Key Figures A Passion for Solutions - Panalpina · Beat Simon Regional CEO, NORAM ... Corporate...

Annual Report 2004

A Passion for SolutionsKey Figures

in CHF millions Change2004 2003 in %

Invoiced Forwarding Services 7,452.3 6,560.9 13.6

Customs, duty and taxes (1,331.9) (1,198.5) 11.1

Net forwarding revenue 6,120.3 5,362.4 14.1

Gross profit (contribution margin) 1,341.1 1,238.9 8.2

in % of net forwarding revenue 21.9 23.1

Operating result before depreciation and amortization (EBITDA) 212.0 195.4 8.5

in % of gross profit 15.8 15.8

Operating result before amortization (EBITA) 174.4 152.6 14.3


Operating result (EBIT) 152.9 138.1 10.7


Consolidated net earnings 111.4 97.7 14.0

in % of shareholders’ equity 14.0 13.2

Cash flow 212.2 194.9 8.9


Net cash flow from operating activities 33.9 89.6 –62.1


Total capital expenditure 89.9 51.1 76.1

in % of net operating cash flow 264.9 57.0

Net capital expenditure 74.5 39.7 87.5


Depreciation and amortization 59.1 57.4 3.1


Total balance sheet size 1,574.3 1,486.8 5.9

Total Financial debts 36.6 32.2 13.9

Shareholders’ equity 796.8 737.1 8.1

Financial debts to equity in % 4.6 4.4 5.4

Return on equity (ROE) in % 14.5 13.8 5.3

Return on capital employed (ROCE) in % 23.7 26.0 –9.1

Number of employees 13,224 12,344 7.1

Gross profit per employee (CHF) 104,901 99,880 5.0

The best brains for the most convinc-ing ideas: That’s the motto whichPanalpina’s 13,000 employees followday in day out in seeking intelligentsolutions to the highly demanding for-warding and logistics problems of their customers around the globe. Andthey do so with passion.

As one of the world’s leading providersof forwarding and logistics services, thisglobal Swiss-based group specializesin intercontinental air freight and oceanfreight consignments and the associ-ated supply chain management services.Thanks to its in-depth industry know-how and state-of-the-art IT systems,Panalpina provides globally integrateddoor-to-door forwarding solutions tai-lored to its customers’ individual needs.The Panalpina Group operates a close-knit network with some 500 offices in80 countries. In a further 60 countries,it cooperates closely with partner com-panies.

As a clearly focused corporation with a leading market position, Panalpina hasspecialized know-how in all the keyindustries. It thus offers its global keyaccount customers true added value.At the same time, Panalpina is firmlyembedded among internationally activesmall and medium-sized enterprises,and earns approximately three-quartersof its revenues in this segment.

Thanks to a lean and efficient organi-zation, a non-asset-based businessmodel, competitive pricing and the wideexperience of its management team,Panalpina is extremely well equippedfor profitable future growth.

A Passion for Solutions

Key Figures

in CHF millions Change2004 2003 in %

Invoiced Forwarding Services 7,452.3 6,560.9 13.6

Customs, duty and taxes (1,331.9) (1,198.5) 11.1

Net forwarding revenue 6,120.3 5,362.4 14.1

Gross profit (contribution margin) 1,341.1 1,238.9 8.2

in % of net forwarding revenue 21.9 23.1

Operating result before depreciation and amortization (EBITDA) 212.0 195.4 8.5


Operating result before amortization (EBITA) 174.4 152.6 14.3


Operating result (EBIT) 152.9 138.1 10.7



in % of shareholders’ equity 14.0 13.2

Cash flow 212.2 194.9 8.9


Net cash flow from operating activities 33.9 89.6 –62.1


Total capital expenditure 89.9 51.1 76.1


Net capital expenditure 74.5 39.7 87.5


Depreciation and amortization 59.1 57.4 3.1


Total balance sheet size 1,574.3 1,486.8 5.9

Total Financial debts 36.6 32.2 13.9

Shareholders’ equity 796.8 737.1 8.1

Financial debts to equity in % 4.6 4.4 5.4

Return on equity (ROE) in % 14.5 13.8 5.3

Return on capital employed (ROCE) in % 23.7 26.0 –9.1

Number of employees 13,224 12,344 7.1

Gross profit per employee (CHF) 104,901 99,880 5.0

The best brains for the most convinc-ing ideas: That’s the motto whichPanalpina’s 13,000 employees followday in day out in seeking intelligentsolutions to the highly demanding for-warding and logistics problems of their customers around the globe. Andthey do so with passion.

As one of the world’s leading providersof forwarding and logistics services, thisglobal Swiss-based group specializesin intercontinental air freight and oceanfreight consignments and the associ-ated supply chain management services.Thanks to its in-depth industry know-how and state-of-the-art IT systems,Panalpina provides globally integrateddoor-to-door forwarding solutions tai-lored to its customers’ individual needs.The Panalpina Group operates a close-knit network with some 500 offices in80 countries. In a further 60 countries,it cooperates closely with partner com-panies.

As a clearly focused corporation with a leading market position, Panalpina hasspecialized know-how in all the keyindustries. It thus offers its global keyaccount customers true added value.At the same time, Panalpina is firmlyembedded among internationally activesmall and medium-sized enterprises,and earns approximately three-quartersof its revenues in this segment.

Thanks to a lean and efficient organi-zation, a non-asset-based businessmodel, competitive pricing and the wideexperience of its management team,Panalpina is extremely well equippedfor profitable future growth.

On 6 continents

Group Management Structureas of May 2005

Corporate Financial Reporting & Tax ManagementCorporate TreasuryCorporate Controlling & Corporate Credit Control

CFORoland Wider

CIOMonika Ribar

President & CEO

Bruno Sidler

Management Information SystemsProject ManagementBusiness Processes & QualityCorporate Information Technology

Europe / Middle East /Africa / Central Asia / CIS

Air FreightOil and GasPanprojects

Latin America

Operations

USA / Canada

Asia-Pacific

Ocean Freight

Regional CEO, EMEAJörg Eggenberger

Regional CEO, LATAM Beat Simon

Regional CEO, NORAMPeter Merath

Regional CEO, APACLars-Ola Gunnarsson

Corporate Auditor Board of Directors

Gerhard Fischer, ChairmanWilfried Rutz, Vice ChairmanHeinz KühnleinRoger SchmidHeinrich Walti

Members of the Executive Board Corporate Functions

Steering Committee

Gerhard Fischer, ChairmanWilfried RutzRoger SchmidBruno SidlerRoland Wider

Corporate Secretary

Corporate Marketing & Sales

Corporate Human Resources

Corporate Legal Services Corporate Communications

Corporate Development

A Passion for Solutions

Some 500 offices in 80 countries,13,000 employees and a worldwide air- and ocean freight network.

Key Figures

Interview with the Chairman and the CEO 4

Executive Board 8

Core Activities

Air Freight 12

Ocean Freight 14

Supply Chain Management 16

Key Industries

Oil and Gas 20

Automotive 22

Hi-Tech 24

Retail and Fashion 26

Health Care 28

Industrial Projects 30

Information Technology 32

Human Resources 34

Social Responsibility 36

Financial Statements 2004

Interview with the CFO 40

Consolidated Financial Statements 2004 42

Annual Financial Statements 2004 Panalpina World Transport (Holding) Ltd. 80

Main offices worldwide 88

Impressum 91

Panalpina Annual Report 2004 3

14 Ocean FreightIn 2004 Panalpina increased its transport volume to 824,200 TEUs. Strong growth rates were achieved mainly in the trade lanes from and to Asia and Latin America.

Core Activities

16 Supply Chain ManagementIn today’s global village, customers are increasinglydemanding more than just transportation of their goodsbetween A and B. Internationally active companies arerelocating production to sites around the world, resultingin more and more complex supply chains.

20 Oil and GasPanalpina as a global marketleader serves the oil and gas industry everywhere in theworld. The name Panalpinastands for high quality, safe andenvironmentally responsiblelogistics services with a clearcustomer focus.

22 AutomotiveThe international automotive industry is a truly globalizedsector. Vehicles are no longer completely manufactured in one plant. Instead, components are sourced from aroundthe world and shipped to a central location for the finalassembly. Panalpina’s supply chain management skills andits international network are key elements that help tokeep the production lines running.

24 Hi-TechHi-tech industries such as consumer electronics andtelecommunications are among the big winners ofglobalization and rising living standards around the world.Panalpina helps Hi-tech companies to improve theirsupply chain and thus to be able to market their productseven more successfully.

26 Retail andFashion

Considering the impor-tance of the retail andfashion business and itsfuture potential, andfollowing intensive discus-sions with customers, itwas a logical step to put astrong focus on the retailand fashion markets.

28 Health CareDue to its traditionally strongcustomer base in this field,Panalpina focuses on thehealth care sector as one ofits core industries. Theworldwide health care mar-ket is expanding stronglyand Panalpina keeps thecargo flow running betweenproducers and consumers.

12 Air FreightPanalpina increased its airfreight transport volume againin 2004 and transported a total of over 750,000 tons.This was an increase of 21% on 2003. A major driving force was the strong Asianexport market, in particularChina.

Key Industries

30 Industrial Projects

Providing transport services for big industrial projectsrequires special skills, high flexibility, total commitment anda true passion for solutions. All these requirements areprovided by the 185 staff of Panprojects, the specialist proj-ect division of the Panalpina Group.

Contents

4 Panalpina Annual Report 2004

How would you assess the past financial year?

Gerhard Fischer 2004 has been a successful year,and we were able to achieve our main targets.Panalpina has grown in all regions against the back-ground of a generally favourable economic cli-mate. Of course, the main source of revenues hasbeen major relocation of production activities toAsia with the consequent strong growth in freight

volumes. However, the fact that we have once againoutperformed the market shows that we are notsimply relying on the business cycle to drive growth.We have done our homework. For example, thereorganization of our global marketing and salesstructures has borne fruit which we are now har-vesting in the form of improved sales skills. I amalso very pleased with the fact that 99% of ourgrowth has been organic, i.e. has not entailed majoracquisitions. The global forwarding sector contin-ued to suffer the effects of the weak dollar last year.This influence is of course tangible in a sectorsuch as ocean freight in which almost all transac-tions take place in dollars. Pressure on margins in our highly competitive environment is a furtherchallenge. However, we have coped with this chal-lenge successfully in 2004 thanks to a furtherincrease in the efficiency of our services and rigor-ous lowering of our transaction costs.

Growth has outperformed the marketaverage in every core area,with new business in all key industriesAnother successful business year, further organic growth andconsistent implementation of the new strategic direction chosen in 2002 has put Panalpina in an ideal position to con-tinue benefiting from the effects of globalization.

Interview with the Chairman Gerhard Fischer and the CEO Bruno Sidler

How strong was Panalpina’s growth in eachsector?

Bruno Sidler We are very pleased with the trendin our core activities. Our total tonnage in airfreight rose by 21%, confirming our position as the world’s second largest provider of airfreightservices. Sea container freight volume rose by 21%,and revenues in our third main area of activity,

supply chain management, went upby 23%. We have gained new cus-tomers both in the SME segment,which accounts for around three-quarters of our turnover, and amongmajor global companies. We haveacquired new customers or conclud-

ed more comprehensive contracts with existingcustomers in all key industries. In 2004 we havebeen awarded important new business by Intel,Nokia, Ericsson, Alcatel, Siemens and Samsung inthe Hi-tech and telecommunications sector, ex-panding our leading position as a provider of serv-ices to global network suppliers and mobile tele-phone manufacturers. We have also concluded majornew or additional contracts with Adidas, Escada,H & M and Otto Versand in the retail and fashionsector, with BMW, Porsche and Hyundai in theautomotive industry, and with BP (Azerbaijan) andAgip KCO (Kazakhstan) in the oil and gas sector,where we have been the unchallenged market leaderfor many years.

“We will also extend our commitment to complexsupply chain management services.”


Interview with the Chairman and the CEO



What improvements in productivity wereachieved in the year under review?

Bruno Sidler Following the launch of our regionalmanagement structure in 2002 and preparationsfor the move to a functional organization in 2003,our central procurement, operational and sales &marketing organizations have been working in thenew structure since January 1, 2004. With the roll-out of the “target model project” the old forward-ing structure is now firmly a thing of the past, andthe performance of each business unit is meas-ured consistently against its own targets. We are

very satisfied with the results so far. The introductionof the Shared Services Centres and further movesto standardize our IT applications in the year underreview have also led to a rise in productivity peremployee, which has had a direct impact on ouroperating result.

What are your aims for the coming years?

Gerhard Fischer We aim to achieve a continuousrise in revenues well above the market average.We will continue to benefit from globalization, alasting phenomenon that will act as a generaldriver for growth, and from the fact that our sectoris still highly fragmented. We will also graduallyexpand our range of services, responding to cus-tomers’ demands for added value above andbeyond simply transporting objects from A to B.

Will Panalpina’s strategy change?

Gerhard Fischer The main elements of our tried andtested strategy – the clear focus on internationalair and ocean freight transport – will be maintainedin future too. We will also extend our commitmentto related supply chain management services. Thisis a deliberate choice and marks us out from ourmain rivals who offer integrated contract logisticsand generally use their own infrastructure to storegoods and distribute them by land for major cus-tomers. We see our role differently, preferring to actas a lead logistics provider, concentrating on theintelligent management of these logistics chains andproviding the same solutions via selected best-in-class subcontractors and strategic partnerships inthe various regions. This non-asset-based busi-ness model increases our flexibility, reduces risksand improves our liquidity.

What role do acquisitions play in your growth?

Bruno Sidler As we have already said, acquisitionsaccounted for a tiny proportion of our revenuegrowth in the year under review. However, the take-

over of Grampian gave a consider-able boost to our leading position inthe oil and gas sector, and the inte-gration of Korean IAF improves ourposition in Asia, as was the intention.The aim of these types of acquisi-tions is to continue to grow steadily,

strengthening our position on geographical mar-kets (particularly North America, Europe and Asia)or key industries by taking over leading local airand ocean freight forwarders. Buying up existingpartners has proven to be a particularly attractiveoption, as the long-standing relationship andabsence of network duplication in most casesmakes integration much easier.

Gerhard FischerChairman of the Board of Directors

“This non-asset-based business model increases ourflexibility, reduces risks and improves our liquidity.”

“We will continue to aim at sustained growth inrevenues well above the market average.”



What will Panalpina get out of a stock market launch?

Gerhard Fischer The planned IPO would give thecompany easier access to the capital markets and thus support its growth strategy. The group’sstatus and profile would also, of course, improve,thus helping us to market our services. Not least,going public would enhance the industrial com-petencies of our board committees, which can onlybe beneficial for the company.

Our current shareholder will, in any case, retain asubstantial stake in Panalpina over the long term.This is a direct consequence of the foundationbylaws, requiring an entrepreneurial asset manage-ment. This strategy is much welcomed by thecompany.

Furthermore, we have never been afraid of com-parisons with our direct competitors. This year theBoard of Directors filed an application to theGeneral Meeting that the ordinary dividend be in-creased by 10 million Swiss francs, bringing thetotal payout to 40 million francs and placing ourdistribution ratio on a par with that of our mainrivals.

What role does sustainability play in your plans?

Bruno Sidler Sustainable growth for the benefit ofshareholders and employees remains our toppriority. The fact that in 2004 we created new jobsand at the same time increased gross profit peremployee shows that we have been successful.We consolidated the already well establishedPanalpina brand last year by further efforts to im-prove the quality of our service and by the launchof our world-wide branding campaign.

Bruno SidlerPresident & CEO

10 major factors for success

Panalpina operates its own global network, man-ages capacity centrally and is represented on all the key markets with its own local organiza-tions. The company is justifiably proud of itsstaff; they not only work for Panalpina but haveassimilated its corporate culture and hence alsoits commitment to customer service. CEO BrunoSidler sums up the Group’s strengths in thefollowing 10 points:

• A global network combined with a strongpresence on local markets

• High brand recognition

• A healthy balance between major globalcustomers and SMEs

• A strong customer base in all key industries

• Global market leader in the oil and gasindustry’s supply chain

• Central procurement and air and ocean freightcapacity management

• A non-asset-based business model

• Process-integrated IT platforms

• Passionate staff

• A management team with long-termexperience in the industry


Executive Board

“Well trained IT specialists, an efficient controlof data flows as well as secure systems enableus to solve complex problems.”

Monika RibarCIO

Born 1959. Member of the Executive Board since 2000.Responsible for Corporate Information Technology, Management InformationSystems, Project Management, Business Processes & Quality.

Bruno SidlerPresident & CEO

Born 1957. President of theExecutive Board since 1998.Also directly responsible forMarketing & Sales, CorporateDevelopment, CorporateCommunications, Legal Ser-vices and Human Resources.

“The revenue growth we haveachieved, both among globalaccounts and small and medium-sized enterprises, clearly showthat our investments in marketingand sales have paid off.”

“We have met most of our targets,and the first successes yielded by the strategic and organizationalgroup restructuring launched in 2002 are now clearly visible.”

Roland WiderCFO

Born 1959. Member of the Executive Board since 2002.Responsible for Corporate Finances, Investor Relations, FinancialReporting & Tax Management, Treasury, Controlling and Credit Control.


Executive Board

Jörg EggenbergerRegional CEO EMEA

Born 1961. Member of the Executive Boardsince 2000. Regional responsibility: Europe, Middle East,CIS, Central Asia and Africa. Functionalresponsibility: Air Freight, Oil and Gas,Panprojects.

“Our decades of experience incentral procurement andcapacity management aregenerating good growthpotential in a highly frag-mented air freight market.”

“By ‘Operational Excellence’ wenot only mean ongoing improve-ments to our service quality, but consistent increases in ouremployees’ productivity andmotivation.”Beat Simon

Regional CEO LATAM

Born 1966. Member of the ExecutiveBoard since 2003.Regional responsibility: Latin America.Functional responsibility: Operations.

Lars-Ola GunnarssonRegional CEO APAC

Born 1948. Member of the Executive Board since 2002.Regional responsibility: Asia-Pacific. Functional responsibility: Ocean Freight.

“The continuing development of our partner-ship with selected leading shipping linesguarantees top-quality service and forms thebasis for double-digit growth in volumes.”

Peter MerathRegional CEO NORAM

Born 1942. Member of the Executive Board since 2005.Regional responsibility: USA and Canada.

“Motivated staff, solution-drivenservice concepts and impressiveforwarding, logistics and industrycompetencies are a guaranteeof satisfied customers in futuretoo.”


Core Activities

7500 Jumbo JetsThe 750,000 tons of air freight flown by Panalpina would fit in 7500 B747 cargo planes.

5000 kilometresPlaced end to end, the containers handled by Panalpinawould form a line around 5000 km long.


Core Activities

Core Activities• Air Freight• Ocean Freight


Core Activities

Panalpina increased its air freight transport volume again in 2004and transported a total of over 750,000 tons. This was anincrease of 21% on 2003. A major driving force was the strongAsian export market, in particular China.

Panalpina’s central procurement and capacitymanagement system and its capability to provide

capacity even during the peak season proved tobe a success factor. This was particularly evidenttowards the end of the year, when the demand for capacity was especially high. Panalpina couldoffer customers additional space and increasefrequencies, mainly out of Asia.

The Asian export market to Europe is expected tocontinue its strong upwards trend in 2005. Thetranspacific routes also developed successfully. In response to customer demand, Panalpina hasextended its services on Asia-North America routes.The twice-weekly B747-400F service betweenHong Kong and the hub in Huntsville, USA, thatwas launched in 2004 was extremely successful.On the transatlantic the westbound/eastboundtraffic balance between North America and Europeimproved.

Latin America showedgood import growth, witha clear increase in ship-ments such as electron-ics and automotive partsto Brazil. Northboundvolumes were also rising,and a further increase in Latin American exports

in 2005 is expected. Africa developed stronglythanks to the oil and gas industry, and Panalpinaoffered more capacity by increasing cargo flightsfrom five to seven per week.

Unique Panalpina Multi Hub Strategy

The central procurement and capacity management(CCM) concept has been further developed andwill be gradually extended in 2005. The PanalpinaAir Freight Division centrally handles capacity andprocurement, organizes and coordinates the globalair freight network and the traffic flows supportedby a hub and sub-hub system. A best-in-class ITtool ensures transparency of the capacity andbooking situation and the steering of the air freightnetworks in a multi hub environment.

Network expansion to profit from strong market growth

Air Freight

In Europe, Panalpinaoperates three equally-important air freight hubs:Luxembourg, Frankfurtand Paris. Panalpina’sstrong presence in NorthAmerica will be furtherextended when New York(JFK) will complement

the existing hub-network consisting of Huntsville,Chicago, Miami and Los Angeles. Panalpina AirFreight, with 550 staff, also operates a road feederservice to and from the hubs and sub-hubs.

Achieve the optimal capacity mix

Panalpina Air Freight combines the capacity ofselected commercial airline partners with the ownscheduled freighter operations in order to achievethe optimal capacity mix. This is being balancedout during the low and high season to achievebest capacity utilization on a daily basis.

The worldwide charter operations are controlledround the clock from the hubs in Luxembourg,Huntsville and Hong Kong which ensures immedi-ate response to customer requests in the threetime zones. It developed well in 2004 and – in aver-age – Panalpina operates three charter flightsevery day. The charter market offers good growthpotential, mainly for emergency shipments to bigproduction plants and oil and gas exploring sites.

New product portfolio

As part of the product re-definition to offer cus-tomers clearly-defined, easy to understand services,Panalpina has drawn up new air freight productnames. Priority offers a typical airport-airport tran-sit time of 1–2 days for time-critical shipmentsusing the fastest available connection. Standard,with a typical transit time of 3–4 days, providescost-effective and rapid transportation. Economyoffers transit times of 5–6 days. For vitally-urgentshipments, the “Now” service uses the fastestpossible solution, including onboard couriers, char-ters or helicopter transfers. Customers can alsoselect any combination of airport and door collec-tion and delivery options.


Core Activities


Core Activities

P analpina outgrew the overall internationalocean freight transport market last year. Total

ocean freight volumes rose 21% to 824,200 TEU.The major drivers were the dynamic Asian exportmarkets, especially China. Traffic with Asia (fromand to Europe, North America, Latin America) grewto about 446,700 TEU. Considerable growth rateswere also achieved in traffic from Latin America to North America and Europe and vice versa.Between Asia and North America the transportvolume grew by 33%. Capacity out of Asia andLatin America was generally very tight, leading tohigher westbound rates.

The strong growth in the ocean freight market isexpected to continue in 2005 and Panalpina isconvinced it can achieve above-average growthrates again. Furthermore, Panalpina will furtherdevelop its intra-Asian and transpacific ocean freightvolumes.

Availability of capacity even in peak season

Panalpina offers globally active and SME cus-tomers a choice of standardized products thatprovide reliable and efficient worldwide oceanfreight transportation. Through its worldwide LCL(Less than Container Load) and NVOCC (NonVessel Operating Common Carrier) products itoffers seamless door-to-door services on thebasis of long-term capacity and rate agreements

with leading carriers.Having centralizedcapacity procurementand allocation withinPanalpina Ocean Freight,the group can ensurecapacity for its cus-tomers throughout theyear on all trade lanes,even during the peakseason. The consequentdevelopment of part-nerships with selectedleading shipping linesensures highest servicequality and contributesto further growth on allmajor routes.

Standardized ocean freight products for allcustomers

Panalpina offers clear“easy freight” solutionsfor all kinds of customerrequirements. The fullcontainer load (FCL)product comprises com-plete schedule flexibil-ity, a high frequency ofsailings and available

equipment. LCL, the competitively-priced consoli-dation product, provides reliable performance andcost-effective transportation. LCL shipments arehandled through a dense network of strategically-located hubs in Europe, North America and Asia.A special focus in 2005 will be the extension ofthe network in Asia and further improved connec-tions within North America.

Service close to the customer

Panalpina is committed to serving customers closeto their location. New customer service teamshave been successfully formed to handle orderacceptance and to advise customers. Separateback-office staff will process orders and documen-tation. The combination of global contracts withcarriers and local service for the customers enablesPanalpina to respond quickly to changing cus-tomer requirements. At the same time, productiv-ity can be increased.

Security rules improve quality

Panalpina has successfully implemented new secu-rity procedures – including setting up appropriateIT tools – following the introduction of internationalsecurity rules for ocean freight shipments in July2004. In line with the obligatory standard operatingprocedures introduced by the International Mari-time Organization, Panalpina is providing advancemanifest information about its ocean freight ship-ments to the relevant authorities.

21% global growth and volume increase in all trade lanesIn 2004 Panalpina increased its transport volume to 824,200 TEUs.Strong growth rates were achieved mainly in the trade lanes from andto Asia and Latin America.

Ocean Freight


Supply Chain Management

Supply ChainManagement

180 football fieldsPanalpina manages a total of more than 1.1 millionsquare metres of storage space at 240 locations around the world.


Parts, semi-finished goods and complete prod-ucts have to be stored, packaged and at

times assembled on their way between productionsites or as they head for the point of sale. Natio-nal, regional and local distribution centres are turn-ing into logistics hubs. This is where Panalpina as a logistics expert comes into the picture. Withdecades of experience in international freightforwarding, Panalpina offers high-quality supplychain management solutions for customers around the world.

Panalpina works to helpits customers get theirgoods to the market in the most efficient andcost-effective manner.Panalpina delivers solu-tions to reduce inventorylevels and overall supplychain costs.

Successful supply chain management

Panalpina has focused its logistics growth in recentyears on global customers who require high-valuesupply chain management. While maintaining astrict asset-free strategy, Panalpina provides ware-housing, distribution and value added servicessuch as order management, repackaging, kittingand reverse logistics in cooperation with partners.A large number of warehouses at key locationsaround the globe are operated on behalf of clientsfrom the automotive, Hi-tech and retail and fashionindustries. Panalpina delivers added value to thecustomer, and its employees are driven by a conse-quent “can do” attitude and a real passion forsolutions. Recent successes for Panalpina in thefield of supply chain management include a leadlogistics contract in Asia for a major Hi-tech com-pany, and operation of a regional hub in EasternEurope for a large customer.

In response to customer demand, supply chainmanagement has become the third pillar ofPanalpina’s core business, alongside freight for-warding. Building on proven expertise for largergroups, the company is constantly extending its

logistics services. Best-in-class partnerships withspecialist companies in strategic sectors andregions ensure a comprehensive range of supplychain services.

Lead logistics provider

As a lead logistics provider, Panalpina works closelywith the customer to analyse and improve the sup-ply chain. Existing logistics processes are reviewed,including the materials flow and stock levels. It isimportant to understand the customer’s needsabsolutely. Panalpina selects, manages and takesresponsibility for the carriers and logistics suppli-ers within the supply chain. Furthermore, Panalpinahelps to identify the ideal warehousing and distri-

bution facilities as part ofthe overall supply chain.As an asset-free com-pany, Panalpina has thefreedom to work withbest-in-class partners andthus provide customerswith the best possiblesolutions.

Proven IT systems manage the flow

Integration of the physical flow of goods with theelectronic flow of information is absolutely vital forsuccessful supply chain management. The well-proven Panlogic Application Suite includes theweb-based Pantrace tracking and tracing systemand the Intrac system for tracking, report andlogistics management, as well as first-class orderand materials management applications. More-over, an event management application alerts cus-tomers to any differences between planned andactual transportation. The Suite is being extendedwith a new Warehouse Inventory System (WIS)and a Supply Chain Visibility (SCV) tool which pro-vides full end-to-end information, including exter-nal distribution centres.

Adding value to the customer’s businessIn today’s global village, customers are increasingly demandingmore than just transportation of their goods between A and B.Internationally active companies are relocating production tosites around the world, resulting in more and more complexsupply chains.

Supply Chain Management


Key Industries


Key Industries

Key Industries• Oil and Gas• Automotive• Hi-Tech• Retail and Fashion• Health Care

• Industrial Projects


Key Industries


Key Industries

P analpina’s customer base includes leading oiland gas producers, drilling companies, oilfield

supply companies, construction firms and manyothers in the industry. With decades of experiencein the oil and gas industry, Panalpina has the in-depth specialist knowledge and a range of servicesprecisely targeted to customers’ needs. It has a major presence in vital regions such as Europe,West Africa, North Amer-ica, South East Asia, theFar East and CentralAsia/CIS, and is expand-ing in emerging markets.The global Panalpina Oiland Gas division, withclose to 1,000 dedicated employees enables thecompany to operate close to the customers andto respond quickly to new or changing needs. Pro-ducers and service providers continue to expandand open up new production locations, and, as aresult, their requirements for top-class logisticsservices are also becoming more and more global.

Successful acquisition

The acquisition and successful integration of Scot-tish forwarding company Grampian InternationalFreight was a major development for Panalpina’soil and gas business in 2004. The acquisition ex-tended its presence in the UK-based oil and gassectors and also opened up new growth opportu-nities in Europe, West Africa, Central Asia and NorthAfrica. Grampian, with 150 skilled staff and turn-over of CHF 61 million in 2003, continues to oper-ate under its existing company name and brand.

Improved services

In 2004, Panalpina Oil and Gas replaced the formerMS Merlin by taking the newly-built MS Merlin IIIunder charter and thereby further improved qualityand service standards in West Africa. The CoastLink Service, comprising the two shallow draftvessels Merlin II and Merlin III together with the fastcargo boat African Star, transports cargo to off-shore rigs and is directly linked to Panalpina’s airand ocean freight network. Unique is Panalpina’scombined air/ocean service via the hub in Malabo.

All three vessels are operated commercially undercharter to Panalpina.

The new oil and gas hub at Moerdijk in the Nether-lands enables Panalpina to offer European cus-tomers services such as international road trans-ports, expediting, inbound transport, warehousingand customs clearance. Panalpina also increasedits strategic presence in Tunisia, Mauritania, Libyaand Algeria.

Significant new contracts

Panalpina successfully grew its oil and gas businesswith a number of significant new contracts. Thepromising activities in Angola developed very sat-isfactorily as several contracts were gained fromleading world producers. 2005 is expected to seeequally successful developments in the region. InNigeria, Panalpina continued to extend its alreadyvery strong position with additional new business.

The Central Asia region continued to grow withmajor new contracts and more Panalpina directservices from Europe were started up. The develop-ments in Russia were also very positive as newbusiness was gained in several regions, includingSakhalin Island. Following the strategy of beingwhere the customers need the best service,Panalpina launched its activities on Sakhalin at avery early stage and has gained considerableexperience in finding efficient solutions for complexchallenges. Demand for quality logistics in Russia is increasing, and Panalpina also grew strongly inthe Americas, particularly in Mexico, Venezuelaand Brazil. In Houston a new hub with warehousingcapacity was opened. The Asia business alsocontinued to increase.

Fueling the world economyPanalpina as a global market leader serves the oil and gasindustry everywhere in the world. The name Panalpina stands for high quality, safe and environmentally responsiblelogistics services with a clear customer focus.

Oil and Gas


Key Industries

The international automotive industry is a truly globalized sector.Vehicles are no longer completely manufactured in one plant.Instead, components are rather sourced from around the world andshipped to a central location for the final assembly. Panalpina’ssupply chain management skills and its international network arekey elements that help to keep the production lines running.

Not only are production methods changing, butmarkets are, too. Consumer demand fluctu-

ates and purchasing power is growing in countriesaround the globe. In short, the automotive indus-try needs top logistics experts in order to designand market its products successfully.

Panalpina has been at home in this complex andchallenging market for many years and has estab-lished a customer base among manufacturers,tier-level suppliers, spare parts providers, and other

sections of the industry.This means Panalpinareally knows the market,and can react rapidly to new operating condi-tions. The services rangefrom air and oceanfreight forwarding to com-plex logistics solutions.

Panalpina picks up, transports and delivers goodsjust-in-time, or just-in-sequence, to productionlines in many countries. Thanks to centralized ca-pacity management and procurement both for air and ocean freight, Panalpina is able to provideautomotive customers with capacity wheneverand wherever they need it. For example, Panalpinaoperates a regular freighter service between SaoPaulo and Luxembourg to give the Brazilian automo-tive industry sufficient capacity and better accessto international markets. Furthermore, Panalpinaprovides customers with full supply chain visibilitythrough its IT systems, and can pro-actively alertcustomers to any transportation changes that mightaffect their business.

Industry competence and global coverage

Panalpina is a preferred logistics partner for manyautomotive companies. It provides worldwide oceanfreight transportation and air freight forwarding inseveral large regions for one of Germany’s leadingcar manufacturers, and also operates a logisticsterminal for the company in Singapore. Panalpinaacts as the “logistics management company” for

Preferred partner for global playersAutomotive

air and ocean freight and some logistics activitiesfor one of the world’s biggest automotive suppliers,a US-based group, on routes between North andSouth America, Europe and Asia. For another lead-ing supplier with head office in Germany, for ex-ample, Panalpina is the “preferred global serviceprovider” for air and ocean freight covering Ger-many, North America and parts of Asia. The totalcustomer list, of course, is much longer. It could becontinued, for example, with the business wherePanalpina ships components for a major internation-al automotive supplier from Asia, North Americaand Latin America to Europe.

New contracts worldwide

Panalpina successfully developed its position as aleading logistics provider for the global automotiveindustry in 2004. In the autumn, a major contractwith a large Asian car manufacturer was signed toprovide forwarding services for its new manufactur-ing base in the southern USA. This contract coversall air and ocean freight forwarding from both theUSA and Asia. Components and other items areflown or shipped to the production site, stored in anearby Panalpina-run warehouse and delivered on a just-in-time basis to the production line. More-over, our contract to provide forwarding servicesbetween North America, Latin America and Europefor one of the world’s largest automotive supplierswas further extended. Panalpina also increasedbusiness with a large German manufacturer and aleading German automotive supplier. Hybrid carsare a highly-promising future market.

Automotive competence centre

Panalpina will further develop its already very suc-cessful competence centre for the automotiveindustry during 2005. A network of industry expertsbased at six strategic centres in North America,Europe and Asia-Pacific is being established. Theseexperts are important contacts and informationsources for key account managers and sales rep-resentatives. The competence centre team is alsoresponsible for monitoring and analysing trends inthe industry, pooling expertise and creating indus-try solutions for existing and potential customers.


Key Industries


Key Industries

Demand for telecommunication networks andfor products such as computers and acces-

sories, mobile phones and other electronic devicesis growing worldwide. At the same time, manufac-turers are changing their sourcing operations toregions such as Asia. These decisive trends havea major impact on the flow of parts and finishedgoods.

Hi-tech competence centre

Panalpina not only profits from these developmentsbut is a key element within the supply chains. Like with all other key industries, Panalpina alsooperales a dedicated Hi-Tech Competence Centre.It supports the key account managers for globalcustomers and is responsible for drawing up indus-try solutions for the Hi-tech sector based onmarket and customer requirements.

A highly successfulexample of a partnershipbetween Panalpina andglobal Hi-tech companyis the case of the KoreanPanalpina organization.It transports PCs, mobilephones, home electron-ics equipment, domesticappliances and other consumer items for themanufacturer from Seoul to various European desti-nations. A dedicated Panalpina team has directelectronic links to the customer to organize trans-port, track shipments and plan future orders.

New electronics and telecoms business

In 2004, Panalpina gained significant additionalbusiness from existing customers in the computerindustry. This included more traffic out of Europe,as well as new trans-Pacific and transatlantic vol-umes. A major project in 2004 was to provide for-warding services to Nigeria for communicationstechnology from a long-standing German customer.This industrial group is one of several suppliers of new fixed-line and mobile phone networks inAfrica’s most populous country. Panalpina set up a special department in Europe for equipment

deliveries to Nigeria, and forwarded more than8,000 tonnes of air freight as well as ocean freightas part of the project.

In early 2005, Panalpina rang up a major successin the telecommunications industry. One of theworld’s leading mobile phone companies appointedthe company as a Lead Logistics Provider andawarded significant traffic on trade lanes from Asiato Europe and North America, and from Brazil toNorth America. The telecoms sector offers highly-attractive growth prospects in many regions of theworld.

Top security for valuable cargo

Panalpina is committed to the very highest levelsof security for freight shipments, whether Hi-techgoods or other types of cargo. Security heads and coordinators at global, regional and local lev-els ensure that all staff are thoroughly screenedand trained in-depth on the security standards andawareness program. Where appropriate, specialsecurity facilities for vulnerable goods are available.Panalpina also monitors the security standards of its subcontractors. Needless to say, Panalpinaalso operates according to the operating stan-dards of the Hi-tech manufacturers organizationTAPA (Technology Asset Protection Association)and has been certified by the US program C-TPAT(Customs-Trade Partnership Against Terrorism).The involvement in industry initiatives is also partof Panalpina’s commitment to improving security.

Ringing up successes in the Hi-tech sectorHi-tech industries such as consumer electronics and telecom-munications are among the big winners of globalization and rising living standards around the world. Panalpina helps Hi-techcompanies to improve their supply chain and thus to be able to market their products even more successfully.

Hi-Tech

Key sectors with growth potential include tex-tiles, quality and casual clothing, footwear,

fashion jewelry and accessories. An industry com-petence centre has been set up in Zurich to pro-vide overall strategic direction and support for keyaccount managers.

Panalpina already has a large retail and fashion cus-tomer base in many countries around the world.In particular, international air and ocean forwardingservices for large European retailers and fashionmanufacturers have been provided for many years.These customers include leading brands. One ofthe world’s leading sports footwear companies, forexample, has entrusted Panalpina with significantvolumes of boxed freight from Asia to parts ofEurope. Some of the European customers exportsignificant volumes to Asia, enabling Panalpina to balance traffic flows between the two continents.In spring 2004, for example, one of Italy’s mostprestigious fashion companies relied on Panalpina’slogistics expertise for the opening of its new flag-ship store in Shanghai as well as for a special showin Hong Kong. The high-value haute couture itemswere successfully delivered just-in-time to the twoevents.

Value added services

The services for the retail and fashion industriesrange from traditional air and ocean freightforwarding to logistics and value added services.Dedicated sales and operational teams are fullyfocused on customer needs. Due to the global im-portance of Asia as a textiles manufacturing base, Panalpina is able to consolidate shipmentsat a “buyers’ platform” and ship items from this hub to Europe or other continents. Included inthe service package are time-definite transportsolutions and distribution services. Furthermore,Panalpina provides seasonal storage capacity – a particularly important service for these highlyseasonal industries.

Panalpina also provides a range of value addedservices for customers in the retail and fashionsectors. For example, Panalpina offers “flyingboutiques” in the form of transport equipment forhanging garments for smaller fashion companieswithout their own specialized containers. Once inEurope, the clothing items are unpacked and made ready for the market, for example by fittinglabels or buttons. Other pre-retailing servicesinclude shipment control, re-conditioning and dis-patching. Furthermore, vendor and order man-agement, cross-docking, and door-to-store deliv-ery are offered. Special services include storeopening or trade show logistics, as well as reverselogistics. This is all backed up by tracking andtracing, and detailed reporting.

Fit for the future

Panalpina is technologically-equipped for currentsecurity requirements and future needs. The group has TAPA and C-TPAT certification, as wellas GPS-controlled, hard-covered trucks in majorlocations. A RFID technique project to assess theperformance and operational aspects of the newtags is being developed. In addition, Panalpina isclosely monitoring the effects of the end of quotason Chinese textile exports. A major shift in textilemanufacturing from traditional locations around theworld to China has been widely predicted.Panalpina is already well-prepared for this devel-opment thanks to its strong presence in thecountry.

Tailor-made services for international retailersConsidering the importance of the retail and fashion business, its future potential and following intensive discussions withcustomers, it was a logical step to put a strong focus on theretail and fashion markets.

Retail and Fashion


Key Industries


Key Industries

Due to its traditionally strong customer base in this field,Panalpina focuses on the health care sector as one of its coreindustries. The worldwide health care market is expandingstrongly and Panalpina keeps the cargo flow running betweenproducers and consumers.

Leading pharmaceutical and biotechnology com-panies are extending their production and

sales markets around the world. Further potentialin this strategic key industry comes from the fastgrowing market of “generic” drugs, often pro-duced in regions such as Eastern Europe, India orLatin America.

For their worldwide logis-tics, major producers of health care productsrequire experts whoknow just how to handlethe sensitive and expen-sive products. Vaccines,medicines and otheritems frequently have to

be transported at exact temperatures, need extra-careful physical handling and also require specialsafety measures. At the same time, however, suchshipments are often vitally urgent. They may haveto be airfreighted as quickly as possible to largecities or even to minor destinations less accessible.Even if they are not particularly urgent, health care products are often shipped by air due to theirsensitive nature and high value.

Expansion in Asia

Panalpina has been an expert in the field of healthcare logistics for many years. It has acted as themain logistics provider of a globally leading Swiss-based producer for a long time, and has had abroad customer base among pharmaceutical com-panies in countries around the world. Panalpinahas – as in the other key industry groups – estab-lished a health care competence centre in Zurich.

Keeping the logistics chains healthyHealth Care

Panalpina’s main areas of activity are in Europe,the USA and Asia. Further growth will be generatedmainly in Asia. Panalpina therefore is constantlyextending its logistics capabilities for inbound andintra-Asian transportation as well as for distribu-tion to retailers.

Keeping things cool

Panalpina’s competitive advantages in the healthcare sector include the tight, self-controlled net-work, the availability of capacity at all times andthe specialist equipment that is used. Goods suchas vaccines have to be transported at constanttemperatures. Panalpina uses specially-designedEnvirotainers for this purpose. These temperature-controlled “cool boxes” are equipped with thermo-stats and dry ice so that the temperature canalways be kept at just the right level between –20and +20 degrees Celsius. The vaccines are loadedinto these containers at the customer’s premisesand transported to the consignee without any inter-ruption in the cool chain.

Another innovative service that Panalpina providesfor health care customers is its “e-hub” for elec-tronic data transmission. Customers can transmittheir orders electronically into the e-hub and receiveorder confirmation. Panalpina staff use the data to organize transportation, documentation andbilling. The e-hub is linked to Panalpina’s trackingand reporting system.


Key Industries


Key Industries

Providing transport services for big industrial projects requiresspecial skills, high flexibility, total commitment and a truepassion for solutions. All these requirements are provided by the185 staff of Panprojects, the specialist project division of thePanalpina Group.

“Can’t do” doesn’t existIndustrial Projects

Strong energy sector

Driven by the increasing demand for oil and gas in2004, Panprojects continued to benefit from theglobal investment in new projects by the oil and gasand petrochemical industries. The main focus wason several large projects in sectors such as liquidnatural gas, petrochemicals, refinery and oil fielddevelopment in the Middle East (Qatar, Iran, Oman,Saudi Arabia), China, Australia, Central Asia (Azer-baijan, Kazakhstan), Indonesia, Equatorial Guinea,Nigeria, Mexico and on Russia’s Sakhalin Island.On Sakhalin, Panalpina plays a pioneering role,being one of the first companies to offer its servicesand operate its own organization.

Rising commodity prices have fueled a global boomin mining site developments, prompting Panprojectsto develop tailor-made logistics products for themining industry. Some major greenfield miningand expansion projects were won during the year in South and Central America (Chile, Venezuela,Guatemala, Mexico, Peru), Burkina Faso, Russiaand Turkey.

For the power and energy industry, Panalpina sup-plied logistics services to major projects in Canada,Mexico, Chile, China, the Dominican Republic,USA, Russia, Saudi Arabia, Romania, Turkmenistanand Tanzania.

The global tonnage handled by Panprojects in2004 increased considerably compared to previousyears, enabling the development of strategicpartnerships with major break bulk ocean carriers.A large number of project-related air and oceanfreight charter fixtures has further strengthenedPanprojects’ position as a major freight purchaserand broadened our in-house expertise.

Due to the special needs of project work, theexisting Panalpina project department is oper-

ated as a separate business unit with its headoffice in Bremen (Germany). It is based on a proventrack record and the competence of the Panalpinaproject division. It uses the global Panalpinaorganization as its support base during projectexecution.

Panprojects providesintegrated logisticsturnkey project forward-ing and managementservices on a global scaleto engineering procure-ment and constructioncompanies. In addition,Panprojects specializes

in serving the mining industry on mining emplace-ments and extensions where the end user or thefinal client is part of the mining industry or a sup-plier to it. For the power & energy sector, Pan-projects provides tailor-made transport solutionsfor the supply of large generating plants, turbines,hydro-power plants and wind parks. Moreover,these services are offered to miscellaneous manu-facturers and suppliers of other industrial plants,heavy and over-dimensional equipment and mod-ules. This includes a large range of clients such as manufacturers of railway rolling stock, construc-tion companies, steel and paper mills.


Key Industries


Information Technology

InformationTechnology


In 2004, Panalpina focused on three key aspectsof information technology: continued standardiza-

tion of hardware and software, the outsourcing ofcertain programming stages and the consolidationof the Data Center. All of this had one objective:even better use of electronic tools by staff, and thusincreased productivity, improved customer serviceand, not least, lower costs. In the consolidation of

the Data Center the aimwas to reduce the num-ber of server locationsand, thus, the number ofinterfaces. This alsoenables the IT special-ists’ knowledge to bemore focused and betterutilized. At the local

offices, on the other hand, it is vital to give staffproper on-site software training so that they canput their electronic tools to optimal and efficientuse.

Generally, Panalpina is pursuing a similar strategyin the IT area as in its core operation: Only thebest is good enough. This is why Panalpina workstogether with partners, selected according to the “best-in-class” policy, who put their respectivecore competences to service for Panalpina.Panalpina does not move the goods physically, butorganizes and monitors the entire goods chain;and IT is not Panalpina’s core business but rathera production factor of international shipping for which it manages information media and datastreams. For this reason, the company is increas-ingly outsourcing programming and developmenttasks to subcontractors, including one partner inIndia. Panalpina’s primary aim in this is not to saveon staffing costs, but rather to better employ thecompetences of its own experts. Panalpina’s own

IT specialists initiate, control and coordinate allactivities carried out by the partners underPanalpina’s management. This means that con-tent management, decision competencies andcontrol of data streams, data preparation and dataquality are performed in-house.

Consistent separation of in-house and outsourcedactivities resulted in the analysis and optimizationof all internal processes. Solutions to complex prob-lems require specialist knowledge that cannot beprovided by the conventional “Jack-of-all-trades”.This is why Panalpina’s IT division has clear struc-tures with well-defined responsibilities andprocesses which enable it to offer the companypowerful and cost-efficient solutions.

Continuous standardization of the IT tools andprocesses is one of the strategic objectives. As aglobal company, Panalpina applies global stan-dards wherever possible – the financial area beingan example. Furthermore, new systems special-ly developed for our own requirements are beingemployed globally. This means that the entirePanalpina organization is using the same systems,

which can be supportedglobally by our ownpeople. Panalpina rulesout “stand-alone” solu-tions so that it can offerits customers creativesolutions that meet theirown individual require-ments.

Managing the information flowsThe smooth transportation of goods requires efficient informationflows. Operational excellence is ensured by secure systems,powerful software, reliable hardware and high data quality. Together,these make a significant contribution to high productivity, efficientuse of resources and customer satisfaction.

Information Technology


Human Resources

HumanResources


T he company’s strategy is not to invest in fixedassets such as trucks, planes or ships but to

be a lean and flexible global supplier of logisticsservices, contracting the capacity required by cus-tomers from a variety of transport carriers. In otherwords, Panalpina’s assets are its staff. For atPanalpina, “A Passion for Solutions” is not a mereslogan but the job commitment of all employees.It’s they who make the difference!

The company’s success in the highly competitivefreight transport and logistics markets is not onlydetermined by its global strategy, range of productsand services, IT systems and other “hard” factors.With the strategic focus on operational excellenceand profitable growth, well-qualified, trained andexperienced staff who are motivated to do the bestjob at all times are absolutely essential. Their rela-tionships with customers, their ability to react fast with optimal solutions to changing operationalcircumstances and other “soft” factors are majordrivers for the company’s successful development.

As a leading global company in the growing logis-tics industry, Panalpina is an attractive employer.The company offers a dynamic environment andworldwide job opportunities with its 500 offices in80 countries. Responsible for overall personnelissues, implementation of corporate HR guidelinesand various global training programs is the cor-porate Human Resources department in Basel. Thehead office team is supported by human resourcesmanagers at regional and area levels who areresponsible for recruitment, training at a local leveland everyday personnel tasks.

Global guidelines for a global business

Panalpina continued to successfully implement itsglobal guidelines in its regions and local areas

around the world in 2004, and will maintain this pathin 2005. These guidelines set uniform standards forpersonnel-related procedures and issues. The aimis to ensure that all parts of the company are work-ing to the same set of basic rules. Regional andarea managers can, however, vary these rules wherelocal circumstances require. The key objective isto ensure that the company’s corporate values arespread throughout the entire worldwide network.These are based on the company’s positive, “can-do” mentality and its entrepreneurial approach.

In addition, a new IT tool will be rolled out during2005 to further improve personnel-related datacollection and monitoring of productivity and otherkey indicators.

Training tomorrow’s managers

With its “Panacademy” learning platform, Panalpinahas developed a range of targeted courses for in-house staff training. The global training programcovers all aspects of the company’s activities,including operations, sales and marketing, and isdesigned to offer staff at all levels the opportunityfor further professional development. Employeesare selected for the Management DevelopmentProgram on the basis of their annual performanceassessment and review.

The first stage of the management developmentprogram “Steering Success” trains some 400 em-ployees a year in basic management skills such as manager roles, personnel management and com-munications. In 2004, Panalpina launched a new,two-year training program “Navigating Our Future”.Some 80 talented managers were selected toparticipate in a series of seminars on issues suchas business strategy, processes and more com-plex management skills. This program is designedto groom participants for rapid promotion tohigher-ranking jobs. For about 40 top managers,Panalpina runs a flexible Executive Programcomprised of short, intensive modules focusing onspecific issues.

Furthermore, training courses on general topicstake place regularly at a regional or area level.

Panalpina’s assets are its staffAs the industry saying goes, “Logistics is a people business”.Nowhere is this truer than at Panalpina, with its 13,000 employeesaround the world.

Human Resources


Social Responsibility



P analpina and its entire staff were horrified atthe devastation wrought by the tsunami flood

disaster in Southeast Asia at the end of December2004 and the immeasurable suffering in its after-math. The shock was all the greater given the com-pany’s manifold personal and business relations in the affected countries. Hence Panalpina initiateda spontaneous group-wide donation appeal andused the donations to support a sustainable proj-ect aimed at helping the flood victims to helpthemselves. Before the disaster struck, more than100,000 people living in the northern part of theIndonesian island of Sumatra earned their living inthe fishing industry. Mainly small boats were usedto fish the coastal waters. The tsunami destroyedor damaged a large part of the fleet together withthe port and processing plant infrastructure. More-over, the fish stocks moved to the open sea, i.e. to areas where fishing with the conventional boatsis impossible. Panalpina therefore backed a projectto help these fishermen regain the means to earna living. The scheme is overseen by a local aidorganization sponsored by the Indonesian govern-ment. It involves the construction of modernfishing boats that will allow deep-water fishing.The fishermen are also being trained in the use of modern technology. Panalpina has financed amodern ship, named the Panalpina Passion,that will provide some 10 families with their dailyincome.

Right to Sight

Sustainable local aid is also at the heart of the“Right to Sight” initiative. In this project, Panalpinasupports a Swiss Red Cross (SRC) campaignagainst poverty-induced blindness in Ghana byproviding additional funding for an eye healthprogram. Working in tandem with the nationalauthorities and Ghanaian Red Cross, the SRC hasset up regional eye clinics with the capacity totreat 80,000 patients a year. Panalpina is fully

committed to the scheme,which brings concrete,on-the-spot relief tothose afflicted. Havingoperated in the regionover many years, thecompany naturally takesits social responsibilitiesvery seriously.

ISO 14001

As a logistics company, Panalpina is in favor ofenvironmentally efficient forwarding solutions andhandling methods. All the more gratifying, then,was the news that Panalpina Sweden had beenhonored with the Environmental Award 2004 by itsclient Tetra Laval. This accolade was bestowed bythe Swedish company in recognition of Panalpina’scommitment to environmental protection.

Shouldering responsibilityPanalpina is part of a global economic and social system. Its actions are guided not only by economic principles, but also to a significant extent by social and ecological con-victions. In supporting the various groups with which it has contact, the company thus engages in a wide variety ofactivities – globally.



Consolidated Financial Statements 2004

Consolidated and Annual Financial Statements 2004




Interview with the CFO 40

Consolidated Income Statement 42

Consolidated Balance Sheet 43

Consolidated Statement of Recognized Income andExpenses 44

Consolidated Cash FlowStatement 45

Notes to the Consolidated Financial Statements 46

Principal Group companies and participations 70

Report of the Group Auditors 73

Key Figures 5-year review in CHF 74

Balance Sheet 5-year review in CHF 76

Key Figures 3-year review in EUR 77

Balance Sheet 3-year review in EUR 79

Annual Financial Statements 2004Panalpina World Transport (Holding) Ltd.

Income Statement 81

Balance Sheet as of December 31 (before appropriation of profit) 82

Notes 84

Appropriation of Profits 86

Report of the Statutory Auditors 87

Contents



What prompted the adjustment of the 2002 and2003 Group financial statements?

In view of the planned going public, we alreadyadopted the IAS 8 (revised) and IAS 19 (amended),valid from 2005 onwards, for financial year 2004.To ensure comparability, the two previous yearsalso needed to be restated. Financial years 2002 to2004 are now presented consistently.

What do you regard as the principal challengesand risks?

The main challenge is posed by the fact that a sub-stantial portion of our activities is increasinglybecoming a commodity business in which priceplays a pivotal role. This also explains the continu-ing sector-wide pressure on margins. In this kindof scenario, additional growth is the sole means ofoffsetting lower margins. Besides, we need growthfor greater economies of scale and to pave the wayfor further productivity gains.

One risk that we treat with particular caution is thatof currency fluctuations: while we consolidate inSwiss francs, dollars and euros each make up some40% of revenues. It is our general policy to elimi-nate currency risks by means of hedging. Our aimis merely to safeguard our operating result and we in no way endeavor to achieve currency gainsthrough speculation. In this regard, we have clear-cut policies for individual countries; the worldwidenet exposure is centrally hedged in Basel.

A milestone in the implementation of our strategyPanalpina has achieved most of its objectives and the growthstrategy is clearly starting to pay off. Revenues increased by 13.6% whereas the operating result rose by 14.3%. With this, Panalpina has far outgrown the market.

Interview with the CFO Roland Wider

What is your assessment of businessperformance in 2004?

For Panalpina, 2004 was a crucial year, a veritablemilestone in the implementation of our strategy.2002 and 2003 saw us embark on the program ofrestructuring needed to gear up the Group to thenew strategy. Even though this process still has someway to run, we have achieved most of our objec-tives and the growth strategy is clearly starting topay off. With revenues up 13.6% – or even 16.3%in local currency – our performance is well abovepar for the market.

Given the continuing pressure on margins, whichtriggered a further slide in gross profit margins, the rise in gross profits was limited to 8.2%. Theoperating result (EBITA), by contrast, rose by arespectable 14.3%. All in all, we are satisfied with2004. Our approach has proven sound and we are on course for sustainable and profitable growth.

What share of revenue growth is attributable to the acquisitions?

Last year’s takeover of Scottish company Grampianand the integration of the business activities ofIAF, our long-standing agent in Korea, accountedfor less than 1% of our increase in revenues.Hence, the growth achieved was almost exclu-sively organic driven. In future, however, we shall increasingly look for bolt-on acquisitions as a means of fostering organic growth.

Which targets have not yet been achieved? What areas are you not satisfied with?

Unlike our operating result, our operating cash flowfell. It is, of course, our avowed aim to lift thisfigure too. The volatility in operating cash flow istraceable to the fluctuations in net current assets.Here, the fast and consistent invoicing of ourservices offers room for improvement. Appropriatesteps have been taken.

Forwarding revenuein CHF millions

8,000

7,000

6,000

5,000

1999

2000

200

120

0220

0320

04

Gross profitin CHF millions

1,600

1,200

800

400

1999

2000

2001

2002

2003

2004



“While the growth achieved in 2004 was almostexclusively organic driven, we shall increasingly lookfor bolt-on acquisitions in future.”



Consolidated Income Statementfor the years ended December 31, 2004, 2003 and 2002

in CHF thousands Notes 2004 2003 2002

Invoiced forwarding services 7,452,291 6,560,879 6,363,591

Customs, duty and taxes (1,331,946) (1,198,509) (1,188,893)

Net forwarding revenue 6,120,345 5,362,370 5,174,698

Forwarding services from third parties (4,779,294) (4,123,508) (3,926,480)

Contribution margin (gross profit) 1,341,051 1,238,862 1,248,218

Personnel expenses 3 (782,383) (734,763) (725,896)

Other operating expenses 4 (349,596) (308,973) (315,366)

Gains on sales of non-current assets 5 2,925 299 4,236

Depreciation of property, plant and equipment 10 (37,592) (42,834) (46,722)

Amortization of intangible assets 11 (15,755) (12,945) (12,785)

Impairment of financial assets 11 (5,799) (1,576) 0

Operating result (EBIT) 152,851 138,070 151,685

Financial income 6 6,577 5,515 10,300

Financial expenses 6 (16,090) (19,038) (12,428)

Earnings before taxes and minority interests 143,338 124,547 149,557

Taxes on income 7 (30,949) (26,438) (32,818)

Earnings before minority interests 112,389 98,109 116,739

Minority interests 18 (966) (391) (1,111)

Consolidated net earnings 111,423 97,718 115,628



Consolidated Balance Sheetfor the years ended December 31, 2004, 2003 and 2002

Assets


Current assets

Cash and cash equivalents 230,097 330,700 299,487

Financial assets held for trading 16,469 1,699 1,658

Trade receivables 8 906,409 767,188 729,443

Work in progress 58,541 57,042 57,042

Other receivables and other current assets 9 51,398 54,821 49,881

Total current assets 1,262,914 1,211,450 1,137,511

Non-current assets

Property, plant and equipment 10 159,232 153,946 167,420

Financial and other assets 11 40,372 48,847 48,326

Intangible assets 11 91,300 53,060 59,232

Deferred tax assets 14 20,471 19,465 18,566

Total non-current assets 311,375 275,318 293,544

Total assets 1,574,289 1,486,768 1,431,055

Liabilities and shareholders’ equity


Current liabilities

Trade payables 330,680 286,054 272,561

Other payables and accruals 94,595 80,347 127,315

Accrued cost of services 139,868 182,486 156,267

Borrowings 15 36,324 32,020 35,610

Other liabilities 12 61,221 43,983 40,317

Current income tax liabilities 19,925 23,080 19,911

Total current liabilities 682,613 647,970 651,981

Non-current liabilities

Borrowings 15 309 132 751

Provisions 13 69,722 79,114 71,473

Deferred tax liabilities 14 21,332 19,457 24,378

Total non-current assets 91,363 98,703 96,602

Total liabilities 773,975 746,673 748,583

Minority interests 18 3,484 2,916 2,956

Shareholders’ equity

Share capital 16 50,000 50,000 50,000

Translation and other reserves 17 (87,264) (66,940) (55,164)

Retained earnings 17 834,094 754,119 684,680

Total shareholders’ equity 796,830 737,179 679,516

Total liabilities and shareholders’ equity 1,574,289 1,486,768 1,431,055



Consolidated Statement of Recognized Income and Expensesfor the years ended December 31, 2004, 2003 and 2002


Net investment hedge

Transferred to profit or loss for the period 0 0 2,166

Amounts recognized in equity for pension plan

Actuarial gains / (losses) 20 (9,818) 7,604 (30,546)

Effect of impact of limit in paragraph 58b 20 7,876 (4,955) 26,357

Foreign currency impact 20 9 (55) 40

Tax effect 14 484 (874) 1,046

Exchange difference on translations of foreign operations (20,324) (11,776) (47,491)

Net earnings recognized directly in equity (21,773) (10,056) (48,428)

Consolidated net earnings 111,423 97,718 115,628

Total recognized earnings for the year 89,650 87,662 67,200




Total cash flow from operating activities 22 97,645 142,383 124,335

Interest received 5,727 5,021 4,899

Interest paid (7,445) (7,445) (9,620)

Taxes paid (36,995) (23,209) (34,688)

Other liabilities utilized (11,446) (20,042) (10,240)

Long-term provisions utilized (13,540) (7,087) (2,783)

Net cash flow from operating activities 33,946 89,621 71,903

Cash flow from investing activities

Property, plant and equipment (38,324) (32,637) (45,580)

Investments (incl. goodwill) in consolidated subsidiaries 23 (39,699) 0 (74)

Investments held for trading (14,344) (96) (17,375)

Other financial investments (7,053) (7,044) (4,232)

Intangible assets (31,389) (6,581) (2,997)

Total investments (130,809) (46,358) (70,258)

Proceeds from sales of property, plant and equipment 9,175 1,334 12,379

Proceeds from sales of investments 24 0 0 1,637

Loan repayments 3,382 1,291 2,106

Proceeds from sales of securities 0 71 10

Repayment of other financial assets 5,658 1,511 239

Sale of intangible assets 898 53 1,450

Total cash flow from investing activities (111,696) (42,098) (52,437)

Cash flow from financing activities

Proceeds from (repayment of) short-term borrowings 5,654 (1,432) 16,637

Proceeds from (repayment of) long-term borrowings (670) (129) 867

Dividends paid (30,000) (30,000) (20,000)

Dividends paid to minority interests (94) (128) (212)

Total cash flow from financing activities (25,110) (31,689) (2,708)

Effect of exchange rate changes on cash and cash equivalents 2,257 15,379 34,619

Increase (decrease) in cash and cash equivalents (100,603) 31,213 51,377

Cash and cash equivalents at the beginning of the year 330,700 299,487 248,110

Cash and cash equivalents at the end of the year 230,097 330,700 299,487

Consolidated Cash Flow Statementfor the years ended December 31, 2004, 2003 and 2002



Notes to the Consolidated Financial Statements

1. Accounting policies used in the consolidation

General

Panalpina World Transport (Holding) Ltd. (the Company) with its subsidiaries (together the Group) is one of the world’sleading logistics and forwarding companies specialized in international air and sea transports.

The Company is a limited company registered and domiciled in Basel. The address registered is Viaduktstrasse 42, 4002 Basel, Switzerland.

The consolidated financial statements have been approved for issue by the Board of Directors on April 19, 2005.

Basis of preparation

The consolidated financial statements are prepared in accordance with historical cost convention except for the revaluationto market value of certain financial assets and liabilities and comply with the International Financial Reporting Standards(IFRS). The accounting policies applied in preparing the financial statements are described below.

The preparation of the financial statements requires management to make assumptions and estimates about future develop-ments that affect the financial situation and performance set out in the financial statements. The actual outcome may differfrom the assumptions and estimates made.

Early adoption of standards

In 2004, the Group decided to adopt early IAS 8 (revised 2003) “Accounting Policies, Changes in Accounting Estimates andErrors” and IAS 19 (amended 2004) “Employee Benefits”. Consequently the 2003 and the 2002 comparatives have beenamended correspondingly. All changes in the accounting policies have been made in accordance with the transition provisionset out in the two revised standards.

The adoption of IAS 8 (revised 2003) resulted in a change of accounting policy regarding the treatment of errors. In the past, errors prior to that date have been corrected in the income statement in the period the error has been discovered. In accordance with IAS 8 (revised 2003) the Group is correcting material prior period errors retrospectively by restating thecomparative amounts for the prior periods presented in which the error occurred. If the error occurred before 2002, theopening balances of assets, liabilities and equity have been restated.

As a result of periodical review the Group has discovered in 2003 and 2004 that in selected subsidiaries in the past someaccruals have been overstated or understated due to incorrect calculation. In the financial statement 2003, the errordiscovered, was corrected in the income statement 2003. In accordance with IAS 8 (revised 2003) this error is correctedretrospectively. The error discovered in 2004 had no effect on the presented income statement. Therefore only the openingbalance of 2002 was restated. As a result balance sheet and income statement are affected as follows:

in CHF thousands Notes 2002 2003

Increase (decrease) in accrued cost of services (11,705) 4,735

Increase (decrease) in deferred tax assets 14 1,383 1,383

Increase (decrease) in deferred tax liabilities 14 6,354 0

Increase (decrease) in equity 31/12/ net of tax 6,734 (3,352)

(Increase) decrease in forwarding expenses 7,033 (17,139)

(Increase) decrease in income taxes 7 (2,718) 6,624

Increase (decrease) in net consolidated earnings 4,315 (10,515)



In 2004 the Group discovered that in the past invoices have been erroneously overcharged. The amounts were correctedin the respective periods presented. Balance Sheet and Income Statement are affected as follows:


Increase (decrease) in provisions 13 3,642 4,408

Increase (decrease) in deferred tax assets 14 1,238 1,499

Increase (decrease) in equity 31/12/ net of tax (2,404) (2,909)

Increase (decrease) in forwarding revenue (1,702) (1,261)

(Increase) decrease in income taxes 7 579 429

Increase (decrease) in net consolidated earnings (1,123) (832)

The adoption of IAS 19 (amended 2004) results in a change of accounting policy for the recognition of all actuarial gainsand losses. The Group decided to recognize all actuarial gains and losses for defined benefit plans in the periods inwhich they occur outside the Income Statement in the Statement of Recognized Income or Expenses. Balance Sheetand Income Statement are affected as follows:


Increase (decrease) in pension plan assets 20 (33,491) (32,886)

Increase (decrease) in provisions 13 3,683 349

Increase (decrease) in deferred tax liabilities 14 (9,449) (8,241)

Increase (decrease) in equity 31/12/ net of tax (27,725) (24,994)

(Increase) decrease in personnel expenses 3 (380) 1,345

(Increase) decrease in income taxes 7 95 (334)

Increase (decrease) in net consolidated earnings (285) 1,011

New accounting pronouncements – not yet adopted

In December 2003, the International Accounting Standards (IAS) were amended when the IASB released revised IAS 32,Financial Instruments: Disclosure and Presentation and IAS 39, Financial Instruments: Recognition and Measurement.These standards replace IAS 32 (revised 2000), and supersede IAS 39 (revised 2000), and must be applied for annualperiods beginning on or after January 1, 2005. In December 2003, as a part of the IASB’s project to improve internationalaccounting standards, the IASB released revisions to the following standards that supersede the previously releasedversions of those standards: IAS 1, Presentation of Financial Statements; IAS 2, Inventories; IAS 10, Events after theBalance Sheet Date; IAS 16, Property, Plant and Equipment; IAS 17, Leases; IAS 21, The Effects of Changes in ForeignExchange Rates; IAS 24, Related Party Disclosures; IAS 27, Consolidated and Separate Financial Statements; IAS 28,Investments in Associates; IAS 31, Interests in Joint Ventures; IAS 33, Earnings per Share and IAS 40, InvestmentProperty. The revised standards must be applied for annual periods beginning on or after January 1, 2005. During 2004the following International Financial Reporting Standards ( IFRS) were issued:

IFRS 2, Share-Based Payments; IFRS 4, Insurance Contract; IFRS 5, Non-Current Assets Held for Sale and DiscontinuedOperations and IFRS 6, Exploration for and Evaluation of Mineral Resources.

Under IFRS 3, with effect from January 1, 2005, goodwill originated from acquisition before March 31, 2004 is consideredto have an indefinite life and is not amortized, but is subject to annual impairment testing. Goodwill of CHF 20.1 millionrecognized in the Group’s financial statement on the transaction occurred after March 31, 2004 is already subject to thenew accounting policy and has not been amortized.

The management has reviewed the new accounting pronouncement released in 2004. The adoption of the new pro-nouncements, except for the early adopted standards as described above, does not have any significant impact on theGroup’s income statement and financial position.



Scope and method of consolidation

The consolidated financial statements comprise the financial statements of all companies which are directly or indirectlycontrolled by Panalpina. Control is defined as the power to govern the financial and operating policies of an enterprise so asto obtain benefits from its activities.

The purchase method of accounting is used for acquired businesses. Companies acquired or disposed of during the year areincluded in the consolidated financial statements from the date of acquisition or up to the date of disposal. The cost of anacquisition is measured as the fair value of the assets given and liabilities incurred at the date of exchange, plus costs directlyattributable to the acquisition.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initiallyat their fair value on the acquisition date, irrespective of the extent of any minority interest. The excess of the costs ofacquisition over the Group’s share of the fair value of the acquired subsidiary’s identifiable net assets is recorded as goodwill.If the cost of acquisition is less than the Group’s share of the fair value of the net asset of the subsidiary acquired, thedifference is recognized directly in the income statement.

Intercompany transactions, debts and receivables as well as intercompany income and expenses have been eliminated.

Investments in associated companies are those entities in which the Group is able to exercise a significant influence over thefinancial and operational policy, generally accompanying a shareholding of between 20% and 50% of the voting rights.Associates are accounted for using the equity method and initially recognized at cost.

The majority of Group companies and equity investments are listed on page 70 ff.

Minority interests

The interests of minority shareholders in net assets and net income are disclosed as minority interests.

Reclassification

Certain prior-year balances have been reclassified to conform to the current year’s presentation.

In 2004, Management decided to disclose work in progress and accrued cost of services separately from trade payables.Management believes that a gross disclosure of work in progress and accrued cost of services is a fair presentation of theGroup’s activities.

Revenue recognition

Net forwarding revenue includes services for forwarding invoiced to third parties less charges for customs, duty and taxes.

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

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

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

Financial risk management

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

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

There is a clear separation of duties between Front, Middle and Back Office. The Middle Office is independently in charge of monitoring compliance to the strategies with reference to the approved Risk Committee decisions. Operational risk andindependent performance calculation are also under Middle Office supervision.

Clear Treasury Management guidelines define approved financial transactions and products, counterparty limits, minimumcreditworthiness and transaction limits.

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



Financial risk factors

Foreign exchange riskThe Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures,primarily with respect to the US dollar. Foreign exchange risk arises from future commercial transactions, recognizedassets and liabilities and net investments in foreign operations.

To manage foreign exchange risks arising from future commercial transactions or recognized assets and liabilities,entities in the Group use forward contracts, transacted generally with Group Treasury. Foreign exchange risk arises whenfuture commercial transactions or recognized assets and liabilities are denominated in a currency that is not the Groupentity’s measurement currency. Group Treasury is responsible for managing the net position using external derivativescontracts.

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

Credit riskCredit risk stems from counterparty’s failure to meet its obligation. The Group is exposed to credit risk on financialinstruments, mainly its liquid assets, derivative assets and trade receivables. Credit risk is managed in accordance withclear and well-acknowledged guidelines.

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

Trade receivables are strictly monitored and clear guidelines are established in order to set credit limits, approval proce-dures, and procedures to monitor overdue items. Concentration of credit risk in trade receivables is not material.

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

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

Critical accounting estimates and judgments

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

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

Impairment of tangible and intangible assetsLong-lived assets are regularly reviewed for impairment, including intangibles and goodwill, whenever events or changesin circumstance indicate that the balance sheet-carrying amount of the asset may not be recoverable. In order to assess if there is any impairment, estimates are made of the future cash flows expected to result from the use of theasset or cash-generating unit and its eventual disposal and of the fair value of the asset or cash-generating unit.

Litigation provisionsA number of subsidiaries are subject to litigation arising out of the normal conduct of their businesses, as a result ofwhich claims could be raised against them that might not be covered by existing provisions or by insurance.The Group believes that the outcomes of such actions, if any, would not be material to the Group’s financial condition,but could be material to future results of operations in a given period.

Income taxesThe Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining theworldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determi-nation is uncertain during the ordinary course of business.

Accounting for derivative financial instruments and hedging activities

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



To qualify for hedge accounting, the hedging relationship must meet several strict conditions on documentation, probability ofoccurrence, hedge effectiveness and reliability of measurement. If these conditions are not met, then the financial instrumentdoes not qualify for hedge accounting. In this case the hedging instrument and the hedged item are valued independently ofone another. The derivative hedging instrument is reported at fair value with the changes in fair value included in income(expenses).

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

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

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

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

• a hedge of net investments in a foreign operation.

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

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

Foreign currency translation

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

Translation of Group companiesExpenses and revenue of the consolidated companies are translated at the average exchange rates prevailing during theyear. All assets and liabilities are translated at year-end exchange rates. The resulting translation differences are recognizedin shareholders’ equity. In addition the Group recognizes in equity exchange differences on a monetary item that in sub-stance forms part of net investments in a subsidiary (quasi-equity loans). These exchange differences are taken to incomestatement on the sale of a subsidiary or repayment of an intercompany quasi-equity loan.

Foreign currency transactionsTransactions in a foreign currency other than the measurement currency of an entity are translated into the measurementcurrency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resultingfrom the settlement of such transactions and from the translation at closing exchange rates of monetary assets and liabilitiesare recognized in the income statement (or – in very limited circumstances – in equity when the foreign currency transactionis designated as a cash flow hedge or a net investment hedge).

Translation differences on non-monetary items, such as equities classified as available-for-sale financial assets, are includedin the other reserves as equity.

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

2004 2003 2002Balance Income Balance Income Balance Income

Sheet Statement Sheet Statement Sheet Statement

EUR 1.5427 1.5438 EUR 1.5590 1.5161 EUR 1.4542 1.4680

USD 1.1322 1.2445 USD 1.2368 1.3416 USD 1.3881 1.5587

GBP 2.1804 2.2776 GBP 2.2056 2.2002 GBP 2.2276 2.3429



Cash and cash equivalents

Cash and cash equivalents included in the balance sheet and cash flow statement represents cash, bank and postalcheques, bills of exchange, bank current account balances and time deposits as well as highly liquid money marketpaper with an original maturity period of less than three months. Bank current account liabilities are included undershort-term borrowings.

Trade receivables

Accounts receivable from third parties represent invoiced amounts less valuation adjustments for impairments. Impair-ment adjustments are established based upon the difference between the receivable and the estimated net collectibleamount discounted to present value at the balance sheet date.

Work in progress

Work in progress represents the gross amount due from customers for forwarding services in progress for which costsincurred exceed progress billings. For logistics projects and other services with a longer period of delivery recognizedprofits are included.

Property, plant and equipment

Property, plant and equipment have been valued at the cost of acquisition and are depreciated on a straight-line basis tothe income statement over the following estimated useful lives:

Years

Land is not depreciated –

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

Assets acquired under financial leases are initially recognized at fair value or present value of minimum lease payments iflower and are depreciated over shorter of useful life and the lease term.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, onlywhen it is probable that future economic benefits associated with the item in excess of the originally assessed standardof performance will flow to the Group and the cost of the item can be measured reliably. All costs for repair and mainte-nance are charged to the income statement during the period in which they are incurred.

Gains and losses on disposals are determined by comparing proceed with carrying amount. These are included in theincome statement.

Leases

Financial leasing agreements are recorded at the date of the agreement. Lease payments are divided into an amortizationof a finance lease liability and an interest element. The interest element is charged to the income statement using theeffective interest rate method.

Leases of assets under which all the risks and benefits of ownership are substantially retained by the lessor are classifiedas operating leases. Payments made under operating leases are charged to the income statement on a straight-linebasis over the period of the lease.

Investments

The Group classifies its financial investments into the following categories according to IAS 39:

• Held-for-trading

• Originated loans and receivables

• Available-for-sale

The classification depends on the nature of the asset and the purpose of the transaction. The Group does not classifyany financial instruments as “held-to-maturity”.



Held-for-tradingA financial asset is classified as held-for-trading if acquired principally for the purpose of generating a profit from short-termfluctuations in price. The Group’s investments in marketable securities are classified as held-for-trading. Such investmentsare included in current assets in the balance sheet. Marketable securities comprise only exchange-traded and readily realizableinvestments.

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

ReceivablesReceivables originated by the Group are financial assets that are created by providing money or services directly to the debtor.Such receivables are not quoted and not originated with the intent to be sold immediately or in the near term. Receivablesare presented in current assets for maturities up to twelve months, while other receivables are presented in non-current assets.

Loans and receivables are included in the following line items of the balance sheet:

• Trade receivables (the treatment of the trade receivables is outlined in more details in the “Trade receivables” section)

• Other receivables and other current assets include– Short-term active loans – Other receivables

• Financial and other assets– Receivables

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

Recognition and measurementPurchases and sales of investments are recognized on settlement date. Investments are initially recognized at fair value ofconsideration given plus transaction costs.

Held-for-trading investments are subsequently carried at fair value, with all changes in fair value recorded as financial income(expenses) in the period in which they arise. Originated loans and receivables are subsequently carried at amortized costusing the effective interest rate method. Available-for-sale investments are subsequently carried at fair value, with changes infair value recorded in equity (except for currency revaluation gains/losses on monetary available-for-sale financial assets,which are included in profit or loss according to IAS 21). When available-for-sale investments are sold, impaired or otherwisedisposed of, the cumulative gains and losses previously recognized in equity are included in financial income (expenses) forthe current period.

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

Intangible assets

Acquired intangible assets such as brands, trademarks and software licenses are shown at historical cost less accumulatedamortization and impairment losses if any. Customer lists and customer relations acquired in a business combination afterMarch 31, 2004 are separately identified and recognized at fair value at the date of acquisition. The mentioned intangible assetshave a definite useful life and are amortized. Amortization is calculated using the straight-line method. Software licenses areamortized over 3–5 years, all other intangible assets over a maximum of 15 years.

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assetsof the acquired subsidiary at the date of acquisition. Acquisitions prior to March 31, 2004 were accounted in accordance withIAS 22 and goodwill was amortized over its useful life (maximum 10 years). The remaining useful life is reviewed periodically.Acquisitions since April 1, 2004 are accounted in accordance with IFRS 3 and goodwill is no longer amortized but instead isassessed annually for impairment. The unamortized goodwill is taken into account in calculating the gain or loss on disposalof an investment.

Costs in connection with internally developed software are recognized as an expense as incurred. Computer software devel-oped internally is capitalized if the development costs can be measured reliably and if the software product is of long-termuse for the organization. Capitalized software development costs recognized as assets are amortized over their estimateduseful life (not exceeding three years). Costs for maintaining and modifying existing programs are charged to the incomestatement.



Impairment of assets

Tangible assets and identifiable intangibles assets are reviewed for impairment whenever events or changes in circum-stances indicate that the carrying amount of the asset may not be recoverable. Goodwill acquired since March 31, 2004 is reviewed for impairment annually. When events or changes in circumstances indicate the value may not be fullyrecoverable, the Group estimates its value in use based on the future cash flows. If the carrying amount of the assetexceeds the higher of its value in use or its fair value less cost to sell, the Group recognizes an impairment loss. For purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiablecash flows (cash-generating units).

Borrowings

Borrowings are recognized initially as proceeds received, net of transaction costs incurred. Borrowings are subsequentlymeasured at amortized cost and the difference between the proceeds (net of transaction costs) and the redemptionvalue amortized over the lifetime of the borrowings using the effective interest rate method.

Provisions

The Group establishes provisions if it has a current legal or constructive obligation as a result of past events requiring a settlement with third parties and if the amount of the obligation can be reliably estimated.

Provisions are established specifically for:

• Employees’ pension fund balances, and

• Claims from freight forwarding

Current and deferred income taxes

Current income taxes are accrued for the taxable income of the current financial year.

Deferred taxes arise from temporary differences between the tax bases of assets and liabilities and their carrying valuesfor financial reporting. The calculation is made using the balance sheet liability method applying currently enacted taxrates expected to apply when the temporary difference reverse. The tax effects of loss carry forwards and deductibletemporary differences are capitalized only if it is probable that they can be set off against future taxable profits or taxabletemporary differences. The Group’s deferred tax assets and deferred tax liabilities are disclosed separately under non-current assets and non-current liabilities respectively. Changes in deferred tax liabilities and assets are reported in theincome statement. An exception is deferred tax on transactions that are recorded directly in shareholders’ equity. Suchdeferred taxes are also recorded in shareholders’ equity.

Provisions for withholding tax, which would arise on dividend distributions to the parent companies, are made only if theparent company intends to declare a dividend. As a rule subsidiaries’ profits are considered permanently reinvested.

Employee benefits

Short-term benefits, such as salaries and wages, contributions to compulsory social security schemes, vacation accrualsand bonuses, are accrued periodically and charged to the income statement when the employee provides related services.

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

A review of subsidiaries’ pension plans in Germany, Taiwan and Switzerland has shown that they are defined benefitschemes. They are assessed using the projected unit credit method. Under this method the cost of providing pensions ischarged to the income statement to spread the regular cost over the service period of employees. The pension obli-gation for past employee service is measured as the present value of the estimated future cash outflows using appropriatediscount rates. The past post-employment benefits obligations are reviewed annually by independent actuaries. All actu-arial gains and losses are recognized in the periods in which they occur outside the income statement in the statementof recognized income and expenses.

Other long-term employee benefits exist in form of jubilee gifts, long service benefits and health costs. The provisionsnecessary to provide the benefits are determined and recorded actuarially (cf. projected unit credit method) with actuarialgains and losses and past service costs, if any, recognized immediately in the income statement.



The Group organizes its business primarily by regions. For strategic and organizational reasons, Panalpina decided in 2003 toseparate the America Region into North and South America Region. The Africa Region, Middle East and CIS (Commonwealthof Independent States) was for organizational reasons integrated into the Europe Region to form a single EMEA Region.

Segment information is prepared on the basis of the location of the assets. Usually the location of the customers generallydoes not differ from the location of the assets in the particular region. Intersegmental services are charged at market rates.Segment expenses are shown after elimination of intersegmental transactions.

The Group’s business can be divided into three divisions: Air, Sea and Supply Chain Management. The assets allocated tothe divisions primarily comprise trade receivables, work in progress, accruals and tangible fixed assets. Cash, financialinvestments and assets related to the central management functions are not allocated.

2. Segmental reporting

Reporting by geographical segments

Europe/Africa/Middle East/CIS North Americain CHF millions 2004 2003 2002 2004 2003 2002

External invoiced forwarding services 3,512 3,056 2,965 1,316 1,213 1,140

Intersegment invoiced forwarding servcies 2,062 1,822 1,592 274 364 309

Net forwarding revenue 5,574 4,878 4,557 1,590 1,577 1,449

Forwarding services from third parties (4,784) (4,156) (3,843) (1,346) (1,344) (1,195)

Segment contribution margin 790 722 714 244 233 254

Other segment expenses (723) (633) (617) (238) (240) (253)

Segment operating result (EBIT) 67 89 97 6 (7) 1

Financial result

Earnings before taxes

Taxes on income

Earnings before minority interests

Minority interests

Consolidated net earnings

Additional information

Segment assets 953 984 924 300 227 231

Segment liabilities 465 482 464 104 83 94

Capital expenditure 60 27 38 6 5 6

Depreciation of property, plant and equipment 24 28 29 6 7 9

Amortization of intangible assets 10 12 12 2 1 1

Impairment of financial assets 6 2 0 0 0 0

Reporting by business segments

Air Seain CHF millions 2004 2003 2002 2004 2003 2002

Revenue 3,086 2,720 2,573 2,102 1,885 1,833

Total assets 643 547 517 427 375 345

Capital expenditure 47 13 14 21 9 10



Central and South America Asia /Pacific Eliminations Total2004 2003 2002 2004 2003 2002 2004 2003 2002 2004 2003 2002

608 521 533 684 573 536 6,120 5,363 5,174

119 106 113 480 450 371 (2,935) (2,742) (2,385) 0 0 0

727 627 646 1,164 1,023 907 (2,935) (2,742) (2,385) 6,120 5,363 5,174

(616) (526) (527) (968) (840) (746) 2,935 2,742 2,385 (4,779) (4,124) (3,926)

111 101 119 196 183 161 0 0 0 1,341 1,239 1,248

(96) (110) (117) (131) (118) (109) (1,188) (1,101) (1,096)

15 (9) 2 65 65 52 153 138 152

(10) (14) (2)

143 124 150

(31) (26) (33)

112 98 117

(1) 0 (1)

111 98 116

109 95 100 163 124 122 1,525 1,430 1,377

32 19 17 95 89 93 696 673 668

2 4 3 18 3 6 86 39 53

4 4 5 4 4 4 38 43 47

1 0 0 3 0 0 16 13 13

0 0 0 0 0 0 6 2 0

Supply Chain Management Unallocated Total2004 2003 2002 2004 2003 2002 2004 2003 2002

932 758 768 0 0 0 6,120 5,363 5,174

190 180 163 314 385 406 1,574 1,487 1,431

7 9 10 4 8 19 86 39 53



3. Personnel expenses

in CHF thousands 2004 2003 2002

Salaries and wages 612,025 573,533 566,745

Cost of defined contribution plans 37,352 37,057 37,655

Cost of defined benefit plans 7,047 9,092 8,324

Other social security costs 66,635 59,672 60,046

Miscellaneous 59,324 55,409 53,126

Total personnel expenses 782,383 734,763 725,896

The number of employees increased during the current year by 880 to 13,224 (2003: 12,344; 2002: 12,463).

4. Other operating expenses


Administrative expenses 26,813 22,572 23,480

Communication expenses 66,925 61,991 63,246

Rent and utilities expenses 142,005 130,382 127,579

Travel and promotion expenses 54,513 45,977 46,110

Insurance expenses and claims 21,327 20,631 30,668

Bad debt and collection expenses 11,630 6,336 5,049

Other operating expenses 26,383 21,084 19,234

Total operating expenses 349,596 308,973 315,366

5. Gain on sales of non-current assets


On sales of investments 0 0 (97)

On sales of property, plant and equipment 2,925 299 4,333

Total net gain on sale of non-current assets 2,925 299 4,236

In the current year the net gain from the sale of assets results essentially from the sale of operational property in the USA ( in 2002 the net gain from the sale of assets results essentially from the sale of operational property in Switzerland).

6. Net financial result


Interest income 5,858 4,236 8,812

Other financial income 719 1,279 1,488

Financial income 6,577 5,515 10,300

Interest expenses (9,978) (8,050) (8,586)

Exchange differences (1,539) (6,657) 326

Bank charges (3,440) (3,200) (3,157)

Other financial expenses (1,133) (1,131) (1,011)

Financial expense (16,090) (19,038) (12,428)

Net financial result (9,513) (13,523) (2,128)



7. Taxes on income


Current income taxes 31,680 33,159 27,942

Deferred income taxes (731) (6,721) 4,876

Total taxes on income 30,949 26,438 32,818

The following table reconciles expected and actually disclosed tax expenses. The expected tax expenses aredetermined by multiplying the result before income taxes and the tax rate applicable in Switzerland.


Earnings before taxes 143,338 124,547 149,557

Tax at the applicable tax rate of 25% (2003: 25%; 2002: 25%) 35,834 31,137 37,389

Effect of differing national tax rates (7,574) (12,532) (7,646)

Utilization of non-capitalized tax loss carryforwards (220) (865) (1,730)

Capitalization of deferred tax assets from previous periods 0 0 (1,410)

Not recognized loss carryforwards 2,353 1,383 1,249

Effect of changes in the tax rate on temporary differences (400) 616 (161)

Withholding tax on dividends received 1,008 1,200 369

Expenses not deductible for tax purposes and non-taxable income (1,389) 3,081 4,377

Miscellaneous 1,337 2,418 381

Actual tax charge 30,949 26,438 32,818

Expenses not deductible for tax purposes were incurred primarily in Italy, France, Germany, UK and Brazil (2003: in Germany, Italy and France; 2002: in Germany, Italy and Brazil ). The heading “Miscellaneous” includes mainlyother income taxes such as IRAP in Italy and CIDE in Brazil.

8. Trade receivables


Commercial clients 903,406 767,596 729,250

Agents 37,841 31,849 34,912

Total trade receivables (gross) 941,247 799,445 764,162

Impairment of receivables (34,838) (32,257) (34,719)

Total trade receivables (net) 906,409 767,188 729,443

9. Other receivables and other current assets


Office supplies 2,012 4,507 936

Taxes (VAT, withholding tax) 21,385 20,568 19,998

Accrued income 5,980 3,914 4,835

Accrued interest income 531 754 697

Personnel advances 423 455 0

Prepaid rent expenses 3,750 3,166 3,028

Others 17,317 21,457 20,387

Total trade receivables (net) 51,398 54,821 49,881



10. Property, plant and equipment

Land Machinery Vehicles Construc- Total Total Totaland and tion in 2004 2003 2002

in CHF thousands buildings equipment progress

Acquisition costs

Balance on January 1 160,189 219,925 29,718 99 409,931 404,735 428,383

Translation differences (5,792) (8,528) (1,533) (47) (15,900) (8,908) (40,442)

Change in the scope of consolidation 6,958 1,156 6,420 570 15,104 0 0

Additions 5,500 25,138 5,617 2,069 38,324 32,637 45,580

Disposals (7,927) (16,099) (4,078) 0 (28,104) (18,418) (28,735)

Reclassifications 2,149 394 (68) (2,363) 112 (115) (51)

Balance on December 31 161,077 221,986 36,076 328 419,467 409,931 404,735

Accumulated depreciation

Balance on January 1 62,169 170,097 23,719 0 255,985 237,315 236,512

Translation differences (3,352) (7,581) (437) 0 (11,370) (6,800) (25,182)

Additions 8,047 26,693 2,852 0 37,592 42,834 46,722

Disposals (5,045) (13,782) (3,027) 0 (21,854) (17,383) (20,687)

Reclassifications (157) 107 (68) 0 (118) 19 (50)

Balance on December 31 61,662 175,534 23,039 0 260,235 255,985 237,315

Net book value on January 1 98,020 49,828 5,999 99 153,946 167,420 191,871

Net book value on December 31 99,415 46,452 13,037 328 159,232 153,946 167,420

Of which net book value of assetsacquired under finance leases 98 0 0 0 98 850 1,542

11. Financial and other intangible assets

Financial and other assets Intangible assetsAvailable- Receiv- Pension Goodwill Other Total Total Total

for-sale ables plan intangible 2004 2003 2002in CHF thousands investments assets assets

Acquisition costs

Balance on December 31 26,327 12,777 11,560 79,600 33,151 163,415 157,594 178,717

IAS 19 restatements on opening balance (27,665)

Balance on January 1 26,327 12,777 11,560 79,600 33,151 163,415 157,594 151,052

Translation differences (50) (256) 0 (708) (912) (1,926) (926) (2,939)

Change in the scope of consolidation 0 0 0 12,812 10,424 23,236 0 0

Additions 5 6,511 0 7,275 24,986 38,777 18,428 21,397

Disposals (61) (8,828) 0 0 (764) (9,653) (11,796) (11,967)

Reclassifications 0 0 0 1,562 (159) 1,403 115 51

Balance on December 31 26,221 10,204 11,560 100,541 66,726 215,252 163,415 157,594

Accumulated depreciation or impairment losses

Balance on January 1 1,736 81 0 34,658 25,033 61,508 50,035 40,247

Translation differences (1) (2) 0 164 (834) (673) (1,563) (1,389)

Additions 5,799 0 0 8,751 7,004 21,554 14,521 12,785

Disposals 0 0 0 0 (442) (442) (1,466) (1,657)

Reclassifications 0 0 0 1,562 71 1,633 (19) 50

Balance on December 31 7,534 79 0 45,135 30,832 83,580 61,508 50,036

Net book value on January 1 24,591 12,696 11,560 44,942 8,118 101,907 107,559 138,470

Net book value on December 31 18,687 10,125 11,560 55,406 35,894 131,672 101,907 107,558



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

In 2004, impairment charges of CHF 5.8 million were recorded to net available-for-sale investments relating to thevaluation of the equity investment GF-X.

Receivables includes third-party loans of CHF 2.2 million (2003: CHF 5.4 million; 2002: CHF 3.7 million) and mainly rentaldeposits of CHF 7.9 million (2003: CHF 3.2 million; 2002: CHF 5.0 million).

Impairment test for goodwillGoodwill is allocated to the Group’s cash-generating units (CGUs) identified to country of operation. The goodwill inconnection with the Grampian acquisition has been tested for impairment.

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flowprojections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth. As a result of the test, no goodwill impairment chargewas recognized in 2004.

The following key assumptions have been made for the goodwill impairment test of Grampian:

• Yearly growth of forwarding revenue 5%

• EBIT margin amounting to 6.9%

• Working capital as a percentage of forwarding revenues 5%

• Growth rate in capital expenditure and depreciation 10%

• Discount rate used 10%

• Tax rate used 35%

The net book value of other intangible assets comprises:

• Software in the amount of CHF 15.2 million (2003: CHF 6.7 million; 2002: CHF 3.9 million)

• Other intangible assets CHF 19.3 million (mainly acquired brands and customer relations)

12. Other liabilities

Outstanding Claims Employee Total Total Totalvacation benefits 2004 2003 2002

in CHF thousands entitlement

Other liabilities

Balance on January 1 20,595 3,953 19,435 43,983 40,317 31,807

Translation differences (542) 0 (447) (989) 370 (2,111)

Change in scope of consolidation 141 0 14 155 0 0

Additional accruals 3,488 10,060 16,351 29,899 26,821 22,452

Reversals of other liabilities 0 0 (8,284) (8,284) (3,483) (1,591)

Charged in income statement 3,087 10,060 7,634 20,781 23,708 18,750

Amount paid (2,306) 0 (9,142) (11,448) (20,042) (10,240)

Transfers 0 7,905 0 7,905 0 0

Balance on December 31 21,376 21,918 17,927 61,221 43,983 40,317

Employee benefits include payroll, bonuses, social security and payroll taxes.



13. Provisions

Employee Claims and Total Total Totalbenefits other 2004 2003 2002

provisions

Long-term provisions

Balance on December 31 48,710 30,404 79,114 71,473 60,276

IAS 8 and 19 restatements on opening balance 7,107

Balance on January 1 48,710 30,404 79,114 71,473 67,383

Translation differences (727) (467) (1,194) 1,298 (2,551)

Addition 5,668 21,147 26,815 19,455 17,404

Reversal of unused amount (254) (9,280) (9,534) (6,025) (7,980)

Charged in income statement 4,687 11,400 16,087 14,728 6,873

Utilized during the year (1,864) (15,710) (17,574) (7,087) (2,783)

Transfers 0 (7,905) (7,905) 0 0

Balance on December 31 51,533 18,189 69,722 79,114 71,473

Employee benefits provisions include the current portion of net liabilities relating to defined benefit plans of CHF 28.6 million(2003: CHF 24.2 million; 2002: CHF 21.3 million).

The balance for claims represents a provision for certain claims brought forward against the Group by customers andforwarding agents. The balance as at December 31 is expected to be utilized within the next 2–3 years.

Long-term claims include an additional provision for probable potential future payments in connection with transportdamages.

Management determined the provision based on past performance and the anticipated funds needed for future settlement ofclaims for services delivered in the past, which have yet to be reported.

14. Deferred taxes

Deferred taxes are related to the following balance sheet items:

Deferred tax assets Deferred tax liabilitiesin CHF thousands 2004 2003 2002 2004 2003 2002

Receivables 4,085 4,263 4,510 (972) (1,557) (1,186)

Fixed assets 3,837 2,780 2,653 (13,250) (11,576) (10,724)

Provisions 5,903 6,600 7,736 (5,983) (1,499) (6,692)

Other balance sheet captions 10,936 6,063 6,163 (7,100) (6,038) (9,729)

Deductible loss carryforwards 1,683 972 1,457 0 0 0

Total 26,444 20,678 22,519 (27,305) (20,670) (28,331)

Net deferred tax assets (liabilities) (861) 8 (5,812)



In this summary, deferred tax assets and liabilities are shown gross by balance sheet captions. For balance sheet dis-closure purposes the liabilities and assets are reported net by each subsidiary, resulting in the following balance sheetpresentation:


Deferred tax assets 20,471 19,465 18,566

Deferred tax liabilities (21,332) (19,457) (24,378)

Net deferred tax assets (liabilities) (861) 8 (5,812)

The gross movement on the deferred income tax account is as follows:


Balance on December 31 8 (5,812) (6,573)

Restatements on opening balance 0 0 6,754

Balance on January 1 8 (5,812) 181

Translation differences (955) (25) (2,161)

Change in the scope of consolidation (256) 0 0

Income statement charge (142) 6,719 (4,877)

Tax charged to equity due to IAS 19 (amended 2004) 484 (874) 1,045

Balance on December 31 (861) 8 (5,812)

During the year being reported deferred tax assets were not established on taxable temporary differences amounting net( i.e. after setting off deferred tax assets against tax liabilities for companies with a net tax asset) to CHF 114,000because it is not probable that they can be set off against future profits.

Year of expiry of unrecognized tax loss carry-forwards (in CHF thousands) 2004 2003 2002

2004 0 314 0

2005 495 1,687 711

2006 1,060 4,421 280

2007 3,172 719 916

2008 137 21 0

2009 1,854 0 0

Later 11,803 9,052 5,166

Total unrecognized tax loss carry-forwards 18,521 16,214 7,073

The unrecognized tax loss carryforwards increased in UK, Turkey, Brazil and Malaysia. The tax loss carryforwardsexpired in Ecuador, Azerbaijan, Panama and Australia.

At December 31, 2004 un-remitted earnings of CHF 277.8 million (2003: CHF 274.2 million; 2002: 275.1 million) have beenretained by subsidiary companies for reinvestment. No provision is made for income taxes that would be payable upon the distribution of such earnings. If the earnings were remitted, an income tax charge could result based on the taxstatutes currently in effect.



15. Borrowings

Short-term borrowings (in CHF thousands) 2004 2003 2002

Bank borrowings 11,237 19,180 15,368

Cheques and bills in transit 21,139 10,984 16,863

Finance lease liabilities 141 873 981

Other loans 3,807 983 2,398

Total short-term borrowings 36,324 32,020 35,610

Long-term borrowings (in CHF thousands) 2004 2003 2002

Finance lease liabilities 155 113 297

Other 154 19 454

Total long-term borrowings 309 132 751

The weighted average interest rate of bank borrowings and other financing liabilities is 3.45% (2003: 3.6%; 2002: 4.71%).The carrying amounts of short-term bank borrowings approximate their fair value.

Maturity of long-term financial debts (excluding lease liabilities) 2004 2003 2002

2004 0 0 454

2005 0 19 0

2006 112 0 0

2007 42 0 0

2008 0 0 0

Later 0 0 0

Total 154 19 454

The carrying amounts of the Group’s borrowings are denominated in the following currencies:

2004 2003 2002

USD 15,796 2,169 8,765

EUR 4,248 6,407 11,785

XAF 4,001 3,972 5,507

CAD 3,646 2,963 10

NGN 3,641 4,685 4,601

TWD 2,044 2,296 1,607

GBP 1,206 3,618 327

INR 778 538 68

MYR 367 2,034 1,066

HUF 0 1,010 145

SGD 408 874 986

Others 498 1,587 1,494

Total 36,633 32,153 36,361

16. Share capital

On December 31, 2004, the share capital amounted to CHF 50 million, and comprised 50,000 registered shares with a nominalvalue of CHF 1,000 each. The Ernst Göhner Foundation, Zug, is the sole shareholder, holding 100% of shares.

The amount available for dividend distribution is based on the available distributable retained earnings of Panalpina WorldTransport (Holding) Ltd., determined in accordance with the legal provisions of the Swiss Code of Obligations. In 2004 thedividend paid was CHF 30 million (2003: CHF 30 million; 2002: CHF 20 million).



17. Change in translation and other reserves and retained earnings

The movements in translation and other reserves and retained earnings recognized in shareholders’ equity are as follows:

Translation Retainedin CHF thousands differences earnings

Balance on December 31, 2001 (7,580) 615,518

Restatement IAS 8

– Over- or understated accruals (net of tax) (106) 2,677

– Overcharged invoices (net of tax) 13 (1,705)

Restatement IAS 19 (net of tax) (24,336)

Restated balance on January 1, 2002 (7,673) 592,154

Consolidated net income 115,629

Dividends paid (20,000)

Settlement of group loans, as per IAS 39, transfer to profit or loss statement 2,166

Actuarial gains / losses IAS 19 (net of tax) (3,103)

Valuation of group loans, as per IAS 21 (9,570)

Translation differences (40,087)




Actuarial gains / losses IAS 19 (net of tax) 1,720


Translation differences 5,719




Actuarial gains / losses IAS 19 (net of tax) (1,449)


Translation differences 6,982


18. Minority interests


Balance on January 1 (net) 2,916 2,956 2,620

Translation differences (304) (303) (563)

Interest in profit 966 391 1,111

Dividends paid (94) (128) (212)

Total net minority interests 3,484 2,916 2,956



19. Derivative financial instruments

The year-end contract value is calculated on the total volume of individual contracts using the value at year-end. The positivereplacement value represents the theoretical profit if the open currency contracts had been closed out as of December 31.Correspondingly, the negative replacement value represents the theoretical loss on closing the currency transactions open asof December 31.The change in the fair value has been recognized in the income statement because the instruments did notfulfill the conditions for hedge accounting.

Positive replacement Negative replacementContract value value value

in CHF thousands 2004 2003 2002 2004 2003 2002 2004 2003 2002

Foreign exchange contracts 705,553 405,810 441,450 8,543 9,730 21,537 (2,329) (603) (7,549)

Forward trading hedges 568,695 405,810 441,450 8,291 9,730 21,537 (2,288) (603) (7,549)

Foreign exchange options 136,858 0 0 252 0 0 (41) 0 0

Positive replacement Negative replacementContract value value value

in CHF thousands 2004 2003 2002 2004 2003 2002 2004 2003 2002

Terms of the forward foreign exchange contracts 705,553 405,810 441,450 8,543 9,730 21,537 (2,329) (603) (7,549)

0– 3 months 694,406 405,810 404,807 8,543 9,730 19,614 (1,032) (603) (7,549)

4–12 months 11,147 0 36,643 0 0 1,923 (1,297) 0 0

13–18 months 0 0 0 0 0 0 0 0 0

Derivative financial instruments are spread over the following currencies:

Forward foreign exchange contractsin CHF thousands 2004 2003 2002

USD 490,113 279,742 347,440

EUR 120,130 54,850 60,584

CAD 7,257 5,424 1,654

GBP 13,658 5,042 0

HKD 29,927 22,407 15,242

SGD 10,830 8,325 1,051

AUD 6,984 9,244 8,801

JPY 8,075 7,927 3,817

SEK 5,212 3,865 0

NZD 2,775 3,110 2,549

Other 10,592 5,874 312

Total 705,553 405,810 441,450



20. Employee benefit obligations

The Group has numerous pension funds. Retirement benefits vary from plan to plan reflecting applicable local practicesand legal requirements. Defined benefit pension plans are predominantly in Switzerland and Germany. The cost of thedefined contribution plans is charged to personnel expenses. For defined benefit plans the plans domiciled in Switzerlandhave an excess of assets over liabilities. Capitalized is the portion of the surplus which Management estimates willgenerate an economic benefit to the Group in the form of future contribution reductions.


Fair value of plan assets 237,033 226,302 205,822

Defined benefit obligation (DBO) funded (218,804) (200,190) (184,815)

(Deficit) /surplus 18,229 26,112 21,007

Unrecognized surplus due to paragraph 58b (11,216) (19,092) (14,137)

Defined benefit obligation (DBO) unfunded (24,032) (22,599) (21,432)

(Liability) asset recognized in balance sheet (17,019) (15,579) (14,562)

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

Calculation of pension cost for year ending

Current service cost (17,900) (16,514) (13,681)

Interest cost (8,310) (7,809) (7,638)

Expected return on assets 10,070 9,192 10,358

Member contributions 6,043 5,279 2,170

Settlements/curtailments 3,050 760 467

Net periodic pensions (cost) credit (7,047) (9,092) (8,324)

Actual return of plan assets 10,944 19,552 (29,366)

Changes in defined benefit obligation (DBO)

DBO beginning of year (222,789) (206,247) (202,950)

Current service cost (17,900) (16,514) (13,681)

Interest cost (8,310) (7,809) (7,638)

Actuarial gains / (losses) recognized in equity (10,692) (2,756) 9,178

Benefit paid 14,744 11,861 8,018

Liabilities extinguished on settlement 2,222 0 0

Currency impact (111) (1,324) 826

DBO end of year (242,836) (222,789) (206,247)

The movements recorded in the balance sheet are:

Changes in fair value of plan asset

Fair value beginning of year 226,302 205,822 237,054

Employer contributions 7,680 6,800 3,611

Member contributions 6,043 5,279 2,170

Expected return on assets 10,070 9,192 10,358

Actuarial gains / (losses) recognized in equity 874 10,360 (39,724)

Benefit paid (13,916) (11,101) (7,551)

Currency impact (20) (50) (96)

Fair value end of year of plan asset 237,033 226,302 205,822




Analysis of amounts recognized in equity

Recognized equity on January 1 74,268 76,862 72,713

Actuarial gains ( losses) fair value (874) (10,360) 39,724

Actuarial gains ( losses) DBO 10,692 2,756 (9,178)

Effect of impact of limit in para 58b (7,876) 4,955 (26,357)

Currency impact (9) 55 (40)

Recognized equity on December 31 76,201 74,268 76,862

Amounts for the current and previous periods

DBO 222,789 206,247 202,950

Plan assets 226,302 205,822 237,054

(Deficit) /surplus (3,513) 425 (34,104)

Experienced gains ( losses) on plan liability (13,316) (2,756) 9,178

Experienced gains ( losses) on plan assets 874 10,360 (39,724)

Major categories of plan assets are as follows:

Cash and cash equivalents 7,901 13,543 14,795

Equity investments 79,610 93,189 79,685

Bonds 121,232 93,795 89,520

Investment funds 21,262 15,891 14,644

Insurance contracts 7,028 9,884 7,178

The following weighted parameters have been chosen as the actual basis:

Discount rate 3.80% 3.80% 3.80%

Expected return on pension plan assets 4.50% 4.50% 4.50%

Salary increase 1.50% 2.00% 2.00%

Rate in pension increase 1.00% 2.00% 2.00%

The overall expected return of plan assets is based on country specific long-term market expectations at the beginning ofthe period.

21. Related parties

Members of the Board of Directors and senior management and members of their family are defined as persons related tothe Group. In the normal course of business the following remuneration was paid:

2004 2003 2002in CHF Persons in CHF Persons in CHF Persons

thousands thousands thousands

Remuneration of members of the Boardof Directors and of senior management 6,799 14 5,892 14 5,027 12

There were no contributions or donations to members of their families.

Shareholders, pension funds, associated companies and all subsidiaries are defined as parties related to the Group. Apartfrom the transactions with related parties mentioned here and in note 16, there are no other significant transactions requiringdisclosure.



22. Cash flow statement

Cash flow from operating activities (in CHF thousands) 2004 2003 2002

Consolidated net income before taxes 143,338 124,547 149,558

Depreciation of property, plant and equipment 37,592 42,834 46,722

Impairment of financial investments 5,799 0 4

Amortization of intangible assets 15,755 12,945 12,781

(Decrease) increase in long-term provisions 13,601 10,983 13,146

Loss/(gain) on sales of fixed assets (2,925) (299) (4,332)

Loss/(gain) on sales of investments 0 0 97

Decrease (increase) in excess assets of pension funds (280) 123 2,628

Interest income (5,857) (4,236) (8,811)

Interest expense 5,225 8,050 8,584

Cash flow before interest and taxes 212,248 194,947 220,377

Decrease/(increase) receivables and other current assets (196,819) 4,506 (59,307)

(Decrease)/increase payables, accruals and deferred income 60,601 (80,409) (57,596)

(Decrease)/increase other liabilities 21,615 23,338 20,861

Total cash flow from operating activities 97,645 142,382 124,335

23. Business combination

On April 1, 2004, Panalpina acquired 100% of the share capital of the Grampian Group, which offers global air and seafreight forwarding services as well as European road transport for the oil and gas industry. The acquired businesscontributed revenue of CHF 55.3 million and net profit of CHF 3.6 million to the Group for the period from April 1 toDecember 31, 2004. If the acquisition had occurred on January 1, 2004, Group gross revenue would have been CHF 7.5 billion, and net income would have been CHF 111.5 million.

Details of net assets acquired and goodwill are as follows:

in CHF thousands 2004

Purchase consideration:

– Cash paid 42,282

– Direct costs relating to the acquisition 211

Total purchase consideration 42,494

Fair value of net assets acquired (29,682)

Goodwill 12,812

The goodwill is attributable to the high profitability of the acquired business and the synergies expected to arise after theGroup’s acquisition.



The assets and liabilities arising from the acquisition are as follows:

Acquiree’s Revaluation due Faircarrying to purchase value

in CHF thousands amount accounting

Cash and cash equivalents 2,795 0 2,795

Property, plant and equipment 15,104 0 15,104

Intangible assets 35 10,389 10,424

Receivables 14,565 (336) 14,230

Payables (11,247) (136) (11,383)

Borrowings (1,231) 0 (1,231)

Deferred tax liabilities (394) 138 (256)

Net assets 19,627 10,055 29,682

Less acquired liquidity (2,795)

Goodwill 12,812

Total cash flow from acquisition of businesses 39,699

In addition the Group increased its investment in Nigeria in 2004 from 61.0% to 69.0% by acquiring further voting shares.

There were no acquisitions in the years ended December 31, 2003 and 2002.

24. Disinvestments

Neither in 2004, 2003, nor in 2002 were significant subsidiaries sold.

25. Additional information

Contractual commitments on non-cancellable operating lease contractsin CHF thousands 2004 2003 2002

2004 0 50,338 41,644

2005 86,251 41,020 33,636

2006 49,114 33,617 27,132

2007 39,013 26,984 24,772

2008 32,854 23,956 0

2009 28,973 67,322 64,684

Later 65,695 – –

Total residual commitments 301,900 243,237 191,868



Included in the residual lease commitments is an operating lease contract for an aircraft (total CHF 25.6 million), leasedby Panalpina Airfreight Management AG. The contract with a yearly notice period expires in August 2005.

Obligations under finance lease contractsin CHF thousands 2004 2003 2002

2004 0 900 204

2005 147 58 58

2006 149 29 36

2007 0 0 0

2008 0 0 0

Later 0 0 0

Total residual commitments 296 987 298

Pledged assets

The value of pledged assets amounts to CHF 15,000 (prior year CHF 704,000).

Pending legal claims

Various subsidiaries are involved in legal disputes in the ordinary course of business as defendants in legal disputes, as a result of which obligations could arise. It is possible that their satisfaction may not, or only partially, be covered byinsurance.

Group management is, however, of the opinion that no consequences can arise from these pending legal claims whichcould significantly affect the Group’s financial position. If the result of the legal proceedings can be reasonably estimated,the corresponding provisions are created.

Subsequent events

Since the balance sheet date no events have become known for which a disclosure is required.



26. Principal Group companies and participations

Nominal Equity Methodcapital interest Invest- of con-

Company Registered Currency in 1,000 in % ment solidation

Europe

Panalpina World Transport (Holding) Ltd. Basel CHF 50,000 100 1 C

Panalpina Management AG Basel CHF 2,500 100 1 C

Panalpina Finance Limited Jersey CHF 10,000 100 1 C

Panalpina AG Basel CHF 600 100 1 C

ASB Air Sea Broker AG Basel CHF 3,000 100 1 C

Pantainer AG Basel CHF 100 100 1 C

Panalpina Insurance Broker AG Basel CHF 100 100 1 C

Hausmann Transport AG Reinach CHF 100 100 1 C

Panalpina Airfreight Management AG Basel CHF 2,700 100 1 C

Jacky Maeder AG Basel CHF 2,000 100 1 C

Panalpina Welttransport (Deutschland) GmbH Mörfelden EUR 10,226 100 1 C

Panalpina Welttransport GmbH Bremen EUR 153 100 1 C

Panalpina Welttransport GmbH Düsseldorf EUR 154 100 1 C

Panalpina Welttransport GmbH Hamburg EUR 153 100 1 C

Panalpina Welttransport GmbH Kehl EUR 153 100 1 C

Panalpina Welttransport GmbH Mörfelden EUR 153 100 1 C

Panalpina Welttransport GmbH Nürnberg EUR 3,937 100 1 C

Panalpina Welttransport GmbH Stuttgart EUR 153 100 1 C

Panalpina Ocean Freight Management GmbH Hamburg EUR 150 100 1 C

Panalpina Welttransport GmbH Vienna EUR 36 100 1 C

Panalpina Welttransport GmbH Höchst EUR 36 100 1 C

Panalpina France Transports Internationaux S.A.S. Paris-Roissy EUR 4,500 100 1 C

Panalpina Trasporti Mondiali S.p.A. Milan EUR 2,000 100 1 C

Panalpina Transportes Mundiales S.A. Madrid EUR 451 100 1 C

Panalpina Transportes Mundials Lda. Lisbon EUR 50 100 1 C

Panalpina World Transport Ltd. London GBP 500 100 1 C

Panalpina World Transport ( Ireland) Ltd. Dublin EUR 25 100 1 C

Grampian International Freight Ltd. Aberdeen GBP 97 100 1 C

Panalpina World Transport N.V. Antwerp EUR 124 100 1 C

Panalpina Luxembourg S.A. Luxembourg EUR 31 100 1 C

Panalpina World Transport B.V. Amsterdam EUR 91 100 1 C

Grampian International Freight B.V. Beverwijk EUR 18 100 1 C

Panalpina Czech Sro. Prague CZK 1,000 100 1 C

Panalpina Magyarorszag Kft. Budapest HUF 3,000 100 1 C

Panalpina AB Gothenburg SEK 1,000 100 1 C

Panalpina World Transport Nakliyat Ltd. Srk. Istanbul TRL 70,000,000 100 1 C

Panalpina World Transport ZAO Moscow RUB 2,100,176 100 1 C

Panalpina World Transport Ltd. Kiev USD 220 100 1 C

Luxair S.A. Luxembourg EUR 13,744 12 4 N

C = fully consolidatedN = not consolidated

1 = capital participation 91–100%2 = capital participation 50–90%3 = controlling influence over management4 = capital participation less than 50%





North, Central and South America

Panalpina Inc. Miami USD 4,000 100 1 C

Hensel, Bruckmann & Lorbacher, Inc. Farmingdale N.Y. USD 50 100 1 C

Panalpina Inc. Toronto CAD 100 100 1 C

Panalpina Transportes Mundiales, S.A. de C.V. Mexico City MXN 8,900 100 1 C

Panalpina S.A. Panama City USD 1,250 100 1 C

Almacenadora Mercantil S.A. Panama City USD 25 100 1 C

Panalpina S.A. de C.V. San Salvador SVC 100 100 1 C

Panalpina Transportes Mundiales S.A. San José CRC 2,500 100 1 C

Panalpina Uruguay Transportes Mundiales S.A. Montevideo UYU 4,500 100 1 C

Panalpina S.A. Santa Fé de Bogotá COP 7,450,838 100 1 C

DAPSA Depositos Aduaneros Panalpina S.A. Santa Fé de Bogotá COP 2,815,208 100 1 C

Panalpina C.A. Caracas VEB 180,000 100 1 C

Inversiones Ortac C.A. Caracas VEB 6,000 100 1 C

Panalpina Ecuador S.A. Quito ECS 20,000 100 1 C

Panalpina Aduanas S.A. Lima PEN 333 100 1 C

Panalpina Transportes Mundiales S.A. Lima PEN 1,460 100 1 C

Panalpina Ltda. São Paulo BRL 1,277 100 1 C

Panalpina Chile Transportes Mundiales Ltda. Santiago USD 102 100 1 C

Panalpina Transportes Mundiales S.A. Buenos Aires ARS 20 100 1 C

Panalpina Transportes Mundiales S.A. de C.V. Santo Domingo USD 1 100 1 C

Panalpina Reinsurance Ltd. Hamilton CHF 2,000 100 1 C

Asia and Australia

Panalpina World Transport (Singapore) Pte. Ltd. Singapore SGD 2,500 100 1 C

PT Panalpina Nusajaya Transport Jakarta IDR 1,500,000 100 1 C

Panalpina China Limited Hong Kong HKD 1,000 100 1 C

Panalpina World Transport (PRC) Ltd. Shanghai CNY 5,000 100 1 C

Panalpina Asia-Pacific Services Ltd. Hong Kong HKD 500 100 1 C

Panalpina Taiwan Ltd. Taipei TWD 15,500 100 1 C

Panalpina IAF (Korea) Ltd. Seoul KRW 500,000 100 1 C

Panalpina World Transport (Thailand) Limited Bangkok THB 14,000 49 3 C

Panalpina Macao Limited Macao HKD 1,000 100 1 C

Panalpina Transport (Malaysia) Sdn. Bhd. Kuala Lumpur MYR 4,215 100 1 C

Panalpina World Transport (Japan) Ltd. Tokyo JPY 50,000 100 1 C

Panalpina World Transport ( India) Pvt. Ltd. Delhi INR 1,667 100 1 C

Panindia Cargo Private Ltd., Dehli Delhi INR 100 100 1 C

Panalpina World Transport (Philippines) Inc. Manila PHP 10,000 100 1 C

Panalpina World Transport (Pty) Limited Sydney AUD 2,500 100 1 C

Panalpina Kazakhstan LLP Almaty USD 1 100 1 C



26. Principal Group companies and participations



Africa and Middle East

Panalpina Gulf LLC Dubai AED 1,000 49 3 C

Panalpina (Bahrain) WLL Manama BHD 10 100 1 C

Panalpina Central Asia EC Manama USD 300 100 1 C

Panalpina Georgia LLC Tbilisi USD 5 100 1 C

Panalpina Azerbaijan LLC Baku USD 1 100 1 C

Panalpina Turkmenistan LLC Turkmenbashi USD 60 100 1 C

Qatar Shipping Company (Panalpina Qatar) WLL Doha QAR 200 49 3 C

Panalpina Transports Mondiaux Cameroon S.A.R.L. Douala XAF 150,000 90 1 C

Panalpina World Transport Ltd. (Equitorial Guinea) Malabo XAF 10,000 100 1 C

Panalpina Transports Mondiaux Congo SARL Pointe Noire XAF 70,000 80 1 C

Panalpina Transports Mondiaux Gabon S.A. Port-Gentil XAF 50,000 90 1 C

Panalpina World Transport (Nigeria) Limited Apapa NGN 100,000 69 2 C

Panalpina (Ghana) Limited Accra GHC 100,000 100 1 C

Panalpina Transportes Mundiais Navegaçao e Transitos, S.A.R.L. Luanda AON 18,000,000 80 1 C

C = fully consolidatedN = not consolidated

1 = capital participation 91–100%2 = capital participation 50–90%3 = controlling influence over management4 = capital participation less than 50%



Report of the Group auditors to the General Meeting ofPanalpina World Transport (Holding) Ltd., Basel

As auditors of the Group, we have audited the consolidated financial statements (income statement, statement ofrecognized income and expenses, balance sheet, statement of cash flows and notes /pages 42 to 72) of PanalpinaWorld Transport (Holding) Ltd. for the years ended December 31, 2004, 2003 and 2002.

These consolidated financial statements are the responsibility of the board of directors. Our responsibility is to expressan opinion on these consolidated financial statements based on our audit. We confirm that we meet the legal requirementsconcerning professional qualification and independence.

Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession and with the Inter-national Standards on Auditing, which require that an audit be planned and performed to obtain reasonable assuranceabout whether the consolidated financial statements are free from material misstatement. We have examined on a testbasis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessedthe accounting principles used, significant estimates made and the overall consolidated financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position, theresults of operations and the cash flows in accordance with the International Financial Reporting Standards ( IFRS) andcomply with Swiss law.

We recommend that the consolidated financial statements submitted to you be approved.

PricewaterhouseCoopers AG

A. Baur Th. Brüderlin

Basel, April 19, 2005

Report of the Group Auditors



in CHF millions 2004 2003 2002 2001 2000

Invoiced forwarding services 7,452 6,561 6,364 6,717 6,879

Change in % 13.59 3.10 (5.26) (2.35) 26.43

Net forwarding revenue 6,120 5,362 5,175 5,386 5,373

Change in % 14.14 3.63 (3.92) 0.24 27.75

Gross profit (contribution margin) 1,341 1,239 1,248 1,280 1,188

Change in % 8.25 (0.75) (2.48) 7.74 23.49

in % of net revenue 21.91 23.10 24.12 23.77 22.11

Consolidated net earnings 111.4 97.7 115.6 111.7 92.7

Change in % 14.03 (15.49) 3.52 20.50 26.47

in % of gross profit 8.31 7.89 9.26 8.73 7.80

EBITDA 212.0 195.4 211.2 223.9 185.0

Change in % 8.48 (7.47) (5.68) 21.03 22.35


EBITA 174.4 152.6 164.5 213.2 180.8

Change in % 14.30 (7.22) (22.86) 17.92 22.35


EBIT 152.9 138.1 151.7 155.8 133.2

Change in % 10.71 (8.98) (2.64) 16.97 24.84


Cash flow before interest and taxes 212.2 194.9 220.4 215.9 187.6

Change in % 8.87 (11.54) 2.07 15.09 61.45


Net cash flow from operating activities 33.9 89.6 71.9 326.7 54.1

Change in % (62.12) 24.64 (77.99) 503.88 (25.17)


Free cash flow (77.7) 47.5 19.5 195.8 11.0

Change in % (263.61) 144.13 (90.06) 1,680.00 (83.82)

in % of gross profit (5.80) 3.84 1.56 15.30 0.93

Net working capital 370.1 263.1 220.0 175.2 318.1

Change in % 40.65 19.59 25.57 (44.92) 44.92

Key Figures in CHF 5-year review



in CHF millions 2004 2003 2002 2001 2000

Capital expenditure on fixed assets 89.9 51.1 67.0 127.0 57.9

Change in % 76.08 (23.76) (47.26) 119.34 (33.60)


Net capital expenditure on fixed assets 74.5 39.7 48.6 114.2 50.3

Change in % 87.54 (18.34) (57.43) 127.04 12.53


Depreciations 59.1 57.4 59.5 68.2 51.8

Change in % 3.12 (3.62) (12.75) 31.66 16.40


Personnel expenses 782.4 734.8 725.9 744.2 700.6

Personnel

Number of employees at year-end (World) 13,224 12,344 12,463 12,042 11,586

Number of employees at year-end (Switzerland) 669 755 813 927 869

Yearly average (World) 12,784 12,404 12,253 11,814 11,301

Productivity ratios (CHF)

Net sales per average employee 478,750 432,327 422,338 455,900 475,466

Gross profit per average employee 104,901 99,880 101,875 108,346 105,128

Personnel expenses per average employee 61,200 59,238 59,245 62,993 61,997

Personnel expenses in % of gross profit 58.34 59.31 58.15 58.14 58.97

Leverage (liabilities /equity) 0.97 1.01 1.10 1.13 1.39

Net interest bearing liabilities (231) (311) (282) (232) (64)

Gross gearing (interest bearing liabilities /equity) 0.02 0.03 0.03 0.03 0.18

Net gearing (net interest bearing liabilities /equity) (0.28) (0.41) (0.40) (0.35) (0.11)

ROCE (EBIT/capital employed) in % 23.67 26.03 27.76 26.31 23.42

Current cash debt coverage ratio (Net operating cash flow/average current liability) 0.05 0.14 0.11 0.50 0.08

Cash debt coverage ratio(Net operating cash flow/average total liability) 0.04 0.12 0.10 0.43 0.07

Return on equity in % 14.5 13.8 17.3 18.3 17.6

Change in % 5.30 (20.21) (5.58) 4.00 7.16



in CHF millions 2004 2003 2002 2001 2000

Assets 1,574 1,487 1,431 1,404 1,365

Change in % 5.89 3.89 1.93 2.86 6.89

Current assets 1,263 1,211 1,138 1,055 1,065

Change in % 4.25 6.50 7.82 (0.94) 9.56

Liquid funds 247 332 301 250 165

Change in % (25.82) 10.38 20.46 51.52 (17.91)

Receivables and other current assets 1,016 879 836 805 900

Change in % 15.62 5.10 3.90 (10.56) 16.71

Fixed assets 311 275 293 349 300

Change in % 13.10 (5.89) (16.18) 16.33 (1.32)

Tangible assets 159 154 167 192 197

Change in % 3.43 (8.05) (12.80) (2.54) (3.90)

Financial assets 61 68 66 86 85

Change in % (10.93) 3.67 (23.38) 1.18 14.86

Intangible assets 91 53 59 71 18

Change in % 72.07 (10.42) (16.57) 294.44 (28.00)

Liabilities and shareholders’ equity 1,574 1,487 1,431 1,404 1,365

Change in % 5.89 3.89 1.93 2.86 6.89

Liabilities 774 747 749 743 783

Change in % 3.66 (0.26) 0.75 (5.11) 1.03

Payables. accruals and deferred income 646 616 616 571 529

Change in % 4.93 (0.07) 7.95 7.94 5.17

Borrowings 37 32 36 28 113

Change in % 13.94 (11.58) 29.86 (75.22) (23.65)

Provisions 91 99 96 144 141

Change in % (7.63) 2.84 (33.44) 2.13 13.71

Minorities 3 3 3 3 20

Equity 797 737 680 658 562

Change in % 8.09 8.49 3.27 17.08 14.46

Share capital 50 50 50 50 50

Change in % 0.00 0.00 0.00 0.00 0.00

Translation differences (87) (67) (55) 0 0

Change in % 30.36 21.35 0.00 0.00 0.00

Retained earnings 834 754 685 608 512

Change in % 10.61 10.14 12.61 18.75 16.10

Balance Sheet in CHF 5-year review



Key Figures in EUR 3-year review

in EUR millions 2004 2003 2002

Invoiced forwarding services 4,827 4,327 4,218

Change in % 9.67 2.60

Net forwarding revenue 3,964 3,537 3,430

Change in % 9.79 3.12

Gross profit (contribution margin) 869 817 827

Change in % 4.75 (1.23)

in % of net revenue 21.91 23.10 24.12


Change in % 1.27 (15.90)

in % of gross profit 8.31 7.89 9.26

EBITDA 137.3 128.9 140.0

Change in % (2.02) (7.92)


EBITA 113.0 100.6 109.0

Change in % 12.24 (7.68)


EBIT 99.0 91.1 100.5

Change in % 8.72 (9.42)


Cash flow before interest and taxes 137.5 128.6 146.1

Change in % 6.92 (11.97)


Net cash flow from operating activities 22.0 59.1 47.7

Change in % (62.80) 24.03


Free cash flow (50.4) 31.3 12.9

Change in % (260.67) 142.94

in % of gross profit (5.80) 3.84 1.56

Net working capital 239.9 168.8 148.4

Change in % 42.14 13.70




Capital expenditure on fixed assets 58.3 32.8 45.2

Change in % 77.93 (27.51)


Net capital expenditure on fixed assets 48.3 25.5 32.8

Change in % 89.51 (22.37)


Depreciations 38.3 37.8 39.4

Change in % 1.27 (4.09)


Personnel expenses 506.8 484.6 481.1

Personnel

Number of employees at year-end (World) 13,224 12,344 12,463

Number of employees at year-end (Switzerland) 669 755 813

Yearly average (World) 12,784 12,404 12,253

Productivity ratios

Net sales per average employee 310,110 285,157 279,935

Gross profit per average employee 67,949 65,880 67,525

Personnel expenses per average employee 39,642 39,073 39,269

Personnel cost in % of gross profit 58.34 59.31 58.15

Leverage (liabilities/equity) 0.97 1.01 1.10

Net interest bearing liabilities (150) (200) (190)

Gross gearing (interest bearing liabilities/equity) 0.02 0.03 0.03

Net gearing (net interest bearing liabilities/equity) (0.29) (0.42) (0.42)

ROCE (EBIT/capital employed) in % 23.67 26.03 27.76

Current cash debt coverage ratio(net operating cash flow/average current liability) 0.05 0.14

Cash debt coverage ratio(net operating cash flow/average total liability) 0.04 0.12

Return on equity in % 14.6 13.8 17.1

Change in % 5.47 (19.18) 11.59



Balance Sheet in EUR 3-year review


Assets 1,020 954 965

Change in % 7.00 (1.16) 1.86

Current assets 819 777 767

Change in % 5.35 1.25 7.82

Liquid funds 160 213 203

Change in % (25.04) 4.94 20.46

Receivables and other current assets 659 564 564

Change in % 16.84 (0.07) 3.90

Fixed assets 202 177 197

Change in % 14.29 (10.52) (16.18)

Tangible assets 103 99 113

Change in % 4.52 (12.58) (12.80)

Financial assets 39 44 44

Change in % (9.99) (1.43) (23.38)

Intangible assets 59 34 40

Change in % 73.88 (14.83) (16.57)

Liabilities and shareholders’ equity 1,020 954 965

Change in % 6.88 (1.16) 2.66

Liabilities 502 479 505

Change in % 4.75 (5.17) 0.75

Payables, accruals and deferred income 419 395 416

Change in % 6.03 (4.99) 7.95

Borrowings 24 21 25

Change in % 15.14 (15.93) 29.86

Provisions 59 63 65

Change in % (6.65) (2.23) (33.44)

Minorities 2 2 2

Equity 516 473 458

Change in % 8.98 3.27 4.87

Share capital 34 34 34

Change in % 0.00 0.00 0.00

Translation differences (59) (58) (30)

Change in % 0.64 96.70 0.00

Retained earnings 540 497 454

Change in % 8.62 9.60 12.61


Annual Financial Statements 2004Panalpina World Transport (Holding) Ltd.


Annual Financial Statements 2004

Income Statement

in CHF thousands 2004 2003

Income

Income from participations 124,312 122,717

Financial income 18,023 16,316

Rental income 350 350

Other income 47 50

Total income 142,732 139,433

Expense

Personnel expenses 753 780

Other administrative expenses 6,831 2,895

Financial expenses 31,110 16,429

Depreciation and valuation adjustments 10,558 149

Total expenses 49,252 20,253

Taxes 1,000 1,200

Profit for the year 92,480 117,980

Presentation of the income statement was changed in 2004. The prior financial year was adjusted for comparativepurposes.



Balance Sheetas of December 31 (before profit appropriation )

Assets


Current assets

Cash 42,869 89,041

Receivables 242 311

– from Group companies 0 0

– from third parties 242 311

Financial receivables from Group companies 201,792 121,857

Time deposits 15,000 10,031

Prepaid expenses and deferred charges 10,564 15,786

Total current assets 270,467 237,026

Long-term assets

Buildings and real estate p.m. p.m.

Participations 118,568 118,568

Loans to Group companies 199,916 135,853

Total long-term assets 318,484 254,421

Total assets 588,951 491,447



Liabilities


Short-term liabilities

Banks 0 0

Payables 1,000 2,570

– due to group companies 952 2,435

– due to third parties 48 135

Financial liabilities to Group companies 83,055 58,126

Accrued expenses 3,373 2,594

Total short-term liabilities 87,428 63,290

Long-term liabilities

Provisions 39,916 29,030

Total long-term liabilities 39,916 29,030

Total liabilities 127,344 92,320


Share capital 50,000 50,000

General legal reserve 10,000 10,000

Special reserve 297,850 207,850

Retained earnings 103,757 131,277

– brought forward 11,277 13,297

– profit for the year 92,480 117,980

Total shareholders’ equity 461,607 399,127

Total liabilities 588,951 491,447



Notes

General

The Group’s consolidated financial statements must be considered for a proper financial and economic assessment of thecompany. The financial statements of the parent company, Panalpina World Transport (Holding) Ltd., are included in this part of the annual report as supplementary information to the consolidated financial statements and were prepared in accor-dance with the accounting principles prescribed by Swiss company law.

Financial receivables from group companies

Financial receivables increased by CHF 79.9 million compared with the prior year. The increase is largely contributable to thegranting of new short-term loans to Panalpina Airfreight Management Ltd. aggregating CHF 40.4 million, to Panalpina USAaggregating CHF 18.5 million and to Panalpina Singapore aggregating CHF 11.1 million, which primarily serve as workingcapital financing for these companies. It was possible to reduce or repay several local bank loans as a result.

Participations

The increase in the year under review amounted to CHF 7.4 million, which is comprised of acquisitions. As a commercialprecaution, value adjustments were made amounting to CHF 7.4 million.

Time deposits

Investments were made in time deposits during the year under review, which amounted to CHF 15.0 million at year-end. The maturity of these instruments varies between three months and one year.

Loans to Group companies

Loans increased by CHF 64.1 million in the year under review. This increase primarily comprises the granting of new long-term loans to Panalpina England aggregating CHF 38.1 million and to Panalpina USA aggregating CHF 23.9 million.

Provisions

These include provisions relating exclusively to foreign exchange risks.

Financial liabilities to group companies

The increase in financial liabilities is mainly a result of the granting of a new loan by Panalpina Management Ltd.


The fully-paid share capital on December 31, 2004 amounted to CHF 50 million, consisting of 50,000 registered shares with a nominal value of CHF 1,000 each.

Financial income

The increase in the reporting year is predominantly attributable to increased earnings from supplemental loans granted aswell as to higher bank interest payments.

Financial expense

The increase in financial expenses is predominantly due to greatly increased loss coverage of subsidiaries as well as tohigher external interest payments.

Depreciation and valuation adjustments

In the year under review, value adjustments totaling CHF 10.6 million were made to the debit of the Income Statement. This refers to value reduction making use of the Swiss Code of Obligation, primarily for loans to and participations in oursubsidiaries in Latin America and other emerging nations.




Guarantees in favor of third parties

Guarantees and indemnity liabilities, Code of Obligations, article 663b 109,947 118,263

In addition, Panalpina World Transport (Holding) Ltd, Basel, has issued lettersof comfort in favor of various banks concerning liabilities due from subsidiaries amounting to CHF 36.0 million (prior year: CHF 42.6 million).

Fire insurance value of buildings and real estate 1,546 1,494

Shareholders

Ernst Göhner Foundation, Zug 100% 100%



Appropriation of Profit

The Board of Directors recommends the following appropriation of available earnings of CHF 103,757,000 at the Annual General Meeting:

in CHF thousands 2004

80% dividend on share capital of CHF 50 million 40,000

One-time anniversary dividend 20,000

Transfer to special reserve 30,000

To be carried forward 13,757

Total 103,757



Report of the Statutory Auditors

To the General Meeting of Panalpina World Transport (Holding) Ltd., Basel

As statutory auditors, we have audited the accounting records and the financial statements (income statement, balancesheet and notes/pages 81 to 86) of Panalpina World Transport (Holding) Ltd. for the year ended December 31.

These financial statements are the responsibility of the board of directors. Our responsibility is to express an opinion onthese financial statements based on our audit. We confirm that we meet the legal requirements concerning professionalqualification and independence.

Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession, which requirethat an audit be planned and performed to obtain reasonable assurance about whether the financial statements are freefrom material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed the accounting principles used, significant estimates made and theoverall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the accounting records and financial statements and the proposed appropriation of available earningscomply with Swiss law and the company’s articles of incorporation.

We recommend that the financial statements submitted to you be approved.

PricewaterhouseCoopers AG

A. Baur Th. Brüderlin

Basel, April 19, 2005


Algeria Hassi Messaoud

AngolaCabinda, Lobito, Luanda, Soyo

Argentina Buenos Aires

Australia Brisbane, Melbourne, Sydney

Austria Graz, Hoechst, Innsbruck, Linz,Vienna

Azerbaijan Baku

Bahrain Manama

Bangladesh Chittagong, Dhaka

Belgium Antwerp, Brussels, Liège,Voeren-Fouron

Brazil Belo Horizonte, Campinas,Curitiba, Guarulhos, Joinville,Macaé, Manaus, Porto Alegre,Rio de Janeiro, Santos, SãoPaulo, Viracopos

Cameroon Douala

Canada Calgary, Edmonton, Fort Erie,Kitchener, Montreal, Ottawa,Quebec, Toronto, Vancouver,Windsor, Winnipeg

Chile Iquique, Santiago, Valparaíso

China Beijing, Chengdu, Dalian,Fuzhou, Guangzhou, Haikou,Hangzhou, Hong Kong, Macau,Nanjing, Ningbo, Qingdao,Shanghai, Shenyang, Shenzhen,Suzhou, Tianjin, Urumqi, Wuxi,Xiamen, Xi’an, Zhuhai

Main offices worldwide

Colombia Barranquilla, Bogotá, Buena-ventura, Cali, Cartagena,Medellín, Pereira

Congo Pointe-Noire

Costa Rica San José

Czech Republic Prague

Denmark Copenhagen

Dominican Republic Santo Domingo

Ecuador Guayaquil, Quito

Egypt Cairo

El Salvador San Salvador

Equatorial Guinea Malabo

Finland Helsinki

France Lille, Lyon, Marseille, Nantes,Paris, Strasbourg

Gabon Libreville, Port Gentil

Georgia Poti, Tbilisi

Germany Bad Waldsee, Berlin, Bremen,Dortmund, Dusseldorf,Frankfurt, Hamburg, Hanover,Kassel, Kehl, Leipzig, Ludwigshafen, Munich,Muenster /Osnabrueck,Nuremberg, Stuttgart

Ghana Accra, Takoradi, Tema

Hungary Budapest

India Ahmedabad, Bangalore,Chennai, Cochin, Coimbatore,Hyderabad, Kolkata, Mumbai,New Delhi, Pune, Tirupur

Indonesia Jakarta, Semarang, Surabaya

Ireland Dublin, Shannon

Italy Bergamo, Biella, Bologna,Como, Florence, Genoa, Milan, Monteprandone, Rome,Turin, Vicenza

Japan Fukuoka, Nagoya, Osaka,Sapporo, Tokyo

Kazakhstan Aktobe, Almaty, Aqtau, Atyrau

Korea Busan, Daegu, Iksan, Incheon,Seoul


Main offices worldwide

LuxembourgLuxembourg

MalaysiaJohor Bahru, Kuala Lumpur,Penang

MexicoCancún, Guadalajara, México City, Monterrey, Tijuana

MoroccoCasablanca

NetherlandsAmsterdam, Eindhoven,Maastricht, Moerdijk, Rotterdam

New ZealandAuckland

NigeriaAbuja, Apapa (Lagos), Kaduna,Kano, Port Harcourt, Warri

PanamáColón, Panamá,Tocumen

PeruCallao, Lima

PhilippinesCebu, Manila

PortugalLisbon, Porto

Puerto RicoSan José

QatarDoha

RussiaMoscow, Nakhodka, Noyabrsk, St. Petersburg,Usinsk,Yekaterinburg, Yuzhno-Sakhalinsk

Saudi ArabiaAl Khobar, Jeddah, Riyadh

SingaporeSingapore

South AfricaCape Town, Durban, EastLondon, Johannesburg, Port Elizabeth

SpainBarcelona, Bilbao, Madrid,Valencia

Sri LankaColombo

SwedenGothenburg, Stockholm

SwitzerlandBasel, Berne, Geneva, Lugano,St. Gall, Zurich

TaiwanHsin-Chu, Kaohsiung,Taichung, Taipei

ThailandBangkok, Laem Chabang

TurkeyAnkara, Istanbul, Izmir

TurkmenistanAshgabad, Turkmenbashi

Ukraine Borispol, Kiev

United Arab Emirates (UAE)Dubai, Sharjah

United Kingdom (UK)Aberdeen, Birmingham,Glasgow, Great Yarmouth,London, Manchester, Prestwick

United States of America (USA)Anchorage, Atlanta, Austin,Baltimore, Boston, Bradley/Hartford, Charleston, Charlotte,Chicago, Cincinnati, Cleveland,Columbus, Dallas, Denver,Detroit, El Paso, Foster City,Greenville, Houston, Huntsville,Indianapolis, Laredo, LosAngeles, Memphis, Miami,Milwaukee, Minneapolis, Mont-gomery, Morristown, Nashville,New Orleans, New York,Norfolk, Orlando, Philadelphia,Phoenix, Portland, Raleigh/Durham, San Diego, SanFrancisco, Seattle, St. Louis,Tulsa, Washington DC

UruguayMontevideo

VenezuelaCaracas, Maiquetía/La Guaria,Maracaibo, Puerta Ordaz,Puerto Cabello, Puerto La Cruz,San Antonio del Táchira,Valencia

VietnamHanoi, Ho Chi Minh City

Panalpina World Transport (Holding) Ltd.Viaduktstrasse 42P.O. BoxCH-4002 BaselSwitzerland

Phone +41 61 226 11 11Fax +41 61 226 11 [email protected]

The Panalpina Annual Report is published in German andEnglish.

For additional copies please referto the above address or send usan e-mail.

An electronic version can bedownloaded at:www.panalpina.com

EditorPanalpina World Transport(Holding) Ltd. Corporate Communications

Concept/DesignWirz Corporate AG, Zurich

LithographyLithoteam, Allschwil/Basel

Printed by Basler Druck+Verlag AG, bdv,Basel

Picture creditsPanalpina, getty images (p.27),imagepoint (p.27), zefa (p.1, 10/11, 16, 18/19, 21, 22,23, 24, 25, 27, 28, 29, 32, 33, 36,38/39, 92)

Publishingdetails


Panalpina World Transport (Holding) Ltd.Viaduktstrasse 42P.O. BoxCH-4002 Basel

Phone +41 61 226 11 11Fax +41 61 226 11 [email protected]

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