1998
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1998


                          Commission File Number 0-8664

                        Circle International Group, Inc.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)
 
             Delaware                                   94-1740320
  -------------------------------                    ----------------
  (State of other jurisdiction of                    (I.R.S. Employer
   incorporation or organization)                 Identification Number)

           260 Townsend Street
       San Francisco, California                          94107-1719
----------------------------------------                  ----------
(Address of principal executive offices)                  (Zip Code)

       Registrant's telephone number, including area code: (415) 978-0600

           Securities registered pursuant to Section 12(b) of the Act:
                                                 Name of each exchange
           Title of each class                    on which registered
           -------------------                    -------------------
                  None                                   None

             Securities registered pursuant to Section 12(g) of the Act:
                                 Title of each class
             -----------------------------------------------------------
                          Common Stock, $1.00 par value
           Rights to Purchase Series A Junior Participating Preferred Stock

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     At March 25, 1999,  the aggregate  market value of the registrant's  Common
Stock held by non-affiliates of the registrant was approximately $213,770,250.
     At March 25, 1998, the number of shares  outstanding of registrant's Common
Stock was 17,131,969.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Proxy Statement dated April 1, 1999 - Part III of this Form 10-K (Items 10,
11, 12 and 13).
     The Exhibit Index is located on pages 21 through 22 hereof.
<PAGE>

                                     PART I
                                     ------

ITEM 1  - BUSINESS
------------------

General

Circle  International  Group,  Inc. and  subsidiaries  ("Circle") is a leader in
providing transportation and integrated logistics services for the international
movement of goods and the furnishing of value-added  information,  distribution,
and inventory management services to customers worldwide.  Circle is principally
engaged in international air and ocean freight forwarding, customs brokerage and
integrated logistics.  Circle provides value-added services in addition to those
customarily  provided by  traditional  air  freight  forwarders,  ocean  freight
forwarders  and customs  brokers.  These services are designed to provide global
logistics  solutions for  customers in order to  streamline  their supply chain,
reduce their  inventories,  improve their logistics  information,  enhance their
profitability  and provide them with more efficient and effective  international
distribution strategies.

Circle's  global  array of  services  benefits  customers  by  reducing  overall
international  logistics  costs and increasing the speed and  reliability of the
delivery of goods worldwide.  These services  include:  air and ocean export and
import freight transportation;  worldwide customs brokerage, duty drawback, Free
Trade Zone management and associated  services;  global freight tracking;  other
information  management  services such as electronic data  interchange  ("EDI"),
electronic  invoicing  and  purchase  order  management;  logistics  management;
warehousing  and  distribution  services;  inventory and  materials  management;
protective cargo packing; bonded warehousing;  project cargo management;  global
purchasing  and trade  finance  services;  and marine  insurance  (ocean and air
coverage).

Circle's global  services are supplied  through its network of over 300 offices,
agents and distribution centers located in over 100 countries on six continents.
These  facilities  are  linked by  Circle's  real-time,  on-line  communications
network  that speeds the two-way  flow of  shipment  data and related  logistics
information  between origins and  destinations  around the world. In addition to
its  own   operations,   Circle  utilizes  a  network  of  overseas  agents  for
comprehensive, global coverage of major trade centers.

Circle  commenced  operations in 1898,  and marked its 100 year  anniversary  in
1998. It was incorporated in California in 1970, and  reincorporated in Delaware
in 1987.  Unless the context  otherwise  requires,  references to Circle include
Circle International Group, Inc. and its subsidiaries.

Certain information  regarding Circle's operations by geographic regions for the
three years in the period ended December 31, 1998, is included in Note 13 of the
Notes to Consolidated Financial Statements.


Recent Developments
-------------------

Organization and Acquisitions

In July 1998, Circle hired a new President and Chief Executive Officer, David I.
Beatson. Within three months after his arrival, Mr. Beatson hired new executives
to fill the following  positions:  Chief  Information  Officer;  Chief Operating
Officer,  North America;  Senior Vice President,  Global Sales;  and Director of
Corporate  Communications.  In January 1999, Mr. Beatson was elected Chairman of
Circle's  Board of  Directors.  Circle's  former  Chairman  and Chief  Executive
Officer,  Peter Gibert,  relocated to Spain and operates as a minority owner and
managing  director  of  Circle's  subsidiaries  in Spain  and  Portugal.  Circle
recently  implemented  a strategy  to  strengthen  and grow  Circle's  sales and
marketing  efforts,  particularly in the United States, and has announced a plan
to invest further in global  information  technology.  Circle  anticipates  that
there will be more investment in furthering these strategies.

In August 1998,  Circle acquired in a transaction  accounted for as a pooling of
interests  all of  the  stock  of  Alrod  International,  Inc.,  a  full-service
transportation  company with  operations  on the West Coast of the United States
and Mexico.  Additionally,  in three separate transactions occurring from May to
August 1998,  Circle  acquired 76% of the stock of Concord  Express  (Singapore)
Pte.  Ltd., and CE Logistics  Asia,  Pte. Ltd., and all of the assets of Concord
Express  (United  Kingdom)  Ltd.  and  Concord  Express  of  Texas,  Inc.  These
operations are primarily based in Singapore with branches in Houston,  Texas and
Prestwick,  Scotland and specialize in distribution and transportation  services
for the high-tech  industry.  See Note 3 of the Notes to Consolidated  Financial
Statements for a further discussion of Circle's acquisitions.

                                       2
<PAGE>

Information Systems

Circle continuously  enhances its information  systems  capabilities in order to
meet its  customers'  changing  needs  and to  provide  first-class  information
transmission,  processing,  and management services. Circle has been a leader in
providing its customers with shipment tracking and tracing capabilities and with
providing data and reports to better manage the global logistics process.

Circle is  devoted to  improving  the  automation  of its  services  in order to
support the logistics  needs of its customers,  increase  efficiency and enhance
employee productivity. Circle's information systems allow its customers to track
shipments,  produce  variance  reports and  analyses  helpful to managing  their
business, and provide an easy-to-use electronic mail communication system.

Circle  has  invested  considerable  effort  in its EDI  capabilities  to  allow
electronic   transmission  of  shipment  documentation   according  to  customer
requirements.  Additionally, Circle maintains a web-site through which customers
can track air freight shipments.  Circle continues to link future development of
its information systems to the specific  requirements of its customers and seeks
to connect its customers to its information  systems and Internet tools whenever
possible.   New  information  systems  initiatives  include   implementation  of
purchased   integrated   accounting  and  operational  software  within  Europe,
implementation  of imaging,  work-flow and document  management  technology  and
accounting  software  for the  Americas as well as  implementation  of warehouse
management and sales force automation software worldwide.

Year 2000 remediation efforts present a challenge to Circle because its services
depend on third parties (such as airline or ocean carriers, customs authorities,
truckers,  customers  and  governmental  agencies)  around the world.  Circle is
devoting  significant  time,  effort and expense  toward Year 2000  remediation.
There is no assurance  that the  operations of Circle and its customers will not
be impacted by Year 2000 events. (For a further discussion of Circle's Year 2000
efforts,  see  "ITEM 7 -  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations"; Year 2000.)

                                       3

<PAGE>

Description of Business
-----------------------

INTERNATIONAL AIR FREIGHT FORWARDING

Circle believes that it is one of the largest  forwarders of  international  air
freight in the United  States.  Circle's  air  freight  forwarding  and  related
logistics services include the following:  inland transportation of freight from
point  of  origin  to  distribution  center  or the  carrier's  cargo  terminal;
warehousing and inventory management;  cargo assembly; export packing and vendor
shipment  consolidation;  global freight  forwarding;  charter  arrangement  and
handling; electronic transmittal of logistics documentation; electronic purchase
order/shipment  tracking;  expedited document delivery to overseas  destinations
for customs clearance;  and procurement of cargo insurance.  Circle does not own
or  operate   aircraft,   which  management   believes  gives  Circle  increased
flexibility to tailor its services to customer requirements.

As a global air freight forwarder,  Circle is both a consolidator of air freight
shipments  (an indirect air carrier) and an airline  cargo agent.  The following
table provides certain  information  concerning  Circle's air freight forwarding
business during each of the three years ended December 31, 1998, 1997 and 1996.

                                               Year ended December 31,
                                        1998 (2)        1997 (2)        1996 (2)
                                       ------          ------          ------
                                      (in thousands, except per shipment data)
As indirect carrier:
Revenue (1)                         $ 466,121        $ 452,462       $ 395,968
Revenue net of air freight
  consolidation costs (1)           $ 101,590         $ 87,109        $ 79,567
Number of shipments                       476              466             427
Net revenue per shipment                $ 213            $ 187           $ 186
Weight in kilos                       183,245          181,893         150,513
Kilos per shipment                        385              391             352

As airline agent:
Revenue (1)                          $ 16,580         $ 19,101        $ 22,538
Number of shipments                       109              108             115
Net revenue per shipment                $ 152            $ 177           $ 196
Weight in kilos                        39,075           31,510          33,050
Kilos per shipment                        358              292             287

(1)  Management  believes  that revenue net of air freight  consolidation  costs
     ("net revenue") is a better  measure for  comparison  purposes of the above
     two types of air freight forwarding  services offered by Circle because net
     revenue,  like  revenue  earned  by Circle as an  airline  agent,  does not
     include the carrier's charge to Circle for carrying the shipment.

(2)  Previously  reported  amounts have been  restated to reflect the pooling of
     interests with Alrod International, Inc. in August 1998.

During 1998,  Circle's principal air freight forwarding  customers were shippers
of computer,  electronic and high  technology  equipment,  automotive  products,
machinery  and  machine  parts,  consumer  goods,   clothing,   pharmaceuticals,
chemicals and aerospace equipment.

The air  freight  forwarding  business  of  Circle is not  dependent  on any one
customer  or  industry.  Circle  provides  services  to global or  multinational
customers, as well as regional customers. No customer accounted for more than 5%
of Circle's net air freight forwarding revenue in 1998.

                                       4
<PAGE>

Indirect Air Carrier

As an indirect  air  carrier,  Circle  procures  shipments  from its  customers,
consolidates  shipments  bound  for a  particular  destination,  determines  the
routing, selects the direct carrier (an airline) with which the consolidated lot
is to move and tenders each  consolidated lot as a single shipment to the direct
carrier for transportation to a destination. At the destination,  Circle, or its
agent, receives the consolidated lot, breaks it into its component shipments and
distributes the individual shipments.  During 1998, Circle derived approximately
86% of its net air freight  forwarding  revenue from its services as an indirect
air carrier.

Circle's rates are based on a per kilo charge that generally  decreases within a
certain range as the weight of the shipment increases. Circle ordinarily charges
the  shipper a rate less than the rate that the  shipper  would be charged by an
airline.  The rates that airlines charge to forwarders and others also generally
decrease  as  the  weight  of  the  shipment  increases.  As  a  result  of  the
consolidation of its customers' shipments,  Circle generally obtains lower rates
per kilo from airlines  than the rates it charges its  customers for  individual
shipments.  This rate  differential  is the primary  source of Circle's  net air
freight forwarding  revenue.  Circle's practice is to make prompt adjustments in
its rates to match changes in airline rates.

As  part  of  its  services,  Circle  prepares  documentation  relating  to  the
international  movement of goods; provides handling,  packing and containerizing
services;  arranges  for the routing and tracing of  shipments  when  necessary;
provides physical breakbulk,  delivery and inland transportation  services;  and
arranges  for freight  insurance.  Another  source of  Circle's  net air freight
forwarding  revenue is the fees which Circle charges for services related to the
movement  of  goods,  that  include  computer-prepared  shipment  documentation;
expedited  delivery of air waybills,  packing lists,  commercial  invoices,  and
other documents; and electronic shipment tracking and tracing. Circle offers its
customers access to its global on-line computer  information system,  which acts
as a comprehensive source of vital information for its customers.

Airline Agent

As an authorized cargo sales agent of most airlines  worldwide,  Circle arranges
for the  transportation of individual  shipments and receives from the airline a
commission for arranging the shipment. In addition,  Circle provides the shipper
with  ancillary  services such as export  documentation  for which it receives a
separate  fee.  When  acting  in this  capacity,  Circle  does  not  consolidate
shipments or have  responsibility  for shipments once they have been tendered to
the airline.  Circle conducts its agency air freight forwarding  operations from
the same facilities as its indirect  carrier  operations,  and services the same
regions of the world.  During 1998, Circle derived  approximately 14% of its air
freight forwarding net revenue from its services as an airline agent.

CUSTOMS BROKERAGE

Circle  functions  as a customs  broker with  respect to entries of freight into
approximately  55  major  destinations  in the  United  States  and in over  300
overseas destinations through its network of offices and agents.

In its  capacity  as a customs  broker,  Circle  prepares  and files all  formal
documentation  required for clearance through customs agencies,  obtains customs
bonds,  in many cases  facilitates the payment of import duties on behalf of the
importer,  arranges  for  payment of collect  freight  charges,  and assists the
importer in obtaining the best commodity  classifications  and in qualifying for
duty  drawback  refunds.   Circle's  customs  brokers  and  support  staff  have
substantial  knowledge  of the  complex  tariff  laws  and  customs  regulations
governing the payment of duty, as well as valuation and import  restrictions  in
their respective countries. Within the U.S., Circle employs a significant number
of personnel holding individual customs broker licenses.

Circle relies both on company-designed  and third-party  computer technology for
customs brokerage activities performed on behalf of its clients.  Circle employs
the Automated Brokerage Interface information system,  providing an on-line link
with the United States Customs  Service.  In several  global trading  centers in
addition to the United States, Circle's offices are connected  electronically to
customs  agencies for expedited  pre-clearance  of goods and centralized  import
management.  Such on-line interface with customs agencies speeds freight release
and provides  nationwide control of clearances at multiple ports and airports of
entry.

                                       5
<PAGE>

Circle  works with  importers  to design  cost-effective  import  programs  that
utilize Circle's  distribution and logistics  services and computer  technology.
Such  services  include  electronic  document  preparation,  routing  cargo from
overseas   origins  to  ports  and  airports  of  entry,   bonded   warehousing,
distribution  of the cleared cargo to inland  locations and duty  drawback.  For
consolidated shipments,  containers are devanned,  cargo is segregated according
to final  destination,  and goods are forwarded to final  destinations.  In many
U.S. and overseas  locations,  Circle's bonded  warehouses  enable  importers to
defer  payment of  customs  duties  and  coordinate  release of cargo with their
production or  distribution  schedules.  Goods are stored under Customs  Service
supervision  until the importer is ready to withdraw or re-export  them.  Circle
receives  storage  charges  for  these  in-transit  goods  and fees for  related
ancillary  services.  Circle  also offers  Free Trade Zone  management  and duty
drawback  services  to  provide  customers  with  additional  tools to  maintain
cost-effective import programs.

As a customs broker  operating in the United  States,  Circle is licensed by the
Treasury Department and regulated by the United States Customs Service. Circle's
fees for acting as a customs  broker in the United  States are not regulated and
Circle  does not have a fixed  fee  schedule  for  customs  brokerage  services.
Instead, its fees are generally based on the volume of business transacted for a
particular  customer,  and the type, number and complexity of services provided.
In addition to its fees,  Circle bills the importer for amounts which Circle has
paid on the importer's behalf,  including duties,  collect freight charges,  and
similar payments.

INTERNATIONAL OCEAN FREIGHT FORWARDING

As a global ocean freight forwarder, Circle arranges for the shipment of freight
by ocean carriers and acts as the agent of the shipper or the importer. Circle's
ocean  freight   forwarding  and  related  logistics   services  include  inland
transportation from point of origin to distribution  facility or port of export;
cargo assembly, packing and consolidation;  warehousing;  electronic transmittal
of documentation and shipment tracking;  expedited document delivery;  pre-alert
consignee notification; and cargo insurance.

A number of Circle's  facilities provide  protective cargo packing,  crating and
specialized handling services for retail goods,  government-specification cargo,
consumer goods,  hazardous cargo,  heavy machinery and assemblies and perishable
cargo.  Other  facilities  are equipped to handle tons of equipment and material
from multiple  origins to overseas  "turn-key"  projects,  such as manufacturing
facilities or government installations.  Circle does not own or operate ships or
assume carrier  responsibility,  preferring to retain the  flexibility to tailor
logistics services and options to the customer's requirements.

Circle's  compensation  for its ocean  freight  forwarding  services  is derived
principally  from  commissions  paid by shipping  lines and from  forwarding and
documentation fees paid by its customers, who are either shippers or consignees.
In 1998,  approximately 49% of Circle's net ocean freight forwarding revenue was
attributable to commissions, forwarding fees and associated ancillary services.

Ocean Freight Consolidation

Circle's  global  operations as an indirect  ocean carrier or NVOCC  (non-vessel
operating  common  carrier)  are  similar in some  respects  to its air  freight
consolidation  operations.   Circle  procures  customer  freight,   consolidates
shipments bound for a particular  destination,  determines the routing,  selects
the ocean  carrier or charters a ship,  and tenders each  consolidated  lot as a
single  shipment to the direct  carrier  for  transportation  to a  distribution
point. As a NVOCC,  Circle generally derives its revenue from the spread between
the rate charged to its customer  and the ocean  carrier's  charge to Circle for
carrying  the  shipment,  in addition to charging for other  ancillary  services
related  to the  movement  of the  freight.  Because  of the  volume of  freight
controlled and consolidated by Circle,  Circle is generally able to obtain lower
rates  from  ocean  carriers  than the rate  that the  shipper  would be able to
procure.  In 1998, this service and associated  ancillary  services  contributed
approximately 51% of Circle's net ocean freight forwarding revenue.

                                       6
<PAGE>

DISTRIBUTION AND MATERIALS MANAGEMENT SERVICES

Circle offers a full range of customized  distribution and materials  management
services in connection  with the  transportation  of cargo.  These  services are
provided in a number of Circle's owned and leased  logistics  facilities in many
locations  throughout  the  world.  In 1998,  Circle  continued  its  program of
improving  its  existing   facilities   and   constructing   new  warehouse  and
distribution  facilities to meet its customers' needs. Circle's distribution and
materials  management  services include  inventory  control,  order  processing,
import and export  freight  staging,  protective  and  specialized  packing  and
crating,   pick-and-pack   operations,   containerization,   consolidation   and
deconsolidation  and special handling for perishables,  hazardous  materials and
heavy-lift  equipment.  For import  shipments,  Circle provides bonded warehouse
services and, in certain  locations,  Free Trade Zone services.  These warehouse
and  distribution   services  complement  the  other  transportation   services,
including the information systems tools provided by Circle that form part of the
integrated logistics solutions Circle offers to its customers.

INSURANCE

Another  transportation  service  offered  to  customers  is  the  arranging  of
international marine insurance in connection with Circle's air freight and ocean
freight forwarding  operations.  Insurance coverage  frequently is tailored to a
customer's  shipping  program and is procured for the customer as a component of
Circle's  integrated  logistics.  Circle  also  arranges  for  surety  bonds for
importers as part of its customs brokerage activities.

GLOBAL PROJECTS

Circle has global  project  divisions in North America and the United Kingdom to
meet the  special  requirements  of global  project  management  and heavy  lift
movements.  In  addition  to  logistics  advice  and  traditional  ocean and air
transportation  services,  the project  divisions  provide  on-site  assistance,
vessel  chartering  services  and  consulting   regarding   large-scale  project
movements.

TRADE FACILITATION SERVICES

Circle's wholly-owned  subsidiary,  Circle Trade Services Ltd. ("CTSL"),  offers
purchasing,  procurement  and trade  finance  services to  companies  engaged in
global trade. CTSL's mission is to provide customers requiring the international
transportation  of cargo with creative global trade solutions,  which enable the
customer  to  lower  its  costs  or  improve  its  supply  chain  management  in
international transactions.  Included among its various trade services, CTSL has
developed   programs  for   customers   which   entail   locating  new  sourcing
opportunities,  coordinating  the activities of multiple  suppliers and creating
trade finance solutions.


Competition and Business Conditions

Circle's   principal   businesses   are  directly   related  to  the  volume  of
international  trade,  particularly  trade  between the United  States and other
nations. In general, global trading is expanding as businesses increasingly seek
new sourcing  opportunities and penetrate  international  markets. The extent of
such trade is  influenced  by many  factors,  including  economic and  political
conditions in the United States and abroad,  changes in supply or  manufacturing
practices,   labor  conditions,   wars  and  other  armed  conflicts,   currency
fluctuations  and United  States and foreign  laws  relating  to tariffs,  trade
restrictions,  foreign investments and taxation.  In 1998, Circle's business was
impacted by global economic events, particularly in Asia and Latin America. This
was  reflected   particularly   in  reduced  exports  from  the  United  States.
Additionally,  Circle believes that contingencies  surrounding the transition to
the Year 2000 might have an adverse impact on business  conditions in the market
it serves.

Circle  is one of the  world's  largest  international  freight  forwarders  and
integrated  logistics  providers.  In addition to competition from other freight
forwarders and cargo sales agents,  Circle  encounters  competition  from direct
carriers  which  actively  solicit  freight from  shippers  and from  integrated
transportation  companies  that  operate  their  own  aircraft  and  also act as
carriers.  Other   transportation-related   businesses,  such  as  trucking  and
distribution  companies,  have also entered the logistics and freight forwarding
market. Significant competition comes from large domestic and foreign firms with
substantial  capital  resources which have offices in multiple global locations,
offer a broad  array of  services  and  provide  information  technology  ("IT")
support.

As a customs  broker  and ocean  freight  forwarder,  Circle  encounters  strong
competition  in  every  port in  which  it does  business.  Circle  has  customs
brokerage and ocean freight forwarding offices in most major United States ports
and  competes  with  large  domestic  and  foreign  firms,  as well as local and
regional firms.

                                       7
<PAGE>

Circle offers its customers  multiple  transportation  services,  in addition to
traditional  air and  ocean  freight  forwarding,  in  order  to meet all of the
logistics  requirements of its customers.  An extension of its array of multiple
services is Circle's  integrated  transportation  logistics  program under which
Circle offers a  comprehensive  program  designed to meet the  customer's  total
door-to-door transportation requirements.  This assists the customer in creating
more efficient global sourcing, financing, inventory management and distribution
and warehousing strategies. The value-added logistics capabilities which support
this  strategy use the full  spectrum of services  offered by Circle,  including
information  management,   materials  management,   protective  packing,  vendor
coordination and purchase order processing, ocean or air transportation, customs
brokerage, warehouse and distribution and global trade services. Circle's global
transportation  logistics  program  often  relies  on  the  integration  of  its
customers'  information systems with Circle's  information  systems,  frequently
using electronic data interchange ("EDI") and assigning Circle employees who are
dedicated exclusively to the customer's shipment management requirements.

Integrated  logistics and related value-added  services are, in part, a response
to the growing trend toward the  outsourcing  of key  distribution  functions by
businesses  requiring  international  logistics  services  and are a response to
competitive  pressures  which have reduced  traditional  freight  forwarding and
customs brokerage margins.

Marketing

Circle's worldwide services are marketed primarily by its senior executives,  by
its local and global salespeople and by over 450 country,  regional,  branch and
district  managers who divide  their time among  marketing,  administration  and
operations.  These  people  generally  deal  directly  with  executives  in  the
transportation,  finance,  logistics,  shipping  or  purchasing  departments  of
Circle's existing and potential customers.  Their sales efforts are supplemented
by Circle's  agents in certain foreign  commercial  centers in which Circle does
not have an office.

Circle employs a global sales team targeting multinational customers, as well as
regional and local sales professionals. Circle also relies on its foreign agents
to sell its services.  In 1998, Circle placed additional  emphasis on building a
global sales  infrastructure and retained several additional sales professionals
to focus on this effort. In addition, in 1998, Circle started the implementation
of its strategy to increase the number of its  salespeople in the United States.
Circle also has  Marketing and Global Sales  departments  designed to strengthen
Circle's  sales and  marketing  activities,  including  its  response  to global
requests for bids.

In  conjunction  with these sales and  marketing  efforts,  Circle  continues to
invest significant  resources in enhancing its information systems to make these
systems  more  responsive  to  customers  and  other  users  in  managing  their
international transportation needs. The use of EDI applications, global tracking
and visibility to a customer's  shipments via the Internet as well as customized
Extranets also serve as important sales tools.


Employees

As  of  December  31,  1998,   Circle  employed  over  4,600  people,   of  whom
approximately  825 were  engaged  in  managerial  and sales  activities  and the
balance were engaged in  operations  or were general  office  employees.  Circle
conducts regular training  programs for its supervisors,  managers,  salespeople
and customer  service  representatives.  In 1998, over 1,100 employees  attended
Circle conducted training programs.

Executive Officers

Circle's executive officers are as follows:

   Name            Age                   Position
   ----            ---                   --------

David I. Beatson    51     Chairman of the Board, President and Chief Executive
                           Officer
Janice Kerti        50     Senior Vice President, Chief Financial Officer and
                           Treasurer
Cynthia A. Stoddard 42     Senior Vice President and Chief Information Officer
Robert H. Kennis    46     Vice President, Secretary and General Counsel
Kim E. Wertheimer   45     Vice President (and Executive Vice President of 
                           Circle International, Inc.)

Mr.  Beatson  joined Circle in July 1998 as its  President  and Chief  Executive
Officer.  In January 1999, Mr.  Beatson  assumed the position of Chairman of the
Board of  Directors.  From July 1994 to July 1998,  he served as  President  and
Chief Executive Officer of the Emery Worldwide subsidiary of CNF Transportation,
Inc. Mr. Beatson was employed by CNF  Transportation,  Inc. for approximately 16
years.

                                       8
<PAGE>

Ms.  Stoddard  joined Circle in September  1998 as its Senior Vice President and
Chief Information Officer,  responsible for managing Circle's global information
technology and communications  systems.  From June 1997 to July 1998, she served
as Vice President,  Information  Services for the Emery Worldwide  subsidiary of
CNF Transportation Inc. Prior to June 1997 she served as Director of Information
Systems for Emery.

In September  1996,  Ms. Kerti joined Circle as Senior Vice  President,  Western
Division. From June 1997 to May 1998, she was Corporate Controller. In May 1998,
Ms. Kerti assumed the position of Chief Financial  Officer and Treasurer.  Prior
to 1996, Ms. Kerti served as Finance Director and as Managing  Director of South
Pacific Operations for MSAS Cargo International, Ltd.

Mr.  Wertheimer  joined Circle in May 1991,  following  Circle's  acquisition of
Sekin  Transport  International,  where he was Vice  President  of Planning  and
Development.  In May 1995, he was elected Vice President of Circle. He presently
has management responsibilities for Circle's North America  logistics operations
and Circle Trade Services.

Mr. Kennis joined  Circle in 1989.  He serves as Vice  President,  Secretary and
General Counsel and is Circle's Chief Legal Officer. Prior to joining Circle, he
was Vice President and Legal Counsel for The Consolidated  Capital Companies for
four years.  From 1978 to 1984,  he was with the law firm of Bronson,  Bronson &
McKinnon as an associate and first-level partner.


ITEM 2  - PROPERTIES

The  properties  used  in  Circle's  domestic  and  foreign  operations  consist
principally  of air and ocean  freight  forwarding  offices,  customs  brokerage
offices and warehouse and distribution facilities. In the United States, freight
forwarding  operations and customs brokerage offices are conducted from the same
facility.  Circle's foreign offices are principally engaged in customs brokerage
and  ocean  and  air  freight  forwarding.  Additionally,  other  transportation
management    services    such   as    warehousing,    distribution,    packing,
containerization and other specialized services are offered at many offices.

The  following  table sets forth  certain  information  as of December  31, 1998
concerning  Circle's  domestic  and  foreign  facilities  and  freight  handling
terminals.

                      Number of Facilities
                      --------------------
                 Owned       Leased       Total
                 -----       ------       -----

Domestic           13          59           72
Foreign            26         165          191
               ---------   ---------     -------
Total              39         224          263
               =========   =========     =======


Circle owns its headquarters building in San Francisco.

Under many of its leases, Circle, in addition to rental payments, is responsible
for payment of property taxes, maintenance and insurance. In 1998, the aggregate
rental expense for all of Circle's  leased  facilities was  approximately  $18.8
million.

For further information concerning Circle's lease commitments, see Note 6 of the
Notes to Consolidated Financial Statements.


ITEM 3  - LEGAL PROCEEDINGS

Circle  is party to  routine  litigation  incident  to its  business,  primarily
relating to claims for goods lost or damaged in transit or  improperly  shipped.
Many of the lawsuits to which Circle is a party are covered by insurance and are
being defended by Circle's insurance carriers.  Circle has established  reserves
and it is  management's  opinion that the resolution of such litigation will not
have a material  adverse effect on Circle's  consolidated  financial  statements
taken as a whole.

                                       9
<PAGE>

ITEM 4  - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Inapplicable.

                                     PART II

ITEM 5  - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
          HOLDER MATTERS

Circle's  common  stock is traded over the counter  under the symbol  CRCL.  The
following  table sets forth the  closing  prices in the NASDAQ  national  market
system for Circle's common stock for the calendar periods indicated, as reported
by NASDAQ.

                      High          Low
                     ------        -----
1998
Fourth Quarter       $21.38       $13.50
Third Quarter         28.56        14.00
Second Quarter        29.00        23.13
First Quarter         29.50        21.00
                                 
                                 
1997                             
Fourth Quarter       $32.38       $22.94
Third Quarter         31.38        24.88
Second Quarter        27.75        21.63
First Quarter         23.50        21.00
                               

As of January 27, 1999,  the  approximate  number of  stockholders  of record of
Circle's common stock,  excluding stockholders whose stock is held as nominee or
in street name by brokers, was 368.

Dividends Declared

Dividends declared per common share during 1998 and 1997 were:

1998                    1997
----                    ----

June 29     $0.135      June 30     $0.135
December 14  0.135      December 15  0.135

The Board of Directors  considers  payment of cash  dividends  on a  semi-annual
basis subject to the availability of earnings, the financial condition of Circle
and other relevant factors.

                                       10
<PAGE>

ITEM 6  - SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>
                                CIRCLE INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
                              (in thousands except per share and employee amounts)


                                                           Year Ended December 31, (1)

                                   1998 (2)         1997             1996             1995             1994
                                   ----             ----             ----             ----             ----
<S>                         <C>         <C>  <C>         <C>  <C>         <C>  <C>         <C>  <C>         <C>
Revenue:
Air freight forwarding      $ 482,701   66%  $ 471,563   66%  $ 418,506   65%  $ 378,900   65%  $ 341,283   68%
Ocean freight forwarding      111,938   15%    111,200   15%    106,554   16%     96,921   17%     80,464   16%
Customs brokerage and other   143,039   19%    134,226   19%    120,570   19%    104,812   18%     79,721   16%
                            ---------------  ---------------  ---------------  ---------------  ---------------
     Total                  $ 737,678  100%  $ 716,989  100%  $ 645,630  100%  $ 580,633  100%  $ 501,468  100%
                            ===============  ===============  ===============  ===============  ===============
                                                              
                                                              
Net Revenue:                                                  
Air freight forwarding      $ 118,170   39%  $ 106,210   38%  $ 102,105   39%   $ 94,573   41%   $ 93,973   46%
Ocean freight forwarding       40,471   13%     37,608   14%     35,783   14%     32,238   14%     29,174   15%
Customs brokerage and other   143,039   48%    134,226   48%    120,570   47%    104,812   45%     79,721   39%
                            ---------------  ---------------  ---------------  ---------------  ---------------
     Total                  $ 301,680  100%  $ 278,044  100%  $ 258,458  100%  $ 231,623  100%  $ 202,868  100%
                            ===============  ===============  ===============  ===============  ===============
                                                              
                                                              
Income from                                                   
     operations              $ 23,829         $ 32,373         $ 29,711         $ 26,496         $ 24,181
Net income                     18,515           26,332           21,717           18,159           17,108
Net income per share:                                         
     Basic                       1.09             1.57             1.30             1.08             0.99
     Diluted                     1.07             1.53             1.28             1.07             0.99
Dividends declared                                            
     per share                   0.27             0.27             0.24             0.22             0.21
 Weighted average shares                                      
      outstanding:                                            
         Basic                 17,040           16,823           16,671           16,791           17,198
         Diluted               17,260           17,191           16,926           17,026           17,280
                                                              
At December 31,                                               
Working capital                93,428          100,271           73,570           73,650           44,055
Marketable securities             935            1,284            7,799           36,544           41,660
Total assets                  493,729          434,399          409,253          348,256          335,096
Long-term obligations          21,558           27,702           29,014           30,183           32,066
Stockholders' equity          219,712          200,972          182,777          166,387          152,993
Number of employees             4,602            4,160            3,782            3,361            3,262
                                                               
                                                                  
<FN>
(1)  Previously reported amounts have been restated to reflect the pooling of 
     interests with Alrod  International, Inc. in August 1998.
(2)  1998 includes special charges of $10.7 million, or $8.1 million, net of tax
     ($0.47 per diluted share).
</FN>
</TABLE>

                                       11
<PAGE>

ITEM 7  - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion contains certain forward-looking  statements reflecting
Circle's  current   expectations   that  are  dependent  on  certain  risks  and
uncertainties  including  but  not  limited  to such  factors  as  economic  and
political  conditions around the world,  international  laws,  currency exchange
rates,  the  effect of  Circle's  accounting  policies  and other  risk  factors
detailed herein and the impact Year 2000 may have on information systems.  There
can be no assurances  that Circle's  actual  future  performance  will meet such
expectations.  There  may also be  important,  unforeseen  risks  not  described
herein.


Results of Operations
1998 versus 1997
----------------

Revenue in 1998 increased by $20.7 million or 3% over 1997:

Air freight  forwarding  revenue increased by $11.1 million or 2% over 1997 as a
result of revenue  increases in Asia  Pacific and Europe  where  Circle  handled
higher kilo volumes and an increased  number of shipments.  These increases were
partially  offset by revenue  reductions in North  America where Circle  handled
less kilo volume and a reduced number of shipments due primarily to decreases in
export activity to Asia Pacific.

Ocean freight  forwarding revenue increased by $0.7 million or 1% over 1997 as a
result of increased  revenue and shipments in Asia Pacific and Europe.  Circle's
North America operations  experienced lower volumes as well as a shift of export
activity  from Asia Pacific to other parts of the world,  resulting in a revenue
decrease.

Customs brokerage and other revenue which includes warehousing, distribution and
other  logistics  services,  increased  7%, or $8.8 million over 1997. In Europe
there was higher  import  activity  which was  partially  offset by lower import
activity in Asia  Pacific  due to weakened  local  currencies.  Warehousing  and
distribution,  and other revenue  increased in Europe,  North America,  and Asia
Pacific over the same period last year.

The gross  revenue  increase of $20.7  million  included a negative  impact from
foreign  exchange of  approximately  $50.9  million  resulting  from  converting
foreign currency into U.S. dollars for financial reporting purposes.

Net Revenue in 1998 increased by $23.6 million or 9% over 1997:

Air freight  forwarding net revenue  increased by $12.0 million or 11% over 1997
as a result of improved margins in all regions and increased  shipment volume in
Europe and Asia Pacific. In North America, net revenue declined due to lower air
freight  revenue.  This  reduction was  substantially  offset by more  effective
purchasing  of  transportation  services.  Although  the  result  was  lower net
revenue, margins in North America improved by two percentage points.

Ocean freight  forwarding net revenue  increased by $2.9 million or 8% over 1997
as a result of increased  shipments and revenue in Asia Pacific and Europe.  Net
revenue grew at a faster rate than revenue due to improved margins.

The net  revenue  increase  of $23.6  million  included a negative  impact  from
foreign  exchange of  approximately  $13.1  million  resulting  from  converting
foreign currency into U.S. dollars for financial reporting purposes.

Salaries and related  costs  increased  7.1% or $10.5 million  principally  as a
result  of  hiring  more  employees  to serve new  customers  and to  accelerate
business growth.  Salaries as a percentage of net revenues dropped from 53.2% to
52.5%.

Operating,  selling, and administrative expenses increased 22% or $21.7 million.
This  increase  included  $10.7  million  of special  charges  related to merger
integration  costs for Alrod  International,  Inc.,  the  write-off  of  certain
receivables  at Circle Trade  Services as part of  repositioning  that business,
certain charges related to Latin America operations, facility consolidation, the
write-down of information  technology  assets and employee  severance costs. The
remaining  $11.0  million  increase  was mainly due to an increase in  occupancy
costs related to additional  warehousing and distribution  facilities as well as
an increase in professional  fees and  depreciation  related to the upgrading of
computer  systems and relocation of the information  technology group supporting
the North America operations.  There were also higher communication costs across
all  regions,  due to a higher  volume of  transactions.  In late  1998,  Circle
implemented cost reductions to partially offset the increased  expenses from the
expansion of its sales force and increased  information  technology  costs.  The
benefit of these reductions is expected to occur primarily during 1999.

                                       12
<PAGE>

Other income, net, decreased $0.9 million. Income from affiliates decreased $1.9
million  primarily  due to the effect of the  downturn in the Latin  America and
Asia Pacific economies on Circle's automotive logistics affiliate.  The increase
in interest,  net, of $1.3 million was attributable to income on IRS tax refunds
and to a reduction in Circle's debt levels. Other, net, decreased $0.2 million.

The effective income tax rate for 1998 was 41.1% compared to 35.6% for 1997. The
effective tax benefit from the special charges was only 24.1%.  This resulted in
an overall  increase in the tax rate for the year.  The  effective  tax rate for
1998 excluding the special charges was 36.8%. The increase from 1997 is a result
of the 1997 favorable resolution of IRS audits of the years 1986 through 1992.

1997 versus 1996
----------------

Revenue in 1997 increased by $71.4 million or 11% over 1996:

Air freight  forwarding revenue increased by $53.1 million or 13% over 1996 as a
result of revenue  increases  in Asia and the  Americas.  Increases  were due to
higher kilo volumes and  increased  number of  consolidation  export  shipments,
offset slightly by lower direct agency  shipments.  This is due to shifting more
share of the business to consolidations and higher kilo global accounts.

Ocean freight  forwarding  revenue  increased  $4.6 million or 4% over 1996 as a
result of an increase in the number of shipments in the Americas.

Customs  brokerage and other revenue  increased  $13.7 million or 11% over 1996.
The  improvement  was a result of  increases  in the number of  customs  entries
processed and in warehousing and distribution services.

Net Revenue in 1997 increased by $19.6 million or 8% over 1996:

Air freight  forwarding net revenue  increased $4.1 million or 4% over the prior
year due to an increase  in the number of  shipments  in Asia and the  Americas.
Significant volume increases in these regions were offset by fewer direct agency
shipments  and  downward  pressure on air freight  yields as a result of intense
competition.

Ocean freight forwarding net revenue increased $1.8 million or 5% over the prior
year as a result of an increase in the number of shipments.

The net  revenue  increase  of $19.6  million  included a negative  impact  from
foreign exchange of approximately $6.8 million resulting from converting foreign
currency into U.S. dollars for financial reporting purposes.

Salaries and related costs increased $6.1 million or 4% over the prior year as a
result of an increase in the number of employees due to increased business,  but
declined as a percentage of net revenue due to administrative  cost controls and
productivity initiatives.

Operating,  selling and administrative costs increased $10.8 million or 12% as a
result of costs related to processing higher  transaction  volumes and increases
in occupancy expense on additional leased facilities.

Other income,  net,  increased $3.3 million or 62% from prior year primarily due
to  strong  earnings  from our  unconsolidated  affiliates  and  higher  foreign
exchange gains  resulting from U.S.  dollar  denominated  transactions  in Asia.
These gains were partially offset by higher minority partner expense  associated
with our consolidated joint ventures as well as lower interest income and higher
interest  expense  due to the  sale of  marketable  securities  during  1996 and
additional  debt  incurred  in the third  quarter of 1996 to acquire  40% of TDS
Logistics, Inc.

The  effective  income  tax  rates  for 1997  and 1996  were  35.6%  and  37.9%,
respectively.  Circle's  effective tax rate fluctuates due to changes in foreign
tax rates and regulations and the level of pre-tax profit in foreign  countries.
In 1997,  Circle  benefited  from the favorable  resolution of IRS audits of the
years  1986  through  1992,  resulting  in net  refunds  in  excess  of  amounts
previously anticipated.

                                       13
<PAGE>

Liquidity and Capital Resources
1998 and 1997
-------------

Net cash  provided by  operations  increased to $38.3 million for the year ended
December 31, 1998, from $34.2 million in 1997. Cash used in investing activities
decreased to $3.9 million in 1998  compared to $37.4  million in 1997  primarily
due to proceeds from sales of  investments  of $20.3 million in 1998 compared to
purchases of $27.5  million in 1997.  In  addition,  in 1998 Circle used cash of
$13.2 million to acquire businesses.

Long term notes  payable  decreased  $6.1  million.  This is primarily  due to a
reduction in commercial  paper issued and  outstanding  by $11.0  million,  from
$25.0 million as of December 31, 1997, to $14.0 million as of December 31, 1998.
This  reduction  was  partially  offset  by  acquired  mortgage  liabilities  in
conjunction with Circle's Concord acquisition in Singapore.

Net working  capital at December 31, 1998, was $93.4 million  compared to $100.3
million at December  31, 1997.  The  decrease is primarily  due to the timing of
receipts and disbursements. The fluctuations in individual components is largely
due to 1998 acquisitions.

Circle  makes   significant   disbursements  on  behalf  of  its  customers  for
transportation  costs and customs  duties.  The billings to customers  for these
disbursements,  which are several  times the amount of revenue and fees  derived
from these  transactions,  are not  recorded  as revenue and expense on Circle's
income  statement,  but are reflected in Circle's  trade  receivables  and trade
payables.

Capital  expenditures  for Circle during 1998 were $13.0 million and were funded
by working capital.  Circle expects to increase  capital  expenditures by 50% to
75% during 1999 as a result of increased investment in information technology.

Notes payable increased $5.0 million during 1998. This is primarily attributable
to a $5.8  million  overnight  loan at year end to  cover  Circle's  daily  cash
position at certain locations.

The semi-annual  dividend of $0.135 per share declared in December 1997 was paid
in the first quarter of 1998 for a total of $2.2 million. The Board of Directors
declared a semi-annual  cash dividend of $0.135 per share on June 29, 1998. This
dividend of $2.3 million was paid on  September  15, 1998,  to  shareholders  of
record August 14, 1998.

Management  believes  that  operating  cash flows,  Circle's  current  financial
structure  and  borrowing  capacity  will be  adequate  to fund its  operations,
finance capital expenditures and acquisitions, and pay dividends to stockholders
over the coming year.

New Accounting Pronouncements

See Note 1 of the Notes to Consolidated  Financial  Statements for a description
of new accounting pronouncements.

                                       14
<PAGE>

YEAR 2000

General Discussion

The following discussion of the implications of the Year 2000 problem for Circle
contains  forward-looking  statements based on inherently uncertain information.
The cost of Year 2000  compliance and the date on which Circle plans to complete
its Year 2000  modifications  are based on Circle's best  estimates,  which were
derived  utilizing  a number of  assumptions  of  future  events  including  the
continued   availability  of  internal  and  external  resources,   third  party
modifications and other factors.  However,  there can be no guarantee that these
estimates will be achieved, and actual results could differ. Moreover,  although
Circle believes it will be able to make the necessary  modifications in advance,
there is no  assurance  that  failure  to modify  the  systems  would not have a
material adverse effect on Circle.  Circle relies on several internal systems to
support its freight  forwarding,  customs  brokerage,  logistics  management and
warehouse  management  systems  worldwide.  Circle is also  reliant  upon system
capabilities of customs offices, business partners, trading partners, customers,
suppliers and governmental agencies in many countries around the world.

Circle  places a high  degree of  reliance  on  computer  systems  of such third
parties.  Although  Circle is assessing the readiness of these third parties and
preparing contingency plans, there can be no guarantee that the failure of these
third parties to modify their systems in advance of December 31, 1999, would not
have a material adverse effect on Circle.

Readiness

A Year 2000 Program  Management  Office has been  established to provide overall
direction of Circle's Year 2000 efforts worldwide. Internal management reporting
requirements have been  established.  Plans and progress against those plans are
reviewed  by the Year 2000  Program  Management  Office and are  reported to the
Chief Information Officer and the Board of Directors.  The core business systems
that support Circle in each  geographic  region have been assessed for Year 2000
compliance  and are  undergoing  upgrades to become Year 2000  compliant.  These
upgrades to core business  systems,  including  testing and  certification,  are
expected to be completed by September 1999.

Circle has plans for a comprehensive  site validation that will result in a Year
2000  Readiness  Health  Check of all  computing  resources  and non-IT  devices
located in branch offices worldwide.  Mission critical branch office systems and
mission  critical  devices are expected to be renovated or replaced by September
1999.

Circle has  accelerated  its  communication  with third parties to determine the
extent to which Circle's systems are vulnerable to the  non-compliance  of these
third party systems.  Contact  information  for various  customs offices will be
gathered  and Year 2000 efforts of customs  offices  will be closely  monitored.
Circle  plans  to  conduct  systems  testing  with  business  partners,  trading
partners,  suppliers and key  governmental  agencies  during calendar year 1999.
Additionally, Circle is participating with software vendors' user groups in Year
2000  testing of the three core  business  systems  used by Circle.  There is no
certainty that the systems of various third parties will be compliant, and there
is  some  likelihood  that  the  systems  of  third  parties  such  as  overseas
governmental agencies will not be Year 2000 ready.

Costs

Because  of the  potential  overall  impact of Year 2000 on  Circle,  Circle has
adopted a centralized  corporate strategy to address the Year 2000 problem. This
corporate  strategy  is  budgeted  and  managed  from  headquarters  and  is the
responsibility of the Chief Information Officer.

Year 2000 costs are estimated to be between $7.0 and $10.0  million  through the
end of 1999 with an additional $1.0 to $2.0 million estimated for post-Year 2000
work that is deemed  non-mission  critical.  Approximately  $3.8 million of this
estimate is allocated to testing,  including  end-to-end  testing with  business
partners,  trading  partners,  critical  suppliers  and  governmental  agencies.
Approximately $1.0 million is allocated to business  contingency  planning.  The
expected funding of all Year 2000 costs is through cash flows from operations.

Included in the  estimated  costs for Year 2000  readiness  are the costs of the
Year 2000 Health Check to assess branch office systems and non-IT  devices,  the
replacement of mission  critical  devices,  the  replacement or  modification of
application software and the implementation of contingency plans.

                                       15
<PAGE>

Actual Costs as of December 31, 1998

As of December 31, 1998,  Circle has spent  approximately  $0.2 million in costs
specifically directed to the Year 2000 remediation. This amount does not include
costs  incurred in the  development of new systems or systems  replacement  that
assisted in the retirement of non-compliant code.

Risks

Because of the significant reliance on the systems of third parties unaffiliated
with Circle,  there can be no  assurance  that Circle will not  experience  some
disruption  in its  systems.  In  Circle's  opinion,  there is likely to be some
interruption in services as a result of non-compliance by third parties.  In the
event  Circle's  systems or the systems of third  parties  that are  critical to
Circle's  business  are not Year 2000  compliant  by January  1, 2000,  Circle's
business performance may be adversely affected.

Certain  of  Circle's  systems  may need to  operate  in a manual  mode for some
limited time.  Circle will work closely with customers and business  partners to
minimize the impact of manual operations on service levels.  Circle believes the
greater risk is with the potential non-compliance of third party systems, a risk
which is inherent to the  industry.  Circle is unable to estimate the  financial
impact of the risks stated above. However,  Circle believes that its initiatives
to solve the Year 2000 problem,  and a comprehensive  business contingency plan,
should  reduce  the  possibility  of  a  material  adverse  effect  on  business
operations.

Of all the external risks, Circle believes the most reasonably likely worst case
scenario   would  be  a  business   disruption   resulting   from  an   extended
communications  failure.  With  its  extensive  use  of  technology,  Circle  is
dependent upon data and voice communications to receive, process, track and bill
customer  orders.  Based on Circle's  information  regarding  the  readiness  of
communication  carriers,  as well as Circle's  contingency plans, Circle expects
that any such disruption would be localized and of short duration.

Contingency Planning

Contingency  planning  for business  continuity  is led by a member of corporate
senior management.  Each geographic region's  contingency plans will reflect the
areas of risk that are unique to a particular region or country.

Each  branch,  country  and  region  will be  required  to  prepare  a  detailed
Contingency Plan and procedures that address the following:
     Communication plan;
     Priority operations and performance thresholds;
     Emergency  instructions for extended outages (includes activation of a "hot
     site");
     Special security instructions;
     Identification of responsibilities:  recovery team director,  recovery team
     command center, command center coordinator, recovery team leaders, recovery
     team  members,   damage   assessment   teams,   plan   activation   process
     (notification and activation authority);
     Identification  of  minimum   infrastructure   capabilities  to  operate  a
     location:  computer hardware,  network infrastructure,  software,  physical
     facilities, utilities, vendor support, personnel and embedded systems;
     Assure on-hand inventories of mission critical supplies;
     An assessment of the  organization's  direct  suppliers to determine  those
     that are "high risk";
     Identification of the "weak link" in each critical supply chain.

EURO CONVERSION

Circle is engaged in various efforts  worldwide  related to the  introduction in
January 1999 of the European single currency known as the euro.  Circle does not
believe that the euro will have a material impact on the  competitiveness of its
services in Europe.  Circle  believes that its current  accounting  systems will
accommodate the euro conversion with minimal intervention and does not expect to
experience  material  adverse tax  consequences  as a result of the  conversion.
Based on the  results  of its  efforts  to date,  management  believes  that the
internal and external  costs  incurred to address the euro  conversion  will not
have a material impact on the operations,  cash flows or financial  condition of
Circle.

                                       16
<PAGE>

ITEM 7A  -QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Discussion

Circle's cash flow and net income are subject to fluctuations  due to changes in
exchange  rates.  Circle  attempts to limit its  exposure  to  changing  foreign
exchange rates through both  operational and financial  market  actions.  Circle
provides  services to  customers  in  locations  throughout  the world and, as a
result, has a well diversified range of functional  currencies including the key
currencies of North America,  Latin America, Asia, the South Pacific and Europe.
This diverse base of local currency costs serves to partially counterbalance the
earnings  effect  of  potential  changes  in value of  Circle's  local  currency
denominated revenues.

Short-term  exposures to changing  foreign  currency  exchange rates are related
primarily  to  intercompany  transactions.  The  duration of these  exposures is
minimized through the use of an intercompany  netting and settlement system that
settles  the  majority  of  intercompany  obligations  two times per  month.  In
addition,  certain exposures are managed by financial market transactions in the
form of forward foreign exchange contracts  (typically with maturities of twelve
months or less).  Forward foreign exchange contracts are denominated in the same
currency as the receivable or payable being covered, and the term of the forward
foreign  exchange  contract  matches the term of the  underlying  receivable  or
payable.  Circle covers known and measurable  exposed  receivables  and payables
denominated in currencies  that have a liquid,  cost-effective  forward  foreign
exchange market,  and that are of sufficient size to warrant such coverage.  The
receivables  and  payables  being  covered  arise  from  trade and  intercompany
transactions of and among Circle's  operating units and intercompany loans among
Circle's operating and other business units.

Circle  does not hedge its  foreign  currency  exposure  in a manner  that would
entirely  eliminate the effects of changes in foreign exchange rates on Circle's
consolidated net income.

Circle does not have significant  exposure to changing interest rates because of
the low  levels of  marketable  securities  and the  amount  and term of debt on
Circle's balance sheet.  Circle does not undertake any specific actions to cover
its  exposure  to interest  rate risk and Circle is not a party to any  interest
rate risk management transactions.

Circle  does not  purchase  or hold any  derivative  financial  instruments  for
trading purposes.

                                       17
<PAGE>

Exchange Rate Sensitivity

Circle's use of derivative  financial  instruments is limited to forward foreign
exchange contracts.  At December 31, 1998, the nominal value of all open forward
foreign  exchange  contracts  was $1.9  million  related  to seven  transactions
denominated  in U.S.  dollars,  Australian  dollars,  Japanese  yen and  British
pounds. A 10% appreciation or 10% depreciation against the U.S. dollar of any or
all of the underlying  currencies  would not have a material  effect on Circle's
net income.

The following table provides information about Circle's  non-functional currency
components of balance sheet items by currency,  and presents such information in
U.S. dollar equivalents.  The table summarizes  information on transactions that
are  sensitive to foreign  currency  exchange  rates,  including  non-functional
currency-denominated receivables and payables. The net amount that is exposed to
changes in foreign currency rates is then subjected to a 10% change in the value
of the functional currency versus the non-functional currency.

Non-Functional Currency Exposure in U.S. Dollar equivalents
as of December 31, 1998 (in thousands):
                                                             Foreign Exchange 
                                                              Gain/(Loss) if
                                                           Functional Currency
                                                         -----------------------
Non-Functional                             Net Exposure  Appreciates Depreciates
Currency               Asset    Liability  Long/(Short)    by 10%       by 10%
-------------------- --------- ----------- ------------- ----------- -----------
United States dollar $ 58,560    $ 24,061      $ 34,499    $ (3,450)   $ 3,450
Swiss franc                99         988          (889)         89        (89)
Singaporean dollar        101         580          (479)         48        (48)
Irish punt                 17         422          (405)         41        (41)
German mark               131         530          (399)         40        (40)
Indian rupee                1         358          (357)         36        (36)
British pound              62         390          (328)         33        (33)
Italian lira               29         352          (323)         32        (32)
Dutch guilder               7         217          (210)         21        (21)
All others                887       1,701          (814)         81        (81)
                     --------- ----------- ------------- ----------- -----------
 Totals              $ 59,894    $ 29,599      $ 30,295    $ (3,029)   $ 3,029
                     ========= =========== ============= =========== ===========

                                       18
<PAGE>

ITEM 8  - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  information  required by this item is set forth at the pages indicated
in Item 14(a) of this Annual Report.

ITEM 9  - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE

     Inapplicable.

                                    PART III

ITEM 10   - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this item is incorporated by reference from the
sections of Circle's Proxy Statement  dated April 1, 1999 entitled  "Election of
Directors" and "Section 16(a) Information".  Also see "Executive Officers" under
Item 1 above.

ITEM 11   - EXECUTIVE COMPENSATION

     The information required by this item is incorporated by reference from the
sections of Circle's Proxy Statement dated April 1, 1999 entitled  "Compensation
of Executive Officers", "Options Granted to Executive Officers", and "Employment
Agreements".

ITEM 12   - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item is incorporated by reference from the
section of Circle's Proxy Statement  dated April 1, 1999 entitled  "Ownership of
Management and Principal Stockholders".

ITEM 13   - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item is incorporated by reference from the
sections of Circle's Proxy Statement dated April 1, 1999 entitled  "Transactions
with  the  Company"  and   "Compensation   Committee   Interlocks   and  Insider
Participation".



                                       19
<PAGE>

PART IV

ITEM 14   - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following are filed as part of this report:

                                                                        PAGE
   (1) (2)  Consolidated Financial Statements of Circle:

            Consolidated Income Statements for the years ended
            December 31, 1998, 1997 and 1996                            F-1

            Consolidated Balance Sheets, December 31, 1998 and 1997     F-2

            Consolidated Statements of Stockholders' Equity for the
            years ended December 31, 1998, 1997, and 1996               F-3

            Consolidated Statements of Cash Flows for the years
            ended December 31, 1998, 1997, and 1996                     F-4

            Notes to Consolidated Financial Statements            F-5 - F-15

            Independent Auditors' Report                                F-16


      (3)   Exhibits: See the attached Exhibit Index on pages 21 and 22.


(b)   Form 8-K:

            No reports on Form 8-K were filed during the 3 months ended 
            December 31, 1998.


All other Schedules required by Form 10K Annual Report have been omitted because
they are not applicable, are included in the notes to the consolidated financial
statements,  or were otherwise not required under the instructions  contained in
Regulation S-X.

                                       20
<PAGE>

                                  EXHIBIT INDEX

EXHIBIT
NUMBER       EXHIBIT                                                    PAGE
-------      -------                                                    ----

3.1          Certificate of Incorporation of the Harper Group, Inc.,
             a Delaware  corporation.  (Incorporated by reference to
             Exhibit  4.2 to  Registration  Statement  No.  33-40826
             filed on May 24, 1991.)

3.1.2        Certificate    of   Amendment   to    Certificate    of
             Incorporation  filed  May 14,  1997.  (Incorporated  by
             reference  to  Exhibit  3.1.2 to the Annual  Report on
             Form 10-K for fiscal year ended December 31, 1997.)

3.2          Registrant's  by-laws,  as  amended.  (Incorporated  by
             reference  to  Exhibit  3.2.1 to Annual  Report on Form
             10-K for the fiscal year ended December 31, 1986, filed
             on or about March 31, 1987.)

3.2.1        Amendments  to Article  IV,  Sections  2,3,4,5 and 6 of
             Registrant's  by-laws,  effective  as of May 23,  1991.
             (Incorporated  by reference to Exhibit  3.2.1 to Annual
             Report on Form 10-K for the fiscal year ended  December
             31, 1991, filed on or about March 31, 1992.)

3.2.2        Sections 2 and 3 of Registrant's  by-laws  effective as
             of May 31, 1992.  (Incorporated by reference to Exhibit
             3.2.2 to Annual Report on Form 10-K for the fiscal year
             ended  December  31,  1992 filed on or about  March 31,
             1993.)

4.1          Specimen  certificate  of  Registrant's  Common  Stock.
             (Incorporated   by   reference   to   Exhibit   4.1  to
             Registration  Statement No.  2-59017,  filed on May 16,
             1977.)

4.2          Rights Agreement, dated as of October 24, 1994, between
             The Harper  Group,  Inc. and Chemical  Trust Company of
             California,  which  includes  as Exhibit A thereto  the
             Certificate of  Designation,  Preferences and Rights of
             Series  A  Junior  Participating  Preferred  Stock,  as
             Exhibit B thereto the Form of Rights Certificate and as
             Exhibit  C thereto  a  Summary  of  Rights to  Purchase
             Common  Stock.  (Incorporated  by reference to the Form
             8-A  Registration  Statement  filed on or about October
             24, 1994.)

10.1         Agreement of Merger  between  Registrant and the Harper
             Group,  a  California  corporation,  providing  for the
             reincorporation     of    Registrant    in    Delaware.
             (Incorporated by reference to Exhibit A to Registrant's
             Proxy Statement dated April 1, 1987,  filed on or about
             April 10, 1987.)

10.3         Form of indemnity agreement between Registrant and each
             of its directors  (Incorporated by reference to Exhibit
             10.3 to Annual  Report on Form 10-K for the fiscal year
             ended  December 31,  1988,  filed on or about March 31,
             1989.)

10.4         Agreement and Plan of Reorganization  dated as of April
             23,   1992,   with   exhibits    attached,    including
             Registration  Rights  Agreement,  Employment  Agreement
             between Registrant and Peter Gibert and Indemnification
             Agreement.  (Incorporated  by reference to Exhibit 2.1.
             to  Current  Report  on Form 8-K,  dated May 21,  1991,
             filed on or about May 23, 1991.)

                                       21
<PAGE>

EXHIBIT
NUMBER       EXHIBIT                                                    PAGE
-------      -------                                                    ----

10.4.1       Amendments  to May 1991  Employment  Agreement of Peter
             Gibert  (Incorporated by reference to Exhibit 10.4.1 to
             Annual  Report on Form 10-K for the  fiscal  year ended
             December 31, 1995.) *

10.4.2       Amendment   dated   October  27,  1997  to   Employment
             Agreement of Peter Gibert.  (Incorporated  by reference
             to Exhibit 3.1.2 to the Annual Report on Form 10-K for
             fiscal year ended December 31, 1997.) *

10.4.3       Consulting Agreement dated January 1, 1000 between Zita
             Logistics, Ltd. and Circle International Group, Inc.)*      40

10.5         1990 Stock Option Plan.  (Incorporated  by reference to
             Exhibit  10.5 to  Annual  Report  on Form  10-K for the
             fiscal year ended December 31, 1992,  filed on or about
             March 31, 1993.) *

10.6         Stock   Option   Plan   for   Non-Employee   Directors.
             (Incorporated  by  reference  to Exhibit 10.6 to Annual
             Report on Form 10-K for the fiscal year ended  December
             31, 1992, filed on or about March 31, 1993.)*

10.8         Credit   Agreement   dated  October  15,  1993  between
             Registrant  and  Bank of  America  National  Trust  and
             Savings  Association.  (Incorporated  by  reference  to
             Pages  14-103  to Form 10-Q for the nine  months  ended
             September  30,  1993,  filed on or about  November  10,
             1993.)

10.9         1994 Omnibus  Equity  Incentive Plan  (Incorporated  by
             reference to the Form S-8 Registration  Statement filed
             on or about May 9, 1994) *

10.9.1       Amendment No. 1 to 1994 Omnibus  Equity  Incentive Plan
             (Incorporated by reference to Exhibit 10.11.1 to Annual
             Report on Form 10-K for fiscal year ended  December 31,
             1995.)

10.10        1995  Stock  Option  Plan  For  Non-Employee  Directors
             (Incorporated  by reference to Exhibit  10.12 to Annual
             Report on Form 10-K for the fiscal year ended  December
             31, 1995.) *

10.11        Employment Agreement with Kim Wertheimer  (Incorporated
             by reference to Exhibit  10.13 to Annual Report on Form
             10-K for the fiscal year ended December 31, 1995.) *

10.12        Letter  Agreement  dated May 4, 1998  between  David I.
             Beatson and Circle International Group, Inc. *            43

21.1         List of Subsidiaries                                      46

23.1         Consent of Deloitte & Touche LLP                          47

27           Financial Data Schedule                                   48

----------------------------

* Indicates, as required by Item 14(a)(3), a management contract or compensatory
plan required to be filed as an exhibit to this Form 10-K.


                                       22
<PAGE>

                                   Signatures

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Date:  March 5, 1999

CIRCLE INTERNATIONAL GROUP, INC.

By:  /S/ David I. Beatson
    ----------------------------------------------
     David I. Beatson
     Chairman of the Board, President and Chief Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities indicated on March 5, 1999.

            Signature                              Title

     /S/    David I. Beatson          Chairman of the Board, President and Chief
------------------------------------- Executive Officer (Principal Executive
     (David I. Beatson)               Officer)

     /S/    Janice Kerti              Senior Vice President, Chief Financial
------------------------------------- Officer and Treasurer (Principal Financial
     (Janice Kerti)                   Officer and Principal Accounting Officer)

     /S/    Wesley J. Fastiff         Director
-------------------------------------
     (Wesley J. Fastiff)

     /S/    Peter Gibert              Director
-------------------------------------
     (Peter Gibert)

     /S/    Edwin J. Holman           Director
-------------------------------------
     (Edwin J. Holman)

     /S/    John M. Kaiser            Director
-------------------------------------
     (John M. Kaiser)

     /S/    John M. Lillie            Director
-------------------------------------
     (John M. Lillie)

     /S/    Ray C. Robinson, Jr.      Director
-------------------------------------
     (Ray C. Robinson, Jr.)

     /S/    Frank J. Wezniak          Director
-------------------------------------
     (Frank J. Wezniak)


                                       23
<PAGE>

                CIRCLE INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

                         CONSOLIDATED INCOME STATEMENTS
                    (in thousands, except per share amounts)

                                                    Year ended December 31,

                                                1998         1997         1996
                                                ----         ----         ----

Revenue                                     $ 737,678    $ 716,989    $ 645,630
Freight consolidation costs                   435,998      438,945      387,172
                                           -----------  -----------  -----------

Net revenue                                   301,680      278,044      258,458

Other costs and expenses:
     Salaries and related                     158,382      147,931      141,828
     Operating, selling and administrative    119,469       97,740       86,919
                                           -----------  -----------  -----------

Total other costs and expenses                277,851      245,671      228,747
                                           -----------  -----------  -----------

Income from operations                         23,829       32,373       29,711

Other income:
     Interest, net                              2,475        1,225        2,036
     Income from affiliates, net                3,853        5,785        1,563
     Other, net                                 1,288        1,527        1,679
                                           -----------  -----------  -----------

     Total other income, net                    7,616        8,537        5,278
                                           -----------  -----------  -----------

Income before taxes                            31,445       40,910       34,989

Taxes on income                                12,930       14,578       13,272
                                           -----------  -----------  -----------

Net income                                   $ 18,515     $ 26,332     $ 21,717
                                           ===========  ===========  ===========

Net income per share:
     Basic                                     $ 1.09       $ 1.57       $ 1.30
                                           ===========  ===========  ===========
     Diluted                                   $ 1.07       $ 1.53       $ 1.28
                                           ===========  ===========  ===========

Weighted average shares outstanding:
     Basic                                     17,040       16,823       16,671
                                           ===========  ===========  ===========
     Diluted                                   17,260       17,191       16,926
                                           ===========  ===========  ===========


                 See Notes to Consolidated Financial Statements


                                      F-1

                                       24
<PAGE>

                CIRCLE INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share amounts)


                                                            December 31,
                                                        1998            1997
                                                     -----------     -----------
ASSETS
Current assets:
    Cash and equivalents                               $ 44,586        $ 17,998
    Short-term investments                               14,213          34,494
    Trade receivables, less allowance for doubtful
        accounts of: 1998, $7,131; 1997, $7,816         252,615         223,367
    Other receivables                                     7,765           5,006
    Other current assets                                  7,820          11,264
                                                     -----------     -----------
        Total current assets                            326,999         292,129

Property:
    Land                                                 15,161          14,021
    Buildings and improvements                           70,632          56,615
    Equipment and furniture                              78,204          70,882
                                                     -----------     -----------
        Total                                           163,997         141,518
    Less accumulated depreciation                       (75,809)        (67,405)
                                                     -----------     -----------
        Property, net                                    88,188          74,113


Marketable equity securities                                935           1,284
Investments in unconsolidated affiliates                 42,967          40,487
Goodwill, net                                            30,727          22,014
Other assets                                              3,913           4,372
                                                     -----------     -----------
Total assets                                          $ 493,729       $ 434,399
                                                     ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Notes payable to banks                              $ 7,869         $ 2,847
    Trade payables                                      175,532         153,644
    Accrued salaries and related costs                   15,582          11,217
    Dividends payable                                     2,312           2,189
    Income taxes payable                                  7,292           6,660
    Other liabilities                                    24,984          15,301
                                                     -----------     -----------
        Total current liabilities                       233,571         191,858

Minority interests                                        4,546           1,462
Deferred income taxes                                    14,342          12,405
Long-term notes payable                                  21,558          27,702
Commitments and contingencies                               -               -

Stockholders' equity:
    Preferred stock, $1 par: shares
        authorized, 1,000,000                               -               -
    Common stock, $1 par: shares 
        authorized, 40,000,000;
        shares issued and outstanding
        1998, 17,131,994; 1997, 17,004,653               30,822          28,456
    Retained earnings                                   201,907         188,014
    Accumulated other comprehensive loss                (13,017)        (15,498)
                                                     -----------     -----------
        Total stockholders' equity                      219,712         200,972
                                                     -----------     -----------
Total liabilities and stockholders' equity            $ 493,729       $ 434,399
                                                     ===========     ===========

                 See Notes to Consolidated Financial Statements


                                      F-2

                                       25
<PAGE>

<TABLE>
<CAPTION>

                                    CIRCLE INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

                                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                           (in thousands, except share amounts)


                                  For the years ended December 31, 1998, 1997 and 1996


                                                                                                          Accumulated
                                                                                                             Other         Total
                                          Common Stock        Treasury Stock      Retained Comprehensive Comprehensive Stockholders'
                                          ------------        --------------    
                                       Shares     Amount      Shares    Amount    Earnings     Income    Income (Loss)     Equity
                                     ----------- ---------  --------- ---------  ----------   --------   -------------  ------------
<S>                                  <C>         <C>        <C>       <C>        <C>          <C>           <C>          <C>      
Balance December 31, 1995            17,021,311  $ 20,012   (287,000) $ (4,890)  $ 156,302                  $ (5,037)    $ 166,387
  Comprehensive income:                
    Net income                              -         -          -         -        21,717     21,717            -          21,717
                                                                                              -------- 
    Change in the value of            
      marketable securities, net            -         -          -         -           -          399            399           399
    Foreign currency translation            -         -          -         -           -         (522)          (522)         (522)
                                                                                              -------- 
    Other comprehensive income                                                                   (123)
                                                                                              -------- 
  Comprehensive income                                                                         21,594
                                                                                              ======== 
  Cash dividends ($.24 per share)           -         -          -         -        (3,818)                      -          (3,818)
  Issuance of stock for acquisition      20,469       496        -         -           -                         -             496
  Exercise of stock options,          
    including tax benefit               121,710     2,175        -         -           -                         -           2,175
  Purchase of treasury stock                -         -     (213,000)   (4,057)        -                         -          (4,057)
                                     ----------- ---------  --------- ---------  ----------                ----------    ----------
Balance December 31, 1996            17,163,490  $ 22,683   (500,000) $ (8,947)  $ 174,201                  $ (5,160)    $ 182,777
  Comprehensive income:
    Net income                              -         -          -         -        26,332     26,332            -          26,332
                                                                                              -------- 
     Change in the value of 
       marketable securities, net           -         -          -         -           -          398            398           398
    Foreign currency translation            -         -          -         -           -      (10,736)       (10,736)      (10,736)
                                                                                              -------- 
    Other comprehensive income                                                                (10,338)
                                                                                              -------- 
  Comprehensive income                                                                         15,994
                                                                                              ======== 
  Cash dividends ($.27 per share)           -         -          -         -        (4,363)                      -          (4,363)
  Issuance of stock for acquisition      32,958       785        -         -           -                         -             785
  Issuance of restricted stock           24,615       626        -         -           -                         -             626
  Exercise of stock options,
    including tax benefit               283,590     5,153        -         -           -                         -           5,153
  Retirement of treasury stock         (500,000)     (791)   500,000     8,947      (8,156)                      -             -
                                     ----------- ---------  --------- ---------  ----------                ----------    ----------
Balance December 31, 1997            17,004,653  $ 28,456        -         -     $ 188,014                 $ (15,498)    $ 200,972
  Comprehensive income: 
    Net income                              -         -          -         -        18,515     18,515            -          18,515
                                                                                              -------- 
    Change in the value of
       marketable securities, net           -         -          -         -           -          (43)           (43)          (43)
    Foreign currency translation            -         -          -         -           -        2,524          2,524         2,524
                                                                                              -------- 
    Other comprehensive income                                                                  2,481
                                                                                              -------- 
  Comprehensive income                                                                         20,996
                                                                                              ======== 
  Cash dividends ($.27 per share)           -         -          -         -        (4,622)                      -          (4,622)
  Issuance of restricted stock           13,942       172        -         -           -                         -             172
  Exercise of stock options,
    including tax benefit               113,399     2,194        -         -           -                         -           2,194
                                     ----------- ---------  --------- ---------  ----------                ----------    ----------
Balance December 31, 1998            17,131,994  $ 30,822        -         -     $ 201,907                 $ (13,017)    $ 219,712
                                     =========== =========  ========= =========  ==========                ==========    ==========


                                     See Notes to Consolidated Financial Statements
</TABLE>


                                      F-3

                                       26
<PAGE>



                CIRCLE INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)

                                                      Year Ended December 31,

                                                    1998       1997       1996
                                                    ----       ----       ----
Operating activities:
   Net income                                    $ 18,515   $ 26,332   $ 21,717
   Adjustments to reconcile net income to net
   cash provided by operating activities:
      Depreciation and amortization                13,604     12,046     11,943
      Provision for doubtful accounts               4,232      5,050      3,029
      Deferred income taxes                         1,963      6,531     (1,527)
      Gains on sales of real property,
         investments and equipment                   (271)      (613)    (1,153)
      Equity in earnings of affiliates,
         net of dividends received                 (2,229)    (5,785)    (1,062)
      Minority interests                              928      1,286        456
      Other                                           171         (5)       387
      Net effect of changes in:
         Trade receivables                        (14,299)   (14,475)   (36,620)
         Other receivables                         (2,677)       788     (1,168)
         Other current assets                       3,822     (1,621)    (1,935)
         Trade payables                             4,875      4,113     32,661
         Other liabilities                          9,674        593      4,124
                                                 ---------  ---------  ---------
Net cash provided by operating activities          38,308     34,240     30,852
                                                 ---------  ---------  ---------

Investing activities:
   Proceeds from sales of property                  1,527      1,468      9,231
   Proceeds from sales of marketable securities       495      6,669     29,225
   Purchases of marketable securities                 -          (26)      (655)
   Net proceeds from sales (purchases) of
      short-term investments                       20,281    (27,527)     5,327
   Capital expenditures                           (12,960)   (14,144)   (21,019)
   Acquisitions of businesses                     (13,229)    (3,731)   (41,276)
   Other                                               (3)      (101)      (205)
                                                 ---------  ---------  ---------
Net cash used in investing activities              (3,889)   (37,392)   (19,372)
                                                 ---------  ---------  ---------

Financing activities:
   Repayment of long-term notes payable, net      (11,507)    (1,295)    (1,064)
   Increase (decrease) in notes payable             5,022     (4,936)     4,755
   Dividends                                       (4,503)    (4,085)    (3,729)
   Proceeds from exercise of stock options          1,980      4,360      1,679
   Common stock repurchase                            -          -       (4,057)
                                                 ---------  ---------  ---------
Net cash used in financing activities              (9,008)    (5,956)    (2,416)
Effect of exchange rate changes on cash             1,177     (4,458)       (24)
                                                 ---------  ---------  ---------

Increase (decrease) in cash and equivalents        26,588    (13,566)     9,040

Cash and equivalents at beginning of period        17,998     31,564     22,524
                                                 ---------  ---------  ---------

Cash and equivalents at end of period            $ 44,586   $ 17,998   $ 31,564
                                                 =========  =========  =========

Supplemental cash flow information:
   Cash paid for interest                        $  2,001   $  2,837   $  2,650
                                                 =========  =========  =========
   Cash paid for income taxes                    $ 11,155   $  6,676   $ 12,845
                                                 =========  =========  =========
   Non-cash transactions:
      Issuance of stock for acquisitions         $ 21,000   $    785   $    496
                                                 =========  =========  =========
      Mortgages assumed in acquisitions          $  5,265   $    -     $    -
                                                 =========  =========  =========

                 See Notes to Consolidated Financial Statements


                                      F-4

                                       27
<PAGE>


CIRCLE INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Significant Accounting Policies

Basis  of  Presentation  -  The  consolidated  financial  statements  of  Circle
International  Group, Inc. and subsidiaries  (Circle) have been prepared to give
retroactive effect to the merger with Alrod  International,  Inc. in August 1998
(See Note 3).

Nature of Operations - Circle is an international  transportation  and logistics
service provider. Circle's services are provided through its network of over 300
offices,  distribution centers, and agents located in more than 100 countries on
six continents. Circle's principal lines of business are air freight forwarding,
ocean freight forwarding,  customs brokerage and other value-added services such
as warehousing,  distribution and insurance. The principal markets for all lines
of business are North America,  Europe and Asia with  significant  operations in
the Middle East, Latin America and the South Pacific (see Note 13).

Use of Estimates - The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Risk Factors - Circle's  operations  are  influenced by many factors,  including
economic and political conditions around the world, international laws, currency
exchange rates,  and the impact Year 2000 may have on information  systems.  The
impact of some of these risk  factors is reduced by having  customers  in a wide
range of industries located throughout the world.

Principles of Consolidation - The accompanying consolidated financial statements
include Circle  International  Group, Inc. and its majority-owned  subsidiaries.
Investments in 50% or less owned  affiliates  over which Circle has  significant
influence are accounted for by the equity method (see Note 11). All  significant
intercompany balances and transactions have been eliminated.

Foreign  Currency  Translation  - Assets and  liabilities  of  Circle's  foreign
subsidiaries are translated into U.S. dollars at year-end rates of exchange, and
income and expenses are translated at average rates during the year. Adjustments
resulting from translating  financial  statements into U.S. dollars are reported
as cumulative  translation  adjustments and are shown as a separate component of
other comprehensive  income in the statements of stockholders' equity. Gains and
losses from foreign exchange transactions are included in net income.

Cash and  Equivalents  include  demand  deposits and  investments  with original
maturities of three months or less.

Short-term  Investments include deposits of cash in interest-bearing  securities
that have  original  maturities  of greater than 90 days and less than one year.
Such  investments  are  classified as available for sale and the carrying  value
approximates fair value.

Trade  Receivables  include  disbursements  made  by  Circle  on  behalf  of its
customers for transportation costs and customs duties. The billings to customers
for these disbursements,  which are several times the amount of revenue and fees
derived  from these  transactions,  are not  recorded  as revenue and expense on
Circle's income statement. Management establishes reserves based on the expected
ultimate recovery of these receivables.

Property  is  stated  at  cost.  Depreciation  is  computed  principally  by the
straight-line method at rates based on the estimated useful lives of the various
classes of property as follows:  buildings, 20-50 years; leasehold improvements,
life of the lease or estimated useful life if shorter;  equipment and furniture,
3-10 years.

Goodwill,  representing  the excess of purchase price over the fair value of net
assets acquired,  is being amortized on a straight-line basis over the period of
expected benefit not exceeding 40 years. Accumulated amortization as of December
31, 1998 and 1997, is $12.2 million and $10.6 million, respectively.


                                      F-5

                                       28
<PAGE>

Impairment  of Long Lived Assets - Statement of Financial  Accounting  Standards
("SFAS") No. 121, "Accounting for the Impairment of Long Lived Assets," requires
that long lived assets, and certain  identifiable  intangibles  related to those
assets be reviewed for impairment  whenever  events or changes in  circumstances
indicate  that the  carrying  amount  of an asset  may not be  recoverable.  The
carrying  value  of  long  lived  assets,   including   goodwill,   is  reviewed
periodically  based on the  projected  undiscounted  cash  flows of the  related
business unit over the remaining  amortization period. If the cash flow analysis
indicates that the asset is not recoverable,  the carrying value will be reduced
to the fair value of the assets or the present value of the future cash flows.

Revenue Recognition - Revenue and freight  consolidation costs are recognized at
the time the freight departs the terminal of origin. Customs brokerage and other
revenue are  recognized  upon  completing  the  documents  necessary for customs
clearance or completing other fee-based services.

Revenue  realized as an indirect  air carrier or an ocean  freight  consolidator
includes  the direct  carrier's  charges to Circle for  carrying  the  shipment.
Revenue  realized in other  capacities  includes only the  commissions  and fees
received.

Net Income per Share - Basic net income per share is computed  by  dividing  net
income by the weighted  average number of common shares  outstanding  during the
period. The difference between weighted average shares outstanding for basic and
diluted is the  dilutive  effect of  outstanding  stock  options and  restricted
stock.  Diluted net income per share is  computed by dividing  net income by the
weighted  average  number of common  shares  outstanding  including the dilutive
effect of outstanding stock options and restricted stock.

Taxes on Income - Circle provides a deferred tax expense or benefit equal to the
change in the  deferred  tax assets and  liabilities  during the year.  Deferred
income  taxes  represent  tax credit  carry  forwards  and  future  tax  effects
resulting from temporary differences between the financial statement and the tax
basis of assets and liabilities using current or enacted tax rates in effect for
the year in which the differences are expected to reverse.

Foreign  Currency  Forward  Contracts - Circle  uses  foreign  currency  forward
contracts to hedge foreign  currency  exposure on certain trade and intercompany
transactions. These contracts do not subject Circle to risk due to exchange rate
movements because gains and losses on these contracts offset gains and losses on
the payable or receivable  being hedged.  Gains and losses on such contracts are
recognized  currently in the carrying amount of the related payable. At December
31, 1998, foreign currency forward contracts were outstanding,  in the amount of
$1.9 million,  which  approximates fair value.  Realized gains and losses on the
contracts for 1998 and 1997 were insignificant.

Fair Value of Financial Instruments - The fair values presented throughout these
financial   statements   have  been  estimated   using   appropriate   valuation
methodologies  and market  information  available at December 31, 1998 and 1997.
However,  considerable  judgment  is  required  in  interpreting  market data to
develop estimates of fair value and the estimates  presented are not necessarily
indicative  of the  amounts  that  Circle  could  realize  in a  current  market
exchange.  The use of different market  assumptions or estimation  methodologies
could have a material  effect on the estimated  fair values.  Additionally,  the
fair  values  presented  throughout  these  financial  statements  have not been
estimated  since December 31, 1998.  Current  estimates of fair value may differ
significantly from the amounts presented.

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

   Cash and equivalents,  receivables and payables,  short-term  investments and
   notes payable to banks - The carrying amount approximates fair value.

   Marketable  equity  securities  - The fair  value is based on  quoted  market
   prices.  As discussed  in Note 4 to the  Consolidated  Financial  Statements,
   these securities are recorded at fair value.

   Borrowings - The fair value of Circle's  long-term debt is estimated based on
   quoted market  prices for the same or similar  issues or on the current rates
   offered to Circle for debt of the same  remaining  maturities.  The  carrying
   amounts approximate their fair value.

                                      F-6

                                       29
<PAGE>

   Foreign Currency Forward Contracts - The fair value is estimated based on the
   U.S.  dollar  equivalent at the contract  exchange  rate. Any gain or loss is
   largely offset by a change in the value of the underlying transaction, and is
   recorded as an  unrealized  foreign  exchange gain or loss until the contract
   maturity date.

Stock-Based  Compensation - Circle accounts for stock-based  awards to employees
using the intrinsic value method in accordance with Accounting  Principles Board
No. 25, "Accounting for Stock Issued to Employees." ("APB No. 25")

New  Accounting  Standards - In June 1998,  the Financial  Accounting  Standards
Board issued SFAS No. 133,  "Accounting  for Derivative  Instruments and Hedging
Activities," which defines derivatives,  requires that derivatives be carried at
fair value and provides for hedge  accounting  when certain  conditions are met.
This  statement is  effective  for Circle  beginning in the year 2000.  Although
Circle has not fully assessed the  implications  of this new  statement,  Circle
believes  adoption  of this  statement  will not have a  material  impact on its
consolidated financial statements.

Reclassifications  - Certain  1997 and 1996 amounts  have been  reclassified  to
conform with the 1998 presentation.


Note 2 - Special Charges

During the quarter ended September 30, 1998,  Circle recorded special charges of
$10.7 million related to merger integration costs for Alrod International, Inc.,
the  write-off  of  certain  receivables  at Circle  Trade  Services  as part of
repositioning   that  business,   certain   charges  related  to  Latin  America
operations,  facility  consolidation,  the write-down of information  technology
assets and employee  severance  costs.  These charges are recorded in operating,
selling and administrative  expenses.  As of December 31, 1998, $6.0 million has
been  utilized  and $4.7 is included  in other  liabilities.  Circle  expects to
utilize  substantially  all of the special charge  reserves  during 1999. Of the
$10.7  million,  $4.5  million was cash  related and $6.2  million was  non-cash
related.


Note 3 - Acquisitions

In  August  1998,  Circle  acquired  100% of the  outstanding  shares  of  Alrod
International,  Inc. (Alrod), a privately owned international freight forwarding
and customs  brokerage company based on the West Coast of the U.S. In connection
with the  acquisition,  Circle issued 770,642 shares of common stock in exchange
for all of the outstanding stock of Alrod. The total purchase  consideration was
$21.0 million, of which $1.0 million is held in escrow subject to the resolution
of certain pre-acquisition contingencies. The acquisition was accounted for as a
pooling of interests.

Summarized  results of operations  of the separate  companies are as follows (in
thousands):

                           6 Months Ended           Years ended
                              June 30,              December 31,
                                1998            1997            1996
                            -----------     -----------     -----------
Net revenues:
      Circle                 $ 134,166       $ 262,753       $ 245,618
      Alrod                      7,412          15,291          12,840
                            -----------     -----------     -----------
      Combined               $ 141,578       $ 278,044       $ 258,458
                            ===========     ===========     ===========

Net income:
      Circle                  $ 13,043        $ 25,871        $ 21,615
      Alrod                        259             461             102
                            -----------     -----------     -----------
      Combined                $ 13,302        $ 26,332        $ 21,717
                            ===========     ===========     ===========


                                      F-7

                                       30
<PAGE>

During  1998,  Circle  also  acquired  interests  in  other  transportation  and
logistics  providers located  primarily in Singapore and the United Kingdom.  In
connection with these acquisitions, the seller retained a minority interest, for
which Circle has buyout options. These acquisitions were accounted for using the
purchase method.  The aggregate  purchase price for these  acquisitions,  net of
cash  acquired was $13.2  million  resulting in $9.8 million of goodwill that is
being amortized over estimated useful lives of up to 20 years.

During  1997,  Circle  acquired  the assets of various  freight  forwarders  and
customs brokers for an aggregate purchase price of $4.9 million,  including $0.8
million in Circle's  common  stock.  These  acquisitions  were  accounted for as
purchases.  In connection with these acquisitions,  Circle recorded $3.4 million
of goodwill,  which is being  amortized over estimated  useful lives of up to 20
years.

In August 1996,  Circle  acquired a 40% interest in TDS Logistics Inc. (TDS) for
$30 million.  TDS is primarily  involved in providing  specialty  packaging  and
services  for  automotive  exports.   The  investment  in  TDS  is  recorded  in
investments in unconsolidated affiliates and as of the acquisition date included
$28.1 million of excess purchase price over net assets, which is being amortized
over 37 years. Circle has an option to purchase the other 60% interest in TDS at
a price to be determined when the option is exercised. The option is exercisable
between October 1, 1999, and December 31, 1999. If Circle elects not to exercise
its option,  other TDS shareholders have the right to sell their shares and can
require Circle to sell its shares in the same manner. (See Note 11, "Investments
in Unconsolidated Affiliates".)

If all of the purchase method  acquisitions in 1998 and 1997 occurred on January
1 of the respective years, the effect on revenues and net income would have been
immaterial.  The results of these  acquisitions are included in Circle's results
as of the date of the acquisitions.


Note 4 - Marketable Equity Securities

Management has designated  marketable  equity  securities as available for sale.
Changes in the fair value of  available  for sale  securities,  net of  deferred
taxes,  are  excluded  from income and  presented  in the  stockholders'  equity
section of the balance sheet under the caption  "Accumulated other comprehensive
loss." In 1998 and 1997,  Circle sold debt and equity  securities  and  realized
losses of $13,000 and $20,000, respectively. Total unrealized loss on marketable
equity securities before deferred taxes was $83,000 and $15,000,  as of December
31, 1998 and 1997, respectively.


Note 5 - Borrowings

Long-term notes payable included commercial paper of $14 million and $25 million
at December 31, 1998 and 1997,  respectively.  The commercial paper is supported
by a $40 million backup  facility line of credit which expires on June 30, 1999,
at which time Circle can convert any outstanding borrowings into a one-year term
loan. The backup  facility line of credit requires Circle to comply with certain
financial  covenants.  Although the  commercial  paper is issued on a short-term
basis,  it is  classified  as  long-term  because  Circle  intends,  and has the
ability, to reissue such paper as it matures. At December 31, 1998 and 1997, the
weighted  average  interest rate of  outstanding  commercial  paper was 5.6% and
6.1%, respectively.

At  December  31,  1998  and  1997,   Circle  had  long-term  notes  payable  of
approximately $7.6 and $2.7 million, respectively (excluding current portion and
commercial  paper),  with a  weighted  average  interest  rate of 6.0% and 7.1%,
respectively. These notes are secured by real property.

Principal  payments on  long-term  notes that mature in 1999 ($2.1  million) are
classified as notes payable to banks.  Principal  payments for 2000 through 2003
are approximately $0.6 million,  $1.2 million,  $0.4 million,  and $0.1 million,
respectively.  Principal  repayments  thereafter are approximately $5.3 million.
Also included in notes payable to banks is $5.8 million of short-term borrowings
at 6.0%.

At December 31, 1998,  Circle had unused borrowing  capacity from its commercial
paper program and other lines of credit totaling $30 million.


                                      F-8

                                       31
<PAGE>

Note 6 - Lease Commitments

At December 31, 1998,  commitments on long-term  operating lease  agreements for
facilities require the following minimum annual rentals (in thousands):

1999                        $  19,051
2000                           16,012
2001                           12,568
2002                            9,843
2003                            8,382
2004 and thereafter            63,684
                           -----------
Total                       $ 129,540
                           ===========



Rental  expense  under such leases was $18.8  million in 1998,  $17.2 million in
1997 and $10.9  million in 1996,  net of rents from  subleases of $3.2  million,
$1.0 million and $0.8 million,  respectively.  Total rental  expense  (including
leases on equipment) was $22.3 million in 1998,  $19.1 million in 1997 and $12.9
million in 1996.


Note 7 - Contingencies

Circle  is  party  to  routine  litigation  incidental  to its  business,  which
primarily  involves claims for goods  lost or  damaged in transit or  improperly
shipped.  Many of the  lawsuits  to  which  Circle  is a party  are  covered  by
insurance  and are being  defended by Circle's  insurance  carriers.  Circle has
established  reserves for these matters and it is management's  opinion that the
resolution  of such  litigation  will  not have a  material  adverse  effect  on
Circle's consolidated financial statements taken as a whole.


Note 8 - Common Stock

Stock Repurchase Programs

Stock repurchase programs totaling one million shares were approved by the Board
of Directors  prior to 1997.  During 1996,  213,000  shares were  acquired at an
average  purchase price of $19.05 per share.  These shares were held as treasury
stock until July 29, 1997, when they were retired along with  previously  issued
shares.  In February 1997, the Board of Directors  approved the repurchase of an
additional 100,000 shares,  however no shares were repurchased during 1997. This
authorization was cancelled in 1998.

Shareholder Rights Plan

In  October  1994,  Circle  adopted a  Shareholder  Rights  Plan and  declared a
dividend distribution of one preferred share purchase Right for each outstanding
share of Circle's common stock. Each Right will entitle  stockholders to buy one
one-hundredth of a share of a new series of junior participating preferred stock
at an exercise price of $53.00.

The  Rights  will  become  exercisable  if,  without  approval  of the  Board of
Directors, a person or group acquires 20% or more of Circle's common stock (or a
lesser percentage set by the Board in the case of a person determined to present
certain specific risks to Circle and its  stockholders,  as defined in the plan)
or announces a tender offer the  consummation of which would result in ownership
of 20% or more of the common  stock.  If a person or group does  acquire  20% or
more of Circle's  stock (or such lesser  percentage as has been set with respect
to a specific  person)  each Right  unless  redeemed  will entitle its holder to
purchase,  at the Right's then current  exercise  price,  a number of the common
shares  of  Circle  having a  market  value at that  time of twice  the  Right's
exercise price.

Circle will be entitled to redeem the Rights at one  one-hundredth of a cent per
Right at any time before a 20% position (or such lesser  percentage  as has been
set with  respect  to a specific  person)  has been  acquired.  Until the Rights
become exercisable, Rights certificates will not be sent to stockholders and the
Rights will automatically trade with the common stock.


                                      F-9

                                       32
<PAGE>

Stock Option Plans

The  1982  and  the  1990  Stock  Option  Plans  provide  for  the  granting  of
non-qualified  or incentive  stock  options to officers and key  employees for a
maximum of 956,250  common shares at not less than fair market value on the date
of grant.  The Human  Resources,  Compensation  and Nominating  Committee of the
Board of Directors  determine the exercise  period for the options.  Under these
plans,  Stock Options are generally  issued with the restriction  that no option
may be  exercised  before  three  years  from date of grant nor later than eight
years from date of grant.

The 1994  Omnibus  Equity  Incentive  Plan  provides  for the  granting of stock
options,  stock appreciation rights,  restricted stock awards,  performance unit
awards and  performance  share awards to key employees and consultants of Circle
and its  subsidiaries.  The plan was  originally  authorized  for a  maximum  of
2,000,000 common shares,  and was amended in May 1998 to increase the maximum to
2,500,000  common shares.  Stock options under this plan are generally issued at
an  option  price at not less than fair  market  value on the date of grant.  To
date, no incentive or non-qualifying  stock options have been granted below fair
market  value.  Stock  options  under this plan are  generally  issued  with the
restriction  that no option  may be  exercised  before one year from the date of
grant nor later than eight  years from the date of grant.  During 1998 and 1997,
13,942 and 24,615  restricted  shares were  granted,  respectively.  These share
grants generally vest within one to three years.

A summary of stock option  transactions  for the three years ended  December 31,
1998, follows:

                                               Shares         Weighted
                                                Under         Average
                                               Option      Exercise Price
                                            -----------    --------------
Outstanding at December 31, 1995               988,713        $ 14.89
      Granted                                  570,589          19.67
      Exercised                               (121,710)         13.76
      Canceled                                 (35,750)         14.85
                                            -----------
Outstanding at December 31, 1996             1,401,842          16.60
      Granted                                  422,950          23.29
      Exercised                               (283,590)         15.40
      Canceled                                (143,923)         16.73
                                            -----------
Outstanding at December 31, 1997             1,397,279          18.93
      Granted                                  796,250          23.95
      Exercised                               (113,399)         15.95
      Canceled                                (266,700)         25.58
                                            -----------
Outstanding at December 31, 1998             1,813,430        $ 20.64
                                            ===========

                                                       December 31,
                                              1998         1997          1996
                                            -------      -------      ---------
Options available for grant                 844,903      841,718      1,123,570
Options exercisable                         730,974      441,567        354,683
Weighted average fair value of options
      granted during the year                $ 7.20       $ 8.37         $ 5.41


                                      F-10

                                       33
<PAGE>

The following table summarizes  information  about stock options  outstanding at
December 31, 1998:

                          OPTIONS OUTSTANDING            OPTIONS EXERCISABLE
                    ----------------------------------  ------------------------
                                 Weighted      Weighted                Weighted
   Range of                       Average      Average                  Average
 Exercisable         Number      Remaining     Exercise      Number    Exercise
    Prices         of Shares  Life (in years)   Price      of Shares      Price
---------------   ----------- --------------- ---------   ----------   ---------
$12.75 - 16.38      399,455       3.88        $ 14.51       313,455    $ 14.11
 16.75 - 20.63      375,875       4.41          17.79       211,174      17.55
 20.75 - 21.88      388,500       6.92          21.50        52,623      20.99
 22.00 - 26.63      557,100       6.77          25.27       153,722      24.97
 26.75 - 27.50       92,500       7.30          27.26           -         -
                 -----------                             ----------  
 12.75 - 27.50    1,813,430       5.71          20.64       730,974      17.88
                  ===========                             ==========  


In 1998, 200,000 options granted to Chief Executive  Officer,  David I. Beatson,
were repriced from $28.00 per share to $21.688 per share.


SFAS No. 123 Pro Forma Disclosures

Circle  applies APB No. 25 and related  interpretations  in  accounting  for its
Stock Option Plans described above.  Accordingly,  no compensation cost has been
recognized for its options  granted.  Had  compensation  cost for Circle's stock
option plans been  determined  based on the fair value at the grant dates of the
stock options, consistent with the method in SFAS No. 123, "Accounting for Stock
Based Compensation",  Circle's net income and earnings per share would have been
reduced to the pro forma amounts indicated below (in thousands, except per share
amounts):

                                             Year ended
                                    1998         1997         1996
                                   ------       ------       ------

Net Income:  As Reported         $ 18,515     $ 26,332     $ 21,717
             Pro Forma             16,674       25,142       20,980

Net Income per share:
     Basic - As Reported           $ 1.09       $ 1.57       $ 1.30
             Pro Forma               0.98         1.49         1.26

   Diluted - As Reported           $ 1.07       $ 1.53       $ 1.28
             Pro Forma               0.97         1.46         1.24


The fair value of each option  grant is estimated on the date of the grant using
the Black-Scholes  option-pricing  model which requires  subjective  assumptions
such as future  stock price  volatility  and expected  time to  exercise.  These
assumptions greatly affect the calculated values.

Circle's  calculations  are based on a multiple  option  valuation  approach and
cancellations  are  estimated  based  on  a  historical  pattern.   However,  in
accordance  with SFAS No. 123, the impact of outstanding  stock options  granted
prior to 1995 has been excluded from the pro forma calculation; accordingly, the
1998,  1997 and 1996 pro forma  adjustments  are not indicative of future period
pro forma adjustments. The following weighted-average assumptions were used:

                                        1998        1997        1996
                                       ------      ------      ------
Expected dividend yield                 1.00%       1.00%       1.00%
Expected volatility                       43%         37%         36%
Risk-free interest rate                 4.67%       5.62%       5.67%
Expected lives (years from vesting)      0.5         0.7         0.5


                                      F-11

                                       34
<PAGE>

Note 9 - Taxes on Income

Taxes on income include the following (in thousands):
                                          1998           1997           1996
                                         ------         ------         ------
                                  
Federal:   Current                     $  2,711       $   (637)      $  6,546
           Deferred                       1,199          6,535         (1,237)
                                  
State:     Current                          426          1,370          1,167
           Deferred                         481           (363)           -
                                  
Foreign:   Current                        7,830          7,315          7,073
           Deferred                         283            358           (277)
                                      ==========     ==========     ==========
Total                                  $ 12,930       $ 14,578       $ 13,272
                                      ==========     ==========     ==========
                               
Significant components of Circle's net deferred tax liability are as follows (in
thousands):

                                             1998           1997
                                             ----           ----
Deferred tax liabilities:
Undistributed earnings of subsidiaries     $  9,459       $  9,714
Accelerated depreciation                      5,025          5,131
Gain on sale of property                      2,533          2,250
Incentive compensation                           16            -
Investment in subsidiary                        273            273
                                          ==========     ==========
                                           $ 17,306       $ 17,368
                                          ==========     ==========
Deferred tax assets:
Intercompany billings                      $    -         $  1,596
Bad debts                                     1,292          1,613
Vacation pay                                    836            608
Incentive compensation                          -               57
Insurance claims reserves                       523            882
Valuation of marketable securities               31              6
Other                                           282            201
                                          ==========     ==========
                                           $  2,964       $  4,963
                                          ==========     ==========
Net deferred tax liability                 $ 14,342       $ 12,405
                                          ==========     ==========

Taxes on  income  were  different  than the  amount  computed  by  applying  the
statutory  income tax rate.  Such  differences  are  summarized  as follows  (in
thousands):

                                              1998           1997         1996
                                             ------         ------       ------

Tax computed at 35% statutory rate         $ 11,006       $ 14,319     $ 12,247
Increases (decreases) resulting from:
    Foreign taxes lower than federal rate    (1,347)        (1,184)        (861)
    Non-deductible items                      2,273          1,212          775
    State taxes on income,
       net of federal income tax effect         590            654          758
    Other                                       408           (423)         353
                                          ==========     ==========   ==========
    Total                                  $ 12,930       $ 14,578     $ 13,272
                                          ==========     ==========   ==========


                                      F-12

                                       35
<PAGE>

Taxes on income include  deferred  income taxes on  undistributed  earnings (not
considered permanently invested) of consolidated subsidiaries, net of applicable
foreign tax credits.  At December 31, 1998,  cumulative earnings of consolidated
foreign  subsidiaries  designated as permanently invested were approximately $69
million.  Deferred  income  taxes  are  not  provided  on  permanently  invested
earnings.

Sources of pretax income are summarized as follows (in thousands):

                     1998           1997           1996
                    ------         ------         ------
Domestic           $ 7,790       $ 18,944       $ 16,404
Foreign             23,655         21,966         18,585
                 ----------     ----------    -----------
Total             $ 31,445       $ 40,910       $ 34,989
                 ==========     ==========    ===========


Note 10 - Other Income-Net

Other income-net includes the following (in thousands):

                                       1998          1997          1996
                                      ------        ------        ------
Interest income                      $ 4,416       $ 4,163       $ 4,695
Interest expense                      (1,941)       (2,938)       (2,659)
Income from affiliates, net            3,853         5,785         1,563
Gains on sales of assets                 257           633         1,061
Minority interests                      (928)       (1,286)         (456)
Net foreign exchange gains             1,365         2,162         1,258
Other                                    594            18          (184)
                                    ---------     ---------     ---------
Total                                $ 7,616       $ 8,537       $ 5,278
                                    =========     =========     =========


Note 11 - Investments in Unconsolidated Affiliates

Investments in net assets of affiliated  companies amounted to $43.0 million and
$40.5  million  at  December  31,  1998 and 1997,  respectively.  This  includes
Circle's 40%  investment in TDS Logistics  Inc. (TDS) of $38.0 million and $35.3
million as of  December  31,  1998 and 1997,  respectively.  The TDS  investment
balance  includes the excess of purchase  price over net assets of $26.4 million
and $27.1 million as of December 31, 1998 and 1997, respectively, which is being
amortized over 37 years. The results of operations and financial position of TDS
are summarized below (in thousands):

Condensed Income Statement Information:      1998         1997        1996
                                          ---------    ---------   ---------
Revenue                                   $ 77,521     $ 95,981    $ 50,115
Income from operations                      15,348       23,929       6,438
Net income                                   8,682       12,983       3,297


Condensed Balance Sheet Information:            December 31,
                                             1998         1997
                                          ---------    --------- 
Current assets                            $ 15,815     $ 25,035
Non-current assets                          31,626       34,695
Current liabilities                          8,807       13,216
Non-current liabilities                      9,613       25,418
Stockholders' equity                        29,021       21,096


                                      F-13

                                       36
<PAGE>

Note 12 - Employee Benefit Plans

Circle has a 401(k) Savings Plan in the U.S.  under which an employee  generally
may  contribute  up to 15%  of  compensation  to  the  plan.  For  every  dollar
contributed  to the plan,  Circle will match 50 cents,  up to a maximum of 6% of
the employee's compensation. Circle's contributions for the years ended December
31,  1998,  1997 and 1996 were $1.0  million,  $0.9  million  and $0.8  million,
respectively.  Circle's  contributions vest over a four year period.  Circle has
various other employee benefit plans outside of the U.S.


Note 13 - Business Segment Information

Circle's reportable segments are geographic segments that offer similar products
and services.  They are managed  separately  because each segment requires close
customer  contact and each segment is affected by similar  economic  conditions.
Certain information regarding Circle's operations by region is summarized below.

<TABLE>
<CAPTION>

                                                Europe &      Asia &
                                                 Middle       South                     Elimi-      Consoli-
                                   Americas       East       Pacific     Corporate     nations       dated
                                  ----------   ----------   ----------   ----------  -----------   ----------
                                                                (in thousands)

<S>                               <C>          <C>          <C>          <C>         <C>           <C>      
Year ended December 31, 1998:
Total revenue                     $ 390,877    $ 167,173    $ 197,330    $     -     $  (17,702)   $ 737,678
Transfers between regions            (6,492)      (3,935)      (7,275)         -         17,702            -
                                  ----------   ----------   ----------   ----------  -----------   ----------
Revenues from customers           $ 384,385    $ 163,238    $ 190,055    $     -     $      -      $ 737,678
                                  ==========   ==========   ==========   ==========  ===========   ==========
Net revenue                       $ 161,095    $  81,361    $  59,224    $     -     $      -      $ 301,680
                                  ==========   ==========   ==========   ==========  ===========   ==========
Income (loss) from operations     $  11,298    $  12,268    $   9,809    $  (9,546)  $      -      $  23,829
                                  ==========   ==========   ==========   ==========  ===========   ==========
Identifiable assets               $ 191,021    $ 139,300    $ 153,311    $ 118,358   $ (108,261)   $ 493,729
                                  ==========   ==========   ==========   ==========  ===========   ==========


Year ended December 31, 1997:
Total revenue                     $ 422,151    $ 147,628    $ 167,053    $     -     $  (19,843)   $ 716,989
Transfers between regions            (7,442)      (3,613)      (8,788)         -         19,843          -
                                  ----------   ----------   ----------   ----------  -----------   ----------
Revenues from customers           $ 414,709    $ 144,015    $ 158,265    $     -     $      -      $ 716,989
                                  ==========   ==========   ==========   ==========  ===========   ==========
Net revenue                       $ 159,055    $  71,065    $  47,924    $     -     $      -      $ 278,044
                                  ==========   ==========   ==========   ==========  ===========   ==========
Income (loss) from operations     $  20,110    $  10,408    $   9,169    $  (7,314)  $      -      $  32,373
                                  ==========   ==========   ==========   ==========  ===========   ==========
Identifiable assets               $ 214,520    $ 117,432    $ 102,098    $ 123,914   $ (123,565)   $ 434,399
                                  ==========   ==========   ==========   ==========  ===========   ==========


Year ended December 31, 1996:
Total revenue                     $ 403,300    $ 142,405    $ 114,332    $     -     $  (14,407)   $ 645,630
Transfers between regions            (6,091)      (3,396)      (4,920)         -         14,407          -
                                  ----------   ----------   ----------   ----------  -----------   ----------
Revenues from customers           $ 397,209    $ 139,009    $ 109,412    $     -     $      -      $ 645,630
                                  ==========   ==========   ==========   ==========  ===========   ==========
Net revenue                       $ 146,910    $  70,465    $  41,083    $     -     $      -      $ 258,458
                                  ==========   ==========   ==========   ==========  ===========   ==========
Income (loss) from operations     $ 17,510     $  11,077    $   7,644    $  (6,520)  $      -      $  29,711
                                  ==========   ==========   ==========   ==========  ===========   ==========
Identifiable assets               $ 179,315    $ 118,287    $  96,041    $ 123,835   $ (108,225)   $ 409,253
                                  ==========   ==========   ==========   ==========  ===========   ==========
</TABLE>


Revenue from transfers between regions represents approximate amounts that would
be charged if the  services  were  provided by an  unaffiliated  company.  Total
regional  revenue is reconciled with total  consolidated  revenue by eliminating
inter-regional revenue.

Circle is domiciled in the U.S. The U.S. had revenues from external customers of
$356 million in 1998,  $382  million in 1997 and $367 million in 1996.  The U.S.
had long  lived  assets of $41  million  and $44  million at the end of 1998 and
1997, respectively.

                                      F-14

                                       37
<PAGE>

The following  tables show the  approximate  amounts of revenue and net revenue,
expressed in dollars and as a  percentage,  attributable  to Circle's  principal
services  during each of the three years in the period  ended  December 31, 1998
(in thousands).

                                   1998               1997             1996
                                  ------             ------           ------
Revenue:
Air freight forwarding       $ 482,701   66%   $ 471,563   66%   $ 418,506   65%
Ocean freight forwarding       111,938   15%     111,200   15%     106,554   16%
Customs brokerage and other    143,039   19%     134,226   19%     120,570   19%
                            ----------------  ----------------  ----------------
             Total           $ 737,678  100%   $ 716,989  100%   $ 645,630  100%
                            ================  ================  ================


Net Revenue:
Air freight forwarding       $ 118,170   39%   $ 106,210   38%   $ 102,105   39%
Ocean freight forwarding        40,471   13%      37,608   14%      35,783   14%
Customs brokerage and other    143,039   48%     134,226   48%     120,570   47%
                            ----------------  ----------------  ----------------
             Total           $ 301,680  100%   $ 278,044  100%   $ 258,458  100%
                            ================  ================  ================


Note 14 - Quarterly Data (unaudited)

(in thousands, except per share amounts)
                                            Net     Net Income (Loss)
                                Net       Income        per share      Dividends
                   Revenue    Revenue     (Loss)    Basic     Diluted  per share
                   -------    -------    -------   ------------------  ---------

1998 Quarters
  4th Quarter    $ 206,706   $ 82,517    $ 5,757    $ 0.34     $ 0.34   $ 0.135
  3rd Quarter*     190,799     77,585       (544)    (0.03)     (0.03)      -
  2nd Quarter      174,760     73,005      7,857      0.46       0.45     0.135
  1st Quarter      165,413     68,573      5,445      0.32       0.31       -


1997 Quarters
  4th Quarter    $ 194,444   $ 74,506    $ 7,824    $ 0.46     $ 0.45   $ 0.135
  3rd Quarter      180,771     69,730      7,330      0.43       0.42       -
  2nd Quarter      179,593     69,299      6,506      0.39       0.38     0.135
  1st Quarter      162,181     64,509      4,672      0.28       0.27       -

 * 1998  includes  special charges of $10.7 million or $8.1 million,  net of tax
   ($0.47 per diluted share).


                                      F-15

                                       38
<PAGE>


Independent Auditors' Report

The Board of Directors and Stockholders of Circle International Group, Inc.:

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Circle
International  Group,  Inc. and subsidiaries  (the "Company") as of December 31,
1998 and 1997, and the related  consolidated  income  statements,  statements of
stockholders' equity and statements of cash flows for each of the three years in
the  period  ended  December  31,  1998.  These  financial  statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these  financial  statements  based on our audits.  The  accompanying
consolidated   financial   statements  give  retroactive   effect  to  the  1998
acquisition  of Alrod  International,  Inc.,  which has been  accounted for as a
pooling  of  interests  as  described  in Note 3 to the  consolidated  financial
statements.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects,  the financial position of Circle  International  Group, Inc.
and  subsidiaries  as of  December  31,  1998 and 1997 and the  results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.





/S/ DELOITTE & TOUCHE LLP
San Francisco, California
March 5, 1999


                                      F-16

                                       39
<PAGE>


EXHIBIT 10.4.3

                              Consulting Agreement

     This Consulting Agreement ("Agreement") is entered into as of the first day
of  January  1999 by and  between  Zita  Logistics,  Ltd.  ("Zita")  and  Circle
International Group, Inc.'s ("CIG") wholly owned subsidiary Circle International
European Holdings Limited ("the Company").

     Zita is an independent  consulting company engaged in providing  consulting
services to businesses.

     The Company is engaged in the provision of air freight and related services
worldwide.

     The Company desires to use the consulting  services of Zita for the term of
this Agreement and Zita desires to provide said services to the Company.

     For and in  consideration  of the  mutual  promises  set forth  below,  the
parties agree as follows:

     1.   Services  To Be  Provided.  Zita shall  provide  the Company and CIG's
          global network of offices,  except those located in the United States,
          Spain and Portugal, with consulting services consisting of:

          (a)  Identifying,  analyzing  and  reporting  on  potential  strategic
               partners;

          (b)  Selling  services  offered  by  Company,   including  calling  on
               existing and potential customers;

          (c)  Assisting in developing responses to global bids and proposals;

          (d)  Providing training seminars; and

          (e)  Providing customer satisfaction reviews and surveys.

     2.   Level Of Service.  Zita agrees to provide the services set forth above
          in a competent, professional manner and to the reasonable satisfaction
          of the Company and its customers.

     3.   Independent  Contractor  Status.  It is the intent of the parties that
          Zita shall be and is an independent  contractor,  and at no time shall
          Zita,  its officers or employees be the agent(s) or employee(s) of the
          Company  or any of its  related  entities.  Zita  shall  have full and
          direct control and supervision  over the services  provided under this
          Agreement  and  shall  determine  the  method,  means  and  manner  of
          performance.

                                       40
<PAGE>

     4.   Responsibility   For   Employees.   Zita  shall  furnish  at  its  own
          discretion,  selection  and  expense  any labor  required  to  perform
          services under this  Agreement.  Zita shall be solely  responsible for
          the direction and control of its  employees,  including the selection,
          hiring,  firing,  supervision,  assignment and direction of employees,
          the setting of wages, hours and working conditions, and the adjustment
          of grievances.  Zita shall  determine the method,  means and manner of
          the performance of the work of its employees and their  performance of
          this  Agreement.  Zita  assumes full and sole  responsibility  for the
          payment of all wages,  benefits and expenses of its  employees and for
          all income tax withholding,  unemployment  insurance,  social security
          taxes and other taxes for its  employees.  The Company  shall  neither
          have nor  exercise  disciplinary  authority  or  control  over  Zita's
          employees  and shall have no authority  to supervise or direct  Zita's
          employees  in the  performance  of their work.  All pay,  benefits and
          working conditions of Zita and its employees are a matter of agreement
          solely  between Zita and its employees.  Zita and Zita's  officers and
          employees  shall  not  participate  in  any  benefits  enjoyed  by the
          Company's  employees.  Zita shall  hold the  Company  and its  related
          entities  harmless  for  any  failure  by  Zita  to  comply  with  any
          obligation  or right  pertaining  Zita's  employees,  including  those
          arising from statute or regulation.

     5.   Limitation  On Authority.  As an  independent  contractor  acting as a
          consultant  to the  Company,  Zita and its  employees  do not have the
          authority to make any contract or create any  obligation  or liability
          on behalf of the Company or its related  entities.  Zita shall pay any
          and all taxes which might arise as a result of the  services  provided
          hereunder  and shall  indemnify  and hold harmless the Company and CIG
          and  their  related  entities  from  and  against  any and all loss or
          liability  arising from the failure of  consultant  or its officers or
          employees to comply with the provisions of this  Agreement.

     6.   Office Space And  Equipment.  Zita shall  provide its own office space
          and office equipment at its own expense.

     7.   Compensation.  During  1999,  Zita  shall  be  paid by the  Company  a
          quarterly service fee of U.S. $77,500. Thereafter, for the term of the
          Agreement, Zita shall be paid a quarterly service fee of U.S. $68,750.
          Additionally,  Zita's  reasonable  business  expenses  incurred in the
          provision of services  under this  Agreement will be reimbursed by the
          Company.  Payment shall be made by wire transfer as instructed by Zita
          within  ten (10)  calendar  days of receipt  of Zita's  invoice.  Such
          invoices shall be sent by Zita to the Company  following each calendar
          quarter during which Zita performed services under this Agreement.


                                       41
<PAGE>

     8.   Non-competition.  Zita and its  officers  and  employees  agree to the
          provisions  of  the  attached   Non-competition   and   Non-disclosure
          Agreement.  Further,  Zita and its officers and  employees  agree that
          their  services  shall be  exclusive  to the  Company and shall not be
          offered to third parties  without the written  consent of the Company.


     9.   Arbitration.  Any and all disputes  concerning this Agreement shall be
          subject  to  binding  arbitration  in  London,   England,   under  the
          Commercial Arbitration Rules of the American Arbitration  Association.
          The  cost of the  arbitration  will be  divided  equally  between  the
          parties  and each side  shall  bear its own  legal  fees  incurred  in
          connection with the arbitration.

     10.  Term.  The term of this  Agreement  shall  be from  January  1,  1999,
          through  December 31, 2001.

     11.  Termination.  This  Agreement may be terminated  before its expiration
          for  reasons  constituting  cause,  which  shall  include,  but not be
          limited  to,  breach of this  Agreement  or  breach  of CIG's  written
          policies (however,  such written policies shall not be created for the
          purpose of establishing a termination of this Agreement) or any act by
          Zita or its officers or employees which constitutes fraud,  dishonesty
          or  illegality.  In the event this  Agreement is terminated for cause,
          all further obligations under this Agreement will cease as of the date
          of  termination.  Once  the  term of this  Agreement  expires,  or the
          Agreement is terminated,  the Company,  CIG and their related entities
          will owe no further  obligation  to Zita or its  officers or employees
          other than amounts then accrued and unpaid hereunder,  unless there is
          an express written agreement to continue an obligation.

     12.  Entire  Agreement.  This  Agreement  supersedes  any  prior  agreement
          between the parties, whether oral, written or implied, constitutes the
          entire  agreement  between the  parties and may be modified  only by a
          written agreement signed by both parties hereto.

                              CIRCLE INTERNATIONAL EUROPEAN HOLDINGS LIMITED


Dated:  __________________    BY: _________________________________________

                              ZITA LOGISTICS, LTD.


Dated:  __________________    BY: _________________________________________



                                       42
<PAGE>

EXHIBIT 10.12

                                                           World Headquarters
                                                           260 Townsend Street
                                                           San Francisco
                                                           California 94107-1719
                                                           Phone: 415-978-0600
May 4, 1998                                                Fax: 415-978-0558

Mr. David Beatson
260 Townsend Street
San Francisco, CA 94107

Re:   Offer of Employment


Dear David:

It is with pleasure that I offer you on behalf of Circle International Group the
position of Chief Executive Officer under the following conditions:

    Starting Date:       July 1st, 1998 or sooner

    Salary:              $450,000,  annually  to be  reviewed  by the Board
                         annually for merit and cost of living increases.

    Share Options*:

    Amount               Date                    Price
    ------               ----                    -----

    200,000              Hiring Date             Market Price

     50,000              Anniversary Hiring      Market Price
                         Date Year 1999

     50,000              Anniversary Hiring      Market Price
                         Date Year 2000

     50,000              Anniversary Hiring      Market Price
                         Date Year 2001

    *The  options  will vest in one-third  increments  after 12 months  waiting
     period.

    Signing Bonus:       $150,000.   Payable   January  1st,   1999  plus  1,000
                         restricted  shares  which  fully  vest in one year from
                         starting date.

    Incentive:           1) For period July 1st or sooner through December 31st,
                         1999: $150,000 guaranteed (any amount above that at the
                         Board's discretion).


                                       43
<PAGE>


Mr. David Beatson
May 4, 1998
Page 2



      Incentive, cont'd: 2) See attachment A) C.E.O.  incentive  methodology for
                         subsequent years (i.e., 1999 and beyond).

      Agreement Terms:   5 years,  subject to a 12-month pay-out for termination
                         without cause.

      Change in Control: Options vest, change in control is 20%+

      Other:             You  will be  nominated  to the  position  of  Director
                         effective   August  1998.   As  you  know,   the  Board
                         understands   that  for   personal   reasons,   I  will
                         relinquish  the  position  of  Chairman  prior  to  the
                         expiration  of my  December  31,  1999 term.  When this
                         occurs,  I will recommend to the Board that you succeed
                         me in this position.

      Benefits:          You will be entitled to a monthly car allowance of $750
                         per  month.  Additionally,  you  will  have  use of the
                         Company  limousine  and  part-time  driver for business
                         purposes.  Our  standard  health and medical  benefits,
                         401(k)  plan  and  executive   non-qualified   deferred
                         compensation  plan will apply in short waiting  periods
                         whenever possible.  Additionally,  the Company will pay
                         your monthly dues  associated with a local health club,
                         such as the nearby San Francisco Tennis Club.

This is a tremendous  opportunity  with unlimited  upside  potential.  We have a
great deal of pride in the  excellent  Company we have  developed  and earnestly
believe that you are the right person for the Company.

During our Saturday,  May 2nd,  conversation,  we agreed to Friday, May 15th, as
the date of your acceptance or otherwise.  However, after subsequent discussions
with the members of the Board, they have requested that you provide me with your
response  (at the  latest) by Monday,  May 11th,  the day of our Board  meeting.
Everyone  understands the need for confidentiality and your wish to stay through
June 30th with your present company in order to protect certain stock options.

I look forward to hearing from you.

                                  Best regards,


                                  /S/ Peter Gibert
                                  --------------------
                                  Peter Gibert
                                  Chairman of the Board


                                       44
<PAGE>

Mr. David Beatson
May 4, 1998
Page 3

Attachment A:   C.E.O. incentive methodology for subsequent years (i.e. 1999 and
                beyond)

C.E.O. (Pool is 1% of EBT) ***



                           Net Revenue Growth

 EPS            <0%          0 to<10%     10 to<15%     15 to <20%    >=20%
-----           ---          --------     ---------     ----------    -----


>=25%           25%            60%          100%           120%        150%

>=20%           20%            50%           80%           100%        120%

>=15%           10%            40%           60%            80%        100%

>=10%            3%            20%           30%            60%         80%


Under 10% E.P.S. at Board's discretion.
Minimum incentive 1998 and 1999 =  $150,000 each


*** Note:   E.B.T. - 1997:       $40 Million
            E.B.T. - 1998:       $49 Million



                                       45
<PAGE>


EXHIBIT 21.1
LIST OF SUBSIDIARIES

The following  table sets forth  certain  information  concerning  the principal
subsidiaries of Circle as of December 31, 1998.

                                            State or other jurisdiction
Name                                             of incorporation
----                                             ----------------

Alrod International, Inc.                           California
Circle Airfreight Japan, Ltd.                       California
Circle Espana, S.A.                                 Spain
Circle Freight International
   Speditionsgesellschaft GmbH                      Germany
Circle Fretes Internacionais do
   Brasil Ltda.                                     Brazil
Circle Freight International (Argentina) S.A        Argentina
Circle Freight International Belgium S.A.           Belgium
Circle Freight International (Canada) Ltd.          Canada
Circle Freight International (Netherlands) BV       Netherlands
Circle Freight International (India) Pvt. Ltd.      India
Circle Freight International (Italia) S.R.L.        Italy
Circle Freight International Japan, Inc.            Japan
Circle International Korea Co. Limited              Korea
Circle Freight International (NZ) Ltd.              New Zealand
Circle Freight International
   Philippines Ltd., Inc.                           Philippines
Circle International (Australia) Pty., Ltd.         Australia
Circle International (Hong Kong) Ltd.               Hong Kong
Circle International, Inc.                          Delaware
Circle International Limited                        United Kingdom
Circle International (Singapore) Pte. Ltd.          Singapore
Circle International (Sweden) AB                    Sweden
Circle Worldbridge International (Thailand) Ltd.    Thailand
CE Logistics (Asia) Pte. Ltd.                       Singapore
Concord Express (Singapore) Pte. Ltd.               Singapore
Darrell J. Sekin & Co., Inc.                        Texas
F.J. Tytherleigh & Co. Ltd.                         United Kingdom
Harper Logistics International S.A.                 France
J.R. Michels Incorporated                           Texas
Max Gruenhut B.V.                                   Netherlands
Max Gruenhut GmbH                                   Germany
Regga Holdings Limited                              Bermuda
Regga Insurance Limited                             Bermuda

The  names of  certain  subsidiaries  have been  omitted  because  such  unnamed
subsidiaries,  considered in the  aggregate,  would not constitute a significant
subsidiary as that term is defined in Regulation S-X.



                                       46
<PAGE>


EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT

We consent to the  incorporation  by reference in  Registration  Statements  No.
33-44357,  No.  33-35272,  No.  33-53557,  No.  33-17601,  No.  333-04139,   No.
333-04141,  No. 333-64147 and No. 333-68127 of Circle  International Group, Inc.
and  subsidiaries  of our report  dated March 5, 1999,  appearing in this Annual
Report on Form 10-K of Circle International Group, Inc. and subsidiaries for the
year ended December 31, 1998.


/S/ DELOITTE & TOUCHE LLP
San Francisco, California
March 30, 1999


                                       47