Report on the Group s financial position. SBB in 2012.

Transcription

1 Report on the Group s financial position. SBB in SBB has improved on its 2011 result: consolidated net income for 2012 came in at CHF million (2011: CHF million). One-off effects and reversals of provisions (CHF 93.2 million, including reversals of provisions for the pension fund and higher market valuation of securities) raised the result. When adjusted for these one-off effects, the operating performance improved slightly compared to the previous year. Traffic revenues rose slightly by 0.8 % thanks to fare adjustments, despite a stagnation in demand for transport. A positive contribution was made by real estate rental revenue. By contrast, operating expenses increased despite productivity improvements. This was due in part to higher personnel expenses, train path costs, and maintenance costs, as well as depreciation. Finally, the financial result boosted consolidated net income thanks to a lower financing requirement. Free cash flow improved to CHF million (previous year: CHF 5.2 million) owing to active cash management and the sale of Railway Employees Building Society (EGB) mortgages. By contrast, higher commercially financed investment (particularly rolling stock) weighed on free cash flow. Net interest-bearing debt amounted to CHF 6.8 billion, and was reduced by CHF 0.7 billion compared to 2011.

2 P 79 Contents. Financial Report. SBB Group P 80 Report on the Group s financial position P 88 Consolidated income statement P 89 Consolidated balance sheet P 90 Consolidated cash flow statement P 91 Consolidated statement of changes in equity P 92 Notes to the consolidated financial statements 2012 P 119 Report of the statutory auditor on the consolidated financial statements P121 P 122 P 123 P132 P 133 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.

3 P 80 SBB in 2012 Report on the Group s financial position Consolidated net income Capital expenditure CHF millions CHF millions 3,500 3,000 3, ,500 2, , , Operating result (EBIT) Consolidated net income Infrastructure (network) Passenger Freight Real Estate, Infrastructure (energy), other A difficult economic environment last year resulted in stagnating to declining demand in some of the passenger and freight markets. The number of passenger-kilometres declined for the first time due to the trend in long-distance passenger services, which revealed a saturation tendency in the commuter market as well as a decline in the leisure travel market. Passenger revenues grew solely because of fare adjustments. In the Freight Division, the closure of the Gotthard mountain route on three occasions, the economic situation and ongoing capacity reductions in freight-intensive industries led to a decrease in volumes and revenues. Real Estate increased rental revenue thanks to the commissioning of new premises and optimisation of the tenant mix. Operating expenses rose by 2.5 % year on year. The primary causes of this development were higher headcount, higher train path and energy costs, higher IT costs and an increase in thirdparty services for maintenance and repairs. Overall, this led to a year-on-year decline in the operating result (CHF million, 7.3 %). Thanks to a stronger financial result, consolidated net income rose from CHF million in 2011 to CHF million in the 2012 financial year. The financial result of the previous year was influenced by negative one-off effects such as the early termination of a leasing transaction. Extension of the rail network, particularly the Zurich cross-city line and the Cornavin-Eaux-Vives-Annemasse (CEVA) rail link, together with an increase in network capacity utilisation, required additional funding for the rail infrastructure. The Infrastructure Division invested CHF 1,659.4 million (+20.7 % year on year) in SBB contributed to the other rail infrastructure investment projects that have been implemented by improving its efficiency and through successful purchasing activities. The Passenger Division expanded its regional and longdistance fleets with the addition of new double-deck trains. Investment was made in new ETR-610 tilting trains for services to Italy. In addition to further purchases of rolling stock, existing vehicles were also modernised. Overall, new investment volume rose by CHF million (+83.1 %) year on year to CHF 1,013.7 million. The investment volume in the Freight Division declined by CHF 15.7 million year to CHF 46.3 million, due among other things to the decision not to carry out retrofits on shunting locomotives. Real Estate invested CHF million (CHF million year on year) in the development of central sites near to stations such as the Europaallee in Zurich, Basel s Südpark and Trans- Europe in Neuchâtel. Energy invested CHF 67.8 million (CHF 75.6 million year on year) in upgrading and maintaining energy production and transmission facilities.

4 SBB in 2012 Report on the Group s financial position P 81 Free cash flow before and after public-sector funding CHF millions 1,000 Public-sector funding CHF millions 3,000 3, ,250 1,000 1,500 2, , 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 came in at CHF million, a substantial improvement on the previous year (CHF 5.2 million). Cash flow from operating activities improved by CHF million thanks to active cash management, particularly in adjustments to invoicing and booking processes in passenger services and due to payments received for the cross-city line from the previous year. Cash outflows as a result of higher investment in property, plant and equipment such as rolling stock were more than offset by cash inflows from divestments of financial assets, particularly the sale of Railway Employees Building Society (EGB) mortgages to the SBB pension fund. Overall, cash flow from investing activities improved by CHF million year on year. The public sector commissions and finances rail infrastructure maintenance and improvements. In the 2012 financial year this amounted to CHF 1,605.3 million (CHF million compared to the previous year, of which CHF million was earmarked for CEVA). Federal government grants for infrastructure cover any costs not covered by the statutory track charges in relation to the provision and operation of the rail network and a network maintenance contribution equivalent to reported depreciation. Grants for regional passenger services are the subsidies paid by public-sector authorities for services whose costs are not covered by passenger revenues. Loans from the infrastructure fund and the FinöV fund were granted primarily for expanding the Zurich cross-city line, CEVA and links with the European high-speed network.

5 P 82 SBB in 2012 Report on the Group s financial position Operating income Operating expenses CHF millions CHF millions 10,000 10,000 8,000 8,169 8,000 7,678 6,000 6,000 4,000 4,000 2,000 2, Traffic revenues Public-sector payments (excluding loans) Other income Own work capitalised Rental revenue from Real Estate Personnel expenses Other operating expenses Depreciation Cost of materials Operating income rose by 1.8 % year on year to CHF 8,168.5 million. Despite a decline in passenger-kilometres due to developments in long-distance services, passenger traffic revenues rose by 1.8 % year on year owing to fare adjustments. The decline in freight traffic revenues by 3.0 % was primarily the result of lower traffic volumes. The underlying causes were the closure of the Gotthard mountain route on three occasions, the difficult economic environment and ongoing capacity reductions in freight-intensive industries. The public-sector grants figures include the revenue components for infrastructure operations and maintenance that are reflected in the income statement, plus grants for regional and freight services. The increase of CHF 16.9 million compared to the previous year is primarily due to higher grants to regional passenger services for new rolling stock. By contrast, the grants to Cargo declined owing to the discontinuation of payments to compensate for the strength of the Swiss franc. Public-sector payments for infrastructure remained virtually constant year on year. Own work capitalised for infrastructure and the renewal of the existing passenger fleet rose by CHF 57.4 million. Rental revenue at Real Estate increased thanks to the rental of new premises such as the Europaallee in Zurich and due also to an improved tenant mix. Operating expenses rose by 2.5 % year on year. Personnel expenses rose by 2.2 % in the reporting year owing to wage increases and a higher average workforce (+655 to 29,240 FTEs). Other operating expenses rose by CHF 76.5 million year on year owing to higher train path and energy costs, higher IT costs and an increase in third-party services for maintenance and repairs. Depreciation of investments, particularly in expansion, asset maintenance and rolling stock, rose by 4.0 % year on year because of the higher investment volume. Taking impairment into account, the volume of depreciation overall remained virtually constant at +1.1 %. Increased maintenance activity led to a CHF million rise in the cost of materials.

6 SBB in 2012 Report on the Group s financial position P 83 Financial result CHF millions The financial result amounted to CHF million. When adjusted for one-off effects such as the early termination of a lease transaction in 2011 (CHF 78.1 million) the financial result improved by CHF 79.8 million year on year. The reasons for this improvement include a higher market valuation of securities (CHF million) and lower foreign currency losses (CHF million).

7 P 84 SBB in 2012 Report on the Group s financial position Balance sheet breakdown (assets) Balance sheet breakdown (equity and liabilities) CHF millions 40,000 CHF millions 40,000 34,877 34,877 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 rose from CHF 27,485.3 million in 2008 to CHF 31,252.2 million in 2012 (+3.3 % p. a.). The 4.8 % increase in the financial year was primarily the result of the procurement of the double-deck trains, fleet modernisation, and an increase in real estate, in particular the new premises at Zurich s Europaallee. The year-on-year decline in financial and intangible assets by CHF million is primarily attributable to the sale of Railway Employees Building Society (EGB) mortgages to the SBB pension fund. Current assets rose by 5.4 % in a year-on-year comparison, owing in particular to the rise in cash and cash equivalents from the sale of mortgages of the Railway Employees Building Society (EGB) to the SBB pension fund. Receivables and prepaid expenses/accrued income declined as a result of active cash management in particular. Net interest-bearing debt (interest-bearing financial liabilities minus cash and cash equivalents as well as securities and current receivables) declined by CHF million year on year to CHF 6.8 billion. As a result, net interest-bearing debt last year amounted to 12.3 times SBB s operating result (EBIT). In 2011, the debt coverage ratio (net interest-bearing debt divided by EBIT including gains from real estate disposals) stood at The rise in federal and cantonal loans includes investments in repairs and upgrades.

8 SBB in 2012 Report on the Group s financial position P 85 Segment earnings Passenger Freight Infrastructure Real Estate CHF millions Passenger. As a result of fare adjustments, traffic revenues rose in 2012 despite a decline in transport demand. The additional receipts were largely offset by higher train path costs, most notably traction power, and higher personnel expenses due to the expanded range of services. The financial result improved year on year, owing in particular to foreign currency effects. Overall, passenger services contributed earnings of CHF million (+25.7 % year on year). Freight. Freight traffic revenues declined as a result of lower freight volumes (CHF 17.9 million year on year). Despite the difficult economic environment and ongoing capacity reductions in freight-intensive industries, sales remained at the previous year s level when adjusted for the effect of the closure of the Gotthard mountain route on three occasions. Restructuring measures led to lower personnel expenses and cost of materials. The contribution to earnings deteriorated by CHF 5.2 million to CHF 51.2 million in Infrastructure. Infrastructure contributed earnings of CHF 37.1 million in 2012 ( 48.8 % year on year), of which Network contributed CHF 44.4 million and Energy CHF 81.5 million. Owing to findings detailed in the Network Status Report in 2011, action was taken to stabilise the maintenance backlog in rail infrastructure and additional work was carried out. The proportion of assets in good or very good condition rose from 74 % to 78 %. Maintenance costs rose accordingly, and higher train path revenues and efficiency improvements were not sufficient to offset the increase. Consequently, the Network unit posted a negative result (not covered by federal contributions) amounting to CHF 44.4 million (CHF 91.4 million year on year). The Energy unit contributed CHF 81.5 million to earnings. This improvement in the result by CHF 56.1 million year on year is attributable to the increase in the sale price for traction power by CHF 0.01 per kwh and higher energy sales in the market due to additional production, which in turn was due to exceptionally high water inflow. Real Estate. Rental revenue rose year on year thanks to the addition of new premises, including the Europaallee in Zurich, and optimisations in the tenant mix. The annual earnings contribution amounted to CHF 8.6 million after annual compensation payments. Segment earnings prior to compensation payments amounted to CHF million. Of this amount, CHF 150 million accrued to Infrastructure, while the remainder was used for interest and capital repayments for the restructuring of the pension fund.

9 P 86 SBB in 2012 Report on the Group s financial position Free cash flow by segment Passenger Freight Infrastructure Real Estate CHF millions , ,000 1, Passenger. Free cash flow in the financial year amounted to CHF million (CHF million year on year). Owing to the improved annual result and active cash management, particularly adjustments to invoicing and booking processes, the higher cash outflow from investing activities (CHF million year on year) was more than offset. Real Estate. Despite higher earnings prior to compensation payments and active cash management, increased investing activities led to higher negative free cash flow year on year (CHF million compared to CHF million in 2011). Freight. The decline in free cash flow by CHF 8.1 million year on year (CHF 49.9 million in 2012) is attributable above all to lower earnings and higher negative cash flow from investing activities compared to Infrastructure. The negative free cash flow reflects capital expenditure on the rail infrastructure commissioned and financed by the federal government.

10 SBB in 2012 Report on the Group s financial position P 87 Outlook. Over the next few years, SBB will continuously develop its services and gradually expand its offering, particularly with the operational launch of the Zurich cross-city line (from 2014), new services in southern Switzerland and the Geneva region, and the upgraded north-south route through the Gotthard Base Tunnel (end of 2016). Additional funding will be required for increased maintenance and reduction of the infrastructure backlog. Increasingly difficult times mean that latitude will be required if SBB s business is to be developed sustainably and future strains (particularly in the passenger business) successfully mastered. In view of the prevailing economic uncertainties, SBB must prepare for the possibility of lower public funding being available for public transport. This means an even greater focus is being placed on productivity and investment in high-income areas. To strengthen its earning power, SBB focuses consistently on increasing benefits to customers. Additional revenue from self-financing long-distance passenger services and a sustainable restructuring of freight services are needed. This is essential if sufficient funds are to be available for meeting future challenges and expanding the overall service offering. The current investment in Real Estate will also help to secure SBB s future earnings.

11 P 88 SBB Group Consolidated income statement Consolidated income statement. 1 January 31 December. CHF millions Note Operating income Traffic revenues 1 3, ,675.4 Public-sector funding 2 2, ,304.5 Rental income from real estate Other income Own work capitalised Total operating income 8, ,021.7 Operating expenses Cost of materials Personnel expenses 7 3, ,554.3 Other operating expenses 8 1, ,579.1 Write-downs of financial assets, depreciation of property, plant and equipment, amortisation of intangible assets 9, 21, 22, 23 1, ,673.8 Total operating expenses 7, ,492.1 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.

12 SBB Group Consolidated balance sheet P 89 Consolidated balance sheet. Assets. CHF millions Note Current assets Cash and cash equivalents Current financial receivables Trade accounts receivable Other receivables Inventories and work in progress Prepaid expenses and accrued income Total current assets 2, ,289.7 Fixed assets Financial assets ,116.7 Property, plant and equipment 22 25, ,720.1 Assets under construction property, plant and equipment 22 6, ,090.6 Intangible assets Total fixed assets 32, ,591.1 Total assets 34, ,880.8 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 28 1, ,390.6 Current provisions Total current liabilities 3, ,219.9 Non-current financial liabilities 24 7, ,382.1 Non-current public-sector loans for rail infrastructure financing 25 11, ,661.6 Other non-current liabilities 27 1, ,962.3 Non-current provisions Total non-current liabilities 20, ,316.5 Total liabilities 24, ,536.4 Equity Share capital 9, ,000.0 Capital reserves 2, ,069.1 Retained earnings/accumulated loss before consolidated net income ,152.9 Consolidated net income Equity, excl. minority interests 10, ,254.9 Minority interests Total equity 10, ,344.3 Total equity and liabilities 34, ,880.8 The Notes form an integral part of these financial statements.

13 P 90 SBB Group Consolidated cash flow statement Consolidated cash flow statement. 1 January 31 December. CHF millions Note Consolidated net income Depreciation and amortisation of fixed assets 1, ,647.3 Reversal of/loss from impairment Decrease of provisions Other expenses/income not affecting cash flows Gains on the disposal of fixed assets Pro rata 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 contributions for depreciation on SBB infrastructure 2, ,786.0 Federal government contributions for depreciation on SBB infrastructure Cash flow from operating activities excluding federal government contributions for depreciation on SBB infrastructure 1, Outflows from the liquidation of consolidated companies Outflows for investment in property, plant and equipment/assets under construction 2, ,246.2 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 2, ,365.3 Financing of rail infrastructure investment by non-repayable federal government grants 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 Capital repayments to minority shareholders Cash flow from financing activities 1, ,284.5 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 1, Cash flow from investing activities 2, ,365.3 Free cash flow before public-sector financing of rail infrastructure ,480.3 Cash flow from public-sector financing of rail infrastructure 1, ,475.1 Free cash flow after public-sector financing of rail infrastructure Cash flow from financing for commercial investments and pension fund restructuring Total cash flow

14 SBB Group Consolidated statement of changes in equity P 91 Consolidated statement of changes in equity. CHF millions Share capital Capital reserves (premium) Retained earnings Difference on foreign currency translation Total excl. minority interests Minority interests Total incl. minority interests Equity as at , , , , ,995.4 Dividends Change in minority shareholders Consolidated net income Currency translation effect Equity as at , , , ,344.3 Change in scope of consolidation Dividends Change in minority shareholders Consolidated net income Equity as at , , , ,763.5 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.

15 P 92 SBB Group Notes to the consolidated financial statements 2012 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 (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 fiscal 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 management. The principle of uniform management throughout the SBB Group does not apply in this case, therefore. 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 118. 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 translated 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 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 GBP

16 SBB Group Notes to the consolidated financial statements 2012 P 93 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 principles. All assets and liabilities are valued on an item-by-item basis. 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. Securities and current financial receivables are composed of securities, current financial receivables and loans, and short-term deposits (remaining term of four to twelve months). They are stated at their nominal or market value. Trade accounts receivable and other receivables are stated at their nominal value, less economically necessary valuation allowances. Actual credit risks are considered individually while a general 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. Manufacturing costs are calculated on the basis of the cost of materials and production costs (full costs). The consequential cost procedure or standard cost accounting is applied to the valuation, depending on the item. Valuation allowances are recognised for slow-moving goods and items with reduced marketability. Fixed assets. Financial assets include unconsolidated interests in which at least 20 % of the voting rights are held, recognised using the equity method, and the other unconsolidated interests, which are stated at historical cost less appropriate economically necessary write-downs. Financial assets comprise non-current receivables from third parties and associates. These are shown at their nominal value less valuation allowances for actual credit risks. Assets relating to the pension schemes and employer contribution reserves are 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 only recognised if it is very 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. Straight-line depreciation has been applied over the anticipated useful life of the assets. The estimated useful life is as follows (in years): 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, 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 for investments in areas entitled to public-sector funding or commercial constructions have been capitalised where a significant construction period is necessary before commissioning can take place. They are capitalised based on the average asset value at the average rate applicable to the liabilities. Assets used under a lease, but 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 transactions are deferred and released over the term of the contract.

17 P 94 SBB Group Notes to the consolidated financial statements 2012 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) purchased. 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 is as follows (in years): 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. Current 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 and released in accordance with standard business principles and the requirements of Swiss GAAP FER 23. If time is a significant factor, the amount of the provision is discounted at the refinancing rate to the federal government. Non-current tax 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. The provision is set up in accordance with the liability method and continuously adapted to any changes in local tax laws. It is recognised under non-recurrent provisions. The occupational pension plan for employees of SBB AG, SBB Cargo AG and other subsidiaries is the responsibility of the SBB pension fund, which has been an independent foundation since 1 January Contributions to the pension schemes are made in accordance with the requirements of the Swiss Federal Law on Occupational Retirement, Survivors and Disability Pension Plans (BVG). The SBB pension fund is a defined contribution plan. The other subsidiaries either have 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, 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 minimising risk. 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 receivables. Sureties, guarantees, pledges and other liabilities and assets of a contingent nature are stated at their nominal value under contingent liabilities or assets respectively. Other obligations not included in the balance sheet. This item includes all obligations entered into which cannot be terminated within one year. They are disclosed at their nominal value.

18 SBB Group Notes to the consolidated financial statements 2012 P 95 Detailed notes to the consolidated financial statements. 0.1 Changes to accounting principles. The changes to Swiss GAAP FER for 2012 do not result in any adjustments to SBB s consolidated financial statements. 0.2 Changes to the scope of consolidation. The scope of consolidation has changed as follows since 1 January 2012: Tiefgarage Bahnhofplatz AG, Lucerne, partially sold (January 2012); now included in other investments SBB Transportpolizei Schweiz AG, Berne, merged with SBB AG, Berne (May 2012) STC Switzerland Travel Centre AG, Zurich, partially sold (May 2012); now recognised using the equity method STC Switzerland Travel Centre Ltd., London, sold (May 2012) STC Switzerland Travel Centre GmbH, Stuttgart, sold (May 2012) e-domizil AG, Zürich, sold (May 2012) Compagnie du Chemin de fer Vevey-Chexbres SA, Vevey, acquired (July 2012) SBB Cargo S.r.l., Gallarate, liquidated (November 2012) 1 Traffic revenues. CHF millions Passenger 2, ,731.6 of which long-distance services 2, ,076.2 of which regional services Freight Operating services Infrastructure (train path revenues) Traffic revenues 3, ,675.4 Traffic revenues increased by a total of CHF 29.9 million (+0.8 %). Passenger revenues rose by CHF 49.7 million (+1.8 %) due to fare adjustments and despite a decline in passenger-kilometres. Leisure traffic in particular was down. The commuter market showed a slower pace of growth. Freight revenues declined by CHF 24.5 million ( 3.0 %) due mainly to multiple closures on the Gotthard mountain route. Adjusted for the revenue lost as a result of the Gotthard closures, freight revenues were on a par with the previous year despite challenging market conditions in Italy and ongoing capacity reductions. Train path revenues increased due to higher contribution margins and traffic volumes in the Passenger Division and increases in traction power prices.

19 P 96 SBB Group Notes to the consolidated financial statements 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 Non-capitalised portions of investment expenses Operating grant for infrastructure Total federal grants from service-level agreement 1, ,554.6 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, ,695.8 Grants to Cargo for non-transalpine freight Federal grants for offsetting the strength of the Swiss franc Total grants for freight services Public-sector funding 2, ,304.5 Grants for commissioned regional passenger services are paid to compensate SBB for costs not covered by passengers. An additional CHF 21.1 million (+3.7 %) was paid for improvements in regional passenger services. These comprised new or refurbished rolling stock and a slight expansion of the offering. Total federal grants for rail infrastructure remained almost unchanged year on year (+0.4 %). Grants for freight services declined by CHF 11.2 million as there were no more grants from the federal government s programme to offset the strength of the Swiss franc and due to a cut in grants for wagonload traffic as a result of the decline in the volumes transported. Federal government grants for infrastructure also include benefits of CHF 41.0 million (unchanged year on year) 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. Rental income increased by CHF 33.0 million (+9.3 %) due to new rentals following the completion of extension and renovation projects at central locations (Europaallee in Zurich, Südpark in Basel, TransEurope in Neuchâtel), optimisation of the mix of tenants and improvements to make the major stations more attractive.

20 SBB Group Notes to the consolidated financial statements 2012 P 97 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 increased by CHF 9.6 million (+1.1 %) year on year thanks to higher cost participations, sales of materials, rental income (vehicle rentals) and higher energy-related revenues. The CHF 23.0 million net increase in cost participations was due to the introduction of the buy-before-you-board requirement on long-distance services. Energy-related revenues rose thanks to a rise in the selling price of traction power and an increase in the amount of energy sold in the market due to higher water inflows. Service income, on the other hand, declined as a result of the outsourcing of the incoming tourism business. The fall in income from maintenance and servicing work was due to the decline in vehicle maintenance orders. 5 Own work capitalised. CHF millions Investment orders Stock orders Own work capitalised Own work capitalised rose due to an increase in work performed on investment projects to expand and replace rail infrastructure. In addition, work was stepped up to recondition assets for the modernisation and overhaul of vehicles in the Passenger Division. 6 Cost of materials. Cost of materials rose by CHF 12.5 million (+1.8 %) year on year due to an increase in maintenance work on vehicles. 7 Personnel expenses. CHF millions Wages and salaries 2, ,848.6 Social security costs Personnel expenses for Labour Market Centre (AMC) Other personnel expenses Personnel expenses 3, ,554.3 Wages and salaries were CHF 87.7 million (+3.1 %) higher. This increase was driven both by the creation of new jobs in the Infrastructure and Passenger Divisions and pay increases. Headcount increased by 655 to 29,240 full-time equivalents. The employer s share of the restructuring contributions for the SBB pension fund and the 2 % increase in the employer s savings contribution as of October 2012 pushed up social security costs by CHF 53.6 million (previous year: CHF 43.8 million). In the reporting period, pension fund liabilities recognised in accordance with FER 16 were used to offset the restructuring contributions. Other personnel expenses were impacted by the recognition and reversal of provisions for restructuring measures.

21 P 98 SBB Group Notes to the consolidated financial statements 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 fixed assets Input tax reductions on grants/public-sector funding Sundry operating expenses Other operating expenses 1, ,579.1 Rail services expenses were up by CHF 7.9 million (+3.4 %) due to higher track charges for rail infrastructure abroad and an increase in road transport costs (replacement services). New building construction in Real Estate and an increase in facility management services in the Passenger Division pushed up third-party services for maintenance and repair by CHF 14.4 million (+2.9 %). The higher IT costs reflected higher spending on IT projects. Sundry operating expenses were CHF 36.0 million higher than in the previous year, when expenses were reduced by the one-time reversal of insurance provisions that were no longer required. 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 Change in write-downs of financial assets Depreciation of property, plant and equipment 1, ,536.7 Amortisation of intangible assets Write-downs of net book values from disposals of fixed assets Write-downs of financial assets, depreciation of property, plant and equipment and amortisation of intangible assets 1, ,673.8 Write-downs, depreciation and amortisation increased by CHF 18.0 million (+1.1 %).

22 SBB Group Notes to the consolidated financial statements 2012 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 from balances on bank and postal accounts. The CHF 15.2 million decline in financial income from third parties is due to the sale of financial assets (term deposits and loans to railway workers building cooperatives). The increase in other financial income is the result of an upward adjustment of CHF 27.5 million (previous year: CHF 12.0 million) to the value of financial assets. Foreign currency gains, on the other hand, were down to CHF 21.2 million in the reporting period (previous year: CHF 40.2 million). 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 Interest expense was lower due to the repayment of financial liabilities. In the previous year, other financial expenses included costs for the use ahead of schedule of the buy-back option for leased vehicles in the amount of CHF 78.1 million. In addition, foreign currency losses fell to CHF 19.7 million in the reporting period (previous year: CHF 58.2 million). 12 Non-operating result. CHF millions Profit from real estate disposals Loss from real estate disposals Non-operating result Gains on real estate disposals are used entirely for principal and interest payments on the loans taken out for the restructuring of the SBB pension fund.

23 P 100 SBB Group Notes to the consolidated financial statements Income taxes. CHF millions Current income taxes Deferred income taxes Income taxes Deferred taxes for unused tax loss carryforwards of subsidiaries amount to CHF 2.0 million (previous year: CHF 4.1 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. Due to the revision of the Swiss decrees on public transport (RöVE), additional deferred taxes had to be recognised. This increased income tax expense in the Real Estate Division in particular. 14 Minority interests. As at Change in scope of consolidation Dividend Change in minority interests Profit shares Foreign currency effect As at The change in minority interests is due to the sale of subsidiaries in the incoming tourism business, the acquisition of Compagnie du Chemin de fer Vevey-Chexbres SA, dividend payments and the capital reduction at Euroswitch AG. 15 Cash and cash equivalents. Cash Postal account Banks Term deposits Cash in transit Cash and cash equivalents Securities and current financial receivables. In the previous year, this item comprised short-term deposits and current building loans to railway workers building cooperatives. These were sold to the SBB pension fund (see the Related party transactions section under Other notes ).