financial report - panalpina.com · property, plant and equipment 12 99,648 96,733 right-of-use of...

FINANCIALREPORT

2018#INMOTION

Financial Report 2018

Consolidated Financial Statements panalpina.com 2

Consolidated financial statements

CONTENTS

Consolidated income statement 3

Consolidated statement of comprehensive income 4

Consolidated statement of financial position 5

Consolidated statement of changes in equity 6

Consolidated statement of cash flows 8

Notes to the consolidated financial statements 9

61 of the consolidated financial statements

Key figures (five-year review) 65

Consolidated statement of financial position 67 (five-year review)


Consolidated income statement for the years ended December 31, 2018 and 2017

In thousand CHF Notes 2018 2017

Net forwarding revenue 3 / 4 6,035,706 5,532,779

Forwarding services from third parties 4 (4,536,017) (4,134,986)

Gross profit 4 1,499,689 1,397,793

Personnel expenses 5 (925,834) (889,847)

Other operating expenses 6 (284,351) (361,760)

EBITDA 289,504 146,185

Depreciation of property, plant and equipment 12 (22,722) (21,294)

Depreciation of right-of-use of leased assets 13 (124,494) 0

Amortization of intangible assets 14 (23,919) (21,570)

Operating result (EBIT) 118,369 103,321

Finance income 8 3,034 2,750

Finance costs 8 (13,837) (4,529)

Profit before income tax (EBT) 107,565 101,542

Income tax expenses 9 / 10 (31,849) (44,082)

Profit 75,716 57,460

Profit attributable to:

Owners of the parent 78,042 58,809

Non-controlling interests 21 (2,326) (1,350)

Earnings per share (in CHF)

Basic 11 3.29 2.48

Diluted 11 3.29 2.48


Consolidated statement of comprehensive income for the years ended December 31, 2018 and 2017


Profit 75,716 57,460

Other comprehensive income

Items that will not be reclassified to profit or loss:

Remeasurement of the net defined benefit asset / liability 23 (11,105) 16,931

Income taxes on this component of other comprehensive income 9 / 10 2,143 (3,397)

(8,962) 13,535

Items that are or may be reclassified subsequently to profit or loss:

Available-for-sale financial assets - net change in fair value 15 0 (12)

Exchange difference on translations of foreign operations (30,366) 16,861

(30,366) 16,849

Other comprehensive income, net of tax (39,328) 30,384

Total comprehensive income 36,389 87,843

Total comprehensive income attributable to:

Owners of the parent 38,238 90,288

Non-controlling interests 21 (1,850) (2,445)


Consolidated statement of financial position as of December 31, 2018 and 2017


Assets

Non-current assets

Property, plant and equipment 12 99,648 96,733

Right-of-use of leased assets 13 314,921 0

Intangible assets 14 119,097 88,452

Investments and other financial assets 15 31,386 31,042

Post-employment benefit assets 23 9,454 19,553

Deferred income tax assets 10 67,843 63,223

Total non-current assets 642,348 299,003

Current assets

Trade receivables 16 1,063,271 1,003,537

Contract Assets (previously shown under "Unbilled forwarding services") 4 137,344 93,476

Other receivables and other current assets 17 113,848 128,805

Derivative financial instruments 18 4,447 3,360

Cash and cash equivalents 19 286,970 310,850

Assets classified as held for sale 12 6,065 0

Total current assets 1,611,944 1,540,028

Total assets 2,254,293 1,839,031

Equity and liabilities

Equity

Share capital 20 2,375 2,375

Treasury shares 20 (707) (1,531)

Retained earnings and reserves 563,851 607,174

Total equity attributable to owners of the parent 565,519 608,018

Non-controlling interests 21 5,641 6,280

Total equity 571,160 614,299

Non-current liabilities

Borrowings 22 154,053 3,221

Non-current lease liabilities 13 216,655 0

Non-current provisions 24 32,519 36,002

Non-current other liabilities 24 64,404 48,874

Post-employment benefit liabilities 23 54,118 59,317

Deferred income tax liabilities 10 16,116 10,396

Total non-current liabilities 537,865 157,810

Current liabilities

Trade payables 453,323 491,954

Contract liabilities 4 41,527 0

Other payables and accruals 142,824 152,770

Accrued cost of services 289,949 304,692

Borrowings 22 1,905 2,643

Current lease liabilities 13 102,501 0

Derivative financial instruments 18 1,398 1,185

Current provisions 24 19,294 22,000

Current other liabilities 24 77,292 74,547

Current income tax liabilities 15,254 17,131

Total current liabilities 1,145,268 1,066,922

Total liabilities 1,683,133 1,224,732

Total equity and liabilities 2,254,293 1,839,031


Consolidated statement of changes in equity for the years ended December 31, 2018 and 2017

Attributable to the owners of the parent

Non- con-

trolling interests

Total equity

2018 in thousand CHF Notes

Share capital

Treasury shares

Trans-lation

reserve Retained earnings Total

Balance on January 1, 2018 2,375 (1,531) (268,778) 875,952 608,018 6,280 614,299

Effect of initial application of IFRS 15 (net of tax)

0 0 0 1,524 1,524 0 1,524

Effect of initial application of IFRS 9 (net of tax)

0 0 0 6,733 6,733 0 6,733


Profit 78,042 78,042 (2,326) 75,716


Exchange difference on translations of foreign operations

(30,842) (30,842) 476 (30,366)

Remeasurement of the net defined benefit asset / liability, net of tax

(8,962) (8,962) (8,962)

Total other comprehensive income, net of tax

0 0 (30,842) (8,962) (39,804) 476 (39,328)

Total comprehensive income for the period

0 0 (30,842) 69,081 38,238 (1,850) 36,389

Dividends paid 20 (89,033) (89,033) (89,033)

Credit to equity for share-based compensation plans

7

8,037 8,037 8,037

Changes in treasury shares, net 20 823 (4,516) (3,693) (3,693)

Acquisition of subsidiaries with non-controlling interests

21

0 0 1,211 1,211

Transaction with non-controlling interests 1

21

(4,306) (4,306) (4,306)

Balance on December 31, 2018 2,375 (707) (299,620) 863,471 565,519 5,641 571,160 1 This movement is related to put options for the acquisition of non-controlling interests in the group's subsidiaries


Attributable to the owners of the parent

Non- con-

trolling interests

Total equity

2017 in thousand CHF Notes

Share capital

Treasury shares

Trans-lation

reserve Retained earnings Total


Profit 58,809 58,809 (1,350) 57,460


Exchange difference on translations of foreign operations

17,957 17,957 (1,096) 16,861

Remeasurement of the net defined benefit asset / liability, net of tax

13,535 13,535 13,535

Available-for-sale financial assets net change in fair value

(12) (12) (12)

Total other comprehensive income, net of tax

0 0 17,957 13,522 31,479 (1,096) 30,384

Total comprehensive income for the period

0 0 17,957 72,331 90,288 (2,445) 87,843

Dividends paid 20 (89,057) (89,057) (89,057)

Credit to equity for share-based compensation plans

7 6,115 6,115 6,115

Changes in treasury shares, net 20 2,457 (4,757) (2,300) (2,300)

Acquisition of subsidiaries with non-controlling interests

21 0 0 1,989 1,989

Transaction with non-controlling interests 1

21 (7,258) (7,258) (7,258)

Reclassification of non-controlling interests to parent shareholders 2

21 2,204 2,204 (2,204) 0

Balance on December 31, 2017 2,375 (1,531) (268,778) 875,952 608,018 6,280 614,299 1 This movement is related to a put option for an acquisition of a non-controlling interests in one of the group's subsidiaries 2 This movement is related to the transfer of non-controlling interests to the parents' equity


Consolidated statement of cash flows for the years ended December 31, 2018 and 2017


Profit 75,716 57,460

Income tax expenses 9 31,849 44,082

Depreciation of property, plant and equipment 12 22,722 21,294

Depreciation of right-of-use of leased assets 13 124,494 0

Amortization of intangible assets 14 23,919 21,570

Interest income and dividend on available-for-sale financial assets 8 (3,030) (2,232)

Interest expenses 8 7,773 614

Loss / (gain) on foreign exchange 8 3,262 (512)

Loss / (gain) on sales of property, plant and equipment 12 304 (329)

Expenses for share-based compensation plans 5 / 7 8,037 6,115

Other non-cash (income) and expenses 2,393 5,524

Subtotal cash flow from operations 297,440 153,586

Working capital adjustments:

(Increase) / decrease receivables, other current assets, unbilled forwarding services and contract assets (150,931) (175,106)

(Decrease) / increase payables and accruals incl. accrued cost of service and contract liabilities 19,814 131,519

(Decrease) / increase non-current provisions and other liabilities 24 (4,686) (6,950)

(Decrease) / increase current provisions and other liabilities 24 2,810 2,563

Cash generated from operations 164,446 105,613

Interest paid 22 (980) (1,220)

Income taxes paid (37,998) (37,087)

Net cash from operating activities 125,468 67,306

Interests and dividends received 8 3,030 2,278

Proceeds from sale of property, plant and equipment and intangible assets 1,756 1,757

Proceeds from sale of investments 1,030 2,405

Repayments of loans and long-term receivables 3,582 5,493

Acquisition of subsidiaries and other businesses, net of cash 31 (29,803) (10,594)

Purchase of property, plant and equipment 12 (35,232) (53,169)

Purchase of intangible assets and capitalized development costs 14 (5,614) (828)

Purchase of investments and other financial assets (2,997) (11,589)

Investments in long-term loans and long-term receivables (1,963) (3,886)

Net cash used in investing activities (66,212) (68,132)

Free cash flow 59,256 (826)

Proceeds from short- and long-term borrowings 22 150,613 3,254

Repayment of short- and long-term borrowings 22 (614) (82)

Repayment of lease liabilities 13 / 22 (120,042) 0

Interest paid on lease liabilities 8 (6,793) 0

Dividends paid (89,033) (89,057)

Purchase of treasury shares 20 (5,431) (3,775)

Sale of treasury shares 1,738 1,475

Net cash used in financing activities (69,561) (88,184)

Net increase / (decrease) in cash and cash equivalents (10,305) (89,010)

Cash and cash equivalents at the beginning of the year 19 310,850 388,777

Effect of exchange rate changes on cash and cash equivalents 27.2 (13,575) 11,084

Cash and cash equivalents at the end of the year 19 286,970 310,850


Notes to the consolidated financial statements

1. General information

Panalpina World Transport (Holding) Ltd. (referred to hereafter as the Company) and its subsidiaries (collectively the "Group" and individually "Group Companies") is one of the leading providers of supply chain solutions. The company combines its core products of Air Freight, Ocean Freight and Logistics to deliver globally integrated tailor-made end-to-end solutions. Drawing on in-depth industry knowledge and customized IT systems, Panalpina manages the needs of its supply chains, no matter how demanding they might be.

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

The consolidated financial statements for the year ending December 31, 2018, were authorized for issuance in accordance with a resolution by the Board of Directors on February 20, 2019.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these Consolidated Financial Statements are set out in the following notes of this document. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation The Consolidated Financial Statements are based on the accounts of the individual subsidiaries on December 31, which have been drawn up according to uniform Group accounting principles.

2.2 Statement of compliance The consolidated accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.

2.3 Changes in presentation In 2018, there was no change in presentation compared to the prior year Consolidated Financial Statements, except as described below:

IFRS 15 --- the standard introduces a 5-step approach to revenue recognition: 1. Identify the contract(s) with a customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations in the contract 5. Recognise revenue when or as the entity satisfies its performance obligations

The standard requires entities to exercise considerable judgement taking into account all the relevant facts and circumstances when applying each step of this model to its contracts with customers and adds far more prescriptive guidance to deal with some specific scenarios.

performance obligations are met over time when control is transferred to the contractual counterparty. For the majority of cases, there is only one performance obligation within a contract. IFRS 15 is not significantly changing the timing or amount of revenue recognized in respect to the agreements but impacts the level of disclosures for the Annual Financial Statements. The Group implemented the new standard on January 1, 2018 and applied the modified retrospective method. The cumulative effect

5 million and is visible as a separate line item in the Statement of Changes in Equity. The Consolidated Statement of Financial Position was also impacted by the inclusion of two additional line items to reflect contract assets and contract liabilities. Contract assets (previously shown under unbilled forwarding services) and contract liabilities (previously shown under trade payables) were recognized as of January 1, 2018 in the amount of CHF 95.6 million and CHF 16.6 million respectively.

IFRS 9 --- the standard changes the requirements in terms of classification and measurement of financial instruments. The Group implemented the new standard on January 1, 2018 and applied the exemption from full retrospective application for the reclassification and measurement requirements, including impairment. Therefore the comparative 2017 results have not been restated.


the bad debt calculatiearnings in the amount of CHF 6.7 million and is visible as a separate line item in the Statement of Changes in Equity. IFRS 9 also affects Annual Financial Statements.

Note

Original measurement

category under IAS 39

New measurement category under

IFRS 9

Original carrying amount

under IAS 39

Effect of adoption of IFRS 9

New carrying amount

under IFRS 9

Financial assets

Investments in equity instruments 15 AFS FVOCI 523 523

Other investments 15 FVTPL FVTPL 434 434

Debt investments 15 Amortized costs Amortized costs 5,867 5,867

Loan receivables 15 Loans & receivables Amortized costs 1,572 1,572

Long term receivables 15 Loans & receivables Amortized costs 9,021 9,021

Other financial assets 15 Loans & receivables Amortized costs 13,625 13,625

Trade receivables 16 Loans & receivables Amortized costs 1,003,537 9,223 1,012,760

Contract assets (unbilled forwarding services) 4 Loans & receivables Amortized costs 93,476 93,476

Other receivables 17 Loans & receivables Amortized costs 55,619 55,619

Derivative financial instruments 18 FVTPL FVTPL 3,360 3,360

Cash and cash equivalents 19 Amortized costs Amortized costs 310,850 310,850

Balance on January 1, 2018 1,497,884 9,223

1,507,107

Financial liabilities

Borrowings 22 Amortized costs Amortized costs 5,864 5,864

Trade payables Amortized costs Amortized costs 491,954 491,954

Other payables and other liabilities Amortized costs Amortized costs 77,789 77,789

Derivative financial instruments 18 FVTPL FVTPL 1,185 1,185

Balance on January 1, 2018 576,792 576,792

IFRS 16 --- On adoption of IFRS 16, the Group recognized right-of-use assets and lease liabilities in relation to leases which had previously been classified as operating leases under the principles of IAS 17 Leases. Below table outlines the reconciliation between the two standards:

In thousand CHF 2018

Operating lease commitments disclosed on December 31, 2017 397,430

Discounting impact using the countries and asset specific incremental borrowing rates (20,903)

Add: Finance lease liabilities recognized on December 31, 2017 22

(Less): Short-term leases recognized on a straight-line basis as expense (12,623)

(Less): Low-value leases recognized on a straight-line basis as expense (5,182)

Lease liability recognized on January 1, 2018 358,744

The Group applied the cumulative catch up approach, which requires the recognition of the cumulative effect of initially applying IFRS 16, as of January 1, 2018, to the retained earnings and not restate prior years. The Group used different practical expedients permitted by IFRS 16. As per IFRS 16 C8(b) ii, it has elected to measure the right-of-use asset at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the statement of financial position immediately before the date of initial application. Since the Group recognized the right-of-use assets at the amount equal to the lease liabilities (as per IFRS 16C8(b)ii) there was no impact to the retained earnings.

The Group has also elected not to recognize right-of-use assets and lease liabilities for short-term leases (i.e. < 12 months) and leases of low-value assets (see section 29.12.2). Options (extension / termination) on lease contracts are considered on a case by case basis following a regular management assessment. The borrowing rates used for IFRS 16 purposes have been defined based on the risk free rates of the underlying countries, a company specific adjustment and asset clasweighted average incremental borrowing rate for the financial year 2018 amounted to 1.99%. As of January 1, 2018, the Group recognized CHF 358.7 million of right-of-use of leased assets and lease liabilities. The Group income statement was impacted by a shift from gross profit (CHF 32.5 million) and other operating expenses (CHF 94.6 million) to depreciation of right-of-use of leased assets (CHF --- 124.5 million) and interest expenses (CHF - 6.8 million). During the same period,


the Group cash flow statement was impacted by a shift from the cash generated from operations (CHF 131.2 million) to the net cash used in financing activities. Overall, IFRS 16 was cash flow neutral for the Group. When applying IFRS 16, the Group made the following changes in presentation: in the Consolidated Income Statement, one additional line related to the depreciation of the right-of-use of leased assets; in the Consolidated Statement of Financial Position, additional line items to reflect the right-of-use of leased assets, the non-

current and the current lease liabilities; and in the Consolidated Statement of Cash Flows, additional line items related to the depreciation of the right-of-use of leased assets,

repayment of the principal and interest portion of the lease payments.

2.4 Basis of measurement The Consolidated Financial Statements have been prepared under the historical cost basis, except for financial assets and financial liabilities (including derivative instruments) at fair value through profit and loss or other comprehensive income and liabilities for cash-settled share-based payment arrangements that have been measured at fair value. Net defined benefit liabilities (assets) are recognized at the difference in fair value of the plan assets and the present value of the defined benefit obligation.

2.5 Presentation currency The Consolidated Financial Statements are presented in Swiss francs (CHF), which is the functional currency of the company and all values are rounded to the nearest thousand except where otherwise indicated.

2.6 Use of estimates and judgment The preparation of the Consolidated Financial Statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect application of accounting policies and the reported amounts of assets, liabilities, income and expenses. It

ual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Deviations from estimates are recognized in the period in which the estimates are revised and in any future periods affected. The areas involving a higher degree of judgment or complexity or areas in which assumptions and estimates are significant to the Consolidated Financial Statements are disclosed in note 30. As outlined in detail in the next section of this document, re the measurement of fair values, for both financial and non-financial assets and liabilities. When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as described in note 27. The Group recognizes transfers between levels of the fair value hierarchy, if any, at the end of the reporting period during which the change has occurred. The methods used to measure fair values are described further in note 29. Further information about the assumptions made in measuring fair values is included in note 27.


3. Condensed operating segment information

Management has determined the operating segments based on the reports reviewed by the Executive Board that are used to make strategic decisions. The Executive Board considers the business from are predominately managed by geographical location. The Executive Board assesses performance of the operating segments based on a measure of adjusted operating result (Segment EBIT). Intra-group forwarding services between segments are based on prices generally equivalent to commercially available prices.

In 2018, it has to be noted that the implementation of IFRS 16 impacted the segment reporting with a shift from gross profit (CHF 32.5 million in Europe only) and other operating expenses (CHF 94.6 million) to depreciation of right-of-use of leased assets (CHF - 124.5 million) and interest expenses (CHF - 6.8 million). The underlying impact on the segment EBIT (CHF 2.5 million considering the front loading effect) is evenly distributed between the regions.

Information by region for the year ended December 31, 2018 and 2017:

2018 in thousand CHF

Asia Pacific Europe

Middle East,

Africa, CIS Americas

Total segments

Elimi-nations

Total group

External forwarding services 1,386,076 3,345,384 381,008 1,991,315 7,103,784 7,103,784

Customs, duties and taxes (83,170) (726,541) (77,977) (180,390) (1,068,078) (1,068,078)

Intra-group forwarding services 1,639,248 1,321,577 81,312 734,392 3,776,529 (3,776,529) 0

Net forwarding revenue 2,942,154 3,940,420 384,344 2,545,317 9,812,235 (3,776,529) 6,035,706

Forwarding services (2,579,287) (3,316,049) (298,157) (2,119,053) (8,312,546) 3,776,529 (4,536,017)

Gross profit 362,868 624,371 86,187 426,264 1,499,689 1,499,689

Personnel expenses (192,330) (402,594) (55,236) (275,674) (925,834) (925,834)

Other operating expenses (58,951) (110,868) (20,503) (94,027) (284,351) (284,351)

EBITDA 111,586 110,909 10,447 56,562 289,504 289,504

Depreciation and amortization (32,498) (94,340) (10,077) (34,221) (171,135) (171,135)

Operating result (Segment EBIT) 79,088 16,569 371 22,341 118,369 118,369

Financial result (10,804)

Profit before income tax (EBT) 107,565

Income tax expenses (31,849)

Profit 75,716


Asia Pacific Europe

Middle East,


Total segments

Elimi-nations

Total group

External forwarding services 1,350,139 3,025,622 326,237 1,829,613 6,531,611 6,531,611

Customs, duties and taxes (76,510) (707,662) (54,642) (160,018) (998,832) (998,832)

Intra-group forwarding services 1,631,598 1,190,345 87,436 674,676 3,584,054 (3,584,054) 0

Net forwarding revenue 2,905,227 3,508,305 359,031 2,344,271 9,116,833 (3,584,054) 5,532,779

Forwarding services (2,556,445) (2,977,922) (269,282) (1,915,391) (7,719,040) 3,584,054 (4,134,986)

Gross profit 348,782 530,383 89,749 428,880 1,397,793 1,397,793

Personnel expenses (186,673) (372,214) (58,640) (272,321) (889,847) (889,847)

Other operating expenses (79,939) (142,053) (25,428) (114,341) (361,760) (361,760)

EBITDA 82,170 16,117 5,680 42,218 146,185 146,185

Depreciation and amortization (11,560) (17,340) (3,593) (10,371) (42,864) (42,864)

Operating result (Segment EBIT) 70,610 (1,223) 2,087 31,847 103,321 103,321




Profit 57,460


divisions: Air Freight, Ocean Freight, Logistics.

The implementation of IFRS 16 impacted the segment reporting with a shift from gross profit (CHF 32.5 million on Air Freight only) and other operating expenses (CHF 94.6 million) to depreciation of right-of-use of leased assets (CHF - 124.5 million) and interest expenses (CHF 6.8 million). The underlying impact on the segment EBIT (CHF 2.5 million considering the front loading effect) is primarily on the Logistics product.

Information by product for the year ended December 31, 2018 and 2017: 2018 in thousand CHF

Air Freight

Ocean Freight Logistics

Total group

External forwarding services 3,659,036 2,850,353 594,396 7,103,784

Customs, duties and taxes (443,552) (584,912) (39,614) (1,068,078)

Net forwarding revenue 3,215,484 2,265,441 554,782 6,035,706

Forwarding services from third parties (2,503,803) (1,819,291) (212,923) (4,536,017)

Gross profit 711,681 446,150 341,859 1,499,689

Personnel expenses (407,641) (322,794) (195,399) (925,834)

Other operating expenses (115,858) (90,667) (77,826) (284,351)

EBITDA 188,182 32,688 68,634 289,504

Depreciation and amortization (79,950) (34,463) (56,722) (171,135)

Operating result (EBIT) 108,231 (1,775) 11,912 118,369




Profit 75,716

2017 Air

Freight Ocean

Freight Logistics Total

group

External forwarding services 3,362,403 2,574,996 594,211 6,531,611

Customs, duties and taxes (442,621) (500,714) (55,497) (998,832)

Net forwarding revenue 2,919,782 2,074,282 538,715 5,532,779

Forwarding services from third parties (2,280,337) (1,647,070) (207,579) (4,134,986)

Gross profit 639,445 427,212 331,136 1,397,793

Personnel expenses (379,324) (318,894) (191,629) (889,847)

Other operating expenses (131,164) (108,331) (122,266) (361,760)

EBITDA 128,957 (13) 17,242 146,185

Depreciation and amortization (18,610) (15,079) (9,175) (42,864)

Operating result (Segment EBIT) 110,346 (15,092) 8,067 103,321




Profit 57,460


Information about segment assets and liabilities for the year ended December 31, 2018 and 2017:


Asia Pacific Europe

Middle East,


Total operating segment

Non-segment

assets

Non-segment liabilities

Total group

Segment assets 637,552 726,636 215,155 478,086 2,057,429 196,864 0 2,254,293

Segment liabilities (285,350) (623,346) (131,447) (322,280) (1,362,423) 0 (320,710) 1,683,133

Net forwarding revenue and non-current assets other than financial instruments, deferred tax assets and post -employment benefits assets from the country of domicile (Switzerland) and major countries:


Switzer-land Germany

United States of America Brazil

Republic of China

Other countries Total

Net forwarding revenue 255,042 783,434 849,193 284,222 584,909 3,278,905 6,035,706

Segment non-current assets other than financial instruments, deferred tax assets and post-employment benefits assets 3,038 86,225 51,682 8,716 16,510 398,881 565,052


Asia Pacific Europe

Middle East,


Total operating segment

Non-segment

assets

Non-segment liabilities

Total group

Segment assets 505,923 581,790 125,324 359,557 1,572,595 266,436 0 1,839,031

Segment liabilities (294,651) (516,746) (63,986) (239,240) (1,114,622) 0 (110,110) (1,224,732)

Net forwarding revenue and non-current assets other than financial instruments, deferred tax assets and post -employment benefits assets from the country of domicile (Switzerland) and major countries:


Switzer-land Germany

United States of America Brazil

Republic of China

Other countries Total

Net forwarding revenue 230,073 715,215 795,080 252,659 576,848 2,962,904 5,532,779

Segment non-current assets other than financial instruments, deferred tax assets and post-employment benefits assets 645 14,143 11,363 7,783 5,783 176,510 216,227


4. Revenue from contracts with customers

The Group derives revenue from the transfer of the services to the customers. The timing of the revenue recognition is fully over time across all geographical and product segments.

Contract assets provided. In 2017, and 2018, there were no impairment loss in relation to the contract assets/unbilled forwarding services. All unsatisfied performance obligations as at December 31, 2018 will be recognized in revenue in the following financial year.

Contract liabilities a contract. Contract liabilities are recognised as revenue as (or when) the Group performs under the contract. As the Group operates with short term sales cycle, all contract liabilities from the prior period have been recognized in revenue in the following financial quarter.

Below outlines movements on contract assets and liabilities:

In thousand CHF 2018 2017

Contract assets on January 1 93,476 60,342

Transfers from contract assets recognised at the beginning of the period to receivables and increase as a result of changes in the measure of progress 43,868 33,134

Contract assets on December 31 137,344 93,476

Contract liabilities on January 1 (16,570) (13,303)

Increase due to cash received and decrease as a result of changes in the measure of progress (24,957) (3,267)

Contract liabilities on December 31 (41,527) (16,570)

5. Personnel expenses In thousand CHF 2018 2017

Wages and salaries (716,618) (680,551)

Compulsory social security contributions (74,316) (72,577)

Contributions to defined contribution plans (46,053) (43,915)

Expenses related to defined benefit plans (note 23) (12,165) (11,213)

Staff training (4,287) (4,457)

Share-based compensation (note 7) (8,037) (6,115)

Other personnel-related expenses (64,357) (71,018)

Total personnel expenses (925,834) (889,847)

Number of employees (FTEs on December 31) 14,847 14,416

thereof in Switzerland 622 619

6. Other operating expenses In thousand CHF 2018 2017

IT expenses (52,207) (57,165)

Facility and utilities expenses 1 (48,167) (129,680)

Communication expenses (21,800) (22,895)

Leased equipment 1 (6,161) (7,362)

Maintenance and repair expenses (17,635) (19,399)

Cars and motor vehicles expenses 1 (18,093) (19,336)

Travel and promotion expenses (33,440) (30,941)

Administrative expenses (49,618) (47,354)

Insurance expenses and claims (13,208) (12,651)

Credit loss allowance and credit impairments 2 (6,397) 482

Indirect Taxes (14,165) (16,498)

Gains on sales of property, plant and equipment 280 758

Losses on sales of property, plant and equipment (584) (429)

Other (3,155) 711

Total other operating expenses (284,351) (361,760) 1 Above items were affected with the application of IFRS 16, which transferred most of these expenses to the depreciation line 2 In 2018 and 2017, credit loss allowance and credit impairments expenses do not include any credit insurance premiums.


7. Share ownership programs

The Group operates several share ownership programs, eligible to the members of the Board of Directors, the members of the Executive Board and/or selected preferential employees (on a voluntarily basis).

The Group holds its own shares in order to meet its obligations under the share ownership programs. These shares are deducted from equity (note 20).

7.1 Management incentive (share) plans (MIPs 14 / 15 to 17 / 18) Since 2011, participants in these programs have the right to invest some or all of their bonus payout and purchase shares with a discount of 10 percent (based on the share price equal to the closing price on the SIX Swiss Stock Exchange at the cut-off day). The difference between the discounted share price on the grant date and the share price paid by the participants is recognized as personnel expenses on the date of the issue of the shares. The shares are subject to a one-year lock-up period. For every purchased share under this plan, the Group granNomination Committee. This ratio was set to 1:3 (one free share per three shares bought) for the MIPs 14 / 15 to 17 / 18. The free shares are granted on the condition of continuous employment and have a staggered vesting period of three years (one third per year). On non-vested free shares, no dividends are paid and there is no entitlement for dividends. The shares cannot be settled in cash. The fair value of the free shares corresponds to the market price of the shares at the grant date minus discounted dividends.

All free shares related to the MIPs up to 14/15 were vested or forfeited end of 2018 or earlier. For the MIP 17 / 18, the fair value of the free shares granted in 2018 was CHF 126.10 (2017: CHF 134.10 for the MIP 16 / 17). The table below summarizes movements on the respective MIPs with outstanding movements in 2017 and 2018:

In thousand CHF

2018 MIP

14 / 15

2017 MIP

14 / 15

2018 MIP

15 / 16

2017 MIP

15 / 16

2018 MIP

16 / 17

2017 MIP

16 / 17

2018 MIP

17 / 18

Outstanding free shares on January 1 1,140 2,332 2,569 4,454 4,207 0 0

Granted free shares 0 0 0 0 0 4,207 5,015

Vested free shares (1,118) (1,178) (1,328) (1,511) (1,501) 0 (37)

Forfeited free shares (22) (14) (114) (374) (213) 0 (151)

Free shares outstanding on December 31 0 1,140 1,127 2,569 2,493 4,207 4,827 In 2017 and 2018 the members of the Executive Board and the Boards of Directors did not participate in the management incentive plans.

7.2 Roadmap Performance Share Unit Plan -year roadmap targets were selected to participate to this one-

off plan. Eligible employees are nominated to participate by their line manager and the nominations have to be approved by the CEO in hare Units in 2018. Once granted, PSUs

(which are also not entitled to dividends and voting rights) will vest after three years and be converted into Panalpina shares, subject to continuous employment not under notice until the vesting date and performance conditions.

The number of granted PSUs that will be converted into to Panalpina shares at the end of the three-year cycle is 150% if the participant remains employed at Panalpina for the entire duration of the plan cycle (without notice at vesting date) and meets the roadmap performance condition. Only 100% will vest if only the first condition (continuous employment) is met.

In 2018 (plan service and performance period from January 2018 to December 2020), 32,250 PSUs (100%) were granted to the selected employees. The maximum number of shares which vest in case of meeting both conditions are 48,375 PSUs (150%).

7.3 Mid-term Incentive plan (MTIP) The MTIP model has been discontinued as per the 2017 bonus paid in 2018. In addition, two changes have been introduced in respect of the method in which the share-based component of bonuses are paid to executives. Firstly, the share price which is used to convert the share-based element of the bonus to shares is the share price at the moment of grant (previously, the share price was fixed for a period of three years). Secondly, the share-based component of the bonus is no longer subject to a one-to-one share match (Free Share Award) due to the discontinuing of the MTIP. The discontinued free share match will be cgranted under the Performance Share Unit Plan (PSUP) as of 2017. To off-set the remuneration gap arising from the longer vesting period of the LTIP compared to the MTIP, there will be a one-off free share match on the DBS 2017.

Employees eligible to the MTIP were the members of the Executive Board (6 executives in 2018) and top executives of the core business functions who were not member of the Executive Board (8 executives in 2018). The plan features were the same for all

shares for EB members, 20 percent converted into PWTN shares for the top executives of the core business functions, the remaining part being paid in cash). S were blocked from trading for a period of one year.

In 2018, the Executive Board members received 6,395 shares (2017: 6,228) corresponding to 40 percent of the bonus 2017 and 5,551 free matching shares (2017: 9,182) (related to the bonus paid in 2017 / performance year 2016). Top executives of the core business functions received 3,285 shares (2017 2017:


7.4 Performance Share Unit Plan (PSUP) The members of the Executive Board and top executives of the core business functions (14 executives in 2018) were selected to

g-term shareholder value creation. This is done through the annual grant of a fixed number of Performance Share Units (PSUs), which differs per member of the Executive Board and Executive Committee. Once granted, PSUs (which are also not entitled to dividends and voting rights) will vest after three years and be converted into Panalpina shares, subject to the attainment of performance conditions.

With discontinuation of the MTIP in 2017, the number of units granted to each member of the Executive Board and Executive Committee has increased significantly compared to the years before. This increase is intended to both compensate for the removal of the bonus share matching and to increase the focus on long-term value creation. Another minor change compared to the PSU plan 2016-2018 was the manner in which the number of PSUs are reported. Rather than granting the number of PSUs vesting at maximum (i.e. 50% vesting at target, 100% at maximum), the terminology has been aligned to match that of the Bonus scheme. As such, the granted number of PSUs represents the amount of units which will be vesting at target. At maximum, 200% of these units will be converted into Panalpina shares.

The number of granted PSUs that will be converted into to Panalpina shares at the end of a three-year cycle is dependent on two separate Key Performance Indicators (KPIs): Total Shareholder Return (TSR) and Conversion Rate. These two KPIs both carry equal weight and function independently of one another. This means that the performance of one KPI will supplement the performance of the

Market performance conditions:

ed to a balanced selection of companies within the industry taking into consideration, among other factors, market capitalization, business profile and geographic distribution. One PSU is converted to one Panalpina share following the three-year performance period if P the 75th percentile, the PSUs forfeit if Panalpina ranks below the 25th percentile, and for any performance between the lowest and top quartile the vesting amount of PSUs is calculated on a straight-line proration basis.

Non-market performance conditions:

Conversion Rate, which is calculated by dividing EBIT by Gross Profit. Once a year, the CNC will determine the three-year Conversion Rate target for the PSUs granted in that year. Although this target will change from year to year, the impact on the amount of PSUs vesting into shares remains the same: at or below the minimum performance figure, no PSUs will vest, at target one PSU will vest and at or above the maximum performance target two PSUs will vest. Performance in the range from minimum to target and target to maximum will result in a vesting based on a straight-line proration basis, similar to the TSR KPI.

For the plans introduced prior to 2017, only the TSR KPI was used to determine the amount of vesting PSUs. Further, vesting conditions differed compared to above (linear vesting from 0 to the maximum of 100 percent was applied between the 25th and 75th percentile).

Service conditions:

The service conditions require the other party (the beneficiary) to complete a specified period of service. This non-market vesting condition is considered for the estimate of the quantity structure (= volume of PSUs). In the event of retirement, disability or death, pro-rated vesting applies at the end of the plan performance period. The Compensation and Nomination Committee has the right to apply discretion for special circumstances.

The Grant Date is defined as the time at which Panalpina and the other party (employees) have a common understanding of the structure of the compensation plan. The fair value of performance share units at grant date is determined independently through a financial model and based on various parameters including but not limited to the cost of equity and dividend yield, time duration (3 years), average expected performance vs. peers (50 percent) and the employee expected attrition rate.

In 2018 (PSU plan 2018 2020 with performance period from January 2018 to December 2020), 20,625 PSUs were granted to the Executive Board members (2017: 23,175) and 8,066 to top executives of the core business functions (2017: 10,547). Based on the company's valuation model, the present value per PSU at grant date amounted to CHF 74.38 (assuming median TSR performance versus peer group) versus a market value at grant date of CHF 128.30.

As per December 31, 2018 the PSU plan 2016 2018 TSR ranked at 50.0% compared to the peer group (based on the third year performance), which resulted in a 100.0% vesting. Regarding the PSU plans 2017 2019 and 2018-2020, the respective TSRs ranked at 55.5% and 55.5% percent after the second and first year performance. These performance would result in an approximate vesting of 122.0% and 122.0% percent of the respective PSUs.


7.5 Long-Term Incentive Plan (LTIP) The Long-Term Incentive Plan (in place until 2012) rewards long-term value creation measured by economic profit. Under this plan, which has a five year cycle, the individual Executive Board member and top executive of the core business functions is entitled to a proportion of the respective pool after the expiry of the five-year plan period. This plan can be cash-settled. There is no more liability at December 31, 2018 (2017: CHF 754 thousand). Based on a decision of the Compensation and Nomination Committee (CNC) this plan was discontinued and the remaining liability fully paid out in 2018.

7.6 Board of directors Restricted Stock Award (RSA) plan The Restricted Stock Award Plan for the Board of Directors was introduced in 2009. Part of the remuneration of each Board member is settled in free shares the assignment date. The shares have a one-year restriction period. During the period under review the Board of Directors received 5,561 shares (2017: 3,566).

7.7 Costs of share based compensation In thousand CHF 2018 2017

Employee share plan (8,037) (6,115)

Total cost of share-based payments (8,037) (6,115)

8. Finance income and expenses In thousand CHF 2018 2017

Interest income 2,929 2,132

Interest income on trade receivables 1,703 1,342

Interest income on financial assets at amortized costs 419 0

Interest income on cash and cash equivalents 518 633

Interest income on loans 217 57

Interest income on financial assets at fair value through profit or loss 7 4

Cash discount income 65 95

Gain on foreign exchange differences 0 512

Dividend on available-for-sale financial assets 101 100

Other financial income 4 5

Total finance income 3,034 2,750

Interest expenses (7,773) (614)

Interest expenses on lease liabilities (6,793) 0

Interest expenses on financial leasing 0 (1)

Interest expenses on bonds 3rd parties (79) 0

Interest expenses on loans (262) (9)

Interest expenses on financial liabilities (389) (338)

Interest expenses on cash and cash equivalents (183) (258)

Cash discount expenses (67) (9)

Bank charges (2,543) (2,468)

Loss on foreign exchange differences (3,262) 0

Other financial expenses (259) (1,447)

Total finance costs (13,837) (4,529)

Net financial result (10,804) (1,779)


9. Income tax expenses In thousand CHF 2018 2017

Current income taxes

Current period (35,728) (32,263)

Income Taxes previous year(s) (2,406) (1,678)

Total current income taxes (38,135) (33,942)

Deferred income taxes (note 10)

Origination and reversal of taxes on temporary differences (3,224) (1,865)

Effect on changes in the tax rate on temporary differences (438) (11,135)

Recognition of previously not recognized tax loss carry-forwards 9,948 2,859

Total deferred income taxes 6,286 (10,140)

Total income tax expenses (31,849) (44,082)

ighted average tax rate based on pre-tax income of each subsidiary and can change each year) and the effective tax rate are as follows:


Profit before income tax 107,565 101,542

Tax at aggregated weighted average tax rate of 22.26% (2017: 15.76%) (23,943) (16,000)

Utilization of not yet recognized tax loss carry-forwards 2,635 1,942

Recognition of previously not recognized tax loss-carry-forwards 9,948 (344)

Not yet recognized tax loss carry-forwards (10,867) (9,416)

Adjustment of previous year tax provision (2,406) (1,678)

Effect of changes in the tax rate on recognized tax loss carry-forwards and temporary differences (438) (11,135)

Withholding tax on dividends received (3,302) (3,540)

Non-taxable / (non-deductible) amounts (1,836) (1,886)

Miscellaneous (1,640) (2,025)

Actual tax charge (31,849) (44,082) In 2018 Panalpina recognised an income tax expense of CHF 31.8 million representing an effective income tax rate of 29.6% (2017: 43.4%). The tax rate has been impacted by changes in the expected performance of Group entities (mainly Brazil) and the associated recognition of previously unrecognized deferred tax assets. Further, the effective tax rate has been impacted by losses incurred by Group entities, for which no tax benefit has been recognised.

Income tax recognized in other comprehensive income is as follows:

2018 2017

In thousand CHF Before tax

Tax benefit

(expense) Net of tax Before tax

Tax benefit

(expense) Net of tax

Remeasurement of the net defined asset / liability (11,105) 2,143 (8,962) 16,931 (3,397) 13,535

Available-for-sale financial assets 0 0 0 (12) 0 (12)

Exchange differences on translation of foreign operations (30,366) 0 (30,366) 16,861 0 16,861

Total (41,471) 2,143 (39,328) 33,781 (3,397) 30,384


10. Deferred income taxes

Deferred taxes are related to the following statement of financial position items:

2018 In thousand CHF Receiv-

ables Fixed

assets Provi- sions

Post-em-ployment

benefits Net

Leases Others

Deduct-ible

tax loss carry-

forwards Total

Net deferred income tax balance at January 1 6,373 3,362 15,116 5,843 0 (540) 22,673 52,827

Recognized translation differences (154) (88) (411) (245) (8) 72 (937) (1,770)

Recognized in income statement (469) (1,415) (5,537) 876 469 1,430 10,932 6,286

Recognized in OCI 0 0 0 2,143 0 0 0 2,143

Recognized in equity (3,054) 0 0 0 0 0 0 (3,054)

Acquired in business combinations 0 0 0 0 0 (4,707) 0 (4,707)

Net deferred income tax balance at December 31 2,696 1,858 9,168 8,618 462 (3,743) 32,668 51,727

Thereof deferred income tax assets 67,843

Thereof deferred income tax liabilities (16,116)

2017 In thousand CHF Receiv-

ables Fixed

assets Provi- sions

Post-em-ployment

benefits Net

Leases Others

Deduct-ible

tax loss carry-

forwards Total

Net deferred income tax balance at January 1 1,606 14,714 12,738 9,455 0 1,856 26,799 67,167

Recognized translation differences 24 225 195 0 0 28 (271) 202

Recognized in income statement 4,743 (11,577) 2,183 (214) 0 (1,418) (3,856) (10,139)

Recognized in OCI 0 0 0 (3,397) 0 0 0 (3,397)

Acquired in business combinations 0 0 0 0 0 (1,005) 0 (1,005)

Net deferred income tax balance at December 31 6,373 3,362 15,116 5,843 0 (540) 22,673 52,827

Thereof deferred income tax assets 63,223

Thereof deferred income tax liabilities (10,396)

Year of expiry of unrecognized tax loss carry-forwards (in thousand CHF) 2018 2017

2018 n/a 680

2019 1,149 8,069

2020 2,788 7,168

2021 16,809 10,015

2022 4,089 6,964

2023 2,626 3,620

Later 137,212 133,197

No expiry date 125,211 149,191

Total unrecognized tax loss carry-forwards 289,883 318,904

The total decrease of CHF 29.0 million (2017: increase of CHF 34.5 million) derived mainly from the recognition of tax loss carry forwards in Brazil. Deferred tax liabilities have not been recognized for withholding tax and other taxes that would be payable on the remittance of earnings of subsidiaries, where such amounts are currently regarded as permanently reinvested. The total unremitted earnings of the Group amounted to CHF 57.0 million as at December 31, 2018 (2017: CHF 38.7 million).


11. Earnings per share

11.1 Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding (total shares less treasury shares) during the period.


Consolidated profit attributable to owners of the parent 78,042 58,809

Weighted average number of ordinary shares outstanding 23,739 23,734

Basic earnings per share (in CHF) 3.29 2.48

11.2 Diluted earnings per share Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group only has free shares outstanding that can be categorized as dilutive potential ordinary shares.


Consolidated profit attributable to owners of the parent 78,042 58,809

Weighted average number of ordinary shares outstanding 23,739 23,734

Adjustments for share ownership program 8 8

Weighted average number of ordinary shares for diluted earnings per share 23,748 23,742

Diluted earnings per share (in CHF) 3.29 2.48 At December 31, 2018 and 2017, no options were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.


12. Property, plant and equipment

2018 In thousand CHF

Land and buildings

Machi-nery and

equipment

Vehicles

Construc- tion in

progress

Total

Acquisition costs

Balance on January 1 116,119 184,241 11,480 27,773 339,613

Translation differences (4,424) (4,609) (139) (232) (9,404)

Acquisition of subsidiaries and other businesses 883 591 246 0 1,721

Additions 16,097 19,408 315 196 36,015

Disposals and deletions (8,500) (36,828) (1,357) 0 (46,686)

Reclassified to held for sale (6,065) (6,065)

Reclassifications 27,391 342 0 (27,733) 0

Balance on December 31 141,501 163,143 10,546 3 315,194

Accumulated depreciation

Balance on January 1 (74,064) (159,311) (9,504) 0 (242,880)

Translation differences 2,096 3,434 (99) 0 5,431

Additions (7,724) (14,234) (764) 0 (22,722)

Disposals and deletions 8,106 35,364 1,156 0 44,626

Reclassifications 114 (114) 0 0 0

Balance on December 31 (71,472) (134,862) (9,212) 0 (215,546)

Net book value on January 1 42,055 24,929 1,976 27,773 96,733

Net book value on December 31 70,030 28,281 1,334 3 99,648


Land and buildings

Machi-nery and

equipment

Vehicles

Construc- tion in

progress

Total

Acquisition costs

Balance on January 1 106,489 184,468 12,859 919 304,736

Translation differences 3,155 2,160 (1) 684 5,998

Acquisition of subsidiaries and other businesses 118 501 396 0 1,015

Additions 12,550 13,782 1,143 26,169 53,644

Disposals and deletions (4,803) (18,068) (2,911) 0 (25,781)

Reclassifications (1,391) 1,397 (6) 0 0

Balance on December 31 116,119 184,241 11,480 27,773 339,613


Balance on January 1 (70,125) (160,494) (10,592) 0 (241,212)

Translation differences (2,195) (2,251) (390) 0 (4,836)

Additions (7,430) (12,812) (1,053) 0 (21,294)

Disposals and deletions 4,645 17,292 2,525 0 24,462

Reclassifications 1,040 (1,045) 6 0 0

Balance on December 31 (74,064) (159,311) (9,504) 0 (242,880)

Net book value on January 1 36,364 23,974 2,266 919 63,524

Net book value on December 31 42,055 24,929 1,976 27,773 96,733

Of which net book value of assets acquired under finance leases 0 0 30 0 30

In 2018, the reclassification from the category constructions in progress to land and buildings mainly relates to the opening of the new build-to-suit facility in Singapore which occurred at the beginning of the year. In addition, the Group has made the decision to dispose of a land located in Germany. As IFRS 5 held for sale criteria were met in 2018, the Group has reclassified this property as assets held for sale.


13. Leases

13.1 Right-of-use of leased assets


Land and buildings Vehicles 1 Others

Total

Acquisition costs

Balance on January 1 304,744 48,900 5,100 358,744

Translation differences (6,257) (250) (124) (6,630)

Acquisition of subsidiaries and other businesses 2,631 0 0 2,631

Additions 75,525 8,441 1,192 85,158

Disposals and deletions (3,303) (143) (50) (3,496)

Balance on December 31 373,340 56,948 6,118 436,406


Balance on January 1 0 0 0 0

Translation differences 1,521 99 37 1,657

Additions (86,665) (35,691) (2,138) (124,494)

Disposals and deletions 1,274 39 39 1,352

Balance on December 31 (83,870) (35,554) (2,061) (121,485)

Net book value on January 1 304,744 48,900 5,100 358,744

Net book value on December 31 289,470 21,394 4,056 314,921 1 The aircraft rented at January 1, 2018 this aircraft was recognized with a net book

value of CHF 42.2 million and amounts to CHF 16.1 million as at December 31.

13.2 Lease liabilities


Land and buildings

Vehicles Others

Total

Balance on January 1 (304,744) (48,900) (5,100) (358,744)


Acquisition of subsidiaries and other businesses (2,631) 0 0 (2,631)

Additions (75,525) (8,441) (1,192) (85,158)

Reversal of unused amounts 2,196 149 11 2,356

Repayment of lease liabilities 82,466 35,480 2,096 120,042


Regarding lease liabilities, the amortization depends on the applied incremental borrowing rate for the respective lease component. The weighted average rate of the incremental borrowing rate is 2.2% for the asset class building, 1.9% for cars, 1.9% for equipment and 1.3% for the plane.

13.3 Amounts recognized in profit and loss

In thousand CHF 2018

Depreciation expense on right-of-use assets 124,494

Interest expenses (included in finance costs) 6,793

Expense relating to short-term leases (included in other operating expenses) 3,165

Expense relating to leases of low-value assets (included in other operating expenses) 1,937

Total recognized in profit and loss 136,388 The total cash outflow for leases including short-term leases and low-value-assets in 2018 was CHF 131.9 million.


14. Intangible assets

14.1 Overview

2018 Goodwill Software

Internally generated

software

Customer lists and

other intangible

assets

Software under

develop -ment Total

Acquisition costs

Balance on January 1 59,589 48,596 84,787 27,763 0 220,736

Translation differences 1,597 (861) 0 447 0 1,183

Acquisition of subsidiaries and other businesses 30,863 286 0 15,195 0 46,344

Additions 0 771 0 119 4,940 5,830

Disposals and deletions 0 (2,560) 0 (10) 0 (2,570)

Reclassifications 0 0 655 0 (655) 0

Balance on December 31 92,050 46,233 85,441 43,514 4,286 271,524

Accumulated amortization and impairment losses

Balance on January 1

123 (47,739) (68,771) (15,898) 0 (132,285)

Translation differences 0 610 0 721 0 1,331

Additions 0 (670) (16,076) (7,174) 0 (23,919)

Disposals and deletions (123) 2,560 0 10 0 2,447

Reclassifications 0 0 0 0 0 0

Balance on December 31 0 (45,239) (84,847)

(22,340) 0 (152,426)

Net book value on January 1 59,712 858 16,016 11,866 0 88,452

Net book value on December 31 92,050 994 594 21,173 4,286

119,097

2017 Goodwill Software

Internally generated

software

Customer lists and

other intangible

assets

Software under

develop -ment Total

Acquisition costs

Balance on January 1 89,545 50,482 84,787 24,801 0 249,615

Translation differences 629 1,233 0 727 0 2,589

Acquisition of subsidiaries and other businesses 6,160 70 0 4,710 0 10,940

Additions 0 719 0 108 0 828

Disposals and deletions (36,744) (3,908) 0 (2,583) 0 (43,235)

Balance on December 31 59,589

48,596 84,787 27,763 0 220,736

Accumulated amortization and impairment losses

Balance on January 1 (36,487) (49,238) (51,812) (14,132) 0 (151,668)

Translation differences (135) (1,253) 0 (787) 0

(2,173)

Additions 0 (1,154) (16,959) (3,458) 0

(21,570)

Disposals and deletions 36,744 3,906 0 2,477 0 43,127

Balance on December 31 123

(47,739) (68,771)

(15,898) 0

(132,285)

Net book value on January 1 53,058 1,244 32,975 10,669 0

97,947

Net book value on December 31 59,712

858 16,016

11,866 0

88,452

Intangible assets with estimable useful lives are amortized over the period of their respective estimated useful lives to their estimated residual values and reviewed for impairment. In 2018 the acquired Goodwill and Customer lists relate to the acquisition of Adelantex, Newport and Skyservices sub-group. In 2017, the acquired Goodwill and Customer lists relate to the acquisition of Carelog sub-group and the deletions relate to disposal of software not in use anymore.


14.2 Goodwill impairment test -generating units (CGUs) identified according to the country of operation or division. The

recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. The management determined budgeted growth rates based on past performance and its expectations of market development. Cash flows beyond the five-year period are extrapolated using the estimated terminal growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.

The weighted average cost of capital (WACC) used is pre-tax and reflects specific risks relating to the relevant CGUs. A summary of the goodwill allocation per CGU is presented below:


Air Freight division (CGU Airfreight) / various countries 31,027 31,027

Others 61,023 28,685

Panalpina Airflo Subgroup (CGU Airflo) / Netherlands, Kenya 10,144 10,053

Grampian International Freight Aberdeen & Beverwijk (CGU Grampian) / United Kingdom 5,540 5,788

Panalpina World Transport (Singapore) Pte. Ltd (CGU Janco) / Singapore 3,942 4,019

Panalpina World Transport (Pty) Ltd (CGU Australia) / Australia 2,616 2,876

Panalpina Carelog (CGU Carelog) / Denmark 5,708 5,949

Adelantex (CGU Adelantex) / Belgium 9,323 0

Newport Cargo S.A. (CGU Newport) / Argentina 8,606 0

Skyservices (CGU Skyservices) / South Africa 15,143 0

Total goodwill 92,050 59,712 The following key assumptions have been used for the value-in-use calculations of each CGU:

2018 2017

CGU

Airfreight Other CGUs

CGU Airfreight

Other CGUs

Basis for recoverable amount value in use value in use value in use value in use

Pre-tax discount rate applied to the cash flow projections 7.60%

7.6% - 15.0%

7.20% 7.9% -

10.04%

Projection period 5 years 5 years 5 years 5 years

Terminal growth rate 2.00% 2.00% -

4.00% 2.00% 2.00% -

4.00%

Management has considered and assessed reasonable discount rate) and has identified two CGUs that where these changes could cause the carrying amount to exceed the recoverable amount (amount of excess (+) / necessary impairment ( ) in thousand CHF):

Skyservices Change in discount rate 12.5% 13.5% 14.5% 15.5%

Change in growth rate

10.7% 1,028 261 (470) (1,166)

9.7% (765) (1,455) (2,113) (2,741)

8.7% (3,016) (3,627) (4,209) (4,764)

7.7% (4,275) (4,832) (5,364) (5,871)

Airflo Change in discount rate 10.3% 11.3% 12.3% 13.3%

Change in growth rate

6.75% 5,680 4,147 2,689 1,303

5.75% 1,240 (100) (1,374) (2,586)

4.75% (3,208) (4,374) (5,483) (6,538)

3.75% (6,116) (7,156) (8,146) (9,088)


15. Non-current investments and other financial assets In thousand CHF 2018 2017

Financial assets at fair value through other comprehensive income (previously reported as "Available-for-sale investments") 0 523

Financial assets at fair value through profit or loss 1,943 434

Financial assets at amortized costs

Debt investments 5,875 5,867

Loans receivable 847 1,572

Rental and guarantee deposits 8,952 9,021

Other 13,769 13,625

Total non-current investments and other financial assets 31,386 31,042 Long-term receivables primarily include rental and guarantee deposits.

15.1 Financial assets at fair value through other comprehensive income In thousand CHF 2018 2017

Balance on January 1 523 535

Translation differences 0 0

Fair value adjustments recognized in other comprehensive income 0 (12)

Fair value adjustments reclassified to profit or loss (523) 0

Balance on December 31 0 523 In 2017 the above position was classified as available for sale investment.

15.2 Financial assets at fair value through profit and loss In thousand CHF 2018 2017

Balance on January 1 434 340

Translation differences (57) 31

Additions 1,594 371

Acquisition of subsidiaries and other businesses 0 65

Disposals (29) (361)

Fair value adjustments recognized in profit or loss 1 (12)

Reclassifications 0 0

Balance on December 31 1,943 434


16. Trade receivables In thousand CHF 2018 2017

Commercial clients 1,063,902 1,009,926

Agents 8,038 7,468

Total trade receivables (gross values) 1,071,940 1,017,394

Credit loss allowance for trade receivables (8,669) (13,857)

Total trade receivables (net) 1,063,271 1,003,537

Europe 487,064 452,095

thereof European Union and Rest of Europe 442,058 407,456

thereof Switzerland 45,005 44,639

Asia Pacific 188,692 196,374

Middle East, Africa, CIS 59,549 68,753

Americas 327,966 286,315

Total trade receivables (net) 1,063,271 1,003,537 There is no significant concentration of credit risk with regard to trade receivables, as the Group has a large number of customers that are dispersed internationally.

Panalpina establishes its overall credit loss allowance for trade receivables based on the expected credit loss model (ECL), which considers both historical loss experiences and prospective information. Significant financial difficulties of the debtor are individually impaired. The maximum exposure to credit risk on the reporting date is the carrying amount of net trade receivables mentioned above. The change in provisions for impaired trade receivables have been included in other operating expenses in the income statement.

The following table summarizes the movement in the loss allowance for trade receivables:


Balance on December 31 (under IAS 39 for the year 2017) (13,857)

Adjustment upon application of IFRS 9 on January 1, 2018 9,223

Balance on January 1 (under IFRS 9 for the year 2018) (4,634) (18,572)

Trade receivables written off during the year as uncollectible 1,928 4,109

Changes in credit loss allowance for trade receivables (5,962) 607

Balance on December 31 (8,669) (13,857) The following table provides details about the aging of trade receivables that are not overdue, as the payment terms specified in the terms and conditions established with Panalpina customers have not been exceeded and as an analysis of overdue amounts and related loss allowance for trade receivables:


Not overdue 778,462 751,718

Past due not more than 30 days 185,771 166,378

Past due more than 30 days up to 180 days 85,725 77,847

Past due more than 180 days up to 360 days 11,536 12,044

Past due more than 360 days 10,447 9,407

Total trade receivables (gross) 1,071,940 1,017,394

Loss allowance for trade receivables (8,669) (13,857)

Total trade receivables (net) 1,063,271 1,003,537


17. Other receivables and other current assets In thousand CHF 2018 2017

Prepaid Income Tax 23,948 27,950

Other Tax receivables (VAT, withholding tax) 35,914 45,246

Accrued income 1,758 1,750

Other current financial assets 2,154 40

Personnel advances 266 381

Social security and payroll taxes (569) (717)

Prepaid rent expenses 3,841 4,699

Prepaid communication and IT expenses 3,730 3,752

Supplier rebates 26,910 30,589

Others 15,896 15,115

Total other receivables and other current assets 113,848 128,805

18. Derivative financial instruments

In thousand CHF Contract

value Positive replacement

value Negative replacement

value

2018 2017 2018 2017 2018 2017

Forward foreign exchange contracts 691,026 647,837 4,447 3,360 (1,398) (1,185)

Forward trading hedges 691,026 647,837 4,447 3,360 (1,398) (1,185)

Terms of the forward foreign exchange contracts 691,026 647,837 4,447 3,360 (1,398) (1,185)

0 - 3 months 681,570 631,660 4,427 2,822 (1,330) (1,153)

4 - 12 months 9,456 16,176 20 538 (68) (32) Derivative financial instruments are spread over the following currencies:

In thousand CHF Forward Foreign

Exchange Contracts

2018 2017

CHF 264,253 215,155

EUR 159,830 168,439

USD 67,168 67,921

CNY 50,819 55,614

HKD 47,088 34,922

SGD 12,835 15,910

MXN 17,647 15,608

CRC 5,322 12,014

CLP 5,988 8,208

VND 9,653 7,906

TWD 3,418 7,027

GBP 10,767 2,743

Others 36,238 36,370

Total 691,026 647,837 ISDA Master Agreements The Group enters into derivative transactions with several counterparties under International Swaps and Derivatives Association (ISDA) master agreements. The ISDA agreements do not meet the criteria for offsetting in the consolidated statement of financial position. This is because the Group does not have any currently legally enforceable rights to offset recognized amounts, as the right to offset is enforceable only on the occurrence of triggering events in the future, e.g. when a credit event such as default occurs or in the event of bankruptcy of one party. In such a triggering event, all outstanding derivative transactions with one counterparty under such an agreement are terminated, the termination value is assessed and a single net amount is payable in settlement of all transactions.

The following table sets out the carrying amounts of recognized derivatives that are subject to the above agreements.



Gross and net amounts presented in

the statement of financial position

Related financial instruments that are

not offset Net

amount

Financial assets

Forward foreign exchange contracts 4,447 (1,374) 3,073

Total on December 31 4,447 (1,374) 3,073


Forward foreign exchange contracts (1,398) 1,374 (24)

Total on December 31 (1,398) 1,374 (24)


Gross and net amounts presented in

the statement of financial position

Related financial instruments that are

not offset Net

amount

Financial assets

Forward foreign exchange contracts 3,360 (961) 2,399

Total on December 31 3,360 (961) 2,399


Forward foreign exchange contracts (1,185) 961 (224)

Total on December 31 (1,185) 961 (224)

19. Cash and cash equivalents In thousand CHF 2018 2017

Cash on hand 142 125

Cash at bank 282,414 305,971

Checks and bills of exchange in transit 4,414 4,754

Total cash and cash equivalents 286,970 310,850

Net cash (debt) is comprised as follows:


Cash and cash equivalents 286,970 310,850

Other current financial assets 2,154 40

Lease liabilities (319,157) 0

Borrowings (155,958) (5,863)

Net cash (185,991) 305,026


20. Share capital and treasury shares

The share capital, the number of issued shares and the authorized capital have not changed during the Interim Period. As of December 31, 2018, the weighted average number of shares issued amounted to 23,740,230 (December 31, 2017: 23,734,011).

The amount available for dividend distribution is based on the available distributable retained earnings of Panalpina World Transport (Holding) Ltd determined in accordance with the legal provisions of the Swiss Code of Obligations.

8, 2018 approved a dividend of CHF 3.75 per share that was distributed in respect of the business year 2017. The total dividend paid in 2018 amounted to CHF 89.0 million (2017: CHF 89.1 million). For the business year 2018, the Board of Directors has proposed a dividend of CHF 3.75 per share (2017: 3.75 per share). This is subject to approval at the Annual Meeting of Shareholders to be held on May 9, 2019.

Outstanding

number of shares Value

Numbers in TCHF

Total number of shares issued on January 1, 2018 23,750,000 2,375

Treasury shares outstanding on January 1, 2018 (12,523) (1,531)

Total number of shares outstanding on January 1, 2018 1 23,737,477

Movements in Treasury shares

Purchased (41,500) (5,431)

Sold under employee share plan 14,959 1,915

Free shares from share plan 3,984 530

Bonus settled with own shares 29,537 3,809

Subtotal movement of treasury shares during the period 6,980 823

Total number of shares outstanding on December 31, 2018 1 23,744,457

Total number of treasury shares outstanding on December 31, 2018 (5,543) (707) 1 i.e. shares entitled to voting rights and dividends

Outstanding

number of shares Value

Numbers in TCHF

Total number of shares issued on January 1, 2017 23,750,000 2,375

Treasury shares outstanding on January 1, 2017 (33,367) (3,987)

Total number of shares outstanding on January 1, 2017 1 23,716,633

Movements in Treasury shares

Purchased (29,600) (3,775)

Sold under employee share plan 12,541 1,652

Free shares from share plan 8,892 1,104

Bonus settled with own shares 29,011 3,476

Subtotal movement of treasury shares during the period 1 20,844 2,457

Total number of shares outstanding on December 31, 2017 23,737,477

Total number of treasury shares outstanding on December 31, 2017 (12,523) (1,531) 1 i.e. shares entitled to voting rights and dividends


21. Non-controlling interests

The following tables summarize the information relating to the principal with material carrying value of Non-Controlling Interests (NCI) (before any intra-group eliminations). This is the reason why entities disclosed this year differ to prior year.


PA Airflo Netherlan

ds B.V.

PA Airflo Ltd.

(Kenya)

Panalpina Carelog

A/S PA Sky

-services

Other indivi-dually

immaterial subsi-diaries

Intra-group

elimina-tions Total

NCI percentage 25% 25% 25% 20%

Non-current assets 9,125 13,515 2,845 8,764

Current assets 17,245 5,947 4,361 3,837

Non-current liabilities (2,712) (12,274) (443) (3,196)

Current liabilities (11,598) (2,284) (3,015) (2,972)

Net assets 11,789 4,904 3,748 8,764

Carrying amount of NCI 2,947 1,226 937 1,753 (1,222) 0 5,641

Revenue 131,388 0 52,701 5,044

Profit/(loss) (2,102) (34) (553) 197

Other comprehensive income (280) 78 (166) 2,528

Total comprehensive income (2,382) 45 (719) 2,725

Profit/(loss) allocated to NCI (526) (8) (138) 39 (1,693) 0 (2,326)

OCI allocated to NCI (70) 20 (41) 506 (890) 0 (476)

Cash flows from operating activities 617 1,654 (323) (1,953)

Cash flows from investment activities 483 (2,385) 3 0

Cash flows from financing activities (45) 187 (58) 29

Effect of exchange rate changes on cash and cash equivalents (69) 16 (30) 135

Net increase (decrease) in cash and cash equivalents 986 (528) (408) (1,788)

During the period under review, there was an increase of NCI following the acquisition of Panalpina Skyservices (South Africa) (see note 31).


PA Airflo Netherlan

ds B.V.

PA Airflo Ltd.

(Kenya)

Panalpina Carelog

A/S

Qatar Shipping

Company (PA Qatar)

W.L.L.

Other indivi-dually

immaterial subsi-diaries

Intra-group

elimina-tions Total

NCI percentage 25% 25% 25% 51%

Non-current assets 13,127 10,419 9,423 55

Current assets 14,477 5,150 6,284 3,570

Non-current liabilities (3,432) (8,987) (575) (128)

Current liabilities (10,014) (1,722) (4,717) (1,488)

Net assets 14,158 4,860 10,415 2,009

Carrying amount of NCI 3,540 1,215 1,117 1,024 (615) 0 6,280

Revenue 111,314 0 23,439 9,122

Profit/(loss) (786) 296 (852) (585)

Other comprehensive income 494 (147) 518 433

Total comprehensive income (292) 149 (334) (153)

Profit/(loss) allocated to NCI (196) 74 (213) (298) (716) 0 (1,350)

OCI allocated to NCI 123 (37) 129 221 (1,532) 0 (1,096)

Cash flows from operating activities 769 8,230 908 (458)

Cash flows from investment activities (2,495) (9,590) 0 (28)

Cash flows from financing activities 666 2,202 0 0

Effect of exchange rate changes on cash and cash equivalents 130 (11) 50 (43)

Net increase (decrease) in cash and cash equivalents (930) 830 958 (529)

During the prior period, the non-controlling interests part related to Panalpina Sakhalin Projects , Besides, there was an increase of NCI following the

acquisition Carelog sub-group.


22. Borrowings

-bearing loans and borrowings, which are measured see note 27.


Overdraft (1,905) (2,621)

Current portion of finance lease liabilities 0 (22)

Total current borrowings on December 31 (1,905) (2,643)

Non-current portion of public fixed rate bond (150,000) 0

Non-current loans from third parties (4,053) (3,221)

Total non-current borrowings on December 31 (154,053) (3,221) In 2018, the Group issued a public fixed rate bond in the amount of 150 mio. CHF, with a 4 years maturity and a nominal rate of 1%. Overall, the weighted average interest rate on borrowings is 1.2 percent (2017: 7.2 percent).

The carrying amounts of short-term bank borrowings approximate their fair value.


CHF (150,245) (327)

KES (2,861) (2,193)

KRW (1,287) 0

EUR (675) (701)

DKK (618) (319)

INR 0 (2,302)

PLN 0 (22)

Others (272) 0

Total (155,958) (5,863) 22.1 Net debt reconciliation The net debt reconciliation (also considering lease liabilities) can be summarized as follows:


Opening balance

Change from

financing Cash flows

Interest charges

Acqui-sitions

Exchange movements

Change in fair value

Other non-cash changes

Closing balance

Finance leases due within one year (22) 0 0 0 0 0 0 0

Lease liabilities (358,744) 120,042 0 0 0 0 (80,455) (319,157)

Public fixed rate bond due after more than one year 0 (150,000) 0 0 0 0 0 (150,000)

Loans due within one year (2,621) 614 (183) 0 285 0 0 (1,905)

Loans due after more than one year (3,221) (613) (262) 0 43 0 0 (4,053)

Total (364,607) (29,957) (446) 0 328 0 (80,455) (475,115)


23. Post-employment benefit obligations

-employment benefits to employees, to ensure at the same time that the various plans are appropriately financed and to -term financial position. The nature of such plans varies according to legal regulations and fiscal requirements in the countries in which the employees are employed. Other post-employment benefits consist mostly of post-retirement schemes. Post-

or to a third-party financial institution and will have no further legal or constructive obligation to pay further contributions. All other plans are classified as defined benefit plans.

23.1 Defined benefit plans Plans are usually established as trusts independent of the Group and are funded by payments from the Group and by employees. In some cases, notably for the defined benefit plans in Germany and Japan, the plans are unfunded and the Group pays pensions to retired employees directly from its own financial resources.

Qualified independent actuaries carry out valuations on a regular basis within the reporting period for major plans. For funded plans,

statement of financial position corresponds to the over/underfunding of the plan. For unfunded plans, where the Group meets the pension obligations directly from its own financial resources, a liability for the defined benefit obligation is recorstatement of financial position. Pension assets and liabilities in different defined benefit plans are not offset.

are in Switzerland followed by Germany. The Swiss pension plans account for 98 percent (2017and 82 percent (2017: 81 percent) of its defined benefit obligation.

23.1.1 Pension plans in Switzerland

which stipulates that pension plans are to be managed by independent, legally autonomous units. Pension plans are overseen by a mposed of

equal numbers of employee and employer representatives.

The defined benefit obligations are based on old age, disability and survivors benefits that include the legally required benefits. The various benefits are governed in regulations, with the BVG specifying the minimum benefits that are to be provided. The plan is contribution-based with a guaranteed minimum interest rate on old age savings and a mandatory conversion rate to define the level of the old age pension. The disability and survivors benefits are defined as a percentage of the insured salary. Both employer and employee pay contributions to the plan. Statutory minimum funding requirements exist. In case of underfunding, various measures can be taken such as the adjustment of the pension commitment by altering the conversion rate or increasing current contributions. The employer can also make additional restructuring contributions. The BVG prescribes how employees and employer have to jointly fund potential restructurings. Actuarial risks include both demographic (primarily life expectancy and disability) and financial risks (primarily discount rate, future increases in salaries and wages and the actual return on plan assets) and are regularly assessed by the Board of Trustees. The plans include certain features that share the benefits of a surplus or the cost of a deficit between the employer and the employees.

The Board of Trustees is responsible for the investment of the assets. It regularly defines and reassesses the investment strategy as deemed appropriate and necessary especially in the case of significant market developments or changes to the structure of the plan participants es, benefit obligations and risk capacity. The investment strategy is defined in the form of a long-term target asset structure (investment policy). The Board of Trustees delegates the implementation of the investment policy in accordance with the investment strategy as well as various principles and objectives to an Investment Committee, which consists of members of the Board of Trustees.


23.2 Movements in the Defined Benefit Obligations (DBO) In thousand CHF 2018 2017

DBO at beginning of year (335,026) (321,550)

Included in profit or loss (14,042) (12,853)

Current service cost (11,621) (10,467)

Past service (costs) / gains 228 241

Interest expenses (2,649) (2,627)

Included in OCI 8,862 (5,052)

Remeasurement gains/(losses)

Actuarial gains/(losses) from demographic assumptions (395) 8,891

Actuarial gains/(losses) from financial assumptions 10,341 (4,397)

Actuarial gains/(losses) from experience adjustments (4,111) (4,287)

Currency impact 3,026 (5,259)

Other 8,819 4,430

Employee contributions (6,348) (6,359)

Benefits paid 15,166 10,789

DBO at end of year (331,388) (335,026)

Represented by

Swiss plans (271,542) (270,490)

Other plans (59,846) (64,537)

23.3 Movements in the Plan assets In thousand CHF 2018 2017

Fair value of the plan assets on January 1 295,262 267,467

Included in profit or loss 1,877 1,640

Interest income 1,877 1,640

Included in OCI (17,824) 18,587

Remeasurement gains/(losses)

Return on plan assets, excluding amounts included in interest income (17,623) 18,315

Currency impact (200) 272

Other 7,408 7,567

Employer contributions 16,426 12,297

Employee contributions 6,348 6,359

Benefits paid (15,166) (10,789)

Other pension costs (200) (300)

Fair value of plan assets on December 31 286,723 295,262

Represented by

Swiss plans 280,995 289,890

Other plans 5,728 5,372


23.4 Movements in the Net Defined Benefit Asset / (Liability) In thousand CHF 2018 2017

Balance on January 1 (39,764) (54,082)

Net impact included in profit or loss (12,165) (11,213)

Net impact included in OCI (8,962) 13,535

Net impact other 16,226 11,997

Balance on December 31 (44,664) (39,764)

Split into

Post-employment benefit assets 9,454 19,553

Post-employment benefit liabilities (54,118) (59,317)

(44,664) (39,764)

23.5 Plan assets In thousand CHF 2018 2018 2017 2017

Major categories of plan assets

Cash and cash equivalents 13,652 4.76% 11,135 3.77%

Equity investments 95,595 33.34% 102,004 34.55%

Equities Switzerland 10,290 3.59% 11,281 3.82%

Equities Global 63,858 22.27% 67,862 22.98%

Equities Emerging Markets 10,875 3.79% 11,549 3.91%

Equities Small and Middle Cap 10,571 3.69% 11,312 3.83%

Bonds 131,028 45.70% 133,328 45.16%

Swiss Bonds (CHF) 63,686 22.21% 63,471 21.50%

Non-Swiss Bonds (CHF) 22,254 7.76% 22,614 7.66%

Non-Swiss Bonds (Foreign Currency) 31,648 11.04% 33,133 11.22%

Company Bonds 13,440 4.69% 14,110 4.78%

Hedge funds and private equity 0 0.00% 0 0.00%

Real estate funds Switzerland 46,448 16.20% 48,795 16.53%

Total 286,723 100.00% 295,262 100.00%

23.6 Defined benefit obligations (DBO) 23.6.1 Actuarial assumptions Actuarial assumptions are unbiased and mutually compatible estimates of variables that determine the ultimate cost of providing post employment benefits. They are set on an annual basis by local management and actuaries and are subject to approval by corporate management. Actuarial assumptions consist of demographic assumptions on matters such as mortality and employee turnover and financial assumptions on matters such as salary and benefit level as well as discount rates. The Group operates defined benefit plans in several countries and the actuarial assumptions vary based on local economic and social conditions.

Demographic assumptions

into account historic patterns and expected changes, such as further increases in longevity. The mortality tables used for the major schemes are:

2018

Switzerland BVG 2015 Generation table

Germany tables 2018 G from Klaus Heubeck

France table INSEE TV / TD 2010 / 2012


2017

Switzerland BVG 2015 Generation table

Germany tables 2005 G from Klaus Heubeck

France table INSEE TV / TD 2010 / 2012

In 2017, in order to improve the accuracy of the projections, the Group decided to use for the Swiss plan the CMI Mortality Projections Model (as opposed to the Menthonnex model) for extrapolating future mortality improvements. This change led to a decrease of the respective DBO in the amount of CHF 6.6 mio.

Rates of employee turnover, disability and early retirement are based on historical behavior within the Group companies. For the Swiss plan, the Group used in 2017 and 2018 the BVG 2015 Generation table together with a ratio of 80% to consider the degree of disability in its estimate. This change led to a decrease of the respective DBO in the amount of CHF 2.3 mio in 2017 (no impact in 2018).

Financial assumptions

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


Discount rate 1.01% 0.81%

Future salary increase 0.92% 0.70%

Future pension increase 0.23% 0.25%

Discount rates are determined with reference to market yields on high-quality corporate bonds. Expected rates of salary increases are based on the latest expectation and historical behavior within Group entities. At December 31, 2018, the weighted average duration of the DBO was 15.8 years (2017: 16.1 years). The Group expects to pay CHF 2.2 million in contributions in 2019 (2017: CHF 9.5 million).

DBO relating to the Swiss plans

At December 31, 2018, the duration of the DBO of CHF 271.7 million (2017: CHF 270.5 million) was approximately 15.8 years (2017: approximately 16.0 years). 548 active members (2017: 547) and 178 pensioners (2017: 177) were included in the 2018 actuarial valuation of the DBO.

DBO relating to the German plans

At December 31, 2018, the duration of the DBO of CHF 49.4 million (2017: CHF 54.6 million) was approximately 16.8 years (2017: approximately 17.7 years) related to 520 (2017: 556) active members (DBO of CHF 15.2 million, 2017 CHF 16.9 million), to 626 (2017: 599) deferred members (DBO of CHF 12.0 million, 2017: CHF 14.0 million) and to 237 (2017: 235) pensioners (DBO of CHF 22.1 million, 2017: CHF 23.7 million).

23.6.2 Sensitivity analysis Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below:

2018 In thousand CHF Increase Decrease

Discount rate (change of 0.3%) 16,168 (14,920)

Future salary change (change of 0.5%) (2,963) 2,984

Future pension change (change of 0.25%) (7,731) 8,079 2017 In thousand CHF Increase Decrease

Discount rate (change of 0.3%) 16,772 (15,309)

Future salary change (change of 0.5%) (2,990) 3,143

Future pension change (change of 0.25%) (7,970) 8,542

The sensitivity analysis above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.


24. Provisions and other liabilities

24.1 Non-current and current provisions 2018 in thousand CHF Claims

Restruc-turing

Other provisions Total

Balance on January 1 (30,594) (9,846) (17,562) (58,002)


Change in scope of consolidation (325) 0 0 (325)

Addition (12,005) (4,139) (3,388) (19,532)

Reversal of unused amounts 3,600 1,842 175 5,617

Charged in income statement (8,405) (2,297) (3,212) (13,914)

Charges to Property, Plant and Equipment 0 0 (776) (776)

Utilization 7,372 5,796 6,290 19,458


thereof

non-current (17,596) (3,353) (11,570) (32,519)

current (13,118) (2,887) (3,288) (19,294) The claim provisions as of December 31, 2018 include a portion in the amount of CHF 24.0 million (2017: CHF 23.7 million) for certain claims brought forward against the Group by customers and forwarding agents. The non-current part of the provisions as of December 31, 2018, is expected to be utilized within the next two to five years. Management determined the provision based on past performance and its expectation of the funds needed for the future settlement of claims not yet reported. Further details on open legal claims are described in note 28.2 Pending Legal Claims.

The majority of the restructuring provision reported as of of December 31, 2018 relates to the U.S. entity following the restructuring plan initiated during Q2 2016 (which resulted in a total charge of CHF 28 million in FY 2016).

Other provisions mainly consist of provisions to cover the risks of non-recoverability of withholding tax receivables and provisions for decommissioning costs in connection with constructions in leased buildings (where decommissioning costs are initially transferred to capitalized costs and subsequently depreciated through the lease period of the respective asset).

24.2 Non-current and current other liabilities


Balance on January 1 (123,421) (109,672)

Balance on December 31 (141,695) (123,421)

thereof

non-current (64,404) (48,874)

current (77,292) (74,547)

The current part includes personnel profit participation, outstanding vacation entitlement and related social security costs and payroll taxes. As of December 31, 2018 a liability of CHF 58.1 million (2017: CHF 55.0 million) was recorded for personnel profit participation including related social security costs and payroll taxes. During the period under review, the amount of CHF 61.0 million (2017: CHF 52.0 million) for personnel profit participation was recognized in the income statement and CHF 56.3 million (2017: CHF 48.6 million) was paid out related to this profit participation.

The non- on payments and long service benefits, mainly in the USA, Switzerland, Austria and Germany. The timing of these cash outflows can be reasonably estimated based on past experience. Also included are redemption liabilities relating to put options for the acquisition of non-controlling int a total amount CHF 26.7 million (2017: CHF 17.5 million) together with contingent consideration liabilities amounting to CHF 9.6 million (2017: CHF 0 million).


25. Related parties

25.1 Key management personnel compensation Key management personnel consists of the Board of Directors and the Executive Board. There were no contributions or donations to close members of the families of the key management. The following table shows the compensation of key management personnel:


Short-term employee benefits 3

Post-employ-

ment benefits

Other long-term

benefits

Shared-based

payments 4

Total compen-

sation 2018

Total remuneration of Board of Directors 1 1,646 0 0 700 2,346

Total remuneration of Executive Board 2 6,469 872 0 2,705 10,046

Total remuneration of key management personnel 8,115 872 0 3,405 12,392 1 The members of the Board of Directors receive a fixed annual compensation and participate in certain equity compensation plans (see note 7). In 2018,

there were 8 (2017: 8) members of the Board of Directors. 2 The compensation of the Executive Board consists of a fixed portion and a variable portion, which depends on the course of business and the individual

addition, members of the Executive Board receive indirect benefits and are able to participate in certain equity compensation

plans (see note 7). In general, for those who have left or joined the Executive Board in the course of the year, the information in the table above reflects their

pro rata compensation for the period they were a member of the Executive Board. In 2018, there were 6 (2017: 7) members in the Executive Board. 3 Short-term employee benefits incl. fringe benefits, expense allowance, salaries, bonus and social security payments. 4 Share-based payments are disclosed on an accrual basis. This means that for the Executive Board, the disclosed amount includes the shares granted

under the Mid-Term Incentive Plans (MTIP DBS and FSA) (e.g. DBS shares related to the 2018 annual bonus to be granted in 2019, FSA free sha res

matching related to the 2017 annual bonus to be granted in 2019) and the fair value of shares granted in 2016 to 2018 related to the Performance Share Unit

Plans.


Short-term employee benefits 7

Post-employ-

ment benefits

Other long-term

benefits

Shared-based

payments 8

Total compen-

sation 2017

Total remuneration of Board of Directors 5 1,624 0 0 467 2,091

Total remuneration of Executive Board 6 6,935 1,062 0 3,144 11,141

Total remuneration of key management personnel 8,559 1,062 0 3,611 13,232

5 The members of the Board of Directors receive a fixed annual compensation and participate in certain equity compensation plans (see note 7). In 2017,

there were 8 (2016: 8) members of the Board of Directors. 6 The compensation of the Executive Board consists of a fixed portion and a variable portion, which depends on the course of business and the individual

e to participate in certain equity compensation

plans (see note 7). In general, for those who have left or joined the Executive Board in the course of the year, the information in the table above reflects their

pro rata compensation for the period they were a member of the Executive Board. In 2017, there were 7 (2016: 7) members in the Executive Board. 7 Short-term employee benefits incl. fringe benefits, expense allowance, salaries, bonus and social security payments. 8 Share-based payments are disclosed on an accrual basis. This means that for the Executive Board, the disclosed amount includes the shares granted

under the Mid-Term Incentive Plans (MTIP DBS and FSA) (e.g. DBS shares related to the 2017 annual bonus to be granted in 2018, FSA free sha res

matching related to the 2016 annual bonus to be granted in 2018) and the fair value of shares granted in 2015 to 2017 related to the Performance Share Unit

Plans.


The following table shows the equity holdings in Panalpina World Transport (Holding) Ltd of key management personnel and their related parties in line with article 663c of the Swiss Code of Obligations (no options were held by Board of Directors or Executive Board members as of December 31, 2018 and 2017).

Number of PWT nominal shares 2018 2017

Board of Directors

Peter Ulber, Chairman 23,322 20,540

Beat Walti, Vice Chairman 2,949 2,552

Knud Elmholdt Stubkjær, Member 2,522 2,125

Sandra Emme, Member (from May 8, 2018) 0 n/a

Thomas E. Kern, Member 1,664 1,267

Pamela Knapp, Member 1,214 817

Ilias Läber, Member 1,958 1,561

Chris E. Muntwyler, Member (until May 7, 2018) n/a 2,552

Dirk Reich, Member (from May 4, 2017) 397 0

Total Board of Directors on December 31 34,026 31,414

Executive Board

Stefan Karlen, Chief Executive Officer 7,278 4,273

Robert Erni, Chief Financial Officer 9,461 8,839

Karl Weyeneth, Chief Commercial Officer 10,753 8,286

Christoph Hess, General Counsel and Corporate Secretary 2,906 2,825

Karsten Breum, Chief Human Resources 4,444 2,595

Ralf Morawietz, Chief Information Officer 2,669 1,085

Andy Weber, Chief Operating Officer (until December 31, 2017) n/a 2,113

Total Executive Board on December 31 37,511 30,016

Total Related Parties on December 31 71,537 61,430

25.2 Major shareholder As of December 31, 2018, Ernst Göhner Stiftung holds 45.9 percent (2017: 45.9 percent) of the share capital of Panalpina World Transport (Holding) Ltd.

25.3 Other related parties The major shareholder (as described above), pension funds and all subsidiaries are defined as parties related to the Group. Apart from the transactions with related parties mentioned below, we refer to notes 7 and 23.

25.4 Other related party transactions In 2017 and 2018, there were no related parties transactions to be reported.

26. Group risk management

In the field of risk management, the Audit Risk and Compliance Committee (ARCC) approves the detailed and weighted risk map of the Executive Board. It adopts the necessary measures for risk control and risk mitigation and reports the respective outcome to the Board of Directors on an annual basis. The risk map itself covers any strategic, financial, operational, legal and compliance risks that could

nd prioritized by the Executive Board according to their significance and likelihood of occurrence. For each risk, specific risk mitigation measures including their current status are defined and responsibilities are allocated. The risk map, which is compiled by the Risk Review Committee, chaired by the Corporate Secretary, for review by the Executive Board and the Audit Risk and Compliance Committee and subsequently approved by the ARCC, contains risks identified and assessed by the respective corporate functions, selected country management, Corporate Audit and the Group auditors. The annual risk map also features risks that have increased or decreased in the course of the reporting year. Financial risk management specifically is described in further detail below.


27. Financial risk management

The main purpose of these financial liabilities is to raise funds and manage liquidity for Group operations. The Group has trade and other receivables, loans, cash and short-term and long-term deposits that arise directly from its operations. The Group also holds investments and enters into derivative transactions.

The Group is exposed to market risk, credit riskmanagement of these risks. It is supported by a treasury risk committee that advises on financial risks and the appropriate financial risk governance framework for the Group. The

-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with Group policies and Group risk appetite. All derivative activities for risk management

policy that no trading in derivatives for speculative purposes shall be undertaken.

The Board of Directors reviews and agrees on policies for managing each of these risks, which are summarized below.

27.1 Financial risk factors Accounting classification and fair values of financial assets and liabilities


Financial assets

at FVTPL

Financial assets

at FVOCI

Financial assets

at amortized

cost Carrying amount

Total (fair

value)

Trade receivables 1,063,271 1,063,271 1,063,271

Other receivables 54,298 54,298 54,298

Contract assets (unbilled forwarding services) 137,344 137,344 137,344

Cash and cash equivalents 286,970 286,970 286,970

Derivative financial instruments 4,447 4,447 4,447

Investments:

Bonds and debt investments 1,943 5,875 7,818 7,818

Third-party loans 847 847 847

Rental and guarantee deposits 8,952 8,952 8,952

Other 13,769 13,769 13,769

Total 6,390 0 1,571,325 1,577,716 1,577,716


Financial liabilities at FVTPL


at amortized


Total (fair

value)

Trade Payables and other payables (532,061) (532,061) (532,061)

Borrowings (155,958) (155,958) (155,958)

Lease liabilities (319,157) (319,157) (319,157)

Public fixed rate bond (150,000) (150,000) (152,370)

Derivative financial instruments (1,398) (1,398) (1,398)

Contingent consideration (9,592) 0 (9,592) (9,592)

Total (10,990) (1,157,176) (1,168,165) (1,170,535)



Cash and cash

equiva -lents

Available- for-sale

FVTPL held

for trading

Debt investmen

ts

Loans and

receiv-ables

Carrying amount

Total (fair

value)

Trade receivables 1,003,537 1,003,537 1,003,537

Other receivables 55,619 55,619 55,619

Unbilled forwarding services 93,476 93,476 93,476

Cash and cash equivalents 310,850 310,850 310,850

Derivative financial instruments 3,360 3,360 3,360

Investments:

Bonds and debt investments 434 5,867 6,301 6,301

Shares 523 523 523

Third-party loans 1,572 1,572 1,572

Rental and guarantee deposits 9,021 9,021 9,021

Other 13,625 13,625 13,625

Total 310,850 523 3,795 5,867 1,176,850 1,497,884 1,497,884


Financial liabilities at FVTPL


at amortized


Total (fair

value)

Trade Payables and other payables (569,743) (569,743) (569,743)

Borrowings (5,863) (5,863) (5,863)

Derivative financial instruments (1,185) (1,185) (1,185)

Total (1,185) (575,607) (576,792) (576,792)

The Group's financial risk management objectives, policies and government structure are consistent with those disclosed in note 26 to the Consolidated Financial Statements.

Fair value hierarchy

The table below analyzes recurring fair value measurement for financial assets and financial liabilities. These fair value measurements are categorized into different levels in the fair value hierarchy based on the input and techniques used. The different levels have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as

prices) or indirectly (i.e. derived from prices) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

December 31, 2018 (in thousand CHF) Level 1 Level 2 Level 3 Total

Financial assets at fair value through profit or loss 1 1,943 0 0 1,943

Derivative financial assets 0 4,447 0 4,447

Total 1,943 4,447 0 6,390

Derivative financial liabilities 0 (1,398) 0 (1,398)

Contingent consideration 2 0 0 (9,592) (9,592)

Total 0 (1,398) (9,592) (10,990)

December 31, 2017 (in thousand CHF) Level 1 Level 2 Level 3 Total

Available-for-sale financial assets 1 0 0 523 523

Financial assets at fair value through profit or loss held for trading 1 434 0 0 434

Derivative financial assets 0 3,360 0 3,360

Total 6,301 3,360 523 4,318

Derivative financial liabilities 0 (1,185) 0 (1,185)

Total 0 (1,185) 0 (1,185)

1 reported as part of investments in the statement of financial position

2 reported as part of non-current other liabilities in the statement of financial position

The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service


or -length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely, as little as possible, on entity-specific estimates. If all significant inputs required to fair-value an instrument are observable, the instrument is included in level 2. The fair value of forward exchange contracts is calculated with a discounted cash flow model, using observable inputs such as spot rates and interest curves. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3 (if any).

Other financial instruments (such as e.g. trade and other receivables, payables) are not disclosed as their carrying amounts are a reasonable approximation of fair values.

No financial instruments were transferred into another level in either 2018 or 2017.

27.2 Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market price. Market prices entail three types of risk: foreign currency risk, interest rate risk and other price risks such as equity risk.

27.2.1 Foreign currency risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily in regard to the euro, the US dollar, the Chinese yuan and Great British pound. Foreign exchange risk arises from future commercial transactions recognized assets and liabilities and net investments in foreign operations.

Management has set up a policy that requires Group Companies to report to Group Treasury their foreign exchange risk against their functional currency (on monetary items only). Group Treasury is responsible for managing the net positions using external derivative contracts (economic hedge). When doing so, future commercial transactions and net investments in foreign operations are not considered.

The following table demonstrates the sensitivity to a reasonable possible change of 10 percent strengthening (+) or weakening ( ) of the 2018 (this analysis

assumes that all other variables remain constant):

2018 in thousand CHF +10% -10%

Total impact on P&L 9,137 (9,137)

thereof

BRL 1,565 (1,565)

CNY 6,841 (6,841)

GBP (423) 423

MXN 884 (884)

USD (2,439) 2,439

Other currencies 2,709 (2,709)

Similarly (assuming that all other variables remain constant), the following table demonstrates the sensitivity to a reasonable possible change of 10 percent strengthening (+) or weakening (-) of the Swiss Franc against all the other functional currencies used in the group

2018 in thousand CHF 10% -10%

Total impact on OCI 42,139 (42,139)

thereof

BRL 2,000 (2,000)

CNY 3,057 (3,057)

EUR 27,318 (27,318)

HKD 1,508 (1,508)

SEK (1,348) 1,348

Other currencies 9,605 (9,605)

27.2.2 Interest rate risk In general, the Group has a clear funding policy that prohibits affiliates from borrowing in foreign currency and has a clear preference for intragroup financing. Affiliates are also required to repatriate their excess cash. Liquidity is mainly managed at the corporate level by using money market products.


Besides the public bond (which bears a fixed interest rate), the Group has no significant other interest-bearing assets and liabilities. Therefore, the Group has a limited exposure to interest rate risk and independent of changes in market interest rates.

27.3 Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its investing activities, including deposits with banks and other financial institutions, foreign exchange transactions and other financial instruments.

Credit risk related to trade receivables

ng to customer credit risk management. Credit limits are established for all customers based on external ratings or, if not available, according

ding customer receivables are regularly monitored. The objective of the management of trade receivables is to sustain the growth and profitability of the Group by optimizing asset utilization while maintaining risks at an acceptable level. There is no significant concentration of counterparty

continuously monitored by country and by the nature of counterparties. Additionally, the Group obtains credit insurance and similar enhancements when appropriate to protect the collection of trade receivables.

Credit risk related to financial instruments and cash deposit

Credit risk from balances with banks and financial institutions is managed by the Group TreaInvestments of surplus funds are made only with approved counterparties and with credit limits assigned to each counterparty with a minimum rating of A. Counterparty credit limits are reviewed by senior management on a regular basis. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through potential counterparty failure.


Cash and cash equivalents (excluding cash on hand) 286,828 310,725

Derivative financial instruments 4,447 3,360

Trade receivables 1,063,271 1,003,537

Contract assets (unbilled forwarding services) 137,344 93,476

Other receivables 113,848 128,805

Investments and other financial assets 31,386 31,042

Total financial assets shown in statement of financial position subject to credit risk 1,637,124 1,570,945

27.4 Liquidity risk approach to

managing liquidity is to ensure, to the extent possible, that it will always have sufficient liquidity to meet its liabilities when due, under

objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts, bank loans, finance leases

To secure liquidity, the Group holds a net cash position of CHF -186.0 million (2017: CHF 305.0 million) and credit lines with various financial institutions totaling CHF 547.1 million (2017: CHF 598.4 million). Of this total, CHF 208.6 million (2017: CHF 281.9 million) is allocated to bank guarantees and foreign exchange lines.


December 31, 2018 and 2017 based on contractual undiscounted payments (the prior year table has been adjusted to only present financial liabilities):


between 1 and 3 months

between 3 months

and 1 year

between

1 and 5 years

Total remaining

contrac-tual

payments

Borrowings (1,287) (618) (4,053) (5,958)

Public fixed rate bond (1,500) (154,500) (156,000)

Lease liabilities (32,156) (70,750) (237,827) (340,733)

Trade payables and contract liabilities (469,434) (15,447) (9,968) (494,850)

Other payables (74,037) (2,218) (2,483) (78,738)

Total non derivative financial liabilities (576,914) (90,533) (408,831) (1,076,278)

Foreign exchange contracts

Cash inflow 183,363 7,166 0 190,529

Cash outflow (184,799) (7,165) 0 (191,963)

Total derivative financial liabilities (1,436) 1 0 (1,435)

Total (578,350) (90,532) (408,831) (1,077,713)


between 1 and 3 months

between 3 months

and 1 year

between

1 and 5 years

Total remaining contractu

al payments

Borrowings (2,302) (344) (4,280) (6,927)

Trade payables (467,876) (19,752) (4,326) (491,954)

Other payables (72,916) (2,637) (2,237) (77,790)

Total non derivative financial liabilities (543,094) (22,734) (10,843) (576,670)

Foreign exchange contracts

Cash inflow 175,272 2,694 0 177,966

Cash outflow (176,434) (2,746) 0 (179,180)

Total derivative financial liabilities (1,162) (52) 0 (1,214)

Total (544,255) (22,786) (10,843) (577,884)

It has to be noted, that for the borrowings disclosed above, interests expenses have been considered hereby preventing a direct reconciliation with the statement of financial position.

27.5 Capital risk management The rns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts. Capital is monitored on the basis of the equity ratio, which is calculated as equity (including non-

ble below:


Capital and reserves attributable to Panalpina shareholders 565,518 608,018

Equity attributable to non-controlling interests 5,641 6,280

Total equity 571,160 614,299

Total assets 2,254,293 1,839,031

Equity ratio 25.3% 33.4%


28. ADDITIONAL INFORMATION

28.1 PLEDGED ASSETS As of the statement of financial position at December 2018 and 2017, the Group does not have any pledged assets.

28.2 PENDING LEGAL CLAIMS As mentioned in note 24.1 current and non-current provisions, the Group from time to time is involved in legal proceedings in the ordinary course of its business. However the Group is not a party to any legal, administrative or arbitration proceedings which could

of any such proceedings which may currently be contemplated by governmental or third parties.

28.3 SUBSEQUENT EVENTS On January 16 the Board of Directors of Panalpina announced that it has received an unsolicited, non-binding proposal from DSV to acquire the company at a price of CHF 170 per share, comprising a mix of cash and DSV shares.

On February 15, the Board of Directors of Panalpina announced that it is in discussions with Agility Group on potential strategic opportunities with regard to their respective logistics businesses. The discussions between the two companies are at a preliminary stage. Subsequently, DSV announced it has put a revised indicative and contingent all-cash offer to the shareholders of Panalpina at CHF 180 per share.

According to its fiduciary duties, the Board of Directors of Panalpina continues to review the approach by DSV in conjunction with its professional advisers.

Other than the above, no events have become known since the statement of financial position date for which a disclosure would be required.


29. General accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these Consolidated Financial Statements and have been applied consistently by Group entities. If necessary, comparative amounts have been re-represented to conform with to

29.1 Changes in standards, interpretation and amendments The group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January 2018: Annual improvements to IFRS Standards 2014-2016 Cycle --- amendments to IFRS 1 and amendments IAS 28 (both effective date

January 1, 2018) IFRIC 22 --- Foreign Currency Transactions and Advance Consideration (effective date January 1, 2018) Amendments to IFRS 2 --- Classification and Measurement of Share-based Payment Transactions (effective date January 1, 2018) IFRS 9 Financial Instruments (effective date January 1, 2018) IFRS 15 Revenue from Contracts with Customers (effective date January 1, 2018)

The group also elected to adopt the following amendments early: IFRS 16 Leases (effective date January 1, 2019)

With the exception of IFRS 15, IFRS 9 and IFRS 16 (which are described in more details in note 2.3), the other changes listed above did not have any significant impact on the Consolidated Financial Statements:

29.2 Future new and revised standards The Group analyzed in detail upcoming new IFRS standards and revisions/amendments to IFRS standards and came to the conclusion, that the following changes will be relevant for the Group. None of these changes have been early adopted yet. Annual improvements to IFRS Standards 2015-2017 Cycle --- amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23 (effective date

January 1, 2019) IFRIC 23 --- Uncertainty over Income Tax Treatments (effective date January 1, 2019) Amendments to IFRS 9 --- Prepayment Features with Negative Compensation (effective date January 1, 2019) Amendments to IAS 28 --- Long-term Interests in Associates and Joint Ventures (effective date January 1, 2019) Amendments to IAS 19 --- Plan Amendments, Curtailment or Settlement (effective date January 1, 2019) Amendments to IFRS 3 --- Business Combinations (effective date January 1, 2020) Amendments to IAS 1 --- Definition of Materiality (effective date January 1, 2020) Amendments to References to the Conceptual Framework in IFRS Standards (effective date January 1, 2020)

29.3 Basis of consolidation 29.3.1 Consolidation policy The subsidiaries are those companies controlled, directly or indirectly, by Panalpina World Transport (Holding) Ltd. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. This control is normally evidenced when the Group owns, either directly or indirectly, more than one half of the voting rights.

The Group also assesses existence of control where it does not have more than 50 percent of the voting power but is able to govern the financial and operating policies by de-facto control. De-facto control may arise in circumstances where the size of the Groupvoting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies. In some circumstances, control was also derived from the purpose and design of the investee or tto direct the main activities of the subsidiary.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and they are de-consolidated from the date that control ceases. In case of business combination, the Group applies the rules described in note 29.13.1 of this document.

Intercompany transactions, balances, income and expenses on transactions between Group companies are eliminated. Unrealized losses are eliminated in the same way as unrealized gains.

Changes in ownership interest in subsidiaries without change of control

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

Disposal of subsidiaries

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

29.3.2 Scope of consolidation The list of the principal group companies and participations considered for the establishment of the group's Consolidated Financial Statements is disclosed in note 31.


29.3.3 Operating segment information Management has determined the operating segments based on the reports reviewed by the Executive Board that are used to make

predominately managed by geographical location. Headquarter activities are not separately reported but included in the respective results of each segment in the segment information. The Executive Board assesses performance of the operating segments based on a measure of the operating result (Segment EBIT).

Revenue is attributed to an individual country based on the domicile of the entity issuing the invoices to the customer. Transfer prices -length basis.

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

29.4 Foreign currency 29.4.1 Functional currency Most Group companies use their local currency as their functional currency. Certain Group companies use other currencies (such as US dollars or Euros) as their functional currency where this is the currency of the primary economic environment in which the entity or branch operates.

29.4.2 Transactions and balances Local transactions in other currencies are initially reported using the exchange rate at the date of the transaction or reporting date. Gains and losses from the settlement of such transactions and gains and losses on transactions of monetary assets and liabilities denominated in other currencies are included in the income statement, except when they arise on monetary items that, in substance,

ty. In such cases, the gains and losses are deferred into other comprehensive income.

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

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

On disposal of a foreign entity, the identified cumulative currency translation differences within equity relating to that foreign entity are recognized in the income statement as part of the gain or loss on divestment. Any goodwill arising on the acquisition is treated as an asset of the foreign operation and translated at the closing rate.

The following foreign currency exchange rates mostly impacted the current financial statements:

Statement of financial position1 Income statement and cash

flow statement2 Variance %

December

2018 December

2017 December

2018 December

2017

Statement of financial

position 1

Income statement and cash flow

statement 2

BRL 0.256 0.296 BRL 0.268 0.309 BRL -14% -13%

CNY 0.143 0.150 CNY 0.148 0.146 CNY -5% 2%

EUR 1.125 1.169 EUR 1.155 1.110 EUR -4% 4%

GBP 1.245 1.316 GBP 1.305 1.267 GBP -5% 3%

MXN 0.050 0.050 MXN 0.051 0.052 MXN 0% -2%

PLN 0.262 0.280 PLN 0.271 0.261 PLN -6% 4%

SGD 0.718 0.732 SGD 0.725 0.713 SGD -2% 2%

USD 0.981 0.980 USD 0.978 0.985 USD 0% -1% 1 Period end rate 2 Period end average rate (i.e. year to date rate)

As from January 1, 2018, -monetary assets and liabilities and the income statement to be restated to reflect the changes in the general pricing power of the functional currency, leading to a gain or loss on the net monetary position included in the net income. Moreover, the financial statements are converted into Swiss Franc using the closing exchange rate of the relevant period.


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

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

Revenue is recognized over time for all products based on the input factors (costs) for rendering the forwarding service to the customer. A forwarding service is considered as one performance obligation. The completion stage of the performance obligation is assessed with reference to the completion of the specific transactions assessed on the basis of the actual service provided as a proportion of the total services to be provided.

Gross profit includes net forwarding revenue from services rendered less related expenses for services provided by third parties net of customs, duty and taxes. This is a key measurement for the group and also an industry practice.

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

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

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

Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognizes costs for a restructuring. If benefits are payable more than 12 months after the reporting date, then they are discounted to their present value.

29.7.1 Pension obligations Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans.

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

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

When the calculation results in a potential asset for the Group, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reduction in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability / asset which comprise actuarial gains and losses arising from changes in actuarial assumptions (both demographic and financial) and experience adjustments, the return of plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are charged or credited immediately to equity in other comprehensive income. The Group determines the net interest expense on the net defined benefit liability / asset at the beginning of the annual period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability / asset, taking into account any changes in the net defined benefit liability / asset during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in the income statement under

When the benefits of a defined benefit plan are changed or amended or when a defined benefit plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in the income statement. The Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.


The Group applies the practical expedient and recognizes contributions from employees that are independent of the number of years of service (including those that are a fixed percentage of an employthe service cost in the period in which the related service is rendered (IAS 19 paragraph 93 [b]).

29.7.1.2 Defined Contribution Plan A defined contribution plan is a pension plan under which the Group pays fixed contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no legal or contractual obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.

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

29.7.3 Share-based compensation The Group operates a number of equity-settled share-based compensation plans under which the entity receives services from employees as consideration for equity or equity instruments (options) of the Group. The fair value of the employee services received in exchange for the granting of the options and the discount on the shares granted is estimated at the grant date and recorded as an expense over the vesting period. The expense is recognized as other employee benefits in the income statement. For equity-settled plans, an increase in equity is recorded for this expense and any subsequent cash flows from exercises of vested awards are recorded as changes in equity.

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

29.9 Finance income and costs Finance income comprises interest income on funds invested, dividend income from investments, cash discounts, changes in the fair value of financial assets at fair value through profit or loss and gains on derivatives that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss using the effective interest method. Dividends receive the payment is established.

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

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

Current income tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and associates to the extent that it is probable that they will not reverse in the foreseeable future. In addition a deferred income tax liability is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred income tax assets and liabilities are offset if there is a legally enforceable right to offset current income tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities but they intend to settle current income tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred income tax asset is recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred income tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Additional income taxes that arise from the distribution of dividends are recognized when the distribution is expected.


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

Gains and losses on a disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized net within other operating expenses in the income statement. For additional information see note 6 Other operating expenses.

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

The estimated useful lives for the current period are as follows: Years

Warehouse and office buildings 10-25

Warehouse and transportation equipment 3-10

Office furnishings and equipment 3-10

EDP hardware 3

Trucks, trailers and special vehicles 3-15

Automobiles 3-5

ation charge is accelerated.

29.12 Leases The group leases various buildings, vehicles and other assets. Rental contracts are typically made for fixed periods of 2 to 33 years but may have extension options as described below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.

Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-ofuse asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis, using the countries and asset specific incremental borrowing rate. This rate is calculated based on the risk free rate of the country plus a premium considering the Panalpina

29.12.1 Right of use Right-of-use assets are measured at cost comprising the following:

the amount of the initial measurement of lease liability any lease payments made at or before the commencement date less any lease incentives received any initial direct costs, and restoration costs.

29.12.2 Lease liabilities Lease liabilities are initially measured at the present value of the lease payments, discounted by using the incremental borrowing rate. Following lease payments are included in the net present value:

fixed payments (including in-substance fixed payments), less any lease incentives receivable variable lease payment that are based on an index or a rate amounts expected to be payable by the lessee under residual value guarantees the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets are not exceeding an amount of CHF 25 thousand and mainly comprise IT-equipment.

Extension and termination options are included in a number of property and equipment leases across the group. These terms are used to maximise operational flexibility in terms of managing contracts. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension


options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The majority of extension and termination options held are exercisable only by the group and not by the respective lessor.

This assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee.

29.13 Intangible assets 29.13.1 Business combination and goodwill Business combinations are accounted for using the acquisition method of accounting. The consideration transferred in a business combination is measured at fair value at the date of acquisition and includes the cash paid plus the fair value at the date of exchange of assets given, liabilities incurred or assumed and equity instruments issued by the Group. The fair value of the consideration transferred also includes contingent consideration arrangements at fair value. Directly attributable acquisition-related costs are expensed in the income statement.

At the date of acquisition the Group recognizes the identifiable assets acquired and the liabilities assumed at fair value. Where the Group does not acquire 100 percent ownership of the acquired business, non-controlling interests are recorded as the proportion of the fair value of the acquired net assets attributable to non-controlling interest.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in the income statement. Any goodwill and fair value adjustments are recorded as assets and liabilities of the acquired business in the functional currency of that business.

If the initial accounting for a business combination is incomplete at the end of a reporting period, provisional amounts are used. During the measurement period, the provisional amounts are retrospectively adjusted and additional assets and liabilities may be recognized, to reflect new information obtained about the amounts recognized at acquisition date, had they been known.

Goodwill is not amortized but assessed for possible impairment at each reporting date or more frequently if events or changes in circumstance indicate a potential impairment. For the purpose of impairment testing, goodwill acquired in a business combination is

-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. When the recoverable amount of the cash-generating units, being the higher of its fair value less costs of disposal or its value in use, is less, then the carrying value of the goodwill is reduced to its recoverable amount. The reduction is reported in the income statement as an impairment loss.

Changes in ownership interest in subsidiaries are accounted for as equity transactions if they occur after control has already been obtained and if they do not result in a loss of control.

In situations where the Group grants the right to the holders of non-controlling interests to sell their shares at a future date (put option), a financial (redemption) liability is recognized at the present value of the redemption amount with a corresponding entry in equity. Such financial liability is subsequently remeasured at each reporting date through the income statement.

In terms of the disclosure requirements as defined in IFRS 3, management considered these requirements and came to the conclusion for certain transactions, which are either individually or in aggregate below a certain threshold, these transactions will not be considered material for disclosure purposes. Management will assess each transaction individually and in aggregate also considering qualitative factors (e.g. strategic nature, impact on business model etc.) before deciding to which extent disclosures shall be included in the notes to the Consolidated Financial Statements.

29.13.2 Customer list Customer lists acquired in a business combination are recognized at fair value at the acquisition date. Customer lists have a finite useful life and are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is calculated using the straight-line method over the expected life of the customer lists which is usually comprised between three to five years.

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

it is technically feasible to complete the software product so that it will be available for use; management intends to complete the software product and use or sell it; there is an ability to use or sell the software product; it can be demonstrated how the software product will generate probable future economic benefits; adequate technical, financial and other resources to complete the development and to use or sell the software product are

available; and the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalized as part of the software product include software development costs, employee costs and an appropriate portion of relevant overhead costs. Other development expenditures that do not meet these criteria are recognized as an expense as incurred. Development costs previously recognized as expenses are not recognized as an asset in a subsequent period. Costs associated with maintaining computer software programs are recognized as an expense as incurred. Computer software development costs recognized as assets are amortized over their estimated useful life, which does not exceed three years (except for SAP TM which was internally generated and where a useful life of 5 years is used).


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

29.14 Impairment of property, plant and equipment, right-of-use of leased assets and intangible assets (excl. goodwill) An impairment assessment is carried out when there is evidence that an asset may be impaired. In addition, intangible assets that are not yet available for use are tested for impairment annually. If any such indication exists, or when annual impairment testing for an asset

or cash- se and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or asset groups. Where the carrying amount of an asset exceeds its recoverable amount, the asset is impaired to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An appropriate valuation model is used to determine fair value less costs of disposal. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded entities or other available fair value indicators. Impairment losses are recognized in the income statement. When an impairment loss arises, the useful life of the asset in question is reviewed and, if necessary, the future depreciation / amortization charge is accelerated.

29.15 Financial assets and liabilities 29.15.1 Financial assets Financial assets are including cash and marketable securities, short-and long-term deposits, trade and other receivables, contract assets, loans, quoted and unquoted financial instruments and derivative financial instruments.

29.15.1.1 Classification and initial measurement Under IFRS 9, the group classifies its financial assets between those to be measured subsequently at fair value (either through OCI or through profit or loss), and managing the financial assets and the contractual terms of the cash flows.

All financial assets are initially recognized at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Trade receivables are originally recognized at the original invoice amount less adjustments such as trade discounts, volume rebates and similar allowances.

29.15.1.2 Subsequent measurement Under IFRS 9, financial assets have to be distinguished between investments in debt instruments and investments in equity instruments.

Investments in debt instruments are categorized based on the SPPI (Solely Payment of Principal and Interests) and BMA (Business mmon

case), at be not met). Investments in equity instruments are usually measured at fair value through profit or loss, unless the Group has irrevocably elected to present fair value changes in Other Comprehensive Income (FVOCI).

When assets are measured at amortized costs, gains and losses arising from subsequent remeasurement are recognized in the income statement in case of derecognition or impairment, as well as through the amortization process. When assets are measured at fair value, gains and losses arising from subsequent remeasurement are either recognised entirely in profit or loss (fair value through profit or loss, FVPL), or recognised in other comprehensive income (fair value through other comprehensive income, FVOCI).

29.15.1.3 Impairment From 1 January 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The Group has mainly identified the trade receivables and contract assets, that are subject to the expected credit loss model. Other financial assets identifiable in the balance sheet (such as investments and other financial assets, other receivables and other current assets and cash and cash equivalents) are also subject to the impairment requirements of IFRS 9, however the identified impairment loss was immaterial.

The simplified approach (which is permitted by IFRS9) was implemented, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The contract assets were assessed to have substantially the same risk characteristics as the trade receivables for the same types of contracts. The group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets. To measure the expected credit losses, trade receivables and contract assets have been grouped based on the days past due. The expected loss rates are based on the payment profiles of sales over a period of 12 months before December 31, 2018 and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables/contract assets.

For an investment in an equity security, objective evidence of impairment includes a significant or prolonged decline in its fair value below its cost. The Group considers a decline of 20% to be significant and a period of nine months to be prolonged.

29.15.1.4 Derecognition of financial assets A financial asset is derecognized when:


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

29.15.2 Financial liabilities 29.15.2.1 Classification Financial liabilities are either classified as financial liabilities at fair value through profit or loss or at amortized costs. The Group determines the classification of its financial liabilities at initial recognition. Financial liabilities are recognized initially at fair value plus, in the

lities include trade and other payables, loans and borrowings and derivative financial instruments.

29.15.2.2 Subsequent measurement Gains or losses on liabilities at fair value through profit or loss are recognized in the income statement.

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

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

29.15.3 Derivatives The Group holds derivative financial instruments to hedge its foreign currency risk exposures. Hedge accounting as defined under IFRS 9 is not applied. Derivative financial instruments are initially recognized and subsequently carried at fair value. All changes in fair value are recorded as financial income or financial costs in the period in which they arise. Embedded derivatives are recognized separately if not closely related to the host contract and where the host contract is carried at amortized costs. Attributable transaction costs are recognized in the income statement when incurred. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

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

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

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

29.18 Treasury shares When share capital recognized as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, is net of any tax effects and is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity and the resulting surplus or deficit on the transaction is presented within retained earnings.

29.19 Retained earnings Retained earnings contain legal reserves that are not distributable to the shareholders pursuant to Swiss law as well as accumulated distributable profits, cumulative remeasurements of the net defined benefit liability / asset from post-employment plans net of taxes and the fair value reserve for financial assets at FVOCI.

29.20 Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

29.21 Provisions Provisions are recognized where a legal or constructive obligation has been incurred and if an outflow of resources is probable and can be estimated reliably. Provisions are recorded for the estimated ultimate liability that is expected to arise, taking into account the time value of money where material, determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost. Provisions are established for example for freight forwarding claims and decommissioning. Provisions for restructuring are recognized only when the Group has approved a detailed and formal restructuring plan and the restructuring either has commenced or has been announced publicly. Future operating costs are not provided for.


29.22 Fair value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is determined by reference to quoted market prices or by the use of established valuation techniques such as option pricing models and the discounted cash flow method if quoted prices in an active market are not available. Valuation techniques will incorporate observable market data about market conditions and other factors that are likely to affect the fair value of a financial instrument. Valuation techniques are typically used for derivative financial instruments. Information on fair value hierarchy is included in note 27 on risk management.

30. Critical judgment policies and estimates

30.1 Judgments 30.1.1 Revenues The Group utilizes independent contractors and third-party carriers in the performance of its logistics and transportation services. In all situations, the Group acts as principal party to the transaction and consequently recognizes revenue on a gross basis.

When the Group arranges the transportation of a shipment, it considers the various services provided as one single performance obligation (PO) as defined in IFRS 15. Control is transferred to the contractual counterparty over time when the services are performed. When closing accounting periods, significant accounting estimates and judgements are made regarding services in progress. The Group uses the input method, which looks at the direct costs to date to create the service being transferred, together with an estimate of the margin thereof. These estimates are based on experience and continuous follow-up on provisions for services in progress relative to subsequent invoicing.

30.1.2 Leases As outlined in note 2.3, the Group has implemented IFRS 16 Leases as from January 1, 2018. In few circumstances where the Group has an option embeded into a lease (e.g. extention or termination of a real estate commitment), the standard requires management judgement when estimating whether or not an option would be reasonably certain to be exercised. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extention option, or not exercise a termination option, on a case by case.

30.2 Accounting estimates 30.2.1 Impairment of goodwill The Group tests annually are disclosed in note 14 Intangible assets, section: Impairment test for goodwill. The recoverable amounts of cash-generating units (CGUs) have been determined based on value-in-use calculations. The underlying calculations require the use of estimates as further described in note 14.2.

30.2.2 Pension and other post-employment benefits The expense of defined benefit pension plans and other post-employment medical benefits and the present value of the pension obligation are determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. All assumptions are reviewed at each reporting date. When determining the appropriate discount rate, management considers the interest rates on high-quality corporate bonds (with an AAA or AA rating) in the respective country and appropriate duration. The mortality rate is based on publicly available mortality tables for the specific country. Future salary increases and pension increases are based on expected future inflation rates for the specific country. The actuarial assumptions used may differ materially from actual results due to changes in market and economic conditions, higher or lower withdrawal rates, longer or shorter life spans of participants and other changes in the factors assessed. These differences could impact the assets or liabilities recognized in the statement of financial position in future periods. Additional information is disclosed in note 23.

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

The Group has established a captive reinsurance company that insures a dedicated risk portion of its errors and omissions, transporter operator and commercial general liability programs. The exposure of its captive reinsurance company is limited by a third-party insurer that covers losses exceeding an amount of CHF 1 million per incident and a total aggregate limit of CHF 9 million annually for claims exceeding CHF 50,000 per incident. In a consolidated view, the Group, through its captive reinsurance company, bears the risks insured with its captive reinsurance company up to the limit as if such risks were not insured at all. Furthermore, as third-party coverage is subject to a considerable deductible and a total aggregated limit per year, the Group, in effect, bears the risk of damages, losses and claims that are above such aggregated limits as well.

The Group used for the above- as the

growth of business. At December 31, 2018, the recognized liability for freight forwarding related claims amounts to CHF 24.0 million (2017: CHF 23.7 million). If management decided to use the optimal actuarial calculation method, which takes into consideration only the linear loss development according to historical figures, the carrying amount of claim provisions would be approximately CHF 4.8 million lower (2017: CHF 4.6 million). Using a more conservative percentile, the carrying amount of claim provisions would be approximately CHF 4.1million higher (2017: 4.8 million).

A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes estimates but is limited to the directly identifiable


expenditures arising from the restructuring (which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity).

30.2.4 Deferred income tax assets Deferred tax assets are recognized for unused tax losses carry-forwards to the extent that it is probable that taxable profit will be available and the tax losses carry-forwards will be used to offset them. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based on the likely timing and level of future taxable profits.

The carrying value of recognized tax loss carry-forwards amounts to CHF 123.9 million resulting in a deferred tax asset of CHF CHF 32.7 million (2017: CHF 92.0 million resulting in a deferred tax asset of CHF 22.7 million) and unrecognized tax loss carry-forwards to CHF 289.9 million (2017: CHF 318.9 million). Further details are provided in note 10.

CHF 46.9 million (2017: CHF 51.3 million) of the net deferred tax assets arise in entities that have been loss making in 2018 or in 2017, respectively. In evaluating whether it is probable that taxable profits will be earned in future accounting periods, all available evidence was considered including the analysis of historical operating results and the assessment of the approved budgets, forecasts and business plans.

30.2.5 Income taxes As per December 31, 2018, the liability for current income taxes amounts to CHF 15.3 million (2017: CHF 17.1 million). The Group reports also a prepaid income tax asset in the amount of CHF 23.9 million (2017: CHF 28.0 million). As the Group is subject to income taxes in numerous jurisdictions, significant judgments are required in determining worldwide provisions for income taxes and the recoverability of the prepaid income tax assets.

Some of these estimates are based on interpretations of existing tax laws or regulations. Management believes that the estimates are reasonable and that the recognized liabilities for income tax-related uncertainties are adequate and the prepaid income tax assets are recoverable.

Various external factors may have favorable or unfavorable effects on income taxes. These factors include, but are not limited to, changes in tax law regulations and / or rates, changing interpretation of existing tax laws or regulations and changes in management estimations. Such changes that arise could affect the income tax related assets and liabilities recognized in the statement of financial position in future periods.

In particular, on December 22, 2017, the US tax legislation commonly known as the Tax Cuts and Jobs Act was signed into law by the president, which includes substantial changes to the US taxation of individuals and businesses. Although the new law substantially decreased tax rate applicable to corporations, we do not yet know all the consequences, including whether the law will have any unintended consequences. Significant uncertainties remain as to how the US government will implement the new law, including with respect to the so-called Base Erosion Anti-Abuse Tax.


31. Principal group companies and participations

During the year 2018, the following changes occurred in the scope of consolidation:

Change in scope of consolidation in 2018 Currency

Share Capital in

1,000

Equity interest in

% Effective

date

Acquisitions

Adelantex NV EUR 701 100 01.01.2018

AD Handling NV EUR 62 100 01.01.2018

Lifeline Critical Logistics NV EUR 376 100 01.01.2018

Panalpina Newport Cargo S.A. ARS 25 100 01.08.2018

Linkit lnvestments (Pty) Ltd ZAR 1 80 01.11.2018

Skyservices (Pty) Ltd ZAR 1 100 01.11.2018

Incorporations

Firefly Investments (Pty) Ltd ZAR 223,050 100 01.11.2018

Merger

Adelantex NV EUR 701 100 01.07.2018

Lifeline Critical Logistics NV EUR 376 100 01.07.2018

Liquidation

Panalpina (Ghana) Ltd GHS 10 100 01.08.2018

Panalpina Logistics (Chengdu) Ltd CNY 5,000 100 01.01.2018

Panalpina Asia-Pacific Services Ltd HKD 500 100 01.01.2018


Company Registered Currency

Nominal capital

in 1,000

Equity interest

in % Invest-

ment

Method of con-

solidation

Asia and Australia

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

Panalpina Asia Pacific Management Pte. Ltd Singapore SGD 500 100 1 K

PT Panalpina Nusajaya Transport Jakarta IDR 35,000,000 95 1 K

Panalpina China Ltd Hong Kong HKD 1,000 100 1 K

Panalpina World Transport (PRC) Ltd Shanghai CNY 13,500 100 1 K

Panalpina Logistics (Shanghai) Ltd Shanghai CNY 5,000 100 1 K

Panalpina Logistics (Wuhan) Ltd Wuhan CNY 5,000 100 1 K

Panalpina World Transport Ltd Hong Kong HKD 500 100 1 K

Pantainer (H. K.) Ltd Hong Kong HKD 100 100 1 K

International Claims Handling Services Ltd Hong Kong HKD 10 100 1 K

Panalpina Taiwan Ltd Taipei TWD 15,500 100 1 K

Panalpina Korea Ltd Seoul KRW 500,000 100 1 K

Panalpina World Transport (Thailand) Ltd Bangkok THB 27,000 100 1 K

Panalpina Asia-Pacific Services (Thailand) Ltd Bangkok THB 10,000 100 1 K

Panalpina Macao Ltd Macao HKD 1,000 100 1 K

Panalpina World Transport (Vietnam) Company Ltd Ho Chi Minh City VND 6,100,000 99 1 K

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

Panalpina Customs Services (M) SDN BHD Kuala Lumpur MYR 300 100 1 K

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

Panalpina World Transport (India) Pvt. Ltd Delhi INR 475,550 100 1 K

Panalpina Global Business Services India Private Limited Mumbai INR 20,000 100 1 K

Panalpina World Transport (Philippines) Inc. Manila PHP 10000 99.998 1 K

Panalpina Global Business Services (GBS) - Philippines Manila USD 200 100 1 K

Panalpina World Transport (Pty) Ltd Sydney AUD 15,000 100 1 K

Panalpina Myanmar Company Ltd Yangon USD 50 70 1 K

Panalpina World Transport (Cambodia) Co., Ltd Phnom Penh KHR 1,200,000 100 1 K

K = fully consolidated

1 = capital participation 51 - 100 %

2 = control over the subsidiary



Nominal capital

in 1,000

Equity interest

in % Invest-

ment

Method of con-

solidation

Europe

Panalpina World Transport (Holding) Ltd Basel CHF 2,375 K

Panalpina Management Ltd Basel CHF 2,500 100 1 K

Panalpina Ltd Basel CHF 600 100 1 K

Panalpina International Ltd Basel CHF 1,000 100 1 K

Panalpina Global Employment Services Ltd Basel CHF 100 100 1 K

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

Panalpina Welttransport GmbH Vienna EUR 36 100 1 K

Panalpina France Transports Internationaux S.A.S. Paris-Roissy EUR 2,000 100 1 K

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

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

Panalpina Transportes Mundiais Lda Lisbon EUR 50 100 1 K

Panalpina World Transport Ltd London GBP 19,350 100 1 K

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

Panalpina World Transport N.V. Antwerp EUR 19,050 100 1 K

AD Handling NV Brussels EUR 62 100 1 K

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

Panalpina World Transport B.V. Eindhoven EUR 91 100 1 K

Panalpina Airflo B.V. De Kwakel EUR 20 75 1 K

Interfresh Airfreight Handling BV Schiphol-Rijk EUR 19 75 1 K

Fresh Cargo Connection Schiphol-Rijk EUR 18 75 1 K

Dutch Cargo Connection Schiphol-Rijk EUR 10 75 1 K

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

Panalpina Business Services (Prague), s.r.o. Prague CZK 1,000 100 1 K

Panalpina Croatia d.o.o. Rijeka HRK 400 100 1 K

Panalpina Slovakia S.R.O. Bratislava EUR 23 100 1 K

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

Panalpina Romania S.R.L. Oradea RON 6,072 100 1 K

Panalpina Polska Sp. z o.o. Wroclaw PLN 1,500 100 1 K

Panalpina AB Gothenburg SEK 1,000 100 1 K

Panalpina A/S Oslo NOK 3,000 100 1 K

Panalpina Carelog AS Åbyhøj DKK 1,220 75 1 K

Panalpina Carelog Logistics AS Åbyhøj DKK 1,876 75 1 K






Nominal capital

in 1,000

Equity interest

in % Invest-

ment

Method of con-

solidation

Middle East and Africa

Panalpina Gulf LLC Dubai AED 1,000 49 2 K

Panalpina Jebel Ali Ltd. Jebel Ali AED 100 100 1 K

Panalpina World Transport (Dubai) DWC-LLC Dubai AED 300 100 1 K

Panalpina World Transport (Kuwait) WLL Kuwait KWD 20 49 2 K

Panalpina Qatar WLL Doha QAR 200 49 2 K

Panalpina World Transport (Saudi Arabia) Ltd Al Khobar SAR 500 100 1 K

Panalpina (Bahrain) WLL Manama BHD 20 100 1 K

Panalpina Central Asia EC Manama USD 300 100 1 K

Al-Alb Co. for General Transportation (PLLC) Baghdad IQD 11,000 100 1 K

Panalpina World Transport Nakliyat Ltd. Srk. Istanbul TRY 15,000 100 1 K

Panalpina Georgia LLC Tbilisi GEL 11 100 1 K

Panalpina Azerbaijan LLC Baku AZN 1 100 1 K

Panalpina Turkmenistan LLC Turkmenbashi TMT 62 100 1 K

Panalpina World Transport LLP Atyrau KZT 1,252,395 100 1 K

Panalpina Sakhalin Projects Yuzhno-Sakhalinsk RUB 30 100 1 K

Panalpina World Transport JSC Moscow RUB 2,100 100 1 K

Panalpina World Transport Ltd Kiev UAH 376 100 1 K

Panalpina Transports Mondiaux Cameroun S.A.R.L. Douala XAF 150,000 90 1 K

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

Panalpina Transportes Mundiais Navegãçao e Trânsitos S.A.R.L. Luanda AOA 18 49 2 K

Panalpina World Transport Egypt LLC Cairo EGP 10,000 49 2 K

Panalpina Morocco S.A.R.L. Casablanca MAD 10 100 1 K

Panalpina Kenya Ltd Nairobi KES 156,053 100 1 K

Panalpina Airflo Ltd Nairobi KES 361,200 75 1 K

Firefly Investments (Pty) Ltd Johannesburg ZAR 223,050 100 1 K

Linkit lnvestments (Pty) Ltd Johannesburg ZAR 1 80 1 K

Skyservices (Pty) Ltd Johannesburg ZAR 1 100 1 K






Nominal capital

in 1,000

Equity interest

in % Invest-

ment

Method of con-

solidation

North, Central and South America

Panalpina Inc. Miami USD 138,000 100 1 K

International Claims Handling Services Inc. Miami USD 1 100 1 K

Panalpina Inc. Toronto CAD 100 100 1 K

Panalpina Transportes Mundiales, S.A. de C.V. Mexico City MXN 35,834 100 1 K

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

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

Panalpina S.E.M. Panama Panama City USD 1 100 1 K

Panalpina S.A. de C.V. San Salvador SVC 11 100 1 K

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

Panalpina Uruguay Transportes Mundiales S.A. Montevideo UYU 4,093 100 1 K

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

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

Panalpina C.A. Caracas VEF 1,180,846 100 1 K

Panalpina Ecuador S.A. Quito USD 100 100 1 K

Panalpina Transportes Mundiales S.A. Lima PEN 4,008 100 1 K

Panalpina Ltda. São Paulo BRL 186,474 100 1 K

Panalpina Chile Transportes Mundiales Ltda. Santiago CLP 3,505,817 100 1 K

Panalpina Transportes Mundiales S.A. Buenos Aires ARS 228,366 100 1 K

Panalpina Newport Cargo S.A. Buenos Aires ARS 25,000 100 1 K

Panalpina Transportes Mundiales S.R.L. Santo Domingo DOP 1,000 100 1 K

Mondi Reinsurance Ltd Hamilton CHF 1,000 100 1 K

Panalpina FMS, Inc. (Washington) Jersey City USD 1 100 1 K





Statutory

To the General Meeting of

Panalpina World Transport (Holding) Ltd, Basel

Report on the Audit of the Consolidated Financial Statements

Opinion

We have audited the consolidated financial statements of Panalpina World Transport (Holding) Ltd and its subsidiaries (the Group),

which comprise the consolidated statement of financial position as at 31 December 2018 and the consolidated income statement,

consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash

flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting

policies.

In our opinion the consolidated financial statements (pages 3 to 60 give a true and fair view of the consolidated financial position of the

Group as at 31 December 2018, its consolidated financial performance and its consolidated cash flows for the year then ended in

accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.

Basis for Opinion

We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Auditing Standards. Our

responsibilities under those provi

Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the provisions of Swiss

law and the requirements of the Swiss audit profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have

fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our Audit Approach Summary

Key audit matters - Forwarding Revenue Process (revenue recognition) - Goodwill - Impact of IFRS 16

Materiality

Scoping - 71% of gross profit - 75% of net forwarding revenue - 72% of total assets

Deloitte AG

Steinengraben 22

4002 Basel

Schweiz

Telefon: +41 (0)58 279 60 00

Fax: +41 (0)58 279 66 00

www.deloitte.ch


Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated

financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial

statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Forwarding revenue process (revenue recognition)

Key audit matter How the scope of our audit responded to the key audit

matter

The forwarding revenue process is defined by the major revenue stream which comprises the proceeds received from customers for the performance of forwarding services included in net forwarding revenues, trade receivables and contract assets (accrued revenue). Forwarding services from third parties include the corresponding direct services costs, contract liabilities and related accrued cost of services.

The Group recognizes net forwarding revenue and the costs of the respective forwarding services from third parties over the time the services are performed, resulting in a gross profit. At reporting date, management judgement is required in estimating the timing and amount of revenue as well as costs for services performed, whenever third party suppliers have not yet confirmed the final costs.

contract assets in the amount of CHF 137.3 million and accrued cost of services and contract liabilities in the amount of CHF 331.5 million are recorded.

Our focus on this area is due to the fact that the determination of the accruals in relation to revenue and costs at year-end as well as the date at which revenue is recognized require a high level of

The accounting policy applied by the Group is explained in the notes to the consolidated financial statements in the sections 2.5, 29.5 and 30.1.1. Further details on revenue and related accruals are disclosed in note 3 and 4 to the consolidated financial statements.

accounting policy for revenue recognition and related accrual accounts in terms of the applicable accounting standards.

Furthermore we obtained an understanding of the forwarding process and the controls relevant to the audit and evaluated the design of these controls and determined whether they have been implemented. We performed operating effectiveness testing on selected controls within the revenue process and obtained appropriate audit evidence through substantive procedures to address the identified risk of material misstatement.

During our audit we also considered the IT environment and automated controls involved.

We challenged the appropriateness of the assumptions made by management in relation to the determination of the estimated revenue and costs accruals, among others, by an evaluation of files with material high and low margins and by

estimates.

We assessed the appropriateness of the assumptions in relation to the revenue recognition date by challenging transactions which took place before and after the balance sheet date, to evaluate whether revenue was recognized in the correct period. We did this by agreeing forwarding files to underlying documentation on a sample basis.

In addition, we considered the appropriateness of the related disclosures in the consolidated financial statements.

Goodwill


matter

At 31 December 2018, the Group discloses goodwill arising from acquisitions for an amount of CHF 92.1 million.

Goodwill is tested for impairment at least once a year. If there are any indicators of possible impairment, such impairment testing is performed more frequently.

Impairment testing uses future cash flow projections covering a five-year period which is based on financial budgets approved by management. Management determined budgeted growth rates based on past performance and its expectations of markets development. Cash flows beyond the five-year period are extrapolated using estimated terminal growth rates.

We focus on this position due to the fact that there are key

future performance, the definition of assumptions included in the impairment model and the discount and growth rates applied to assess the recoverability of the goodwill.

The accounting policy applied by the Group is explained in the notes to the consolidated financial statements in the sections 29.13.1, 30.1.2. Further details on goodwill are disclosed in note 14 to the consolidated financial statements.

We assessed the impairment models used by the group, including the key assumptions applied for their computation.

We evaluated the design and tested the implementation of the relevant controls around the impairment tests performed on goodwill. We challenged the appropriateness of the future cash flows and growth rates used in the models for the different CGUs, by analysing the developments against historical results and by corroborative inquiries with key management on the major underlying factors used in the projections. We further considered the forecasted developments in the projections against macroeconomic and sector-specific market expectations.

We have involved internal valuation specialists to assist us in reviewing the valuation models (validity of the model, completeness and mathematical accuracy) and validating the discount rates applied to ensure compliance with IAS 36

key assumptions and considered the appropriateness of the related disclosures in the consolidated financial statements.


Impact of IFRS 16


matter

The Group has early adopted the requirements of IFRS 16 January 2018.

At 31 December 2018, the relevant positions and amounts in connection with the early adoption of the leases standard are the following:

Right-of-use of leased assets CHF 314.9 million Non-current lease liabilities CHF 216.7 million Current lease liabilities CHF 102.5 million Depreciation of right-of-used leased assets CHF 124.5 million

The Group is recognizing the majority of their leases as on-balance sheet liabilities with underlying right-of-use assets. Management identified the relevant lease contracts and considered the relevant lease terms and options for their calculations. The borrowing rates have been defined based on the risks for the underlying countries and classes of assets.

There is a risk that the Group might fail to identify all contracts that contain a lease or all lease components within a lease contract or to account for a contract outside of the standard as a lease. There is also a risk that the Group might fail to properly record the lease contracts or lease options in their systems (e.g. lease terms) or the determination of the applied incremental borrowing rate («IBR») is not in line with the requirements of the standard.

The accounting policy applied by the Group is explained in the notes to the consolidated financial statements in the sections 2.3, 29.12 and 30. Further details on leases are disclosed in note 13 to the consolidated financial statements.

We have evaluated the accounting policies in connection with IFRS 16 and tested the controls around the identification of lease contracts and lease terms inputs within the system.

We have performed test of details on a sample basis for the initial application of the IFRS 16 accounting as per 01 January 2018 and recalculated, based on the lease terms of the contract, the relevant lease liabilities, right-of-use of leased assets, the monthly depreciation of right-of-use of leased assets and the monthly interest expense.

Based on the sample selections above, we challenged s applied in determining

the IBR as well as the options used within the IFRS 16 calculations.

We have performed a combination of test of details and substantive analytical procedures to test the additions of new lease contracts and modifications for existing contracts recorded since initial application. We have tested the overall depreciation and interest expense charge for the period.

In addition, we considered the appropriateness of the related disclosures in the consolidated financial statements.

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions

of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work

and in evaluating the results of our work.

We agreed with the Audit Risk & Compliance Committee that we report to the Committee all audit differences in excess of CHF

as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the

Audit Risk & Compliance Committee on disclosure matters that we identified when assessing the overall presentation of the financial

statements.

An overview of the scope of our audit

Our group audit was scoped by obtaining an understanding of the group and its environment, including groupwide controls, and

assessing the risks of material misstatement at group level. Based on this assessment, we focused our group audit scope primarily on

the audit work at 21 key locations. 19 of these were subject to a full audit, whilst the remaining 2 were subject to an audit of specified

account balances where the extent of our testing was based on our assessment of the risks of material misstatement and of the

nt for 71%

provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified above. Our audit work

at the 21 locations was executed at levels of materiality applicable to each individual entity which were lower than group materiality and

At the parent entity level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that

there were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject

to audit or audit of specified account balances.


Other Information in the Annual Report

The Board of Directors is responsible for the other information in the annual report. The other information comprises the corporate

governance report, but does not include the consolidated financial statements, the stand-alone financial statements of the Company,

the

remaining parts of the annual report (integrated management report), which is expected to be made available to us after that date.

Our opinion on the consolidated financial statements does not cover the other information in the annual report and we do not and will

not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information in the annual

report and in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our

knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the

ent of this

other information, we are required to report that fact. We have nothing to report in this regard.

Responsibility of the Board of Directors for the Consolidated Financial Statements

The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in

accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary

to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

o continue as

a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless

the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

cial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from

Reasonable assurance

is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing

Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered

material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the

basis of these consolidated financial statements.

A further description of our responsibilities for the audit of the consolidated financial statements is located at the website of

EXPERTsuisse: http://expertsuisse.ch/en/auditreportforpubliccompanies. This

Report on Other Legal and Regulatory Requirements

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system

exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of

Directors.

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

Deloitte AG

Fabien Lussu Robert Renz

Licensed Audit Expert Licensed Audit Expert

Auditor in Charge

Basel, 20 February 2019 FLU/RRE/sdo


Key figures in CHF Five-year review

In million CHF 2018 2017 2016 2015 2014

Forwarding services 7,104 6,532 6,321 7,129 8,172

Change in % 8.76 3.32 (11.33) (12.77) (0.03)

Net forwarding revenue 6,036 5,533 5,196 5,855 6,707

Change in % 9.09 6.48 (11.26) (12.70) (0.75)

Gross profit 1,500 1,398 1,425 1,474 1,586

Change in % 7.29 (1.88) (3.34) (7.07) 1.60

in % of net revenue 24.85 25.26 27.42 25.17 23.65

Profit 75.7 57.5 52.3 88.2 86.5

Change in % 31.78 9.89 (40.73) 1.97 639.50

in % of gross profit 5.05 4.11 3.67 5.99 5.46

Operating result before depreciation and amortization (EBITDA) 289.5 146.2 131.7 168.3 174.0

Change in % 98.03 11.04 (21.79) (3.26) 45.26


Operating result before amortization (EBITA) 266.8 124.9 105.9 140.5 142.1

Change in % 113.59 17.96 (24.62) (1.12) 66.15


Operating result (EBIT) 118.4 103.3 82.0 117.2 116.7

Change in % 14.57 26.06 (30.09) 0.44 143.19


Cash generated from operations 164.5 105.6 150.1 187.4 152.9

Change in % 55.71 (29.66) (19.87) 22.54 107.19


Net cash from operating activities 125.5 67.3 110.8 151.7 123.0

Change in % 86.41 (39.22) (26.98) 23.27 189.48


Free cash flow 59.3 (0.8) 86.6 142.8 87.0

Change in % (7,239.76) (100.96) (39.34) 64.08 (1,681.84)

in % of gross profit 3.95 (0.06) 6.08 9.69 5.49

Net (operational) working capital 1 415.8 300.4 256.3 285.0 384.8

Change in % 38.43 17.19 (10.07) (25.94) (1.10)

1 Net (operational) working capital includes movements on Trade receivables, Contract assets, Trade payables, Contract liabilit ies and Accrued costs of

services.


In million CHF 2018 2017 2016 2015 2014

Capital expenditure on tangible and intangible assets 40.8 54.0 24.6 16.5 48.1

Change in % (24.37) 119.51 48.98 (65.65) (3.49)


Net capital expenditure on tangible and intangible assets 46.4 52.2 8.2 6.4 45.1

Change in % (11.17) 537.07 28.62 (85.87) (6.96)


Depreciation and amortization (incl. impairment losses) 171.1 42.9 49.7 51.1 57.3

Change in % 299.28 (13.79) (2.75) (10.81) (20.27)


Personnel expenses 925.8 889.8 870.5 896.2 976.9

Personnel

Number of employees (headcount) at year-end (world) 14,539 14,355 14,217 14,774 15,639

Number of employees (headcount) at year-end (Switzerland) 622 619 641 651 682

Yearly average full time equivalents (FTE) (world) 14,514 14,051 14,572 15,340 16,180

Productivity ratios (CHF)

Net sales per average FTE 415,857 393,764 356,566 381,714 414,521

Gross profit per average FTE 103,328 99,480 97,762 96,078 98,018

Personnel expenses per average FTE 63,789 63,330 59,737 58,423 60,372

Personnel cost in % of gross profit 61.74 63.66 61.10 60.81 61.59

Leverage (liabilities / equity) 2.95 1.99 1.72 1.68 1.66

Net interest-bearing liabilities 186 (305) (386) (390) (363)

Gross gearing (interest-bearing liabilities/equity) 0.83 0.01 0.00 0.00 0.01

Net gearing (net interest-bearing liabilities/equity) 0.33 (0.50) (0.63) (0.61) (0.50)

ROCE (EBIT less tax/capital employed) in % 16.05 21.69 21.43 28.20 24.01

Current cash debt coverage ratio (net operating cash flow/average current liability) 0.11 0.07 0.12 0.15 0.11

Cash debt coverage ratio (net operating cash flow/average total liability) 0.09 0.06 0.10 0.13 0.10

Return on equity in % 12.77 9.40 8.40 13.00 12.20

Change in % 35.85 11.90 (35.38) 6.56 662.50


Consolidated statement of financial position in CHF Five-year review

In million CHF 2018 2017 2016 2015 2014

ASSETS 2,254 1,839 1,661 1,728 1,930

Change in % 22.58 10.75 (3.89) (10.46) (0.99)

Non-current assets 642 299 261 275 329

Change in % 114.83 14.77 (5.16) (16.61) (6.15)

Property, plant and equipment and right-of-use of leased assets 415 97 64 78 104

Change in % 328.58 52.28 (19.04) (24.76) (12.37)

Financial and deferred tax assets 109 114 99 97 103

Change in % (4.51) 14.91 1.69 (5.52) (9.57)

Intangible assets 119 88 98 99 122

Change in % 34.65 (9.70) (0.88) (19.02) 3.41

Current assets 1,612 1,540 1,400 1,453 1,600

Change in % 4.67 10.00 (3.65) (9.20) 0.15

Liquid funds 287 311 389 392 372

Change in % (7.68) (20.04) (0.89) 5.43 10.40

Receivables and other current assets 1,325 1,229 1,011 1,061 1,228

Change in % 7.79 21.55 (4.67) (13.63) (2.59)

LIABILITIES AND EQUITY 2,254 1,839 1,661 1,728 1,930

Change in % 22.58 10.75 (3.89) (10.46) (0.99)

Equity 571 614 608 641 721

Change in % (7.02) 1.03 (5.18) (11.05) 3.43

Share capital 2 2 2 2 2

Change in % 0.00 0.00 0.00 0.00 0.00

Treasury shares (1) (2) (4) (2) (2)

Change in % (53.59) (61.65) 77.05 7.80 (30.37)

Translation reserves (300) (269) (287) (278) (187)

Change in % 11.47 (6.26) 3.09 49.02 (0.72)

Retained earnings and other reserves 863 876 896 919 907

Change in % (1.42) (2.28) (2.49) 1.33 2.40

Non-controlling interests 6 6 9 12 12

Liabilities 1,683 1,225 1,044 1,074 1,197

Change in % 37.43 17.36 (2.87) (10.20) (3.50)

Payables, accruals and deferred income 1,013 1,036 861 911 991

Change in % (2.23) 20.30 (5.46) (8.08) (1.08)

Borrowings, lease liabilities and other financial liabilities 477 7 7 3 9

Change in % 6,659.15 7.31 142.55 (68.67) 72.80

Provisions and other liabilities 194 181 176 161 197

Change in % 6.66 3.30 9.34 (18.35) (15.57)

Annual Financial Statements panalpina.com 68

Annual financial statements Panalpina World Transport (Holding) Ltd., Basel

CONTENTS

Income Statement 69

Balance Sheet 70

Notes to the Financial Statements 71

Appropriation of Available Earnings 75

Report of the Statutory Auditor 76


Income statement for the year ended December 31, 2018 and 2017


Income from royalties 2.1 26,189 31,597

Total operating income 26,189 31,597

Personnel expenses (16,581) (17,701)

Other operating expenses 2.2 (8,273) (6,618)

Operating result before depreciation and amortization 1,335 7,278

Depreciation of property, plant and equipment (41) (38)

Impairment of participations and loans to group companies 2.3 (94,841) (80,149)

Reversal of impairment losses on participations and loans to group companies 2.3 72,522 148,130

Impairment of third party investments and loans to third parties (1,167) 0

Operating result (22,191) 75,221

Dividend Income 2.4 122,134 108,974

Other financial income 2.5 1,547 1,372

Financial expenses 2.6 (4,704) (84,318)

Profit for the year before taxes 96,786 101,249

Direct taxes (1,137) (2,066)

Profit for the year 95,649 99,184


Balance sheet as of December 31, 2018 and 2017


Assets

Cash and cash equivalents 155 1,610

Receivables from services

From group companies 87 17

Cash pool receivables from group companies 2.10 117,314 21,644

Other short-term receivables

From third parties 231 162

From related parties (Personalvorsorgestiftung der PWT) 6,758 0

From group companies 301 301

Prepaid expenses and accrued income 2.7 9,649 8,748

Total current assets 134,495 32,483

Financial assets

Long-term loans to group companies and other long-term financial assets 2.8 85,302 162,335

Participations 2.9 913,537 796,342

Property, plant and equipment 61 78

Total fixed assets 998,900 958,756

Total assets 1,133,395 991,238

Liabilities

Liabilities from goods and services

Due to third parties 0 0

Due to group companies 193 224

Cash pool liabilities due to group companies 0 0

Short-term interest bearing liabilities

Due to group companies 22,715 32,700

Other short-term liabilities

Due to third parties 635 1,182

Due to related parties (Personalvorsorgestiftung der PWT) 0 152

Accrued liabilities and accrued expenses 2.11 4,316 4,390

Total current liabilities 27,859 38,649

Long-term interest bearing liabilities

Due to third parties 2.12 150,000 0

Other long-term liabilities

Due to third parties 183 0

Long-term provisions 2.13 93,257 97,933

Total non-current liabilities 243,440 97,933

Total liabilities 271,299 136,582

Equity

Share capital 3.3 2,375 2,375

Legal retained earnings

General legal retained earnings 475 475

Free reserves 264,268 264,268

Available earnings

Profit brought forward 500,036 489,886

Profit for the year 95,649 99,184

Treasury shares 2.14 (707) (1,531)

Total equity 862,096 854,657

Total liabilities and equity 1,133,395 991,238


Notes to the financial statements

1. Accounting principles

1.1 General aspects These financial statements were prepared according to the provisions of the Swiss Law on Accounting and Financial Reporting (32nd title of the Swiss Code of Obligations "SCO"). Where not prescribed by law, the significant accounting and valuation principles applied are described below.

The Company has prepared its Consolidated Financial Statements in accordance with a recognized accounting standard (International Financial Reporting Standards). In accordance with the SCO the Company decided to forgo presenting additional information.

1.2 Financial assets Financial assets include long-term loans. Loans granted in foreign currencies are translated at the exchange rate at the balance sheet date, whereby unrealized losses are recorded but unrealized profits are not recognized.

Loans are valued based on the principle of individual valuation and part of the annual impairment review as described in note 1.3.

1.3 Participations Participations are valued based on the principle of individual valuation. Management reviews the value of each material participation on an annual basis. Impairments and reversals of impairment are recognized based on this annual review which takes into account the net equity together with the actual and the future financial performance of the respective participation.

1.4 Treasury shares Treasury shares are recognized at acquisition cost and resale, the gain or loss is recognized through free reserves.

1.5 Share-based payments Should treasury shares be used for share-based payment programs, the difference between the acquisition costs and any consideration paid by the employees at grant date is recognized as personnel expenses.

2. Information on income statement and balance sheet items

2.1 Income from royalties Since 2009, Panalpina World Transport (Holding) Ltd charges royalty fees to its subsidiaries for the use of the Panalpina network and trademark name.

2.2 Other operating expenses In thousand CHF 2018 2017

Other operating expenses

Legal, consulting and audit expenses 1,573 1,681

Insurance 2,588 2,833

Other administrative expenses 4,112 2,104

Total 8,273 6,618

2.3 Impairment and reversal of impairment on participations and loans The application of the single valuation method resulted in an impairment charge of CHF 94,841 thousand on participations. There was no impairment on loans to group companies in 2018 (2017: CHF 56,007 thousand on participations and CHF 24,142 thousand on loans to group companies).

The reversal of impairment on participations amounting to CHF 65,497 thousand (2017: CHF 148,130 thousand) and a reversal of impairment on loans to group companies amounting to CHF 7,025 thousand (2017: Amounted to zero).

2.4 Dividend income In the reporting year, dividend income amounted to CHF 122,134 thousand (2017: CHF 108,974 thousand). This amount mainly consists of dividends from group participations.


2.5 Other financial income In thousand CHF 2018 2017

Other Financial income

Foreign exchange differences 288 489

Other financial income 1,259 883

Total 1,547 1,372

2.6 Financial expenses In thousand CHF 2018 2017

Financial expenses

Foreign exchange difference 7,466 1,239

Interest expenses 1,694 2,388

Other financial expenses 183 297

Guarantee expenses / reversal of provision for gurantees (note 2.13) (4,639) 80,393

Total 4,704 84,318

2.7 Prepaid expenses and accrued income In thousand CHF 2018 2017

Prepaid expenses and accrued income

Sublicense Panalpina Management Ltd 8,482 8,276

Various from group companies 200 137

Various from third parties 967 336

Total 9,649 8,748

Panalpina Management Ltd invoices the group companies on behalf of Panalpina World Transport (Holding) Ltd for the respective royalty fees. Above accrued income is related to this sublicense agreement.

2.8 Financial assets As per December 31, 2018, total loans to group companies and other long-term financial assets amounting to CHF 85,302 thousand (2017: CHF 162,335 thousand) whereof the majority of the amount relates to a loan granted to Panalpina International Ltd to finance the

2.9 Participations The principal direct and indirect subsidiaries of Panalpina World Transport (Holding) Ltd and changes in scope of consolidation are listed in note 31

2.10 Cash pool liabilities due to group companies In 2008, Panalpina World Transport (Holding) Ltd has signed a letter of indemnity as a security for the intraday cash pool overdraft limits (managed by Panalpina International Ltd) over a maximum amount of CHF 62,502 thousand (2017: CHF 63,381 thousand). As per December 31, 2018 the overall overdraft amounted to zero (2017: Amounted to zero).

2.11 Accrued liabilities and accrued expenses In thousand CHF 2018 2017

Accrued liabilities and accrued expenses

Due to third parties 3,968 4,129

Due to group companies 348 262

Total 4,316 4,390

2.12 Long-term interest bearing liabilities due to third parties On December 12, 2018 Panalpina World Transport (Holding) Ltd issued a public fixed rate bond in the amount of CHF 150,000 thousand, with maturity date December 12, 2022 and a nominal rate of 1%.


2.13 Long-term provisions CHF 17,512 thousand (2017: CHF 17,540 thousand) of the long-term provision relates to put options for the acquisition of non-

Furthermore, Panalpina World Transport (Holding) Ltd issued guarantees to Panalpina Management Ltd and Panalpina International Ltd for specified outstanding loans to group companies and cash pool receivables. Based on the management assessment some guarantees to subsidiaries will become payable due to the financial situation of the counterparty, hence a provision amounting to CHF 75,745 thousand (2017: CHF 80,393 thousand) was recognized.

2.14 Treasury shares In thousand CHF 2018 2017

Movements on Treasury Shares

Opening balance 1,531 3,987

Purchased 5,431 3,775

Sold (granted for employee option/share plan or to settle bonus entitlements) (6,254) (6,232)

Closing Balance 707 1,531

In the current period, 41,500 treasury shares (2017: 29,600 shares) were purchased at an average price of CHF 130.9 (2017: CHF 127.5 ). Treasury shares sold / granted totaled 48,480 shares (2017: 50,444 shares) with an average price of CHF 129.0 (2017: CHF 123.5 ). The number of treasury shares held as per December 31, 2018 amounted to 5,543 (2017: 12,523 ). All shares are held to be used for share based payment. For further details also refer to note 20

3. Other information

3.1 Company and legal entity Panalpina World Transport (Holding) Ltd, Basel.

3.2 Full time employees The year average of full time employees does not exceed 50 FTEs (2017: does not exceed 50 FTEs).

3.3 Share capital and significant shareholders The fully paid-in share capital on December 31, 2018 amounts to CHF 2.375 million consisting of 23.75 million registered shares at a par value of CHF 0.10 each. With regards to the authorized capital increase we refer to note 20

shareholdings are disclosed when exceeding 3% of all voting rights in one of the reporting periods.

In % 2018 2017

Shareholders

Ernst Göhner Stiftung, Switzerland 45.9 45.9

Cevian Capital II Master Fund L.P. 12.3 12.3

Artisan Partners Limited Partnership, USA

Franklin Resources < 3

Other investors 3.4 Shares or options on shares owned by related parties In accordance with the stipulations of SCO Art. 663c, the shareholdings in the company and the conversion and option rights held by each current member of the board of directors and the executive board are disclosed in note 25 ements.

3.5 Contingent liabilities Panalpina World Transport (Holding) Ltd carries a joint liability to the federal tax authorities for value-added tax of all Swiss Panalpina subsidiaries.

3.6 Hidden reserves In 2018 and 2017, there was no release of hidden reserves.

3.7 Pending legal claims 28.2 of


3.8 Guarantees In thousand CHF 2018 2017

Guarantees

Guarantees and indemnity liabilities in favor of third parties 540,504 538,966

Guarantees and indemnity liabilities in favor of group companies 38,574 36,473

3.9 Significant events after the balance sheet date The significant events after the statements.


Appropriation of available earnings

The Board of Directors proposes the following appropriation of available earnings at the forthcoming Annual General Meeting:

In CHF 2018 2017**

Available earnings

Balance brought forward from previous years 500,036,416 489,885,582

Profit for the year 95,649,423 99,183,855

Total available earnings 595,685,839 589,069,437

Appropriation of available earnings in accordance to resolution of the general assembly

- Dividend distribution to shareholders (distribution of an ordinary dividend of CHF 3.75 gross per share (2017: CHF 3.75)* (89,041,714) (89,033,021)

Balance to be carried forward 506,644,125 500,036,416 * It is not planned to pay a dividend on own shares held by the Group

** Prior year numbers were adjusted to reflect the actual dividend payout which took place in May 2018


To the General Meeting of

Panalpina World Transport (Holding) Ltd, Basel

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Panalpina World Transport (Holding) Ltd, which comprise the balance sheet as at

31 December 2018 and the income statement and notes for the year then ended, including a summary of significant accounting

policies.

In our opinion the financial statements (pages 69 to 75) articles of

incorporation.

Basis for Opinion

We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those provisions and

f the Financial Statements section of our report. We are

independent of the entity in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession and we

have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements

of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming

our opinion thereon, and we do not provide a separate opinion on these matters.

Investments and Loans


matter

As of 31 December 2018, investments in, and loans to Group companies amounted to CHF 998.8 million. The valuation of the investments and loans is performed on an individual basis in accordance with the Swiss Code of Obligations. The recorded amounts of the investments and loans are compared to the equity balance at valuation date as well as the capitalised earnings or profit projections using to calculate the enterprise value. Due to the significance of the carrying amount of the investments in, and loans to Group companies as well as the judgement involved in the assessment of the valuation, this matter was deemed to be a focus area. For further information on the investments and loans, please refer to

the notes 1.2, 1.3, 2.3, 2.8 and 2.9 to the financial statements.

We haaccounting policy for the valuation of investments and loans. Management uses a predefined impairment testing model to identify the potential need for the impairment of investments and loans. We assessed the difference between the carrying amounts of

the investments including the loans compared to the equity

balances or enterprise values of the related entities. We

furthermore tested the assumptions used by management in

connection with the capitalized earnings and discount rate

used.

In addition, we considered the appropriateness of the related

disclosures in the financial statements.

Deloitte AG

Steinengraben 22

4002 Basel

Schweiz

Telefon: +41 (0)58 279 60 00

Fax: +41 (0)58 279 66 00

www.deloitte.ch


Responsibility of the Board of Directors for the Financial Statements

The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss law and

nable the

preparation of financial statements that are free from material misstatement, whether due to fraud or error.

s a going

concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board

of Directors either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so.

f the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material

easonable assurance is a high

level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards will

always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,

individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of

these financial statements.

A further description of our responsibilities for the audit of the financial statements is located at the website of EXPERTsuisse:

http://expertsuisse.ch/en/audit-report-for-public-companies.

Report on Other Legal and Regulatory Requirements

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system

exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.

We further co

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

Deloitte AG

Fabien Lussu Robert Renz

Licensed Audit Expert Licensed Audit Expert

Auditor in Charge

Basel, 20 February 2019

FLU/RRE/sdo

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