Fiscal Year in millions

Transcription

1 Fiscal Year 2004 CONSOLIDATED FINANCIAL STATEMENTS SNCF GROUP in millions

2 CONTENTS All amounts are in millions of euros ( millions), unless stated otherwise CONSOLIDATED BALANCE SHEET...2 CONSOLIDATED INCOME STATEMENT...3 CONSOLIDATED STATEMENT OF CASH FLOWS...4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING STANDARDS COMPARABILITY OF THE FINANCIAL STATEMENTS ACCOUNTING POLICIES GOODWILL INTANGIBLE ASSETS TANGIBLE ASSETS RESEAU FERRE DE FRANCE RECEIVABLE OTHER LONG-TERM INVESTMENTS EQUITY AFFILIATES INVENTORY AND WORK-IN-PROGRESS OPERATING RECEIVABLES MARKETABLE SECURITIES AND CASH AND CASH EQUIVALENTS SHAREHOLDERS EQUITY MINORITY INTERESTS PROVISIONS FOR CONTINGENCIES AND LOSSES EMPLOYEE BENEFITS LOANS AND BORROWINGS DERIVATIVES OPERATING LIABILITIES REVENUES PURCHASES AND EXTERNAL CHARGES OPERATING SUBSIDIES EMPLOYEE COSTS AND NUMBERS DEPRECIATION, AMORTISATION AND OPERATING PROVISIONS NET FINANCIAL EXPENSE EXCEPTIONAL ITEMS INCOME TAX DIVISION SEGMENT INFORMATION OFF-BALANCE SHEET COMMITMENTS CONSOLIDATED STATEMENT OF CASH FLOWS SNCF FINANCIAL STATEMENTS FOR THE SPECIAL DEBT ACCOUNT AND EMPLOYEE-RELATED BENEFITS SERVICE ACCOUNT LITIGATION AND DISPUTES SUBSEQUENT EVENTS SCOPE OF CONSOLIDATION

3 CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2004 ASSETS NOTE 31 December December 2003 Goodwill Intangible assets Tangible assets Reseau ferre de france ( rff ) receivable Other long-term investments Equity affiliates Total non-current assets Inventory and work-in-progress Operating receivables Special debt account assets Employee-related benefits service account assets Cash and cash equivalents Total current assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERS EQUITY NOTE 31 December December 2003 Share capital Provisions and accumulated profit (loss) Shareholders equity (group share) Minority interests Provisions for contingencies and losses Loans and borrowings Operating liabilities Special debt account Liabilities Employee-related benefits service account Liabilities Total liabilities TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

4 CONSOLIDATED INCOME STATEMENT NOTE Consolidated revenues Capitalized production and production for stock Operating subsidies Purchases and external charges Taxes and duties other than income tax Personnel expenses Gross operating income Depreciation, amortisation and provisions, net Other operating income and expenses Net operating income Net financial expense Net income (loss) from ordinary activities of consolidated companies Exceptional items Income tax Net income of consolidated companies Share in earnings of equity affiliates Amortisation and reversals of goodwill Consolidated net income Minority interests Net income for the year (Group share)

5 CONSOLIDATED STATEMENT OF CASH FLOWS NOTE Net income of consolidated companies Elimination of non-cash items or items not related to operations: Depreciation, amortisation and provisions, net (excluding current asset provisions) Deferred tax movement Capital gains (losses) on disposal Other 3-6 Cash flow from consolidated company operations (3) Dividends received from equity affiliates 6 6 Change in working capital requirements Net cash from operations Non-current asset purchases Non-current asset disposals Change in loans and receivables Impact of changes in group structure Other investment changes 2 Net cash used in investing activities Dividends paid to minority interests in consolidated companies New loans secured Loan repayments (1) Investment subsidies received Change in marketable securities (2) Change in cash borrowings (2) Change in financial receivables Net cash from financing activities Increase (decrease) in cash balance Opening cash balance Closing cash balance Impact of exchange rate fluctuations -1-4 Impact of changes in accounting method (1) including receipt of RFF receivable (2) Portion with an initial maturity of more than 3 months (3) Cash flow from operations amounted to 1,296 million in (4) Securitisation 4

6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS All amounts are in millions of euros, unless stated otherwise Amounts shown in millions ACCOUNTING STANDARDS Pursuant to Article 25 of the Orientation Law on Domestic Transport (LOTI) of 30 December 1982, Société Nationale des Chemins de fer Français (SNCF), a state-owned industrial and commercial enterprise is subject to the financial management and accounting rules applicable to commercial companies. SNCF keeps its accounting books and records in accordance with prevailing legislation and regulations in France. The consolidated financial statements are prepared in accordance with the rules and methods applicable to consolidated financial statements, approved by the Ministerial Order of 22 June 1999 authorizing CRC Regulation issued by the French Accounting Standards Setting Body COMPARABILITY OF THE FINANCIAL STATEMENTS CHANGES IN GROUP STRUCTURE / CONSOLIDATION METHODS The list of companies included in the scope of consolidation is presented in Note 34. Two changes in Group structure affect the comparability of 2004 and 2003 net income: - The equity accounting of Keolis from 1 September 2004 following the restructuring of the Keolis capital according to an LBO type arrangement. The 3i investment fund has become the majority shareholder of Keolis at 52.68%; SNCF Participations having a 45.35% interest. Keolis was fully consolidated until 31 August The equity accounting of Cegetel SAS as at 31 December Telecom Développement was fully consolidated previously. The impact of these changes in consolidation method is presented in the balance sheet and the income statement: 5

7 2003 PRO FORMA INCOME STATEMENT 2003 published Keolis equity accounting impact over 4 months TD impact 2003 pro forma 2004 Consolidated revenues Capitalised production and production for stock Operating subsidies Purchases and external charges Taxes and duties other than income tax Personnel expenses Gross operating income Depreciation, amortisation and provisions, net Other operating income and expenses Net operating income (loss) Net financial expense Net income (loss) from ordinary activities of consolidated companies Exceptional items Income tax Net income (loss) of consolidated companies Share in earnings of equity affiliates Amortisation of goodwill Consolidated net income (loss) Minority interests Net income for the year (Group share) RESTATED BALANCE SHEET AS AT 31 DECEMBER 2003 ASSETS 31 December 2003 published Impact of Keolis 31 December 2003 pro forma 31 December 2004 Goodwill Intangible assets Tangible assets Reseau ferre de france ( rff ) receivable Other long-term investments Equity affiliates Total non-current assets Inventory and work-in-progress Operating receivables Special debt account Assets Employee-related benefits service account Assets Cash and cash equivalents Total current assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERS EQUITY 31 December 2003 published Impact of Keolis 31 December 2003 pro forma 31 December 2004 Share capital Provisions and accumulated profit (loss) Shareholders equity (Group share) Minority interests Provisions for contingencies and losses Loans and borrowings Operating liabilities Special debt account Liabilities Employee-related benefits service account Liabilities Total liabilities TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

8 CHANGES IN ACCOUNTING METHOD Capitalisation of software created by the company On 1 January 2004, the Group decided to capitalise the design and development costs of software created internally, in accordance with accounting regulations (Article 331-3II b of French Accounting Regulations and CNC Notice no. 31). The impact on 2004 net income, with respect to IT projects launched over the year, is 19 million in capitalised production. The software created by the Group is amortised over their probable useful life up to a maximum of 5 years. Securitisation The Financial Security Act of 1 August 2003 contains a provision that eliminates the need to hold securities in an entity for consolidation purposes when the entity is controlled. This provision, applicable from 1 January 2004, gave rise to an amendment to CRC regulation by CRC regulation of 4 May 2004, completed by Notice 2007-D of 13 October 2004 of the CNC Emergency Committee. This resulted in the full consolidation of the vehicle used in connection with the trade receivable securitisation programme as at 31 December The following balance sheet impacts were recorded subsequent to the first-time application of the provision: Impact on balance sheet assets: - Refinanced trade receivables Other debtors (over collateralisation) -31 Impact on WCR 124 Impact on balance sheet liabilities: - Short-term borrowing 124 CHANGES IN ESTIMATE Review of the depreciation period for freight locomotives From 1 January 2004, the depreciation period for SNCF Freight locomotives has been extended to 30 years for the entire fleet due to a major reorganisation of the activity and a maintenance and renovation policy adapted to a useful life of 30 years. The impact on 2004 net income amounts to 12 million, less depreciation and amortisation. 7

9 - 3 - ACCOUNTING POLICIES CONSOLIDATION POLICY Companies over which the Group exercises exclusive control, directly or indirectly, are fully consolidated. Companies over which control is exercised jointly with a limited number of shareholders are consolidated on a proportionate basis. Companies which the Group does not control but over which it exercise significant influence are equity accounted. Significant influence is deemed to exist when the Group holds a percentage interest of 20% or more. Companies over which the Group exercises control or significant influence but which are not, as a whole, material to the consolidated financial statements are excluded from the scope of consolidation. The SICF and SOCRIF sub-groups, comprising HLM low-rental housing companies, are not consolidated due to the regulatory restrictions applicable to HLM companies (see Note 8). The financial statements of consolidated and equity accounted companies are adjusted in accordance with Group accounting policies. The financial statements of all companies included in the scope of consolidation are drawn up to 31 December 2004 (with the exception of the Financière Systra financial statements drawn up to 30 September). TRANSLATION OF FOREIGN COMPANY FINANCIAL STATEMENTS The financial statements of independent foreign subsidiaries are translated into euros using the closing rate of exchange method: balance sheet accounts are translated at the year-end rate of exchange, income statement items are translated at the average annual rate of exchange, translation differences arising on the retranslation of opening balance sheet items (movement between opening and closing exchange rates) and income statement items (movement between average and closing exchange rates) are taken to Translation provisions in Consolidated shareholders equity. TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS Foreign-currency denominated transactions are translated at the exchange rate prevailing at the transaction date or at the appropriate hedge rate. Foreign-currency denominated assets and liabilities are valued at the closing rate of exchange or the appropriate hedge rate and any gains or losses are taken to the income statement. CONSOLIDATED STATEMENT OF CASH FLOWS The Statement of Cash flows is prepared using the indirect method which involves adjusting Company net income for non-cash income and expense items in order to determine cash flow from operations. 8

10 The cash balance presented in the Statement comprises cash and cash equivalents, marketable securities, deposits and cash borrowings with an initial maturity of three months or less. GOODWILL On the acquisition of a company, the difference between the acquisition cost of the investment and the fair value of identifiable assets and liabilities as at the acquisition date is recorded as goodwill. Operating assets are stated at their carrying value. Assets not intended for use in operations are stated at their estimated market value as at the acquisition date or, in the absence of a market value, at their expected realizable value. Positive goodwill balances are recorded in consolidated assets and amortised over a period generally not exceeding 20 years. Negative goodwill balances are recorded in Provisions for contingencies and losses in the balance sheet and released to income in accordance with the assumptions and objectives set at the time of the acquisition. Goodwill values are reviewed annually based, in particular, on an appraisal of future cash flows, discounted at a rate appropriate to the activity sector concerned. INTANGIBLE ASSETS Preliminary expenses are amortised in full in the year incurred. Software acquired and created by the Group is amortised over a period of 1 to 5 years, depending on its forecast economic life. Purchased goodwill and market share is amortised over a period not exceeding 20 years, commencing the date of acquisition. Assets are valued using methods specific to each category and enabling value movements over time to be monitored. The methods adopted refer to one or more physical or financial indicators enabling such values to be monitored on a regular basis. TANGIBLE ASSETS Group tangible assets include assets made available by the French State, assets owned outright and assets held under finance lease agreements. SNCF public domain real estate assets made available by the French State The French Orientation Law on Domestic Transport (LOTI) lays down the terms of possession of assets entrusted to SNCF. On the creation of the industrial and commercial public institution SNCF on 1 January 1983, the real estate assets previously given under concession to the semi-public limited liability company which it succeeded were appropriated to it. These assets made available by the French State, without transfer of title, are recorded in the Group balance sheet in the relevant tangible asset accounts, to enable an economic assessment of Group performance. 9

11 Subject to legal provisions applicable to infrastructures deemed of general interest or public utility, the parent company exercises full management powers over all real estate assets entrusted to it or purchased by it. Real estate assets held by the public institution, no longer used in the performance of its activities or which are part of its private domain, may be allocated to another purpose or sold by the public institution for profit. Owned assets Tangible assets owned outright are recorded in consolidated assets at acquisition or production cost, or at fair value upon entry into the scope of consolidation. Production cost comprises the cost of raw materials and labour used to manufacture the assets, including that of purchased spare parts. Interest costs are not capitalised. Maintenance and repair expenses are recognised as follows: - all current maintenance expenses borne during the useful life of equipment (repair work on faulty spare parts and replacement of unusable and missing parts) are recorded as operating expenses; - expenses for long-term major overhaul programmes are subject to a provision for major repairs; - overhauls performed at the end of the useful life of rolling stock, together with refurbishment and transformation costs, are capitalised in assets when they extend the useful life. Tangible assets are depreciated on a straight-line basis over their estimated useful life (except for computer hardware depreciated on a declining balance basis over a period of 4 years). Depreciation period Tangible assets are depreciated over the following periods: Land development (railway line earthworks, etc.) Buildings and facilities Improvements to buildings and facilities Industrial plant and machinery 20 years 50 years 15 years 15 to 20 years 10

12 Rail transport equipment: TGV HIGH-SPEED TRAINS 15 to 30 years Electric locomotives 25 to 30 years Diesel locomotives 20 to 30 years Electric or diesel multiple unit trains and railcars 15 to 30 years Passenger carriages 20 years Freight cars 15 years Rolling stock modification, overhaul, refurbishment 7 years Equipment and machinery 5 to 20 years Automotive vehicles 5 years Ferry boats 8 to 30 years Other tangible assets 3 to 5 years Depreciation charges relating to assets held under concession agreements by the Group, which will be returned to local and administrative authorities free of charge at the end of the concession period, are recorded within Provisions for contingencies and losses. Provision for impairment of tangible and intangible assets The diminution in value of assets, resulting from causes the effects of which are not deemed irreversible, is recognised by a provision for impairment. These provisions (as is the case with depreciation and amortisation) are recorded separately in assets as a reduction in value of the corresponding elements. LONG-TERM INVESTMENTS Investments in unconsolidated companies and other long-term investments are recorded in the balance sheet at acquisition cost net of any impairment provisions. Impairment provisions are booked when the fair value of an investment is less than its acquisition cost. The fair value of an investment is its carrying value to the Group. This is determined taking account of the Group s share in net equity (potentially revalued), future profitability and, for listed companies, stock market trends. INVENTORY Inventory is valued at the lower of cost price and net realizable value. Cost price is equal to acquisition or production cost. Production cost includes both direct and indirect production expenses. Cost price is calculated using the weighted average cost method. Inventory provisions are booked based on the age of items. OPERATING RECEIVABLES Loan receivables are valued at their nominal value. A provision for impairment is recognised when there is a potential risk of non-recovery. This provision is determined based on an individual or statistical appraisal of non-recovery risk. 11

13 MARKETABLE SECURITIES Marketable securities are recorded in the balance sheet at the lower of acquisition cost and market value. The market value of listed shares is equal to the stock market price on the last day of the fiscal year. Bonds are recorded on the acquisition date at face value adjusted for any premiums or discounts. The year-end value includes any accrued interest receivable. Shares in French mutual funds (SICAV) are recorded at acquisition cost net of purchase charges. An impairment provision is booked at the year-end when the net asset value is less than the acquisition cost. Negotiable debt instruments are recorded at acquisition cost and interest is taken to financial income on a time-apportioned basis. DERIVATIVES Derivatives traded by the Group to manage currency, interest rate and commodity risks are recorded off-balance sheet (see Note 18). All hedging instruments used by the Group to manage long-term commitments are allocated, as a general rule, to borrowings on issue or to existing borrowings. Currency derivatives The Group trades on the forex market to hedge foreign-currency denominated receipts and payments linked to debt servicing and commercial activities. The Group uses futures and forward contracts, swaps and forex options. Contracts are recorded off-balance sheet. Gains and losses are only recorded when hedging transactions are cleared. Forex option premiums received or paid are recognised in full in the income statement in the year of exercise. A provision is recognised for net foreign exchange gains resulting from the revaluation at the balance sheet date of currency financial instruments and hedged underlyings. Interest rate derivatives Interest rate swaps and swaptions The Group uses interest rate swaps and swaptions to hedge loan issues and manage its existing debt. Option premiums received and paid are recognised in full in the income statement in the year of exercise, with the exception of the option premium for which the exercise has resulted in the definitive set-up of the hedge swap according to the management strategy determined at the inception of options. This premium is then spread over the term of the swap recorded as a hedge. As part of its active interest rate risk management, the Group seeks, whenever possible, to cancel existing contracts rather than carry out new hedging transactions in order to reduce the number of contracts covering the same loan and thereby reduce counterparty risk and commitment levels. Cash balances received or paid on the conclusion or cancellation of swaps are deferred over the term of the underlying commitment. When a hedging strategy does not 12

14 meet the hedging criteria set by the Group, all gains or losses resulting from the strategy and its cancellation are recorded in their entirety in the year s income statement. Interest rate futures and forward contracts The Group may be called on to trade on interest rate forward markets, notably when preparing a loan issue or in order to manage interest-rate exposure on floating-rate assets and liabilities. Transactions are performed on both organised markets and over-the-counter. Income and expenses on firm futures and forward contracts are deferred over the term of the underlying debt. Option premiums received or paid are recognised in the income statement symmetrically to and in the same period as the hedged transactions. Commodity derivatives In order to optimise the average cost of fuel supplies, the Group trades in the petroleum hedge markets. Transactions traded primarily consist of swaps and swaptions. Option premiums received or paid are fully recognised in the income statement symmetrically to and in the same period as the hedged transactions. ISSUE PREMIUMS, DISCOUNTS AND EXPENSES, LOAN REDEMPTION PREMIUMS When an issue is performed at below par, the discount is deducted from the liability accounts. Expenses are recorded in deferred charges in balance sheet assets. Discounts and expenses are released to the income statement on a straight-line basis over the loan term. When an issue is performed at above par, the issue premium is allocated in priority to the amortisation of issue expenses. The residual balance represents: deferred income when the premium exceeds issue expenses, offset issue expenses when the premium is less than issue expenses. The residual balance is released to the income statement over the loan term. INVESTMENT SUBSIDIES The Group receives investment subsidies in the form of third-party financing, primarily from regional authorities. Investment subsidies are recorded as deferred income and released to operating income (deducted from Depreciation, amortisation and provisions) over the estimated economic life of the relevant assets. FINANCE LEASE TRANSACTIONS Leased assets are recorded as purchases when the contract terms and conditions correspond to finance lease arrangements. Finance lease agreements are contracts whereby the lessor transfers to the lessee the right to use an asset for a given period in exchange for payment; the lessor transfers all benefits and risks inherent to ownership of the asset. 13

15 Such assets are recorded in assets at historical cost and depreciated over the same period as similar assets owned outright or public domain real estate assets made available by the French State. Lease agreements not having the characteristics of finance lease arrangements are recorded as operating leases and only the lease instalments are taken to income. Sale and lease-back transactions and equivalent Sales and lease-back transactions Proceeds from the sale of assets to a lessor under a finance lease arrangement are cancelled in net income in the year of the transaction and released to income over the term of the contract. Other transactions In addition, certain financial arrangements concern existing finance lease agreements. As the existing equipment financing structure is not altered, the proceeds of such transactions are recognised in net financial income on signature of the agreements. DEFERRED TAX The Group recognises deferred tax on all temporary differences between the tax and book values of assets and liabilities in the consolidated balance sheet. Deferred tax is recorded using the liability method, applying the most recently voted tax rate at the year-end applicable to the period in which the temporary differences are expected to reverse. Deferred tax assets in respect of temporary differences and tax losses or credits carried forward are recognised when recovery is deemed probable. Deferred tax balances are discounted to present value when the impact of such discounting is material and the reversal schedule for temporary differences and tax losses can be drawn up reliably. PROVISIONS FOR CONTINGENCIES AND LOSSES Provisions for maintenance and major repairs Pursuant to the transitional measures of CRC Regulation governing the depreciation and impairment of assets, the Company raised provisions for major repairs with respect to expenses for long-term major repair or overhaul programmes whose sole purpose was to verify the smooth operation of facilities and provide maintenance without extending the initial useful life. The provision covers the expenses incurred for complete mid-life overhauls of rolling stock and for long-term building maintenance and repair work. It was calculated: - for real estate: based on projected annual expense flows and the length of time of the overhauls for the assets in question (15 to 30 years); - for the rolling stock units (locomotive, car, TGV train, etc.) by series, based on projected annual expense flows and the length of time of the overhaul readjusted for each series. Provisions for environmental risks 14

16 The Group provides for environmental risks when the realisation of the risk is deemed probable. This provision covers the costs related to environmental protection and site restoration and cleanup. It specifically includes a contingency provision for asbestos lawsuits filed against the Group. Provisions for disputes and litigation The Group is involved in a certain number of disputes and litigation arising in the normal course of its activities and notably: - performance bonds received from companies supplying construction work; - guarantees granted to clients in the freight transportation sector covering incidents arising during transport. Such disputes and litigation are provided based on an assessment of the related risk. Up to and including 1999, the parent company self-insured the majority of risks associated with its activities. In 2000, the parent company took out a number of insurance policies providing coverage beyond an initial level covered by self-insurance. Restructuring provisions The cost of restructuring measures is provided in full in the current year when such measures have been decided, in principle, and announced prior to accounts closure. Restructuring costs primarily consist of employee departure costs and the cost of writing off non-current assets, inventory and other assets. REVENUE AND OTHER INCOME RECOGNITION Transport activities (passengers, freight) Revenue is recognised based on the effective transportation of passengers and freight. Revenue recognised on the issue of a passenger transport ticket is adjusted at the period-end for tickets issued but not used (taken to Deferred income). Contributions from the French State and Regional Authorities These contributions comprise price subsidies covering socially motivated prices introduced by the French State and contributions remunerating global services within a contractual framework or specific services. They are recorded under Revenues. Engineering and contracting services performed by the Group Sub-contracting and project management work performed by the Group is recognised on a percentage of completion basis. Maintenance Maintenance income and income from the operation of the rail network is recognised in accordance with the contract negotiated with the network owner ( RFF ). RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed in the year incurred. 15

17 ORDINARY AND EXCEPTIONAL ACTIVITIES Net income from ordinary activities includes all recurring income and expense items directly relating to the operating activities of the Group. Exceptional income and expenses comprise material items which, due to their nature, unusual character or non-recurrence cannot be considered inherent to the operating activities of the Group. DIVISION AND GEOGRAPHICAL SEGMENT INFORMATION Business segments In addition to its core businesses of passenger and freight rail transport and the delegated management of the infrastructure, SNCF has developed a number of activities performed by subsidiaries. These primarily enrich, complement and extend the activities of the parent company in four operating divisions: - Passenger France Europe, - Passenger public transport, - Freight, - Infrastructure. Segment indicators The business segment indicators are: - Revenues, - Gross Operating Income, - Net Operating Income. Items common to the different divisions, SNCF Participations holding company costs and results specific to services rendered by the parent company (Traction, Equipment), are allocated to the operating divisions based on their respective contributions to Revenues. The accounting methods adopted by each operating division are identical to those used in the preparation of the consolidated financial statements. Inter-division transactions All material transactions between operating divisions are eliminated. Geographical areas As activities are essentially carried out in France, the geographical areas presented are France and Rest of the world. The latter category encompasses all activities performed abroad and the export activities of French Group companies. EMPLOYEE BENEFITS Defined employee benefits (retirement and medical care) are estimated in accordance with prevailing assumptions. These commitments are not accrued but recorded off-balance sheet. 16

18 ACCOUNTING TREATMENT OF EMPLOYEE-RELATED BENEFITS SERVICE ACCOUNTS Pursuant to the French Act of 21 July 1909, employee-related services carried out by the parent company have no independent legal status but have been granted accounting and financial autonomy. In order to ensure the comparability of the Group s financial statements with other industrial and commercial groups, total asset and liability accounts relating to these employee-related parent company services are presented in the Group balance sheet under the headings Special debt account and employee-related benefits service account - Assets and Special debt account and employeerelated benefits service account - Liabilities respectively. The financial statements of these employee-related services are presented in Note 31. DEBT TRANSFERRED TO THE SPECIAL DEBT ACCOUNT ( SAAD ) In accordance with the corporate plan ( contrat de plan ) signed by the French State and the parent company in 1990, a Special Debt Account was set up on 1 January This account has no independent legal status, although separate accounting records are kept by the parent company. The role of this account is to isolate part of SNCF debt, in respect of which interest and capital payments are essentially made by the French State. The debt transferred to the Special Debt Account remains there until extinction and no longer appears on the SNCF balance sheet. A total of 10.7 billion has been transferred to the Special Debt Account: billion ( 5.9 billion face value) on creation on 1 January 1991; billion in net liabilities on 1 January 1997 ( 4.36 billion face value); billion on 1 January 1999 ( 0.61 billion face value) accompanied by an amendment to its structure by loan substitution. Special Debt Account resources consist of an annual contribution from the French State of 677 million, paid in equal quarterly instalments and an annual payment by the parent company of 18 million, paid mid-year. The excess of the French State contribution over net annual expenses is capitalised in the Special Debt Account. The parent company contribution is recorded in net financial income. When loan repayments allocated to the Special Debt Account exceed the debt repayment capacity of the year, the shortfall is covered by interim financing deducted from euro financing, directly or after swap contracts, secured by the parent company on the markets during the year. As the respective balances were not of identical composition at the outset, nor were they expected to be during the life of the Special Debt Account, the decision was taken to equalize the financial charges borne by the two accounting structures once a year as follows: - the effective charge rate borne by the debt allocated to the Special Debt Account and the debt retained by the parent company and the effective rate borne by the overall debt is calculated at each year-end; - the charge rates borne by IN denominated debt recorded in the Special Debt Account and that retained by the parent company are equalised, such that each entity bears the overall charge rate via an equalisation payment recorded in financial income for the year. The equalisation payment owed by the SNCF was subject to an exemption of 85 million between 1999 and 2002, 38 million in 2003, and 30 million in In 2005, the payment will amount to 23 million before disappearing in Total Special Debt Account assets and liabilities are presented in the Group balance sheet under the headings Special debt account - Assets, and Employee-related benefits service account - Assets and Special debt account Liabilities, and Employee-related benefits service account - Liabilities respectively (see Note 31). 17

19 - 4 - GOODWILL GROSS VALUE AMORTISATION NET VALUE 31 December Amortisation Entries into the scope of consolidation Removals from the scope of consolidation Translation differences December As at 31 December 2004, the principal goodwill balances, net of amortisation, concern: - the Geodis sub-group in the amount of 54 million ( 69 million as at 31 December 2003); - the Ermewa sub-group in the amount of 18 million ( 14 million as at 31 December 2003). The entries into the scope of consolidation primarily concern: - the Geodis sub-group: acquisition of additional plots of Trate Sud S.r.l. for 3 million and Pan European Tpt Ltd for 2 million; - the Geodis sub-group: 2 million; - the Ermewa sub-group: 10 million. Removals from the scope of consolidation are related to the change in consolidation method for Keolis for 151 million net, in liaison with the LBO and the equity accounting of Financière Keos INTANGIBLE ASSETS 31 Dec Acquisitions Charges Disposals Reversals Changes in Group structure Translation differences 31 Dec Gross value Concessions, patents and software Purchased goodwill Other intangible assets Total gross value Amortisation Concessions, patents and software Purchased goodwill Other intangible assets Total amortisation Net value The line item Concessions, patents and software primarily concerns software which represents 31 million, net. 18

20 The main contributors to Purchased goodwill are: 31 Dec Dec GROSS AMORT. / PROV. NET NET Geodis Ermewa VFLI GLI Keolis TOTAL The main additions concern software investments at Geodis for 4 million and the software produced internally at the parent company for 19 million. Changes in Group structure stem from the change in the consolidation method of Ermewa (- 31 million, net) TANGIBLE ASSETS 31 Dec Acquisitions Charges Disposals Reversals Changes in Group structure Translation differences 31 Dec Gross value Land Buildings Industrial and technical plant Rail transport equipment Road transport equipment Maritime transport equipment Other tangible assets Assets under construction Total gross value Depreciation Land Buildings Industrial and technical plant Rail transport equipment Road transport equipment Maritime transport equipment Other tangible assets Total depreciation Net value Changes in Group structure (scope of consolidation) stem from the change in the consolidation method of Keolis (- 311 million, net). Investments for 2004 comprise: - the upgrading of stations and buildings (renovation of the Saint-Charles station in Marseilles, infrastructures related to the future TGV Est HSL, creation of a TGV workshop in Lyon, refurbishing of the Metz station, etc.) for a total of 487 million at the parent company; 19

21 - the acquisition and renovation of rolling stock by the parent company for 1,268 million, specifically double-decker TGVs ( 231 million), TGV Est trainsets ( 36 million), TERs ( 475 million), Freight locomotives ( 107 million) and Transilien locomotives ( 31 million); - the acquisition of property assets (land, buildings, and fittings and fixtures) for 51 million (including 22 million by Geodis). Decreases in tangible assets primarily correspond to: - Property disposals for a gross value of 90 million (of which 40 million by Geodis and 30 million by the parent company) and a net book value of 48 million; - disposals of rolling stock for 45 million in net book value. Assets recorded in tangible assets and held under finance lease agreements break down as follows: 31 December December 2003 Gross Depreciation Net Net Land Buildings Rail transport equipment Maritime transport equipment Other transport equipment Other non-current assets TOTAL PARENT COMPANY FIXED ASSET REGISTER SNCF has a fixed asset register representative of all its properties, including those assets subject to, since 1997, conflicting interpretations of Law no of 13 February 1997 and its application decrees. Since 1999, the Commission Nationale de Répartition des Actifs (National Commission of Asset Allocation) has analysed the four main areas of disagreement between the Réseau Ferré de France and SNCF concerning land used for freight purposes (CM4 plots), housing, passenger concourses in stations and the volume division of buildings. These assets are currently included in Group fixed assets. At the request of the supervisory ministries, a report on the allocation of assets between RFF and SNCF was submitted on 2 January 2004, and an arbitration commission was set up. The terms and conditions governing the allocation principles specified in this report and their financial and accounting impacts are being analysed RESEAU FERRE DE FRANCE RECEIVABLE In the law of 13 February 1997 that led to the creation of Réseau Ferré de France (RFF), Article 7 provides for the transfer of a 20.5 billion liability to Réseau Ferré de France in consideration of the transfer of infrastructure assets from 1 January This transfer resulted in the recognition of an RFF receivable in the Company s assets, with no change in liabilities. 20

22 The RFF receivable was constructed line by line so as to present a structure in terms of maturities, foreign currencies and interest rates that is identical in all respects to that of the Company s liability, which totalled 30.3 billion on 31 December 1996, after swap contracts. The 1996 year-end exchange rate was the initial rate used for the foreign currencies included in the receivable. Deferred income and expenses corresponding to issue premiums and costs or swap contract income or expenses were also transferred, resulting in a cash payment. This payment was recognised in the Company financial statements as deferred income, which is recorded in the income statement according to the maturities of the corresponding transactions. The RFF receivable is embodied in an agreement signed by the two companies. As at 31 December 2004, the RFF receivable breaks down as follows: Maturity structure 31-Dec Dec-03 Less than 1 year to 5 years More than 5 years Total Accrued interest receivable Total Currency structure excluding accrued interest 31-Dec Dec-03 Euro Swiss franc Pound sterling Total Interest rate structure after adjustment for derivatives and excluding accrued interest receivable 31-Dec Dec-03 Fixed rate Floating rate Total

23 - 8 - OTHER LONG-TERM INVESTMENTS 31-Dec Dec-03 GROSS Amortisation and provisions NET NET Unconsolidated investments Loans to unconsolidated investments (1) Deposits paid (2) Loans and other long-term investments TOTAL Loans granted to unconsolidated HLM (low-rental) housing subsidiaries in connection with employee housing subsidies (1% logement). Deposits with an initial maturity of less than three months. The increase in deposits is mainly recorded at the parent company. Unconsolidated investments break down as follows: 31-Dec Dec-03 % interest Shareholders equity Net income NBV of investments NBV of investments SICF 100% SOCRIF 99,77% Ermewa shipping activity (1) 100% - 12 Other unconsolidated investments Total (1) The Ermewa ferry activity was sold on 12 July The SICF and SOCRIF sub-groups are not consolidated due to regulatory restrictions regarding the appropriation of earnings applicable to HLM (low-rental housing limited liability companies): the liquidation surplus which may be distributed to shareholders is limited to 50% of the par value of securities held; distributable earnings are limited to 5% of share capital each year. As at 31 December 2004, the sub-group balance sheets were as follows (in millions): SICF sub-group (as at 31 December 2004) Non-current assets, net Shareholders equity 498 (including net income of 32 million) Current assets, net 370 Provisions for contingencies and losses 144 Borrowings Other liabilities 94 Prepayments and accrued income 1 Accruals and deferred income 134 Total assets Total liabilities and shareholders equity

24 SOCRIF sub-group (as at 31 December 2004) Non-current assets, net 82 Shareholders equity 86 (including net income of 2 million) Current assets, net 12 Liabilities 8 Total assets 94 Total liabilities and shareholders 94 equity EQUITY AFFILIATES Movements in investments in equity affiliates break down as follows: As at 31 December 2004 As at 31 December 2003 % interest Net income Investment Investment Cegetel SAS 35,00% Eurofima 23,70% FRP Group 20,00% Geodis Group subsidiaries STVA Group subsidiaries Financière Keos Systra Group 35,80% Novatrans 37,11% Other investments TOTAL Year ended 31 December Opening balance Share in net income Impact of the equity accounting of Cegetel SAS 188 Other changes in Group structure Movement in share of negative net equity -1 2 Dividends paid -6-5 Exchange rate fluctuations 2-10 Closing balance INVENTORY AND WORK-IN-PROGRESS As at 31 December 2004 As at 31 December 2003 GROSS PROVISION NET NET Raw materials Other supplies Production work-in-progress TOTAL

25 OPERATING RECEIVABLES As at 31 December 2004 As at 31 December 2003 GROSS PROVISION NET NET Trade receivables and related accounts Payments on account of orders Employee-related receivables Amounts receivable from the French State and local authorities Other operating receivables Prepayments and accured income TOTAL MARKETABLE SECURITIES AND CASH AND CASH EQUIVALENTS As at 31 December INITIAL MATURITIES OF MORE THAN THREE MONTHS AND/OR EXPOSED TO INTEREST-RATE RISK French and foreign bonds Medium-term negotiable debt instruments INITIAL MATURITIES OF LESS THAN THREE MONTHS, NOT EXPOSED TO INTEREST RATE RISK Negotiable debt instruments French mutual funds (UCITS) Negotiable debt instrument repurchase agreements 114 Treasury stock 2 Foreign currency investments 7 94 ACCRUED INTEREST RECEIVABLE 2 10 CASH IN HAND AND AT BANK TOTAL CASH AND CASH EQUIVALENTS Only marketable securities with an initial maturity of three months or less fall within the definition of cash for the purposes of the consolidated statement of cash flows. 24

26 SHAREHOLDERS EQUITY SHARE CAPITAL CHANGE IN METHOD PROVISIONS AND NET INCOME (LOSS) FOR THE YEAR TRANSLATION DIFFERENCES OTHER TOTAL GROUP SHARE As at 31 December Provisions for major repairs Provisions for long-service medals Exchange rate fluctuations Consolidated net income Group share As at 31 December Provisions for major repairs (1) Employee benefits -9-9 Exchange rate fluctuations 4 4 Consolidated net income Group share As at 31 December (1) This relates to an adjustment for a change in method recorded in equity in The adjustment, involving the provision for major repairs of rolling stock, was recognised as a deduction from equity from 1 January MINORITY INTERESTS (1) Year ended 31 December OPENING BALANCE Dividend distribution Exchange rate fluctuations 0-2 Changes in Group structure Share capital increase 3 Minority interest share in net income (1) Change in accounting methods -9 CLOSING BALANCE The minority interest share in the 2004 net income mainly concerned the Geodis ( 61 million), and Keolis ( 12 million) sub-groups. The change in Group structure includes the equity accounting of the Keolis group. 25

27 PROVISIONS FOR CONTINGENCIES AND LOSSES As at 31 December 2003 Charge Provision used Provision not used Changes in Group structure and reclassification Other As at 31 December 2004 Tax, social security and customs risks (1) Environmental risks (2) Major repairs (3) Litigation and disputes (4) Compensation for work-related injuries and miscellaneous (5) Restructuring costs (6) Risks on subsidiaries (7) Other provisions for contingencies and losses TOTAL The equity accounting of the Keolis group has an overall impact of million on provisions for contingencies and losses. (1) This line item primarily concerns the parent company which provides for social security and tax disputes for reasons of prudence. The parent company s social security dispute was settled during the year. (2) These contingencies primarily concern the following elements at the parent company: - pollution clean-up and compliance work on hydrocarbon storage sites 31 million - asbestos-related costs 96 million (3) In particular, this item includes 1,340 million in provisions recognised by the parent company on rolling stock and long-term building maintenance and repair work (including a correction in the calculation of the provision for major repairs in the amount of 29 million), 51 million for freight wagon overhauls at France Wagons and 41 million for the additional amortisation to write off obsolent electric power plants held under concession by the SHEM group.. (4) This item primarily comprises the contingencies related to legal disputes and the contractual contingencies of the parent company and the provisions intended to cover the termination costs generated by the non-renewal of long-term contracts in the Geodis group. (5) This item records compensation and work-related injuries provided in the amount of 89 million and 42 million for the Geodis group. In 2004, it also includes long-time service medals ( 37 million). The equity accounting of the Keolis group impacted this line item for 70 million in terms of changes in Group structure. 1 (6) The charge for the year mainly comprises the provision for the employee-related assistance measures of the Freight plan recorded at the parent company. (7) This provision mainly comprises negative equity investments, particularly in the Geodis group. 26