On 31 December 2010, the number of outstanding shares amounted to 23,642,458 shares (2009: 23,667,477) and the number of treas ury

shares to 1,357,542 (2009: 1,332,523). Treasury shares have been deducted from equity attributable to owners of the parent. All shares

issued by the Company were fully paid-in.

The extraordinary Shareholders’ Meeting, held on 23 August 2005, authorized the Board of Directors to create authorized capital in the

maximum amount of CHF 6 million by issuing a maximum of 3,000,000 registered shares with a nominal value of CHF 2.00 each at any

time until 22 August 2007. At the Annual General Meeting held on 15 May 2007, the shareholders approved the proposal of the Board of

Directors to extend the authorized share capital until May 2009 with an unchanged amount. The extension of the authorized capital for

another two years was approved at the Annual General Meeting held on 5 May 2009. The Board of Directors has not made use of this

au thorization. The Company has no conditional share capital.

In 2007, the Board of Directors decided to return excess capital to the shareholders by launching a share buyback program via a second

trading line on the SIX Swiss Exchange. Between 13 August 2007 and 2 September 2008, the Group repurchased 1,250,000 registered

shares totaling a value of CHF 185.0 million and representing 5 % of share capital.

The amount available for dividend distribution is based on the available distributable retained earnings of Panalpina World Transport (Holding)

Ltd. determined in accordance with the legal provisions of the Swiss Code of Obligations. On 4 May 2010, the shareholders approved

that no dividends will be distributed in respect of the 2009 business year (2009: CHF 1.90 per share). The Board of Directors has proposed

that no dividends should be distributed for the fiscal year 2010. This proposal is subject to approval at the Annual Meeting on 10 May 2011.

24 Non-controlling interests

in thousand CHF 2010 2009

Balance on 1 January (net) 7,015 7,632

Reclassification of parent’s ownership interest 9 (2,194)

Translation differences (430) (84)

Reclassification of translation differences to parent shareholders’ equity (5) 0

Interest in profit 1,298 1,951

Reclassification of interest in profit to parent shareholders’ equity 55 0

Dividend paid (52) (290)

Total net non-controlling interests 7,890 7,015

During the year under review, the negative non-controlling interests of Panalpina Kuwait were reclassified to parent shareholders’ equity. In

2009, Panalpina took over the 30 % shares from non-controlling interests of Panalpina Thailand.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

124 25 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 2010 2009

Current liabilities

Overdraft 0 39

Current portion of secured bank loans 8,855 11,183

Current portion of finance lease liabilities 480 773

Total current liabilities 9,335 11,995

Non-current liabilities

Non-current portion of finance lease liabilities 399 887

Other loans 4 4

Total non-current liabilities 403 891

Terms and repayment schedule

2010 2009

in thousand CHF

Currency

Nominal

interest rate

Year of

maturity

Carrying

amount

Fair value

Carrying

amount

Fair value

Current liabilities

Secured bank loan USD 5.85 % 2011 6,020 6,020 10,809 10,809

Secured bank loan

COP

DTF

+ 3.00 % 2011 4 4 374 374

Secured bank loan COP 4.91 % 2011 2,831 2,831 0 0

Total current liabilities 8,855 8,855 11,183 11,183

Non-current liabilities

Other loans SGD n / a 2011 4 4 4 4

Total interest-bearing liabilities 8,859 8,859 11,187 11,187

Finance lease liabilities

2010 2009

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 542 62 480 874 101 773

Between 1 and 5 years 450 51 399 1,001 114 887

Total interest-bearing liabilities 992 113 879 1,875 215 1,660

The weighted average interest rate of bank borrowings and other financing liabilities is 5.78 % (2009: 5.00 %). The carrying amounts of

short-term bank borrowings approximate their fair value.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

The maturity of the Group’s long-term financial debts (excluding lease liabilities) is shown in the following table:

125

2010 2009

in thousand CHF

2011 4 4

Total 4 4

The carrying amounts of the Group’s borrowings are denominated in the following currencies:

in thousand CHF 2010 2009

USD 6,020 10,809

COP 2,835 373

GBP 654 1,347

PLN 165 133

EUR 18 162

AUD 0 58

Others 46 4

Total 9,738 12,886

26 Long-term provisions

2010 (in thousand CHF)

Employee

benefits

Claims

and other

provisions

Total provisions

Balance on 1 January 28,756 37,902 66,658

Translation differences (2,513) (3,725) (6,238)

Addition 9,492 70,923 80,415

Reversal of unused amount (2,939) (35,449) (38,388)

Charged in income statement 6,553 35,474 42,027

Utilization (5,092) (514) (5,606)

Transfers 6,746 8,992 15,738

Balance on 31 December 34,450 78,129 112,579

2009 (in thousand CHF)

Employee

benefits

Claims

and other

provisions

Total provisions

Balance on 1 January 26,784 48,986 75,770

Translation differences (4) (806) (810)

Addition 6,692 4,869 11,561

Reversal of unused amount (339) (3,618) (3,957)

Charged in income statement 6,353 1,251 7,604

Utilization (4,377) (11,529) (15,906)

Balance on 31 December 28,756 37,902 66,658

Employee provisions mostly relate to certain employee benefit obligations, such as “anniversary” benefits, termination payments and longservice

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 1,508 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.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

126

The balance for claims represents a provision for certain claims brought forward against the Group by customers and forwarding agents.

The balance as of 31 December 2010 is expected to be utilized within the next two to five years. Long-term claims include an additional

provision for probable potential future payments in connection with transport damages. Furthermore, a long-term provision in the amount of

CHF 38.0 million was recorded to cover the fines, legal penalties and compliance consultancy fees relating to the settlement of the US

Foreign Corrupt Practices Act (FCPA). The management determined the provision based on past performance and its expectation of the

funds needed for the future settlement of the claims which are not yet reported (see also note 4 Critical accounting estimates and judgments).

The current portion of employee provisions and claim provisions are disclosed in note 28.

27 Deferred income taxes

Deferred taxes are related to the following statement of financial position items:

in thousand CHF

Balance

1 January

2009

Recognized

translation

differences

Recognized

in income

statement

Recognized

in equity

Balance

31 December

2009

Recognized

translation

differences

Recognized

in income

statement

Recognized

in equity

Balance

31 December

2010

Deferred tax assets

Receivables 4,461 186 (1,719) 0 2,928 (307) (1,358) 0 1,263

Fixed assets 1,949 81 2,030 0 4,060 (425) (440) 0 3,195

Provisions 8,736 365 5,545 1,064 15,710 (1,645) 6,402 (1,794) 18,673

Other statement of

financial position captions 10,234 428 (1,899) 0 8,763 (917) 3,610 0 11,456

Deductible loss carryforwards

7,234 304 16,340 0 23,878 (2,500) 9,906 0 31,284

Total deferred tax assets 32,614 1,364 20,297 1,064 55,339 (5,794) 18,120 (1,794) 65,871

Deferred tax liabilities

Receivables (780) (42) 182 0 (640) (4) 135 0 (509)

Fixed assets (10,477) (565) 1,871 0 (9,171) (57) (510) 0 (9,738)

Provisions 2,037 110 (5,336) (5,402) (8,591) (54) (668) 7,206 (2,107)

Other statement of

financial position captions (13,048) (703) 8,950 0 (4,801) (30) (3,560) 0 (8,391)

Deductible loss carryforwards

2,823 153 (1,688) 0 1,288 8 (1,296) 0 0

Total deferred tax

liabilities (19,445) (1,047) 3,979 (5,402) (21,915) (137) (5,899) 7,206 (20,745)

Net deferred tax assets

(liabilities) 13,169 317 24,276 (4,338) 33,424 (5,931) 12,221 5,412 45,126

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

The gross movement in the deferred income tax account is as follows:

127

in thousand CHF 2010 2009

Balance on 1 January 33,424 13,169

Translation differences (5,931) 317

Income statement charge 12,221 24,276

Tax charged to equity due to IAS 19 5,412 (4,338)

Balance on 31 December 45,126 33,424

In 2010, temporary differences in the amount of CHF 4.9 million (2009: CHF 8,705) 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) 2010 2009

2010 – 623

2011 2,360 2,190

2012 18,321 17,781

2013 15,544 595

2014 2,677 11,127

2015 723 –

Later 40,698 22,715

Total unrecognized tax loss carry-forwards 80,323 55,031

The total increase of CHF 25.3 million (2009: increase of CHF 25.4 million) derived mainly from unrecognized tax loss carry-forwards in

Angola, Belgium, Brazil and Luxembourg. During the period under review, tax loss carry-forwards expired mainly in Slovenia. Tax loss

carry-forwards of CHF 21.9 million (2009: CHF 31.1 million) were utilized mainly in Switzerland, the Netherlands, Russia and Australia.

28 Provisions and other liabilities

2010 (in thousand CHF)

Employee

benefits and

others

Outstanding

vacation

entitlement

Claims

Restructuring

Total

Balance on 1 January 45,285 21,077 32,983 4,026 103,371

Translation differences (3,073) (2,168) (1,247) (1,144) (7,632)

Addition 122,915 4,113 90,338 265 217,631

Reversal of unused amounts (11,502) (1,253) (16,440) (584) (29,779)

Charged in income statement 111,413 2,860 73,898 (319) 187,852

Utilization (88,888) (2,320) (33,868) (1,724) (126,800)

Transfers 0 0 (15,738) 0 (15,738)

Balance on 31 December 64,737 19,449 56,028 839 141,053

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

128

2009 (in thousand CHF)

Employee

benefits and

others

Outstanding

vacation

entitlement

Claims

Restructuring

Total

Balance on 1 January 31,172 24,941 35,564 0 91,677

Translation differences 1 736 (26) 0 711

Addition 79,021 25,252 12,062 10,645 126,980

Reversal of unused amount (10,293) (11,926) (4,840) (2,753) (29,812)

Charged in income statement 68,728 13,326 7,222 7,892 97,168

Utilization (54,616) (17,926) (9,777) (3,866) (86,185)

Balance on 31 December 45,285 21,077 32,983 4,026 103,371

Apart from outstanding vacation entitlement and the current portions of provisions as disclosed in note 26, provisions and other liabilities

include personnel profit participation and related social security costs and payroll taxes as well as compliance consultancy fees. During

the period under review, CHF 30.7 million of personnel profit participation (2009: CHF 15.3 million) was paid out. For the current year

additional personnel profit participation of CHF 51.2 million (2009: CHF 40.9 million) including related social security costs and payroll

taxes was recognized.

As disclosed in notes 3 and 26, claim provisions include the current portion of certain claims brought forward against the Group by customers

and forwarding agents. In addition, a short-term provision in the amount of CHF 31.0 million was recorded to cover the fines,

legal penalties and compliance consultancy fees relating to the settlement of the US Foreign Corrupt Practices Act (FCPA) and the US as

well as the New Zealand antitrust investigations.

During the period under review, the management reassessed the cash outflow of claims and came to the conclusion that based on past

utilization the duration until claims can be settled increased substantially. The reclassification to long-term claim provisions of CHF 15.7 million

reflects this change. The balance as of 31 December is expected to be utilized within one year.

Restructuring provisions arise from planned programs that materially change the scope of business undertaken by the Group or the manner

in which business is conducted. Such provisions include only the costs necessarily entailed by the restructuring which are not associated

with the recurring activities of the Group. The restructuring provisions newly added in 2009 concern headcount reductions in all functions

mainly in operations and marketing and sales in various countries. In 2010, additionally recognized restructuring provisions related to

adjustments of the previous year estimations. During the period under review, no additional restructuring plan was approved. The timings

of these cash outflows are expected to occur within one year.

29 Related parties

Key management personnel compensation

Key management personnel consist 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 2010, there were 6 (2009: 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 2010, there were 5 (2009: 7) members of the Executive Board.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

The following table shows the compensation of key management personnel:

129

2010 (in thousand CHF)

Annual

salary 1

Bonus

Termination

benefits

Other

benefits 2

Sharebased

payment

Social

security

contribution

Total

compensation

2010

Options

granted

Board of Directors

Rudolf W. Hug, Chairman 454 50 46 550

Guenter Rohrmann, Vice Chairman 154 50 0 204

Roger Schmid, Member* 155 50 0 205

Chris E. Muntwyler, Member 77 50 8 135

Hans-Peter Strodel, Member 77 50 7 134

Beat Walti, Member 77 50 8 135

Board of Directors leaving

Guenther Casjens, Member 154 0 154

Wilfried Rutz, Vice Chairman 127 12 139

Yuichi Ishimaru, Member 77 7 84

Glen R. Pringle, Member 51 0 51

Total remuneration of Board of Directors 1,403 0 0 0 300 88 1,791 0

Executive Board

Monika Ribar, Chief Executive Officer 800 730 27 633 110 2,300

Members of the Executive Board 2,220 1,141 149 1,017 420 4,947

Executive Management leaving 850 33 73 206 134 1,296

Total remuneration of Executive Board 3,870 1,871 33 249 1,856 664 8,543 0

Total remuneration of key management personnel 5,273 1,871 33 249 2,156 752 10,334 0

2009 (in thousand CHF)

Annual

salary 1

Bonus

Termination

benefits

Other

benefits 2

Sharebased

payment 3

Social

security

contribution

Total

compensation

2009

Options

granted

Board of Directors

Rudolf W. Hug, Chairman 454 50 504

Wilfried Rutz, Vice Chairman 256 28 284

Guenther Casjens, Member 155 155

Yuichi Ishimaru, Member 154 18 172

Glen R. Pringle, Member 102 13 115

Roger Schmid, Member * 155 155

Guenter Rohrmann, Member 103 11 114

Total remuneration of Board of Directors 1,379 0 0 0 0 120 1,499 0

Executive Board

Monika Ribar, Chief Executive Officer 800 27 109 936

Members of the Executive Board 3,120 794 298 281 504 4,997

Executive Management leaving 575 0 13 42 630

Total remuneration of Executive Board 4,495 794 0 338 281 655 6,563 0

Total remuneration of key management personnel 5,874 794 0 338 281 775 8,062 0

1

Salaries

incl. fixed remuneration, salary and discount on shares granted

2

Other

benefits incl. expense allowance and fringe benefits

3

This

disclosure item has been amended to conform to the presentation used in 2010 to disclose benefits to the Board of Directors in the

period in which they are accrued.

*

Remuneration

and shares have been transferred to Ernst Göhner Stiftung (employer of respective board member).

There were no contributions or donations to close members of the families of the key management.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

130

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 663b bis and 663c of the Swiss Code of Obligations.

Number of options

Number of PWT

(End of vesting period)

nominal shares 2012 2013 2014

Board of Directors

Rudolf W. Hug, Chairman 7,935 1,200 1,325 2,020

Guenter Rohrmann, Vice Chairman 2,820 2,020

Roger Schmid, Member 9,375 1,800 1,325

Total on 31 December 2010 20,130 3,000 2,650 4,040

Executive Board

Monika Ribar, Chief Executive Officer 21,063 1,800 1,325 2,020

Christoph Hess, General Counsel and Corporate Secretary 3,000 600 600 1,000

Karl Weyeneth, Chief Operating Officer 5,315 0 497 303

Marco Gadola, Chief Financial Officer 2,572 1,800 1,325 2,020

Alastair Robertson, Chief Human Resources 2,200 0 0 200

Total on 31 December 2010 34,150 4,200 3,747 5,543

Total on 31 December 2010 54,280 7,200 6,397 9,583

Number of options

Number of PWT

(End of vesting period)

nominal shares 2012 2013 2014

Board of Directors

Rudolf W. Hug, Chairman 7,935 1,200 1,325 2,020

Wilfried Rutz, Vice Chairman 12,795 1,800 1,325 2,020

Guenther Casjens, Member 13,175 1,200 1,325 1,500

Yuichi Ishimaru, Member 15,542 1,800 1,325 2,020

Glen R. Pringle, Member 4,040 1,800 995 990

Roger Schmid, Member 9,375 1,800 1,325 0

Guenter Rohrmann, Member 2,820 0 0 2,020

Total on 31 December 2009 65,682 9,600 7,620 10,570

Executive Board

Monika Ribar, Chief Executive Officer 17,479 1,800 1,325 2,020

Christoph Hess, General Counsel and Corporate Secretary 4,218 600 600 1,000

Sandro Knecht, Chief Marketing and Sales and

Supply Chain Management Officer 6,538 670 497 1,000

Dominik Tichelkamp, Chief Product and Procurement Officer 2,255 446 373 900

Karl Weyeneth, Chief Operating Officer 2,479 0 497 303

Marco Gadola, Chief Financial Officer 8,318 1,800 1,325 2,020

Alastair Robertson, Chief Human Resources 1,400 0 0 200

Total on 31 December 2009 42,687 5,316 4,617 7,443

Total on 31 December 2009 108,369 14,916 12,237 18,013

Shareholders, pension funds, associated companies and all subsidiaries are defined as parties related to the Group. Apart from the transactions

with related parties mentioned above, we refer to notes 7 and 8.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

30

Business combinations / disinvestments

On 1 November 2010, Panalpina World Transport (Pty) Ltd. in Sydney purchased defined tangible and intangible assets and acquired the

business of Apollo Forwarding in Adelaide, South Australia. Apollo and Panalpina have been close partners for more than 10 years. During

that time, Apollo Adelaide has acted as 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 Adelaide also provides

international freight forwarding services to its South Australia based customers who now gain access to Panalpina’s global network.

Tangible assets acquired include mainly office equipment and vehicles. Intangible assets include mainly customer relationship.

In 2009, there were no business combinations, nor were any significant subsidiaries sold.

Details of net assets acquired and goodwill are as follows:

in thousand CHF 2010 2009

131

Purchase consideration

– Cash paid 2,384 0

Total purchase consideration 2,384 0

Fair value of net assets acquired (980) 0

Goodwill 1,404 0

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:

Revaluation

Acquiree’s due to purchase Fair value Fair value

in thousand CHF

carrying amount accounting

2010

2009

Property, plant and equipment 134 0 134 0

Intangible assets 2 844 846 0

Net assets 136 844 980 0

Goodwill 1,404 0

Total cash flow from acquisition of businesses 2,384 0

31 Additional information

Contractual commitments on non-cancellable operating lease contracts 2010 2009

in thousand CHF

Less than one year 137,768 123,585

Between one and five years 283,793 217,174

More than five years 116,535 105,392

Total residual commitments 538,096 446,151

Included in the residual lease commitments is an operating lease contract for aircrafts of CHF 76.8 million (2009: CHF 30.2 million), leased

by Panalpina Air & Ocean Ltd. The contract with a one-year notice period was renewed in 2010 for the first aircraft until 31. August 2012.

In 2010 a second aircraft was leased with a period at least until 30. September 2012.

Pledged assets

As of the statement of financial position date 2010 and 2009, the Group does not have any pledged assets.

Pending legal claims

Introduction

In addition to the matters discussed in note 4 - Provisions, from time to time the Group is involved in legal proceedings in the ordinary course

of its business. Other than as noted below, the Group is not a party to any legal, administrative or arbitration proceedings which could significantly

harm the Group’s business, financial condition and results of operations taken as a whole, and it does not know of any such

proceedings which may currently be contemplated by governmental or third parties.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

132

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 8.5 million.

Business practices investigation

In 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 continuing to improve 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.

As part of the settlement of the case, Panalpina’s US subsidiary, Panalpina Inc., has agreed to enter a guilty plea to charges related to the

violation of the accounting provisions of the FCPA, and to pay a fine of USD 70.6 million in four instalments. Panalpina, Inc. also consented

to a final judgment in a civil action brought by the SEC to disgorge USD 11.3 million in profits. These payments and the cost of the

related compliance consultancy forms part of a provision that was reserved in the reporting year.

Individual shareholder compensation complaint

In 2009, Panalpina was named as co-defendant in a civil action filed in the USA in which a former minority shareholder was seeking compensation

for alleged misrepresentations and the omission of material facts related to Panalpina’s business in Nigeria and the termination

thereof. In the reporting year Panalpina has settled this case at an insignificant nominal amount in order to avoid further litigation and

related cost.

Freight forwarding antitrust investigation

In October 2007, Panalpina’s headquarters in Switzerland and the USA were raided by the respective competition authorities. Further, a request

for information was served by the New Zealand Commerce Division and a document retention notice by the Competition Bureau Canada.

In April 2008, the Australian Competition and Consumer Commission served a notice on the Australian subsidiary requesting information

and documents and in June 2008, Panalpina’s UK subsidiary was the recipient of a request for information issued by the European

Commission requesting certain information and records relating to alleged antitrust violations in the freight forwarding industry. In August 2010,

Brazilian authorities announced preliminary investigations against the freight forwarding industry.

These activities were part of a coordinated investigation of several competition authorities against various major freight forwarding companies

for alleged anti-competitive behavior.

Furthermore, a civil class action lawsuit was filed in the USA against Panalpina and a number of its major competitors as a direct 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. At this stage, Panalpina is unable to express an opinion as to the probable outcome of this litigation and thus to estimate

the potential loss, if any.

In 2009, the Competition Bureau Canada closed its investigation into alleged anti-competitive activity due to a lack of evidence substantiating

an undue lessening of competition.

In January 2010, the Australian Competition and Consumer Commission also discontinued its investigation.

In February 2010, Panalpina was served with a Statement of Objections by the European Commission, alleging anti-competitive behaviour

in the freight forwarding industry. In an oral hearing before the Commission’s case team held in July 2010, Panalpina has presented its

arguments. In January 2011, Panalpina received an additional request for information issued by the European Commission. A final decision

is not expected prior to mid-2011.

On 1 October 2010 Panalpina announced a settlement with the DOJ over violations of the Sherman Antitrust Act related to the sale of

international air freight forwarding services. Under the terms of the settlement, which is still subject to formal court approval, Panalpina has

agreed to pay a fine of approximately USD 12 million.

In the reporting year Panalpina also started settlement negotiations with the New Zealand Commerce Commission which are at a very

advanced stage. Consequently, the expected penalty has been provided for.

Internal fact finding and Panalpina’s cooperation with the competition authorities in jurisdictions which are still being investigated is ongoing.

It is not possible to predict the outcome of these proceedings at this stage. They may, however, result in material penalties being

imposed on Panalpina. As Panalpina is not yet in a position to assess its exposure and the potential financial consequences in these

proceedings, no related provisions have been made as of 31 December 2010.

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Subsequent events

133

Since the statement of financial position date, no events have become known for which a disclosure is required.

32 Principal Group companies and participations

Company Registered Currency

Nominal

capital

in 1,000

Equity

interest

in %

Investment

Method

of consolidation

Europe

Panalpina World Transport (Holding) Ltd. Basel CHF 50,000 K

Panalpina Management Ltd. Basel CHF 2,500 100 1 K

Panalpina Ltd. Basel CHF 600 100 1 K

Pantainer Ltd. Basel CHF 100 100 1 K

Panalpina Insurance Broker Ltd. Basel CHF 100 100 1 K

Panalpina International Ltd. Basel CHF 100 100 1 K

Hausmann Transport Ltd. Basel CHF 100 100 1 K

Panalpina Air & Ocean Ltd. Basel CHF 2,700 100 1 K

Jacky Maeder international forwarding Ltd. Basel CHF 2,000 100 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 500 100 1 K

Panalpina World Transport (Ireland) Ltd. Dublin EUR 25 100 1 K

Panalpina World Transport N.V. Antwerp EUR 10,500 100 1 K

Panalpina Luxembourg S.A. Luxembourg EUR 31 100 1 K

Panalpina World Transport B.V. Amsterdam EUR 4,091 100 1 K

Grampian International Freight B.V. Beverwijk EUR 18 100 1 K

Panalpina Czech Sro. Prague CZK 1,000 100 1 K

Panalpina Spedicija d.o.o. Koper EUR 100 100 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 3,000 100 1 K

Panalpina Romania S.R.L. Oradea RON 72 100 1 K

Panalpina Polska Sp. z. oo. Wroclaw PLN 1,500 100 1 K

Panalpina AB Gothenburg SEK 1,000 100 1 K

Panalpina A / S Oslo NOK 1,000 100 1 K

Panalpina World Transport Nakliyat Ltd. Srk. Istanbul TRY 808 100 1 K

Panalpina World Transport ZAO Moscow RUB 2,100 100 1 K

Panalpina CIS Helsinki OY Vantaa EUR 8 100 1 K

Panalpina Logistics LLC Moscow RUB 240 100 1 K

Panalpina World Transport Ltd. Kiev UAH 376 100 1 K

Luxair S.A. Luxembourg EUR 13,750 12 3 N

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

134

Company Registered Currency

Nominal

capital

in 1,000

Equity

interest

in %

Investment

Method

of consolidation

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 3,526 100 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 51,050 100 1 K

Panalpina Chile Transportes Mundiales Ltda Santiago CLP 68,960 100 1 K

Panalpina Transportes Mundiales S.A. Buenos Aires ARS 800 100 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 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 4,259,515 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 12,000 100 1 K

Panalpina World Transport LLP Almaty KZT 960,195 100 1 K

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Company Registered Currency

Nominal

capital

in 1,000

Equity

interest

in %

Investment

Method

of consolidation

135

Africa and Middle East

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 300 100 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 Algerie EURL Hassi Messaoud DZD 14,000 100 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 Navegaçao

e Transitos S.A.R.L. Luanda AOA 18,000 92 1 K

K = fully consolidated

N = not consolidated

1 = capital participation 50 – 100 %

2 = controlling influence over management

3 = capital participation less than 50 %

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Report of the Statutory Auditor on the Consolidated

Financial Statements to the General Meeting

of Shareholders of

136

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 78 to 135 for the year

ended 31 December 2010.

Board of Directors’ Responsibility

The board of directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with

International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing

and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are

free from material misstatement, whether due to fraud or error. The board of directors is further responsible for selecting and applying

appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our 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 statements.

The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of

the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal

control system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s

internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness

of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the

audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements for the year ended 31 December 2010 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 Requirements

We 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

Licensed Audit Expert

Auditor in Charge

Martin Rohrbach

Licensed Audit Expert

Zurich, 3 March 2011

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Key Figures in CHF

Five-year review

in million CHF 2010 2009 2008 2007 2006

137

Forwarding services 8,676 7,340 10,597 10,548 9,301

Change in % 18.19 (30.73) 0.47 13.41 12.33

Net forwarding revenue 7,164 5,958 8,878 8,641 7,735

Change in % 20.25 (32.89) 2.74 11.71 11.31

Gross profit 1,480 1,377 1,742 1,803 1,591

Change in % 7.49 (20.94) (3.43) 13.35 13.00

in % of net revenue 20.66 23.11 19.62 20.87 20.57

Consolidated profit (26.0) 10.4 113.8 210.6 183.5

Change in % (348.94) (90.82) (45.98) 14.77 52.54

in % of gross profit (1.76) 0.76 6.53 11.68 11.53

EBITDA 62.4 79.7 240.7 360.8 312.7

Change in % (21.78) (66.88) (33.29) 15.39 45.99

in % of gross profit 4.21 5.79 13.82 20.01 19.65

EBITA 23.5 42.5 204.7 310.7 277.9

Change in % (44.77) (79.23) (34.13) 11.80 56.21

in % of gross profit 1.59 3.09 11.75 17.23 17.47

EBIT 15.4 29.9 193.0 299.4 261.0

Change in % (48.64) (84.50) (35.54) 14.70 57.61

in % of gross profit 1.04 2.17 11.08 16.60 16.40

Cash generated from operations 75.3 311.8 274.5 278.9 321.3

Change in % (75.86) 13.58 (1.58) (13.20) 48.48

in % of gross profit 5.09 22.64 15.76 15.47 20.19

Net cash from operating activities 37.0 259.8 193.2 209.5 240.9

Change in % (85.74) 34.45 (7.78) (13.03) 69.77

in % of gross profit 2.50 18.87 11.09 11.62 15.14

Free cash flow 6.2 225.9 170.2 138.1 186.0

Change in % (97.24) 32.73 (23.20) (25.74) 53.21

in % of gross profit 0.42 16.41 9.77 7.66 11.69

Net working capital 143.0 132.2 351.6 487.8 414.4

Change in % 8.20 (62.42) (27.92) 17.72 (1.03)

Capital expenditure on fixed assets 40.0 41.8 58.4 50.8 57.0

Change in % (4.31) (28.34) 14.90 (10.84) (4.84)

in % of gross profit 2.71 3.04 3.35 2.82 3.58

Net capital expenditure on fixed assets 28.5 29.4 25.6 45.4 54.0

Change in % (3.24) 14.81 (43.56) (15.90) 62.65

in % of gross profit 1.92 2.14 1.47 2.52 3.39

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

138

in million CHF 2010 2009 2008 2007 2006

Depreciation and amortization 47.0 49.8 47.8 61.5 51.7

Change in % (5.65) 4.33 (22.33) 18.91 6.60

in % of gross profit 3.18 3.62 2.74 3.41 3.25

Personnel expenses 890.9 879.1 992.5 1,002.5 886.9

Personnel

Number of employees at year-end (world) 14,136 13,570 14,804 15,301 14,304

Number of employees at year-end (Switzerland) 749 737 778 769 755

Productivity ratios (CHF)

Net sales per average employee 503,703 429,864 582,867 587,344 579,766

Gross profit per average employee 104,062 99,343 114,356 122,581 119,235

Personnel expenses per average employee 62,641 63.430 65,163 68,138 66,474

Personnel cost in % of gross profit 60.20 63.85 56.99 55.59 55.74

Leverage (liabilities / equity) 1.46 1.24 1.27 1.23 1.17

Net interest-bearing liabilities (546) (535) (381) (325) (372)

Gross gearing (interest-bearing liabilities / equity) 0.01 0.02 0.02 0.03 0.03

Net gearing (net interest-bearing liabilities / equity) (0.68) (0.63) (0.44) (0.32) (0.38)

ROCE (EBIT less tax / capital employed) in % (5.40) 6.14 23.03 34.84 31.96

Current cash debt coverage ratio

(net operating cash flow / average current liability) 0.04 0.27 0.19 0.20 0.26

Cash debt coverage ratio

(net operating cash flow / average total liability) 0.03 0.24 0.16 0.18 0.23

Return on equity in % (3.1) 1.2 12.1 21.2 20.2

Change in % (360.88) (89.97) (42.92) 4.83 38.07

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Consolidated Statement of Financial Position in CHF

Five-year review

in million CHF 2010 2009 2008 2007 2006

139

ASSETS 1,989 1,925 1,971 2,278 2,108

Change in % 3.36 (2.35) (13.48) 8.08 15.17

Current assets 1,686 1,599 1,679 1,922 1,773

Change in % 5.48 (4.78) (12.64) 8.40 18.48

Liquid funds 555 548 401 358 376

Change in % 1.30 36.69 12.00 (4.73) 56.00

Receivables and other current assets 1,131 1,050 1,278 1,564 1,397

Change in % 7.66 (17.80) (18.28) 11.94 11.28

Non-current assets 303 326 292 356 336

Change in % (7.04) 11.66 (18.00) 6.06 0.48

Property, plant and equipment 114 141 148 168 162

Change in % (19.42) (4.35) (11.89) 3.47 6.58

Financial assets 111 113 70 103 72

Change in % (1.53) 60.07 (31.29) 42.59 (1.51)

Intangible assets 78 72 74 86 102

Change in % 8.65 (2.52) (14.06) (15.63) (6.70)

LIABILITIES AND EQUITY 1,989 1,925 1,971 2,278 2,108

Change in % 3.36 (2.35) (13.48) 8.07 15.16

Liabilities 1,177 1,061 1,100 1,252 1,131

Change in % 10.93 (3.50) (12.18) 10.73 16.29

Payables, accruals and deferred income 914 878 912 1,056 1,002

Change in % 4.05 (3.69) (13.65) 5.33 19.79

Borrowings 10 13 20 33 27

Change in % (24.43) (36.49) (39.38) 22.60 (46.99)

Provisions 254 170 167 163 101

Change in % 49.17 1.54 2.91 61.10 20.24

Non-controlling interests 8 7 8 7 8

Equity 804 857 864 1,019 970

Change in % (6.10) (0.83) (15.25) 5.07 13.98

Share capital 50 50 50 50 50

Change in % 0.00 0.00 0.00 0.00 0.00

Treasury shares (196) (193) (198) (101) (15)

Change in % 1.78 (2.62) 95.03 575.98 (25.00)

Translation reserves (151) (136) (146) (74) (65)

Change in % 10.70 (6.51) 96.03 13.50 14.04

Retained earnings and other reserves 1,101 1,136 1,157 1,145 1,000

Change in % (3.02) (1.89) 1.09 14.50 13.90

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Key Figures in EUR

Five-year review

140

in million EUR 2010 2009 2008 2007 2006

Forwarding services 6,293 4,861 6,677 6,421 5,895

Change in % 29.45 (27.20) 3.99 8.92 10.41

Net forwarding revenue 5,196 3,945 5,594 5,260 4,903

Change in % 31.70 (29.47) 6.34 7.28 9.44

Gross profit 1,074 912 1,097 1,098 1,008

Change in % 17.71 (16.88) (0.04) 8.91 11.01

in % of net revenue 20.66 23.11 19.62 20.87 20.56

Consolidated profit (18.9) 6.9 71.7 128.2 116.3

Change in % (373.28) (90.35) (44.08) 10.23 49.87

in % of gross profit (1.76) 0.76 6.53 11.68 11.54

EBITDA 45.2 52.8 151.7 219.7 198.2

Change in % (14.33) (65.19) (30.96) 10.83 43.52

in % of gross profit 4.21 5.79 13.82 20.01 19.66

EBITA 17.0 28.1 129.0 189.1 176.1

Change in % (39.41) (78.17) (31.80) 7.40 53.53

in % of gross profit 1.59 3.09 11.75 17.23 17.47

EBIT 11.1 19.8 121.6 182.2 165.4

Change in % (43.73) (83.71) (33.26) 10.18 54.87

in % of gross profit 1.04 2.17 11.08 16.60 16.41

Cash generated from operations 54.6 206.5 176.2 232.1 203.6

Change in % (73.56) 17.20 (24.09) 13.98 45.95

in % of gross profit 5.09 22.64 16.05 21.14 20.20

Net cash from operating activities 26.9 172.0 132.0 127.5 152.7

Change in % (84.38) 30.28 3.54 (16.48) 66.89

in % of gross profit 2.50 18.87 12.03 11.62 15.15

Free cash flow 4.5 149.6 111.9 84.1 117.9

Change in % (96.97) 33.65 33.11 (28.68) 50.57

in % of gross profit 0.42 16.41 10.20 7.66 11.70

Net working capital 114.3 89.0 236.1 293.1 256.9

Change in % 28.41 (62.28) (19.46) 14.09 (4.49)

Capital expenditure on fixed assets 32.0 28.2 39.2 30.5 35.4

Change in % 13.47 (28.09) 28.38 (13.75) (7.88)

in % of gross profit 2.98 3.09 3.57 2.78 3.51

Net capital expenditure on fixed assets 22.8 19.8 17.2 27.3 33.6

Change in % 14.92 15.22 (36.94) (18.79) 57.75

in % of gross profit 2.12 2.17 1.57 2.49 3.33

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

in million EUR 2010 2009 2008 2007 2006

141

Depreciation and amortization 34.1 31.4 30.1 37.4 32.7

Change in % 8.58 4.33 (19.55) 14.44 4.73

in % of gross profit 3.18 3.62 2.74 3.41 3.25

Personnel expenses 646.2 553.9 625.4 610.2 562.1

Personnel

Number of employees at year-end (world) 14,136 13,570 14,804 15,301 14,304

Number of employees at year-end (Switzerland) 749 737 778 769 755

Productivity ratios (in EUR)

Net sales per average employee 365,346 284,667 367,260 357,539 367,461

Gross profit per average employee 75,479 65,787 72,048 74,620 75,572

Personnel expenses per average employee 45,435 39,967 41,059 41,478 42,130

Personnel cost in % of gross profit 60.20 60.75 56.99 55.59 55.75

Leverage (liabilities / equity) 1.46 1.24 1.27 1.23 1.17

Net interest-bearing liabilities (436) (359) (256) (195) (231)

Gross gearing (interest-bearing liabilities / equity) 0.01 0.02 0.02 0.03 0.03

Net gearing (net interest-bearing liabilities / equity) (0.68) (0.63) (0.44) (0.32) (0.38)

ROCE (EBIT less tax / capital employed) in % (5.40) 6.14 23.03 34.84 31.96

Current cash debt coverage ratio

(net operating cash flow / average current liability) 0.04 0.27 0.19 0.20 0.26

Cash debt coverage ratio

(net operating cash flow / average total liability) 0.03 0.24 0.16 0.18 0.23

Return on equity in % (3.1) 1.2 12.1 21.2 20.2

Change in % (360.88) (89.97) (42.93) 4.83 38.07

Panalpina Annual Report 2010


Consolidated and Annual Financial Statements 2010

Consolidated Statement of Financial Position in EUR

Five-year review

142

in million EUR 2010 2009 2008 2007 2006

ASSETS 1,590 1,295 1,323 1,369 1,312

Change in % 22.76 (2.12) 12.17 14.56 12.23

Current assets 1,348 1,075 1,127 1,155 1,103

Change in % 25.36 (2.39) 4.69 15.54 16.54

Liquid funds 444 369 269 215 233

Change in % 20.30 36.69 12.00 (4.73) 56.00

Receivables and other current assets 904 705 858 940 870

Change in % 28.18 (17.80) (18.28) 11.94 11.28

Non-current assets 242 220 196 214 209

Change in % 10.05 12.02 (8.38) 2.33 (2.80)

Property, plant and equipment 91 95 99 101 100

Change in % (4.24) (3.86) (1.55) 0.71 2.61

Financial assets 89 76 47 62 45

Change in % 16.74 61.62 (23.23) 36.89 (5.01)

Intangible assets 62 48 49 52 64

Change in % 30.01 (1.17) (3.98) (19.45) (8.90)

LIABILITIES AND EQUITY 1,590 1,297 1,323 1,369 1,311

Change in % 22.57 (1.99) (3.33) 4.39 12.17

Liabilities 941 715 738 752 703

Change in % 31.56 (3.14) (1.88) 7.01 13.79

Payables, accruals and deferred income 730 592 612 634 623

Change in % 23.34 (3.33) (3.52) 1.83 13.07

Borrowings 8 9 14 20 17

Change in % (13.53) (37.99) (32.27) 18.30 30.19

Provisions 203 115 112 98 63

Change in % 76.25 2.28 14.99 55.18 17.19

Non-controlling interests 6 5 5 4 5

Equity 643 577 580 612 603

Change in % 11.39 (0.50) (5.31) 1.55 10.35

Share capital 40 34 34 30 32

Change in % 17.52 (0.92) 11.73 (6.12) 0.00

Treasury shares (157) (130) (133) (61) (1)

Change in % 20.49 (2.45) 117.91 5,992.36 26.17

Translation reserves (121) (92) (98) (45) (41)

Change in % 31.22 (6.18) 119.03 9.12 11.45

Retained earnings and other reserves 880 765 777 688 622

Change in % 15.05 (1.53) 12.94 10.61 10.27

Panalpina Annual Report 2010


Annual Financial Statements 2010

Financial Statements 2010

Panalpina World Transport (Holding) Ltd.

143

Panalpina Annual Report 2010


Annual Financial Statements 2010

Income Statement

for the years ended 31 December 2010 and 2009

144

in thousand CHF 2010 2009

Income

Income from participations 142,904 127,312

Financial income 55,670 37,295

Royalty income 34,741 21,859

Release of valuation allowance on loans to Group companies 3,520 61,579

Total income 236,835 248,045

Expenses

Personnel expenses 11,939 10,252

Other administrative expenses 35,034 45,525

Financial expenses 12,820 35,792

Depreciation and value adjustments 36,336 33,077

Total expenses 96,129 124,646

Taxes 2,159 0

Profit for the year 138,547 123,399

Panalpina Annual Report 2010


Annual Financial Statements 2010

Statement of Financial Position

as of 31 December (before profit appropriation)

Assets

145

in thousand CHF 2010 2009

Current assets

Cash 353,736 332,067

Cash pool receivables from Group companies 82,140 23,264

Receivables:

– from Group companies 3,371 9,069

– from third parties 194 811

Financial receivables from Group companies 103,667 87,724

Marketable securities 6,089 10,808

Prepaid expenses and deferred charges 51,075 43,147

Total current assets 600,272 506,890

Long-term assets

Participations 162,069 76,953

Loans to Group companies 1 241,515 263,132

Own shares 82,853 79,418

Total long-term assets 486,437 419,503

Total assets 1,086,709 926,393

1 Thereof subordinated CHF 68.0 million (2009: CHF 10.6 million)

Panalpina Annual Report 2010


Annual Financial Statements 2010

146

Liabilities and Equity

in thousand CHF 2010 2009

Short-term liabilities

Cash pool payables to Group companies 122,601 47,743

Payables:

– due to Group companies 5,945 481

– due to third parties 1,589 1,873

Financial liabilities to Group companies 74,469 119,657

Accrued expenses 10,178 8,838

Total short-term liabilities 214,782 178,592

Long-term liabilities

Provisions 5,434 19,855

Total long-term liabilities 5,434 19,855

Total liabilities 220,216 198,447

Equity

Share capital 50,000 50,000

General legal reserve 10,000 10,000

Reserve for own shares 196,003 192,567

Special reserve 131,847 135,283

Accumulated earnings:

– balance brought forward from previous year 340,096 216,697

– profit for the year 138,547 123,399

Total equity 866,493 727,946

Total liabilities and equity 1,086,709 926,393

Panalpina Annual Report 2010


Annual Financial Statements 2010

Notes to the Financial Statements

General

147

The Group’s consolidated financial statements must be considered for an appropriate financial and economic assessment of the Group.

The presented statutory financial statements of Panalpina World Transport (Holding) Ltd. were prepared in accordance with the requirements

of the Swiss Code of Obligations (SCO).

Valuation methods and translation of foreign currencies

Treasury shares are valued at the lower of cost and market value. All other assets including participations are reported at cost less appropriate

write-downs. Assets and liabilities denominated in foreign currencies are translated into Swiss francs (CHF), using year-end rates

of exchange, except participations which are translated at historical rates. Marketable securities are reported at market value. Transactions

during the year which are denominated in foreign currencies are translated at exchange rates effective at the relevant transaction dates.

Resulting exchange gains and losses are recognized in the income statement with the exception of unrealized gains which are deferred.

Income from participations

The raise of CHF 15.6 million is mainly attributable to the fact that most of the subsidiaries recovered from the effects of the financial crisis

and therefore more dividends were distributed to Panalpina World Transport (Holding) Ltd.

Financial income

The increase of CHF 18.4 million compared to the prior year is predominantly attributable to higher foreign exchange gains of CHF 29.4 million

and less interest income of CHF 7.8 million from subsidiaries, as well as CHF 3.2 million decreased income from guarantee fees.

Royalty income

In 2009, Panalpina World Transport (Holding) Ltd. received for the first time a fee from its subsidiaries for usage of the Panalpina network

and trademark. This fee increased in 2010 by CHF 12.9 million.

Release of valuation allowance on loans to Group companies

As a result of a change in loan structure, the Company was able to release a valuation allowance amounting to CHF 3.5 million.

Personnel expenses

In accordance with the Transparency Act, the compensation of the key management personnel is disclosed in note 29 in the Group’s

financial statements.

Other administrative expenses

The decrease of CHF 10.5 million in other administrative expenses is mostly attributable to less legal and consulting expenses in connection

with the FCPA investigation (CHF 15.5 million) and an increase in claims expenses (CHF 3.9 million).

Financial expenses

The decline in financial expenses of CHF 23.0 million is mainly due to the fact that in 2010 CHF 22.8 million less losses of subsidiaries had

to be covered.

Depreciation and value adjustments

In 2010, value adjustments to participations on subsidiaries amounting to CHF 36.3 million were debited to the income statement.

Net reversal of hidden reserves

In 2010, no hidden reserves (2009: 29.0 million) were reversed.

Cash pool receivables and payables

The cash pool receivables increased for CHF 58.9 million and the cash pool payables increased for CHF 74.9 million, thus the net payables

increased for CHF 16.0 million.

Receivables Group

The receivables Group decreased by CHF 5.7 million, mainly due to less invoiced interest income of CHF 6.5 million.

Panalpina Annual Report 2010


Annual Financial Statements 2010

148

Financial receivables and loans Group companies

Financial receivables and loans Group companies increased by CHF 15.9 million compared to the previous year mainly due to increased cash

requirements of subsidiaries due to settlement of the FCPA and antitrust investigation.

Marketable securities

In the year under review, investments of CHF 6.1 million were made in fixed-term deposits.

Participations

The principal direct and indirect subsidiaries of Panalpina World Transport (Holding) Ltd. are listed under the heading “Principal Group companies

and participations” on pages 133 to 135. The net increase of CHF 85.1 million is primarily due to numerous capital increases in

subsidiaries.

Own shares

In the year under review, treasury shares purchased totalled 94,142 shares (2009: 58,980 shares) with an average purchase price per share

of CHF 111.96 (2009: CHF 88.89) and treasury share sales totalled 69,123 shares (2009: 91,272 shares) with an average sale price of

CHF 74.14 (2009: CHF 40.26). Of these shares a total of 107,542 (2009: 82,523) are held for serving the employee option plan. The other

1,250,000 shares (2009: 1,250,000) are held for the share buyback program. This program was launched in 2007 by the Board of Directors

to return excess capital to the shareholders. The share buyback program includes up to 5 % of the total share capital, which represents a

maximum of 1,250,000 registered shares. The number of treasury shares held by Panalpina World Transport (Holding) Ltd. meets the

definitions and requirements of art. 659, 659a, 663b para 10 and 671a SCO.

Number of shares 31.12.2010

Movement

in year 31.12.2009

Movement

in year 31.12.2008

Total Panalpina World Transport (Holding) Ltd. shares

issued 25,000,000 0 25,000,000 0 25,000,000

Total treasury shares held by Panalpina World Transport

(Holding) Ltd. 1,357,542 25,019 1,332,523 (32,292) 1,364,815

in % 5.43 5.33 5.46

Provisions

Provisions relating to foreign exchange risks decreased from CHF 19.9 million to zero. An amount of CHF 3.9 million is related to the obligations

Panalpina has accepted under the DPA as mentioned in note 31.

Share capital

As in the previous year, the fully paid-in share capital on 31 December 2010 amounts to CHF 50 million consisting of 25 million registered

shares at a par value of CHF 2.00 each. With regard to the authorized capital increase and share buyback program we refer to note 23 in

the Group’s financial statements.

in % 2010 2009

Shareholders

Ernst Göhner Stiftung, Switzerland 43.58 44.58

Cevian Capital II Master Fund L.P. 10.31

Artisan Partners Limited Partnership, USA 5.01 5.01

Deccan Value Advisors L.P., USA < 3 < 3

Capital Group Companies, Inc., USA < 3 < 3

FIL Ltd. (Fidelity International), Bermuda – < 5

The Income Fund of America Inc., USA – < 3

Portfolio investment (according to the share register, there are no more shareholders

with holdings of more than 3 % or 5 %) 45.21 50.41

Nominees

Chase Nominees Ltd., UK 6.02 6.79

Nortrust Nominees Ltd., UK – 2.29

Panalpina Annual Report 2010


Annual Financial Statements 2010

General legal reserves

149

The legal reserve must be at least 20% of the share capital of Panalpina World Transport (Holding) Ltd. in order to comply with the SCO.

Panalpina World Transport (Holding) Ltd. has met the legal requirements for legal reserves under art. 671 SCO.

Guarantees

in thousand CHF 2010 2009

Guarantees in favor of third parties

Guarantees and indemnity liabilities, SCO, art. 663b para 1 199,076 136,002

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 0.2 million (previous year: CHF 0.2 million).

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 60 million.

Panalpina World Transport (Holding) Ltd. carries joint liability to the federal tax authorities for value-added tax of all Swiss subsidiaries.

Pending legal claims

Business practices investigation

In 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 continuing to improve 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.

As part of the settlement of the case, Panalpina’s US subsidiary, Panalpina Inc., has agreed to enter a guilty plea to charges related

to the violation of the accounting provisions of the FCPA, and to pay a fine of USD 70.6 million in four instalments. Panalpina, Inc. also

consented to a final judgment in a civil action brought by the SEC to disgorge USD 11.3 million in profits. These payments and the cost

of the related compliance consultancy forms part of a provision that was reserved in the reporting year.

Freight forwarding antitrust investigation

In October 2007, Panalpina’s headquarters in Switzerland and the USA were raided by the respective competition authorities. Further, a

request for information was served by the New Zealand Commerce Division and a document retention notice by the Competition Bureau

Canada. In April 2008, the Australian Competition and Consumer Commission served a notice on the Australian subsidiary requesting

information and documents and in June 2008, Panalpina’s UK subsidiary was the recipient of a request for information issued by the

European Commission requesting certain information and records relating to alleged antitrust violations in the freight forwarding industry. In

August 2010, Brazilian authorities announced preliminary investigations against the freight forwarding industry.

These activities were part of a coordinated investigation of several competition authorities against various major freight forwarding companies

for alleged anti-competitive behaviour.

Furthermore, 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. At this stage, Panalpina is unable to express an opinion as to the probable outcome of this litigation and thus to estimate

the potential loss, if any.

In 2009, the Competition Bureau Canada closed its investigation into alleged anti-competitive activity due to a lack of evidence substantiating

an undue lessening of competition.

In January 2010, the Australian Competition and Consumer Commission also discontinued its investigation.

In February 2010, Panalpina was served with a Statement of Objections by the European Commission, alleging anti-competitive behaviour

in the freight forwarding industry. In an oral hearing before the Commission’s case team held in July 2010, Panalpina has presented its

arguments. In January 2011, Panalpina received an additional request for information issued by the European Commission. A final decision

is not expected prior to mid-2011.

Panalpina Annual Report 2010


Annual Financial Statements 2010

150

On 1 October 2010 Panalpina announced a settlement with the DOJ over violations of the Sherman Antitrust Act related to the sale of

international air freight forwarding services. Under the terms of the settlement, which is still subject to formal court approval, Panalpina has

agreed to pay a fine of approximately USD 12 million.

In the reporting year Panalpina also started settlement negotiations with the New Zealand Commerce Commission which are at a very

advanced stage. Consequently, the expected penalty has been provided for.

Internal fact finding and Panalpina’s cooperation with the competition authorities in jurisdictions which are still being investigated is ongoing.

It is not possible to predict the outcome of these proceedings at this stage. They may, however, result in material penalties being

imposed on Panalpina. As Panalpina is not yet in a position to assess its exposure and the potential financial consequences in these proceedings,

no related provisions have been made as of 31 December 2010.

For further details, descriptions and assessment please refer to note 31 to the consolidated financial statements.

Risk management

The detailed disclosures regarding risk management / assessment that are required by Swiss law are included in the Panalpina Group’s

consolidated financial statements on page 114.

Panalpina Annual Report 2010


Annual Financial Statements 2010

Appropriation of Available Earnings

The Board of Directors proposes the following appropriation of available earnings of total CHF 138,547,047 at the Annual General Meeting:

151

in CHF 2010

Distribution of an ordinary dividend of CHF 0.00 gross per share* 0

To be carried forward 478,643,407

Total 478,643,407

* It is not planned to pay dividends on own shares held by the Group.

Panalpina Annual Report 2010


Annual Financial Statements 2010

152

Panalpina Annual Report 2010


Annual Financial Statements 2010

Report of the Statutory Auditor on the Financial

Statements to the General Meeting of Shareholders of

Panalpina World Transport (Holding) Ltd., Basel

153

As statutory auditor, we have audited the accompanying financial statements of Panalpina World Transport (Holding) Ltd., which comprise

the statement of financial position, income statement and notes on pages 144 to 151 for the year ended 31 December 2010.

Board of Directors’ Responsibility

The board of directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and

the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system

relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The board of

directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are

reasonable in the circumstances.

Auditor’s Responsibility

Our 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 procedures

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

appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall

presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis

for our audit opinion.

Opinion

In our opinion, the financial statements for the year ended 31 December 2010 comply with Swiss law and the company’s articles of

incorporation.

Report on Other Legal Requirements

We 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 incorporation.

We recommend that the financial statements submitted to you be approved.

KPMG AG

Regula Wallimann

Licensed Audit Expert

Auditor in Charge

Martin Rohrbach

Licensed Audit Expert

Zurich, 3 March 2011

Panalpina Annual Report 2010


Appendix

Information for Investors

154

Share information

Share symbol PWTN

Reuters

PWTN.S

Bloomberg PWTN SW

Trading exchange SIX

Fiscal year ends December 31

Valoren 000216808

ISIN

CH0002168083

Share register

SIS Aktienregister AG, Olten, Switzerland

Key figures

in million CHF 2010 2009 * Change in %

Net forwarding revenue 7,164 5,958 20.2

Gross profit 1,480 1,377 7.5

Ebitda 62 80 – 22.5

Ebit (operating result) 15 30 – 50.0

Consolidated profit – 26 10 –

Cash generated from operations 47 312 – 84.9

Net capital expenditure 25 29 – 13.8

Assets 1,989 1,925 3.3

Equity 812 864 – 6.0

Employees (average) 14,223 13,860 2.6

Gross profit per employee (in CHF) 104,062 99,343 4.8

* Certain comparatives have been restated to conform to the current period’s presentation.

Five-year development

in million CHF

Net forwarding revenue

Gross profit

10,500

2,050

9,000

1,900

7,500

6,000

4,500

3,000

1,500

7,735

8,641

8,878

5,958

7,164

1,750

1,600

1,450

1,300

1,150

1,591

1,803

1,742

1,377

1,480

0

1,000

2006 2007 2008 2009 2010

2006 2007 2008 2009 2010

EBIT

Consolidated profit

320

280

240

200

261

299

245

210

175

140

1,327

184

1,408

211

160

120

193

161*

105

70

114

80

40

95*

35

0

10

–26

0

30

15

–35

2006 2007 2008 2009 2010

Shareholders’ equity

*adjusted

2006 2007 2008 2009 2010

1,000

875

750

625

500

375

250

125

0

978

1,026

871

864

812

2006 2007 2008 2009 2010

Panalpina Annual Report 2010


Appendix

Ordinary gross dividend payments

155

Financial year

Amount

(in million CHF) *

Per share

(in CHF)

2010 0 *** 0.00

2009 0 0.00

2008 45 1.90

2007 80 3.20

2006 75 3.00

2005 50 ** 2.00

2004 60 * 2.40

* Based on 25,000,000 shares

** Included a special one-time jubilee dividend of CHF 20 million declared at the ordinary Shareholders’ Meeting of May 20, 2005

*** Subject to vote by the Annual General Meeting of May 4, 2010

Earnings per share

Weighted average of oustanding shares 2010 2009

Basic EPS 23,668 CHF – 1.16 CHF 0.36

Diluted EPS 23,679 CHF – 1.16 CHF 0.36

Share price development

2010 2009

Last day of trading previous year (in CHF) 65.80 59.00

High 128.50 90.95

Low 64.65 37.20

Last day of trading current year 120.50 65.80

Average trading volume 77,922 73,178

Total shareholder return (in %) 83.1% 11.5%

Market capitalization as per December 31 (in CHF million) 3,013 1,546

Share price development in comparison to SPI

January 1 to December 31, 2010

Panalpina World Transport

SPI Swiss Performance Index

200

175

150

125

100

75

Financial calendar

January 1 to December 31

Financial year

March 9, 2011 2010 full-year results

May 4, 2011 Q1 results

May 10, 2011 Annual General Meeting

August 4, 2011 Half-year results

November 3, 2011 Nine-months results

March 7, 2012 2011 full-year results

May 8, 2012 Annual General Meeting

50

1 Jan 10 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 11

Panalpina Annual Report 2010


Appendix

156

Panalpina – Main Offices Worldwide

Algeria

Algiers, Hassi Messaoud

Angola

Cabinda, Lobito, Luanda, Soyo

Argentina

Buenos Aires

Australia

Adelaide, Brisbane, Melbourne, Perth,

Sydney

Austria

Graz, Hoechst, Innsbruck, Linz,

Salzburg, Vienna

Azerbaijan

Baku

Bahrain

Manama

Belgium

Antwerp, Brussels, Liège

Brazil

Belo Horizonte, Cajamar, Campinas,

Curitiba, Joinville, Manaus, Porto

Alegre, Rio de Janeiro, São Paulo

Cameroon

Douala

Canada

Calgary, Edmonton, Kitchener,

Montreal, Ottawa, Quebec City,

Toronto, Vancouver, Windsor,

Winnipeg

Chile

Santiago

China

Beijing, Chengdu, Chongqing, Dalian,

Guangzhou, Hong Kong, Macau,

Nanjing, Ningbo, Qingdao, Shanghai,

Shen zhen, Tianjin, Wuhan, Xiamen,

Zhongshan

Colombia

Barranquilla, Bogotá, buenaventura,

Cali, Cartagena, Medellín, Pereira

Congo

Pointe-Noire

Costa Rica

San José

Croatia

Rijeka

Czech Republic

Ceske Budejovice, Prague

Denmark

Copenhagen

Dominican Republic

Santo Domingo

Ecuador

Guayaquil, Quito

Egypt

Cairo

El Salvador

San Salvador

Finland

Helsinki

France

Annecy, Blois, Bordeaux, Fos,

Giberville, Le Havre, Lille, Lyon,

Marseille, Montpellier, Mulhouse,

Nantes, Nice, Paris, Strasbourg,

Toulouse

Gabon

Libreville, Port-Gentil

Germany

Bad Waldsee, Berlin, Bremen,

Cologne, Dortmund, Dresden,

Dussel dorf, Frankfurt, Hamburg,

Hanover, Kassel, Kehl, Leipzig,

Mannheim, Munich, Muens ter /

Osnabrueck, Nuremberg, Paderborn,

Stuttgart

Ghana

Accra, Takoradi, Tema

Hungary

Budapest

India

Bangalore, Chennai, Cochin,

Coimbatore, Hyderabad, Kolkata,

Mumbai, New Delhi, Pune, Tirupur,

Vishakhapatnam

Indonesia

Jakarta, Semarang, Surabaya

Ireland

Dublin, Shannon

Italy

Bologna, Florence, Genoa, Milan,

Rome, Turin, Vicenza

Japan

Fukuoka, Nagoya, Osaka, Tokyo

Kazakhstan

Aktau, Almaty, Atyrau

Korea

Busan, Iksan, Incheon, Seoul

Panalpina Annual Report 2010


Appendix

157

Kuwait

Safat

Luxembourg

Luxembourg

Malaysia

Johor Bahru, Kuala Lumpur, Penang

Mexico

Cancún, Guadalajara, Mexico City,

Monterrey, Queretaro, Villahermosa

The Netherlands

Amsterdam, Eindhoven, Maastricht,

Moerdijk, Rotterdam

New Zealand

Auckland

Norway

Bergen, Eigersund, Kongsberg, Oslo,

Sandnes

Panama

Colón, Panamá

Peru

Callao, Lima

Philippines

Cebu, Manila

Poland

Gdynia, Warsaw, Wroclaw

Portugal

Lisbon, Porto

Puerto Rico

San Juan

Qatar

Doha

Romania

Bucharest

Russia

Astrakhan, Chelyabinsk, Irkutsk,

Moscow, Murmansk, Nakhodka,

St. Petersburg, Tyumen, Usinsk,

Yekaterinburg, Yuzhno-Sakhalinsk

Saudi Arabia

Al Khobar, Jeddah, Riyadh

Serbia

Belgrade

Singapore

Singapore

Slovakia

Bratislava

South Africa

Johannesburg

Spain

Barcelona, Bilbao, Madrid, Valencia

Sweden

Gothenburg, Stockholm

Switzerland

Basel, Berne, Geneva, Lugano,

St. Gallen, Zurich

Taiwan

Kaohsiung, taichung, Taipei

Thailand

Bangkok

Turkey

Istanbul, Izmir

Ukraine

Kiev

United Arab Emirates (UAE)

Dubai, Jebel Ali, Sharjah

United Kingdom (UK)

Aberdeen, Birmingham, Glasgow,

Great Yarmouth, London, Manchester

United States of America (USA)

Atlanta, boston, Bradley, Charleston,

Charlotte, Chicago, Columbus,

dallas, Denver, Detroit, El Paso,

Greenville, Houston, Huntsville,

Laredo, Los Angeles, McAllen, Miami,

Minneapolis, Nashville, New Orleans,

New York, Norfolk, Orlando,

Philadelphia, Phoenix, San Diego,

San Francisco, Seattle, Saint Louis,

Tampa, Tulsa, Washington DC

Uruguay

Montevideo

Venezuela

Caracas, Maiquetía, Maracaibo,

Puerto Cabello, Puerto La Cruz,

Puerto Ordaz, Valencia

Vietnam

Hanoi, Ho Chi Minh City

Panalpina Annual Report 2010


Appendix

158

Pictures

The black and white illustrations show the Chairman of the

Board of Directors, the CEO and members of the Executive

Board as well as participants in Panalpina’s “Navigating

our Future” (NOF) program aimed at promoting management

talent within the company.

Pages 5, 8

and 9

Rudolf W. Hug (Chairman of the Board

of Directors) and Monika Ribar (CEO)

Page 6

Monika Ribar (CEO)

Page 7

Rudolf W. Hug (Chairman of the Board

of Directors)

Page 21

Panalpina Executive Board

Pages 34,

55, 59, 61

and 74

NOF participants

Panalpina Annual Report 2010


Appendix

Imprint

159

Panalpina World Transport

(Holding) Ltd.

Viaduktstrasse 42

P. O. Box

CH-4002 Basel

Switzerland

Phone +41 61 226 11 11

Fax +41 61 226 11 01

info@panalpina.com

www.panalpina.com

The Panalpina Annual Report is published in German and English.

For additional copies please refer to the above address or send us an e-mail.

An electronic version is available at: www.panalpina.com /ar

Editorial body

Panalpina World Transport (Holding) Ltd. Corporate Communications

Concept / Design

Wirz Corporate AG, Zurich

Portrait Photography

Julian Salinas and Ursula Sprecher, Basel

English translation /editing

text control, Zurich

BMP Translations AG, Basel

Word + Image, Zufikon

Lithography

Detail AG, Zurich

Printed by

Neidhart + Schön AG, Zurich

Consultant on sustainability chapter

sustainserv, Zurich and Boston

Disclaimer

Certain sections of this Annual Report may contain forward-looking statements that are based on management’s expectations,

estimates, projections and assumptions. These statements are not guarantees of future performance and involve certain

risks and uncertainties, which are difficult to predict. Therefore, future developments and trends may differ materially from what

is forecast in forward-looking statements.

All forward-looking statements speak only as of the date of their publication or, in the case of any document incorporated by

reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company

or any person acting on the Company’s behalf are qualified by the cautionary statements. The Company does not undertake

any obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or

changes in expectations after the date of this report.

Panalpina Annual Report 2010


Panalpina World Transport

(Holding) Ltd.

Viaduktstrasse 42

P. O. Box

CH-4002 Basel

Phone +41 61 226 11 11

Fax +41 61 226 11 01

info@panalpina.com

www.panalpina.com

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