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

Letter to Shareholders

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

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

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

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

Panalpina has a carefully crafted corporate strategy in place which is built on the principles of performance, integrity
and professionalism. Our most crucial assets include our in-depth know-how in key industries, an extensive global network comprising some 500 offices on six continents, a highly qualified and committed workforce, process-optimized information technology, outstanding compliance standards, and efficient and transparent procurement. Using these assets we have formed a global company which is no longer a pure freight forwarding company delivering air and ocean freight. Today, value-added logistic services complemented by supply chain services are the third pillar of our business. By expertly combining these products and services, Panalpina offers door-to-door products closely geared to our customers' supply chains. Thanks to our world-spanning network, these solutions can be implemented in all corners of the globe.

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

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

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

Monika Ribar
Chief Executive Officer

Rudolf W. Hug
Chairman of the Board of Directors