DSB S-Tog A/S Annual Report 2008

DSB S-tog a/s Annual report 2008

Annual report 2008· DSB S-tog a/s / 1 Publisher: DSB S-tog a/s Sølvgade 40 1349 København K

Photo: Klaus Holsting

Layout: DSB Kommerciel, Visual Kommunikation

6. marts 2009

Annual report 2008 · DSB S-tog a/s / 2 Contents

Management Statement Annual Accounts & Auditors’ report 11 Accounting Policies 4 Management statement 15 Profit and loss account 5 Independent auditors’ report 16 Balance sheet

18 Equity statement Management’s report 19 Cash flow statement 6 Financial review 20 Notes to the annual accounts 7 Risks

9 Sustainability Other information

10 Expectations for the future 31 Company information

32 Company profile

Annual report 2008· DSB S-tog a/s / 3 Management Statement & Auditors’ report

Management statement The Board of Directors and the Executive Board have today It is also our view that the Management Report contains a dis¬cussed and adopted DSB S-tog’s Annual Report for well-founded assessment of the company’s activities and 2008. financial conditions, the annual result and the company’s financial position in general and a description of the most The Annual Report is presented in accordance with the Da- important risks and uncertainty factors to which the nish Financial Statements Act, Danish Accounting Standards company is subject. and the Act on the Independent Public Corporation DSB and on DSB S-tog A/S. We consider the accounting policies The Annual Report is presented for approval at the Annual applied to be appropriate. Accordingly, the Annual Report Meeting. gives a true and fair view of the company’s assets, liabilities and financial position at 31 December 2008 and the Copenhagen, 6 March 2009 results of the company’s activities and cash flows for the financial year January 1-December 31, 2008.

Executive Board

Gert Frost CEO

Bestyrelse

Søren Eriksen Tage Reinert Marianne A. Jensen Chairman Vice-Chairman

Michael K. Järvinen Gunhild Lange Skovgaard Anne Vang

Annual report 2008 · DSB S-tog a/s / 4 Independent auditors’ report

To the shareholder of DSB S-tog a/s policies used and the reasonableness of accounting estima- We have audited the Annual Report for DSB S-tog a/s for tes made by the Board of Directors and Executive Board, as the financial year January 1-December 31, 2008, comprising well as evaluating the overall presentation of the Annual the management statement, management report, ac- Report. counting policies, profit and loss account, balance sheet, equity statement, cash flow statement and notes. The We believe that the audit evidence we have obtained is Annual Report has been presented in accordance with the sufficient and appropriate to provide a basis for our audit Danish Financial Statements Act, Danish Accounting Stan- opinion. dards and the Act on the Independent Public Corporation DSB and on DSB S-tog A/S. Our audit did not result in any qualification.

The Board of Directors’ and Executive Board’s responsi- Opinion bility for the Annual Report In our opinion, the Annual Report gives a true and fair view The Board of Directors and the Executive Board are re- of the company’s assets, liabilities and financial position sponsible for preparing and presenting annual accounts at December 31, 2008 and of the results of the company’s that give a true and fair view in accordance with Danish operations and cash flows for the financial year January 1 - Financial Statements Act, Danish Accounting Standards and December 31, 2008 in accordance with the Danish Financial the Act on the Independent Public Corporation DBS and Statements Act, Danish Accounting Standards and the Act on DSB S-tog A/S and for preparing a management report on the Independent Public Corporation DSB and on DSB that gives a well-founded assessment in accordance with S-tog A/S and that the management report gives a well- Danish disclosure requirements for annual reports. Such founded assessment in accordance with Danish disclosure responsibility comprises the design, implementation and requirements for annual reports. maintenance of internal controls relevant to preparing and presenting an annual report which gives a true and fair Copenhagen, March 6, 2009 view free of material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies and making accounting estimates that are reasonable KPMG in the circumstances. Statsautoriseret Revisionspartnerselskab

Auditors’ responsibility and basis of opinion Our responsibility is to express an opinion on this annual report on the basis of our audit. We have conducted our audit in accordance with Danish Auditing Standards. These standards require that we comply with ethical require- Torben Kristensen Jesper Mikkelsen Heilbuth ments and plan and perform the audit to obtain reasonable State Authorised State Authorised assurance that the annual report is free from material mis- Public Accountant Public Accountant statement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosure in the annual report. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement in the Annual Report, whether due to fraud or error.

In making those risk assessments, the auditors consider internal controls relevant to the company’s preparation and fair presentation of the Annual Report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting

Annual report 2008· DSB S-tog a/s / 5 Management’s report

Financial review

Pre-tax profits on a par with 2007 The rise in bus transport in connection with track work is DSB S-tog a/s pre-tax profits totalled DKK 185 million, DKK owing to extraordinary major costs for bus transport in 3 million less than in 2007 (DKK 188 million). This is largely connection with track work at the Farum and Klampenborg owing to a reassessment of the S-trains’ expected useful life section, which is a consequence of the fact that the track from 20 to 25 years, which is offset by falling passenger rev- work lasted significantly longer than Rail Net Denmark had enue, increased costs relating to bus transport in connection planned. with track work, higher energy costs and pay increases. Number of employees 90.9 million passengers travelled with DSB S-tog in 2008, The number of full-time employees fell by 490 to 1,336 in which represents a rise of 1.8 million passengers on the 2008. The fall is primarily owing to the transfer of the Kort year. & Godt shops to Kort & Godt A/S.

As a result of the efforts to improve punctuality which Depreciation and write-downs, began in 2006, punctuality levels saw a significant improve- net financials and key ratios ment from 91.6 per cent in 2007 to 94.3 per cent in 2008. This well exceeds the target agreed with the Ministry of Investments Transport of 90.9 per cent in 2007 and 91.8 per cent in In 2008, DSB S-tog’s investments in fixed assets totalled 2008. DKK 197 million against DKK 264 million in 2007.

Net turnover Depreciation and write-downs Net turnover fell by DKK 397 million from DKK 2,783 million In 2008, DSB S-tog carried out a reassessment of the in 2007 to DKK 2,386 million in 2008. The transfer of Kort S-trains’ expected useful life from 20 to 25 years, which & Godt shops as at 1 January 2008 to Kort & Godt A/S ac- resulted in a reduction in the year’s depreciation of DKK 124 counted for a fall of DKK 306 million. million compared to what would have been the case had the reassessment not been carried out. Despite an increase in the number of passengers and an increase in ticket prices, the share of traffic revenue from Net financials the fare co-operation in Greater Copenhagen fell by DKK 23 In 2008, net financials accounted for a net expense of DKK million. This was owing to the fact that the apportionment 292 million against DKK 296 million in 2007. Borrowing of passenger revenue in Greater Copenhagen benefits other requirements were less, while the borrowing rate rose. transport operators. Tax for the year Revenue from the transport contracts agreed with the Tax for the year totalled DKK 44 million, a rise of DKK 93 Ministry of Transport fell by DKK 67 million, as agreed in the million compared to 2007 when tax for the year constituted original transport contract. an income of DKK 49 million. It should be noted that tax in 2007 was positively affected by DKK 95 million following a Expenses reduction in the tax rate from 28 to 25 per cent. Total expenses amounted to DKK 1,481 million in 2008, which is a fall of DKK 240 million on the year. The transfer Balance sheet of Kort & Godt shops reduced costs by approx. DKK 300 million. Assets As at the end of 2008, the balance sheet stood at DKK Changes in expenses DKK million 9,448 million against DKK 10,086 million at the end of Total costs, 2007 -1,721 2007. This represents a fall of DKK 638 million. The decline - transfer of Kort & Godt shops 300 is made up of a fall in fixed assets of DKK 395 million, a - general price increases, wage & salary fall in receivables of DKK 256 million and a rise in stocks of increases and increased energy consumption -50 spare parts of DKK 27 million. - bus transport in connection with track work -30 - miscellaneous, including efficiency measures 20 The decline in fixed assets is owing to the fact that depre- Total costs, 2008 -1,481 ciation exceeds the year’s investments.

Annual report 2008 · DSB S-tog a/s / 6 Liabilities Fare sharing requires co-operation between the transport In 2008, DSB S-tog repaid non-current loans totalling DKK companies. The parties have decided on the new fares for 660 million. In 2008, the principal, therefore, declined from 2009. In the Greater Copenhagen area, DSB S-tog wished DKK 6,439 million to DKK 5,779 million. to keep fares for longer journeys unchanged for regular customers, which is why the average fare increase is less than As at end 2008, the company’s external loans had a total the fixed fare increase ceiling. carrying value of DKK 4,754 million which is DKK 849 million less than at the end of 2007. The development arises For some time, transport operators have disagreed on the from the fact that in 2008, new loans of DKK 975 million basis for revenue sharing in the Greater Copenhagen area. were raised while loans were amortised in the sum of DKK The dispute applies to DSB S-tog’s passenger figures and to 1,635 million. In addition, foreign exchange adjustments on Movia’s bus passenger figures. At the end of 2008, arbitra- loans were carried out at DKK 290 million (gains) compared tion proceedings began in respect of Movia’s bus passenger to year end 2007. figures. The outcome of this case is expected at the end of 2009. Equity As at end 2008, equity stood at DKK 1,781 million against Electronic travel card DKK 1,909 million as at end 2007 corresponding to a fall of In a comprehensive partnership between most of the public DKK 128 million. Equity was positively affected by the result transport operators in Denmark, Rejsekort A/S has signed a for the year of DKK 141 million and negatively affected by contract regarding the acquisition and implementation of an value adjustments of financial instruments of DKK 151 mil- electronic travel card system to replace most of the exist- lion and divided of DKK 118 million. ing ticket and card systems. Under the auspices of Rejsekort A/S, a formalised follow-up of risks and risk management is undertaken at the supplier and at the transport companies. RISKS As the travel card affects key aspects of the transport companies’ activities, the risks relate to a broad range of issues The DSB Group, including DSB S-tog a/s, has established a concerning customer relations, technology, finance, law and process for the identification, management and reporting of organisation. commercial risks in order to prevent the occurrence of negative events and to minimise potential claims. Transport contract The Ministry of Transport has signed a ten-year contract The DSB Group has chosen to view the risk factors based on with DSB S-tog for the provision of passenger transport on four factors: market, employees, operations and finance. S-train lines for the years 2005-2014. The revenue from the contracts constitutes an important part of DSB S-tog’s total Market conditions revenue base.

Market structure Tendering The passenger transport market in the Greater Copenhagen No tendering is expected to be implemented on the S-line area is affected by a range of factors, including fuel prices, over the current contract period. DSB S-tog’s participation in accessible roads, parking facilities, general economic trends the tendering process takes place within the context of the and employment. DSB Group’s business strategy.

Prices and adjustment Fare setting in the Greater Copenhagen area is shared between the transport operators. Common fares in the Greater Copenhagen area must remain in operation.

Non-current liabilities, incl. short- Principal after Carrying value term portion Amounts translation to DKK in DKK million At the beginning of the period 6.439 5.603 Proceeds from new loans 975 975 Redemption and amortization -1.635 1.534 Additional value adjustment - 290 At the end of the period 5.779 4.754

Annual report 2008· DSB S-tog a/s / 7 Staff conditions being offered a travel time guarantee. This ensures that customers affected by disruptions receive compensation. The In order to ensure that DSB S-tog is an attractive workplace, commuter guarantee became effective on January 1, 2007. a staff satisfaction survey is carried out every second year. The outcome is discussed between managers and employ- Safety and contingency ees with a view to creating an environment that retains and DSB S-tog’s efforts within this area are conducted within the attracts qualified employees. framework of the parent company’s work to pro-actively prevent rail safety incidents and to identify safety-related Working environment issues, i.e. through reporting such incidents and through The risks involved for DSB S-tog in the working environ- monitoring safety-critical processes. Should DSB S-tog’s ment area reflect the fact that the area is large and complex, operations be affected by disruptions to service, compre- i.e. the working environment not only consists of tradition- hensive contingency plans are in place to safeguard the al areas (fumes, noise and dirt), but also the psychological safety of customers and employees, both in trains and at working environment such as customer disputes and stress. the stations.

During 2007 and at the start of 2008, DSB S-tog was DSB S-tog also has a close partnership with government inspected by the Danish Working Environment Authority. and local authorities as well as other transport companies Many green “Smileys” resulted and just one improvement with regard to the handling of crisis situations. In 2008, notice. In general, working environment work at DSB S-tog contingency plans were tested at, among others, Nørreport has been much in focus ahead of the imminent certification Station. process. Insurable risks Operational factors DSB S-tog is covered by the parent company’s systems and policy for risk management, which is supplemented by effi- Train deliveries and maintenance cient risk cover policies. An insurance policy has been drawn Risks relating to S-trains primarily relate to operational up whereby all insurable risks are identified, quantified and safety in train sets, the procurement of spare parts and evaluated in order to minimise the overall cost of insurance repair time in connection with the necessary repairs to dam- and damage cover. aged trains. Over the past few years, DSB S-tog has built up a stock of spare parts in order to cover this risk. Terror prevention DSB S-tog’s efforts within this area are conducted within As the consortium that supplied the S-trains has now dis- the framework of the Group’s handling of this issue. DSB’s solved following the completion of the delivery, the pos- terror prevention activities are managed on the basis of a sibility of procuring more trains at short notice no longer terror prevention catalogue whose purpose is to protect and exists. DSB S-tog’s management, therefore, assesses the prevent terror activity against the Group’s values and activi- need for procuring more trains on an ongoing basis. ties. In general, DSB co-operates with the Police Intelligence Service (PET), the police, Rail Net Denmark Metroselskabet Quality and Movia on matters relating to terror prevention. Good infrastructure is key pre-requisite for DSB S-tog sup- plying punctual trains – track, points, signals and catenary. Environment With the current and future legislation regarding CO2 Rail Net Denmark is the main supplier of the S-line’s infra- emissions, threshold values for noise and DSB’s continuing structure. DSB S-tog has signed a contract with Rail Net purchase of green energy, there are no immediate risks at- Denmark which regulates DSB S-tog’s use of the infrastruc- tached to S-tog’s operations. ture, including the agreed track quality, along with penalties and bonuses. The new incentives, which were agreed in IT security 2007, were continued in the 2008 contract. IT plays a crucial role in DSB S-tog’s daily operations. External threats are increasing in line with IT development As in previous years, DSB S-tog’s train operations in 2008 and expansion. Managed within a group context, DSB S-tog were affected by the upgrading of the infrastructure where takes appropriate contingency measures to counter known, track work on the Farum and Klampenborg sections pre- diverse risks. Central installations are protected against sented major challenges. power cuts, fire and other accidents and the IT operations centre is duplicated. DSB S-tog’s operational stability is crucial for passenger growth. To reduce adverse customer reactions as a consequence of interruptions to service, all regular commuters are

Annual report 2008 · DSB S-tog a/s / 8 Financial issues Sustainability

DSB S-tog’s financial risks are centrally managed by the DSB Environmental work and environmental targets Group’s Treasury Department. The use of financial instru- In 2008, DSB S-tog’s environmental work and environmen- ments is regulated annually by the DSB Group’s financial tal organisation were integrated into the DSB Group. DSB policy which determines the framework for using financial S-tog will contribute to meeting the joint overall environ- instruments in relation to hedging as well as counterparts mental targets by reducing the environmental impact from and risk profiles. The Board of Directors approves the finan- air pollution per passenger km by 30 per cent from 2004 cial policy every year and ensures that it is complied with. to 2010. DSB S-tog will also contribute to the target by reducing electricity consumption for the catenary system Market risks and electricity for fixed installations by 10 per cent by 2010 DSB’s financial risks are managed individually within indi- compared to 2004 levels. Moreover, DSB S-tog contributes vidual market segments, although in terms of risk they are to meeting the targets for waste, noise, chemicals, soil pol- regarded as a whole. A Value At Risk (VAR) target is used to lution and green purchasing. create a relative risk relation in the following areas: interest rates, exchange rates and electricity risks. DSB’s use of Environmental policy financial instruments to limit financial risk means that risks DSB S-tog’s target is to exploit the railway’s advantages are reduced. as an environmental-friendly form of transport. DSB S-tog wishes to actively contribute to reducing the transport Interest rate risks sector’s environmental impact per passenger km through To counteract this risk, the DSB Group’s and thereby DSB providing competitive transport with minimum environmen- S-tog’s financial policy prescribes that at least 33 per cent tal impact. of the loan portfolio must carry fixed interest. However, no We will ensure that all activities related to DSB S-tog’s op- less than 50 per cent of the loan portfolio must be hedged erations are carefully planned and executed with due regard by fixed interest or interest rate caps. for people and the environment.

At the end of 2008, 83 per cent of the loan portfolio of DSB DSB S-tog wishes to minimise the risks that exist in the S-tog carried fixed interest (2007: 86 per cent). environmental area. In respect of the environmental impact on our surroundings, DSB S-tog acts as the responsible Foreign exchange risks company we are. In its guidelines for entities with access to state guaranteed borrowing, the Ministry of Finance has determined that DSB In the Group’s environmental report at www.dsb.dk of S-tog may only have foreign exchange exposure in euro. which DSB S-tog is a part, more information is provided on Loans that DSB S-tog has raised in currencies other than specific initiatives, consumption and results. Danish kroner and euro are all translated to Danish kroner via currency swaps. Significant environmental impact So far, DSB S-tog’s most significant environmental im- Energy price risks pact has been the consumption of and emissions from DSB S-tog’s electricity costs totalled DKK 117 million in the production of electricity for train operations and fixed 2008. Fluctuations in electricity prices, therefore, have a installations. In 2008, DSB and DSB S-tog a/s purchased substantial impact on the company’s operating profit. To green energy for train operations and fixed installations, i.e. minimise seasonal price fluctuations, electricity supply con- power produced from sustainable energy sources and with tracts have been entered into. no significant emissions of polluting materials.

Liquidity risks There was a rise in the total consumption of power for S- As part of DSB S-tog’s ongoing financing of operations, train operations of 1.4 per cent and per passenger km of 1 including refinancing risks, the DSB Group’s Treasury Depart- per cent. The reason is that energy consumption is closely ment must ensure sufficient and flexible liquidity contin- linked to the weather, with heating on S-trains accounting gency on behalf of DSB S-tog. for around 20 per cent of the total annual consumption. The financial crisis has created a greater challenge in respect From January to April and September to December, there of capital procurement. In order to maintain a satisfactory were two per cent more degree days than in 2007. liquidity situation, DSB has decided to increase its liquidity contingency temporarily. This was undertaken through In 2008, there was just one complaint about loudspeaker further binding credit facilities arranged at the end of 2008. noise compared to previous years when five complaints were received in 2007 and 15 in 2006. The improvement is owing to the fact that, in 2007 and 2008, DSB S-tog implemented its own improved loudspeaker technology with the option of controlling the sound level at individual stations

Annual report 2008· DSB S-tog a/s / 9 centrally and automatically, independent of the person mak- Expectations for the future ing an announcement. Expectations for 2009 Production waste from DSB S-tog is sorted into many frac- Profits before tax are expected to be in the region of DKK tions to ensure maximum recycling. 200-250 million.

In 2008, containers were set up for the recycling of free Events since 31 December, 2008 newspapers at all stations. The initiative has resulted in No events have occurred since the balance sheet date which far more newspapers being recycled into new paper rather would have an impact on the assessment of the Annual than being incinerated with ordinary waste. There was a Report. rise in the volume of waste for recycling from stations of 340 tonnes (163 per cent) compared to 2007 and a fall in waste for incineration of 131 tonnes. The collection of free newspapers has also resulted in the fact that the volume of newspapers collected in trains for recycling has fallen by 176 tonnes (30 per cent). This enhances the working environment in that employees have to collect less waste.

Annual report 2008 · DSB S-tog a/s / 10 Annual Accounts

Foreign currency translation Accounting Policies Transactions denominated in foreign currencies are translated on initial recognition using the exchange rate on The Annual Report for DSB S-tog a/s was prepared in the transaction date. Differences between the exchange accordance with the provisions of the Danish Financial rate on the transaction date and the exchange rate on the Statements Act for Class D companies, Danish Accounting payment day are recognised in the profit and loss account Standards and the Act on the Independent Public Corpora- under Financial income and expenses. tion DSB and on DSB S-tog A/S. Receivables, liabilities and other monetary items denomi- The Annual Report has been prepared in accordance with nated in foreign currencies that have not been settled at the same accounting policies as stated in the annual report the balance sheet date are translated at the exchange rate for 2007. at the balance sheet date. The difference between the exchange rate at the balance sheet date and the rate when In 2008, a re-evaluation of the expected useful life of the account receivable or liability occurred or was included S-trains from 20 to 25 years was carried out. The re-evalu- in the latest annual report is recognised in the profit and ation resulted in a reduction in the year’s depreciation and loss account under Financial income and expenses. write-downs of DKK 124 million compared to what would have been the case had the re-evaluation not been carried Derivatives out. Initial recognition of derivative financial instruments is made in the balance sheet at cost and they are subsequently meas- General comments on recognition and measurement ured at fair value. Positive and negative changes in fair values Assets are recognised in the balance sheet when it is prob- of derivatives are included in Other receivables or Other able that future economic benefits will accrue to the com- liabilities. pany and the value of the assets can be reliably measured. Changes in the fair value of derivatives which are classified Liabilities are recognised in the balance sheet when an as and meet the criteria for hedging of the fair value of a outflow of economic benefits is probable and when the recognised asset or recognised liability are recognised in the liability can be reliably measured. profit and loss account together with changes in the value of the hedged asset or the hedged liability. Initial recognition of assets and liabilities is made at cost. Subsequently, assets and liabilities are measured as de- Changes in the fair value of derivatives which are classified scribed below for each individual item. as and meet the conditions for the hedging of future assets or liabilities are taken directly to equity. On realisation of the Certain financial assets and liabilities are measured at hedged position, income and costs relating to such hedging amortised cost implying the recognition of a constant ef- transactions are transferred from the equity and recognised fective interest rate to maturity. Amortised cost is calcu- in the same accounting item as the hedged position. lated as the initial cost minus any principal repayments and plus/minus the cumulative amortisation of any difference In respect of derivatives which do not meet the conditions for between cost and nominal amount. handling as hedging instruments, the changes in the fair value are recognised in the profit and loss account on an ongoing In recognising and measuring assets and liabilities, any basis. gains, losses and risks occurring prior to the presentation of the annual report that evidence conditions existing at the balance sheet date are taken into account. The profit and loss account

Income is recognised in the profit and loss account as Net turnover earned, including value adjustments of financial assets and Passenger revenues are recognised at the time of trans- liabilities measured at fair value or amortised cost. Equally, port. Provision is made in respect of the value of tickets costs incurred to generate the year’s earnings are recog- sold that have not been used/expired at the balance sheet nised, including depreciation, amortisation, write-downs date. Discounts in connection with the sale and payments and provisions as well as reversals as a result of changes in relating to the Travel Guarantee Scheme are deducted from accounting estimates. the net turnover.

Annual report 2008· DSB S-tog a/s / 11 Fines from passengers travelling without a ticket are rec- Tax on the profit for the year ognised and measured at the value the company expects DSB S-tog is covered by Danish rules on compulsory joint to receive calculated on the basis of historical payment taxation of Danish consolidated companies. The parent percentages. company DSB is the administration company for the joint taxation and consequently makes all tax payments to the Revenue from transport contracts is recognised in the pe- tax authorities. riod to which it relates. The current Danish corporation tax is distributed by set- Other goods and services are recognised as income at the tlement of the joint taxation contributions between the time of delivery jointly taxed companies relative to their taxable income. In this connection, any companies with a tax loss receive joint Other operating income taxation contributions from the companies that were able Other operating income includes operating income of a to use their tax losses to reduce their own tax profit (full secondary nature in relation to the railway business. allocation).

VAT The tax for the year, which comprises current tax, the DSB S-tog has a right to deduct part of the purchase VAT year’s joint taxation contribution and changes in deferred because the company carries out activities which are both tax, including as a consequence of changed tax legislation subject to and not subject to VAT. The non-deductible part or rates, is included in the profit and loss account with the of the purchase VAT is included in the profit and loss ac- share related to the profit for the year and taken directly count and in balance sheet items. to equity in so far as the share related to items entered directly in equity are concerned. Costs of raw materials and consumables Costs of raw materials and consumables include the year’s purchases and the year’s change in stocks of raw materials Balance sheet and consumables and cost of goods sold in shops. Tangible fixed assets Other external expenses Land and buildings are measured at cost less accumulated Other external expenses primarily include expenses of a depreciation and write downs. primary nature in relation to the railway business. Rolling stock, operating plant, fixtures and fittings, etc. are Staff expenses measured at cost less accumulated depreciation and write- Staff expenses include wages and salaries, remuneration, downs. pension contributions and other staff expenses relating to the company’s employees, including the Executive Board Tangible fixed assets in progress are measured at cost. and the Board of Directors. Changes and improvements adding to the value of tangible DSB S-tog refunds DSB for pension contributions relating fixed assets are capitalised. to public servants on loan to the company. The pension obligation is carried by the state. The pension obligation The cost comprises the original cost and costs directly for other employees is covered by pension schemes. related to the original cost until the time when the asset is ready for use. With regard to own produced assets, the cost Profit/loss of associate company covers direct and indirect costs for equipment, components, The proportionate share of the profit before tax of the sub-contractors and wages/salaries. Furthermore, financing associate company is included in the company’s profit and costs are recognised which can be attributed to the cost. loss account after elimination of the share of intra-group profits/losses. The share of the associate company’s tax is Prepayments on rolling stock not yet delivered are capital- recognised under Tax on the profit for the year. ised.

Financial income and expenses Grants for investments are offset against the cost of the as- Financial income and expenses comprise interest income sets for which grants are received. and expenses, exchange gains and losses relating to securi- ties, liabilities and transactions in foreign currencies and Interest and borrowing costs relating to loans raised to amortisation of financial assets and liabilities, financial in- finance non-delivered rolling stock, including prepayments, come and expenses are recognised with the amounts that are recognised as a part of the cost price of the tangible relate to the financial year. fixed assets if they relate to the production period. All other borrowing costs are recognised in the profit and loss account.

Annual report 2008 · DSB S-tog a/s / 12 Depreciation is calculated on a straight-line basis over the Receivables expected financial useful life based on the following as- Receivables are measured at amortised cost less provisions sessment of the assets’ expected useful lives for expected losses.

Land not depreciated Prepayments and accrued income Buildings 30 - 60 years Prepayments and accrued income comprise incurred costs Installations 10 years relating to the subsequent financial year. Rolling Stock 4 - 25 years Operating plant, fixtures and fittings, etc. 3 - 20 years Equity Proposed dividend is recognised as a liability at the time of Additions during the financial year are depreciated propor- adoption at the Ordinary Annual Meeting (the declaration tionately according to the time of use. date). Dividend expected to be paid for the year is shown as a separate item under equity. In respect of the original acquisition of the tangible fixed asset, account is taken of the shorter useful life of part of Provisions the asset, which is why this part, already at the time of In connection with the establishment of the corporation on acquisition, in terms of effect on the accounts, is treated as January 1, 1999, DSB S-tog a/s was founded with a number a separate asset with a shorter useful life and thus shorter of provisions relating to expected future losses or ex- period of depreciation. penses which were identified in the acquired corporation’s plans for the acquisition, but which were not identifiable Costs for heavy maintenance inspection are recognised obligations on the balance sheet date. separately and depreciated over the useful life, the period until the next inspection. Some of these provisions did not meet the definition of a provision according to the current Financial Statements Act Tangible fixed assets are written down to the recoverable and Danish Accounting Standard No, 17 and were con- amount if this is lower than the carrying amount. In the sequently reclassified as negative goodwill on 1 January event of an indication of a decrease in value, impairment 2002. tests are conducted for each individual asset or group of assets. Negative goodwill Negative goodwill under Provisions comprises the previ- Gains and losses on the disposal or scrapping of tangible ous provision for company formation. Negative goodwill fixed assets are determined as the difference between the is recognised in the profit and loss account as the losses or sales price less disposal costs and the carrying amount at costs are realised or transferred to Other provisions as the the date of disposal or scrapping. The gains and losses are obligation becomes identifiable and can be reliably stated. recognised in the profit and loss account as Other operating income or Other operating expenses. Other provisions Other provisions comprise expected costs for restructuring, Financial fixed assets compensation, etc. The investment in the associate company is measured according to the equity method according to the company’s Other provisions are recognised when the company has a accounting policies less or plus unrealised intra-group legal or constructive obligation as a result of a previous profits and tosses. event and when it is likely that the company will have to give up financial benefits to meet the obligation. Net revaluation of the investment in the associate company is transferred to the net revaluation reserve according Corporation tax and deferred tax to the equity method under equity to the extent that the Current tax due and receivable is included in the balance carrying amount exceeds the acquisition cost. sheet as calculated tax on the taxable income for the year adjusted for tax on the taxable income for previous years Stocks and tax paid on account. Spare parts are measured at cost according to the average cost method including the cost of raw materials and con- Payable and receivable joint taxation contributions are sumables plus any processing costs and other costs directly included in the balance sheet under Debt to affiliated com- or indirectly attributable to the individual spare parts. panies and Receivables from affiliated companies respectively. Goods for resale, consumables and ancillary materials are measured at cost. Deferred tax is measured using the balance sheet liability method on all timing differences between the carrying Obsolete spare parts are written down to the net realis- amount and the tax base of assets and liabilities. However, able value. deferred tax is not recognised on timing differences relat-

Annual report 2008· DSB S-tog a/s / 13 ing to goodwill which is not deductible for tax purposes Contingent liabilities and other financial commitments and on office premises and other items, where timing dif- Contingent liabilities and other financial commitments ferences, apart from business acquisitions, arise at the date comprise events or situations that exist at the balance of acquisition without affecting either the profit/loss for sheet date but whose effect on the accounts cannot be the year or the taxable income. Where alternative tax rules finally determined until the outcome of one or more uncer- can be applied to determine the tax base, deferred tax is tain future events is known. measured based on the planned use of the asset or settle- ment of the liability, respectively. Cash flow statement The cash flow statement is prepared according to the indi- Deferred tax is measured based on the tax rules and tax rect method based on the operating profit. The cash flow rates of the individual countries applicable according to statement shows the cash flows for the year and the cash the legislation in force at the balance sheet date when the at bank and in hand at the beginning and end of the year. deferred tax is expected to become payable as current tax. Cash flow from operating activities Liabilities Cash flow from operating activities is calculated as the Amounts owed to credit institutions are recognised at operating profit adjusted for non-cash operating items, the date of borrowing: at the net proceeds received after financial and extraordinary items paid, corporation tax deduction of transaction costs paid. In subsequent periods, paid and working capital changes. The working capital the financial liabilities are measured at the amortised cost, comprises current assets less current liabilities exclusive corresponding to the capitalised value using the effective of items included in cash at bank and in hand. Changes in interest rate. Accordingly, the difference between the pro- working capital are adjusted for changes that have no ef- ceeds and the nominal value is recognised in the profit and fect on liquidity. loss account over the term of the loan. Cash flow to investing activities Other financial liabilities, which comprise trade payables Cash flow to investing activities includes purchases and and affiliated and associated companies are measured at sales of fixed assets. amortised cost. Cash flow from financing activities Non financial liabilities are measured at the net realisable Cash flow from financing activities comprises proceeds value. from raising loans, instalments on debt, capitalised interest and dividend paid. Accruals and deferred income Accruals and deferred income included under liabilities Cash at bank and in hand comprise payments received relating: to income in subse- Cash at bank and in hand comprises cash less short-term quent years bank debt payable on demand.

Annual report 2008 · DSB S-tog a/s / 14 Profit and loss account

Note Amounts in DKK million 2008 2007

Revenue 1 Net turnover 2,386 2,783

2 Other operating income 65 54 Work performed by the enterprise and capitalised 85 62 Total income 2,536 2,899

Expenses 3 Costs of raw materials and consumables 219 435 4,5 Other external expenses 676 568 6 Staff expenses 586 718 Total expenses 1,481 1,721

Profit before depreciation, amortisation and write-downs 1,055 1,178

7 Depreciation, amortisation and write-downs on tangible fixed assets 578 694

Operating profit 477 484

Net financials Result before tax in associated company -2 -5 8 Financial income 10 21 9 Financial expenses 300 312 Total net financials -292 -296

Profit before tax 185 188

10 Tax Tax on profit for the year -46 49 Adjustment of tax relating to previous years 2 0 Total tax -44 49

Profit for the year 141 237

The profit for the year is proposed for allocation as follows: Proposed dividend DKK 141 per share (2007: DKK 236 per share) 71 118 Transferred to equity: - Retained earnings 70 119 Total 141 237

Annual report 2008· DSB S-tog a/s / 15 Balance sheet- assets

Note Amounts in DKK million 2008 2007

Fixed assets

11 Tangible fixed assets Land and buildings 1,092 1,138 Rolling stock 7,230 7,547 Operating equipment, fixtures and fittings and other equipment 381 394 Tangible fixed assets in progress and prepayments 96 114 Total tangible fixed assets 8,799 9,193

Financial fixed assets 12 Investment in associated company 57 58 Total financial fixed assets 57 58

Total fixed assets 8,856 9,251

Current assets

13 Stocks 138 111

Receivables Trade receivables 63 52 Receivables, affiliated companies 178 256 14 Other receivables 132 320 15 Prepayments and accrued income 17 18 Total receivables 390 646

Cash at bank and in hand 64 78

Total current assets 592 835

Total assets 9,448 10,086

Annual report 2008 · DSB S-tog a/s / 16 Balance sheet - equity and liabilities

Note Amounts in DKK million 2008 2007

Equity Share capital 500 500 Retained earnings 1,210 1,291 Proposed dividend 71 118 Total equity 1,781 1,909

Provisions 16 Negative goodwill 3 3 17 Other provisions 70 62 18 Deferred tax liabilities 990 973 Total provisions 1,063 1,038

Non-current liabilities 19 Non-current loans 4,274 5,524 Total non-current liabilities 4,274 5,524

Current liabilities 19 Current portion of non-current liabilities 480 79 Trade accounts payable 81 135 Debt to affiliated companies 13 2 20 Other liabilities 1,573 1,240 21 Accruals and deferred income 183 159 Total current liabilities 2,330 1,615

Total liabilities 6,604 7,139

Total equity and liabilities 9,448 10,086

22 Derivatives 23 Contingent liabilities and other financial commitments 24 Related parties 25 Accounting relationship

Reconciliation of balance sheet 0,0 0,0

Annual report 2008· DSB S-tog a/s / 17 Equity statement

Amounts in DKK million

Share Retained Proposed capital earnings dividend Total equity Equity at 1 January 2007 500 1,095 90 1,685 Dividend paid - - -90 -90 Value adjustment of financial instruments at 1 Jan - 45 - 45 Value adjustment of financial instruments, 31 Dec - 32 - 32 Profit for the year - 119 118 237 Equity at 31 December 2007 500 1,291 118 1,909 Dividend paid - - -118 -118 Value adjustment of financial instruments at 1 Jan - -32 - -32 Value adjustment of financial instruments at 31 Dec - -119 - -119 Profit for the year - 70 71 141 Equity at 31 December 2008 500 1,210 71 1,781

Annual report 2008 · DSB S-tog a/s / 18 Cash flow statement

Amounts in DKK million 2008 2007

Operating profit 477 484

Adjustment for non-cash operating items, etc. Depreciation, amortisation and write-downs on tangible fixed assets 578 694 Loss on disposal of tangible fixed assets 13 9 Change in negative goodwill and other provisions, net 8 -9 Net financials, paid -270 -270 Joint taxation contribution received 23 130

Cash flow from operating activities before change in working capital 829 1,038

Change in working capital: Change in receivables 55 -81 Change in stocks -27 -20 Change in trade accounts payable and other liabilities etc. -86 40 Total cash flow from operating activities 771 977

Investment in associated company - -38 Purchase of tangible fixed assets, excl. capitalised interest -197 -264 Sale of tangible fixed assets 0 2 Total cash flow from investing activities -197 -300

Change in outstandings with affiliated companies*) 190 106 Proceeds from non-current loans 975 - Repayment of and instalments on non-current loans -1,635 -666 Dividend paid -118 -90 Total cash flow from financing activities -588 -650

Total change in cash at bank and in hand -14 27

Cash at bank and in hand 1 January 78 51

Cash at bank and in hand 31 December 64 78

Which comprises: Liquid funds 64 78

*) The debt to the parent company includes USD loans on which an unrealised foreign exchange adjustment of DKK 101 million (profit) was made as at 31 December 2008.

DSB S-tog a/s is covered by the DSB Group’s overall credit facility.

The cash flow statement cannot be derived directly from the balance sheet and the profit and loss account.

Annual report 2008· DSB S-tog a/s / 19 Notes to the annual accounts

Note Amounts in DKK million 2008 2007

1 Net turnover Share of traffic revenue from fare co-operation 936 959 Fines to passengers travelling without a valid ticket 40 42 Other traffic revenue 55 54 Total passenger revenue 1,031 1,055 Revenue from transport contract with Ministry of Transport 1,355 1,422 Total train operations 2,386 2,477 Shop sales etc. - 306 Total 2,386 2,783

2 Other operating income Renting and leasing 44 35 Sale of goods and services 10 5 Fees 5 4 Miscellaneous 6 10 Total 65 54

3 Costs of raw materials and consumables Energy costs 117 110 Spare parts etc. 102 89 Cost of goods sold in shops etc. - 236 Total 219 435

4 Other external expenses Purchase of transport 36 5 Infrastructure charges 35 33 Repairs, maintenance and cleaning etc. 51 58 Non-deductible VAT 91 82 Ticket commission 98 0 Other external expenses 365 390 Total 676 568

Other external expenses include administration and office expenses, group contribution, etc.

Annual report 2008 · DSB S-tog a/s / 20 Note Amounts in DKK million 2008 2007

5 Fees to auditors elected by the General Meeting are included in Other external expenses as follows:

KPMG Audit of annual report 0,4 0,3 Other services 0,3 0,1 Total 0,7 0,4

Fees are inclusive of non-deductible VAT.

6 Staff expenses Fees to the Board of Directors 1 1 Fees to the Executive Board 2 4 Wages and salaries 515 635 Pensions 66 74 Other social security costs 2 4 Total 586 718

Fees for the Board of Directors total DKK 938 thousand (2007: DKK 750 thousand) of which DKK 274 thousand for the Chairman (2007: DKK 219 thousand), Vice Chairman DKK 195 thousand (2007: DKK 156 thousand) and the other four members DKK 469 thousand (2007: DKK 375 thousand). The fee to the Chairman is paid to the parent company DSB.

The CEO receives a fixed salary and a performance-related salary linked to agreed individual targets. The remuneration is apportioned as follows:

Fixed salary 1,7 1,3 Performance-related salary etc. 0,3 2,7 Total 2,0 4,0

In 2007, the performance-related salary etc. included severance pay etc. to the chief executive

Severance pay for the Executive Board and senior executives in connection with dismissal by DSB S-tog not owing to miscon- duct or the like on the part of the employee does not exceed 12 months’ salary. The general provisions of the Danish Public Servants Act apply to the public servants.

In 2008, all the company’s senior managers and executives including the Executive Board agreed performance-related contracts. Performance-related salaries for 2008 are expected to total DKK 3.9 million (2007: DKK 4.2 million).

Pension contributions paid to the government in respect of public servants are 19.4 per cent of the pensionable salary. For other employees, pension contributions are expensed in accordance with collective and individual agreements.

Average number of employees* 1,336 1,826

* The average number of employees is exclusive of employees transferred to the job exchange, a total of 1 (2007: 3), in that staff expenses for these are covered by provisions.

Annual report 2008· DSB S-tog a/s / 21 Note Amounts in DKK million 2008 2007

7 Depreciation, amortisation and write-down of tangible fixed assets Land and buildings 63 61 Rolling stock 448 565 Operating plant, fixtures and fittings 67 68 Total 578 694

8 Financial income Interest from affiliated companies 7 16 Interest on bank deposits 1 5 Currency exchange gains etc 2 0 Total 10 21

9 Financial expenses Interest on loans, bank debt etc. 242 333 Interest in respect of financial instruments, net 46 -20 Value adjustment on loans and financial instruments, etc. . 12 -5 Fees 0 1 Currency exchange losses etc. 0 3 Total 300 312

10 Tax for the year Change in deferred tax on the profit for the year -47 -143 Joint tax contribution - 96 Adjustment of deferred tax from 28% to 25% - 95 Tax in associated company 1 1 Tax on profit for the year -46 49 Adjustment relating to previous year 2 0 Total tax for the year -44 49

Reconciliation of tax rate: Danish corporation tax rate 25% 25% Adjustment of deferred tax from 28% to 25% 0% -50% Adjustment relating to previous year -2% 0% Effective tax rate for the year 23% -25%

Tax paid during the year - -

Annual report 2008 · DSB S-tog a/s / 22 Note Amounts in DKK million

11 Tangible fixed assets

Operating equipment, fixtures, fit- Fixed assets in tings & and progress Total Land and Rolling other equip- and pre- tangible buildings stock ment payments fixed assets Cost at 1 January, 2008 1,433 10,420 690 114 12,657 Additions for the year - 7 1 189 197 Transferred 19 135 53 -207 0 Disposals for the year -3 -71 -3 - -77 Cost at 31 December 2008 1,449 10,491 741 96 12,777

Depreciation and write-downs at 295 2,873 296 3,464 1 January 2008 Depreciation for the year 63 448 67 578 Depreciation, disposals for the year -1 -60 -3 -64 Depreciation and write-downs at 31 De- 357 3,261 360 3,978 cember 2008

Net book value at 31 December 2008 1,092 7,230 381 96 8,799 Net book value at 31 December 2007 1,138 7,547 394 114 9,193

Prepayments to Alstom LHB/Siemens are recognised in the book avlue at DKK 1 million (2007: DKK 3 million).

In the cost of rolling stock, DKK 198 million (2007: DKK 198 million) is included as capitalised interest relating to the financing of new S-trains.

No mortgage or other form of security has been given in Tangible fixed assets.

No public subsidy for capital investments has been received.

Annual report 2008· DSB S-tog a/s / 23 Note Amounts in DKK million

12 Investment in associated company

Share of NaME Domicile Ownership Share capital equity value DSB Rejsekort A/S * DEnmark 50% 25 57

Cost at 1 January 2008 63 Additions for the year - Cost at 31 December 2008 63

Value adjustment at 1 January 2008 -5 Results for the year -1 Value adjustment at 31 December 2008 -6

Net book value at 31 December 2008 57 Net book value at 31 December 2007 58

* The parent company DSB owns the remaining 50 per cent and has a controlling interest.

2008 2007 13 Stocks Spare parts 138 97 Goods for sale in shops etc. - 14 Total 138 111

14 Other receivables Receivables relating to passenger revenue and contract payment 48 65 Fair value of financial instruments 32 155 Other receivables 52 100 Total 320

15 Prepayments and accrued income Prepaid expenses etc. 0 1 Prepaid salaries and pension contributions (public servants) 17 17 Total 17 18

16 Negative goodwill

Negative goodwill at 1 January 3 4 Utilised 0 -1 Negative goodwill at 31 December 3 3

Annual report 2008 · DSB S-tog a/s / 24 Note Amounts in DKK million

17 Other provisions

Compen- sation personal injury Total and material Other other Restructuring damage obligations provisions Other provisions at 1 January 2008 40 2 20 62 Provisions made during the year 15 4 1 20 Provisions utilised during the year -10 0 -2 -12 Reversed - - 0 0 Other provisions as at 31 December 2008 45 6 19 70

Restructuring covers obligations in respect of public servants and other employees employed under collective agreements made redundant. The obligations are expected to be realised over the next 10-15 years..

2008 2007 18 Deferred tax liabilities

Deferred tax liabilities at 1 January 973 865 Adjustment re. previous year 23 32 Adjustment of deferred tax at 1 January from 28% to 25% - -95 Change in deferred tax relating to profit for the 47 143 year Change relating to financial instruments -53 28 Deferred tax liabilities at 31 December 990 973

Deferred tax relates to the following: Tangible fixed assets 1,347 1,291 Current assets 18 43 Provisions -35 -33 Tax loss -259 -328 Carry forwardable net financing expenses -81 - Deferred tax liabilities at 31 December 990 973

Annual report 2008· DSB S-tog a/s / 25 Note Amounts in DKK million

19 Non-current loans

Primary financial instruments Principal amount Principal after amounts Book conversion Lender/type in million Currency Interest rate % p.a. value to DKK EIB 15 GBP Floating 2009 115 188 EIB 50 GBP Floating 2011 383 601 EIB 29 GBP Floating 2015 223 315 EIB 27 GBP Floating 2015 203 250 EIB 37 USD Floating 2010 195 240 EIB 50 USD Floating 2014 265 304 EIB 154 USD Floating 2018 814 936 Bond loan 450 NOK Floating 2010 341 406 Bond loan 200 NOK 6,33 2011 165 188 Bond loan 600 NOK Floating 2012 455 569 Bond loan 400 NOK 3,95 2015 298 382 Bond loan 3,000 JPY 2,15 2016 185 203 EMTN issue 400 NOK 5,48 2009 304 377 EMTN issue 330 SEK 5,25 2011 240 267 EMTN issue 375 SEK 6,75 2014 305 300 EMTN issue 50 CHF 3,00 2015 263 253 Total 4,754 5,779

The book value of the debt portfolio totals DKK 4,754 million (2007: DKK 5,603 million). Of this value, DKK 480 million falls due in 2009. The amount is recognised as current liabilities. All foreign exchange loans were converted to Danish kroner via currency swaps. The total principal sum after to conversion to DKK amounts to DKK 5,779 million (DKK 2007: 6,439 million).

Repayment on loans granted by the European Investment Bank (EIB) maturing in 2015 began in 2004. All other loans are bullet loans. The interest rate on the floating rate loans varied between 2.0 and 6.9 per cent during the year. All loans are guaranteed by the Danish state to which a guarantee commission has been paid.

The total principal amount after conversion to DKK falls due in the following periods:

2008 2007 Under 1 year 646 94 Year 2 727 659 Years 3-5 2,169 3,038 After 5 years 2,237 2,648 Total 5,779 6,439

Annual report 2008 · DSB S-tog a/s / 26 Note Amounts in DKK million

20 Other liabilities Staff related liabilities etc. 103 133 Fair value of financial instruments 1,319 938 Other liabilities 151 169 Total 1,573 1,240

21 Accruals and deferred income Sold, but unused tickets 76 60 Financial instruments 107 99 Total 183 159

22 Derivatives

To cover interest rate and foreign exchange risks, DSB S-tog has concluded a number of financial contracts. The company has, therefore, concluded currency swap agreements to cover exchange rate risks related to loans raised in foreign currencies. For further details, please refer to the section on Risks in the Management’s Report. In addition, the company has concluded interest swap agreements to manage the interest rate risk on the loan portfolio.

Contracts with positive market value recognised under Other receivables 2008 2007 Currency swap 13 32 agreements Interest swap agreements*) 9 110 Interest options 0 1 Energy price hedging contracts *) 0 2 Other financial contracts 10 10 Total 32 155

Contracts with negative market value recognised under Other liabilities Currency swap 1,145 867 agreements Interest swap agreements *) 164 69 Interest options 4 - Energy price hedging contracts *) 5 0 Other financial contracts 1 2 Total 1,319 938

*) The value adjustment is charged directly to equity, although any ineffective hedging is recognised in the profit and loss account.

Annual report 2008· DSB S-tog a/s / 27 Note Amounts in DKK million

22 Derivatives cont. Currency swap agreements (millions.)

Receiver GBP NOK SEK USD JPY CHF Pays DKK Book value Expiry 15 188 -73 2009

50 601 -218 2011

29 315 -91 2015

27 250 -46 2015

400 377 -73 2009

450 406 -63 2010

200 188 -23 2011

600 569 -115 2012

400 382 -84 2015

330 267 -27 2011

375 300 4 2014

44 *) 292 *) -60 2009

37 240 -46 2010

103 *) 588 *) -42 2011

50 304 -40 2014

154 936 -124 2018

3,000 203 -20 2016

50 253 9 2015

Total 121 2,050 705 388 3,000 50 6,659 -1,132

*) Relates to intragroup loans.

Interest swap agreements, nominal principal Pays fixed amounts in DKK million interest Book value Expiry 1,115 2 2009

240 0 2010

1,344 -28 2011

483 -34 2012

602 -23 2013

300 -24 2014

635 -31 2015

203 -19 2016

403 0 2017

230 2 2018

Total 5,555 -155

Energy price hedging contracts DSB S-tog a/s has entered into fixed price contracts to hedge 76 per cent of its total electricity consumption in 2009.

Other financial contracts Other financial contracts include swap agreements aimed at stabilising DSB S-tog’s financing expenses or secure the market value of loans raised by DSB S-tog against changes in the swap spread.

Annual report 2008 · DSB S-tog a/s / 28 Note Amounts in DKK million

23 Contingent liabilities and other financial commitments 2008 2007

Purchase obligations 533 370

Purchase obligations relate to the electronic travel card and are assessed at DKK 47 million (2007: DKK 50 million). Other pro- jects in progress are assessed at DKK 224 million (2007: DKK 48 million). In addition, obligations have been entered into with the parent company where the annual obligation totals DKK 252 million (2007: DKK 265 million). The obligation is based on one year contracts which are renewed on an ongoing basis. In addition, there are purchase obligations relating to spare parts of DKK 10 million (2007: DKK 7 million.).

Costs in connection with obligations under section 32 of the Danish Public Servants Act concerning severance of availability pay, which the company is liable to pay in accordance with the Act on the Independent Public Corporation DSB and on DSB S-tog A/S. In the event of the discharge of all public employees, the obligation amounts to approx. DKK 1.2 billion (2007: DKK 1.3 billion).

DSB S-tog is party to a number of pending lawsuits. The outcome of these is not expected individually or together to have a significant impact on the company’s financial position.

Together with the DSB Group’s Danish companies, the company is jointly and severally liable for tax on the consolidated taxable income up to and including 2004. When DSB as the administration company receives payment from the jointly taxed companies in the Group, DSB assumes liability for this.

DSB, DSB S-tog a/s and Kort & Godt A/S are jointly VAT registered and are jointly and severally liable for payment of the Danish companies’ aggregate VAT liabilities.

24 Related parties Basis DSB Parent company Kort & Godt A/S Sister company DSBFirst A/S Sister company DSB Rejsekort A/S Associate company The Ministry of Transport and related agencies and institutions (primarily Rail Net Denmark) Owner of parent company Board of Directors and Executive Board Management control

As a state-owned public limited company, DSB S-tog a/s is, according to its articles of association, obliged to submit investments above DKK 100 million to the Danish Parliament’s Finance Committee.

The company’s transations with related parties have comprised: 2008 2007 Revenue Revenue from transport contracts 1,355 1,422

Commission from sale of DSB products 21 16

Expenses etc Purchase of services, including power, infrastructure charges, etc. Indkøb af ydelser, 156 128 herunder kørestrøm, infrastrukturafgift m.v. Guarantee commission to the Danish state 9 10

Dividend paid 118 90

Purchase of administrative services, rent etc. (DSB) 224 212

Purchase of administrative services (Kort & Godt A/S) - 15

Ticket commission (Kort & Godt A/S) 98 -

Engine drivers (DSBFirst A/S) 13 -

Capital contribution into DSB Rejsekort A/S - 38

The above purchase of services is inclusive of non-deductible share of purchase VAT.

Transactions with related parties have taken place at arm’s length, including on a cost allocation basis.

No other material transactions with related parties have taken place.

Annual report 2008· DSB S-tog a/s / 29 Note

25 Accounting relationship The DSB S-tog a/s’ annual accounts are included in the consolidated accounts for the independent public company DSB, Copenhagen. DSB is the immediate and overall parent company and prepares the consolidated accounts.

Annual report 2008 · DSB S-tog a/s / 30 Other information