How To Calculate The Net Profit Of A Railway Company In Chf.Com

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1 P 29 Contents. Financial Report. SBB Group P 30 Report on the Group s financial position P 40 Consolidated income statement P 41 Consolidated balance sheet P 42 Consolidated cash flow statement P 43 Consolidated statement of changes in equity P 44 Notes to the consolidated financial statements 2014 P 71 Report of the statutory auditor on the consolidated financial statements P 73 P 74 P 75 P 84 P 85 SBB AG SBB AG income statement SBB AG balance sheet Notes to the separate financial statements of SBB AG Board s proposal for the appropriation of accumulated loss Report of the statutory auditor on the financial statements The full annual report is available in German, French and Italian only.

2 SBB in 2014 Report on the Group s financial position P 30 Report on the Group s financial position. SBB in SBB increased its consolidated net income by CHF million compared to the previous year to CHF million. This increased income is attributable not only to growth in operating profit by 2.7 % and further efficiency improvements, but also and in particular to the sale of real estate (CHF million compared to the previous year). Passenger services generated earnings of CHF million (CHF +7.8 million compared to the previous year). Passenger revenues rose in particular due to an expansion in regional services (S-Bahn rapid transit network in St. Gallen and the Zurich cross-city line), as well as fare adjustments. Real Estate generated earnings before compensation payments of CHF million, from which compensation of CHF million was paid to finance infrastructure and CHF million to restructure the SBB pension fund. Freight services boosted its earnings by CHF 18.4 million compared to the previous year (to CHF 33.1 million) thanks to increased freight transport and operating efficiency improvements. In the fourth year following its spin-off, SBB Cargo International recorded a positive result (CHF 1.2 million) as well. As in 2013, Infrastructure also provided additional maintenance payments in 2014 which were not completely covered by the funds from the performance agreement. This resulted in a deficit of CHF 65.8 million. Free cash flow was CHF million, which is CHF million higher than in the previous year. The improvement is attributable in particular to operating efficiency measures and real estate sales. Net interest-bearing debt was CHF 7.7 billion. The increase by CHF 0.2 billion is attributable in particular to investments in rolling stock and railway stations, and an increase in rail infrastructure maintenance cost.

3 SBB in 2014 Report on the Group s financial position P 31 Consolidated net income Capital expenditure CHF millions CHF millions 4,000 3,500 3,000 3, , , ,500 1, Operating result (EBIT) Consolidated net income Passenger Real Estate Infrastructure (Network) Freight Infrastructure (Energy) Other Consolidated net income was CHF million, up on the previous year by CHF million. Operating income rose by CHF million (+2.7 %) to CHF 8,542.1 million due to an increase in passenger revenues, freight revenues and increased rental income as well as publicsector funding. Their increase is based on higher contributions for maintenance expenditure. Operating expenses (CHF 8,227.8 million) increased by CHF million compared to the previous year due to higher personnel expenses and greater depreciation. This resulted in an overall improved operating result compared to the previous year, of CHF million (CHF +4.9 million, +1.6 %). The financial result of CHF million was to a large extent the result of interest expenditure. The positive development in valuation of financial assets improved this by CHF 12.6 million compared to the previous year. The non-operating result of CHF million was CHF million higher year on year due to higher gains on the disposal of real estate. The investment volume at CHF 3,462.5 million was CHF 99.7 million lower than the previous year. Investments were made in passenger and freight rolling stock, new railway infrastructure and real estate projects. In total CHF 1,962.7 million (2013: CHF 1,888.4 million) was invested in maintaining and expanding the rail infrastructure with the aim of improving timetable stability and expanding the rail services. To improve its range of services and travelling comfort, Passenger Services invested CHF million (2013: CHF 1,015.9 million) in new trains (e. g. FLIRT and ETR 610 multiple units) and modernisation of existing rolling stock. Real Estate invested CHF million (2013: CHF million) in modernising and expanding railway station buildings, and in developing central sites close to stations. Energy invested CHF million (2013: CHF million) in upgrading and maintaining energy production and transmission facilities.

4 SBB in 2014 Report on the Group s financial position P 32 Free cash flow before and after public-sector funding CHF millions 1,000 Public-sector funding CHF millions 3,750 3, , ,250 1,000 2,000 2,090 1, , Free cash flow before public-sector funding of rail infrastructure Free cash flow after public-sector funding of rail infrastructure Grants and payments for infrastructure and grants to Cargo for non-transalpine rail freight Grants for regional passenger services Federal and cantonal loans for infrastructure Free cash flow was CHF million, which is CHF million higher than in the previous year (2013: CHF million). Free cash flow was supported by operating improvements as well as divestments, especially from real estate sales. In 2014, SBB received CHF 1,885.0 million in public-sector funding for SLA-funded replacement investments and investment projects funded through special financing arrangements. The rise in contributions by CHF 65.7 million compared to the previous year is in particular attributable to higher contributions for maintenance expenditure. Federal government grants for infrastructure cover any costs not covered by the statutory train-path charges for the provision and operation of the rail network and a network maintenance contribution equivalent to reported depreciation. The compensation for regional passenger services corresponds to the costs of the services ordered by public-sector authorities which are not covered by passenger revenues. Loans from the infrastructure fund and the FinöV fund were provided primarily for the Cornavin Eaux-Vives Annemasse line infrastructure enhancement, for AlpTransit approach routes as well as various projects connected to the future develop ment of railway infrastructure.

5 SBB in 2014 Report on the Group s financial position P 33 Operating income Operating expenses CHF millions CHF millions 10,000 10,000 8,000 8,542 8,000 8,228 6,000 6,000 4,000 4,000 2,000 2, Traffic revenues Public-sector payments (excluding loans) Other income Own work capitalised Rental income from real estate Personnel expenses Other operating expenses Depreciation and amortisation Cost of materials Operating income rose by 2.7 % to CHF 8,542.1 million. Passenger revenues rose to CHF 3,044.9 million (+1.6 % year on year) due to an expansion in regional services (S-Bahn rapid transit network in St. Gallen and the Zurich cross-city line) as well as fare adjustments. Rental income from real estate was up by CHF 22.0 million (+5.5 % year on year) in particular thanks to additional space. The growth in freight revenues by CHF 46.1 million (+5.6 %) to CHF million resulted in particular from increased freight transport. Other income held steady year on year at CHF million. Public-sector grants include the revenue components for infrastructure operations and maintenance that are reflected in the income statement, as well as grants for regional and freight services. The increase by CHF 76.7 million compared to the previous year resulted in particular from higher contributions for infrastructure maintenance. Grants for regional passenger and freight services remained almost constant compared to the previous year. Operating expenses rose by 2.7 % to CHF 8,227.8 million compared to the previous year. Expansion in passenger services and major investment projects in infrastructure pushed up personnel expenses by CHF 77.6 million (+2.1 % year on year) and led to an increase in payments for third-party maintenance and repairs by CHF 30.2 million. In particular, taking new railway infrastructure (Zurich crosscity line) and new rolling stock into operation led to an increase in depreciation by CHF million.

6 SBB in 2014 Report on the Group s financial position P 34 Financial result CHF millions In 2014, the financial result was CHF million (includes interest expenditure, investment income and foreign currency effects). The year-on-year improvement is due primarily to the positive development in the valuation of financial assets.

7 SBB in 2014 Report on the Group s financial position P 35 Balance sheet breakdown (assets) CHF millions Balance sheet breakdown (equity and liabilities) CHF millions 40,000 38,106 40,000 38,106 32,000 32,000 24,000 24,000 16,000 16,000 8,000 8, Property, plant and equipment Assets under construction Financial and intangible assets Current assets Equity Public-sector loans (federal and cantonal) Interest-bearing debt Other liabilities Property, plant and equipment and assets under construction were up from CHF 32,945.9 million in 2013 to CHF 34,275.7 million in 2014 (+4.0 %). Since 2010, they have increased on average by 4.1 %. The increase in the reporting period primarily resulted from the Cornavin Eaux-Vives Annemasse and Zurich cross-city line construction projects. In addition, new FLIRT and ETR 610 multiple units were taken into operation, and construction progressed on investment properties (among other things Zurich Europaallee). Financial and intangible assets amounted to CHF 1,384.0 million in 2014 (2013: CHF 1,356.1 million). A rise in cash and cash equivalents resulting from long-term refinancing in the second half of the year was the primary reason for the higher current assets (CHF million compared to the previous year). Net interest-bearing debt (interest-bearing financial liabilities minus cash and cash equivalents) rose by CHF million year on year to CHF 7,720.0 million due to investments in rolling stock and real estate and an increase in rail infrastructure maintenance expenditure. The debt coverage ratio (net interest-bearing debt divided by EBIT including gains from real estate disposals) improved from 19.2 in the previous year to 15.3 in the reporting year due to the higher EBIT and gains from real estate disposals. Public-sector loans for financing the railway infrastructure increased by CHF million to CHF 13,260.7 million in the reporting year, in particular due to major projects ordered by the Federal government and cantons.

8 SBB in 2014 Report on the Group s financial position P 36 Segment earnings Passenger Real Estate Freight Infrastructure CHF millions Passenger. Compared to the previous year earnings increased by CHF 7.8 million to CHF million, in particular due to an expansion in regional transport services and fare adjustments. Freight. Thanks to increased freight transport (net tonne-kilometres % compared to the previous year) and efficiency improvements in production, earnings further improved (+CHF 18.4 million). Real Estate. Real Estate generated earnings before compensation payments of CHF million (CHF million compared to the previous year). In total, CHF million in compensation was paid to finance infrastructure and CHF million to restructure the pension fund. On the one hand, the higher result is due to growth in rental income (+CHF 22.0 million) and, on the other hand, higher real estate sell-offs (+CHF million). Infrastructure. Earnings for the year were CHF 65.8 million (CHF +6.5 million compared to the previous year). The railway infrastructure is burdened by the low level of preventive maintenance in the past and high capacity utilisation at the same time. To ensure the sustained quality and safety of the tracks, Infrastructure (Network) provided increased maintenance services in 2014 just as in These were not completely covered by the funds from the performance agreement, leading in turn to a deficit.

9 SBB in 2014 Report on the Group s financial position P 37 Free cash flow by segment (before public-sector funding and after compensation payments). Passenger Real Estate Freight Infrastructure CHF millions ,000 1,500 2, ,105 Passenger. Free cash flow during the calendar year amounted to CHF million (2013: CHF million). It was not possible to pay for the investments required in rolling stock from ongoing operations. Freight. Free cash flow during the calendar year amounted to CHF 71.3 million. The year-on-year improvement by CHF 56.9 million is attributable in particular to improved earnings for the year and ongoing low investments. Real Estate. Free cash flow increased by CHF million primarily due to the higher cash flow from the sale of real estate, although it still remained negative (CHF million). Infrastructure. Free cash flow before public-sector funding amounted to CHF 2,104.6 million (2013: CHF 1,976.7 million). Investments (including the major Cornavin Eaux-Vives Annemasse project) led to a lower free cash flow.

10 SBB in 2014 Report on the Group s financial position P 38 Outlook. SBB will continue to expand its range of services over the coming years. Important milestones in this regard will be the commissioning of the Gotthard Base Tunnel in 2016 and the Ceneri Base Tunnel in In order to deliver increased customer benefits, investments are being made in modern rolling stock and further development of railway stations. The first new longdistance double-deck trains will run on the east-west route in Although SBB generates the majority of its sales in Swiss francs, the removal of the minimum euro rate by the Swiss National Bank represents an additional challenge, in particular for Freight Services. The ongoing and sustainable economic development of SBB becomes all the more important in order for a high-quality rail service to be offered at a fair price in a financially challenging environment. This will require increases in productivity and earnings in independent commercial sectors, i. e. long-distance passenger services, real estate and freight services.

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12 Consolidated income statement P 40 Consolidated income statement. 1 January 31 December. CHF millions Note Operating income Traffic revenues 1 4, ,961.2 Public-sector funding 2 2, ,172.1 Rental income from real estate Other income Own work capitalised Total operating income 8, ,319.1 Operating expenses Cost of materials Personnel expenses 7 3, ,726.9 Other operating expenses 8 1, ,783.9 Depreciation of property, plants and equipment 9,21 1, ,644.2 Amortisation of intangible assets 9, Total operating expenses 8, ,009.8 Operating result/ebit Financial income Financial expenses Profit from ordinary activities Non-operating result Profit before tax Income taxes Minority interests Consolidated net income The Notes form an integral part of these financial statements.

13 Consolidated balance sheet P 41 Consolidated balance sheet. Assets. CHF millions Note Current assets Cash and cash equivalents Trade accounts receivable Other receivables Inventories and work in progress Prepaid expenses and accrued income Total current assets 2, ,109.7 Non-current assets Financial assets Property, plant and equipment 21 27, ,074.4 Assets under construction property, plant and equipment 21 7, ,871.5 Intangible assets Total non-current assets 35, ,302.0 Total assets 38, ,411.8 The Notes form an integral part of these financial statements. Equity and liabilities. CHF millions Note Liabilities Current financial liabilities Current public-sector loans for rail infrastructure financing Trade accounts payable Other current liabilities Deferred income and accrued charges 27 1, ,498.4 Current provisions Total current liabilities 3, ,294.7 Non-current financial liabilities 23 8, ,651.9 Non-current public-sector loans for rail infrastructure financing 24 13, ,388.5 Other non-current liabilities 26 1, ,787.7 Non-current provisions Total non-current liabilities 23, ,113.2 Total liabilities 26, ,407.9 Equity Share capital 9, ,000.0 Capital reserves 2, ,069.1 Accumulated loss Consolidated net income Equity, excl. minority interests 11, ,915.9 Minority interests Total equity 11, ,003.9 Total equity and liabilities 38, ,411.8 The Notes form an integral part of these financial statements.

14 Consolidated cash flow statement P 42 Consolidated cash flow statement. 1 January 31 December. CHF millions Note Consolidated net income Depreciation and amortisation of non-current assets 1, ,743.8 Impairment losses Decrease in provisions Other expenses/income not affecting cash flows Gains on the disposal of non-current assets Pro rata losses/profits from application of equity method Earnings from minority interests Change in net current assets affecting cash flow Cash flow from operating activities including federal government contri butions for depreciation of SBB infrastructure 1, ,847.6 Federal government contributions for depreciation of SBB infrastructure 1, Cash flow from operating activities excluding federal government contri butions for depreciation of SBB infrastructure Outflows from the liquidation of consolidated companies Outflows for investment in property, plant and equipment/assets under construction 3, ,272.1 Inflows from disposal of property, plant and equipment Outflows for investment in financial assets Inflows from disposal of financial assets Outflows for investment in intangible assets Inflows from disposal of intangible assets Cash flow from investing activities 3, ,369.4 Financing of rail infrastructure investment by non-repayable federal government grants 1, Public-sector loan for financing of rail infrastructure Repayment of current financial liabilities Assumption of non-current financial liabilities Assumption of other non-current liabilities Dividend payments to minority shareholders Cash flow from financing activities 2, ,256.6 Total cash flow Cash and cash equivalents as at 1 January Difference on foreign currency translation Cash and cash equivalents as at 31 December Change in cash and cash equivalents The Notes form an integral part of these financial statements. Free cash flow. CHF millions Cash flow from operating activities Cash flow from investing activities 3, ,369.4 Free cash flow before public-sector financing of rail infrastructure 2, ,472.2 Cash flow from public-sector financing of rail infrastructure 1, ,819.3 Free cash flow after public-sector financing of rail infrastructure Cash flow from financing for commercial investments and pension fund restructuring Total cash flow

15 Consolidated statement of changes in equity P 43 Consolidated statement of changes in equity. CHF millions Share capital Capital reserves (premium) Retained earnings/ accumulated loss Difference on foreign currency translation Total excl. minority interests Minority interests Total incl. minority interests Equity as at , , , ,763.5 Change in scope of consolidation Dividends Change in minority shareholders Consolidated net income Currency translation effect Equity as at , , , ,003.9 Dividends in scope of consolidation Change in minority shareholders Consolidated net income Currency translation effect Equity as at , , , ,377.5 The share capital is divided into 180 million fully paid-up registered shares with a par value of CHF 50 each. The Swiss Confederation is the sole shareholder.

16 Notes to the consolidated financial statements 2014 P 44 Notes to the consolidated financial statements Principles of consolidation. General. The accounting principles applied to these consolidated financial statements meet the requirements of Swiss company law and the Swiss Accounting and Reporting Recommendations in their entirety (Swiss GAAP FER), and give a true and fair view of the financial position, cash flows and results of operations. Closing date. The reporting period for all consolidated companies covers twelve months. The financial year for all consolidated entities with the exception of Kraftwerk Rupperswil-Auenstein AG (closing date: 30 September) is identical to the calendar year. Scope of consolidation. The consolidated financial statements comprise the separate financial statements of Swiss Federal Railways (SBB AG) and those interests in which SBB AG directly or indirectly holds the majority of the voting shares. The 100 % interest in AlpTransit Gotthard AG is not consolidated, but is included using the equity method. Under a special agreement between the Swiss Confederation and SBB, the federal government is directly responsible for its management, as a result of which the criterion of control is not met in this case. As well as managing cross-border lease transactions, SBB also liaises with special purpose entities (SPE). SBB has neither shares nor share options, voting or any other general rights in these SPEs. As a result, they are not included in the scope of consolidation. These operations are recognised as finance leases in the balance sheet. The companies in the scope of consolidation are shown in the list of shareholdings on page 70. Consolidation method. Acquisition accounting is performed using the Anglo-Saxon purchase method. Intra-group assets, liabilities, expenses and income are offset against each other. Profits on intra-group accounts not yet realised through sales to third parties are eliminated on consolidation. On initial consolidation of a company, its assets and liabilities are revalued in accordance with uniform principles. The difference between the resulting equity and the purchase price (goodwill or negative goodwill) is recognised in the balance sheet and amortised using the straight-line method over five years. The full consolidation method has been applied to all companies in which SBB AG holds a direct or indirect interest of more than 50 %. Assets, liabilities, expenses and income are stated in full. Interests of third-party shareholders in equity and profit or loss are shown separately. In the case of true joint ventures, the proportionate consolidation method is applied. This gives the partners absolutely equal influence and control over the company. Assets, liabilities, expenses and income are stated pro rata. Associated companies with an interest of between 20 % and 50 % or companies with an interest of exactly 50 % which do not meet the conditions for proportionate consolidation are included using the equity method. Minority interests. Disclosed minority interests in the Group s equity and profits correspond to the third-party interests in the equity and profit or loss of the respective companies determined on the basis of the current shareholder structure. Foreign currency translation. Assets and liabilities from balance sheets prepared in foreign currencies are translated at the year-end exchange rate. Equity is valued at the historical exchange rate and income, expenses and cash flows at the average rate for the period. The translation differences arising from the application of this method are offset against the retained earnings/accumulated losses and are not reflected in the income statement. The following rates of exchange were applied: Average exchange rate Average exchange rate Exchange rate on the balance sheet date Exchange rate on the balance sheet date EUR

17 Notes to the consolidated financial statements 2014 P 45 Valuation and classification principles. General. The consolidated financial statements are based on the financial statements of the Group companies, prepared in accordance with uniform valuation and classification principles. All assets and liabilities are valued on an item-by-item basis. Amounts are presented in millions of Swiss francs (CHF) rounded to one decimal place, which can result in minor rounding errors. Current assets. Cash and cash equivalents are composed of cash, balances on postal and bank accounts, and highly liquid financial investments with a remaining term of up to three months. They are measured at their nominal value. Trade accounts receivable and other receivables are stated at their nominal value, less economically necessary valuation allowance. Actual credit risks are considered individually while a valuation allowance is recognised for potential credit risks in accordance with the maturity structure and based on past experience. Inventories and work in progress which are primarily for the Group s own use are stated at purchase or manufacturing cost, observing the principle of the lower of cost or market value. Valuation allowances are recognised for slow-moving goods and items with reduced marketability. Non-current assets. Financial assets comprise non-current securities related to buy-back options for lease liabilities and unconsolidated interests and are valued at historical cost less appropriate economically necessary write-downs. Investments in associates include unconsolidated interests where at least 20 % of the voting rights are held and are accounted for using the equity method. Non-current loans to third parties and associates are stated at their nominal value less valuation allowance for actual credit risks. Assets relating to the pension schemes and employer contribution reserves are also recognised as financial assets. If there is a limited waiver of use on employer contribution reserves, an impairment is recognised. Deferred taxes for temporary differences and tax loss carryforwards are recognised if it is likely that they will be realised through future taxable profits. Property, plant and equipment are valued at acquisition or production cost, less the necessary depreciation. They are depreciated using the straight-line method over the anticipated useful life of the assets. The estimated useful life in years is as follows: Technical, electrical and mechanical installations Tools, furniture, instruments 5 20 IT hardware 2 8 Telecommunication Small devices, networks 2 8 Communication systems, radio systems Vehicles Locomotives and power cars Passenger coaches Freight wagons and service vehicles Small motive power units Road and other vehicles 5 20 Substructure and track Railway installations Site development, supply and disposal installations Hydraulic engineering structures Pressure pipes, cisterns/sand traps Other hydraulic structures Buildings Residential/administrative/commercial and office buildings Other buildings Interest expenses incurred in connection with generated assets are capitalised where a significant construction period is necessary before commissioning can take place. They are capitalised based on the average asset value using the weighted average of the liabilities. Leased assets which in substance are equivalent to an asset purchase (finance lease), are recognised as property, plant and equipment and depreciated over the same useful life as similar assets. Lease liabilities are stated under financial liabilities. Profits from sale-and-leaseback trans actions are deferred and released over the term of the contract.

18 Notes to the consolidated financial statements 2014 P 46 Undeveloped land is considered to be land that is located within a building zone and on which no buildings currently exist. Assets under construction comprise the accrued capitalisable project costs of a project for property, plant and equipment. Non-capitalised project costs are charged to the income statement as incurred. Intangible assets comprise purchased non-material items (goodwill, water rights, rights of way, other rights and software). These are amortised on a straight-line basis over the corresponding useful life. No intangible assets have been generated internally. The estimated useful life of the intangible assets in years is as follows: Goodwill 5 Rights as per agreement Software 4 8 Accrued capitalisable project costs are stated under intangible assets under construction. Non-capitalised project costs are charged to the income statement as incurred. Liabilities. With the exception of provisions, liabilities are stated at their nominal value. Financial liabilities with a remaining term of more than twelve months are deemed non-current. Financial liabilities include loans and advances received from third parties and the federal government, such as liabilities to banks, lease liabilities, bonds and liabilities to SBB staff accounts. Public-sector loans for rail infrastructure financing relate to federal or cantonal loans and are usually non-interest-bearing loans. Other non-current liabilities include non-current deferred income and pension fund liabilities. Provisions are recognised if there are legal and constructive obligations in accordance with the requirements of Swiss GAAP FER 23. If time is a significant factor, the provision is discounted at the refinancing rate to the federal government. Tax provisions recognised as non-current provisions comprise deferred taxes. They include all effects of taxes on income arising from the different requirements of commercial or local tax law or from the internal valuation principles of the Group. Provisions are recognised using the liability method and periodically adapted to any changes in local tax laws. The occupational pension plan for employees of SBB AG, SBB Cargo AG and certain other subsidiaries is the responsibility of the SBB pension fund, which has been an independent foundation since 1 January The SBB pension fund is a defined contribution plan. The other subsidiaries either have affiliation contracts with other pension schemes or have their own schemes. The economic effects of projected benefit obligations must be stated in accordance with Swiss GAAP FER 16, irrespective of the legal form of the pension plans and schemes. This substance-over-form approach requires the pension fund liabilities or assets to be carried in the financial statements of the associated companies, although no legally binding effect emerges to the benefit or detriment of the pension funds. The economic effects of deficits or surpluses are determined on the basis of the most recent available (interim) financial statements of the pension funds. Investigations are undertaken to establish whether other assets (economic benefits) or liabilities (economic obligations) exist at the balance sheet date in addition to the contributions and related deferrals taken into account. Economic benefits arise from the possibility of a positive effect on the company s future cash flow (e. g. from reductions in contributions) as a result of a pension fund surplus. Economic obligations arise from the possibility that a pension fund deficit may adversely affect future cash flow in the event that the company wishes or is required to be involved in the financing (e. g. through restructuring contributions). Changes in these economic effects are recognised in the income statement under personnel expenses. Derivatives. SBB s treasury policy is geared to minimise risks. Derivatives are therefore used only for hedging underlying transactions. Hedging instruments are valued in the same way as the hedged underlying transaction, and are recognised in the income statement at the time the underlying transaction is realised. Contingent liabilities and assets. Sureties, guarantees, pledges and other liabilities of a contingent nature are regarded as contingent liabilities. These are disclosed at their nominal value. Contingent assets are disclosed if the inflow of economic benefits is possible. Other obligations not included in the balance sheet. This item includes all other obligations entered into which cannot be terminated within one year. They are disclosed at their nominal value. This item largely contains investment and energy purchase commitments.

19 Notes to the consolidated financial statements 2014 P 47 Detailed notes to the consolidated financial statements. 0.1 Changes to accounting principles. Changes to Swiss GAAP FER for 2014 do not result in any changes to the SBB consolidated financial statements. 0.2 Changes to scope of consolidation. The scope of consolidation has changed as follows since 1 January 2014: login Berufsbildung AG, Olten, partial sale (June 2014) Terzag Terminal Zürich AG, Zurich, liquidated (December 2014) 1 Traffic revenues. CHF millions Passenger 3, ,995.6 of which long-distance services 2, ,259.7 of which regional services Freight Operating services Infrastructure (train-path revenues) Traffic revenues 4, ,961.2 Traffic revenues increased by a total of CHF 81.2 million (+2.0 %). The revenue from regional services grew in particular due to the opening of the cross-city line in June 2014 and the expansion in services offered by the St. Gallen S-Bahn rapid transport network by CHF 51.3 million (+7.0 %). Freight revenues were up by CHF 46.1 million (+5.6 %) thanks to an increase in traffic volume.

20 Notes to the consolidated financial statements 2014 P 48 2 Public-sector funding. CHF millions Grants for regional passenger services Federal government Cantons Total grants for regional passenger services Federal government grants to SBB AG for infrastructure arising from service-level agreement Depreciation on infrastructure 1, Non-capitalised portions of investment expenses Operating grant for infrastructure Total federal grants from service-level agreement 1, ,404.6 Contributions for non-capitalised portions of investments funded by special financing Federal government Cantons Total contributions to investments funded by special financing Grants for infrastructure of subsidiaries (regional passenger services) Federal government Cantons Total grants for infrastructure of subsidiaries Total grants for rail infrastructure 1, ,557.2 Federal government grants to Cargo for freight Total grants for freight services Public-sector funding 2, ,172.1 Grants for commissioned regional passenger services are paid to compensate SBB for costs not covered by passenger revenues. The CHF 80.2 million (+5.2 %) rise in total public-sector funding for rail infrastructure was driven by the increase in maintenance expenditure as a result of higher depreciation. Depreciation increased, amongst other things due to the cross-city line coming into service. Federal government grants for infrastructure also include benefits of CHF 52.0 million (previous year: CHF 52.0 million) paid to SBB AG which were passed on to the Zurich transport authority (ZVV) ( preferential compensation ). This sum is not directly linked to services performed by SBB AG but is forwarded in full to the ZVV by deducting it from the cantonal grants for regional passenger services in accordance with the disclosure practice specified by the Federal Office of Transport (FOT). 3 Rental income from real estate. The new buildings at Europaallee and Zurich Altstetten WestLink Plaza as well as the new facilities opening in Zurich and Geneva Cornavin stations led to growth in rental income by CHF 22.0 million (+5.5 %).

21 Notes to the consolidated financial statements 2014 P 49 4 Other income. CHF millions Services Maintenance and servicing work Rental income Energy-related revenues Foreign currency exchange Commissions Sales of printed matter and materials Cost participations Net proceeds from the disposal of operating assets Sundry other income Other income Other income declined by CHF 2.9 million ( 0.3 %) year on year. On the one hand, growth in revenue from services resulted from including login Berufsbildung AG in the SBB scope of consolidation in mid-2013 and, on the other hand, from increased sales with third parties. 5 Own work capitalised. CHF millions Investment orders Stock orders Own work capitalised Increased in-house production instead of third-party services led to an increase in own work capitalised, especially in investment orders. 6 Cost of materials. The cost of materials for rail infrastructure maintenance as well as for vehicle maintenance remained unchanged. 7 Personnel expenses. CHF millions Wages and salaries 3, ,013.1 Social security costs Personnel expenses for Labour Market Centre (AMC) Other personnel expenses Personnel expenses 3, ,726.9 Personnel expenses grew by CHF 77.6 million (+2.1 %). This increase was due to newly created jobs in various productive and safety-relevant areas, the new login Berufsbildung AG subsidiary as well as pay increases. Headcount increased by 1,753 to 32,730 full-time equivalents.

22 Notes to the consolidated financial statements 2014 P 50 8 Other operating expenses. CHF millions Rail services Lease of plant Third-party services for maintenance, repair and replacement Vehicle costs Energy costs Administrative costs IT costs Advertising costs Licences, duties and fees Loss on the disposal of non-current assets Input tax reductions on grants/public-sector funding Sundry operating expenses Other operating expenses 1, ,783.9 Higher track access charges in Germany for freight operations resulted in higher operating costs of CHF 6.1 million (+2.2 %). The CHF 30.2 million (+5.5 %) rise in third-party services for maintenance and repair was primarily attributable to the increase of infrastructure maintenance costs. The vehicle costs increased by CHF 11.7 million (+11.5 %) as a result of vehicle rental. Information technology consulting costs were able to be reduced thanks to expanding the number of in-house specialists. The expenses stated under the item Input tax reductions on grants/public-sector funding are based on the VAT regulations applicable to public transport operators. SBB AG uses flat tax rates to calculate an input tax reduction on the grants it receives, instead of a reduction in proportion to the composition of its total turnover. 9 Write-downs of financial assets, depreciation of property, plant and equipment and amortisation of intangible assets. CHF millions Depreciation of property, plant and equipment 1, ,607.9 Amortisation of intangible assets Write-downs of net book values from disposals of non-current assets Write-downs of financial assets, depreciation of property, plant and equipment and amortisation of intangible assets 1, ,746.2 Write-downs, depreciation and amortisation rose by CHF million (+6.2 %) due to increased investment in infrastructure projects and rolling stock.

23 Notes to the consolidated financial statements 2014 P Financial income. CHF millions Financial income from third parties Financial income from associated companies Financial income and investment income from other interests Adjustment of book values of associated companies Other financial income Financial income Financial income from third parties comprises interest income. The CHF 2.9 million reduction in other financial income was due to lower foreign currency gains. In the reporting period, these amounted to CHF 12.6 million (previous year: CHF 28.4 million). This was offset by a positive development of financial assets. 11 Financial expenses. CHF millions Financial expenses from liabilities to third parties Financial expenses shareholder Adjustment of book values of associated companies Other financial expenses Financial expenses The financial expenses from liabilites to third parties include the interest expense for liabilities to pension funds (see Related party transactions ). Refinancing of third-party liabilities to the federal government led to reclassification between the third-party and shareholder financial expenses. Lower foreign currency losses resulted in a reduction in other financial expenses. In the reporting period, these amounted to CHF 16.2 million (previous year: CHF 27.3 million). 12 Non-operating result. CHF millions Gains on real estate disposals Losses on real estate disposals Non-operating result Gains on real estate disposals are used entirely for the restructuring of the SBB pension fund.

24 Notes to the consolidated financial statements 2014 P Income taxes. CHF millions Current income taxes Deferred income taxes Income taxes Deferred taxes for subsidiaries unused tax loss carryforwards amount to CHF 0.7 million (previous year: CHF 1,2 million). With the exception of auxiliary facilities and properties unconnected with SBB s licensed transport activities, SBB AG is exempt from federal and cantonal tax on earnings, capital gains tax, capital gains tax on property and real estate tax. In summer 2013, a final tax agreement was negotiated between the federal government and the cantons based on the revision of the Swiss decrees on public transport (RöVE). This brought greater legal certainty, enabling deferred taxes to be reversed, which leads to a revenue from taxes. 14 Minority interests. CHF millions As of Change in scope of consolidation Dividends Change in minority interests Profit shares Currency translation effect As of Cash and cash equivalents. CHF millions Cash Postal account Banks Term deposits Cash in transit Cash and cash equivalents

25 Notes to the consolidated financial statements 2014 P Trade accounts receivable. CHF millions Trade accounts receivable from third parties from associated companies Bad debt allowance Trade accounts receivable The reduction is due to lower receivables from passengers travelling without a valid ticket. 17 Other receivables. Other receivables consist of input tax credits arising from value added tax, withholding taxes and advance payments to suppliers. 18 Inventories and work in progress. CHF millions Inventories Work in progress Impairments Inventories and work in progress Work in progress includes CHF 34.2 million in prepayments for customer orders (previous year: CHF 25.9 million). 19 Prepaid expenses and accrued income. Prepaid expenses and accrued income comprise services to other transport operators which have not yet been billed, derivative financial instruments and other accrued revenues.

26 Notes to the consolidated financial statements 2014 P Financial assets. CHF millions Securities Investments in associated companies Loans to third parties Loans to associated companies Pension fund assets Total Net book value as of Acquisition costs As of Change in valuation Additions Disposals Reclassifications As of Accumulated write-downs As of Disposals As of Net book value as of Acquisition costs As of Change in valuation Additions Disposals Reclassifications As of Accumulated write-downs As of Disposals As of Net book value as of The securities column contains other investments with a net book value of CHF 38.7 million (previous year: CHF 37.9 million). Securities classified as non-current assets comprise non-current structured financial assets related to buy-back options in lease liabilities. These had a higher market value of CHF 28.4 million. In the case of financial assets for which there are no buy-back options, the increase in value recognised in the income statement for reversal of previous impairment losses amounted to CHF 23.5 million (previous year: CHF 9.3 million). The disposals include repayments from sale-and-lease-back transactions. Lease liabilities were settled to the same extent. The reduction in loans to third parties concerns the repayment of financial investment to EUROFIMA. The transfers relate to financial receivables that will become due in the next twelve months. These are reported in current receivables.

27 Notes to the consolidated financial statements 2014 P 55 Investments in associated companies. Share of equity Net book value as of Addition 54.4 Dividends received 23.7 Profit shares 6.9 Net book value as of SBB invested CHF 54.0 million in the capital increase of Nant de Drance SA.

28 Notes to the consolidated financial statements 2014 P Property, plant and equipment and assets under construction. CHF millions Vehicles (incl. leasing) Civil engineering, trackbed and railway installations Other property, plant and equipment Land Buildings Total property, plant and equipment Assets under construction and prepay - ments Total Net book value as of , , , , , , , ,252.2 Acquisition costs As of , , , , , , , ,448.8 Change in scope of consolidation Investments , ,356.0 Disposals of assets Reclassifications 1, , , As of , , , , , , , ,126.6 of which leases of which held as investments of which undeveloped land Accumulated depreciation and impairment As of , , , , , ,196.6 Change in scope of consolidation Depreciation , ,605.6 Impairments Disposals Reclassifications As of , , , , , ,180.6 of which leases of which held as investments of which undeveloped land Net book value as of , , , , , , , ,945.9 Acquisition costs As of , , , , , , , ,126.6 Investments , ,248.8 Disposals of assets Reclassifications , , , As of , , , , , , , ,554.7 of which leases of which held as investments of which undeveloped land Accumulated depreciation and impairment As of , , , , , ,180.6 Depreciation , ,682.5 Impairments Disposals Reclassifications As of , , , , , ,279.0 of which leases of which held as investments of which undeveloped land Net book value as of , , , , , , , ,275.7