SNCF — financial report 2007 - A

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Management report 2 consolidated financial statements 38 Company financial statements 160

SNCF — financial report 2007 - 1 rMAapportNAGEM ENT deREPORT gestion Sauf(In € millions)indication contraire, les montants sont indiqués en millions d’euros (M€)

2 - management report contents

1 significANT EVENTS OF THE YEAR 4 1-1 Environment 4 1-2 Significant events for the Group 6 1-3 a group demonstrating solidarity and responsibility 11

2 sncf GROUP ORGANISATION 13 2-1 corporate structure 13 2-2 lEgal structure 14

3 sncf GROUP 15 3-1 consolidated net profit 15 3-2 cash position and financing sources 18 3-3 balance sheet 21 3-4 financial relations with the French State, Reseau Ferré de France and local authorities 22 3-5 workforce 25

4 ACTIVITY AND RESULTS BY DIVISION 26 4-1 passenger France and Europe 26 4-2 local Transport 28 4-3 transport and Logistics 30 4-4 infrastructure and Engineering 33 4-5 common operations and investments 35

5 corporATE GOVERNANCE 36

SNCF — financial report 2007 - 3 1. SIGNIFICANT EVENTS OF THE YEAR

1-1 Environment Inflationary pressures have also been aggravated by rising commodity food prices. On an uptrend since mid-2006, prices have soared since An uncertain yet nevertheless the beginning of 2007 for reasons both environmental (adverse dynamic economic environment weather conditions) and structural (sharp rise in demand and biofuel in the transport sector, production, which is reducing food acreage). Beginning in the summer, and particularly for rail transport these rises are now being passed on to the consumer.

Worldwide growth withstood reasonably well the turbulence of 2007: a The main source of uncertainty affecting 2008 lies in the extent and plunging US real estate market, the crisis in US subprime home loans that duration of the current liquidity crisis. A continuing liquidity shortage led to a general liquidity shortage from August, and the surge in oil prices in could hamper numerous investment decisions and the global the second half. economic slowdown would worsen. Conversely, a rapid resolution The impact of these events on the global economy should be more tangible to the crisis and consequently an easing of financing conditions, in 2008. In all countries, business investment will suffer from tighter magnified by Federal Reserve prime rate cuts in the United States, financing conditions, and the inflationary toll expected from agricultural could quickly act to stimulate growth. and energy commodities should restrict household consumption. The economic slowdown will be most felt in the United States and the United According to the most recent ECB monthly bulletin, the fundamentals Kingdom but should be more limited in the euro zone. of the euro zone economy are solid, corporate profits remain high, Euro zone growth remained steady at 2.7% in 2007. In Germany, job growth is robust and the unemployment rate has fallen to levels growth slowed to 2.5% following 2.9% in 2006. unseen in the last twenty-five years. Consequently, the rise in In this international context, the French economy has not been enti- consumer spending should continue to boost economic growth, in the rely immune to the global slowdown, the 1.9% growth rate falling wake of higher real disposable income, and investment growth should below the forecasts of early 2007. provide ongoing support.

In general, because of its core businesses, SNCF Group has An environment undergoing profound underscored the importance of household consumption, which change remained stable at 2.1%, close to the trend observed over the last two years. The transport sector is evolving in a context marked by significant eco- nomic trends, from a social and individual perspective, as epitomised There will only be a gradual return to normal for the money markets, by the concept of sustainable development, and the development of and it could be some time before there is an easing of the financial high-speed infrastructures in Europe. These issues represent challen- turmoil. Indeed, there remains great uncertainty in the United States ges, and presage a momentous future for the transport sector in general, as to the exact location of high-risk financial assets, such as doubtful and particularly for rail transport, due to the growing mobility needs real estate loans. Borrowing terms will therefore remain tight in the of people and goods, the saturation of road and airport infrastructures coming quarters. and the mid-term perspectives for oil.

Added to these financial qualms is a dual inflationary impact. Pressures Likewise, the competitive environment must restructure itself, parti­ continue to bear down on the oil markets. After an initial surge in September, cularly with respect to current or previous monopolies that oil prices continued to climb in October and November. These upward must open to competition in ever-increasing numbers: freight rail pressures reflect physical tension in the oil markets: demand is up transport, international TGVs, including cabotage, infrastructure sharply, notably in the Middle East and China, and OPEC is not using all activities, through development of public-private partnerships, rail its spare capacity. These pressures were exacerbated by rising public transport activities opened up over a longer timeframe (Public geopolitical uncertainties and erratic weather conditions that disrupted Service Obligation regulation), not to mention the increasingly fierce oil extraction and shipment. competition between transport means via the technical advances of truck and automobile manufacturers and continuing transformations in the airline industry.

4 - management report Intramodal competition in the transport and logistics business SNCF Group, and more generally, the entire transport sector, is thus demonstrated its momentum in 2007 and an aggressiveness that was confronted with major strategic challenges and disruptions in an envi- particularly intense. Seven companies hold the safety licences and ronment that is highly conducive to development. certificates required for the domestic market and five are making use of them. At the end of 2007, or barely 20 months following “Grenelle” Environment Round Table: the opening to competition, new arrivals represent 8% of tonnage an excellent opportunity for the rail hauled. This competition is particularly active in certain market segments sector (agriculture, quarry products). It will rapidly intensify in the coming months under the combined impact of: The conclusions adopted in October 2007 at the end of the proceedings, – new competitor capacities in terms of locomotives, and, conse- announced “a radical change in strategy with an absolute priority given quently, their foreseeable positioning in new market segments with to rail and waterways.” Accordingly: longer travel times; – construction of 2,000 km of high-speed lines by 2020, – the purchase of the ECR parent company (EWS), number two in – for freight, creation of new rail motorways for north/south-east and France, by the German company Die Bahn, making the latter the main north/south-west routes in France, national competitor of SNCF Group. – for urban transport, construction of 1,500 km of additional tramway lines in the major cities, excluding Greater Paris, Other major strategic developments recently observed for rail transport – creation of an ecotax by 2010 based on mileage for trucks using the groups include: French non-concessionary road network (offset by a tax decrease for – a general trend towards an integrated vertical structure for business French trucks), segments: recent years have seen a series of such reorganisations in – for air traffic, creation of a programme to reduce carbon dioxide Europe, seeking to make management more accountable for market/ emissions by 20% by 2012, and by 40% by 2020. customer combinations and better adapt processes and organisation to market challenges, and also to develop additional markets either in new areas, or by extending know-how to new but related markets; Third railway package: agreement – a diversification of strategic positioning: alongside the arrival of between the European Parliament specialised players such as Rail4chem or Arcelor-CFL, the upsurge in and Council strategic models that can be described as conglomerate, as symbolised by the Deutsche Bahn “mobility, network, logistics” positioning. It On 21 June 2007 the European Parliament and Council confirmed the bears noting, moreover, that the various Deutsche Bahn competitive conciliation agreement covering the “Third railway package”. Tabled positions are presented independently of transport means; by the European Parliament in March 2004, the package has been – the rapid step-up in players who already have strong positions in non- the subject of lively debate. It will finally involve two directives and a domestic markets, clearly posing the challenge of internationalisation regulation governing market liberalisation for international passenger to all players. In the first half, for example, a player in the form of Arriva rail traffic, passenger rights and the certification of train drivers. announced its ambitions for the Polish market and Transdev concluded Following the example of freight, international passenger transport a major purchase transaction in the Netherlands, while SNCF Group will now operate based on the principle of free access, as of 1 January pursued its development on the British market with its partner Go 2010. Domestic cabotage will be authorised but restricted, while the Ahead (see below); liberalisation of national traffic has been postponed indefinitely. – the emergence of new growth drivers in rail transport, such as large- scale partnerships, as in the initiative between SNCF and Railteam, or The Act of 2 August 2007 on social acquisitions, as demonstrated by the two Deutsche Bahn transactions dialogue and the continuity of public in the first half involving EWS and Transfesa, following those of Schenker service in public land-based and Bax, non-rail players, in recent years. passenger transport

Lastly, the likelihood of the flotation in 2008 of a minority stake in The provisions of the Act of 2 August 2007 on the continuity of public Deutsche Bahn’s share capital is growing in Germany and will likely service in public land-based passenger transport entered into effect represent a major event in the European transport sector.

SNCF — financial report 2007 - 5 1. SIGNIFICANT EVENTS OF THE YEAR

and have been implemented by SNCF since 1 January 2008. With respect to the prevention of disputes, SNCF negotiated an 1-2 Significant events addendum to its 2004 agreement on improving social dialogue. The agreement was signed with five trade unions on 13 December 2007. for the Group Pursuant to the Act, the addendum stipulates that the filing of advance notice of industrial action must be preceded by preliminary nego- 2007 was a catalyst for SNCF Group tiations over eight clear days (so-called “immediate consultation” approach). Major steps towards corporate maturity In terms of service predictability, management approved a special plan on 21 December 2007, following negotiations with the trade unions. • First-time publication of Group consolidated financial state- The plan is applicable as of 1 January 2008. ments according to IFRS for the period ended 30 June 2007, first annual publication as at 31 December 2007 Three high-speed projects As from 1 January 2007, SNCF is subject to international accounting of major significance regulations (IAS/IFRS) applicable to all major public issuers.

In 2007, progress was made for three extension projects covering the • Creation of the Employee Pension and Provident Fund (CPRP) as high-speed network: at 30 June 2007 – a financing agreement for preliminary studies and work under phase On 11 April 2007, the SNCF Board of Directors approved an amendment two of the East European line was signed on 24 January 2007; to the SNCF terms of reference, presented by the Government – a letter of intent for the new South Europe Atlantic line was signed Commissioner at the same time as the regulatory mechanism to on 25 January 2007 by the Minister of Transport, RFF, and the Poitou- provide the Pension and Provident Fund with independent legal status. Charentes, Aquitaine and Midi-Pyrenees regions; The new employee pension and provident fund is a social security – a rail service agreement was signed on 30 January 2007 by the body that provides a public service for rail workers. Minister of Transport, SNCF, RFF and all regions concerned, in respect The result of a long process of communication and consultation with of the Bretagne-Pays de la Loire high-speed line. This was completed trade unions and employees, the creation of the independent fund by the publication of the decree declaring the public service nature of is accompanied by a continuing State contribution guaranteeing the this line in the Journal Officiel on 28 October 2007. pension fund’s financial equilibrium.

• Debt standardisation thanks to the elimination of the Special An advance for sustainable Debt Account (SAAD) intra-Community exchanges During the 1980s and 1990s, the rail system became increasingly indebted for purposes of network development, with the debt being The decrees declaring the public service nature of the work to build the mainly borne by SNCF until 1997. Created in 1991, the SNCF Special French section of the new international rail link between Lyon and Turin Debt Account (SAAD) was assigned the task of ring-fencing a portion were signed in December 2007. This link will contribute to meeting of SNCF debt, so as to “stabilise its financial position” through “significant the major challenges arising from the Environment Round Table by debt reduction”. transferring 1.35 million heavy trucks to trains between France and Italy In 2006, average outstanding amounts ring-fenced in the Special Debt by 2030. Account stood at €8.2 billion. SAAD resources consisted in an annual contribution from the State, and an annual SNCF contribution equal to 2.6% of the annual State payment.

A thorough Eurostat analysis based on national accounting rules led to an INSEE revision of the public debt in September 2007, to take into account the State’s commitment to SNCF to continue repaying the debt borne by the SAAD Special Debt Account. The public debt was therefore automatically increased by €8.2 billion. Accordingly, the State sought a permanent and definitive solution regarding the debt’s future,

6 - management report under conditions of neutrality for the State and SNCF. World rail speed record beaten on 3 April 2007 Following these operations, the SAAD Special Debt Account was by the East European high-speed line (574.8 Km/h) eliminated, and SNCF: This technological and human achievement will position SNCF and – remains indebted vis-à-vis shareholders, its partners, RFF and Alstom Transport, as long-term global leaders in – holds a receivable from the Public Debt Fund (Caisse de la Dette high-speed rail transport. Publique (CDP)) reflecting the exact amount and characteristics of this indebtedness. Freight structuring

As part of this operation, SNCF pledged to pay a balancing cash adjust- • Implementation of the SNCF Freight action programme ment of €640 million. 2007 was marked by the definition and launch of the action pro- gramme for high-speed rail transport. The purpose of the programme Structuring commercial initiatives for operations is to restore the conditions necessary for permanent and profitable economic growth for SNCF Freight. It has been initiated based on • Commercial launch of the East European high-speed line on certain guidelines: response to the logistical needs of customers, per- 9 June 2007 formance of the industrial tool, accountability of SNCF freight teams, SNCF had welcomed seven million passengers at the end of and European goals. December 2007, a sign of true popular success. One hundred TGVs serve the stations of Eastern France, as well as Switzerland, Germany – Industrial consolidation began in April 2007, with the appointment and Luxembourg, transporting an average of 33,000 passengers daily. of five Freight directors. In 2008, virtually all traction and operational At the same time, the TER traffic offering has been increased by 20% employees contributing to freight-related businesses will become spe- for the associated regions. cialised, prior to their integration in the Freight organisational structure. This will be characterised by a short chain of command very much attu- • Network rescheduling in Rhone-Alpes ned to customer requirements. In early December 2007, the Rhone-Alpes regional network was sub- ject to rescheduling in order to meet a growing public transport need – Customer relations have been reorganised in order to assure Freight (35% increase in the number of passengers on the Rhone-Alpes TER credibility and restore the confidence of customer representatives. in four years). These relations are based on logistics solutions that are more rigorous, The rescheduling enables the circulation of more trains each day with offerings that are often specific, designed according to customer through traffic reorganisation (100 trains created for a total of 1,200). requirements and a new form of risk sharing. A gradual increase is expected: 15% over three years. Through a domino effect, this reorganisation has modified 30% of train schedules – The reallocation of means and standardisation of activity flows has throughout France (excluding Greater Paris). been set in motion, particularly through the deployment of resources for the major priorities of European interest. In effect, the objective is to significantly enhance the performance and reliability of the service offering, which are crucial to rail transport viability.

• Finalisation of the Geodis acquisition of Wilson The acquisition of TFM (TNT Freight Management, renamed “Wilson”) was finalised in February 2007. The transaction positions GEODIS among the leading freight forwarding players in Europe and was financed via a loan and a share capital increase subscribed equally by GEODIS shareholders.

SNCF — financial report 2007 - 7 1. SIGNIFICANT EVENTS OF THE YEAR

With stable share ownership, the Keolis group will now find support • Renewal of the strategic-financial partnership with the Ermewa for its French and international development projects. group On 30 May 2007, the secondary LBO was carried out in accordance Labour unrest with the memorandum of agreement signed by SNCF Participations Results for fiscal year 2007 were particularly affected by the impact of and IPE in December 2006. SNCF Group sold its direct interest in the national strikes in the last quarter, over reform of special pension Ermewa France, and now holds 49.6% of the group’s holding company, schemes, which significantly hindered production. Financière Ermewa. Some events Renewed and updated commitments • SNCF, official partner of the Rugby World Cup • New long-term management agreement signed with RFF The Rugby World Cup marked the first time trains were used for team On 25 May 2007, RFF and SNCF signed a new agreement for the travel in an international competition. For SNCF, the stakes were sub­ management of traffic and circulation on the national rail network and stantial: increasing the prestige of high-speed, demonstrating solid the maintenance of this network. Covering a four-year term (2007- reliability in a global sporting event, and promoting expertise and know- 2010), the agreement clarifies the respective responsibilities of RFF how. In addition to mobilising teams and equipment, all activities, TGV and SNCF and specifically defines the services to be rendered and the and Téoz, Transilien and TER, were also involved in the transport of objectives to be met. nearly one million supporters.

• Ongoing renewal of agreements with Organising Authorities In terms of sustainable development, the choice of rail to transport

Ten new TER agreements came into force as of 1 January 2007: teams and spectators significantly reduced CO2 emissions. By way of three were signed in 2006 (PACA, Franche-Comté, and Languedoc- illustration, the French Environment and Energy Management Agency Roussillon) and seven in 2007 (Centre, Picardie, Rhône Alpes, Poitou calculated that the use of trains rather than automobiles for a single

Charentes, Bourgogne, Bretagne and Lorraine). The Basse Normandie match at Lens saved 13 CO2 equivalent tonnes. agreement was signed in January 2008 and the Nord Pas de Calais agreement was approved in February 2008 by the Board of Directors, • 70 years of SNCF for application as of 1 January 2008. These new agreements reinforce In honour of its 70th anniversary, SNCF presented the “L’art entre en the partnership-based contractual model. gare” exhibition at the Grand Palais in Paris at the end of December, and in 18 cities throughout France in January. With respect to Transilien, on 13 February 2008 the Board of Directors approved a contract that will affiliate the company with STIF (Syndicat And at the beginning of 2008… des Transports d’Ile-de-France) for the 2008-2011 period. The contract represents annual business volume of approximately €2.5 billion for • Reform of the special pension scheme for SNCF qualifying SNCF, or €10 billion by 2011. It grants greater priority to passenger employees concerns, particularly in regard to service reliability and customer The decree of 15 January 2008 covering the special pension scheme information, through the definition of clear objectives and the set-up of for SNCF employees reiterates the fundamental principles set forth in adequate funding. the Government guidelines and most of the pension settlement items that were adopted as part of negotiations between SNCF management • Finalisation of the Keolis group share capital restructuring and the union organisations. The decree confirms the entry into effect Initiated in September 2006 and completed during the first half of of the reform on 1 July 2008 and covers two phases: the implementa- 2007, the KEOLIS group share capital restructuring brought in AXA tion of common harmonisation principles and the implementation of Private Equity and Caisse de Dépôt et Placement du Québec as stake measures arising from company negotiations. holders via a joint venture, along with SNCF Participations and mana- gement. SNCF Group maintains its 45% interest and remains the core • Renewal of the Board of Directors and appointment industrial shareholder. SNCF now holds Keolis through the new holding of Mr Guillaume Pépy as Chairman of SNCF company Kuvera Développement. The decree appointing the French State representatives to the SNCF Board of Directors and the individuals chosen for their expertise was

8 - management report signed on 20 February 2008. Employee representatives were elected In 2007, the SNCF consolidated financial statements were completely during a vote held on 5 February 2008. revised as part of the adoption of IFRS, which the State has actively On 27 February 2008, Mr Guillaume Pépy was appointed Chairman of accompanied. SNCF fully confirmed the “financial revolution” launched SNCF by decree of the Council of Ministers, to replace Mrs. Anne-Marie at the end of 2003 and early 2004 and its ability to deliver a growing Idrac. net profit from recurring operations year after year, to fund its equity- financed investments, with a free cash flow of €302 million at the end • Acquisition of Rohde & Liesenfeld by Geodis of 2007, and to build a solid financial structure, as reflected in a debt/ On 3 January 2008, the Geodis acquisition of the German group Rohde equity ratio of 0.5 at the end of 2007, even though the financial position & Liesenfeld was finalised. The Geodis network’s main partner since of certain divisions has still to be restored or consolidated. 2002, Rohde & Liesenfeld is an international air and maritime forward­ The contrast between this ability, as demonstrated yearly over the past ing agent. This operation will enhance the geographical coverage of the five years, and the prior situation existing since 1937, is demonstrated Geodis Wilson network and provide Geodis with additional expertise in by the fact that SNCF does not currently pay income tax due to prior terms of industrial projects. year tax losses, amounting to €7.6 billion at the end of 2007. Moreover, encouraged by its future course, SNCF decided to begin recognising • First dividend payment to the French State deferred tax assets in 2006. Most major public corporations pay an annual dividend to the State. This is also true for companies whose parent company is a public In agreement with the public authorities, it therefore seemed appro- institution such as Caisse des dépôts et consignations since the early priate for the company to go a step further in normalising the SNCF 1990s and La Poste this year. The payment of such a dividend, as public corporation’s relationship with its shareholder, through the currently stipulated in the provisions of Article 79 of the Amending implementation of a mechanism for paying an annual dividend. This Finance Act of 31 December 2003, reflects the fact that the public reinforces company-shareholder solidarity in the creation of a major corporation’s financial position is solid and that the public “sharehol- public transport group in full development, with a financial discipline der” may naturally receive a share in current or future profits. guaranteeing the sound management of receipts from customers and public partners in compensation for services rendered. The legal framework governing dividends paid by public corporations under State authority stems from Article 79 of the 2001 Amending It is the company’s express wish that the dividend payment be focused Finance Act (2001-1276 of 28 December 2001), amended by Article on rail considerations and purposes and it has asked the public authori- 88 of the 2003 Amending Finance Act (2003 – 1312 of 30 December ties to consider “channelling” the dividend towards the financing of rail 2003), presented in title II of the 2001 Amending Finance Act relating sector development. The public authorities have just recently confirmed to permanent provisions. This article grants the State the general pos- that nearly 40% of the dividend (€50 million) will indeed be used to sibility of receiving a dividend from its public institutions. Among other reinforce the rail investment policy. items, Article 79 of the Amending Finance Act specifies that: – the dividend is first deducted from distributable earnings of the year, Once the principle of a dividend was set, it was necessary to deter- within the meaning of Article L. 232-11 of the French Commercial mine the calculation method. External practices have demonstrated Code, and can be deducted from available reserves; that: – the amount of the dividend payable to the French State is determined – dividends are generally calculated on the basis of consolidated by decision “of the ministers responsible for the economy and budget”, results, which therefore was the option proposed; following review of the financial position of the public institution and – dividend rates average 33.33% for listed companies and are variable confirmation of distributable amounts, based on the report of its Board for public companies according to activity sectors. On this issue, the of Directors, Supervisory Board or its deliberating body as the case State and the company agreed on a rate of 20% only; may be. – as the adoption of IFRS introduced volatility into the accounts, parti­ In return, Article 79 of the 2001 Amending Finance Act put an end to cularly because of the greater weight accorded to asset valuations, the previous mechanisms for remunerating capital charges. which can have a material positive or negative impact on the financial statements without any cash flow, and the fact that the company reco- gnised material deferred tax assets, which also represent non-cash accounting entries, the company proposes the use of net profit from

SNCF — financial report 2007 - 9 1. SIGNIFICANT EVENTS OF THE YEAR

recurring operations as the calculation base, as it does not include Accordingly, the company will record entries for the payment of this these volatile and exceptional items not reflected by cash flows, rather dividend in the 2008 company and consolidated financial statements, than net profit attributable to equity holders of the parent. which will have the following impact on reserves presented in these Consequently, the State indicated its intention to deduct a dividend financial statements for the year ended 31 December 2007: corresponding to 20% of consolidated net income from recurring ope- rations of SNCF, or 20% of €656,839,000, i.e. €131,367,800.

in euros Financial statements Company Consolidated 31/12/2007 31/12/2007

Net profit for the year Net profit attributable to equity 996,527,662 1,042,324,000 holders of the parent Retained earnings 920,180,062 1,875,423,000 Consolidated reserves

Net accumulated profit attributable Available reserves 1,916,707,724 2,917,747,000 to equity holders of the parent

Dividends to be distributed in 2008 131,367,800 131,367,800 Dividends to be distributed in 2008

Net accumulated profit Retained earnings after distribution 1,785,339,924 2,786,379,200 attributable to equity holders of the parent after distribution

Overall, the payment of the first dividend by SNCF demonstrates the • Reduced restrictions on use of the national rail network permanent turnaround of the SNCF economic model, reflecting a global Decree 2008-148 of 18 February 2008 expands the conditions governing performance which is now solid thanks to the efforts of rail workers use of the national rail network. Public authorities and their groups, and all employees, and represents a major sign of confidence in the as well as public corporations can now claim rights of way, provided profitable development of the company. they are for freight transport purposes. As of 14 December 2008, the Regional Councils and the Syndicat des Transports d’Ile de France (STIF) will also be entitled to these rights of way as public corporations “organising a public transport service for passengers on the national rail network”.

10 - management report • SNCF obtains safety certification Under decree 2006-1279 of 19 October 2006 relating to rail traffic 1-3 A group safety and rail system interoperability, which follows in the wake of European regulations, SNCF must demonstrate its ability to satisfy demonstrating solidarity regulatory safety requirements and manage the risks relating to the exercise of this rail activity. Accordingly, SNCF Infrastructure and and responsibility Engineering developed a safety management system (SGS) in close cooperation with RFF. The approval of this SGS by the Etablissement Train accessibility Public de Sécurité Ferroviaire (French rail safety public authority), enabled In order to further improve train travel accessibility, SNCF has created SNCF to obtain its safety certification on 27 February 2008 for a period Accès Plus, a new service offered free of charge to the disabled so of five years. SNCF is one of the very first networks to obtain this certi- they may better prepare each step of their trip. fication in Europe. The Accès Plus service is available in 3 stations in Paris, 12 stations in the Central region and 25 stations in the Provence-Alpes-Côte d’Azur • Billboard contracts region, as well as in the East European TGV stations. This service will New operating contracts for 34,000 SNCF and RFF billboards were be available in more than 400 stations in early 2008. signed in early March 2008 by JCDecaux and Metrobus (Publicis subsidiary). Sustainable development: environmental protection SNCF Group has implemented the following environmental protection practices:

• Reduced use of pesticides On 16 March 2007, SNCF, Réseau Ferré de France, the Ministry of Agriculture and the Ministry of Ecology and Sustainable Development signed a three-year framework agreement setting forth the overall structure for common interest actions covering the use of pesticides for the weeding of tracks and surrounding areas and the reduction of the impact on water quality.

• Waste sorting SNCF is currently testing selective waste sorting in some ten major stations. The objective is to gain experience prior to implementation in a large number of stations and trains in 2008.

• Eurostar launches the “Green Travel” programme Eurostar has set up a “Green Travel” programme aimed at a 25%

reduction in CO2 emissions by 2012 per trip and passenger, thanks to the reduced electricity consumption of rolling stock (installation of energy meters, set up of new controls for lighting, heating and air conditioning), better use of train capacity, and optimised quality of electricity used. Eurostar thus intends to become the first rail company

in the world to offer CO2 neutral travel without any additional cost for customers. Eurostar has also implemented an action plan to mitigate other impacts on the environment (particularly reduced use and recycling of paper, recycling of old uniforms and all waste produced on board, assurance that disposable articles are biodegradable or 100% recyclable, use of

SNCF — financial report 2007 - 11 1. SIGNIFICANT EVENTS OF THE YEAR

food products from local suppliers in Great Britain, France or Belgium • Prevention and reinsertion whenever possible, more frequent use of organic farming and equity On 21 February 2007, SNCF and the Ministry of Justice signed a natio- commerce products, reutilisation of the water used to clean trains and nal partnership agreement encouraging the use of prevention measu- rain water collection project, recycling of 80% of waste by 2009). res and measures aimed at reducing repeat offences. The agreement formalises a cooperative responsibility programme for juvenile This ambitious and demanding project will require close cooperation delinquents and persons ordered to perform community service that between suppliers, contracting parties and partners. Its implementa- has already been set up in six regions since 2005 and is now applicable tion in the three countries will take three to five years. A full environ- in the 23 SNCF regions. mental audit of the group is under way, to ensure that all aspects are considered. • First “Equality and skills” forum in 2007 with higher education The forum took place on 13 February at Université Paris 13 (Villetaneuse). • Vehicles powered by natural gas Following the exchange, 45 candidates were directly integrated in the On 18 December 2007, SNCF received 62 natural gas vehicles to be SNCF hiring process for management positions throughout France. used by personnel responsible for network monitoring and mainte- nance. This delivery is the first step of an overall process for renewing • Meeting day with the world of education the company’s automobile fleet, which will number over 1,200 “clean” A special day, 16 January 2007, was devoted to commitments arising vehicles by 2011. from the Corporate charter for equal opportunity in education, signed on 13 December by SNCF. Human resources • First edition of the national “Passenger and citizen” contest • 2007 wage agreement In October 2007, SNCF launched a major national initiative, the “Passen- The company’s management and four trade unions signed a wage ger and citizen” contest open to 15,000 grade four and five classes and agreement for the fourth consecutive year. The agreement calls for a 6,800 junior high schools in France. The objective is to offer teachers general wage hike of 1.5% for 2007 accompanied by a special measure the opportunity of working on rail safety and civic duty issues with tied to the solid economic results already achieved by the company. A their students. one-time performance bonus will be paid to all employees when gross profit exceeds the annual objective. In terms of low wages, special measures undertaken during the year have increased SNCF entry- ­level wages to a level 8% higher than the index-linked minimum wage (SMIC).

• Agreement to promote employment and professional integration Signed on 19 January 2007 with the Greater Paris Employment Agency (ANPE), this regional agreement further extends the cooperation between SNCF and ANPE, in the spirit of the three-year national agree- ment signed in March 2006.

12 - management report 2. SNCF GROUP ORGANISATION

2-1 Corporate structure

SNCF

passengers LOCAL TRANSPORT INFRAstructure Common operations FRANCE EUROPE TRANSPORT and LOGISTICS and engineering and Investments

TGV, Corail, TER, Equipment, Stations, Transilien, SNCF Infrastructure Traction, Sales, Corail Freight Engineering Transversal Distribution Intercités Functions

Thalys, Eurostar, Systra, ICF, SNEF, VSC.com, Keolis, TLP AREP, Inexia, Seafrance, iDTGV Effia SNCF Intern. SNCF A2C Participations

Geodis

SNCF — FINANCIAL REPORT 2007 - 13 2. SNCF GROUP ORGANISATION

2-2 Legal structure

SNCF

Eurofima SNCFP Voyageurs France Eurostar Geodis Group Semapa Europe Group Partners TLP Transmanche FRP SNEF Group Calberson Night Travel Naviland SA Ltd Socrif Cargo French Bourgey Railways Ltd Intercapital GIE Novatrans Montreuil Regional Rail Eurail Test Ltd Rouch Geodis French Rail Inc. ICF Seafrance intermodal Logistics Rail Europe Group Inc. Züst Rail Europe ICF Novedis ORFEA Froidcombi Groupe Ltd Ambrosetti Rail Europe Sefergie Espagne SRL ESH GIE Vitesse Financière Sceta Districhrono Rail Europe Sealogis United Suisse Group Rail Europe Ceretif Distribution G. SPFRD Benelux Rail Europe Ecorail Geodis Deutschland SCI Ney Wilson Lyria Logistra Rail Europe SCI Thalys Italia du Cercle International Edifret VFLI L’Agence SCI Group VFE Voyages- Vézelay Stesimaf Commerce sncf.com SNC CWS Financière GEIE Voyages- Monceau Ermewa Sysrail/Data Cie Modalhor sncf.com Express ® SNCF Conseil Ermewa iDTGV VSC Holding Group Technologies COMMON CRM OPERATIONS France Services Parvis AND INVESTMENTS Wagons A2C CTC SAM Alleo Valga AREP Ville AREP SGW RE 4A Rail Plus AREP SNCF SEGI STVA Architecture International Group Elipsos SARI PASSENGERS FRANCE Financière Artesia Systra Trans- EUROPE informatique Railteam BV Systra Group TRANSPORT STSI AND LOGISTIC Kuvera Keolis GROUP Inexia INFRASTRUCTURE Groupe EFFIA LOCAL AND ENGINEERING TRANSPORT Full consolidation Proportionate consolidation Equity accounted Not consolidated

14 - MANAGEMENT REPORT 3. SNCF GROUP

3-1 Consolidated net profit

Confirmed growth for all Group results in 2007 In € millions 2007 2006 2006 Change pro forma pro forma

Revenue 23,691 21,957 21,965 1,733 8 % Purchases, sub-contracting and other external expenses – 11,151 – 9,806 – 9,800 – 1,345 – 14 % Employee benefits expense – 8,895 – 8,731 – 8,292 – 164 – 2 % Taxes and duties other than income tax – 829 – 843 – 843 13 2 % Other operating income and expenses – 46 - 61 – 76 15 24 % Gross profit 2,770 2,517 2,954 252 10 %

Depreciation and amortisation, net of grants – 1,198 – 1,209 – 1,210 10 1 % (Charge to) / reversal of provisions – 24 1 4 1 6 – 39 NS Current operating profit 1,547 1,323 1,760 224 17%

Net proceeds from asset disposals 11 8 2 9 0 2 9 3 – 172 NS Impairment losses – 21 – 7 1 3 – 7 0 1 693 NS Operating profit 1,644 8 9 9 1,352 745 NS

Net borrowing costs – 1 7 4 – 261 – 267 86 33 % Finance cost of employee benefits(1) – 697 – 705 – 1,351 8 1 % Finance costs – 872 – 966 – 1,618 94 10 % Net profit before tax from ordinary activities of consolidated companies 7 7 2 – 67 – 266 839 NS

Share of profit of associates 3 7 2 3 2 3 14 NS Income tax expense 3 0 0 4 4 8 4 4 8 – 149 – 33 % Net profit from ordinary activities 1,109 4 0 5 2 0 5 704 NS

Net profit from discontinued operations 0 NS Net profit for the year 1,109 4 0 5 2 0 5 704 NS Attributable to equity holders of the parent 1,042 3 6 8 1 6 8 675 NS Attributable to minority interests 6 7 3 7 3 7 29 NS

Net profit from recurring operations(1) 6 5 7 3 2 4 1 0 8 333 NS (1) Net profit for the year (€1,109 million) less the change in impairment losses (€21 million), net proceeds from asset disposals (– €118 million) and deferred tax assets (– €355 million), or €657 million in 2007.

SNCF — financial report 2007 - 15 3. SNCF GROUP

In € millions 2007 2006 pro forma 2006 Current operating profit / Revenue 6.5% 6.0% 8.0% Net profit from recurring operations / Revenue 2.8% 1.5% 0.5% ROCE = Current operating profit / capital employed(2) 7.5% 6.5% 6.3% ROE = Recurring net profit / average «strict» equity(2) 10.1% 7.8% 7.3%

(2) Equity is adjusted for the temporary impact of pension and provident obligations.

Comparability of financial statements second half of 2007 due to the incorporation of the Pension and Provident Fund as an independent legal entity (– €366 million of the First annual publication under IFRS – €354 million impact in respect of employee benefits presented The financial statements for the year ended 31 December 2007 repre- above), net profit would have amounted to €534 million. sent the first annual publication of the Group financial statements according to IFRS. For comparison purposes, the 2006 financial Closing equity as at 31 December 2007 statements are also presented according to IFRS. The main differences Group equity returned to the black as at 31 December 2007 in the between French GAAP and IFRS are described below. amount of €7.9 billion following the incorporation of the Pension and Provident Fund as an independent legal entity (impact of Opening equity as at 1 January 2006 + €31.2 billion). As at 1 January 2006, equity amounted to €4.8 billion in the French GAAP publications. The creation of an independent Pension and Provident Fund is reflected Under IFRS, equity stood at – €24.9 billion as at 1 January 2006, due to as follows on the 31 December 2007 balance sheet: the following impacts: − a reversal of the total commitment (€116,446 million) recognised in – €31.8 billion for employee benefits (including – €30.9 billion for opening balance sheet liabilities as at 1 January 2006 and updated as Pension and Provident Fund benefits), at 30 June 2007, – €0.7 billion for financial instruments (including the SAAD Special − a reversal of offsetting entries in assets, corresponding to the equa- Debt Account), lisation payment defined by Article 30 of the SNCF terms of reference + €2.5 billion for non-current assets. (€85,130 million), + €0.3 billion with the changes in Group structure. − the removal of other assets and liabilities of the Pension and Provident Excluding the impact of commitments no longer existing as of the Fund, second half of 2007 following the incorporation of the Pension and − offset by a €31,052 million increase in reserves. Provident Fund as an independent legal entity (– €30.9 billion), equity stood at +€6.0 billion as at 1 January 2006. 2006 pro forma For information purposes, changes between the 2007 figures and the 2006 Net profit 2006 pro forma figures are presented. Compared to the 2006 figures Net profit for the year published under French GAAP amounted to presented in IFRS, this data was restated as follows: €652 million. – cancellation of 6 months of employee benefits, IFRS restatements to this result had a total impact of – €484 million, – inclusion of the impacts of the Pension and Provident Fund’s inde- wholly in terms of the portion attributable to equity holders of the pendent legal status as at 30 June, parent. Restatements mainly had the following impacts: – inclusion of the change in management rules. – €354 million for employee benefits, with a positive impact on the employee benefits expense of €997 million and a negative impact Comparison between 2006 and 2007 on finance costs of – €1,351 million, The comparison of 2007 annual results with those of 2006 is affected – €201 million for non-current assets, by a major change in Group structure: the consolidation of Wilson by + €60 million for financial instruments (including the SAAD Special Geodis in early February 2007. The impact on revenue is +€806 million. Debt Account). The acquisition of Wilson weighed on Geodis group operating profit as 2006 net profit under IFRS therefore amounts to €168 million. a result of consolidation costs of -€20.7 million, but the initial synergy Excluding the impact of commitments no longer existing as of the impacts contributed additional income of approximately €3 million.

16 - MANAGEMENT REPORT Revenue Current operating profit stood at €1,547 million, up €224 million com- pared to 2006, or 17%. Group revenue amounted to €23,691 million for 2007, up +€1,733 The rate of conversion of revenue to current operating profit increased million compared to 2006. The 8% increase is attributable for €806 from 6.0% in 2006 to 6.5% in 2007, an increase of 0.5 basis points. million to the acquisition of Wilson and for the remainder (+ 4.3%) to Excluding the temporary impact of Pension and Provident Fund bene- increased activity in the various divisions: fits, current operating profit amounted to nearly €1 billion, up 16%, and – Passenger France and Europe: + €348 million, + 6%; the current operating profit rate rose 0.3 basis points to 4.2%. – Local Transport: +€214 million, + 4%; – Transport and Logistics: + €1,049 million, + 16% (+ €243 million Operating profit excluding Wilson revenue); – Infrastructure and Engineering: + €87 million, + 2%. Compared to current operating profit, operating profit includes unusual transactions, in terms of occurrence and amount (impact of change in Gross profit asset values and proceeds from asset disposals in particular).

Gross profit comprises revenue and related income less charges Standing at €1,644 million, 2007 operating profit exceeded that of directly related to operations (purchasing, subcontracting, other exter- 2006 by €745 million. Operating profit for 2006 stood at €899 million, nal services, employee benefits expense, taxes and duties other than primarily affected by the recognition of provisions for impairment los- income tax and other items including disposals of current assets). ses within the Transport and Logistics Division for -€677 million. Employee benefits are recorded on the balance sheet as employee Proceeds from asset disposals recorded in 2007 of €118 million mainly rights vest. In terms of the income statement, the net cost is presen- comprise: ted: – capital gains on real estate sales by Geodis, SNCF and Novedis for a – in gross profit, under employee benefits expense for the portion cor- total of €84 million, responding to service costs (+ €624 million for 2007), – and proceeds from disposal of Ermewa shares as part of the renewal – in finance costs for the portion corresponding to the interest expense of the Ermewa financial partnership (€17 million). (– €695 million for 2007). Finance costs Standing at €2,770 million in 2007, gross profit increased by €252 million, or 10%. As a percentage of revenue, the gross profit rate The finance costs presented by the Group includes the impacts of increased by 0.2 basis points from 11.5% to 11.7%. financing transactions and breaks down into two main components: The improvement is due to limited growth in internal expenses – the cost of net indebtedness, which includes interest paid on Group (employee benefits expense and purchasing and external charges). borrowings (including the SAAD debt), income from the RFF recei- This increase is 3% excluding the impact of Wilson. vable, income from SAAD debt repayment entitlement and interest The increase in external expenses is more significant (+8%). It is received on available cash; related to higher energy costs and infrastructure fees paid to RFF. – the finance cost of employee benefits, which corresponds to the However, the increase in the latter item was limited in 2007, due to the interest recorded on actuarial obligations with respect to all post-em- decrease in Eurotunnel fees following the end of the Minimum User ployment benefits. Charge (MUC) on 30 November 2006. Excluding the temporary impact of Pension and Provident Fund bene- Consolidated net finance costs for the period were – €872 million, a fits, gross profit stood at €2.2 billion, up 8%, and the gross profit rate slight improvement over 2006 (– €966 million). was steady at 9.4%. The interest expense in respect of the employee benefits provision remained stable at -€697 million, compared to – €705 million in 2006. Current operating profit These costs mainly comprise parent company items: – a -€650 million charge corresponding to benefits relating to the In addition to gross profit, current operating profit includes mostly non- Pension and Provident Fund. The charge was recognised solely for cash items (depreciation, amortisation, provisions, etc.). This balance the first half of 2007. Following the incorporation of the fund as an most truly reflects the Group’s current operating performance. independent legal entity as of 29 June, this type of charge will no longer exist in 2008;

SNCF — FINANCIAL REPORT 2007 - 17 3. SNCF GROUP

– a -€45 million charge corresponding to work-related accidents tax asset since the 31 December 2006 year-end, based on parent and social welfare initiatives. This type of charge will continue to be company tax loss carry-forwards and calculated in line with three-year generated. financial forecasts.

The cost of net indebtedness decreased (-€174 million compared Net profit from recurring operations to -€261million in 2006), primarily because of the following parent company items which had contrasting impacts: Net profit from recurring operations corresponds to net income for the – decrease in the average long-term debt charge due to an interest period adjusted for non-recurring items (gain or loss on asset disposals, rate impact and interest on the cash balance (double impact: rate and impairment losses and parent company deferred tax assets). This volume), balance most truly reflects the Group’s overall performance. – volatility impact generated by trading derivatives giving rise to a decrease in finance costs. Overall net profit from recurring operations doubled to stand at The decrease is nevertheless limited by the cost of financing set up by €657 million in 2007. The increase (+€333 million) reflects the Group’s Geodis to acquire Wilson, and by Ermewa as part of the secondary LBO. commercial momentum and efforts to limit internal expenses, despite year-end strike costs of approximately €260 million. Share of profit of associates Net profit for the year attributable to The share of profit of associates amounts to €37 million, compared equity holders of the parent to €23 million for 2006. This profit includes the stable contribution of Eurofima and the higher Keolis contribution (+ €17 million), but no lon- Following all these changes, net profit for the year attributable to ger includes the SHEM contribution. equity holders of the parent is positive at €1,042 million, compared to €368 million in 2006, after recognition of minority interests of €67 million. Income tax Excluding the temporary impact of Pension and Provident Fund benefits: – the ROCE(1) (calculated on current operating profit) increased from The positive tax impact is related to the recognition of a deferred tax 6.5% to 7.5%; asset as at 31 December 2007 of €355 million. In fact, because of a – the ROE(2) (calculated on net profit from recurring operations) also positive overall profit forecast, the Group has recognised a deferred rose (+ 2.3 basis points) from 7.8% to 10.1%. 3-2 Cash position and financing sources Cash available after financing growth through operations

In € millions 2007 2006 Change

Cash flow from operations (A) 1,880 1,655 224

Equity-financed investments 1,935 1,993 – 58 Disposals of tangible assets 358 325 33 Net equity-financed investments (B) 1,577 1,668 – 91 Difference Free cash flow 302 – 13 315 (A) –(B)

(1) ROCE or Return on Cash Employed represents the ratio between current operating profit and capital employed (equity and net debt). Equity for 2006 was restated for the Pension and Provident Fund impacts. (2) ROE or Return on Equity represents the ratio between net profit from recurring operations and equity. Equity for 2006 was restated for the Pension and Provident Fund impacts.

18 - MANAGEMENT REPORT Group operations generate a level of cash flow that enables it to equity- To better illustrate cash available, free cash flow now includes disposals ­finance investments. Cash flow from operations totalled €1,880 million, of property, plant and equipment that are similar to investments. an increase of 14%, primarily attributable to the Passenger France and The positive free cash flow combined with the lower debt is a favourable Europe Division. indicator for new developments. The investment level was again high in 2007, particularly in terms of railway and other transport equipment. Total equity-financed investments, net of disposals, amounted to €1,577 million, a decrease of €91 million.

Net indebtedness

In € millions 31/12/2007 31/12/2006 Change

Non-current debt 15,877 18,999 – 3,122 Non-current receivables - 9,189 – 12,358 3,169 Net non-current debt 6,688 6,641 47

Current debt 7,786 5,660 2,126 Current receivables - 9,987 – 5,843 – 4,144 Net current debt - 2,201 – 1 8 3 – 2,018

Net debt 4,487 6,459 – 1,971

Net indebtedness decreased by €1,971 million to reach €4.5 billion. as a percentage of net debt increased from 26% at 31 December Excluding the temporary impact of Pension and Provident Fund benefits, 2006 to 42% at 31 December 2007. the debt/equity ratio again improved, standing at 0.5 at 31 December Net indebtedness of the non-consolidated low rental housing companies 2007 (compared to 0.9 at 31 December 2006). Cash from operations of the ICF group amounted to €1.5 billion as at 31 December 2007.

SNCF — FINANCIAL REPORT 2007 - 19 3. SNCF GROUP

The decrease in net indebtedness breaks down as follows:

In € millions 2007

Opening net debt 6,459

Free Cash Flow – 302 Sale of piggy-backed Keos securities (1) – 409 Change in consolidation scope (2) – 1,133 Share capital transactions (3) – 223 Impact of fair value adjustments to derivative instruments 98

Closing net debt 4,487

(1) Pursuant to the memorandum of agreement signed in October 2006 with SNCF, the consortium combining AXA Private Equity and Caisse de Dépôt et de Placement du Québec obtained a 55% majority interest in Keolis, by acquiring the shares held by Deutsche Bank since the withdrawal of the former shareholder 3i in December 2006. (2) Changes in consolidation scope primarily represent the acquisition of Wilson for + €384 million and the deconsolidation of the Provident Fund for – €1,226 million. (3) Share capital transactions break down as follows: – minority interests in the Geodis share capital increase for – €90 million, – Keos cash transfer of – €75 million, – Ermewa share capital restructuring for – €58 million.

Sources of financing – Debt management

The sole issues contracted by the parent company for the year arise aforementioned issues and the new Public Debt Fund receivable set from “required” financing (loans from the Greater Paris region, opera- up at the end of December (see SAAD explanations below in the sec- tions with Eurofima and reinvestment of SNCF Mutual Funds -CLEF- tion “Grants and compensation for financial and social expenses”). coupons and reimbursements). The fixed-rate portion of net indebtedness stood at 99.6% at The risk management policy is described in the Notes to the Group 31 December 2007, given the repayment maturities for the year, the consolidated financial statements.

20 - MANAGEMENT REPORT 3-3 Balance sheet

In € millions 31/12/2007 31/12/2006

Goodwill 509 227 Intangible assets 409 217 Property, plant and equipment 20,826 19,687 Non-current financial assets 9,386 93,494 Investments in associates 260 237 Deferred tax assets 895 538 Non-current assets 32,285 114,399

Inventories and work-in-progress 613 482 Operating receivables 4,963 5,770 Operating assets 5,577 6,252

Current financial assets 6,564 6,128 Cash and cash equivalents 3,424 3,051 Current assets 15,565 15,431

Assets classified as held for sale 420 TOTAL ASSETS 47,850 130,250

Share capital 4,971 4,971 Consolidated reserves 1,875 – 29,389 Net profit for the year 1,042 168 Equity attributable to equity holders of the parent 7,889 – 24,250

Minority interests 348 238 Total equity 8,237 – 24,011

Non-current employee benefits 1,062 111,640 Non-current provisions 491 445 Non-current financial liabilities 15,877 18,999 Deferred tax liabilities 99 65 Non-current liabilities 17,528 131,149

Current employee benefits 80 5,016 Current provisions 258 304 Operating payables 13,962 12,134 Operating liabilities 14,299 17,453

Current financial liabilities 7,787 5,660 Current liabilities 22,086 23,113

TOTAL EQUITY AND LIABILITIES 47,850 130,250

Net debt / Equity (1) 0.5 0.9 Cash flow from operations / Net debt 42% 26%

(1) Equity is adjusted for the temporary impact of pension and provident obligations.

SNCF — FINANCIAL REPORT 2007 - 21 3. SNCF GROUP

There were several significant changes in the Group balance sheet – as at 31 December 2006, other operating receivables included the between 31 December 2006 and 31 December 2007: advance pension payment for the first quarter of 2007 in the amount – increase in goodwill relating to the Geodis acquisition of Wilson; of €1.2 billion; – increase of €1.3 billion in net property, plant and equipment and intan- – the decrease in assets held for sale is explained by the end of the gible assets. KEOS share piggyback; The breakdown of all Group investments, irrespective of the financing – the increase in minority interests is related to the minority interests’ method, is as follows: subscription to the share capital increase that partly financed the Geodis 66% transport equipment, acquisition of Wilson; 33% real estate, equipment and machinery, – the change in “Financial assets” and “Employee benefits” offset 1% intangible assets; through equity, is the result of the incorporation of the Pension and – the increase in deferred tax assets is due to the additional €355 mil- Provident Fund as an independent legal entity as at 30 June 2007. lion recognised as at 31 December 2007; 3-4 Financial relations with the French State, Réseau Ferré de France and local authorities

SNCF receives public service orders, as is the case with any public of the Local Transport Division, SNCF also receives compensation for service agent or supplier to the French State and local authorities, off-balance sheet financial and social security expenses. This compen- but in a monopoly legislative and regulatory framework. In addition to sation is based on European Union regulations intended to equalise operating and investment grants primarily received for the activities competition conditions between rail and other forms of transport.

Public service orders

In € millions 2007 2006 Change

Compensation of IM by RFF 2,805 2,695 111 including Management agreement 825 764 61 including Asset agreement 1,980 1,931 50 Work for RFF 1,030 1,104 – 73

Total RFF 3,836 3,798 37

Compensation for regional rates 322 302 19 Services for the Organising Authorities 2,229 2,109 119 including infrastructure fees 495 489 5

Total regions and STIF 2,550 2,412 139

Newspapers 6 6 0 Socially-motivated prices 70 83 – 1 3 Defence 173 163 10

Total French State 249 252 – 3 TOTAL 6,635 6,462 173

22 - MANAGEMENT REPORT Compensation of the Infrastructure Manager Compensation for regional rates by RFF (RFF management agreement) The increase in this item compared to 2006 stems from the increase in This item is up by €111 million compared to 2006, primarily due to the socially motivated compensation relating to the creation of new regio- change in the compensation received from RFF, following the May nal products, and the substantial increase in traffic. 2007 signature of the new traffic and circulation management agree- ment. Services for transport Organising Authorities (Re- gions and STIF) Work for RFF The increase in this item compared to 2006 (+€119 million) is explained The €73 million decrease in this item compared to 2006 is related to by the expanded offering, the favourable indexing generated by price the completion of the East European high-speed line, partially offset increases (including fuel costs) and the direct transfer of RFF infras- by an increase in regeneration and development operations for rail tructure fee increases to the regions and STIF (neutral impact on profit installations. or loss).

Grants and compensation for financial and social expenses

Public contributions granted to the company by the State and local communities are presented in the following table:

In € millions 2007 2006 Change

Operating grants 21 21 Investment grants received 1,055 868 187 Pensions (Art. 30 contribution) 1,392 2,636 – 1,244 SAAD Special Debt Account 404 627 – 223

TOTAL 2,872 4,152 – 1,280

Public contributions included in net income Investment grants are recorded as deferred income and released Operating grants to operating income (deducted from Depreciation, amortisation and Essentially, these are grants of a social nature paid to companies by provisions) over the estimated economic life of the relevant assets. the State in connection with its employment policy (youth employment and other specific contracts). SAAD Special Debt Account Other payments received not impacting (annual State contribution) profit or loss Article 82 of the 2007 Amending Finance Act published on 27 December Investment grants received 2007 put an end to the SAAD Special Debt Account created on SNCF receives investment grants in the form of third-party financing, 1 January 1991, in accordance with the corporate plan (“contrat de primarily from local authorities, for TER rolling stock. plan”) signed in 1990 between the French State and SNCF, the purpose of which was to isolate part of the SNCF debt. Accordingly, the following transactions took place in December 2007.

SNCF — FINANCIAL REPORT 2007 - 23 3. SNCF GROUP

Conclusion of «mirror» contracts between SNCF and the Public Article 30 of the SNCF terms of reference defines, since 1 January Debt Fund (CDP) on 31 December 2007 1970, the terms and conditions under which the French State assures – Signature of an SNCF loan agreement with CDP, exactly reflecting the financial balance of this regime. the amount and characteristics of the SAAD debt and also covering associated derivatives, In return for the payment by SNCF of “standard” contributions to the – simultaneous signature of a mirror agreement under which CDP Pension Fund, the French State pays a contribution under Article 30 of the borrowed from SNCF. SNCF terms of reference. The “standard” contribution rate is determined Following this step, SNCF had both a receivable and payable vis-à-vis based on SNCF contributor and pensioner populations, adjusted for CDP of the same amount, representing its commitment to the SAAD demographic imbalance compared to that of other ordinary law pension Special Debt Account. schemes. The contribution rate was regularly reviewed until 1990. The decree of 27 February 1991 set it at 36.29% of total payroll costs, French State’s assumption of SNCF commitments to CDP broken down between employee contributions of 7.85% and employer Following implementation of these «mirror» contracts, the French contributions of 28.44%. State, as authorised by Article 82 of the 2007 Amending Finance Act and pursuant to the Order of 28 December 2007, replaced SNCF for In addition, the new benefits specific to the SNCF scheme, created in the repayment of the debt owed to CDP. 1990, compared with the benchmark scheme, are financed by SNCF and its employees. The different benefits relate to the definition of the Consequence of the debt’s assumption – End of the SAAD Special liquid pension base (successive integration of residence compensation Debt Account percentages, implementation of the new remuneration system) and an Because of the State’s assumption of SNCF commitments and the increase in the minimum pension level. For 2007, the rate financed by change in the related debtor, SNCF is now free of all obligations the Company was set at 5.67% of the total liquid payroll. pursuant to the aforementioned agreement vis-à-vis CDP. In return, the State financial commitments with respect to the SAAD As of 30 June 2007: creation of the Employee Pension Special Debt Account were cleared, and for purposes of neutrality and Provident Fund (CPRP) between the French State and SNCF, accompanied by an SNCF payment Decree 2007-730 of 7 May 2007, on the creation of an SNCF Employee for a net amount of €640 million, representing the total present value Pension and Provident Fund as a separate legal entity and the related of contributions and balancing payments due under the SAAD Special decrees of 28 June, gave rise to significant changes in the operation Debt Account, jointly set at €612 million by SNCF and the State, and the and financing of the SNCF pension regime. The autonomous fund was balancing payment for 2007 (€68 million), less the equivalent of the SAAD created as of 30 June 2007. current account balance in the SNCF accounting books (– €40 million). Decree 2007-1056 of 28 June 2007 determines the resources of the Following these operations, the SAAD Special Debt Account was SNCF Employee Pension and Provident Fund. closed. The primary resources of the SNCF employee pension regime are as Pensions (equalisation contribution - Article 30) follows: Mechanism prior to 29 June 2007 – income from contributions payable by SNCF qualifying employees The SNCF pension scheme, which is mandatory for all qualifying and SNCF; personnel, is a special social security regime governed by law. The – payments from the French State in accordance with Article 3 of the conditions for determining pension benefits are set forth in the 1911 decree, the old age solidarity fund, and the special disability fund; pension regulation, applied pursuant to the 1909 law, and whose – SNCF contributions have two components, known as T1 and T2: various amendments were approved by the Transport Minister. With – the T1 rate is determined each year in order to cover, after deduction the coming into force of the decree of 4 October 1945, the SNCF of employee contributions, the amount which would have been special regime, like the majority of special regimes, was maintained payable had the employees been included in the general and provided that its beneficiaries received benefits that were at least equi- supplementary regimes referred to in Article L.921-4 of the French valent to those of the general regime. The SNCF special social security Social Security Code. regime replaces the ordinary law social security regime. – T2 contributions discharge SNCF of all liability and are intended to provide a flat-rate contribution to the financing of specific pension benefits under the special regime. This rate is fixed at:

24 - MANAGEMENT REPORT • 11.96% for 2007, 12.27% for 2008, 12.62% for 2009, and 12.73% for – income from contributions payable by SNCF, SNCF qualifying employees, 2010; employees not in active service and beneficiaries of a pension or a • After 31 December 2010, the rate will be amended on 1 January each survivor’s pension; year in line with an index determined based on pension contributions – the portion of income from contributions allocated to mandatory payable under ordinary law pension regimes. health insurance regimes, payments from the national funds covering – The payment from the French State, provided for in the Decree, will health insurance for salaried workers and solidarity for autonomy; ensure the financial balance between expenses of all kinds and other – income from recoveries and undue amounts paid by the Fund to income from the pension regime. affiliates, health professionals and care institutions; – the contribution rate payable by SNCF and the provident regime The primary resources of the SNCF employee provident regime are as affiliates is determined by decree. follows: 3-5 Workforce

The Group workforce remained stable overall. The change observed within the parent company SNCF is offset by the inclusion of Wilson employees in the Geodis group.

I 2007 2006 Change

SNCF (1) 166,213 168,386 – 1 % GEODIS Group 25,540 23,768 7% STVA Group 1,903 1,899 0% Seafrance 1,463 1,446 1% VFE Partenaires 1,245 1,237 1% EFFIA Group 1,180 1,047 13% Other subsidiaries and associates 4,002 3,959 1%

TOTAL 201,545 201,742 0%

(1) Paid employees, including 946 employees seconded to Group subsidiaries. The average number of parent company management employees totalled 161,656 as at 31 December 2007, compared to 164,407 as at 31 December 2006.

Changes in the number of employees over recent years reflect changes in Group structure:

2007 2006 2005 2004 2003

Parent company (1) 166,213 168,386 170,954 175,416 180,339 Subsidiaries 35,332 33,356 34,885 54,461 63,605

TOTAL 201,545 201,742 205,839 229,877 243,944

(1) Paid employees.

SNCF — FINANCIAL REPORT 2007 - 25 4. A CTIVITY AND RESULTS BY DIVISION

SNCF Group activity is structured according to four divisions that are supported by common operations: Passenger France and Europe, Local Transport, Transport and Logistics, and Infrastructure and Engineering.

Division contributions to revenue, current operating profit and net profit from recurring operations break down as follows:

In € millions Passenger Local Transport Infrastructure Common Group France Transport and and operations and Europe Logistics Engineering Investments and inter-division eliminations Revenue 6,891 5,908 7,726 4,532 – 1,366 23,690 Current operating profit 891 62 – 23 – 67 684 1,547 Net profit from recurring operations 674 – 39 – 185 – 74 280 657

4-1 Passenger France and Europe

The Passenger France and Europe Division encompasses the TGV, Corail and Europe (Eurostar, Thalys, Lyria, etc.) carriers, and the related ser- vice providers, Stations and Staging Points, Distribution (with among others Voyages-sncf.com), Train Management and their administrative sup- port functions and information systems.

passengers France Europe

Service Transporte rs providers

TGV Corail Stations Trains Distribution

IDTGV CRM Services A2C voyages-sncf.com

PARVIS RAIL EUROPE

EUROPE

Eurostar Thalys Artesia Elipsos TGV lyria Alleo

26 - management report Key figures In € millions 2007 2006 Change Revenue 6,891 6,593 298 Current operating profit (COP) 891 828 63 Net profit from recurring operations (PRO) 674 588 86 COP / Revenue 13% 13% 0% PRO / Revenue 10% 9% 1% Faits marquants Highlights Activity and results

For the Passenger France and Europe Division, 2007 was the year of • The 5% increase in Passenger France and Europe revenue reflects High-Speed Rail: the success of the new offerings: – immediate step-up of the TGV East service, • Instant success of the East European TGV launched on 10 June – record TGV occupancy rates with growth in first class services 2007, with new services and an ambitious advertising campaign. demonstrating the success of commercial campaigns and the emphasis Service reliability has been consistent with objectives, success was given to yield performances, immediate with record train occupancy rates and employee enthu- – a surge in international traffic (Eurostar, Thalys, Lyria) primarily driven siasm for this new customer service. ALLEO, an SNCF and DB joint by the new Eurostar offering, venture created on 25 May 2007, is responsible for the new TGV and – launch of the NOTES new price and service offering, ICE service offering between France and Germany, a first in terms of – development of new iDTGV relations, Franco-German cooperation; – continuing growth for station commercial outlets. The position of Voyages-sncf.com as France’s leading retail and tourism • Commissioning of High Speed One and commercial launch of site was reinforced in 2007. The site reported double-digit growth for St Pancras International on 14 November 2007; the fourth consecutive year (+21%).

• Official launch of RAILTEAM, the first European rail alliance, marking • Passenger France and Europe Division results were boosted by the birth of a high-speed network with a solid service offering for European substantial commercial momentum, decreases in Eurotunnel tolls, customers. the travel agency compensation rate and the business licence tax. Growth was nevertheless limited by: Innovative measures were developed for customer service and Division – the cost of the strike in the fall of 2007, estimated at €120 million, growth: – ever increasing energy costs (+ 25%) and infrastructure fees paid to RFF (+ 12%), • Launch of NOTES (new price and service offering) on 7 October – higher costs for maintenance (due to an increase in rolling stock 2007, to better meet specific customer needs, supported by a substantial and the reliability and clean-up improvement policy) and staging point skills upgrade for all customer service personnel; services, – the stress placed on innovations and new projects (TGV Connexion, • Innovative customer service offering: TGV connexion project (wi-fi etc). offered on trains) currently undergoing trial testing, launch of Grand Voyageur Le Club, and Voyages-sncf.mobi services; • Division cash from operations stood at €1,081 million, up 7%, and enabled the financing of investments, which remained high in 2007 • Refurbishment of stations: As of 1 November 2007, Marseille (€654 million in gross investments). The main investments are related St Charles has become a true multimodal station. The new TGV East to the upgrade of the East high-speed line and, primarily, rolling stock stations have been modernised and are now accessible to persons acquisition and modernisation programmes (TGV double-decker trains with reduced mobility (Meuse TGV, Lorraine TGV, and Champagne and the TGV POS). Ardennes TGV).

SNCF — financial report 2007 - 27 4. ACTIVITY AND RESULTS BY DIVISION

Outlook – inauguration of the HSL Zuid line at the end of 2008 (gain of 1 hour between Paris and Amsterdam). The Passenger France and Europe strategy is to pursue the inno- vation of its high added-value customer programmes, in order to • Enhancement of customer relations via the creation of multi-channel strengthen the Division’s positioning as the benchmark for Euro- after-sales services. pean high-speed passenger transport and service. • Continuation of sustainable development initiatives, particularly for The Division’s main initiatives for 2008 are the following: stations: Accès Plus roll-out, energy savings, professionalisation of asset management activities, forging of partnerships with specialised • New advances in the construction of Rail Europe: associations. – first achievements for the RAILTEAM project with the set-up of a network of hubs facilitating international travel and connections to • Sustained action on reliability, particularly in terms of the transverse several rail operators, MOTEURS project to improve service quality: improvements in the – development of the ALLEO offering, handling of traffic disruptions, decrease in rail incidents and better equipment availability. 4-2 Local Transport

The Local Transport Division encompasses all the Group’s local transport local transport activities: medium distance links (Corail Intercity), rail transport regula- ted services (TER, Transilien, Chemins de Fer de la Corse and the Keolis UK subsidiaries), bus, tramway and subway (Keolis) and complementary services (Effia). TER Keolis

Transilien SNCF EFFIA

Corail Intercités

Key figures

In € millions 2007 2006 Change Revenue 5,908 5,682 226 Current operating profit (COP) 62 105 – 43 Net profit from recurring operations (PRO) –39 – 29 – 10 COP / Revenue 1% 2% – 1% PRO / Revenue – 1% – 1% 0%

28 - management report Highlights – the implementation of the TER rescheduling for Rhône Alpes in December 2007. The main highlights for the Local Transport Division were as follows: • Net profit declined in 2007 as the division’s performance suffered from: – the cost of the 2007 year-end strikes, estimated at €70 million, • Implementation as at 1 January 2007 of 10 regional agreements – the increase in external charges: combined development of the renegotiated with the Organising Authorities (Centre, Picardie, Rhône- transport plan and fees or prices (traction energy), ­Alpes, Poitou-Charentes, Bourgogne, Bretagne, Lorraine, PACA, Franche- – the rise in expenses relating to service quality: overhaul and deve- ­Comté and Languedoc-Roussillon). These new longer-term agreements lopment of the offer, implementation of the passenger information develop a greater partnership-based approach between SNCF and the system, cost of replacement transport during strikes, and train station Organising Authorities. service enhancement programmes.

• Finalisation of renegotiations with STIF involving the Transilien • Cash from operations for the Local Transport Division totalled contract and five TER agreements (Haute Normandie, Basse Normandie, €255 million, down 7%. It was not sufficient to finance investment, Midi Pyrenees, Pays de la Loire and Nord Pas de Calais) for implementa- which remained high in 2007, in the modernisation of equipment and tion as at 1 January 2008. passenger comfort (gross investment of €1,366 million, equity-financed investment of €392 million). • Finalisation of the Keolis’ share capital restructuring (see 1-2 Group highlights). • Keolis is equity accounted. The Keos Group contributed €24 million to the Share of profits of associates, compared to €7 million in 2006. • Acceleration of Keolis’ external growth: This improvement is due to the growth in revenue (acquisitions, UK – new rail concessions with Go Ahead in the UK (London Midland, rail concessions, sales momentum) combined with better operating incorporation of Gatwick Express services in the Southern rail concession), performance (in particular, the successful reorganisation of activities – intercity acquisitions (Voyages Dussert, Delion, TPN and Etasse), in France). – take-over of former joint ventures abroad (rail activities of Rhenus- Keolis, City-trafik, and, to a lesser extent, Syntus). Outlook

• Implementation of eco-mobility under the TER and Transilien rolling 2008 will be marked by the following: stock renewal programmes with the inauguration of electro-diesel dual voltage high-capacity railcars. • Implementation as at 1 January 2008 of 5 TER agreements and the STIF agreement; 3 other agreements will be renegotiated (Aquitaine, • Creation of the Inter’Actions economic interest grouping (EIG) Auvergne and Champagne Ardennes), coming into effect on 1 January between SNCF, Keolis and Effia in order to promote inter-modality and 2009. propose operational solutions in response to the expectations of the • Launch of the “Dynamic for Local Transport” programme: aggressive Organising Authorities and customers. 3-year action plan (2008-2010) focusing on the modal shift from the automobile to the train. This programme, intended to boost service Activity and results quality and improve punctuality, involves 1,000 specific jobs and will cost a total of €100 million in 2008. • The 4% growth in revenue of the Local Transport Division reflects: • Modification of services relating to rescheduling in Normandie and – the revitalisation of the TER networks related to the East European Bourgogne; continued implementation in Rhône Alpes. high-speed line, which offset the loss of activity on the Eastern France • Greater simplification of price ranges and subscriptions; roll-out and Corail Intercity route, improvement of the TAPAS (annual card with automatic payments) – the continued development of rail services (in regions and Greater sales offer. Paris) and services for the Organising Authorities, • Keolis’ desire to pursue its steady external growth in France and – the extension of inter-modality and simplification of price ranges, abroad, with the creation of a “Mergers, acquisitions and partnerships” – the development of Intégrale passes (Transilien) and increase in department in order to structure and secure its acquisitions strategy. work-related subscriptions (regions and Greater Paris),

SNCF — financial report 2007 - 29 4. ACTIVITY AND RESULTS BY DIVISION

4-3 Transport and Logistics

The Transport and Logistics Division encompasses all the Group’s freight and logistics activities for both rail and road transport.

transport and Logistics

FRET SNCF TLP GEODIS

Combined Specialist transport Rail Information Freight cars operators commissioners transporters managers

Parcel Delivery and Ermewa Naviland Cargo Groupe STVA VFLI Edifret Express

Transinformatique Freight France Wagons Novatrans Sealogis SNCF Fret Italia forwarding Contractual CTC Rouch Intermodal Logistra Cargo Docks Logistics

SGW Froidcombi Ecorail SNCF Fret Benelux Route

Transengrais AFA Districhrono Rail Euro Concept

CWS Sefergie STSI Sibelit

SNCF Fret Segi Deutschland Freight Europe Sari UK

Cadefer

Sideuropa

30 - management report Key figures

in € millions 2007 2006 Change Revenue 7,726 6,688 1,037 Current operating profit (COP) – 23 – 74 50 Net profit from recurring operations (PRO) – 185 – 233 48 COP / Revenue 0% – 1% 1% PRO / Revenue – 2% – 3% 1%

Highlights International projects have accelerated, with the juxtaposition of complementary mechanisms: Transport & Logistics reinforced its structure in 2007 to restore its competitiveness: • Cooperation with neighbouring operators (launch of Aline in June 2007 with CFF), • Definition and launch of the high-speed rail action programme: – launch of industrial consolidation in April 2007, with the refocusing of • Creation of mutual production facilities based on the Sibelit model Freight production contributors around an action and command unit, (development of rail traffic between Antwerp and Basel on the left – overhaul of customer relations by working on more robust logistics bank of the Rhine through a partnership between B-Cargo, CFL, CFF solutions, often defining specific offers and sharing new risks, and SNCF Freight), – redeployment of means and expansion of flows. • Direct use of locomotives and agents outside French borders (Open • Creation of TLP, a holding company, responsible for the industrial Access): SNCF Freight obtained safety certificates in Belgium, Luxembourg, coordination of Transport & Logistics subsidiaries, excluding Geodis. the United Kingdom, the Netherlands and Italy.

• Acquisition of Wilson in February 2007, making Geodis one of the Activity and results leading Freight Forwarding companies in Europe. 2007 was marked by sharp growth in activity and a major improvement • Set-up of the new Geodis organisation around four 4 Divisions in the in the results of the Transport & Logistics strategic division. first half of 2007: Groupage, Freight Forwarding, Contract Logistics and Full Truckload. This reorganisation takes into account the acquisition Geodis’ performance of Wilson and the strengthening of its two network divisions, Parcel • Geodis’ contribution to Transport & Logistics revenue totalled Delivery and Freight Forwarding. €4,782 million, up 26%, and breaks down as follows: – the consolidation of Wilson as from 5 February 2007 representing • Finalisation of the secondary LBO concerning the Ermewa Group €806 million, (see 1-2 Group highlights). – continued development of international flows, – sustained French domestic flows in Parcel Delivery and Express • Safety certificate obtained in October 2007 by VFLI, which automati- activities, cally became a rail operator (9th company in France, 5th to operate in – strong sales momentum in Eastern European countries. France). • Geodis contributed €122 million to division operating profit. • Sub-contracting by Naviland Cargo of its long-distance traction to The costs of Wilson’s consolidation and the internal reorganisation into challenge the competition. divisions were offset by capital gains realised under the real estate asset streamlining programme. The increase in Geodis operating profit derives from the sharp improv­ ement in the performances of:

SNCF — financial report 2007 - 31 4. ACTIVITY AND RESULTS BY DIVISION

– Asian subsidiaries: growth in revenue at the same time as the removal Growth financing of loss-making centers, Cash from operations of the Transport & Logistics Division totalled – Eastern European countries: new contracts in the automobile industry, €55 million. The €39 million rise is attributable for €47 million to the closure of the loss-making site in Russia and improved use of logistics contribution of SNCF Freight which improved from -€212 million in agreements in Hungary, 2006 to – €164 million in 2007. It was insufficient to finance the invest- – Bourgey Montreuil: appropriate repercussion of cost increases (diesel). ments of the period (gross investments of €421 million), mainly involving diesel locomotives (SNCF Freight) and other transport equipment SNCF Freight and TLP subsidiaries (ISO containers and cars at Ermewa, car overhauls and modifications • The revenue of SNCF Freight and TLP subsidiaries remained stable at France Wagons, purchase of transport equipment at Geodis and (€2,944 million). STVA) and real estate investments pertaining to Geodis parcel delivery The first signs of a turnaround for SNCF Freight in 2007 (significant branches. increase in tonnes transported and related traffic income) were greatly hampered by the October and November strikes, and rail transport was Outlook impacted by the end of the work on the East European high-speed line (VFLI). SNCF Freight must improve its performance as soon as possible. Business has expanded in the following sectors: – the automobile sector where the group gained market shares, including • SNCF Freight certainly has the potential, with the promising rise in STVA abroad, traffic figures in a context of increased competition for unit trains, parti- – the rail-road combined transport sector, whose appeal is evident at cularly in the quarry products segment. SNCF Freight, Naviland Cargo and Rouch Intermodal, – greater leasing of vehicles and rolling stock (early impact for SIBELIT), • To reduce the productivity and competitiveness gap, SNCF Freight – and various European markets (development of France Wagons’ aims to make changes quickly, while continuing to implement the High- customers). Speed Rail action programme between now and the end of 2008. An important initial phase in the first quarter of 2008 is the start of labour • The net loss from recurring operations of SNCF Freight and TLP and management talks. subsidiaries totalled €200 million in 2007, compared to €267 million in 2006 (excluding impairment losses in the amount of €677 million). Geodis will consolidate the Rohde & Liesenfeld Group, whose This €67 million improvement, curbed by strikes costing €50 million, acquisition was finalised on 3 January 2008. reflects the operating effectiveness of the SNCF Freight transport plan and the production streamlining measures undertaken by all entities The R&L Group, the main partner of the Geodis network since 2002, is (productivity initiatives, control of equipment stock and increase in an international player in sea and air freight forwarding. This transaction usage rates, aggressive initiatives to cut head office costs). completes the geographical coverage of the Geodis Wilson network and will provide Geodis with additional expertise with regard to industrial projects.

32 - management report 4-4 Infrastructure and Engineering

The Infrastructure and Engineering Division encompasses the dele- estate promotion activities (SNEF) were repositioned in the Common gated management of Infrastructure (SNCF) and Engineering (Systra, Operations and Investments Division. AREP, SNCF International, Inexia). The urban development and real

Infrastructure and Engineering

INFRA SNCF Systra

SNCF International AREP

Inexia

Key figures

in € millions 2007 2006 Change Revenue 4,532 4,453 79 Current operating profit (COP) – 67 – 110 43 Net profit from recurring operations (PRO) – 74 – 103 30 COP / Revenue – 1% – 2% 1% PRO / Revenue – 2% – 2% 1%

SNCF — financial report 2007 - 33 4. ACTIVITY AND RESULTS BY DIVISION

Highlights – the increase in fixed-rate remuneration, negotiated in order to create the right conditions for an economic balance in the management The main highlights for Infrastructure & Engineering were as follows: agreement, • Signature on 25 May 2007 of the new long-term management – strong productivity initiatives adopted by SNCF Infrastructure. agreement between RFF and SNCF for the management of traffic and circulation on the national rail network and the maintenance of this Engineering and asset management network: this 4-year agreement amounting to around €11 billion, clarifies the respective responsibilities of RFF and SNCF and defines the services Activity growth was reported, particularly in France (SNCF International, to be performed and the targets to be met. AREP) and worldwide (Systra): • Finalisation of 2007-2013 state-regional project contracts: the rail – Systra contributed €116 million to revenue, up 12%, while its contri- component has increased considerably and, in half of the regions, they bution to current operating profit rose by almost €4 million (€8.3 million include a renewal clause. for 2007); • Maintenance and operation of the East European High-Speed Line – AREP’s contribution to revenue increased from €13 million in 2006 to entrusted by RFF to SNCF in connection with its Delegated Infrastructure €17 million in 2007, for current operating profit of €1.1 million; Management assignments. – SNCF International reported a 20% increase in its revenue contribu- • Subcontracting of a considerable volume of work by RFF to SNCF. tion (€20 million in 2007) for current operating profit of €2.7 million; • Start of activity of the INEXIA subsidiary on 1 February 2007. This – Inexia became the holder of engineering contracts following the subsidiary has taken over the engineering activities of SNCF on the ministerial authorisation of 28 November 2006. Inexia contributed competitive market in order to develop them. €51 million to 2007 revenue for a contribution to current operating profit • Reinforcement of sustainable development commitments: of €1.3 million. signature with the French government of a framework agreement regarding the chemical treatment of railway tracks and their surrounding Financing areas, modernisation of high-capacity weed clearance trains, reference manual for the use of pesticides. Cash used in operations of Infrastructure and Engineering totalled • Operational successes: €36 million, down €22 million compared to 2006 and was unable to – end of the campaign to renew all the points and crossings on the finance the investments of the period that mainly involved fixed instal- South East high-speed line, lations. – exemplary production for the replacement of the Culoz bridge, – start of the GSM-R roll-out (particularly on the Eastern high-speed line). Outlook

Activity and results • The network upgrade plan, the increase in regional financing in the rail industry and the new long-term management agreement have opened Infrastructure & Engineering revenue rose by 2% with a significant doors for Infrastructure & Engineering, which has defined its strategy decline in operating losses. for the next 4 years as “Industrialising production.” This objective entails: – a major investment programme, Traffic management and infrastructure work – the set-up of clearly defined production organisations focused on forward-planning and scheduling. • The loss of activity relating to the completion of work on the East •Through its subsidiaries, the division will pursue the international European high-speed line was offset by: development of engineering: – the upwardly revised fixed price of the RFF management contract – participation of SNCF International in the conglomerate headed by which includes a rebasing effect following a report from the General Alstom in order to build the first-ever Latin American high-speed line Finance Inspectorate; between Buenos Aires and Rosario, – the increase in revenue with regard to major repairs, – draft agreement relating to the construction of a high-speed line – unscheduled work for RFF. in Morocco signed on 22 October 2007. Under the agreement with • The curbing of Infrastructure & Engineering losses in 2007, which the Office National des Chemins de Fer Marocains, Systra will act as remains affected by the increase in average agent costs and the rise in project manager for work on an initial section while SNCF International the cost of raw materials, was attributable to: will provide assistance.

34 - management report 4-5 Common operations Three major projects steered by SNCF Freight, in which the Traction division played a significant role, were successfully initiated in 2007: and investments – the ALINE project for extensive coverage in Switzerland up to Buchs, – the Antwerp-NL project for the development of traffic by a single The Common Operations and Investments Division encompasses the carrier to Antwerp and launch of new traffic to Rotterdam, Group’s support functions, the Equipment and Traction service providers, – consolidation of the Traction division within Naviland Cargo for which the Real Estate activities (which now include the urban development the Traction division monitored management’s handling of safety within and real estate promotion activities of the SNEF Group) and a few sub- this subsidiary. sidiaries and affiliates such as Seafrance. Finally, national agreements were signed with new operators on the National Rail Network (EuroCargoRail and Veolia Transport), structuring • Support functions the use of Traction division logistics installations with regard to core 2007 net profit of the support functions includes certain specific items: facilities. – the parent company’s deferred tax assets of €355 million recognised in 2007 (see 3-1 Consolidated net profit); • Real estate – the impacts on net profit of parent company employee benefits The contribution of the Housing division (ICF and NOVEDIS) to revenue recorded in the amount of €624 million in employee benefits expense totalled €84 million, up 4%. Its contribution to current operating profit and in the negative amount of €695 million in finance costs (see 3-1 totalled €18 million, up €10 million and includes gains on real estate Consolidated net profit). disposals. In connection with the reorganisation of the Group’s housing stock, • Equipment the Pension Fund non-HLM housing transfers to Novedis continued in For the Equipment division, 2007 was marked by the improved perfor- 2007. The SNCF and Pension Fund housing transfers to Novedis began mances of its rolling stock and the implementation of several moderni- in the second half of 2006 and are scheduled over four years. sation projects for its industrial facilities. Deliveries of new rolling stock remained at a high level with the The results of the SNEF group companies are positive but reflect cur- commissioning of 80 Freight locomotives during the year; 95 High rent changes to the business portfolio, i.e. high capital expenditure for Capacity Motorised Carriages and 33 parts for new generation double- preliminary analyses, and a decline in ground rent sales and profits of decker TERs; 14 double-decker TGVs, 14 sections for double-decker real estate investment companies compared to 2006. SNEF’s contribu- TGVs and 14 TGV POS for VFE; 23 locomotives and 1 Tram – Train car tion to Group revenue therefore dropped by €9 million in 2006 to reach for Transilien. €5 million in 2007, while its contribution to net profit from recurring operations fell from €4 million in 2006 to €3 million in 2007. The Equipment division continued its efforts to adapt its industrial faci- lities with the optimised location of new maintenance workshops for • Maritime transport TERs and the TGV. To meet the growth of the TGV fleet with the future For Seafrance, 2007 represented a major step in the preparation commissioning of the Rhine-Rhône TGV, the Equipment division built a of its long-term development programme. Benefiting from a sound dedicated maintenance workshop in Lyons. Construction work conti- commercial environment and steadier competition than in previous nued with respect to the TER development plan (construction between years, Seafrance enjoyed sustained activity by relying on the solid 2004 and 2010 of around twenty new maintenance workshops). foundations set up in 2006, and after the resolution of very serious operating problems involving port facilities encountered in 2005. Sea- • Traction france contributed €242 million to Group revenue, up 7% compared to The Traction division pursued its reorganisation in 2007 with the continued 2006. Its contribution to net profit from recurring operations remained restructuring of sites in a move towards greater consolidation. stable at €7 million. Production in 2007 compared to 2006 mainly reflected a decrease in In December 2007, Seafrance entered into an agreement for the acqui- kilometres (down 2.6%) particularly due to a reduction in the Freight sition of a new, efficient and high capacity ship, paving the way for the transport plan and the impact of the November 2007 strikes. use of five more identical ships as from the second half of 2008.

SNCF — financial report 2007 - 35 5. CORPOR ATE GOVERNANCE

The Board of Directors of the industrial and commercial public enter- Since the decision of 5 March 2008, that took immediate effect, there prise SNCF comprises eighteen members: are now a total of five committees. Strategic Committee, responsible for reviewing the annual and half- • Seven representatives of the French State appointed by decree, yearly financial statements, risk mapping and the annual internal audit based on the report of the Transport Minister: work programme; – two at the recommendation of the Transport Minister, Audit and Risk Committee, responsible for reviewing the annual and – one at the recommendation of the Minister for Economy and half-yearly financial statements, risk mapping and the annual internal Finance, audit work programme; – one at the recommendation of the Budget Minister, Contracting Committee, consulted on projects involving government – one at the recommendation of the Minister for Planning and Regional or private contracts, acquisitions, disposals, building exchanges, based Development, on predetermined thresholds set by the Board; – one at the recommendation of the Minister for Industry, Passengers Committee, which takes over the assignments of the – the Chairman of the Board appointed from among directors and at former Public Transport Agreements Committee while extending them their recommendation by a Council of Ministers Decree. to overall passenger problems: monitoring of rail transport agreements between local authorities, public institutions and SNCF, and more • Five members chosen for their expertise and appointed by decree: generally monitoring of programmes relating to quality, cleanliness, – a representative of passengers, passenger information, etc.; – a representative of shippers, Freight Committee, newly created, responsible for monitoring the – two local councillors chosen for their knowledge of regional, department strategies and coordinating the turnaround and operating management and local rail-related matters, of the Transport & Logistics division. – an individual chosen for his personal expertise in the transport sector. In its meeting of 31 May 2007, the Board of Directors decided, at the • Six members, including a management representative, elected by recommendation of its Chairperson, to assess its operations. The employees of the Company and its subsidiaries having a minimum Chairman of the Board’s Strategic Committee, who coordinated this workforce of 200. initiative, presented its report to the Board of Directors on 21 November 2007. A Council of State (“Conseil d’État”) decree lays down the parent company bylaws and sets the procedures for the appointment and election of Executive committee Board members. The Chairman appoints the members of the Executive Committee and Board members are appointed for a five-year term of office. A director defines their tasks. The Executive Committee collectively reviews, at may not exercise more than three consecutive terms of office. Directors the initiative of the Chairman or on the proposal of one of its members, receive no compensation for their activities. development and strategic projects necessary to Group development. The Government Commissioner or, in his absence, the Assistant The Chairman approves decisions concerning all matters reviewed by Government Commissioner has an advisory seat on the Board and all the Executive Committee. Within their areas of expertise, Executive committees and commissions created. Committee members are delegated powers by the Chairman enabling The head of the Transport Economic and Finance Control Office or his them to act and decide in his name. The powers delegated carry authority representative has an advisory seat on the Board and all committees over all Company bodies. and commissions. To successfully carry out its work, the Executive Committee meets The Board Secretary and the Secretary of the Joint Labour-Management during Strategic or Plenary Executive Committee meetings, and relies Committee (CCE) also have a seat on the Board. The Board of Directors on a certain number of specialised committees, such as division meetings meets monthly. and the Customer Service Committee.

Four Committees ensured the Board of Directors is fully informed on The SNCF financial statements (in French GAAP) may be obtained current issues and helped in decision-making: Strategic Committee, by simple request from SNCF (Finance, Purchasing, Information Systems Audit and Risk Committee, Contracting Committee and Public Transport and Telecommunications/Accounts Management and Management Agreements Committee. Control).

36 - management report SNCF — financial report 2007 - 37 CONSOLIDATED FINANCIAL STATEMENTS (in(In €€ millions)millions)

38 - CONSOLIDATED FINANCIAL STATEMENTS contents

CONSOLIDATED BALANCE SHEET 40 CONSOLIDATED INCOME STATEMENT 42 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 43 CONSOLIDATED CASH FLOW STATEMENT 44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 46 1. ACCOUNTING STANDARDS BASE 48 2. SCOPE OF CONSOLIDATION 50 3. MAJOR EVENTS OF THE YEAR 52 4. ACCOUNTING POLICIES 56 5. SEGMENT REPORTING 68 6. GOODWILL 73 7. INTANGIBLE ASSETS 74 8. PROPERTY, PLANT AND EQUIPMENT 76 9. FINANCIAL ASSETS 80 10. INVESTMENTS IN E.S.H. LOW-RENTAL HOUSING COMPANIES 83 11. INVESTMENTS IN ASSOCIATES 84 12. INVESTMENTS IN JOINT VENTURES 86 13. INVENTORIES AND WORK-IN-PROGRESS 86 14. OPERATING RECEIVABLES 87 15. CASH AND CASH EQUIVALENTS 89 16. MINORITY INTERESTS 89 17. EMPLOYEE BENEFITS 90 18. PROVISIONS 95 19. FINANCIAL LIABILITIES 96 20. DERIVATIVE FINANCIAL INSTRUMENTS 100 21. MANAGING MARKET RISKS AND HEDGING 107 22. OPERATING PAYABLES AND OTHER ACCOUNTS IN CREDIT 109 23. ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE 110 24. PURCHASES AND EXTERNAL CHARGES 110 25. EMPLOYEE BENEFITS EXPENSE AND HEADCOUNT 110 26. DEPRECIATION, AMORTISATION AND IMPAIRMENT LOSSES 111 27. NET PROCEEDS FROM ASSET DISPOSALS 112 28. NET BORROWINGS COSTS 113 29. INCOME TAX EXPENSE 114 30. CONSOLIDATED CASH FLOW STATEMENT 116 31. OFF-BALANCE SHEET COMMITMENTS 118 32. RELATED-PARTY TRANSACTIONS 123 33. MANAGEMENT COMPENSATION 125 34. LITIGATION AND DISPUTES 125 35. POST-BALANCE SHEET EVENTS 127 36. SCOPE OF CONSOLIDATION 129 37. TRANSITION NOTE: IMPACT OF FIRST-TIME ADOPTION OF IFRS 141

SNCF — FINANCIAL report 2007 - 39 CONSOLIDATED BALANCE SHEET

CONSOLIDATED ASSETS

In € millions Notes 31/12/2007 31/12/2006

Goodwill 6 509 227 Intangible assets 7 409 2 1 7 Property, plant and equipment 8 20,826 19,687 Non-current financial assets(1) 9 9,386 93,494 Investments in associates 11 260 237 Deferred tax assets 29 895 538 Non-current assets 32,285 114,399

Inventories and work-in-progress 13 6 1 3 482 Operating receivables (1) 14 4,963 5,770 Operating assets 5,577 6,252

Current financial assets (1) 9 6,564 6,128 Cash and cash equivalents (1) 15 3,424 3,051 Current assets 15,565 15,431

Assets classified as held for sale 23 0 420

Total assets 47,850 130,250

(1) Restatements to previously issued comparative information are described in Note 37.

40 - CONSOLIDATED FINANCIAL STATEMENTs CONSOLIDATED BALANCE SHEET

CONSOLIDATED EQUITY AND LIABILITIES

In € millions Notes 31/12/2007 31/12/2006

Share capital 4,971 4,971 Consolidated reserves 1,875 – 29,389 Net profit for the year 1,042 1 6 8 Equity attributable to equity holders of the parent (1) 7,889 – 24,250

Minority interests 16 348 238 Total equity 8,237 – 24,011

Non-current employee benefits (1) 17 1,062 111,640 Non-current provisions 18 491 445 Non-current financial liabilities (1) 19 to 21 15,877 18,999 Deferred tax liabilities 29 9 9 6 5 Non-current liabilities 17,528 131,149

Current employee benefits 17 8 0 5,016 Current provisions 18 258 304 Operating payables (1) 22 13,962 12,134 Operating liabilities 14,299 17,453

Current financial liabilities(1) 19 to 20 7,787 5,660 Current liabilities 22,086 23,113

Total equity and liabilities 47,850 130,250

(1) Restatements to previously issued comparative information are described in Note 37.

SNCF — FINANCIAL report 2007 - 41 CONSOLIDATED INCOME STATEMENT

In € millions Notes Year 2007 Year 2006

Revenue 5 23,691 21,965 Purchases, sub-contracting and other external expenses 24 – 11,151 – 9,800 Employee benefits expense 25 – 8,895 – 8,292 Taxes and duties other than income tax – 829 – 843 Other operating income and expenses – 46 – 76 Gross profit 2,770 2,954

Depreciation and amortisation, net of grants 26 – 1,198 – 1,210 (Charge to) / reversal of provisions 18 – 24 1 6 Current operating profit 1,547 1,760

Net proceeds from asset disposals 27 11 8 293 Impairment losses 26 – 21 – 701 Operating profit 1,644 1,352

Net borrowing costs 28 – 1 7 4 – 267 Finance cost of employee benefits(1) 17 – 697 – 1,351 Finance costs – 872 – 1,618 Net profit before tax from ordinary activities of consolidated companies 772 – 266

Share of profit of associates 11 3 7 2 3 Income tax expense 29 3 0 0 448 Net profit from ordinary activities 1,109 205

Net profit for the year 1,109 205

Attributable to equity holders of the parent 1,042 168 Attributable to minority interests 6 7 3 7

(1) Restatements to previously issued comparative information are described in Note 37.

42 - CONSOLIDATED FINANCIAL STATEMENTs CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

In € millions Share Reserves Net Translation Gains and Arribuable Minority TOTAL capital profit reserves losses to equity interests for the recognized holders year directly of the in equity parent

Equity as at 01/01/06 under IFRS 4,521 – 29,428 – 24,907 218 – 24,689

Share capital transactions 450 450 3 453 Net profit for the year 168 168 37 205 Net gains on changes in fair value 43 43 43 Foreign exchange differences – 4 – 4 – 1 – 5 Net income recognised directly in equity 168 – 4 43 208 36 244 Dividends – 16 – 16 Change in consolidation scope – 3 – 3 Equity as at 31/12/06 4,971 – 29,428 168 – 4 43 – 24,250 238 – 24,011

Share capital transactions 92 92 Appropriation of net profit 168 – 168 – 21 – 21 Net profit for the year 1,042 1,042 66 1,109 Net gains on changes in fair value 52 52 52 Foreign exchange differences – 6 – 6 – 1 – 7 Net income recognised directly in equity 1,042 – 6 52 1,088 66 1,154 Change in consolidation scope – 4 – 4 Creation of the Employee Pension and Provident Fund 31,052 31,052 – 23 31,029 Other movements – 2 – 2 – 2 Equity as at 31/12/07 4,971 1,790 1,042 – 10 96 7,889 348 8,237

SNCF — FINANCIAL report 2007 - 43 CONSOLIDATED CASH FLOW STATEMENT

In € millions Note 31/12/2007 31/12/2006

Net profit before tax from ordinary activities of consolidated companies 772 – 266 Income tax expense 300 448 Net profit after tax from ordinary activities of consolidated companies 1,072 183

Adjustments for non-cash items and items not related to operating activities: • Net depreciation, amortisation, impairment and provisions (excluding impairment of current assets) 1,316 2,261 • Changes in deferred tax 29 – 353 – 500 • Capital gains (losses) on disposal of assets – 114 – 293 • Net gains on changes in fair value and other 28 – 20 – 69

Cash flow from consolidated company operations (1) 1,900 1,582

Change in working capital 73 – 155 Net cash from operating activities 1,973 1,427

Purchases of intangible assets and property, plant and equipment 8 –3,080 – 2,654 Proceeds on disposal of intangible assets and property, plant and equipment 358 347 Change in loans and receivables – 182 – 66 Acquisitions of subsidiaries net of cash acquired – 398 – 73 Sales of subsidiaries net of cash disposed of 61 512 Receipt of investment grants 1,055 852 Change in marketable securities (1) (3) – 492 119 Dividends received from associates 11 81 10 Net cash used in investing activities – 2,597 – 954

Dividends paid to minority interests in consolidated companies – 22 – 1 6 Share capital increase (decrease) 0 450 Share capital increases subscribed by minority interests 93 4 Proceeds from borrowings 892 1,898 Repayments of borrowings (2) (3) – 1,622 – 1,434 Increase (decrease) in cash borrowings 1,661 – 415

Net cash from financing activities 1,001 487 Net increase in cash and cash equivalents 377 960 Opening cash and cash equivalents 30 2,923 1,963 Closing cash and cash equivalents 30 3,300 2,923 Effects of exchange rate changes 0 0

(1) Cash from operations as at 31 December 2007 totalled €1,880 million compared to €1,622 million in 2006. (2) Including proceeds from RFF and CDP receivables. (3) Net debt financing flows: €439 million in 2007 and €168 million in 2006. See Note 31.

44 - CONSOLIDATED FINANCIAL STATEMENTs SNCF — FINANCIAL report 2007 - 45 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS All amounts are in millions of euros (€ millions), unless stated otherwise.

1. ACCOUNTING 1-2-2 Description of accounting options associa- ted with first-time adoption ofifrs STANDARDS BASE 2006 financial information has been prepared in accordance with the provisions of IFRS 1, First-time adoption of IFRS. The general restatement Pursuant to Article 25 of the Orientation Law on Domestic Transport principle consists of the retrospective application to the opening (LOTI) of 30 December 1982, Société Nationale des Chemins de fer balance sheet of the accounting policies adopted for the preparation of Français (SNCF), a state–owned industrial and commercial institution provisional financial information. The impact of these restatements is “is subject to the financial management and accounting rules appli- recorded directly in equity. cable to commercial companies.” SNCF keeps its accounting books Certain optional exceptions offered by IFRS 1 from this general prin- and records in accordance with prevailing legislation and regulations in ciple of retrospective restatement of assets and liabilities, have been France. adopted by the Group: The consolidated financial statements for the year ended 31 December 2007 were settled by the Board of Directors on 19 March 2008. – Business combinations The Group elected not to restate business combinations performed prior to 1 January 2006 in accordance with IFRS 3. As such combinations 1-1 ACCOUNTING RULES AND METHODS concern acquisitions of minority interests, which are not explicitly included in the exceptions authorised by IFRS 1 and in the absence Pursuant to European Regulation 1606/2002 of 19 July 2002, the of specific provisions, the Group retained the accounting treatment consolidated financial statements of SNCF Group for the year ended applied under French GAAP. 31 December 2007 have been prepared in accordance with the international accounting standards issued by the IASB (International – Foreign exchange translation differences Accounting Standards Board) and adopted by the European Union as The Group elected to transfer cumulative translation differences as at at this date. The 2007 consolidated financial statements are the first 1 January 2006 arising on the translation of the financial statements set of published financial statements prepared in accordance with IAS/ of foreign subsidiaries to “consolidated reserves”, after adjustment for IFRS and are presented with 2006 comparative figures prepared in IFRS restatements to opening equity. Foreign exchange translation accordance with the same standards base. differences were therefore reduced to nil at this date. On a subsequent The quantified impact of first-time adoption of IFRS on Group equity disposal of one of these subsidiaries, the gain or loss on disposal will and net profit is set out in Note 37 to the financial statements. exclude translation differences that arose prior to 1 January 2006, but will include translation differences arising after this date.

1-2 PRESENTATION OF THE STANDARDS – Cumulative actuarial gains and losses on pension obligations AND INTERPRETATIONS APPLIED and similar benefits IN THE PREPARATION OF 2006 FINANCIAL The Group elected to recognise in opening equity all cumulative actuarial INFORMATION AND THE 2007 gains and losses on pensions commitments and similar benefits as CONSOLIDATED FINANCIAL STATEMENTS at 1 January 2006. The application of this option does not impact the method adopted for the subsequent recognition of actuarial gains and 1-2-1 Presentation of standards applied losses on pension obligations and similar benefits. The basis of preparation of the 2006 financial information and the 2007 consolidated financial statements detailed in the following notes is the – Fair value measurement of certain items of property, result of: plant and equipment – standards and interpretations of mandatory application for financial The Group elected to apply the option offered by IFRS 1 involving the years commencing on or before 1 January 2007; adoption for certain items of property, plant and equipment of a fair – elected options and exemptions applied in the preparation of the value determined pursuant to a revaluation at a date prior to the transition 2007 consolidated financial statements. date.

46 - CONSOLIDATED FINANCIAL STATEMENTs – Share-based payment transactions and equivalent Standards and interpretations not adopted early in the Pursuant to IFRS 1, the Group elected to apply IFRS 2 to equity instru- preparation of the 2007 consolidated financial statements ments granted after 7 November 2002, that vested between 1 January – IFRIC 11, IFRS 2 – Group and treasury share transactions, is appli- 2005 and the date of transition to IFRS, i.e. 1 January 2006. cable to financial periods commencing on or after 1 March 2007. This The Group did not elect to apply the other exceptions permitted by interpretation considers agreements granting employees entitlement IFRS 1. to equity instruments of the Group as equity-settled transactions, irrespective of the way in which the entity acquires such instruments 1-2-3 Description of accounting options adopted for grant to employees. The impact of application of this new text is In addition to the specific provisions applicable to the preparation of the currently being analysed. opening IFRS balance sheet, certain IASB standards offer options with – IFRS 8, Operating Segments, enters into application on 1 January respect to the measurement and recognition of assets and liabilities. 2009. The principles set forth in this standard may impact the segment The Group therefore opted: reporting structure and the level at which Cash-Generating Units (CGU) – to measure intangible assets and property, plant and equipment at are grouped together for the purpose of testing goodwill values. amortised/depreciated historical cost and did not elect to revalue these – IFRIC 12, Service Concession Arrangements, is applicable to financial assets at each period end; periods commencing on or after 1 January 2008. This text provides – not to capitalise borrowings costs incurred during the period of clarification on the application of the financial asset and intangible construction or acquisition of intangible assets and property, plant and asset models when accounting for service concession arrangements. equipment; Contracts likely to fall into the application scope of this text are – to record actuarial gains and losses in respect of post-employment currently being analysed. This text has not yet been approved by the benefits recognised after 1 January 2006 in accordance with the European Commission. corridor method, which provides for the amortisation of actuarial gains – IFRIC 13, Customer Loyalty Programmes, applicable to financial and losses that exceed 10% of the greater of the present value of the periods commencing on or after 1 July 2008, has not yet been approved defined benefit obligation and the fair value of plan assets over the by the European Commission. This interpretation concerns the reco- remaining working lives of the participating employees; gnition of customer loyalty programmes and its impact on the financial – to account for joint ventures using the proportionate consolidation statements is currently being quantified. method; – IAS 23 revised, Borrowings Costs, is applicable from 1 January – to record grants relating to balance sheet assets and liabilities in 2009. The principles set out in this text represent the new benchmark deferred income (operating payables). treatment of borrowing costs directly attributable to the acquisition, construction or production of an asset, which must be capitalised in Other standards applicable to the preparation of the 2007 the cost of the asset. This standard has not yet been approved by the consolidated financial statements European Commission. The impact of its application is currently being – IFRS 7, Financial Instruments: Disclosures, applicable to financial analysed. periods commencing on or after 1 January 2007. This standard replaces IAS 30 and IAS 32 and introduces new disclosure requirements in the notes to the consolidated financial statements, notably concerning Group exposure to financial risks (market, credit and liquidity risk) and risk management. The new disclosures are presented in the financial statements. – Amendment to IAS 1, Presentation of Financial Statements, capital disclosures, applicable to financial periods commencing on or after 1 January 2007, which requires the presentation of new disclosures enabling users of the financial statements to assess the share capital management objectives, policies and procedures of the Group. As the share capital of the Group is closed and wholly owned by the French State (Government Shareholding Agency), this amendment did not lead to the presentation of additional disclosures in the Notes to the financial statements.

SNCF — FINANCIAL report 2007 - 47 1. accounting standards base

Accounting positions adopted by SNCF Group, pursuant – Individual Training Entitlement (Droit Individuel à la Formation) to paragraphs 10 to 12 of IAS 8 (Accounting policies, chan- In the absence of precise IFRS guidance in the matter, the Group ges in accounting estimates and errors) continues to apply under IFRS the French GAAP treatment of indivi- The accounting positions presented below are not (or only partially) dual training entitlement. Expenditure incurred in respect of Individual covered by specific provisions of international accounting standards (or Training Entitlement is recognised as an expense of the period and no their interpretations) as adopted by the European Union. SNCF Group provision is recorded. has established, to the best of its knowledge, accounting policies reflecting the substance of the transactions concerned. – Acquisition of minority interests 1-3 ACCOUNTING ESTIMATES As IFRS does not provide any specific guidance on the accounting treatment of acquisitions of minority interests, the Group continues In preparing the Group accounts, management must make estimates, to apply the French GAAP treatment which requires the recognition of as numerous items included in the financial statements cannot be goodwill equal to the difference between the acquisition price paid for valued precisely. Management is required to revise its estimates in the the minority interest and the fair value of assets acquired and liabilities event of a change in the circumstances on which they are based or as and contingent liabilities assumed, without revaluation. Following the a result of new information or further experience. As such, the estimates publication in January 2008 of IFRS 3 revised, Business Combinations adopted as at 31 December 2007 may be materially modified. – Phase II, not yet approved by the European Union and the related standard IAS 27, Consolidated and Separate Financial Statements, These estimates and assumptions notably concern: acquisitions of minority interests will be recognised as transactions – Determination of goodwill with shareholders and recorded directly in equity. Goodwill is determined based on management estimates of the fair value of assets acquired and liabilities and contingent liabilities assumed, – Minority interest purchase commitments for the purposes of allocating the purchase cost. IAS 27, Consolidated and Separate Financial Statements, and IAS 32, Financial Instruments: Presentation, as they currently stand, lead the – Impairment of non-financial assets Group to record firm and conditional minority interest purchase com- The Group performs impairment tests once yearly on goodwill balances mitments as a financial liability with an offsetting reduction in minority and intangible assets with an indefinite life. In addition, the Group interests. Where the commitment value exceeds the amount of mino- assesses at each balance sheet date whether there is any indication rity interests, the residual balance is recorded as additional goodwill. that a non-financial asset may have lost value, necessitating the perfor- The fair value of minority interest purchase commitments is revalued mance of a test. at each balance sheet date and the corresponding financial liability is These tests seek, in part, to determine a value in use or a market value adjusted with recognition of an offsetting financial income or expense. less costs to sell. Value in use calculations are based on management Conditional purchase commitments are not material as at 31 December estimates of expected future cash flows from the asset or cash- 2007 and 2006. generating unit (CGU) and the appropriate discount rate to be used to calculate the present value of these future cash flows. Market value – Loyalty programmes calculations are based on an assessment by management of the tran- Loyalty programmes consist of granting customers entitlement to saction price that could be obtained for the sale of the assets tested, benefits that may be used in the future, that are acquired through the taking into account the current condition of such assets. present and or past use of services. Pending adoption by the European The approach adopted for the Freight CGU is presented in Note 4.8.3. Union of IFRIC 13, Customer Loyalty Programmes, and its application, Impairment tests results are presented in Note 26. the Group continues to apply under IFRS the French GAAP treatment of loyalty programmes. A provision is recorded when the benefit is – Provisions for contingencies and employee-benefit related items granted, equal to the number of S’Miles points that will probably be The cost of post-employment benefits is determined using actuarial used by beneficiaries, multiplied by the cost price of their utilisation. valuations based on a number of assumptions: discount rate, expected rate of return on plan assets, rate of salary increase, mortality rate and inflation. Due to the long-term nature of these plans, uncertainties relating to these assumptions are substantial and may lead to different provision amounts.

48 - CONSOLIDATED FINANCIAL STATEMENTs – Income tax expense and deferred tax assets A deferred tax asset is recognised when it is probable that the Group will generate future taxable profits against which unused tax savings may be offset. The amount of the deferred tax asset recognised or not recognised, is based on management estimates of future taxable profits and their timing over the next three years.

– Fair value measurement of financial instruments and financial assets relating to the Special Debt Account This fair value measurement is based on discount rate assumptions and the debt repayment expected by the French State each year. At the end of 2007, the French State fully assumed the amortisation of the Special Debt Account. The accounting treatment of the Special Debt Account is presented in Note 4.11.4.2.

SNCF — FINANCIAL report 2007 - 49 2. SCOPE OF CONSOLIDATION 2-1 NUMBER OF CONSOLIDATED COMPANIES

The number of companies consolidated by SNCF Group breaks down as follows:

31/12/2007 31/12/2006

Fully consolidated companies 413 375 Proportionately consolidated companies 72 70 Equity associates 250 237 Total consolidation scope 735 682

2-2 CHANGES IN SCOPE

The main changes in the consolidation scope during 2007 are presented below.

2-2-1 Business combinations On 5 February 2007, Geodis purchased TNT Freight Management accompanied by a share capital increase. (Wilson), the TNT Group subsidiary specialising in freight forwarding, The Géodis Wilson goodwill was determined as follows: for a consideration of €410.3 million, plus directly attributable costs of €8 million. This entirely cash-settled transaction was financed by a loan

in € millions

Purchase price as at 5 February 2007 410 Share purchase costs 8 Total combination cost 418

Equity as at 5 February 2007 (1), after offset of existing TNT Freight Management (Wilson) goodwill (63) Fair value of intangible assets identified in respect of the customer base and the trade name 122 Fair value of assets acquired and liabilities and contingent liabilities assumed 59

Goodwill as at 5 February 2007 (2) 359

(1) Goodwill of €213 million recorded in the accounts of TNT Freight Management (Wilson), was deducted from equity at the acquisition date. (2) Goodwill = cost of the combination less the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition of control.

50 - CONSOLIDATED FINANCIAL STATEMENTs Assets and liabilities acquired break down as follows:

in € millions Net carrying Fair value Cancellation Fair value (1) amount (1) adjustments of local goodwill

Intangible assets 214 123 (213) 124 Property, plant and equipment 8 8 Financial assets 5 2 7 Working capital 18 (42) (24) Total 245 83 (213) 115

Equity 190 82 (213) 59 Minority interests 1 1 Provisions 6 1 7 Net debt 49 –1 48 Total 245 83 (213) 115

(1) assets acquired and liabilities and contingent liabilities assumed as a 5 February 2007.

Since 5 February 2007, Geodis Wilson has contributed a net loss of Equity and Caisse de Dépôt et de Placement du Quebec acquired a €3.3 million to Group results, due to the amortisation of identified 51.49% majority interest in Keolis, by purchasing the shares held by intangible assets in the amount of €9.4 million and merger costs of Deutsche Bank since the withdrawal of the former shareholder, 3i, in €6.4 million. December 2006. Following completion of the recapitalisation of the Given the acquisition date of 5 February 2007, only 11 months’ activity Keolis Group, Kuvera Développement, the new holding company of have been included in the Income Statement. For information, note the Keolis Group, is owned 45.38% by SNCF Participations, 51.49% by that the month of January reported revenue of €72.5 million, an operating AXA Private Equity and Caisse de Dépôt et Placement du Québec via loss of €5.4 million and a pre-tax net loss of €6.0 million. Kebexa Participations and 3.13% by company management. Pursuant to IFRS 3, the purchase cost allocation will become definitive Given the shareholders’ agreement signed at the time of this transaction, on 5 February 2008. SNCF Participations may be considered to continue to exercise a notable influence over Keolis Group, in accordance with governance 2.2.2 Other transactions rules (representation on the Supervisory Board and decision-making – The financial partnership with Ermewa Group was renewed on procedures). 30 May 2007; the Group remains proportionately consolidated, although Ermewa France is now consolidated at a rate of 49.6% com- pared with 66.14% previously. – In accordance with the Memorandum of Understanding signed in October 2006 with SNCF, the consortium comprising AXA Private

SNCF — FINANCIAL report 2007 - 51 3. MAJOR EVENTS OF THE YEAR

Creation of cprp (caisse de prevoyance Control of the Fund et de retraites du personnel de la sncf – The CPRP is subject to the economic and financial control of the sncf employee pension and provident fund) French State under the conditions set out in the Decree of 26 May The SNCF pension regime is a special social security regime, which is 1955, as amended. legal and mandatory for all employees with qualifying status Pension entitlement is determined in accordance with the conditions set out The main transitional measures in the 1911 pension regulation, implementing the Law of 1909 and The CPRP was created on 30 June 2007. The missions set forth in the amendments thereto approved by the Transport Minister. On the entry decree are provided in the name and on behalf of the Fund by SNCF into effect of the Order of 4 October 1945, the SNCF special regime, up to 31 December 2007, with the possibility for the Board of Directors in the same way as the majority of special regimes, was maintained of the Fund to extend SNCF’s mandate up to 1 July 2008 at the latest. provided it guaranteed its beneficiaries a service level at least equi- SNCF records the corresponding transactions in separate accounting valent to that of the general regime. The SNCF special social security books and records and reports on its mandate to the Board of Directors regime replaces, for its beneficiaries, the ordinary law social protection of the Fund. regime. Decree no. 2007-730 of 7 May 2007, on the creation of the SNCF b) CPRP resources Employee Pension and Provident Fund (CPRP), on which it conferred Decree no. 2007-1056 of 28 June 2007 determines the resources of an independent legal identity, and the related decrees of 28 June 2007, the SNCF Employee Pension and Provident Fund (CPRP). introduced a number of major changes to the operation and financing of this pension regime. The autonomous fund was created with effect Primary resources of the pension regime from 30 June 2007. The primary resources of the SNCF employee pension regime are as follows: 3-1-1 New operation and financing of thesncf – income from contributions payable by SNCF qualifying employees; pension and provident regime – contributions paid by SNCF comprising two components, known as a) Caisse de Prevoyance et de Retraites du personnel de la SNCF T1 and T2: (SNCF Employee Pension and Provident Fund) – the T1 rate is determined each year in order to cover, after deduction The main provisions concerning the fund’s mission of employee contributions, the amount which would have been Decree no. 2007-730 of 7 May 2007 created, with effect from 30 June payable had the employees been included in the general and 2007, a pension and provident fund for SNCF employees (CPRP), with supplementary regimes referred to in Article L.921-4 of the French an independent legal identity. This fund is a social security entity, Social Security Code, charged with a public service mission serving current and retired SNCF – T2 contributions discharge SNCF of all liability and are intended to employees and their beneficiaries. It is placed under the joint supervision provide a flat-rate contribution to the financing of specific pension of the Budget, Transport and Social Security Ministers. rights under the special regime. This rate is set at: This fund will be responsible for the operation of the special regime • 11.96% for 2007, 12.27% for 2008, 12.62% for 2009 and 12.73% benefiting current and retired SNCF qualifying employees and covers for 2010 and beyond. the risks corresponding to pension, retirement and provident benefits • After 31 December 2010, the rate will be amended on 1 January due to current and retired qualifying employees for themselves and each year in line with an index determined based on pension their families, and notably for health insurance, maternity and death contributions due under the ordinary law pension regime. benefits in kind. – Payments from the pension solidarity fund and the special invalidity This fund has also been granted a management mandate, on behalf of fund, SNCF, notably covering social welfare initiatives and services ancillary – payments from other regimes pursuant to compensation due under to the pension and provident regime, managed prior to 30 June by the Article L. 134-1 of the French Social Security Code, “Pension and Provident Fund” department. The management mandate – the payment from the French State, provided for in the Decree, to is defined by an agreement between the fund and SNCF currently ensure the financial balance between expenses of all kinds and the being finalised, subject to the approval of the Budget, Transport and income of the pension regime. Social Security Ministers.

52 - CONSOLIDATED FINANCIAL STATEMENTS Primary resources of the provident regime Main provisions concerning the management mandate granted by Les principales ressources du régime de prévoyance du personnel de SNCF la SNCF sont constituées par : The management mandate granted to the CPRP by SNCF notably the primary resources of the SNCF employee provident regime are as concerns accounting and management services and activities with follows: respect to: – income from contributions payable by SNCF, SNCF qualifying – the repayment of health costs to employees within the framework of employees, employees not in active service and beneficiaries of a pen- SNCF medical service regulations; sion or a survivor’s pension. – compensation for work-related injuries and illness, redundancy – The portion of income from contributions allocated to mandatory benefits and additional benefits due under the senior management health insurance regimes, payments from national health insurance provident regime, as defined by decree. funds for salaried workers and autonomy solidarity, – income from recoveries and undue amounts paid by the Fund to c) Amendments to the SNCF terms of reference affiliates, health professionals and health institutions. Decree no. 2007-1051, approving the amendments to the SNCF terms The contribution rate payable by beneficiaries of the provident regime of reference in order to integrate the contents of the aforementioned is fixed by decree. decrees, was published on 28 June 2007. The employer contribution rate payable by SNCF is 9.6%. This rate will Article 30, notably concerning the payment by the French State, the be amended by indexation to the company health insurance employer standard contribution rate and additional net benefits, is repealed. contribution rate under the social security general regime.

SNCF — FINANCIAL report 2007 - 53 3. MAJOR EVENTS OF THE YEAR

3-1-2 Detailed table of impacts Benefit obligations incumbent on SNCF were transferred on 30 June 2007 to the SNCF Employee Pension and Provident Fund (CPRP). SNCF’s commitment to its employees now consists of a defined contribution scheme.

Financial impact as at 30 June 2007

In € millions Total impact Employee benefits Other former CPR assets and liabilities

Intangible assets and property, plant & equipment – 28 – 28 Non-current financial assets – 81,798 – 81,794 – 4 Non-current assets – 81,826 – 81,794 – 32

Operating receivables – 469 – 469 Current financial assets – 1,813 – 3,336 1,523 Current assets – 2,282 – 3,336 1,054

Total assets – 84,108 – 85,130 1,022

Consolidated reserves 31,052 31,316 – 264 Equity attributable to equity holders of the parent 31,052 31,316 – 264 Minority interests - 23 – 23 Non-current employee benefits – 111,509 – 111,509 Non-current financial liabilities - 4 – 4 Non-current liabilities – 111,513 – 111,509 – 4

Current employee benefits – 4,937 – 4,937 Operating payables – 249 – 249 Current financial liabilities 1,562 1,562 Current liabilities – 3,623 – 4,937 1,314

Total equity and liabilities – 84,108 – 85,130 1,022

The main “pension and other employee benefit” restatements prior to – the reversal of the corresponding assets in the amount of €85,131 mil­lion; this change are detailed in the IFRS transition note. – the removal of the other assets and liabilities of the former CPRP. The new operation and financing model for the SNCF employee pension As the fund was created on 30 June, the Income Statement includes and provident regime is reflected as at 30 June 2007 by: the impact of the recognition of obligations in liabilities and third-party – the reversal of the total obligation (€116,447 million) recognised in the assets up to 30 June 2007. opening balance sheet as at 1 January 2006 and updated at 30 June 2007;

54 - CONSOLIDATED FINANCIAL STATEMENTs The new operation and financing model of the Employee Pension and Senior management fund caisse des cadres superieurs drp Provident Fund led to the transfer of the following related activities as Senior management members and their beneficiaries were included at 30 June: in the SNCF employee provident regime (former provident fund), in consideration for an adjustment to the contribution paid by SNCF to Employee pension and provident fund CPRP, set by Decree 2007-1056 of 28 June 2007. As all activities of the former Pension and Provident Fund were trans- Conversely, provident benefits paid to senior management in excess ferred to the new CPRP, all balance sheet accounts relating to fund and of the provident regime (differential services) remain financed by SNCF provident activities were transferred as at 30 June to the new fund and generate an IFRS post-employment obligation for SNCF (IAS 19). and no longer appear in the accounts of SNCF. However, the buildings These services are managed by the CPRP on behalf of SNCF (manage- will only be effectively transferred on the signature of the agreement ment mandate pursuant to Decree no. 2007-730). approved by the SNCF Board of Directors. As such, assets corresponding The balance sheet of the DRP department as at 29 June is therefore to the net carrying amount of the buildings are retained in SNCF assets split between a portion that is consolidated as at 30 June in the SNCF and a liability is recognised in the same amount to the newly created accounts and a portion that is transferred as at 29 June to the CPRP fund. accounts (provident regime).

Annuities, pension and benefits fund (caisse des rentes, pensions et allocations crpad The CRPAD balance sheet accounts are transferred as follows: – the balance sheet items relating to the activities that will continue to the performed by the CPRP on behalf of SNCF (management mandate pursuant to Decree no. 2007-730) remain consolidated in the SNCF accounts. – The balance sheet items relating to the management of the pensions of former employees of the North African railway network and the items relating to the administrative management of the “Pension and Provident Fund” department are transferred to the CPRP accounts.

SNCF — FINANCIAL report 2007 - 55 4. ACCOUNTING POLICIES The financial statements of fully and proportionately consolidated companies and equity associates are restated to comply with Group 4-1 CHANGES IN ACCOUNTING POLICY accounting policies. All material transactions between consolidated companies and internal profits and losses are eliminated on consolidation. In accordance with IFRS 1, First-time adoption of IFRS, SNCF Group has prepared 2006 financial information on IFRS transition presenting The financial statements of the companies included in the scope of the quantified impact of the adoption of IFRS on: consolidation are drawn up to 31 December 2007. – the balance sheet at the transition date, i.e. 1 January 2006, the date The list of material subsidiaries is presented in Note 36. at which transition impacts are recorded in equity; – equity and balance sheet reconciliations between French GAAP and Low-rental housing companies (ESH) IFRS as at 1 January 2006 and 31 December 2006; The assessment of control exercised over low-rental housing compa- – the reconciliation of the 2006 Income Statement. nies (Enterprises Sociales pour l’Habitat, E.S.H.) is a complex issue, This information is presented in Note 37, Transition note: Impact of that must be approached with pragmatism taking into account the first-time adoption of IFRS. constraints resulting from the extremely strict regulatory framework governing low-rental housing and the focus set by SNCF for its housing policy. It would appear that consolidation is not appropriate as: 4-2 BASIS OF CONSOLIDATION – while SNCF exercises influence over certain aspects of management of the E.S.H., this influence may not be considered to represent Controlled companies over which the Group exercises exclusive control, control, directly or indirectly, are fully consolidated. – the SNCF Group decision to own the four E.S.H. concerned is Control is presumed to exist where the Group holds 50% or more of primarily based on institutional and general interest arguments and the voting rights in an entity (total of existing voting rights and potential not on financial and asset ownership considerations, whether direct voting rights which are immediately exercisable) or where the Group or indirect. can: Nonetheless, given the complexity of the issue and, in the medium- – control over half the voting rights pursuant to an agreement with term, the possibility of changes in SNCF housing policy or the legal or other investors; regulatory E.S.H. framework and in a desire to improve the transparency – manage the financial and operating policy of the entity pursuant to a of its financial reporting on the adoption of IFRS, SNCF Group has decided contract; to disclose in the notes to the financial statements the economic and – appoint or dismiss the majority of the members of the board of directors financial importance of the E.S.H. under IFRS. or an equivalent management body; Shares in the E.S.H. companies are therefore retained in balance sheet – control the majority of voting rights at meetings of the board of directors assets and the principle account headings of these companies are or an equivalent management body. disclosed in Note 10.

Companies over which the Group exercises joint control are propor- tionately consolidated, in accordance with the percentage interest 4-3 BUSINESS COMBINATIONS held by the Group. Joint control is the sharing of control over an entity operated jointly by a limited number of partners or shareholders, such Business combinations are accounted for using the purchase method. that financing and operating policies are determined by mutual agree- The identifiable assets and liabilities of the acquired company that ment. meet IFRS recognition criteria are recognised at their fair value at the Entities in which the Group exercises significant influence over financial acquisition date, except for assets classified as held for sale, which are and operating policies, but which it does not control, are equity accounted. measured at fair value less costs to sell. Significant influence is presumed to exist where the Group holds an interest of 20% or more. The results of companies acquired or disposed of during the financial year are included in the consolidated income statement of the Group from the date control is acquired or up to the date of transfer of control, respectively.

56 - CONSOLIDATED FINANCIAL STATEMENTs Only identifiable liabilities meeting the recognition criteria of a liability Monetary items in the balance sheet are retranslated at the closing or contingent liability in the acquired company are recognised at the exchange rate at each balance sheet date and the resulting translation acquisition date for the purpose of allocating the cost of the business differences are taken to profit or loss. combination. Therefore, a restructuring liability of the acquired company is only recognized for the purpose of allocating the business combi- nation cost if, at the date of the acquisition, the acquired entity has a 4-6 GOODWILL current obligation to perform this restructuring. Goodwill represents the difference between the cost of a business The difference between the purchase cost and the Group’s interest in combination and the Group’s interest in the net fair value of the identi­ net assets acquired, at fair value, is recognised as goodwill. fiable assets, liabilities and contingent liabilities of the acquired company at the date of acquisition of control. Adjustments to the fair value of assets and liabilities acquired as part of Goodwill is recognised at cost, less any accumulated impairment a business combination initially recognised based on provisional values losses. Corrections or adjustments may be made to the fair value (due to ongoing external valuation procedures or outstanding additional of assets and liabilities acquired during the 12 months following the analyses), are recognised as retrospective adjustments to goodwill if acquisition, resulting in a retrospective correction of goodwill. they arise in the 12 months following the acquisition date. After this Goodwill is not amortised but is subject to impairment tests when period, any adjustments are recognised directly in profit or loss unless there is an indication of impairment and at least once a year. they represent corrections of an error. Negative goodwill is recognised immediately in operating profit.

Minority interests in the acquired company are measured at the mino- rity’s proportion of the net fair value of assets, liabilities and contingent 4-7 INTANGIBLE ASSETS liabilities recognised. Intangible assets primarily comprise leasehold rights, licences and software. 4-4 TRANSLATION OF THE FINANCIAL Where an intangible asset has a finite life, it is amortised on a straight- STATEMENTS OF FOREIGN SUBSIDIARIES line basis over its period of use, of between 1 and 5 years. Where an intangible asset has an indefinite life, it is not amortised but The financial statements of foreign subsidiaries whose functional is subject to impairment tests at least once a year. currency is not the euro are translated into euros using the period-end exchange rate method: – balance sheet accounts are translated using exchange rates prevailing on the balance sheet date, – income statement items are translated at the average annual rate of exchange, – translation differences arising on the retranslation of opening balance sheet items (movement between opening and closing exchange rates) and income statement items (movement between average and closing exchange rates) are taken to Translation differences in Consolidated equity.

4-5 TRANSLATION OF FOREIGN CURRENCY TRANSACTIONS

Foreign currency-denominated transactions are translated by the subsi­ diary into its functional currency at the exchange rate prevailing at the transaction date.

SNCF — FINANCIAL report 2007 - 57 4. ACCOUNTING POLICIES

4-8 PROPERTY, PLANT AND EQUIPMENT Production cost comprises the cost of raw materials and labour used to manufacture the assets, including that of purchased spare parts. The property, plant and equipment of the Group include assets made Interest costs are not capitalised. Property, plant and equipment are available by the French State, assets owned outright and assets not subject to periodic revaluation. purchased under finance lease agreements. The French Orientation Law on Domestic Transport (LOTI) lays down Maintenance and repair expenses are recognised as follows: the terms of possession of assets entrusted to SNCF. – rolling stock: On the creation of the industrial and commercial public institution • current maintenance expenses borne during the useful life of SNCF on 1 January 1983, the real estate assets previously given equipment (repair work on faulty spare parts and replacement of under concession to the semi-public limited liability company which it unusable and missing parts) are recorded as operating expenses; succeeded were appropriated to it. • expenses under multi-year major overhaul programmes are capita- These assets made available by the French State, without transfer of lised as a separate overhaul component and depreciated, title, are recorded in the Group balance sheet in the relevant property, • overhauls performed at the end of the useful life of a component, plant and equipment accounts, to enable an economic assessment of together with refurbishment and transformation costs, are capita- Group performance. lised in assets where they extend the useful life. Subject to legal provisions applicable to infrastructures deemed of – fixed installations: general interest or public utility, the parent company exercises full • current maintenance and repair expenses (technical inspections, management powers over all real estate assets entrusted to it or maintenance contracts, etc.) are recorded as operating expenses; purchased by it. • expenses under multi-year major building maintenance programmes Real estate assets held by the public institution, no longer used in the are capitalised via the partial or total replacement of each component performance of its activities or which are part of its private domain, concerned. may be allocated to another purpose or sold by the public institution for Property, plant and equipment are depreciated on a straight-line basis profit. over their estimated useful life (except for computer hardware depre- ciated on a declining balance basis over 4 years). 4-8-1 Owned assets Property, plant and equipment owned outright are recorded in consoli- dated assets at acquisition cost. Internally produced assets are recor- ded at production cost. Property, plant and equipment acquired as part of a business combination are recorded at their fair value on entry into the consolidation scope.

58 - CONSOLIDATED FINANCIAL STATEMENTs 4-8-2 Depreciation periods When performing impairment tests, goodwill is allocated to the Cash- Property, plant and equipment are depreciated over the following Generating Unit (CGU) or group of CGUs that represents the lowest periods: level at which the goodwill is monitored for internal management purposes. Land development 20 years Tangible and intangible assets are subject to impairment when events Complex constructions (stations, administrative buildings, etc) or circumstances during the period (obsolescence, physical deterio- • Building shell 50 years ration, significant changes in the method of utilisation, performances • Enclosures 25 years falling short of forecasts, decline in revenues, other external indicators, • Light work 25 years etc.), indicate that a loss in value may have occurred and that the reco- • Fixtures and fittings 15 years verable amount may be less than the net carrying amount. • Technical work 15 years Impairment tests consist of comparing the net carrying amount of an Simple constructions (workshops, warehouses, etc.) asset or goodwill balance with its recoverable amount, equal to the • Building shell, light work and enclosures 30 years higher of the fair value less costs to sell and the value in use. The reco- • Fixtures and fittings 15 years verable amount of an asset is determined individually, unless the asset • Technical work 15 years does not generate cash flows independent of those of other assets or Plant and equipment 5 to 20 years groups of asset. In such cases, which encompass the majority of tangi- Cars 5 years ble and intangible assets of SNCF and goodwill balances, the Group Rail transport equipment determines the recoverable amount of the group of assets (cash-gene- • TGV : rating unit – CGU) to which the asset tested belongs. Structure 30 years The value in use corresponds to the value of the future economic Interior fittings 15 years benefits expected from the asset’s use or removal. It is assessed Overhaul work 15 years based on discounted future cash flows determined according to eco- • Electric and diesel locomotives: nomic assumptions and projected operating conditions adopted by Structure 30 years SNCF management: Overhaul work 15 years – The cash flows are those determined in business plans, drawn up for • Motorised carriages: periods of between 3 and 6 years and validated by the Group; Structure 30 years – Beyond this timeframe, the flows are extrapolated by applying a per- Interior fittings 15 years petual growth rate that is close to the long-term inflation rate expected Overhaul work 15 years in France, subject to the expected useful life of the assets tested; • Passenger carriages: – Flows are discounted at a rate appropriate to the activity sector Structure 30 years concerned. Interior fittings 15 years In addition, as at 31 December 2006, it was not possible to assess the Overhaul work 10 to 15 years value in use or the fair value of the Freight CGU, insofar as the financial • Freight cars 30 years ± 20% forecasts are based on action programmes currently being drafted. Ships 25 years Accordingly, as a 31 December 2006, the company conducted a Other property, plant and equipment 3 to 5 years certain number of procedures leading to the partial and generalised valuation of rolling stock allocated to SNCF Freight: – for old rolling stock, 100% or 40% impairment based on the type and 4-8-3 Impairment of goodwill and tangible age of the equipment; and intangible assets – for newer equipment and firm order commitments, flat-rate impair- At each balance sheet date, the Group considers whether there is any ment limited to 10% given market requirements. indication that an asset may have suffered a significant loss in value. If A provision was recognised for all assets whose net carrying amount any such indication exists, an impairment test is performed. exceeded the fair value, less individual costs to sell. Goodwill and indefinite-life intangible assets are subject to an impair- Overall, in Freight assets, an additional impairment of €19 million was ment test each year and whenever there is an indication of loss in recognised in respect of property, plant and equipment (including value. PP&E in progress), for rolling stock with a total gross value of €2.7 billion, bringing the total impairment to €630 million and contingency provi-

SNCF — FINANCIAL report 2007 - 59 4. ACCOUNTING POLICIES

sions were reversed in the amount of €14 million in respect of firm Sale and lease-back transactions and equivalent orders, bringing total provisions to €56 million. Sale and lease-back transactions At this stage, the company considers that this provision level represents In the event of an asset sale coupled with a finance lease arrangement, the best estimate of impairment losses to be recognised. the transaction is recorded in accordance with the above principles. Any capital gain realised on disposal is deferred and amortised over the lease term. 4-9 LONG-TERM ASSETS CLASSIFIED AS HELD FOR SALE Other transactions In addition, certain financial arrangements concern existing finance In accordance with IFRS 5, Non-current assets held for sale and dis- lease agreements. As the existing equipment financing structure is not continued operations: altered and the proceeds of such transactions are definitively earned, – non-current assets of controlled entities held for sale are presented on they are recognised in finance costs on signature of the agreement. a separate line of the balance sheet at the lower of their net carrying amount and fair value less costs to sell. Any liabilities relating to these assets or operations are also presented separately in liabilities. 4-11 FINANCIAL ASSETS – the impact on profit or loss of the period of all discontinued operations is presented on a separate line of the income statement, after ordinary Financial assets include investments in companies that are neither activities. controlled nor subject to significant influence, loans and financial recei- vables, guarantee deposits paid in respect of derivative instruments (cash collateral) and the fair value of derivative instruments. 4-10 FINANCE LEASE TRANSACTIONS “Standard” purchases are recorded at the settlement date. Financial assets are presented in non-current assets, unless they Leased assets are recorded as purchases when the contract terms and mature in less than 12 months at the balance sheet date, in which case conditions correspond to finance lease arrangements. Finance lease they are classified in current assets or cash equivalents as appropriate. agreements are contracts whereby the lessor transfers to the lessee the right to use an asset for a given period in exchange for payment; Fair value determination the lessor transfers all benefits and risks inherent to ownership of the The fair value of listed financial instruments is determined by reference asset. The appraisal criteria applied to these agreements are based on to the stock market price at the balance sheet date. The fair value of the following: unlisted financial instruments for which there exists listed instruments – the agreement provides for the mandatory transfer of ownership at of a similar nature and maturity, is determined by reference to the the end of the lease period, stock market price of such instruments. The fair value of other unlisted – the agreement contains a purchase option and the conditions of this instruments is determined using valuation techniques such as the option are such that it is reasonably certain, at the inception of the revalued net asset method, discounted cash flows or option valuation lease, that ownership will be transferred, models. The models used take into account assumptions based on – the lease term is for the major part of the estimated economic life of market data. the leased asset, – the present value of the minimum lease payments under the agreement 4-11-1 Available-for-sale assets is close to the fair value of the leased asset. Available-for-sale assets include Group investments in the share capital The assets concerned are recorded in assets at the lower of the dis- of unconsolidated companies that the Group does not hold for short- counted present value of the minimum lease payments and fair value term profit and investments that do not qualify for inclusion in other and depreciated over the same period as equivalent assets owned asset categories. outright or made available. Investments in associates and other investments are measured at fair Lease agreements not having the characteristics of finance leases are value unless this cannot be reliably determined, in which case they are recorded as operating leases and only the lease instalments are recorded retained in the balance sheet at acquisition cost. Fair value is deter- in profit or loss. mined based on the financial criteria most appropriate to the specific situation of each company. The most commonly adopted criteria are the share in equity held and the profitability outlook.

60 - CONSOLIDATED FINANCIAL STATEMENTs Fair value gains and losses on available-for-sale assets are recorded These instruments are presented in non-current assets, except for directly in equity and released to profit or loss on the sale of the asset. assets maturing in less than 12 months at the balance sheet date, In the event of a long-term fall in the fair value below the net carrying which are recorded in current assets. amount, an impairment loss is recognised. This is recorded in an impairment loss account through profit or loss and cannot be reversed 4-11-4-1 Réseau Ferré de France (rff) receivable if it concerns shares. In the law of 13 February 1997 that led to the creation of Réseau Ferré de France (RFF), Article 7 provides for the transfer of a €20.5 billion 4-11-2 Assets at fair value through profit or loss liability to Réseau Ferré de France in consideration of the transfer of (trading assets) infrastructure assets as at 1 January 1997. Trading assets consist of assets that the Group intends to sell in the This transfer resulted in the recognition of an RFF receivable in the near term in order to realise a capital gain and assets recorded in this Company’s assets, with no change in liabilities. category by designation. The RFF receivable was constructed line by line so as to present a In particular, parent company cash balances are globally managed maturity, currency and interest rate structure identical in all respects pursuant to a general market risk management framework approved to that of the Company’s liability, which totalled €30.3 billion as at by the Board of Directors and combining investments in negotiable 31 December 1996, after swap contracts. debt instruments and French money-market mutual funds (UCITS). The 1996 year-end exchange rate was the initial rate used for the Management performance is measured, in the same way as UCITS, foreign currencies included in the receivable. by reference to EONIA (Euro Overnight Index Average). As UCITS are Deferred income and expenses corresponding to issue premiums and measured at net asset value, which takes into account portfolio fair costs or swap contract income or expenses were also transferred, value and in order to achieve overall consistency, investments with an resulting in a cash payment. This payment was recognised in the initial maturity of more than three months are recorded in this category Company financial statements as deferred income, which is released by designation. to the income statement according to the maturities of the corresponding Assets are valued at fair value at the balance sheet date and fair value transactions. gains and losses are recorded in profit or loss. The RFF receivable is embodied in an agreement signed by the two companies. 4-11-3 Cash and cash equivalents The receivable is recorded at amortised cost and, where appropriate, is Cash and cash equivalents consist of immediately available liquid subject to fair value or cash flow hedge accounting. assets (cash) and short-term investments, easily converted into a known amount of cash with an initial maturity of less than or equal to 4-11-4-2 Public debt fund ( receivable –expected payments three months and which are exposed to a negligible risk of change in under the special debt account value. In particular, investments in French mutual funds (SICAV) and In accordance with the corporate plan (“contrat de plan”) signed by monetary funds with marginal sensitivity are classified in this category the French State and SNCF in 1990, a Special Debt Account was set and notably French mutual funds and monetary funds classified by the up on 1 January 1991 in order to isolate a portion of SNCF’s debt. With French Stock Market Authority (AMF) in the Euro monetary category or a view to the preparation of SNCF’s opening IFRS balance sheet as at which have a sensitivity of less than 0.25. 1 January 2006, the French State and SNCF confirmed the current Current bank facilities classified in current financial liabilities are included practice at this date regarding the financing and management of the in cash and cash equivalents in the Statement of Cash Flows, as are depo- debt transferred to the Special Debt Account. Confirmation of the sits and guarantees with an initial maturity of less than three months. French State’s commitment to contribute to the amortisation and servi- cing of the debt led to the recognition of a receivable in respect of 4-11-4 Loans and receivables issued expected payments from the French State. This heading includes the RFF receivable, the Public Debt Fund recei- The receivable is initially recorded, at the transfer date, at the fair value vable (payments expected under the Special Debt Account in 2006), of debts transferred and subsequently at amortised cost. employee-profit sharing receivables, “construction assistance” loans Derivatives instruments relating to the receivable are recorded at fair and other loans and guarantee deposits (including cash collateral value, with gains and losses on remeasurement recognised in profit assets). These financial instruments are initially valued at fair value and or loss. then subsequently at amortised cost based on the effective interest Fair value gains and losses on contributions and balancing payments rate (EIR). are recognised in profit or loss.

SNCF — FINANCIAL report 2007 - 61 4. ACCOUNTING POLICIES

The following transactions were performed in December 2007, in 4-13 OPERATING RECEIVABLES order to find a long-term and definitive solution to the future of these commit­ments and the financing of Special Debt Account debts: Receivables are recorded at nominal value on issue, except for recei- 1 – On 31 December 2007, on the entry into effect of the 2007 amen- vables with a maturity of more than one year, which are discounted to ded Finance Act and in accordance with Article 82 of this Act, mirror present value where the impact of discounting is material. An impair- contracts were set-up between SNCF and the Public Debt Fund: ment is recognised when there is a potential risk of non-recovery. This – signature of a loan agreement between SNCF and the Public Debt impairment is determined based on an individual or statistical appraisal Fund, exactly reflecting the amount of the Special Debt Account debt of non-recovery risk using historical data. and its financial terms and conditions and also covering the related derivates – simultaneous signature of a mirror agreement, under which the 4-14 SHARE-BASED PAYMENTS Public Debt Fund provides an identical loan to SNCF under the same terms and conditions. Certain sub-groups grant shares or share subscription options to On completion of these transactions, SNCF holds both a receivable employees. and payable vis-à-vis the Public Debt Fund of the same amount and Pursuant to IFRS 2, Share-Based Payment, share subscription and repayable pursuant to identical terms and conditions, which reflect purchase option plans, share offers reserved for employees and the commitments to third-parties ring-fenced in the Special Debt Account. grant of free shares in subsidiaries to Group employees are valued at 2 – Following implementation of these mirror contracts, the French the grant date. State, as authorised by Article 82 of the 2007 amended Finance Act The Group uses the Black & Scholes model for valuation purposes. and pursuant to the Order of 28 December 2007, replaced SNCF with This valuation corresponds to the fair value of services received in regard to the repayment of SNCF’s debt to the Public Debt Fund. return for the definitive grant of these options and is based on the 3 – Due to the transfer of this commitment to the French State and the fair value of such options at the grant date and the number of options change in related debtor, SNCF is now free of all obligations pursuant expected to be exercised at the end of the vesting period. to the aforementioned contract with the Public Debt Fund. The total fair value so determined is recognised on a straight-line basis In return, the financial commitments of the French State under the over the vesting period of the plan concerned. Special Debt Account were cleared and, in order to achieve neutrality This value is recorded in Employee benefits expense on a straight-line for the French State and SNCF, SNCF made a payment equal to the basis over the period commencing the grant date and terminating the present value of contributions and balancing payments due under the vesting date, via a charge recorded directly in equity for equity-settled Special Debt Account, net of the balance on the French State’s cash plans and in employee-related liabilities for cash-settled plans. current account in the books of SNCF. This amount was determined jointly by SNCF and the French State at €640 million. 4 – The Special Debt Account was closed on completion of these tran- sactions. The method of accounting for the receivable is unchanged.

4-12 INVENTORIES

Inventories are valued at the lower of cost price and net realisable value. Cost price is equal to acquisition or production cost. Production cost includes both direct and indirect production expenses. Cost price is calculated using the weighted average cost method. Inventories are written-down based on the turnover, nature, age and useful life of items.

62 - CONSOLIDATED FINANCIAL STATEMENTs 4-15 FINANCIAL LIABILITIES Changes in the fair value of derivative financial instruments that are not part of a designated hedging relationship as defined by IAS 39, are Financial liabilities include borrowings, other financing and bank over- recorded in profit or loss in Finance costs. drafts, guarantee deposits received in respect of derivative instruments (cash collateral liabilities) and the negative fair value of derivative 4-16-2 Cash flow hedge instruments. This heading also includes borrowings allocated to the The Group trades on the derivatives market to hedge floating-rate Special Debt Account (see Note 4.22). receivables and payables and receipts and payments relating to its These instruments are included in non-current liabilities, except for commercial activities. liabilities maturing in less than 12 months at the balance sheet date, When IAS 39 criteria are met, the derivatives instruments are designated which are recorded in current liabilities. as hedges and fair value gains and losses are recorded directly in Borrowings and other financial liabilities are initially measured at fair equity in a specific account, except for the ineffective portion of the value plus transaction costs and subsequently at amortised cost deter- hedge, which is recorded in profit or loss. When the hedged flows mined using the effective interest rate. impact profit or loss, the amounts deferred in equity are released to Certain borrowings are subject to fair value or cash flow hedge accoun- profit or loss to match the flows of the hedged item. ting. In addition, certain borrowings with detachable embedded deriva- tives recorded using hedge accounting, are recorded at fair value (“fair 4-16-3 Fair value hedge value” option). Fair value gains and losses are recorded through profit The Group also uses derivative instruments to hedge the fair value of or loss. fixed-rate receivables and payables denominated in euro and foreign The option to record liabilities at fair value through profit or loss is used currencies. when the liabilities in question comprise an embedded derivative When IAS 39 criteria are met, the derivative instruments are designated significantly modifying the cash flows which would otherwise result as hedges and: from the contract or where the Group is unable to value the embedded – fair value gains and losses arising on the derivative are recorded in derivative separately. This option only concerns liabilities of the parent profit or loss of the period, company, an Industrial and Commercial Public Institution. The Group – the hedged item is remeasured to fair value at the balance sheet considers that exposure to credit risk does not give rise to any change date, for the hedged portion of the risk, through profit or loss. in value. As such, fair value gains and losses on the derivative and the hedged The fair value of financial liabilities is determined using measurement item cancel out in profit or loss, except for the ineffective potion of the techniques such as option valuation models or the discounted cash hedge. flow method. The models take into account assumptions based on market data at the balance sheet date. 4-17 INVESTMENT GRANTS

4-16 DERIVATIVE INSTRUMENTS AND HEDGE The Group receives investment grants in the form of third-party asset ACCOUNTING financing, primarily received from regional authorities. Investment grants are recorded in operating payables and released Derivative instruments traded by the Group to manage currency, interest to operating income (reduction in the depreciation charge) over the rate and commodity risks are recorded in the balance sheet at their fair estimated useful life of the assets to which they relate. value at the balance sheet date.

4-16-1 General case 4-18 DEFERRED TAX Derivative instruments are initially measured at fair value and are remeasured to fair value at subsequent reporting dates. The Group recognises, for each tax entity, deferred tax on all temporary Fair value is determined using measurement techniques such as differences between the tax and book values of assets and liabilities in option valuation models or the discounted cash flow method. The the consolidated balance sheet. Deferred tax is recorded using the models take into account assumptions based on market data at the liability method, applying the most recently voted tax rate at the year- balance sheet date. end applicable to the period in which the temporary differences are expected to reverse.

SNCF — FINANCIAL report 2007 - 63 4. ACCOUNTING POLICIES

Deferred tax assets in respect of temporary differences and tax losses 4-20 Provisions or credits carried forward are recognised when recovery is deemed highly probable. The forecasting range adopted by the Group to assess Provisions are recorded when, at the balance sheet date, the Group this recoverability was limited by prudence to that of the available business has a present obligation to a third party as a result of a past event and plans, i.e. 3 years. No deferred tax asset is recognised beyond this the settlement of this obligation will require an outflow of Company limit. resources. A deferred tax liability is recognised in respect of investments in sub- This obligation may be legal, regulatory or contractual and may result sidiaries, joint ventures and equity associates, on all temporary timing from Group practice or external commitments that create valid expec- differences between the book and tax values of shares, unless: tations in third parties that the Group will assume certain responsibili- – the group controls the date at which the timing difference will reverse ties. (e.g. through a dividend distribution or the sale of an investment); and The estimated amount of the provision reflects the outflow of resources – it is probable that this difference will not reverse in the foreseeable that is likely to be necessary to settle the Group’s obligation. If a reliable future. estimate of this amount cannot be made, a provision is not recorded Therefore, a deferred tax liability is only recognised in respect of and disclosure is provided in the notes to the financial statements. wholly or proportionately consolidated companies in the amount of any A contingent liability is a possible obligation that arises from past withholding tax due on dividend distributions planned by the Group. events whose existence will only be confirmed by the occurrence of A deferred tax asset is only recognised to the extent that it is probable uncertain future events not wholly within the control of the entity, or a that: probable obligation where it is not probable that an outflow of resources – the temporary difference will reverse in the foreseeable future; and will be required. Except for contingent liabilities recognised as part of a – taxable profits will exist against which this temporary difference can business combination, contingent liabilities are not recorded. Disclosure be offset. is provided in the notes to the financial statements. Deferred tax assets and liabilities are not discounted and are recorded Provisions are discounted where the impact of discounting is material. in non-current items. 4-20-1 Provisions for environmental risks The Group provides for environmental risks when the realisation of 4-19 SHARE PURCHASE COMMITMENTS the risk is deemed probable. This provision covers the costs of envi- ronmental protection and site restoration and clean-up. It specifically The minority shareholders of certain fully consolidated companies hold includes a contingency provision for asbestos lawsuits filed against the share purchase commitments granted by the Group. Group. IAS 27, Consolidated and Separate Financial Statements, and IAS 32, With a view to the enactment in French law of Directive 2004/35 of Financial Instruments: Presentation, as they currently stand, lead the 21 April 2004, on environmental liability and introducing the so-called Group to record firm and conditional minority interest purchase com- polluter-payer principle, SNCF launched a review in order to assess the mitments as a financial liability with an offsetting reduction in minority impact of this Directive on its activities. Appraisals are currently in interests. progress, notably with regard to decontamination and asbestos removal Where the commitment value exceeds the amount of minority inter­ work and should be completed during 2008. ests, the residual balance is recorded as additional goodwill. The fair value of minority interest purchase commitments is revalued at each 4-20-2 Provisions for disputes and litigation balance sheet date and the corresponding financial liability is adjusted The Group is involved in a certain number of disputes and litigation with recognition of an offsetting financial income or expense. arising in the normal course of its activities and notably: – performance bonds received from companies supplying construction work, – guarantees granted to clients in the freight transportation sector covering incidents arising during transport. Such disputes and litigation are provided based on an assessment of the related risk.

64 - CONSOLIDATED FINANCIAL STATEMENTs Up to and including 1999, the parent company self-insured the majority The portion of the net charge corresponding to service costs is recorded of risks associated with its activities. In 2000, the parent company took in operating profit and the portion of the net charge corresponding to out a number of insurance policies providing coverage beyond an initial the interest expense net of the expected return on plan assets is recorded level covered by self-insurance. in finance costs.

4-20-3 Restructuring provisions The cost of restructuring measures is provided in full in the year 4-22 SPECIAL DEBT ACCOUNT AND PUBLIC in when such measures are decided, in principle, and announced DEBT FUND RECEIVABLE in sufficient detail prior to the period-end closing in order to create an expectation that they will be implemented. Restructuring costs The Special Debt Account liability is recorded in liabilities in the SNCF primarily consist of employee departure costs and the cost of writing balance sheet, with an offsetting receivable representing the commit- off non-current assets, inventory and other assets. ment of the French State, transferred in December 2007 to the Public Debt Fund (see Note 4.11.4.2). 4-20-4 Provisions for onerous contracts This debt was initially measured at fair value and is subsequently Provisions are recognised for long-term contracts to meet expected measured at amortised cost using the effective interest rate. losses. Provisions depend on the time lapsed since the signature of Derivative instruments hedging this debt are recorded in the balance the contract and are valued based on unavoidable costs. sheet at fair value through profit or loss; hedge accounting is not applied.

4-21 EMPLOYEE BENEFITS 4-23 REVENUE RECOGNITION In accordance with the laws and practice in the countries in which it operates, the Group participates in pension, early retirement, termination 4-23-1 Transport activities (passengers, freight) payment and health insurance schemes. Revenue is recognised based on the effective transportation of pas- In France, the main employee benefit schemes are the special regime sengers and freight. for employees with SNCF qualifying status (see Note 17 for detailed Revenue recognised in the system on the issue of a passenger transport specifications) and, for subsidiaries, retirement termination payments ticket is adjusted at the period-end for tickets issued but not used, which and long-service medals. Outside France, the main companies offering are taken to Deferred income. defined-benefit schemes are the United Kingdom, Italy, Germany and the Netherlands. For the basic schemes and other defined-contribution schemes, the 4-23-2 Contributions from the french state Group expenses contributions payable when they are due. No provisions and regional authorities are recognised as the Group does not have any obligation beyond the These contributions comprise price subsidies covering socially- contributions paid. motivated prices introduced by the French State and contributions In the case of defined-benefit schemes, Group obligations are covered remunerating global services within a contractual framework or by insurance funds or provisions recorded in the balance sheet as specific services. benefit entitlement is acquired by employees. Such provisions are They are recorded under Revenue. determined as follows: – the projected unit credit actuarial method is used; this stipulates 4-23-3 Engineering and contracting services that each period of service gives rise to an additional unit of benefit performed by the group and measures each unit separately to determine the final obligation. Sub-contracting and project management work performed by the Calculations include assumptions concerning the discount rate, morta­ Group over a number of periods is recognised based on contractual lity, employee turnover and expected future salary levels; data and the economic stage of completion. – the corridor method is applied; as such, actuarial gains and losses that exceed 10% of the greater of the obligation and the market value of investments are recognised and amortised over the expected average remaining working lives of participating employees.

SNCF — FINANCIAL report 2007 - 65 4. ACCOUNTING POLICIES

4-23-4 Maintenance 4-25-2 Segment indicators Maintenance income and income from the operation of the rail The Group presents the required balance sheet and income statement network is recognised in accordance with the multi-year contract indicators by business. negotiated with the network owner. The accounting methods adopted by each operating division are identical to those used in the preparation of the consolidated financial statements. The information presented for each division includes transactions 4-24 RESEARCH COSTS between divisions.

Research costs are expensed in the year incurred. 4-25-3 Inter-division transactions All transactions between operating divisions are eliminated in the presentation of the Group’s consolidated financial statements. 4-25 BUSINESS AND GEOGRAPHICAL SEGMENT REPORTING 4-25-4 Determination of geographical segments As activities are essentially carried out in France and to a lesser extent 4-25-1 Business segments in Europe, the following geographical segments are presented: In addition to its core businesses of passenger and freight rail trans- – France, port and the delegated management of the infrastructure, SNCF has – Europe excluding France developed a number of activities performed by subsidiaries. – Rest of the world. These primarily enrich, complement and extend the activities of the The indicators presented for Europe and the Rest of the world include parent company in four operating divisions: activities exercised outside France and export activities performed by – Passengers France and Europe, French companies of the Group. – Local transport – Transport and Logistics – Infrastructure and Engineering 4-26 INCOME STATEMENT ANALYTICAL and an operations division (Common Operations and Investments). BALANCES This latter branch notably encompasses the holding company activities of SNCF Participations and the service provider activities of the parent SNCF Group has elected to present its Income Statement by nature. company (Traction, Equipment and Transversal services). Several analytical balances are identified in order to provide users of the financial statements with information on the component items making up Group net profit.

4-26-1 Gross profit Gross profit is equal to revenue plus incidental income, net of expenses directly relating to operating activities and primarily purchases, sub- contracting costs, other external services, employee costs, taxes and duties other than income tax and miscellaneous other items. All charges to employee-related provisions and in particular charges to pension provisions (excluding the finance cost) are included in “Employee benefits expense”.

66 - CONSOLIDATED FINANCIAL STATEMENTs 4-26-2 Current operating profit In addition to gross profit, current operating profit includes the majority of non-cash items (depreciation and amortisation, charges to provisions, etc.) and miscellaneous other items not directly attributable to another Income Statement account.

4-26-3 Operating profit Transactions of an unusual nature, either due to their frequency or amount, are recorded separately below current operating profit. This presentation has been adopted in order to provide users with as reliable an overview as possible of the recurring performance of the Group. The transactions concerned are limited in number and comprise: – impairment losses – real estate disposals, – disposals of subsidiaries not representing a discontinued operation as defined by IFRS 5.

4-26-4 Finance costs Finance costs presented by the Group reflect the impact of financing transactions. Finance costs comprise two components: – net borrowing costs, consisting of interest paid on Group borro­wings, proceeds from the RFF receivable and the Public Debt Fund receiva- ble and interest received on available cash balances. These items are presented after hedging transactions and include fair value gains and losses on derivative instruments not meeting hedge accounting criteria; – the Finance cost of employee benefits, comprising interest reco- gnised on the actuarial obligation in respect of all post-employment commitments, net of interest recognised on corresponding financial assets.

SNCF — FINANCIAL report 2007 - 67 5. SEGMENT REPORTING

Primary segment reporting in accordance with IAS 14 is presented by business segment. Secondary segment reporting is presented by geographical area.

5-1 BUSINESS SEGMENT 5-1-1 Business segment results for the years ended 31 december 2007 and 2006

In € millions 31/12/2007 Passengers Local Transport Infra­ Common Inter- Total France transport and structure operations division and Europe logistics and engineering

External revenue 5,786 5,749 7,514 4,060 582 23,691 Internal revenue 1,105 1 5 9 2 1 2 472 3,607 - 5,556 Revenue 6,891 5,908 7,726 4,532 4,190 - 5,556 23,691

Current operating profit 891 6 2 – 23 – 67 684 1,547

Operating profit 9 0 0 4 0 5 7 – 69 716 1,644

Depreciation and amortisation – 415 – 321 – 243 – 64 – 156 – 1,198 Net charge to provisions 1 0 2 – 6 22 – 52 – 24 Impairment losses 4 – 21 – 2 – 1 – 0 – 21

Gross investment – 654 – 1,366 – 421 – 105 – 444 – 2,990 Grants received 3 9 9 7 4 1 3 38 1,055

68 - CONSOLIDATED FINANCIAL STATEMENTs In € millions 31/12/2006 Passengers Local Transport Infra­ Common Inter- Total France transport and structure operations division and Europe logistics and engineering

External revenue 5,437 5,535 6,465 3,973 555 21,965 Internal revenue 810 234 224 480 3,469 – 5,217 0 Revenue 6,247 5,770 6,688 4,453 4,024 – 5,217 21,965

Current operating profit 778 104 – 69 – 102 1,050 – 0 1 760

Operating profit 752 74 – 694 – 97 1,317 – 0 1,352

Depreciation and amortisation – 399 – 290 – 278 – 65 – 178 0 – 1,210 Net charge to provisions – 20 – 21 31 – 25 50 0 16 Impairment losses – 25 – 29 – 677 – 1 32 0 – 701

Gross investment – 703 – 1,185 – 426 – 86 – 461 – 2,861 Grants received 72 781 1 0 13 868

SNCF — FINANCIAL report 2007 - 69 5. SEGMENT REPORTING

5-1-2 Balance sheet items by business segment as at 31 December 2007 and 2006

In € millions 31/12/2007 Passengers Local Transport Infra­ Common Inter- Total France transport and structure operations division and Europe logistics and engineering

Goodwill 3 0 502 0 2 509 Intangible assets 7 3 1 5 1 5 4 3 4 1 3 3 409 Property, plant and equipment 6,702 7,815 2,278 4 7 6 3,555 20,826 Investments in associates – 0 5 7 5 3 0 1 5 0 260

Inventories and work-in-progress 1 0 2 0 238 354 6 1 3 Operating receivables 550 623 1,278 1,267 1,563 – 317 4,963

Assets classified as held for sale 0 0

Total segment assets 7,328 8,510 4,285 2,017 5,757 – 317 27,581

Non-current provisions 7 9 8 6 11 3 4 7 1 6 5 491

Current provisions 4 2 3 1 7 1 5 3 7 258 Operating receivables 1,732 6,343 1,960 1,562 2,681 – 317 13,961

Liabilities directly associated with assets classified as held for sale

Total segment liabilities 1,853 6,431 2,244 1,614 2,883 – 317 14,709

70 - CONSOLIDATED FINANCIAL STATEMENTs In € millions 31/12/2006 Passengers Local Transport Infra­ Common Inter- Total France transport and structure operations division and Europe logistics and engineering

Goodwill 4 6 9 1 5 1 1 2 227 Intangible assets 5 9 8 4 6 2 4 8 1 2 1 7 Property, plant and equipment 6,542 7,007 2,141 455 3,542 19,687 Investments in associates – 0 3 0 5 0 0 1 5 7 237

Inventories and work-in-progress 2 1 2 1 1 8 9 268 482 Operating receivables 522 484 1,386 1,188 2,528 – 336 5,770

Assets classified as held for sale 11 409 420

Total segment assets 7,129 7,597 3,807 1,858 6,987 – 336 27,040

Non-current provisions 9 3 6 5 1 3 5 5 8 9 4 445

Current provisions 3 3 1 2 1 6 8 7 8 3 304 Operating receivables 1,503 5,361 1,818 1,329 2,460 – 336 12,134

Liabilities directly associated with assets classified as held for sale

Total segment liabilities 1,628 5,438 2,121 1,394 2,637 – 336 12,882

SNCF — FINANCIAL report 2007 - 71 5. SEGMENT REPORTING

5-2 GEOGRAPHICAL AREA

In € millions 31/12/2007 31/12/2006 France Europe Rest of Total France Europe Rest of Total excl. the world excl. the world France France

Intangible assets 290 11 9 409 2 1 4 3 2 1 7 Property, plant & equipment 20,590 225 1 2 20,826 19,443 235 1 0 19,687 Total intangible assets and PP&E 20,879 344 12 21,235 19,657 238 10 19,904

Investment grants 5,867 1 5,867 4,959 1 4,959 Assets owned outright 15,013 343 1 2 15,368 14,698 237 1 0 14,945

72 - CONSOLIDATED FINANCIAL STATEMENTs 6. GOODWILL

Movements in goodwill during the period break down as follows:

In € millions Gross carrying Impairment Net carrying amount amount As at 1 January 2006 1 8 4 – 19 165

Acquisitions/Additions (1) 6 8 6 8 Provisions – 5 – 5 Disposals/Decreases – 3 – 3 Exchange differences – 2 2 – 1 Other changes in consolidation scope 3 3

As at 31 December 2006 250 – 23 227

As at 1 January 2007 250 – 23 227

Acquisitions/Additions 360 360 Provisions 0 – 2 – 2 Disposals/Decreases – 1 – 1 Reclassifications (1) – 69 – 69 Exchange differences – 3 0 – 3 Other changes in consolidation scope – 6 1 – 5

As at 31 December 2007 532 – 23 509

(1) Financière Kéos share subscription warrants purchased in 2006 and not exercised were reclassified in Investments in associates in 2007.

Acquisitions in 2007 mainly concern the acquisition of Wilson (see Note 2.2.1). The main goodwill balances recorded by the Group at the balance sheet date are as follows:

In € millions 31/12/2007 31/12/2006 Change

Geodis Group (Transport and logistics) 451 9 4 357 o/w Wilson 359 359 Ermewa Group (Transport and logistics) 3 9 4 5 – 5 Keos (Local transport) 6 8 – 68 Other 1 8 2 0 – 1

Total 509 227 282 The decrease in Ermewa goodwill reflects the reduction in the percentage holding and consolidation of this sub-group, which is consolidated on a proportionate basis.

SNCF — FINANCIAL report 2007 - 73 7. INTANGIBLE ASSETS

Group intangible assets mainly comprise purchased software licences, software developed in-house, leasehold rights and, since 2007, customer portfolios and trade names acquired with control of Wilson. Movements in intangible assets during 2006 break down as follows:

In € millions 01/01/2006 Additions // Disposals / Change in Other 31/12/2006 Charges Reversals consolidation changes scope

Gross carrying amount Concessions, Patents, Software 2 1 8 8 2 – 15 1 7 294 Other intangible assets 4 3 3 – 6 5 3 4 7 Intangible assets in progress 4 9 7 – 0 6 11 7 3

Total gross carrying amount 3 1 0 9 2 – 21 1 2 2 1 414

Amortisation/provisions Concessions, Patents, Software – 149 – 45 1 4 0 0 – 179 Other intangible assets – 16 – 2 3 – 1 0 – 16 Intangible assets in progress – 0 – 1 0 0 – 1

Total amortisation/provisions – 165 – 49 1 7 – 1 1 – 197

Total net carrying amount 145 4 3 – 4 1 1 2 2 2 1 7

74 - CONSOLIDATED FINANCIAL STATEMENTs L’évolution du poste au cours de l’exercice s’explique de la manière suivante :

In € millions 01/01/2007 Additions // Disposals / Change in Other 31/12/2007 Charges Reversals consolidation changes scope

Gross carrying amount Concessions, Patents, Software 294 7 4 – 11 11 1 0 377 Other intangible assets 4 7 1 – 2 1 2 4 – 3 1 6 7 Intangible assets in progress 7 3 5 3 – 0 – 8 1 4 1 3 1

Total gross carrying amount 414 128 – 14 127 2 1 6 7 6

Amortisation/provisions Concessions, Patents, Software – 179 – 57 11 - 8 - 8 – 241 Other intangible assets – 16 – 11 2 - 3 2 – 26 Intangible assets in progress – 1 1 0

Total amortisation/provisions – 197 – 68 1 5 – 11 – 6 – 267

Total net carrying amount 2 1 7 6 0 1 1 1 5 1 6 409

In 2007, other intangible assets increased €122 million in respect of Impairment losses are not material. The increase in amortisation and customer portfolios and trade names acquired with the entry into the provisions primarily reflects the amortisation charge for the period. scope of consolidation of Geodis Wilson (see Note 2.2.1). Changes in value due to foreign currency translation are not material. Additions for the period include software developed in-house, either brought into service or under development, of €77 million.

SNCF — FINANCIAL report 2007 - 75 8. PROPERTY, PLANT AND EQUIPMENT

Movements in property, plant and equipment during 2006 break down as follows:

In € millions 01/01/2006 Additions // Disposals / Change in Other 31/12/2006 Charges Reversals consolidation changes scope

Gross carrying amount Land 1,611 7 0 – 31 0 3 9 1,690 Buildings 7,864 264 – 217 2 1 7 7,930 Industrial and technical plant 2,195 1 9 8 – 77 4 7 2,328 Transportation equipment 22,698 1,433 – 436 3 2 7 23,726 Rail equipment 21,779 1,348 – 382 – 0 2 0 22,766 Road equipment 561 8 5 – 5 4 3 7 603 Maritime equipment 357 357 Other property, plant and equipment 785 101 – 28 1 – 2 857 Property, plant and equipment in progress 2,304 646 – 6 0 – 18 2,926

Total gross carrying amount 37,458 2,712 – 795 1 0 7 1 39,457

Depreciation/provisions Land – 94 – 14 6 – 0 1 8 – 84 Buildings – 3,697 – 305 1 3 9 – 1 – 19 – 3,884 Industrial and technical plant – 1,461 – 121 7 5 – 4 – 2 – 1,513 Transportation equipment – 12,552 – 1,613 482 – 13 9 7 – 13,599 Rail equipment – 12,025 – 1,543 434 – 11 9 8 – 13,047 Road equipment – 363 – 6 0 4 9 – 2 – 2 – 378 Maritime equipment – 1 6 4 – 1 0 –1 7 4 Other property, plant and equipment – 525 – 78 2 8 – 1 4 – 572 Property, plant and equipment in progress – 16 – 81 5 7 8 – 85 – 11 7

Total depreciation/provisions – 18,345 – 2,212 787 – 11 1 2 – 19,770

Total net carrying amount 19,114 5 0 0 – 8 – 1 8 3 19,687

76 - CONSOLIDATED FINANCIAL STATEMENTs Movements in property, plant and equipment during 2007 break down as follows:

In € millions 01/01/2007 Additions // Disposals / Change in Other 31/12/2007 Charges Reversals consolidation changes scope

Gross carrying amount Land 1,690 1 – 30 – 0 1 0 4 1,765 Buildings 7,930 3 7 4 – 106 – 8 4 1 8,231 Industrial and technical plant 2,328 1 9 4 – 37 1 5 2,491 Transportation equipment 23,726 1,952 – 556 – 62 5 7 25,118 Rail equipment 22,766 1,906 – 5 1 9 – 6 2 5 2 24,143 Road equipment 603 4 6 – 3 7 – 0 6 6 1 8 Maritime equipment 357 357 Other property, plant and equipment 857 1 0 3 – 41 2 0 – 12 926 Property, plant and equipment in progress 2,926 237 – 2 7 – 281 2,887

Total gross carrying amount 39,457 2,862 – 771 – 43 – 85 41,419

Depreciation/provisions Land – 84 – 17 0 – 0 0 – 1 0 0 Buildings – 3,884 – 348 5 9 6 2 8 – 4,138 Industrial and technical plant – 1,513 – 124 3 5 0 – 2 – 1,604 Transportation equipment – 13,599 – 1,113 694 1 5 – 6 – 14,009 Rail equipment – 13,047 – 1,066 663 1 4 – 4 – 13,441 Road equipment – 378 – 3 6 3 1 1 – 2 – 384 Maritime equipment – 1 7 4 – 1 0 – 0 – 1 8 4 Other property, plant and equipment – 572 – 89 3 7 – 13 1 3 – 625 Property, plant and equipment in progress – 11 7 – 54 5 2 2 – 11 7

Total depreciation/provisions – 19,770 – 1,745 878 1 0 3 3 – 20,593

Total net carrying amount 19,687 1,117 1 0 6 – 33 – 52 20,826

SNCF — FINANCIAL report 2007 - 77 8. PROPERTY, PLANT AND EQUIPMENT

A breakdown of charges to depreciation and impairment losses recorded in profit or loss is presented in Note 26. Changes in value due to foreign currency translation are not material. 2006 and 2007 capital expenditure flows break down as follows:

In € millions 31/12/2007 31/12/2006

Acquisition of intangible fixed assets – 1 2 8 – 9 2 Acquisition of tangible fixed assets – 2,862 – 2,712

Total acquisitions – 2,990 – 2,804 inc. fixed assets held as finance-leasing – 26 – 33

Acquisitions excluding finance-leasing – 2,965 – 2,771

Capital expenditure flows - 115 134

Tangible and intangible capital expenditure flows – 3,080 – 2,638

Capital expenditure during the period primarily comprises: Capitalised production included in additions totals €973 million and – upgrade work to stations and buildings (creation of a TGV workshop includes: in Lyon, multimodal hub at Marseille St. Charles, refurbishment of – fixed assets of €526 million, the Orleans and Le Mans stations and building work at Lyon Perrache) – rolling stock of €447 million, totalling €692 million; The impact of changes in Group structure on rolling stock corresponds – acquisition and renovation of rolling stock for €1,854 million, primarily to the decrease in the percentage consolidation of Ermewa French relating to the following projects: high capacity railcars (€496 million), companies. new generation double-decker TERs (€270 million), double-decker Asset-financing grants received totalled €904 million, including TGVs (€230 million), freight locomotives (€111 million), New Transilien €731 million for rolling stock and €173 million for fixed installations. Electric Railcars (€86 million), Transilien locomotives (€81 million) and the TGV East European (€62 million).

78 - CONSOLIDATED FINANCIAL STATEMENTs Assets recorded in property, plant and equipment and held under finance lease agreements break down as follows:

In € millions 31/12/2007 31/12/2006 Gross carrying Depreciation Net carrying Net carrying amount amount amount

Land 23 0 23 26 Buildings 466 – 192 274 275 Transportation equipment 4,052 – 1,842 2,210 2,227 Rail equipment 3,862 – 1,775 2,087 2,020 Road equipment 88 – 5 5 33 40 Maritime equipment 101 – 11 90 168 Other property, plant and equipment 26 – 21 5 7 Property, plant and equipment in progress 106 0 106 0

Total 4,674 – 2,054 2,619 2,535

Parent company fixed asset register Following completion of this allocation, the implementation of the The company has a fixed asset register representative of all its properties, arbitration conclusions remained subject to dispute in certain areas, including those assets subject since 1997 to the conflicting interpreta- making it difficult to record the definitive consequences in the SNCF tions of Law no. 97-135 of 13/02/97 and its application decrees. financial statements. Since 1999, the National Commission of Asset Allocation (Commission The Executive Vice-President for the Sea and Transport asked the Trans- Nationale de Répartition des Actifs) has analysed the four main areas port Economic and Financial Control Department (Mission de Contrôle of disagreement concerning land used for freight purposes (CM4 Economique et Financier des Transports, MCEFT) to clarify the position plots), housing, passenger concourses in stations and the volume of the two institutions in these areas. division of buildings. The value of these assets is currently included in Based on the MCEFT report issued on 20 February 2008, a compre- Group property, plant and equipment. hensive agreement had still to be reached between RFF and SNCF at At the request of the supervisory ministries, a report on the allocation the closure of the SNCF 2007 financial statements of assets between RFF and SNCF was submitted on 2 January 2004. The arbitration commission that was set up completed its work in the second half of 2006 and submitted its report on 16 October 2006. The report was published in the Official Journal on 29 November 2006.

SNCF — FINANCIAL report 2007 - 79 9. FINANCIAL ASSETS

Financial assets maturing in less than 12 months at the balance sheet date are recorded in Current financial assets. The fair value of asset derivative instruments is classified in current and non-current assets based on the final maturity of the derivative. Current and non-current financial assets as at 31 December 2007 and 2006 break down as follows:

In € millions Note 31/12/2007 31/12/2006 (1) Non- Current Total Non- Current Total current current

Loans and receivables 8,825 5,520 14,345 92,968 5,576 98,543 RFF receivable 9-1 2,393 1,336 3,729 3,675 1,497 5,172 Public Debt Fund receivable(1) 4-11-4 - 2 6,075 2,176 8,251 8,007 198 8,205 and 9-3 Expected payments under the pension regime 9-2 0 0 0 80,931 3,336 84,267 Other 9-4 357 2,008 2,365 354 545 899

Available-for-sale assets 167 167 176 176 Assets at fair value through profit or loss 15 31 852 883 48 344 392 Positive fair value of hedging derivatives 20 22 6 28 46 0 46 Positive fair value of trading derivatives 20 341 17 358 256 7 263 Accrued interest receivable on derivatives 169 169 201 201 Total 9,386 6,564 15,950 93,494 6,128 99,622

(1) Expected payments in respect of the Special Debt Account as at 31/12/2006.

UCITS included in assets at fair value through profit or loss are valued at their net asset value at the balance sheet date. Available-for-sale assets comprise unconsolidated investments in associates.

9-1 RéSEAU FERRé DE FRANCE (RFF) RECEIVABLE

The principles governing the measurement and recognition of this receivable are presented in Note 4.11.4. The receivable breaks down as follows:

In € millions 31/12/2007 31/12/2006 Non- Current Total Non- Current Total current current

At amortised cost 1,776 244 2,020 1,646 1,353 2,999 Recognised using fair value hedge accounting 617 993 1,610 2,029 2,029 Accrued interest receivable 99 99 144 144 Total 2,393 1,336 3,729 3,675 1,497 5,172

80 - CONSOLIDATED FINANCIAL STATEMENTs Fair value of the RFF receivable

In € millions 31/12/2007 31/12/2006 Fair Net Fair Net value carrying value carrying amount amount

RFF receivable 3,935 3,729 5,564 5,172

The maturity schedule based on year-end exchange rates and interest rates is as follows:

In € millions 31/12/2007 31/12/2006 Nominal Interest Nominal Interest

Less than 1 year 1,242 237 1,353 312 1 to 2 years 448 144 1,242 229 2 to 3 years 57 127 448 138 3 to 4 years 93 124 57 125 4 to 5 years 200 114 101 121 More than 5 years 1,574 729 1,797 838

Total 3,614 1,475 4,998 1,763

9-2 EXPECTED PAYMENTS UNDER THE PENSION 9-3 PUBLIC DEBT FUND RECEIVABLE/ SCHEME EXPECTED PAYMENTS UNDER THE SPECIAL DEBT ACCOUNT Pursuant to Article 30, the former Pension and Provident Fund received repayments each year, as set out in Note 17 and in the IFRS transition Up to the end of December 2007, the Group received each year a note (see Note 39). contribution from the French State voted as part of the Finance Law The creation of the Employee Pension and Provident Fund (CPRP) with and intended to repay the borrowings transferred to the Special Debt effect from 30 June 2007, led to the removal of financial assets from Account. This contribution totalled €627 million in 2006. The total financial the SNCF Group balance sheet. The accounting impacts are presented asset excluding derivative instruments in respect of this receivable on and discussed in Note 3. the French State totalled €8,205 million as at 31 December 2006. At the end of December 2007, the receivable representing payments expected in respect of the Special Debt Account was replaced by a Public Debt Fund receivable. Excluding derivative instruments, this receivable totalled €8,251 million as at 31 December 2007.

SNCF — FINANCIAL report 2007 - 81 9. financial assets

The fair value and net carrying amount of this receivable are as follows:

In € millions 31/12/2007 31/12/2006 (1) Fair Net Fair Net value carrying value carrying amount amount

Receivable on CDP (Public Debt Fund) 8,314 8,251 8,422 8,205 (1) Expected payments in respect of the Special Debt Account as at 31/12/2006.

The maturity schedule based on year-end exchange rates and interest rates is as follows:

In € millions 31/12/2007 31/12/2006 (1) Nominal Interest Nominal Interest

Less than 1 year 1,969 462 0 467 1 to 2 years 1,172 318 1,968 466 2 to 3 years 1,084 263 1,172 321 3 to 4 years 68 208 1,148 266 4 to 5 years 930 205 76 209 More than 5 years 2,638 1,115 3,584 1,320

Total 7,861 2,571 7,948 3,049

(1) Expected payments in respect of the Special Debt Account as at 31/12/2006. 9-4 OTHER LOANS AND RECEIVABLES

Other loans and receivables held by the Group break down as follows:

In € millions Note 31/12/2007 31/12/2006 Non- Current Total Non- Current Total current current

Deposits and guarantees 30 30 575 605 29 459 488 CPRP receivable (1) 1,365 1,365 0 Other loans and receivables 327 68 395 325 86 4 11

Total 357 2,008 2,365 354 545 899

(1) As at 31 December 2006, the payment of 2008 first quarter pensions was recorded in other operating receivables (see Note 14). As this payment is made on behalf of the CPRP autonomous fund during the management mandate granted to SNCF, the CPRP receivable is recorded in current financial assets.

82 - CONSOLIDATED FINANCIAL STATEMENTs 9-5 FINANCIAL ASSET IMPAIRMENT PROVISIONS

Financial assets are presented above at their net carrying amount. Movements in financial asset impairment provisions during 2006 and 2007 were as follows:

In € millions 31/12/2006 Charge Reversal Reclas- Change in Exchange 31/12/2006 sification consoli- differences dation and other scope Impairment provisions on available-for-sale assets – 27 – 1 8 1 0 0 – 19 Impairment provisions on non-current loans and receivables – 14 0 1 0 1 0 – 1 3 Impairment provisions on current loans and receivables – 2 0 0 0 0 0 – 2

Total – 42 – 1 8 1 1 0 – 34

In € millions 31/12/2006 Charge Reversal Reclas- Change in Exchange 31/12/2007 sification consoli- differences dation and other scope Impairment provisions on available-for-sale assets – 19 0 9 0 – 1 0 – 1 3 Impairment provisions on non-current loans and receivables – 1 3 0 0 0 0 0 – 1 3 Impairment provisions on current loans and receivables – 2 0 0 0 0 0 – 2

Total – 34 – 1 9 – 1 – 1 0 – 27

10. INVESTMENTS IN E.S.H. LOW-RENTAL HOUSING COMPANIES

The E.S.H. low-rental housing companies in which the Group holds a are as follows: majority interest are not consolidated due to the absence of effective – Non-current assets: €2,261 million (€2,149 million in 2006) control. (see Note 4.2) – Non-current financial liabilities (debts): €1,559 million (€1,514 million The main consolidated balance sheet headings of these companies in 2006)

SNCF — FINANCIAL report 2007 - 83 11. INVESTMENTS IN ASSOCIATES

The Group holds several investments in associates, accounted for using the equity method. The net carrying amount of investments in these companies breaks down as follows:

In € millions 31/12/2007 31/12/2006 % Interest Net profit Investment in Investment in associates (incl. associates net profit)

Eurofima 22.60% 6 1 4 2 1 5 0 STVA Group subsidiaries 2 3 6 3 3 Financière Keos / Kuvera 45% 2 4 5 7 3 0 FRP Group 20% 1 8 6 Other investments 3 1 7 1 8

Total 3 7 260 237

Movements in Investments in associates during 2007 break down as follows:

In € millions

Au 01/01/2007 237

Share of profit of associates 37 Change in scope – 5 Net gains on changes in fair value 4 Keos share capital reduction – 7 2 Reclassification (1) 68 Dividends paid – 5 Exchange differences – 4

As at 31 December 2007 260

(1) ) Financière Kéos share subscription warrants purchased in 2006 and not exercised were reclassified in Investments in associates in 2007.

84 - CONSOLIDATED FINANCIAL STATEMENTs The summary financial information presented below in respect of associates represents 100% of the headings concerned and not the percentage held.

In € millions 31/12/2007 Kuvera Eurofima FRP Total

Current assets 852 2,802 5 3 3,707 Non-current assets 880 18,552 11 19,443 Current liabilities 1,040 1,088 3 8 2,166 Non-current liabilities 721 19,223 1 19,945

Net assets – 28 1,043 2 5 1,039

In € millions 31/12/2006 Keos Eurofima FRP Total

Current assets 606 2,881 4 9 3,536 Non-current assets 864 18,492 1 0 19,366 Current liabilities 845 1,027 4 0 1,913 Non-current liabilities 572 19,327 1 19,900

Net assets 5 3 1,019 1 8 1,090

Kuvera replaces Keos as the new holding company of the Keolis Group (see Note 2.2).

Relations with Eurofima concern the financing of industrial assets. The impacts of this relationship are reflected in the accounts in accordance with IFRS. Assets purchased under finance lease via the intermediary of Eurofima are capitalised in the SNCF Group financial statements for a gross value of €3,173 million as at 31 December 2007. The related financing liability is €3,018 million as at 31 December 2007, compared to €3,170 million as at 31 December 2006.

In € millions 31/12/2007 Keos / Kuvera Eurofima FRP Total

Revenue 2,758 8 1 2,839 Operating profit 9 6 27 6 130

Net profit for the year 5 3 27 7 87

In € millions 31/12/2006 Keos Eurofima FRP Total

Revenue 2,594 7 8 2,672 Operating profit 6 5 2 9 5 1 1 4

Net profit for the year 1 5 2 9 4 4 9

SNCF — FINANCIAL report 2007 - 85 12. INVESTMENTS IN JOINT VENTURES

The Group’s share in the assets and liabilities of proportionately consolidated companies is as follows:

In € millions 31/12/2007 31/12/2006 Ermewa Systra Other Total Ermewa Systra Other Total

Share of assets and liabilities of joint ventures

Current assets 1 0 0 8 1 4 1 222 1 0 8 7 7 2 6 2 11 Non-current assets 309 1 3 7 329 337 1 2 7 356 Current liabilities 6 8 5 4 3 3 1 5 6 9 0 5 1 2 3 1 6 4 Non-current liabilities 289 3 1 293 236 3 1 240

Net assets 5 1 3 8 1 4 1 0 3 120 3 5 9 164

In € millions 31/12/2007 31/12/2006 Ermewa Systra Other Total Ermewa Systra Other Total

Share of profit of joint ventures

Revenue 1 9 2 11 5 4 1 348 203 1 0 3 2 8 334

Operating profit 3 0 7 5 4 2 2 1 4 4 2 9 Net profit for the year 8 6 4 1 7 9 4 3 1 7

13. INVENTORIES AND WORK-IN-PROGRESS

Inventories as at 31 December 2007 break down as follows:

In € millions 31/12/2007 31/12/2006 Gross Impairment Net Net Change

Raw materials 578 – 70 507 377 1 3 0 Finished products 63 – 0 6 3 3 7 2 6 Production work-in-progress 43 – 0 4 3 6 8 – 25

Inventories and work-in-progress 684 – 71 613 482 131

86 - CONSOLIDATED FINANCIAL STATEMENTs Movements in inventory impairment provisions break down as follows:

In € millions 31/12/2006 Charges Reversal 31/12/2007

Raw materials and supplies - impairment – 77 – 11 1 8 –70

Inventory impairment provisions – 77 – 11 1 8 – 70

14. OPERATING RECEIVABLES

Operating receivables as at 31 December 2007 break down as follows:

In € millions 31/12/2007 31/12/2006 Gross Impairment Net Net Change

Trade receivables and related accounts 3,047 – 250 2,797 2,635 1 6 2 Amounts receivable from the French State and local authorities 1,190 1,190 1,230 – 40 Other operating receivables 1,119 – 143 9 7 6 1,904 – 928

Net operating receivables 5,356 – 393 4,963 5,770 – 807

As at 31 December 2006, other operating receivables include the and Provident Fund (CPRP), the receivable on CPRP in respect of payment in advance of 2007 first quarter pensions of €1.2 billion. As at the €1.4 billion advance payment made in 2007 is recorded in current 31 December 2007, following the creation of the Employee Pension financial assets (see Note 9.4).

Movements in impairment provisions on trade receivables and other operating receivables during 2006 and 2007 break down as follows:

In € millions 31/12/2005 Charge Reversal Reclas- Change in Exchange 31/12/2006 sification consoli- differences dation and other scope

Impairment provisions on trade receivables – 237 – 49 42 – 5 0 0 – 249 Impairment provisions on non-financial current accounts and other receivables – 153 – 55 47 0 0 – 10 – 172

Total – 390 – 105 88 – 5 0 – 10 – 422

SNCF — FINANCIAL report 2007 - 87 14. OPERATING RECEIVABLES

In € millions 31/12/2006 Charge Reversal Reclas- Change in Exchange 31/12/2007 sification consoli- differences dation and other scope

Impairment provisions on trade receivables – 249 – 62 38 26 – 3 1 – 250 Impairment provisions on non-financial current accounts and other receivables – 172 – 57 88 1 0 – 2 – 143

Total – 422 – 11 9 126 26 – 3 – 2 – 393

Due to its business, Group exposure to credit risk is limited. Tickets are sold cash to passengers. In addition, the Group has significant relations with a number of public sector customers (RFF, regional authorities, RATP, STIF, armed forces, etc.). While receivables due by these customers may be past due, there are no grounds for impairment. Receivables are impaired when the Group is in dispute with a customer or when the ability to recover the receivable in full is modified. Trade receivables past due break down as follows:

In € millions Not past Impaired Past due but not impaired Total due < 3 months 4 to 6 7 to 12 > 12 months months months

Trade receivables and related accounts 2,434 295 162 80 42 35 3,047

88 - CONSOLIDATED FINANCIAL STATEMENTs 15. CASH AND CASH EQUIVALENTS

In € millions 31/12/2007 31/12/2006 Change

Monetary mutual funds (SICAV) equivalent to cash 2,807 2,526 281 Cash at bank and in hand 6 1 8 525 9 3 Cash and cash equivalents 3,424 3,051 3 7 4

The Group considers the nominal value of investments recorded in cash and cash equivalents to be a reasonable estimate of their market value.

16. MINORITY INTERESTS

Minority interests as at 31 December 2007 break down as follows:

In € millions 31/12/2007 31/12/2006

Geodis 295 1 8 5 STVA 3 2 3 2 Systra 1 0 9 Other 1 2 1 3

Total 348 238

The increase in Geodis minority interests follows the subscription by minority interests of a share capital increase performed in part to finance the acquisition of TNT Freight Management (Wilson).

SNCF — FINANCIAL report 2007 - 89 1 7. EMPLOYEE BENEFITS

The following provisions were booked for employee benefits:

In € millions 31/12/2007 31/12/2006

Pension obligations 7 7 112,555 Provident obligations 4 4 3,046 Social welfare initiatives 3 6 7 3 5 8 Compensation for work-related injuries 6 1 8 6 5 8 Long-service medals 3 6 3 9

Total provision 1,141 116,656 – o/w non-current 1,062 111,640 – o/w current 8 0 5,016

Expected payments in respect of pensions 84,267 – o/w non-current 80,931 – o/w current 3,336

Net provision 1,141 32,389

17-1 description OF EMPLOYEE BENEFITS 17-1-2 Provident obligations (up to 29 June 2007) The Company self-financed provident benefits provided to active and 17-1-1 Pension obligations (up to 29 June 2007) retired employees, via the SNCF Provident Fund and the SNCF Senior Article 30 of the SNCF terms of reference has defined, since 1 January Management Provident Fund. 1970, the terms and conditions under which the French State assured Benefits included the reimbursement of medical costs, temporary the financial balance of the regime. accommodation allowances, retirement allowances and death allowan- In addition to the payment by SNCF of “standardised” contributions ces. A portion of these guarantees were covered by the bilateral natio- to the Pension Fund, the French State assured the financial balance of nal compensation mechanism under the Social Security healthcare the regime. The “standard” contribution rate was determined based regime. In return for the payment of contributions equivalent to those on SNCF contributor and pensioner populations, adjusted for demo- due under the general regime, the Provident Fund received reimburse- graphic imbalance compared to that of other ordinary law pension ments in line with the general regime scale. schemes. The contribution rate was regularly reviewed until 1990. The As such, only additional health care guarantees, the temporary accom- Decree of 27 February 1991 set this rate at 36.29% of payroll costs, modation allowance and the retirement allowance remained at the paid 7.85% by employees and 28.44% by the employer. expense of SNCF. These represent the Provident Regime of SNCF The new benefits specific to the SNCF regime, created in 1990, com- qualifying employees, financed by additional employer and employee pared with the benchmark regime, were financed by SNCF and its contributions, deducted in addition to reinsurance contributions under employees. These new benefits concerned the definition of the liquid the bilateral health care compensation mechanism. pension base (successive integration of residence compensation The provision recorded in respect of provident benefits encompasses percentages and implementation of the new remuneration system) post-employment commitments given by SNCF to its employees, that and an increase in the minimum pension level. is payment of retirement and death allowances.

90 - CONSOLIDATED FINANCIAL STATEMENTs 17-1-3 Retired employee health care obligations 17-1-5 Retired employee social welfare initiatives (up to 29 June 2007) SNCF implements a number of social welfare initiatives: access to So that retired employees continued to benefit from health insurance infrastructures, consultation of social workers, etc. Both active and coverage, SNCF paid a contribution to the Provident Fund calculated retired employees may benefit from these initiatives. as a percentage of total pension payments made during the year. This SNCF recorded a provision in the amount of this post-employment contribution was approximately 3%. benefit. SNCF recorded a provision in the amount of this post-employment benefit. 17-2 MAIN ASSUMPTIONS 17-1-4 Compensation for work-related injuries SNCF self-finances the payment of compensation for work-related Provisions for pension and similar obligations are calculated on an injuries to active and retired employees, independently of the current actuarial basis, using the projected unit credit method. The main general regime. assumptions used in the model are as follows: Life annuities are provided in full at the date of grant to injured employees.

31/12/2007 31/12/2006

Gross discount rate 5.00% 4.25% Inflation rate 2.00% 2.00%

Mortality table: Senior Management Fund and social welfare initiatives TPG93 TPG93 Mortality table - active and retired employees with work-related injuries TD 88-90 TD 88-90 Mortality table - widows of employees with work-related injuries TV 88-90 TV 88-90

18-29 years: 2.0% 18-29 years: 2.0% 30-41 years: 0.0% 30-41 years: 0.0% Employee turnover 42-49 years: 0.3% 42-49 years: 0.3% 49-55 years: 0.9% 49-55 years: 0.9%

Gross rate of salary increase 3.50% 3.50%

Gross rate of pension increase 2.00% 2.00%

Obligations are discounted at a rate based on the rate of French government bonds of comparable maturity.

SNCF — FINANCIAL report 2007 - 91 17. EMPLOYEE BENEFITS

17-3 PRESENT VALUE OF OBLIGATION AND PROVISION

In accordance with the corridor method, the Group progressively records actuarial differences generated by changes in calculation assumptions. Improvements to the different regimes are also recognised progressively in profit or loss.

As at 31 December 2007 Pension Expected Net Provident Social Compen- Long- TOTAL obligation payments pension obligation welfare sation for service iniinitiative work medals related injuries

Present value 7 7 7 7 4 1 3 3 7 6 1 2 3 6 1,102

Actuarial gains and losses 3 3 0 6 3 9 Unamortised plan amendments

Provision 7 7 7 7 4 4 3 6 7 6 1 8 3 6 1,141

As at 31 December 2006 Pension Expected Net Provident Social Compen- Long- TOTAL obligation payments pension obligation welfare sation for service iniinitiative work medals related injuries

Present value 112,557 – 84,267 28,290 3,030 358 658 39 32,375

Actuarial gains and losses – 2 – 2 16 14 Unamortised plan amendments

Provision 112,555 – 84,267 28,288 3,046 358 658 39 32,389

92 - CONSOLIDATED FINANCIAL STATEMENTs 17-4 PROVISION MOVEMENTS DURING THE YEAR

Movements in provisions during the year break down for each regime as follows:

As at 31 December 2007 Pension Provident Social Compensa- Long- TOTAL obligation obligation welfare tion for work- service initiatives related medals injuries

Opening balance 28,288 3,046 3 5 8 6 5 8 3 9 32,389

Current service costs 246 2 8 7 3 285 Interest expense 591 6 5 15 28 699 Benefits paid – 766 - 68 – 14 – 68 – 7 – 923 Actuarial gains and losses Plan amendments Creation of the Fund (1) – 28,289 – 3,027 –31,316 Change in consolidation scope 6 6

Closing balance 7 7 4 4 3 6 6 6 1 8 3 5 1,141

(1) The new pension and provident regime operation and financing model led to the reversal of the obligation in full as at 30 June 2007 (€116,447 million) recognised in the 1 January 2006 opening balance sheet and updated as at 30 June 2007 and the removal of the corresponding assets (€85,131 million) (see Note 3.1).

As at 31 December 2006 Pension Provident Social Compensa- Long- TOTAL obligation obligation welfare tion for work- service initiatives related medals injuries

Opening balance 27,972 2,994 3 5 0 6 8 5 3 7 32,038

Current service costs 490 5 3 7 3 5 5 3 Interest expense 1,185 1 2 6 1 5 2 5 1,351 Benefits paid – 1,480 – 1 2 7 – 14 - 69 – 1 – 1,691 Actuarial gains and losses 1 7 1 7 Plan amendments 136 1 3 6 Creation of the Fund Change in consolidation scope – 1 5 – 15

Closing balance 28,288 3,046 3 5 8 6 5 8 3 9 32,389

SNCF — FINANCIAL report 2007 - 93 17. EMPLOYEE BENEFITS

Net expense recorded in profit or loss All movements in the provision for pension and similar obligations are recorded in gross profit under “Employee benefits expense”, except for the interest expense, recorded in “Finance costs”.

The Income Statement expense may be broken down as follows: As at 31 December 2007 Pension Provident Social Compensa- Long- TOTAL obligation obligation welfare tion for work- service initiatives related medals injuries

Current service cost 246 28 7 0 3 285 Cost of benefits paid 766 68 14 68 7 923 Benefits paid – 766 – 68 – 14 – 68 – 7 – 923 Actuarial gains and losses Plan amendments

Gross profit 246 28 7 – 0 3 285 Interest expense 591 65 15 28 0 699 Finance costs 591 65 15 28 0 699

NET EXPENSE 837 93 22 28 3 984

As at 31 December 2006 Pension Provident Social Compensa- Long- TOTAL obligation obligation welfare tion for work- service initiatives related medals injuries

Current service cost 490 53 7 0 3 553 Cost of benefits paid 1,480 127 14 69 1 1,691 Benefits paid – 1,480 – 127 – 14 – 69 – 1 – 1,691 Actuarial gains and losses 17 17 Plan amendments 136 136

Gross profit 626 53 7 17 3 706 Interest expense 1,185 126 15 25 1,351 Finance costs 1,185 126 15 25 1,351

NET EXPENSE 1,811 179 22 42 3 2,057

Travel privileges SNCF employees (active employees and their beneficiaries and retired employees) receive travel privileges which enable them to travel under certain circumstances at prices different from market prices. SNCF does not consider these travel privileges to have a material impact on its production resources.

94 - CONSOLIDATED FINANCIAL STATEMENTs 18. PROVISIONS

18-1 MOVEMENTS IN PROVISIONS

Movements in provisions for contingencies and losses during 2006 break down as follows:

In € millions 01/01/2006 Charge Reversal Reversal Other 31/12/2006 o/w o/w (used) (used) (not used) move- current non ments current

Tax and customs risks 3 4 6 – 20 – 2 0 1 8 11 7 Environmental risks 1 2 0 5 – 29 – 0 9 6 11 8 5 Litigation and contractual disputes 3 2 5 8 6 – 64 – 14 – 1 3 3 1 1 6 5 1 6 6 Restructuring costs 5 4 6 – 39 – 1 – 0 2 0 8 1 2 Other 2 1 8 1 9 3 – 1 2 1 – 8 1 2 8 3 1 0 8 1 7 5

Total provisions 7 5 1 2 9 6 – 273 – 25 – 0 7 4 9 3 0 4 4 4 5

Movements in provisions for contingencies and losses during 2007 break down as follows:

In € millions 01/01/2007 Charge Reversal Reversal Other 31/12/2007 o/w o/w (used) (used) (not used) move- current non ments current

Tax and customs risks 1 8 1 – 5 – 1 0 1 4 1 0 3 Environmental risks 9 6 1 0 0 – 15 – 5 0 1 7 6 2 3 1 5 3 Litigation and contractual disputes 3 3 1 4 9 – 30 – 34 – 0 3 1 6 1 5 5 1 6 1 Restructuring costs 2 0 11 – 16 – 1 – 0 1 4 9 5 Other 2 8 3 1 0 0 – 1 2 6 – 1 5 – 1 3 2 2 9 6 1 1 6 8

Total provisions 7 4 9 2 6 2 – 1 9 3 – 57 – 13 7 4 8 2 5 8 4 9 1

SNCF — FINANCIAL report 2007 - 95 18. PROVISIONS

18-2 OBSERVATIONS ON PROVISIONS 19. FINANCIAL LIABILITIES

In the interests of prudence, SNCF records provisions in respect of This note provides a breakdown of Group financial liabilities by nature, contested revised tax assessments. maturity, currency and interest rate. Note 20 provides additional disclo- With a view to the enactment in French Law of Directive 2004/35 of sures on derivative instruments subscribed by the Group. The hedging 21 April 2004, on environmental liability and introducing the so-called strategy is presented in Note 21. polluter-payer principle, SNCF launched a review in order to assess the impact of this Directive on its activities. Appraisals are currently in 19-1 CURRENT/NON-CURRENT BREAKDOWN progress, notably with regard to decontamination and asbestos removal OF FINANCIAL LIABILITIES work and should be completed during 2008. As at 31 December 2007, the following environmental risks are provided Borrowings with an initial maturity of more than 12 months are recorded in the accounts: in long-term borrowings while borrowings with an initial maturity of – Site decontamination €33 million (€26 million in 2006), less than 12 months are recorded in cash borrowings. – Asbestos-related costs €137 million (€64 million in 2006), Liabilities maturing in less than 12 months at the balance sheet date – Biotox €5 million (€6 million in 2006). are recorded in current liabilities. The provision for litigation and contractual disputes notably encompasses The fair value of liability derivative instruments is classified in current risks relating to legal disputes and the settlement of contracts, as well and non-current liabilities based on the final maturity of the derivative. as contractual disputes involving RFF of €114 million (unchanged on 2006). Other provisions notably include a contingency provision in respect of firm orders for Freight equipment of €56 million (€70 million in 2006).

96 - CONSOLIDATED FINANCIAL STATEMENTs Financial liabilities break down as follows: In € millions Note 31/12/2007 31/12/2006 Non- Current Total Non- Current Total current current

Bonds 9,373 3,247 12,620 12,657 2,422 15,079 Bank borrowings 2,014 53 2,067 2,011 487 2,499 Lease finance obligations 3,448 62 3,510 3,200 310 3,510 Sub-total borrowings 14,835 3,362 18,197 17,869 3,219 21,088 o/w: – measured at amortised cost 10,343 3,325 13,668 13,013 2,221 15,234 – recognised using cash-flow hedge accounting 1,832 0 1,832 1,907 457 2,364 – recognised using fair value hedge accounting 2,165 37 2,202 2,420 454 2,874 - designated at fair value 495 0 495 529 87 616

Accrued interest payable on borrowings 1 353 355 2 441 444

Negative fair value of hedging derivatives 20 379 10 389 252 5 258 Negative fair value of trading derivatives 20 462 24 487 876 11 887 Accrued interest payable on derivatives 0 213 213 0 279 279

Loans and borrowings 15,677 3,963 19,640 18,999 3,956 22,955

Cash borrowings and overdrafts (1) 200 3,824 4,024 0 1,704 1,704

FINANCIAL LIABILITIES PRESENTED 15,877 7,787 23,664 18,999 5,660 24,659 IN THE BALANCE SHEET

Réseau Ferré de France receivable 9.1 2,393 1,336 3,729 3,675 1,497 5,172 Public Debt Fund receivable (expected payments 9.3 6,075 2,176 8,251 8,007 198 8,205 in respect of the Special Debt Account in 2006) Assets at fair value through profit or loss 9 31 852 883 48 344 392 Positive fair value of hedging derivatives 20 22 6 28 46 0 46 Positive fair value of trading derivatives 20 341 17 358 256 7 263

Accrued interest receivable on derivatives 9 169 169 201 201 Other loans and receivables (2) 9.4 327 2,008 2,335 325 545 870 Cash at bank and in hand and monetary mutual funds equivalent to cash 15 3,424 3,424 0 3,051 3,051

NET INDEBTEDNESS OF THE GROUP 6,688 – 2,202 4,487 6,641 – 183 6,459

(1) Including, in 2007, amounts payable to the French State in respect of the end of the Special Debt Account - see 4.11 and 4.22. (2) o/w CPRP receivable of €1,365 million as at 31/12/2007.

SNCF — FINANCIAL report 2007 - 97 19. FINANCIAL LIABILITIES

The borrowings sub-heading breaks down as follows: – Other subsidiaries for €152 million (€574 million in 2006). – SNCF for €17,346 million (€20,100 million in 2006). The net indebtedness of unconsolidated E.S.H. low-rental housing – Géodis group for €431 million (€192 million in 2006). companies as at 31 December 2007 is €1.5 billion. – Ermewa group for €268 million (€222 million in 2006).

19-2 LOANS AND BORROWINGS MATURITY SCHEDULE

Financial liabilities mature as follows:

In € millions 31/12/2007 31/12/2006

Less than 1 year 3,362 3,219 1 to 5 years 7,522 8,841 More than 5 years 7,216 8,903

Total 18,099 20,963

Accrued interest payable 355 444 Changes in fair value (designated at fair value) 46 68 Changes in fair value (hedge accounting) 52 57 Fair value of non-current derivatives 841 1,128 Fair value of current derivatives 34 16 Accrued interest payable on derivatives 213 279

Total loans and borrowings 19,640 22,955

Liability derivatives are offset in the amount of €386 million by asset derivatives, including €23 million of current asset derivatives. The maturity schedule for SNCF borrowings, which represent 95% of total Group borrowings, based on year-end exchange rates and interest rates is as follows:

In € millions 31/12/2007 31/12/2006 Nominal Interest Nominal Interest

Borrowings Less than 1 year 3,277 943 2,692 1,068 1 to 2 years 2,757 705 3,002 903 2 to 3 years 1,821 554 2,812 654 3 to 4 years 865 466 1,919 534 4 to 5 years 1,634 423 888 448 More than 5 years 6,894 2,636 8,662 3,007

Total 17,248 5,726 19,975 6,614

98 - CONSOLIDATED FINANCIAL STATEMENTs 19-3 BREAKDOWN OF LOANS AND BORROWINGS BY FOREIGN CURRENCY

The breakdown by foreign currency of loans and borrowings, before and after adjustment for derivatives, is as follows:

In € millions Initial debt structure Structure after economic hedging 31/12/2007 31/12/2006 31/12/2007 31/12/2006

Euro 13,351 15,905 17,587 20,455 Swiss franc 774 806 245 249 U.S. dollar 1,754 1,896 65 53 Canadian dollar 277 262 0 0 Pound sterling 1,607 1,759 294 321 Yen 334 350 0 0 Other 100 109 6 9

Total borrowings 18,197 21,087 18,197 21,087

19-4 BREAKDOWN OF LOANS AND BORROWINGS BY INTEREST RATE

The breakdown by interest rate of loans and borrowings, before and after adjustment for derivatives, is as follows:

In € millions Initial debt structure Structure after economic hedging 31/12/2007 31/12/2006 31/12/2007 31/12/2006

Fixed rate 13,997 15,146 11,862 13,996 Floating rate 4,200 5,941 6,335 7,091

Total borrowings 18,197 21,087 18,197 21,087

The breakdown of borrowings by interest rate takes into account the impact of both hedging derivatives and trading derivatives.

19-5 FAIR VALUE OF FINANCIAL LIABILITIES

The net carrying amount and nominal value of liabilities designated at fair value is as follows:

In € millions 31/12/2007 31/12/2006 Fair value Nominal value Fair value Nominal value

Borrowings at fair value 495 449 616 548

SNCF — FINANCIAL report 2007 - 99 The fair value of borrowings is as follows:

In € millions 31/12/2007 31/12/2006 Fair value Net carrying Fair value Net carrying amount amountt

Borrowings 18,623 18,197 21,831 21,088 Cash liabilities 4,016 4,024 1,701 1,704

Total borrowings 22,639 22,221 23,532 22,792

20. DERIVATIVE FINANCIAL INSTRUMENTS

Current and non-current asset and liability derivative instruments break down as follows:

In € millions 31/12/2007 31/12/2006 Non- Current Total Non- Current Total current current

Asset derivative instruments Cash-flow hedging derivatives 11 2 13 3 0 3 Fair value hedging derivatives 11 4 15 43 0 43 Trading derivatives 341 17 358 256 7 263

Total asset derivative instruments 363 23 386 302 7 309

Liability derivative instruments Cash-flow hedging derivatives 30 1 31 55 5 60 Fair value hedging derivatives 348 9 357 198 0 198 Trading derivatives 462 24 487 876 11 887

Total liability derivative instruments 841 34 875 1,128 16 1,145

Derivative instruments almost exclusively concern the parent company. The following disclosures relate to the parent company only. Disclosures concerning subsidiaries are not material.

100 - CONSOLIDATED FINANCIAL STATEMENTs 20-1 FOREIGN CURRENCY DERIVATIVES

SNCF Group operates regularly on the foreign currency derivatives market, primarily in order to hedge borrowings issued. The fair value of these instruments in the balance sheet breaks down as follows by instrument and transaction type:

In € millions Fair value in the balance sheet Fair value in the balance sheet as at 31/12/2007 as at 31/12/2006 Cash flow Fair value Trading TOTAL Cash flow Fair value Trading TOTAL hedge hedge hedge hedge

Currency swaps (with principal) 0 0 0 0 0 0 1 1 Currency swaps 0 4 221 226 0 19 130 150

Asset derivative instruments 0 4 221 226 0 19 131 151

Currency swaps (with principal) 0 0 4 4 0 0 4 4 Currency swaps 13 339 362 714 6 142 248 396

Liability derivative instruments 13 339 366 718 6 142 252 400

Net foreign currency position – 13 – 335 – 145 – 493 – 6 – 123 –121 – 250

SNCF — FINANCIAL report 2007 - 101 20. DERIVATIVE FINANCIAL INSTRUMENTS

As at 31 December 2007 and 2006, the nominal commitments and maturities of the different instruments subscribed were as follows:

Currency swaps with an underlying liability:

Nominal commitments received 31/12/2007

In € millions Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years More than 5 years Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) currency currency currency currency currency currency

Swiss franc 600 363 300 181 U.S. dollar 50 34 1,000 679 970 659 100 68 220 149 100 68 Canadian dollar 100 69 150 104 150 104 Pound sterling 125 170 150 205 31 42 21 29 600 818 Yen 10,000 61 41,500 252 New Zealand dollar 100 53 Hong Kong dollar 200 17 72 6 200 17 Euro 60 60

Total 173 954 870 171 541 1,500 Nominal commitments received 31/12/2006

In € millions Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years More than 5 years Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) currency currency currency currency currency currency

Swiss franc 900 560 U.S. dollar 50 38 1,000 759 970 737 100 76 320 243 Canadian dollar 100 65 150 98 150 98 Pound sterling 125 186 150 223 31 46 621 925 Yen 10,000 64 41,500 264 New Zealand dollar 100 53 Hong Kong dollar 200 20 72 7 200 20 Euro 123 123 60 60

Total 123 176 1,044 967 186 2,170 Nominal commitments given 31/12/2007

In € millions Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years More than 5 years Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) currency currency currency currency currency currency

Euro 179 179 1,074 1,074 1,040 1,040 218 218 599 599 1,738 1,738

Total 179 1,074 1,040 218 599 1,738 (1) Euro equivalent at the year-end exchange rate.

102 - CONSOLIDATED FINANCIAL STATEMENTs Nominal commitments given 31/12/2006

In millions Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years More than 5 years Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) currency currency currency currency currency currency

Euro 124 124 179 179 1,074 1,074 1,040 1,040 218 218 2,337 2,337

Total 124 179 1,074 1,040 218 2,337

(1) Euro equivalent at the year-end exchange rate.

Future interest flows, based on year-end exchange rates and future interest rates implicit in the interest rate curve at the balance sheet date for floating rates, are as follows:

In € millions 31/12/2007 31/12/2006 Interest flows Interest flows Interest flows Interest flows received paid received paid

Less than 1 year 191 – 220 217 – 185 1 to 2 years 200 – 222 207 – 185 2 to 3 years 146 –169 199 – 181 3 to 4 years 108 – 123 139 – 138 4 to 5 years 98 –102 96 – 102 More than 5 years 804 – 913 952 – 839

Total 1,547 – 1,749 1,810 – 1,630

Currency swaps with an underlying asset:

Nominal commitments given 31/12/2007

In millions Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years More than 5 years Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) currency currency currency currency currency currency

Swiss franc 600 363 U.S. dollar 550 374 100 68 100 68 Canadian dollar 100 69 150 104 150 104 Pound sterling 50 68 150 205 New Zealand dollar 100 53 Hong Kong dollar 200 17 72 6 200 17

Total 139 172 584 68 68 484

SNCF — FINANCIAL report 2007 - 103 20. DERIVATIVE FINANCIAL INSTRUMENTS

Nominal commitments given 31/12/2006

In millions Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years More than 5 years Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) currency currency currency currency currency currency

Swiss franc 600 373 U.S. dollar 550 418 100 76 100 76 Canadian dollar 100 65 150 98 150 98 Pound sterling 50 74 150 223 New Zealand dollar 100 53 Hong Kong dollar 200 20 72 7 200 20

Total 0 138 173 648 76 567

Nominal commitments received 31/12/2007

In millions Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years More than 5 years Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) Foreign Euro (1) currency currency currency currency currency currency

Euro 136 136 169 169 687 687 83 83 472 472 114 114

Total 136 169 687 83 472 114

(*) Euro equivalent at the year-end exchange rate.

Nominal commitments received 31/12/2007

In millions Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years More than 5 years Foreign Euro (1) Foreign Euro (1) Foreign Euro(1) Foreign Euro(1) Foreign Euro(1) Foreign Euro(1) currency currency currency currency currency currency

Euro 136 136 169 169 687 687 83 83 586 586

Total 0 136 169 687 83 586

(1) Euro equivalent at the year-end exchange rate.

104 - CONSOLIDATED FINANCIAL STATEMENTs Future interest flows, based on year-end exchange rates and future interest rates implicit in the interest rate curve at the balance sheet date for floating rates, are as follows:

In € millions 31/12/2007 31/12/2006 Interest flows Interest flows Interest flows Interest flows paid received paid received

Less than 1 year – 58 74 – 6 2 62 1 to 2 years – 68 68 – 6 2 59 2 to 3 years – 59 59 – 5 4 55 3 to 4 years – 34 29 – 4 6 47 4 to 5 years – 31 16 – 1 7 24 More than 5 years – 1 5 10 – 28 21

Total – 265 256 – 269 268

20-2 INTEREST RATE DERIVATIVES

The Group operates in the interest rate swap and swaption market in order to manage its exposure to interest rate risk on borrowings. The fair value of these instruments in the balance sheet breaks down as follows by instrument and transaction type:

In € millions Fair value in the balance sheet Fair value in the balance sheet as at 31/12/2007 as at 31/12/2006 Cash flow Fair value Trading TOTAL Cash flow Fair value Trading TOTAL hedge hedge hedge hedge

Fixed rate receiver swaps 6 37 43 10 35 45 Fixed rate payer swaps 12 4 77 94 3 14 41 58 Index-based swaps 23 23 56 56 Swaptions 1 1 0

Asset derivative instruments 13 11 137 160 3 24 132 158

Fixed rate receiver swaps 91 91 52 52 Fixed rate payer swaps 18 29 10 57 54 56 75 185 Index-based swaps 8 8 507 507 Swaptions 1 1 1 0

Liability derivative instruments 19 29 109 157 54 56 634 744

Net interest rate position – 6 – 1 8 27 3 – 51 – 32 – 503 – 586

SNCF — FINANCIAL report 2007 - 105 20. DERIVATIVE FINANCIAL INSTRUMENTS

As at 31 December 2007 and 2006, the nominal value and maturities of the different instruments subscribed were as follows:

In € millions 31/12/2007 31/12/2006 Net long- Net short- Net long- Net short- term debt term debt term debt term debt

Fixed rate receiver swaps 1,367 2,073 1,558 1,082 Fixed rate payer swaps 7,194 1,548 6,672 1,873 Index-based swaps 1,764 2,484 Swaptions 179 3 858

Future interest flows, based on year-end exchange rates and future interest rates implicit in the interest rate curve at the balance sheet date for floating rates, are as follows:

In € millions Net interest flows 31/12/2007 Less than More than 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years 1 year 5 years

Fixed rate receiver swaps – 8 – 8 – 8 – 7 – 5 –15 Fixed rate payer swaps – 7 1 – 1 5 1 – 5 63 Index-based swaps 1 1 1 1 4 143

Total – 14 – 6 – 22 – 5 – 6 191

In € millions Net interest flows 31/12/2006 Less than More than 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years 1 year 5 years

Fixed rate receiver swaps 8 3 3 – 1 – 1 23 Fixed rate payer swaps – 70 – 66 – 54 – 56 – 31 – 98 Index-based swaps 1 1 1 1 1 1 81

Total – 61 – 62 – 50 – 56 – 31 106

20-3 COMMODITY DERIVATIVES

As part of its normal activities, the parent company operates in the Commodity derivatives did not have a material impact on the financial petroleum product hedge market in order to optimise fuel supply statements as at 31 December 2007. costs. It also performs forward purchases of electricity.

106 - CONSOLIDATED FINANCIAL STATEMENTs 21. MANAGING MARKET RISKS AND HEDGING

The management of market risks is governed by a general framework, Fluctuations in market interest rates impact the fair value of derivative approved by the SNCF Board of Directors, setting out the management financial instruments not participating in a hedging relationship as defined principles for parent company risks that may be hedged by financial by IAS 39. Such fluctuations are taken into account when assessing instruments. the sensitivity of the Income Statement. This general framework defines the principles governing the selection From an accounting standpoint, a 1% increase in the interest rate of financial products, counterparties and underlyings for derivative curve as at 31 December 2007 would have a positive impact on net products. profit of the Group of €80 million and on equity of €57 million. More specifically, the general framework defines risk limits for the This hypothetical increase of €80 million in net profit of the Group management of euro and foreign currency cash balances and long- breaks down as follows: term net indebtedness. – €18 million on floating-rate financial instruments not designated as In addition, it details the delegation and decision-making system hedged instruments in a cash flow hedging relationship; and the reporting and control system and its frequency (daily, twice- + €31 million on liabilities designated at fair value; and monthly, monthly and annually). + €67 million on trading derivatives. In addition, the same increase in the interest rate curve would have a positive impact of €24 million on net short-term cash held by the 21-1 MANAGEMENT STRATEGY Group. 21-1-1 Interest rate risk management 21-1-2 Foreign currency risk management The cost of long-term net indebtedness is optimised, with regard The commercial activities of the Group do not expose it to material to interest rates, by managing the mix of fixed and floating rate foreign currency risk. borrowings. The Group uses firm and optional interest rate swap Except for subsidiaries operating in their own country, Group indeb- instruments within the limits defined, for the parent company, by the tedness denominated in currencies other then the euro is managed in aforementioned general framework. line with the acceptable risk limit defined, for the parent company, in From an economic standpoint, fixed-rate borrowings represented 96% the same general framework. The Group uses currency swaps for this of total borrowings as at 31 December 2007 compared to 80% as purpose, generally set-up when the borrowing is issued. at 31 December 2006. On the same basis, the cost of long-term net Foreign currency-denominated borrowings as at 31 December 2007, indebtedness in 2007 was 4.84%. after hedging by currency swaps, represented 1.31% of total bor- Sensitivity analysis rowings, compared to 1.15% as at 31 December 2006. Fixed-rate financial instruments recorded at amortised cost are not Given the small percentage of unhedged foreign currency-denominated exposed to interest rate risk as defined by IFRS 7. borrowings, net profit or loss is not, in the Group’s opinion, sensitive to Floating-rate financial instruments not designated as hedged items in foreign currency risk. a cash flow hedging relationship are affected by fluctuations in market interest rates. As such, they are included in the analysis of the sensiti- 21-1-3 Commodity risk management vity of the Income Statement. The Group’s production requirements exposes it to the risk of fluctuations In fair value hedges, changes in the fair value of hedging instruments in the price of petroleum products. This risk is managed using firm and and hedged items attributable to fluctuations in market interest rates, optional derivatives (swaps, options, caps, floors). largely offset set each other in the Income Statement of the period. As At the beginning of 2007, 89% of forecast purchase volumes of the such, these instruments are not exposed to interest rate risk. year were hedged. The Group does not apply hedge accounting to Fluctuations in market interest rates impact the fair value of derivative these transactions. financial instruments designated as hedging instruments in a cash flow hedging relationship. Such fluctuations are taken into account when assessing the sensitivity of equity. Fluctuations in market interest rates impact the fair value of non-derivative financial instruments designated at fair value. Such fluctuations are taken into account when assessing the sensitivity of the Income Statement.

SNCF — FINANCIAL report 2007 - 107 21. MANAGING MARKET RISKS AND HEDGING

21-1-4 Counterparty risk management The counterparty approval procedure for derivative products also involves The main transactions which could generate counterparty risk are: the signature of a framework agreement. A collateral agreement is also Financial investments signed with certain counterparties in order to limit counterparty risk. Financial investments are diversified. They primarily consist of nego- tiable debt instruments (certificates of deposit, commercial paper), 21-1-5 Liquidity risk management treasury note repos and subscriptions to French money-market mutual The parent company assures its daily liquidity through a commercial funds (UCITS). paper program capped at €3 billion, with €2.4 billion used as at 31 Derivatives December 2007 and on average €1.8 billion in 2007, compared to €1.5 Derivative transactions seek to manage interest rate, foreign currency billion in 2006. and commodity risk. In addition, the parent company has bilateral credit lines of €500 million. The aforementioned general framework defines, for the parent com- Total confirmed credit lines of the Group amount to €616 million and pany, the counterparty approval procedure, which is based on a quan- break down by maturity as follows: titative and qualitative analysis of counterparties. Investment volume and term limits are also defined for each counterparty. The extent to which authorised limits are used, based on future payments or replace- ment costs, is measured daily and reported.

In € millions Total < 1 year 1 to 5 years

Confirmed credit lines 616 158 459

21-2 CASH FLOW HEDGES

The fair value of derivatives designated as cash flow hedges breaks down by hedged item as follows:

In € millions Fair value as at Maturing 31/12/2007 < 1 year 1 to 5 years > 5 year

Bonds Non-bond borrowings – 10 1 – 11 Finance lease obligations – 8 – 11 3

Loans and borrowings – 1 8 1 – 22 3

The impact on equity, profit or loss for the period and reserves breaks down as follows:

In € millions Equity

Opening balance (01/01/2007) 171 Through profit or loss – 63 Through derivative accounts 23

Closing balance (31/12/2007) 131

108 - CONSOLIDATED FINANCIAL STATEMENTs 21-3 FAIR VALUE HEDGES

Asset and liability items hedged as to fair value are initially recorded at Fair value gains and losses on the hedged risk are offset, except for the amortised cost and subsequently remeasured at each balance sheet date ineffective portion, by gains and losses on the hedging derivative. based on the fair value of the risk hedged.

In € millions Valuation Change in Reclassification Valuation difference as at fair value of transactions difference as at 01/01/2007 no longer meeting 31/12/2007 qualification criteria

Bonds 107 192 299 Non-bond borrowings – 28 17 – 11 RFF receivable 19 – 1 6 1 4

Total 98 193 1 292

Hedging derivatives – 155 – 198 11 – 342

Ineffectiveness – 5

22. OPERATING PAYABLES AND OTHER ACCOUNTS IN CREDIT

Operating payables break down as follows:

In € millions 31/12/2007 31/12/2006 Change

Trade suppliers and related accounts 3,345 2,974 3 7 1 o/w amounts payable to suppliers of PP&E 5 0 7 6 2 9 – 1 2 3 Payments received on account for orders 4 11 2 6 1 1 5 0 o/w advances received on sales of PP&E 2 8 8 1 2 0 1 6 8 Employee-related liabilities 8 5 3 7 5 9 9 4 Amounts payable to the French State and local authorities 1,178 1,175 3 Other operating payables 1,085 9 1 5 1 7 0 Investment grants 5,867 4,959 9 0 8 Deferred income 1,222 1,090 1 3 3

Total operating payables 13,962 12,134 1,828

SNCF — FINANCIAL report 2007 - 109 23. ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE

In € millions 31/12/2007 31/12/2006

Assets and liabilities classified as held for sale 0 420

Assets placed with Deutsche Bank as at 31 December 2006 included piggy-backed Financière KEOS securities in the amount of €409 million. The new shareholders, AXA Private Equity and Caisse de Dépôt et Placement du Québec, acquired a portion of the share capital at the end of April 2007.

24. PURCHASES AND EXTERNAL CHARGES

In € millions 31/12/2007 31/12/2006 Change

Sub-contracting – 3,347 – 2,435 – 9 1 2 Tolls (1) – 2,760 – 2,597 – 1 6 4 Other purchases and external charges – 5,043 – 4,769 – 2 7 4

Total purchases and external charges – 11,151 – 9,800 –1,351

(1) Tolls invoiced by RFF and Eurotunnel.

25. EMPLOYEE BENEFITS EXPENSE AND HEADCOUNT

As at 31 December 2007, the employee benefits expense and headcount break down as follows:

In € millions 31/12/2007 31/12/2006 Change

Wages and salaries – 9,322 – 9,073 – 250 Pension and other benefits (1) 632 994 – 361 Profit sharing and incentive schemes – 27 – 25 – 2 Stock options – 3 – 1 – 2 Rebilled, seconded and temporary employees – 1 74 – 187 13

Total Employee benefits expense – 8 ,895 – 8,292 – 602

Average number of full-time employees 201,545 201,742 – 197

(1) Following its creation on 29 June 2007, benefit obligations incumbent on SNCF were transferred to the SNCF Employee Pension and Provident Fund (CPRP) as at 30 June 2007.

110 - CONSOLIDATED FINANCIAL STATEMENTs 26. DEPRECIATION, AMORTISATION AND IMPAIRMENT LOSSES 26-1 DEPRECIATION AND AMORTISATION, NET OF GRANTS RELEASED TO PROFIT OR LOSS

The net charge to depreciation and amortisation as at 31 December 2007 breaks down as follows:

In € millions 31/12/2007 31/12/2006 Change

Depreciation and amortisation – 1,482 – 1,448 – 34 Grants released to profit or loss 283 239 45

Depreciation and amortisation, net of grants – 1,198 – 1,210 11

Depreciation and amortisation concerns: – intangible assets in the amount of €68 million (€49 million in 2006); – property, plant and equipment in the amount of €1,414 million (€1,399 million in 2006).

26-2 IMPAIRMENT LOSSES assets with a finite useful life where there is indication that the CGU has suffered a loss in value. Asset impairment tests are performed on CGUs representing legal Pursuant to IAS 36, Impairment of Assets, CGUs with goodwill are entities or defined based on the destination of the assets used. tested at least once annually irrespective of whether there is any indi- The assets tested include goodwill, indefinite life intangible assets and cation of impairment.

The impact on the Income Statement is as follows:

In € millions 31/12/2007 31/12/2006 Variation

Intangible assets and property, plant and equipment – 34 – 631 596 Goodwill 0 0 0 Provisions for contingencies and losses 14 – 70 84

TOTAL – 21 – 7 0 1 680

Impairment losses primarily concern property, plant and equipment. An – for old rolling stock, 100% or 40% impairment based on the type and additional impairment loss of €19 million was recorded as at 31 December age of the equipment; 2007 in respect of the net assets of Corail and Corail Intercity. – for newer equipment and firm order commitments, flat-rate impair- In addition, as at 31 December 2006, it was not possible to assess the ment limited to 10% given market requirements. value in use or the fair value of the Freight CGU as the financial fore- A provision was recognised for all assets whose net carrying amount casts are based on action programmes currently being drafted. exceeded fair value, less individual costs to sell. Accordingly, as at 31 December 2006, the company conducted a cer- Overall, in Freight assets, an additional impairment of €19 million was tain number of procedures leading to the partial and generalised valua- recognised in respect of property, plant and equipment (including tion of rolling stock allocated to SNCF Freight: PP&E in progress), for rolling stock with a total gross value of €2.7 bil­-

SNCF — FINANCIAL report 2007 - 111 lion, bringing the total impairment to €630 million and contingency At this stage, the company considers that this provision level repre- provisions were reversed in the amount of €14 million in respect of sents the best estimate of impairment losses to be recognised. firm orders, bringing total provisions to €56 million.

2 7. NET PROCEEDS FROM ASSET DISPOSALS

In € millions 31/12/2007 31/12/2006 Change

Disposal of intangible assets – 1 – 1 – 1 Disposal of property, plant and equipment 1 0 2 1 5 7 – 55 Disposal of investments 1 7 1 3 7 – 1 2 0

Total net proceeds from asset disposals 1 1 8 2 9 3 – 1 7 6

Net proceeds from the disposal of property, plant and equipment includes capital gains realised on the sale of Geodis (€42 million), SNCF (€25 million) and Novedis (€17 million) real estate. Net proceeds from the sale of investments of €17 million concern the sale of Ermewa France by SNCF Participations and Cofital to the Ermewa Group, owned 49.1% by SNCF Group.

112 - CONSOLIDATED FINANCIAL STATEMENTs 28. NET BORROWINGS COSTS

In € millions 31/12/2007 31/12/2006 Change

Net gains on changes in fair value and hedges 2 0 6 5 – 45 Net borrowing costs – 1 9 4 – 332 1 3 8

Total – 1 7 4 – 267 9 3

In € millions 31/12/2007

Interest income 916 Interest expense – 1,201

Net interest expense – 285

Expenses on loans and borrowings designated at fair value through profit or loss 25 Change in value of economically-backed trading derivatives – 14

Expenses on loans and borrowings hedged as to fair value 209 Change in value of fair value hedging derivatives – 216

Expenses on loans and borrowings hedged as to cash flow – 1 Interest on cash flow hedging derivatives 4

Expenses on other loans and borrowings at amortised cost 17

Proceeds from RFF receivable hedged as to fair value – 1 6 Change in value of fair value hedging derivatives 19

Proceeds from receivables at amortised cost – 40

Expenses on cash borrowings 1 Proceeds from trading assets 23 Change in value of other trading derivatives 101

Total – 174

SNCF — FINANCIAL report 2007 - 113 29. INCOME TAX EXPENSE 29-1 ANALYSIS OF THE INCOME TAX EXPENSE

In € millions 31/12/2007 31/12/2006 Variation

Current tax (expense)/income – 53 – 50 – 3 Deferred tax (expense)/income 3 5 3 4 9 8 – 1 4 6

Total income tax (expense)/income 3 0 0 4 4 8 – 149

A deferred tax asset was recognised for the first time as at 31 Decem- The update of this business plan, incorporating the same prudence ber 2006 in respect of tax losses carried forward by the parent com- contingencies, led to the recognition of an additional deferred tax pany, due to the overall profitability outlook for the coming years, asset of €672 million. The increase in the deferred tax asset is offset in determined based on 3-year financial projections, minus prudence the amount of €272 million by losses relieved during the year. The net contingencies. impact on profit or loss is €355 million.

29-2 PROOF OF TAX

In € millions 31/12/2007 31/12/2006

Consolidated net profit for the year 1,109 205 – Share in profit of associates 37 23 – Income tax expense recorded 3 0 0 448 Net profit before tax from ordinary activities 7 7 2 – 267 Income tax rate applicable in France 34.43% 34.43%

Theoretical income tax (expense)/income – 266 9 2

Permanent differences – 9 2 2 Capitalisation of prior year losses not capitalised 6 2 7 5 0 6 Tax losses and temporary differences of the period not capitalised – 67 – 1 7 4 Profits offset against tax losses not capitalised 6 Differences in tax rates and tax credits 8 2

Income tax (expense)/income recorded 3 0 0 4 4 8 Effective tax rate – 38.85% 168.18%

29-3 TAX ASSETS NOT RECOGNISED

SNCF opted for the tax grouping regime on 1 July 1988. As at 31 December 2007, the tax group comprised 48 subsidiaries, including Seafrance, SNCF Participations, and France Wagons.

114 - CONSOLIDATED FINANCIAL STATEMENTs Group tax losses carried forward as at 31 December 2007 amounted to €7.6 billion. Tax assets not recognised at this date totalled €2.1 billion, compared to €13.4 billion as at 31 December 2006. This decrease in tax assets not recognised breaks down as follows:

In € millions

DTA not recognised as at 31/12/2006 13,422

Deferred tax recognised in the period – 353 Tax losses utilised and movements in temporary differences not recognised – 530 Creation of the Pension Fund (CPRP) – 10,426 Changes in consolidation scope 11

DTA not recognised as at 31/12/2007 2,124

29-4 DEFERRED TAXES RECOGNISED

In € millions 31/12/2007 31/12/2006 Change

Tax losses carried forward 8 6 1 5 1 2 3 4 9 Non-deductible provisions 1 4 1 9 – 5 Retirement benefit obligations 0 9 – 9 Other temporary differences 1 9 – 2 2 2

Deferred tax assets 8 9 5 5 3 8 3 5 7

Valuation differences 4 5 1 6 2 9 Tax-driven provisions 1 9 8 11 Other temporary differences 3 5 4 0 – 5

Deferred tax liabilities 9 9 6 4 3 5

Net position 7 9 6 4 7 3 3 2 2

The change in the balance sheet net position breaks down as follows: Deferred tax utilised – 272 €353 million Recognition of tax losses carried forward 627 in profit or loss Other profit or loss impacts – 2 Changes in consolidation scope – 30 Total 322

SNCF — FINANCIAL report 2007 - 115 30. CONSOLIDATED CASH FLOW STATEMENT

30. CONSOLIDATED CASH FLOW STATEMENT Closing cash balance

Current financial assets and liabilities comprise items with an initial maturity of more than and less than 3 months. Cash and cash equivalents reported in the cash flow statement comprise the following financial assets and liabilities with an initial maturity of less than 3 months:

In € millions 31/12/2007 31/12/2006 > 3 < 3 Total o/w cash > 3 < 3 Total o/w cash months months and cash months months and cash equiva- equiva- lents lents

Current financial assets 5,942 622 6,564 575 5,661 467 6,128 459 Current assets 3,702 48 3,750 1 5,317 1 5,318 1 Pension Fund receivable 1,365 1,365 Deposits and guarantees 574 574 574 458 458 458 Asset derivatives 23 23 7 7 Financial assets at fair value through profit or loss 852 852 344 344

Cash and cash equivalents 3,424 3,424 3,424 3,051 3,051 3,051 Monetary mutual funds (SICAV) equivalent to cash 2,807 2,807 2,807 2,526 2,526 2,526 Cash at bank and in hand 618 618 618 525 525 525

Current financial liabilities 4,672 3,115 7,787 699 3,968 1,691 5,660 587

Bonds 3,247 3,247 2,421 2,421 Other current borrowings 115 115 797 797 Accrued interest payable 567 5 572 5 720 4 724 4 Commercial paper 40 2,416 2,456 10 1,072 1,082 Other cash borrowings 669 669 3 32 35 Bank overdrafts 694 694 694 583 583 583 Liability derivatives 34 34 17 17

Cash and cash equivalents in the Cash Flow Statement 3,300 2,923

116 - CONSOLIDATED FINANCIAL STATEMENTs Increase/(decrease) in cash Financing activities provided the Group with net cash resources of Net cash from operating activities totalled €1,973 million (€1,427 in €1,032 million in 2007 (€487 million) and mainly comprised: 2006) and was primarily generated by operations (€1,900 million in - the contribution of minority interests to the share capital increase 2007, compared to €1,582 million in 2006). performed by Geodis of €91 million; Net cash used in investing activities totalled €2,592 million in 2007 - new borrowings of €888 million (€1,898 million in 2006) secured (€954 million in 2006). This increase of €1,638 million was mainly due to: to finance the acquisition of Wilson by Géodis, the recapitalisation - capital expenditure on intangible assets and property, plant and of Ermewa and the reorganisation of Novedis real estate assets; equipment of €3,080 million, up 16% on 2006 (€2,654 million); - loan repayments of €1,615 million (€1,434 million in 2006) primarily - the acquisition of Wilson by Geodis, generating a net outflow of relating to bond redemptions, offset by new cash borrowings of Group cash of €396 million; €1,689 million (€415 million in 2006). - investment grants received of €1,055 million compared to €852 mil- lion in 2006.

Analysis of Group net debt financing flows

In € millions Note 31/12/2007 31/12/2006 Change

Non-current financial liabilities 19 15,877 18,999 - 3,122 Non-current financial assets included in net debt 19 - 9,189 - 12,358 3,169 Current financial liabilities excluding cash and cash equivalents 30 7,088 5,073 2,015 Current financial assets included in financing flows (1) 9 / 30 - 5,989 - 2,333 - 3,656

Net debt included in financing flows 7,787 9,381 - 1,595 Net debt financing flows in the Cash Flow Statement 4 3 9 Difference - 1,156

This difference breaks down as follows Piggyback of Financière Keos securities - 409 CPRP receivable created in 2007 - 1,365 Amount payable to the French State in respect of the closure 640 of the Special Debt Account Impact of changes in consolidation scope and other - 22

Total - 1,156

(1) Excluding expected payments in respect of pension regimes in 2006 (see Note 9) and cash and cash equivalents (see Note 30).

SNCF — FINANCIAL report 2007 - 117 31. OFF-BALANCE SHEET COMMITMENTS

In € millions Given/ 31/12/2007 31/12/2006 COMMITMENTS Received Maturing within Total Total Less than 1 to More than commitment commitment one year 5 years 5 years

Operating leases Real estate operating leases (1) given 1,233 264 651 318 834 Equipment operating leases given 277 23 69 185 285 Equipment operating leases received 117 5 56 55 263 Real estate operating leases (1) received 339 12 151 176 4

Irrevocable purchase agreements Purchase commitments to suppliers (2) given 8,200 1,962 5,217 1,021 5,786 Purchase commitments from suppliers (2) received 2,800 967 1,633 199 2,433 Share purchase commitments given 0 0 0 0 460 Other purchase commitments for operations (3) received 86 8 58 20 0 Other purchase commitments for operations (3) given 2,069 1,320 748 2 2,481

Credit lines Undrawn bank credit lines received 616 158 459 0 509

Financial guarantees Vis-à-vis associated undertakings: Guarantees, solidarity commitments given 84 21 63 0 Guarantees given (4) given 238 83 130 25 316 Guarantees received (5) received 216 62 129 25 286 Vis-à-vis employees: Guarantees given in respect of loans given 1 , 111 1,110 1 0 1,100 secured by employees (6) Guarantees received received 1 0 1 0 Vis-à-vis external third parties: Endorsements and guarantees (7) given 1,232 280 389 563 837 Endorsements and guarantees received 733 24 692 16 548

(1) The increase in real estate operating lease commitments given and received includes the signature of leaseholds in future state of completion for buildings in Marseille, Paris, Lyon and Rouen. In return for the lease commitment, the lessor undertook to complete the building and deliver it to the future tenant at an agreed date. (2) Commitments given concern firm orders for rolling stock. Commitments received correspond to investment grants receivable from Regional authorities for ordered rolling stock (TER and Transilien). (3) Other operating purchase commitments given concern firm orders for contracts and various purchases (infrastructure, electricity, transport contracts, intellectual services, etc.). (4) Guarantees given concern €216 million in guarantees granted by the company in respect of SOFIAP (formerly SOCRIF) bank borrowings. (5) Guarantees received concern in full a joint and several sight counter-guarantee given to the Company in respect of the loans granted to SOFIAP. They perfectly match guarantees given. (6) Total outstanding on guarantees given by the Company in respect of real estate loans secured by employees. Statistically, guarantee calls are very limited. (7) Including TNT Freight Forwarding (Wilson) securities pledged in the amount of €428 million and Ermewa Group securities pledged in the amount of €89 million.

118 - CONSOLIDATED FINANCIAL STATEMENTs In € millions Given/ 31/12/2007 31/12/2006 Other contingent commitments Received Maturing within Total Total Less than 1 to More than commitment commitment one year 5 years 5 years

Offers to sell – real estate received 363 181 183 0 332 Offers to sell – real estate given 256 256 0 0 105 Investment call and put options received 0 0 0 0 2 Investment call and put options given 12 12 0 0 2 Advances repayable to third parties given 288 122 125 41 91

Total off-balance sheet commitments given 15,000 5,454 7,391 2,155 12,298 received 5,271 1,417 3,363 491 4,376

Lease transactions SNCF also concluded two New Zealand lease transactions in September SNCF carried out QTE lease transactions in 2004. 2004 and March 2005. A QTE Lease consists in leasing a “qualified technological equipment” The New Zealand lease consists in the sale of rolling stock (Corail TEOZ network to a US lessor, who immediately sub-leases it to SNCF for a cars) to a New Zealand investor, who immediately leases them to maximum period of 16 years. The assets in question are all the SNCF SNCF for a term of 18 years. ticket sale and reservation equipment. At the end of the 18-year period, SNCF has two options: At the end of the 16-year period, SNCF has two options: – exercise a purchase option at a pre-determined price, thus maintaining – exercise an option to purchase the residual rights at a pre-determined its initial profit, price, thus maintaining its initial profit, – give the equipment to the New Zealand lessor, for whom SNCF will – give the equipment to the US lessor who will use it in his own name. act as market sales agent for the equipment, guaranteeing a sale The lessor is a fiscally transparent US trust, specifically created for this price at least equal to the amount of the purchase option. transaction, which can only operate for this purpose. This transaction generated a net gain for SNCF on signature of the During the initial period (16 years), all payments made and received lease. During the leasing period (18 years), all payments made and in connection with the lease offset each other and do not impact the received in connection with this arrangement offset each other and do financial statements, apart from the net profit recognised in the tran- not impact the financial statements. saction period. This profit corresponds to the retrocession of a portion The risks borne by SNCF are limited to equipment ownership, the risks of the tax deferral obtained by the investor. generated by French law, and counterparty risks covered by collaterali- The use, replacement, operation and definition of the hardware and sation contracts. software are not affected. The risks borne by SNCF are limited to equip­ ment ownership and the risks generated by French law. Risks relating to changes in US tax laws are fully borne by the investor.

SNCF — FINANCIAL report 2007 - 119 31. OFF-BALANCE SHEET COMMITMENTS

Ermewa – a guarantee relating to the management of the ERMEWA Group Secondary LBO and commitment given maritime division (signed 22 April 2003) granted to Financière by Ermewa to the banks ERMEWA, ERMEWA Group and ERMEWA SAS, not capped as to amount and valid until 31 July 2011, – a counter-guarantee (signed 9 July 2004) for vendor warranties granted The shareholders of Financière ERMEWA SA, IPES and SNCF Partici- by ERMEWA Group companies to the purchaser of the maritime pations performed a secondary LBO during the first half of 2007. The division, capped at €3.5 million, or €1.7 million Group share. This agreements reiterate all governance provisions implemented to date. guarantee expired on 31 December 2007. The main terms and conditions of the new exit agreements are as SNCF Participations did not grant any new guarantees as a result of the follows: implementation of the secondary LBO. – a 2 year lock-in period, – at the end of this period, IPES may only withdraw by selling its Management profit-sharing investment to SNCF Participations, either by exercising a put option The ERMEWA Group management profit-sharing mechanism is pri- granted by SNCF Participations to IPES during a period of 30 months, marily governed by the Argonautes Investissements Shareholders’ or during a subsequent period of 30 months via a call option granted Agreement. to SNCF Participations by IPES, SNCF Participations and IPES sold to Argonautes Investissements, a – should SNCF Participations exercise the call option during the structure owned by management, Financière ERMEWA options valued 30-month period, IPES may exercise a call option for the containers at fair value and conferring entitlement to a variable number of partici- business, provided that IPES indicates its decision to exercise this pation certificates (capped at 4.8% of the share capital of Financière option before SNCF Participations confirms the exercise of its own Ermewa). These options may only be exercised under certain circums- option, tances and in accordance with procedures set out in the Shareholders – IPES will then have a new 3-month put option at the end of the SNCF Agreement (and notably achievement of a certain IRR). In addition, the Participations call option, which will be followed by a new SNCF Parti- Manager-Investors hold options enabling them to sell their Argonautes cipations call option, also of 3 months, Investissements securities to SNCF Participations and IPES, mirrored – during this second exercise period, SNCF Participations may alternati- by call options covering these same securities held by SNCF Participations vely exercise a call option covering the freight car business only, and IPES: the selling price of securities primarily depends on the date – an IPO may be considered at any time during the investment period, at which the options are exercised (the proportion of securities available – at the end of the initial investment period (7 years and 6 months) des- for sale at fair value varies between 0% and 100% after 6 years) and, cribed above, it is provided that the shareholders may either renew where applicable, the exit method of one of the shareholders. their agreements or implement an exit strategy based on an IPO or The commitment of each shareholder is assessed at the balance sheet third-party sale. date based on its investment in the Ermewa Group. SNCF Participations’ investment in Financière Ermewa was transferred The measurement and recognition of SNCF Participations’ commitment to Transports et Logistique Partenaires (TLP), a wholly-owned subsi- is governed by IFRS 2, as the “management package” is considered to diary of SNCF Participations, in November 2007. TLP assumed all rights be cash-settled. and obligations under the various agreements. The valuation of the commitment is reviewed each year as manager In order to secure financing for the secondary LBO and the financial rights vest. restructuring of the sub-group, Ermewa granted a number of gua- As the value of the commitment in the period is not material, an rantees to lending banks totalling €414 million, or €205 million Group expense was not recorded. share.

In addition, as part of the recapitalisation of ERMEWA in April 2003, SNCF Participations granted several guarantees to ERMEWA Group companies which remain in effect at the end of 2007: – a guarantee (signed 22 April 2003) granted by SNCF Participations to Financière Ermewa concerning the past management of the Ermewa Group. This guarantee is capped at €18 million, or €9 million Group share. It remains valid for matters that are not yet statute-barred only.

120 - CONSOLIDATED FINANCIAL STATEMENTs Keolis or have purchased the securities held by the shareholder having undergone a change in control. Procedures for the transfer or sale of Kuvera – SNCF Participations may request a highly-reputed third party of its Développement securities choice to take its place for the exercise of the purchase undertaking All commitments existing as at 31 December 2006 in respect of the granted to Kebexa Participations or the sale undertaking granted by shareholding restructuring operation were replaced by the following Kebexa Participations. commitments. Kebexa Participations, AXA Private Equity, Caisse de Dépôt et Placement Dividend distribution commitments du Québec and SNCF Participations signed a shareholders’ agreement In the shareholders’ agreement, SNCF Participations, Kebexa, AXA and on 20 April 2007 defining the terms of governance of Kuvera Dévelop- CDPQ undertook to approve in shareholders’ meeting the distribution pement and procedures for the sale or transfer of securities. each year of a minimum Kuvera Développement dividend, subject to The shareholders’ agreement is valid for a period of 15 years. It will compliance with legal limits and criteria relating to consolidated current however cease to apply to any party on the sale of their Kuvera Déve- net profit and the debt ratio of Kuvera Développement. loppement or Kebexa Participations securities and will automatically In addition, SNCF Participations holds Kuvera Développement pre- terminate in the event of an IPO by Kuvera or any Keolis Group company. ference shares conferring preferential financial rights (amount of the The following commitments were given under the shareholders’ agreement preferred dividend and priority entitlement to any liquidation bonus on of 20 April 2007: liquidation). – 5-year lock-in period applicable to Kebexa Participations and Kuvera Développement securities, except for transfers expressly authorised Relations with managers by the shareholders’ agreement. SNCF Participations gave commitments to managers in the amount – After this period and during 6 years, that is from 20 April 2012 to of €7 million, together with the following commitments for a period of 20 April 2018, SNCF Participations grants a purchase undertaking 15 years under the shareholders’ agreement signed on 20 April 2007 to Kebexa Participations covering all its Kuvera Développement by Kuvera Développement shareholders: securities and exercisable early after the 31 December 2009 and – in the event of the transfer by Kebexa Participations of all its Kuvera 31 December 2010 year-ends if performance criteria are not satisfied Développement securities, SNCF Participations and Kebexa Participa- (consolidated EBITDA). The exercise price will correspond to the market tions will be entitled to require managers to sell their Kuvera Dévelop­ value (based on the enterprise value of Kuvera Développement) at pement securities. the exercise date. During the term of the purchase undertaking, a – Managers grant SNCF Participations and Kebexa Participations a mechanism also exists should only one of the Kebexa shareholders sales undertaking covering their securities and Kuvera Dévelop­ wish to sell their investment. pement share subscription warrants that must be exercised jointly in – At the end of a period of 2 years following the lock-in period and the amount of 46.8% by SNCF Participations and 53.2% by Kebexa during a period of 4 years, that is from 20 April 2014 to 20 April 2018, Participations. The calculation of the sales price will depend on the Kebexa Participations grants SNCF Participations a purchase under- date and reasons for the managers’ departure. taking covering all Kuvera Développement securities, at an exercise – SNCF Participations and Kebexa Participations grant managers a price corresponding to the market value at the date of exercise. purchase undertaking covering the entire term of the shareholders’ – At the end of the lock-in period, that is from 20 April 2012, Kebexa agreement and their investment in Kuvera Développement in the Participations will hold joint pre-emption and sale rights in the event event of permanent disability or death. This undertaking must be of a transfer by SNCF Participations of its Kuvera Développement exercised jointly in the amount of 46.8% by SNCF Participations and securities. 53.2% by Kebexa Participations. – At the end of the term of the purchase undertaking, that is from – in order to guarantee the repayment of a €7.3 million loan maturing 20 April 2018, SNCF Participations will hold a right of sale enforceable 2016, granted by the Neuflize bank to the company representing against Kebexa Participations and in the event of the sale by Kebexa managers, SNCF Participations granted a partial purchase under­ Participations of its Kuvéra Développement securities, joint pre-emption taking to this company covering Kuvera Développement securities, and sale rights. which would enable it to repay this loan and any corresponding interest. – Throughout the entire term of the shareholders’ agreement, in the This undertaking may be exercised directly by the Neuflize bank if event of a change in control of one of the main shareholders of the loan is not paid on maturity. In return, the Neuflize bank granted a Kebexa Participations, a mechanism exists to enable SNCF to purchase sales undertaking to SNCF Participations covering any securities that

SNCF — FINANCIAL report 2007 - 121 31. OFF-BALANCE SHEET COMMITMENTS

it may hold following the realisation of the pledge over Kuvera securities Vendor warranties granted by managers. An out-of-court agreement was signed on 20 April 2007 between SNCF Participations and Eole, under which SNCF Participations paid Collateral compensation of €7 million to Eole. In return, Eole waived entitlement In guarantee of the loan contract signed on 24 May 2007 between to the vendor warranties granted by SNCF Participations in respect of Financière Keos and a consortium of banks, concerning a loan contract Keolis and its subsidiaries and investments, except for those relating for a maximum principal amount of €395 million and the opening of to the Competition inquiry commissioned by the French Competition revolving credit facilities for a total maximum amount of €200 million, Council in respect of Keolis subsidiaries. the following collateral was pledged in favour of the financial institutions: – pledge of Financière Keos securities by Kuvera Développement, STVA – pledge by Financière Keos of its bank accounts, As part of the set-up within STVA of a corporate savings scheme, – pledge by Financière Keos of Keolis and Keolis UK securities. whose funds are managed by Crédit Agricole Epargne Salariale, SNCF Participations undertook to assure the liquidity of the STVA mutual fund (created specifically for this purpose), whose assets primarily comprise STVA shares.

122 - CONSOLIDATED FINANCIAL STATEMENTs 32. RELATED-PARTY TRANSACTIONS

SNCF, as an industrial and commercial public institution wholly owned SNCF Group has identified the following related parties: by the French State (via French Government Shareholding Agency), is – the French State for all relations with it in its role as shareholder; related, within the meaning of IAS 24, Related Party Disclosures, to all conversely, taxes paid pursuant to ordinary law are excluded from the companies and entities controlled by the French State. scope of related party transactions; As the ultimate objective of IAS 24 is to draw the attention of financial – transport organising authorities statement users to the terms and conditions of transactions not forming – RFF, part of normal business activities between the Group and third parties – ICF Group E.S.H. low-rental housing companies. with which it has privileged relations, the Group has excluded from Only transactions entered into by the parent company are presented related-party disclosures all transactions entered into on an arm’s length below. Other Group companies do not have material transactions with basis. related parties.

32-1 TRANSACTIONS WITH THE FRENCH STATE

The information presented below concerns transactions entered into Public assistance with the French State via its ministries, central authorities and trans- Public assistance granted to the company by the State and local com- port organising authorities, not governed by ordinary law. munities is presented in the following table:

In € millions 31/12/2007 31/12/2006

Operating grants received 2 1 2 1 Contribution to the Special Debt Account 4 0 4 6 2 7 Contribution to the Employee Pension and Provident Fund 1,392 2,636 TOTAL FRENCH STATE (central) 1,817 3,284

Grants received SNCF receives investment grants in the form of third-party financing, primarily from local authorities, for TER rolling stock. The investment grants are recorded in the balance sheet and released to profit or loss on the depreciation line, over the economic useful life of the corresponding assets.

In € millions 31/12/2007 31/12/2006

Investment grants 1,055 9 0 2 TOTAL REGIONS 1,055 9 0 2

SNCF — FINANCIAL report 2007 - 123 32. RELATED-PARTY TRANSACTIONS

32-2 TRANSACTIONS WITH OTHER STATE COMPANIES

Transactions between SNCF and other State companies (EDF, France Telecom, La Poste, etc.) are all performed on an arm’s length basis, except for tran- sactions entered into by mutual agreement with RFF, for whom SNCF currently remains one of its main customers.

Income and expenses:

In € millions 31/12/2007 31/12/2006

Revenue with RFF 3,836 3,798 Tolls paid to RFF 2,596 2,404

Balance sheet headings:

In € millions 31/12/2007 31/12/2006

RFF net receivable (1) 7 7 4 6 8 7 RFF payables 2 4 1 2 9 6 RFF net balance sheet position 5 3 3 3 9 2

(1) Excluding the financial receivable presented separately in balance sheet assets.

As these transactions are between related parties owned by the French State, credit risk is considered nil. No doubtful receivables have been identified. All other transactions entered into by the Group with related parties are performed on an arm’s length basis.

32-3 TRANSACTIONS WITH ICF GROUP E.S.H. LOW-RENTAL HOUSING COMPANIES

Balance sheet headings:

In € millions 31/12/2007 31/12/2006

Current financial assets 1 0 Non-current financial assets 3 7 7 3 6 7 Current financial liabilities 2 3 2 2 1 6 Non-current financial liabilities Related party net balance sheet position 1 4 6 1 5 2

Non-current financial assets primarily comprise building loans granted by SNCF and ICF to ESH subsidiaries. Financial liabilities represent ESH subsidiary investments with ICF. Transactions with HLM low-rental companies recorded in the Income Statement are not material.

124 - CONSOLIDATED FINANCIAL STATEMENTs 32-4 TRANSACTIONS WITH ASSOCIATES

Transactions with associates are not material.

33. MANAGEMENT COMPENSATION

Key management personnel of the Group consist of members of the SNCF Management Committee. Cumulative compensation paid in 2007 is as follows:

31/12/2007 31/12/2006 Variation

Number of managers concerned 12 1 2 Average number of managers during the half year 12 1 2

Total compensation in € million 3 3 0

34. LITIGATION AND DISPUTES

The company is involved in a number of legal proceedings and dispu- Competition-related disputes tes in the course of its operating activities, which are unresolved at the Euro Express Sonderzuge (EES) and Bahn Touristik Express (BTE) filed year-end. Provisions are recorded to cover the charges associated with a suit against SNCF in December 2002 for abuse of market power these disputes where they are considered probable and they can be regarding rate increases for the French routes used by foreign pilgri- quantified or estimated with reasonable accuracy. mage trains. Following an agreement reached in the summer of 2007 between EES, BTE and SNCF on the price of rail services rendered by France Telecom SNCF on French routes up to 2010, EES and BTE withdrew their suit In October 2000, SNCF initiated a suit against France Télécom before and the Commission closed the file. the Paris administrative court in order to obtain payment of damages Karavel and Last Minute.com filed a suit against SNCF for customer with respect to the installation of telecommunication cables on SNCF enticement for the exclusive benefit of the joint venture between Voyages- rail property between 1991 and 1997. sncf.com and the on-line tour operator Expedia and for distorting com- By notification dated 11 March 2004, the Paris administrative court petition in the on-line retail travel market. rejected the SNCF suit on the grounds that the company had no Based on the report issued by the DGCCRF, the French Competition reason to act in accordance with Article 6 of the law of 13 February Council addressed a notification of grievances on 25 January 2008 1997. SNCF appealed the ruling on 28 May 2004 before the registry of against EXPEDIA, SNCF and its on-line retail subsidiaries. the Paris administrative appeal court. Lastly, British Airways filed a suit against SNCF/Eurostar Group Ltd and In its decision of 24 May 2007, the Paris Appeal Court again rejected FRP for refusing to display a British Airways advertising campaign in the SNCF suit. SNCF appealed to the Council of State on 30 July 2007 the stations. The suit is being contested by FRP pursuant to a binding and filed an initial brief at the end of October 2007. Proceedings are agreement with SNCF. The British Airways suit also claims predatory therefore still in progress. price practices on the Eurostar Paris–London route. This suit was the subject of a request for protective measures, which was examined by the French Competition Council in February 2005. This resulted in a decision not to proceed for FRP and the dismissal of the protective measures requested for unfair price practices.

SNCF — FINANCIAL report 2007 - 125 34. LITIGATION AND DISPUTES

The French Competition Council has referred the suit for a more compre­ In accordance with the Company’s arguments, the court considered hensive analysis of the financial relations between Eurostar and SNCF. that SNCF, a semi-public company at the time and therefore a private- It was decided on 23 November 2007 that there were no grounds for law corporation, operated an industrial and commercial public service continuing the procedure. and, accordingly, that it only transported persons of Jewish origin from stations close to administrative detention centres to stations serving Transportation of deportees during the Second transit centres (with a view to their subsequent deportation), under the World War authority of the German occupation forces and at the State’s request On 6 June 2006, the Toulouse administrative court ordered SNCF or requisition. and the French State to pay, respectively, €20,000 and €40,000 to The court emphasized that the conditions under which the transports the beneficiaries of Messrs Spyritus and Lipietz. The suit cited the at issue were carried out, particularly the train composition, the type involvement of SNCF and the French State, between May and August of cars used, the interior layout and the entries to these cars, like 1944, in the arrest in Pau of these individuals and their relatives, their the conditions of treatment of deportees, “were determined by the transportation by train from Pau to Toulouse and subsequently to Paris- occupier and implemented under the State’s authority”, and hence that Austerlitz, and their imprisonment for approximately 3 months at the SNCF could not be seen as “having, through the requisite services, Drancy camp (they were not deported). performed an administrative public service [in this case an administra- In thus ordering SNCF to compensate the claimants for one third of the tive police operation], nor as having the prerogatives of public authority, damages suffered, the Toulouse administrative court considered: the exercise of which being the source of the damage” and that, – that their action was not time-barred, the starting point for the decen- consequently, only the judiciary was competent to decide. nial time limit being deferred, in the court’s opinion, from 1944 to the The beneficiaries of Messieurs Lipietz and Spyritus filed an appeal publication in 1996 of the Rapport Bachelier, a documentary report, before the Council of State on 25 May 2007 against the decision of the since prior to this publication the SNCF’s role was unknown, Bordeaux Administrative Appeal Court. – and that SNCF was liable given that it was autonomous and could In a decision issued 21 December 2007, the Council of State rejected have opposed the inhuman transport conditions. the appeal and confirmed that the administrative court was not com- In July 2006, SNCF appealed this ruling before the Bordeaux adminis- petent to hear the case, thereby rejecting the argument that SNCF uni- trative appeal court. The French State did not appeal. laterally conferred on itself a deportation administrative public service In a unanimous decision dated 27 March 2007, the Bordeaux Adminis- or solicited the creation of such a service by contractual means and trative Appeal Court overruled the Toulouse administrative court declaring profited therefrom. that the administrative jurisdiction was not competent to hear the The 367 suits pending hearing before 23 administrative courts should case. be rejected by judicial order.

126 - CONSOLIDATED FINANCIAL STATEMENTs 35. POST-BALANCE SHEET EVENTS

Reform of special pension regimes – The possibility for the employer to require employees with 25 years The Decree of 15 January 2008 on the SNCF employee special pension service and who have reached the minimum pension entitlement age regime outlines the fundamental principles detailed in the French to retire is withdrawn. Government orientation documents and the majority of items concerning – The entitlement to early retirement granted to parents with three pension regulations adopted pursuant to negotiations between SNCF children, previously available only to women, is extended to men and, Management and trade union bodies. It confirms that the reform will as for public sector workers, this entitlement is now linked to a cessation take effect on 1 July 2008 and comprises two parts: of activity requirement of at least two months per child. – Handicapped employees with a minimum pension entitlement age Implementation of common harmonisation principles of 55 benefit from a reduction in this age of up to 2.5 years, based on – The insurance period necessary to receive the maximum pension the insurance and contribution period. This early retirement is accom- percentage is harmonised with that applicable to public sector regimes. panied by an increase in the pension. It will be gradually increased from 150 to 160 quarters and thereafter – Survivor pension rights of men are aligned with those of women. will evolve in line with the public sector regime. Where the deceased spouse received the minimum pension, the – D iscount: application of a reduction coefficient to the pension when survivor's pension rate will be increased over three years from 50% employees do not satisfy the all-regime insurance period condition. to 54%. In addition, an orphan’s pension is created. This discount will not apply to employees that increase their period of – Some of the salary measures accompanying the reform of the activity in proportion to the increase in the required insurance period. special regime will be taken into account in the adjustment of 2008 Therefore, the number of discount quarters will be limited to 10 (2.5 pensions, enabling an increase in the purchasing power of retired years) for an insurance period of 160 quarters. employees. – Indexing: special regime pensions will be indexed to the consumer Negotiations will continue in 2008 with respect to matters not yet price index in the same way as public sector pensions from 1 January covered. The French government has undertaken to pass the regulatory 2009. provisions necessary to their application within the required period. – Additional benefits: the additional benefits granted to drivers shall be maintained for employees who join SNCF before 1 January 2009. Renewal of the sncf board of directors For employees recruited after 1 January 2009, measures to take The Board of Directors comprises 18 members: 6 employee represen- account of the specific requirements of driving activities will be defined tatives, including one manager, elected by employees of SNCF and at company level, through negotiation or by unilateral decision of the certain subsidiaries; 7 representatives of the French State appointed employer. by Decree; 5 members chosen for their expertise in the rail sector, also appointed by Decree. The five-year term of office of these 18 members Implementation of measures decided during company expired at the end of February 2008. A new Board of Directors was formed negotiations on 20 February 2008, comprising the following individuals: The Decree gives regulatory weighting to the measures decided during – representatives of the French State: Mr. Guillaume Pepy; Mrs. company negotiations at round table meetings held in November and Michèle Pappalardo, Advisor to the Court of Accounts; Mr. Claude December. Gressier, Division President with the Structural Engineering General – The minimum age (18 years old) for membership of the special Council; Mr. Rémy Rioux, French Government Shareholding Agency; regime is removed, notably to enable the membership of apprentices. Mr. Philippe Josse, Budget Director; Mr. Daniel Canepa, Prefect of – Periods of interruption to or reduction in activity in order to raise the Nord-Pas-de-Calais region; Mr. Jean Bassères, Department Head children shall be included in the pension calculation, up to a maxi- at the Finance General Inspection Service mum of 1 year for children born or adopted prior to 1 July 2008 and – members chosen for their expertise: Mr. Marc Debrincat, National three years for children born or adopted after this date. In addition, Federation of Transport User Associations (FNAUT), representing increases in the insurance period shall also be granted to women passengers; Mr. Jean-Pierre Clamadieu, CEO of Rhodia, representing who have given birth and parents raising a handicapped child. freight users; Mr. Patrick Ollier, Deputy, President of the National – Periods spent in higher education may also be validated up to a maxi- Assembly Commission for Economic Affairs, the Environment and mum of 12 quarters, in return for payment of a purchase contribution. the Regions; Mr. Jean-Paul Emorine, Senator, President of the Senate

SNCF — FINANCIAL report 2007 - 127 35. post-balance sheets events

Commission for Economic Affairs; Mr. Michel Dubromel, Division Acquisition of Rhode & Liesenfeld manager with the association France Nature Environnement On 3 January 2008, Geodis finalised the acquisition of the German – Employee representatives: Thierry Roy (CGT), Henri Bascanuna Group Rohde & Liesenfeld (R&L), an international player in the air and (CGT), Stéphane Leblanc (SUD-Rail), Grégory Roux (CGT), Eric sea freight forwarding sector and industrial project activities. The R&L Tournebœuf (UNSA) and Michel Giraudon (CFDT). Group has been a major partner of the Geodis network since 2002. This transaction extends the geographical coverage of the Geodis Wilson Appointment of Mr. Guillaume Pépy network, providing a significant position in Germany and making the as sncf Chairman company a major player in this sector. This acquisition also enables Mr. Guillaume Pepy was appointed Chairman of SNCF on 27 February Geodis to cover new areas and notably South Africa, where R&L has 2008 to replace Mrs. Anne Marie Idrac. a strong presence and to considerably strengthen its position in Latin America. R&L will also bring to the Group its expertise in industrial Approval of the 2008/2011 stif contract projects, particularly in the growth sector of petroleum and gas projects. The Board of Directors meeting of 13 February 2008 approved the The enterprise value of R&L is estimated at €90 million and Geodis contract linking the company to STIF (Syndicat des Transports d’Ile-de- purchased the securities for €77 million. As the acquisition of control is France - Greater Paris Transport Union) for the period 2008 – 2011. This only recent and given the accounts closing date, we are unable to com- contract represents business volume of approximately €2.5 billion per municate at this stage the amounts which will be allocated to the fair year for SNCF, or €10 billion over the period to 2011. value of assets, liabilities and contingent liabilities for each R&L category at the date of acquisition of control, or the net carrying amount of Signature of a ter regional transport agreement these categories determined in accordance with IFRS immediately with the Basse-Normandie region prior to the acquisition date. Based on equity as at 31 December 2006 On 31 January 2008, SNCF and the Basse-Normandie region signed a (under German GAAP), goodwill would be €73 million. new TER regional transport agreement, associating the company and Financing was provided by a six-year instalment loan secured on the Basse-Normandie region for a period of seven years. This agreement 21 December 2007 with Caisse Régionale de Crédit Agricole Mutuel is for a total amount of approximately €280 million. de Paris et d’Ile de France of €50 million and by a drawdown on the syndicated credit line signed in January 2007. Signature of a ter regional transport agreement with the Nord-Pas-de-Calais region Payment of the first dividend to the French State On 7 February 2008, SNCF and the Nord Pas de Calais region signed a For the first time, the French State will receive a dividend in 2008 equal new TER regional transport agreement, associating the company and to 20% of SNCF consolidated net profit from recurring operations, that the Nord Pas de Calais region for a period of seven years. This agreement is 20% of €656,839,000 or €131,367,800. Net profit from recurring is for a total amount of approximately €203 million. operations is equal to net profit from ordinary activities (€1,109 million), adjusted for net proceeds from asset disposals (€118 million), impairment A new decree extending the conditions losses (€21 million) and movements in deferred tax assets on tax loss of use of the national railway network carry-forwards (€355 million, see Note 29). Decree 2008-148 of 18 February (published in the Official Journal on 20 February) modifies and extends the conditions of use of the national railway network. Therefore, public authorities and their groupings may now claim the allocation of rail rights of way, provided that such requests are aimed at entering into a “contract for freight transport services covering their own requirements”. “Public corporations orga- nising freight transport services on the national railway network, including port authorities managing port rail networks linked to this network” may also request rail rights of way. The new Decree also extends this possibility to Regional Councils and the Greater Paris Transport Union (Stif) in their role as public entities “organising a pas- senger transport public service on the national railway network with effect from 14 December 2008”.

128 - CONSOLIDATED FINANCIAL STATEMENTs 36. SCOPE OF CONSOLIDATION

Percentage interest: share in the share capital of the consolidated Percentage control: percentage of voting rights held by the consolida- company held by the consolidating company, either directly or indirectly. ting company in the consolidated company, either directly or indirectly.

Passengers France & Europe % control % interest Direct subsidiaries of SNCF Participations Full consolidation Voyageurs France Europe Partenaires 100.00 100.00

Local Transport % control % interest Direct subsidiaries of SNCF Participations Full consolidation Effia 99.99 99.99 Equity accounted Kuvera Développement (Keolis holding company) 45.38 45.38

Transport and Logistics % control % interest Direct subsidiaries of SNCF Participations Full consolidation VFLI 100.00 100.00 Sealogis 100.00 100.00 France Wagons 100.00 100.00 Société de transports de véhicules automobiles (STVA) 82.23 81.95 Naviland Cargo 99.96 99.96 Compagnie de transports de céréales (CTC) 73.07 66.34 Geodis 45.07 43.11 Proportionate consolidation Financière Ermewa 49.60 49.10 Ermewa SA Group 49.60 49.10 Direct subsidiaries of Geodis Full consolidation Bourgey Montreuil Holding 100.00 43.11 Calberson SA 100.00 43.11

SNCF — FINANCIAL report 2007 - 129 36. SCOPE OF CONSOLIDATION

Infrastructure % control % interest Direct subsidiaries of SNCF participations Full consolidation SNCF International 100.00 100.00 AREP 100.00 100.00 INEXIA 100.00 100.00 Proportionate consolidation Systra SA 50.00 35.87 Common operations % control % interest Direct subsidiaries of SNCF participations Full consolidation Groupe ICF 100.00 100.00 SNCF Participations 100.00 100.00 Equity accounted Eurofima 22.60 22.60 Direct subsidiaries of SNCF participations Full consolidation Seafrance 100.00 100.00

DETAILED SCOPE OF CONSOLIDATION Consolidation method • FC: Full consolidation • PC: Proportionate consolidation • EA: Equity accounted • NC: Not consolidated

Change in Group structure • CNG: Change in corporate name • CME: Change in method • CPC: Change in % control • EEX: Entry – external growth • ECO: Entry – consolidation criteria • ECR: Entry – creation • RDI: Removal - disposal • RCO: Removal – consolidation criteria • RME: Removal - merger • RLI: Removal – liquidation

130 - CONSOLIDATED FINANCIAL STATEMENTs Country M PC PI PC PI Country M PC PI PC PI YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 2007 2007 2006 2006 2007 2007 2006 2006

PARENT COMPANY SNCF LOCAL TRANSPORT

SNCF FR IG 100.00 100.00 100.00 100.00 Canal TP FR FC 74.97 74.96 74.97 86.22 Effia (holding company) FR FC 99.99 99.99 99.99 99.99 PASSENGERS FRANCE & EUROPE Effia Concessions FR FC 99.96 99.95 99.96 99.95 Effia MTI FR FC 100.00 99.99 100.00 99.99 A2C FR FC 100.00 100.00 100.00 100.00 Effia Services FR FC 99.98 99.99 99.79 99.78 Brit Cities Limited GB FC 100.00 100.00 100.00 100.00 Effia Stationnement et Mobilité FR FC 100.00 99.95 100.00 99.95 CRM Services FR FC 100.00 100.00 100.00 100.00 Effia Synergie FR FC 100.00 99.99 0.00 0.00 ECR Eurostar Group GB FC 62.00 62.00 62.00 62.00 Effia Transport FR FC 100.00 99.99 100.00 99.99 French Rail Incorporated USA FC 100.00 100.00 100.00 100.00 Quiberon Stationnement FR FC 52.00 51.97 52.00 51.97 French Railways Ltd GB FC 100.00 100.00 100.00 100.00 S.E.G. FR FC 100.00 99.95 100.00 99.95 French Travel Service GB FC 100.00 100.00 100.00 100.00 S.G.F.A. FR NI 0.00 0.00 90.00 89.95 RLI GIE SysRailData FR FC 100.00 100.00 100.00 100.00 Keolis Group - equity accounted IDTGV FR FC 100.00 100.00 100.00 100.00 Kuvera Développement L'Agence Voyages-sncf.com FR FC 50.10 50.10 50.10 50.10 (parent company) FR EA 45.38 45.38 0.00 0.00 ECE Lyria FR FC 74.00 74.00 74.00 74.00 Subsidiaries Parvis FR FC 100.00 100.00 100.00 100.00 Aerobag FR EA 45.37 45.27 45.00 44.95 Rail Europe Bénélux B FC 100.00 100.00 100.00 100.00 Aerolignes FR EA 45.37 45.27 45.00 44.95 Rail Europe Deutschland GER FC 100.00 100.00 100.00 100.00 Aéroport Angers-Marcé FR EA 45.37 45.27 45.00 44.95 Rail Europe Espana SP FC 100.00 100.00 100.00 100.00 Aéroport de Clermont-Ferrand Rail Europe Group Limited GB FC 100.00 100.00 100.00 100.00 Auvergne FR EA 45.37 22.63 0.00 0.00 Rail Europe Groupe Inc USA FC 88.00 88.00 87.12 87.12 Aéroport de Troyes-Barbet FR EA 45.37 45.27 0.00 0.00 Rail Europe Italia ITA FC 100.00 100.00 100.00 100.00 Aerosat FR EA 45.37 38.48 45.00 44.95 Rail Europe Limited GB FC 100.00 100.00 100.00 100.00 Airelle FR EA 45.37 45.27 45.00 44.95 Rail Europe Suisse SWIT FC 100.00 100.00 100.00 100.00 Ateliers Chantiers-de-Fécamp FR EA 45.37 45.26 45.00 44.95 SAM Paris Nord FR FC 60.00 60.00 60.00 60.00 Athis Cars FR EA 45.37 45.02 45.00 44.95 Thalys International B FC 62.00 62.00 70.00 70.00 Autocars Charrière Fils FR EA 45.37 45.04 45.00 44.95 Transmanche Night Travel Ltd GB FC 100.00 100.00 100.00 100.00 Autocars Corre FR EA 45.37 45.27 0.00 0.00 VALGA FR FC 100.00 100.00 0.00 0.00 ECR Autocars Delion SAS FR EA 45.37 45.27 0.00 0.00 VFE e-commerce FR FC 100.00 100.00 100.00 100.00 Autocars Planche FR EA 45.37 45.27 45.00 44.95 VFE Partenaires SA FR FC 100.00 100.00 100.00 100.00 Autocars Roche FR EA 45.37 45.27 0.00 0.00 Voyages-SNCF.com FR FC 100.00 100.00 100.00 100.00 Bus Inter FR EA 45.37 45.27 0.00 0.00 VSC Technologies FR FC 100.00 100.00 100.00 100.00 Busslink SUE EA 45.37 31.69 45.00 44.95 ALLEO GER PC 50.00 50.00 0.00 0.00 ECR CTA Valentinoise FR EA 45.37 45.24 45.00 44.95 Artesia FR PC 50.00 50.00 50.00 50.00 Caennaise de service FR EA 45.37 45.27 45.00 44.95 Elipsos SP PC 50.00 50.00 50.00 50.00 Cariane Adour FR EA 45.37 45.27 45.00 44.95 RE 4A FR PC 50.00 50.00 50.00 50.00 Cariane Drôme FR EA 45.37 45.23 45.00 44.95 Intercapital Regional Rail Ltd GB EA 35.00 35.00 35.00 35.00 Cariane Est FR EA 45.37 45.27 45.00 44.95 Railteam bv HOL EA 25.00 25.00 0.00 0.00 ECR Cariane Littoral FR EA 45.37 45.27 45.00 44.95 Rhealys SA LUX NC 0.00 0.00 30.00 30.00 RDI Cariane Loiret FR EA 45.37 45.27 45.00 44.95 Cariane Multimodal International FR EA 45.37 45.27 0.00 0.00 Cariane SA FR EA 45.37 45.27 45.00 44.95

SNCF — FINANCIAL report 2007 - 131 36. SCOPE OF CONSOLIDATION

Country M PC PI PC PI Country M PC PI PC PI YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 2007 2007 2006 2006 2007 2007 2006 2006

Cars Blot FR EA 45.37 45.27 0.00 0.00 Keolis Artois FR EA 45.37 45.26 0.00 0.00 Cars de Bordeaux FR EA 45.37 45.20 45.00 44.95 Keolis Atlantique FR EA 45.37 45.26 45.00 44.95 Cars Planche Cottin Prioux FR EA 45.37 45.27 45.00 44.95 Keolis Auch FR EA 45.37 45.27 45.00 44.95 Cars Sylvestre FR EA 45.37 45.27 45.00 44.95 Keolis Aude FR EA 45.37 45.27 45.00 44.95 Ceyte Tourisme Méditerranée FR EA 45.37 45.27 45.00 44.95 Keolis Bassin de Thau FR EA 45.37 45.17 45.00 44.95 CFTV FR EA 45.37 45.27 45.00 44.95 Keolis Besançon FR EA 45.37 45.22 45.00 44.95 Cie Bus Alençonnais – Cobal FR EA 45.37 45.27 45.00 44.95 Keolis Blois FR EA 45.37 45.27 45.00 44.95 Cie Maritime Penn Ar Bed FR EA 45.37 45.27 45.00 44.95 Keolis Bourgogne FR EA 45.37 44.81 45.00 44.95 Cie Tpts De l’Artois FR EA 45.37 45.27 45.00 44.95 Keolis Brest FR EA 45.37 45.27 45.00 44.95 Cie Tpts Languedoc Narbonne FR EA 45.37 45.27 45.00 44.95 Keolis Caen FR EA 45.37 44.72 45.00 44.95 Cie Tpts Méditerranéens FR EA 45.37 45.04 45.00 44.95 Keolis Cahors FR EA 45.37 45.27 45.00 44.95 City-Trafik DAN EA 45.37 45.27 45.00 44.95 Keolis Calvados FR EA 45.37 45.27 45.00 44.95 Citypendeln SUE EA 45.37 45.27 45.00 44.95 Keolis Canada Inc CAN EA 45.37 45.27 45.00 44.95 Compagnie du Blanc-Argent FR EA 45.37 45.00 45.00 44.95 Keolis Centre FR EA 45.37 45.27 45.00 44.95 CSG Commuter Security SUE EA 45.37 45.27 45.00 44.95 Keolis Châlons-en-Champagne FR EA 45.37 43.94 45.00 44.95 CSTA FR EA 45.37 45.27 45.00 44.95 Keolis Châteauroux FR EA 45.37 45.27 45.00 44.95 Delion Tourisme FR EA 45.37 45.27 0.00 0.00 Keolis Châtellerault FR EA 45.37 45.27 45.00 44.95 Devillairs FR EA 45.37 45.22 45.00 44.95 Keolis Cherbourg FR EA 45.37 45.20 45.00 44.95 Easybus FR EA 45.37 45.27 0.00 0.00 Keolis Concarneau FR EA 45.37 45.27 45.00 44.95 Entreprise Charles Caron FR EA 45.37 45.27 45.00 44.95 Keolis Conseil et Projets FR EA 45.37 45.27 45.00 44.95 Entreprise Philippe Détré FR EA 45.37 45.27 45.00 44.95 Keolis Deutschland COKG ALL EA 45.37 45.27 45.00 44.95 Éole FR EA 45.37 45.37 45.00 44.95 Keolis Deutschland Verwaltung ALL EA 45.37 45.27 45.00 44.95 Étasse Tourisme FR EA 45.37 45.27 0.00 0.00 Keolis en Cévennes FR EA 45.37 43.05 45.00 44.95 Étasse Voyages FR EA 45.37 45.27 0.00 0.00 Keolis Espagne ESP EA 45.37 45.27 45.00 44.95 Eurobahn Verkers Services Keolis Eure FR EA 45.37 45.27 45.00 44.95 Gmbh ALL EA 45.37 45.27 0.00 0.00 Keolis Eure-et-Loire FR EA 45.37 45.16 45.00 44.95 Financière Keos FR EA 45.37 45.37 45.00 44.95 Keolis Garonne FR EA 45.37 45.27 0.00 0.00 Garrel et Navarre FR EA 45.37 45.27 45.00 44.95 Keolis Gironde FR EA 45.37 45.13 45.00 44.95 Gep Vidal FR EA 45.37 45.26 45.00 44.95 Keolis Givors FR EA 45.37 45.26 45.00 44.95 GIE Centre Cars FR EA 45.37 45.27 0.00 0.00 Keolis Gohelle FR EA 45.37 45.27 45.00 44.95 Gie Orset FR EA 45.37 45.27 45.00 44.95 Keolis Grand Tarbes FR EA 45.37 45.27 45.00 44.95 Groupe Orléans Express CAN EA 45.37 33.95 45.00 44.95 Keolis La Roche-sur-Yon FR EA 45.37 45.27 45.00 44.95 Institut Keolis FR EA 45.37 45.27 45.00 44.95 Keolis Languedoc FR EA 45.37 45.27 45.00 44.95 Interhone FR EA 45.37 45.27 45.00 44.95 Keolis Laval FR EA 45.37 45.27 45.00 44.95 Intrabus Orly FR EA 45.37 45.27 45.00 44.95 Keolis Littoral FR EA 45.37 45.27 45.00 44.95 Jobard et Cie FR EA 45.37 45.26 45.00 44.95 Keolis Lorient FR EA 45.37 45.23 45.00 44.95 Keolis FR EA 45.37 45.27 45.00 44.95 Keolis Lyon FR EA 45.37 45.26 45.00 44.95 Keolis Abbeville FR EA 45.37 44.82 45.00 44.95 Keolis Montargis FR EA 45.37 45.27 45.00 44.95 Keolis Agen FR EA 45.37 45.27 45.00 44.95 Keolis Montélimar FR EA 45.37 45.27 45.00 44.95 Keolis Aix-les-Bains FR EA 45.37 45.27 0.00 0.00 Keolis Montluçon FR EA 45.37 45.22 0.00 0.00 Keolis America Inc USA EA 45.37 45.27 0.00 0.00 Keolis Morlaix FR EA 45.37 45.27 45.00 44.95 Keolis Angers FR EA 45.37 45.27 45.00 44.95 Keolis Nevers FR EA 45.37 45.27 0.00 0.00 Keolis Arles FR EA 45.37 45.27 45.00 44.95 Keolis Nordic SUE EA 45.37 45.27 45.00 44.95

132 - CONSOLIDATED FINANCIAL STATEMENTs Country M PC PI PC PI Country M PC PI PC PI YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 2007 2007 2006 2006 2007 2007 2006 2006

Keolis Oise FR EA 45.37 45.26 45.00 44.95 SA Sap Drogoul FR EA 45.37 44.85 45.00 44.95 Keolis Pays-de-Montbelliard FR EA 45.37 45.27 45.00 44.95 SAP Cariane Provence FR EA 45.37 45.21 45.00 44.95 Keolis Provence FR EA 45.37 45.27 45.00 44.95 SCAC FR EA 45.37 45.26 45.00 44.95 Keolis Pyrénées FR EA 45.37 43.08 45.00 44.95 SCAC Bagnis FR EA 45.37 23.08 45.00 44.95 Keolis Quimper FR EA 45.37 45.27 45.00 44.95 SCE A14 FR EA 45.37 23.07 45.00 44.95 Keolis Rennes FR EA 45.37 45.19 45.00 44.95 SEA Albert-Picardie FR EA 45.37 23.06 0.00 0.00 Keolis Saint-Brieuc FR EA 45.37 45.27 45.00 44.95 Serag Voyages FR EA 45.37 45.17 45.00 44.95 Keolis Saint-Malo FR EA 45.37 45.27 45.00 44.95 Setver FR EA 45.37 45.27 45.00 44.95 Keolis Saintes FR EA 45.37 45.27 45.00 44.95 SFD FR EA 45.37 45.27 45.00 44.95 Keolis Seine-et-Eure FR EA 45.37 45.27 45.00 44.95 Sivet Voyages FR EA 45.37 45.27 0.00 0.00 Keolis Seine-Maritime FR EA 45.37 45.27 45.00 44.95 Sodetrav FR EA 45.37 43.04 45.00 44.95 Keolis Somme FR EA 45.37 45.27 45.00 44.95 SOMAP FR EA 45.37 45.27 45.00 44.95 Keolis Touriscar Ain FR EA 45.37 45.27 45.00 44.95 STA FR EA 45.37 45.27 45.00 44.95 Keolis Tours FR EA 45.37 45.27 45.00 44.95 STCAR FR EA 45.37 44.85 45.00 44.95 Keolis UK GB EA 45.37 45.27 45.00 44.95 Sté Tpts urbains d’Oyonnax FR EA 45.37 45.27 45.00 44.95 Keolis Urbest FR EA 45.37 45.27 45.00 44.95 Sté Expl. Étab. Lenegre FR EA 45.37 45.27 0.00 0.00 Keolis Val-d’Oise FR EA 45.37 45.27 45.00 44.95 Ste Tpt Com. Urbaine d’Arras FR EA 45.37 44.99 45.00 44.95 Keolis Val-de-Maine FR EA 45.37 45.27 45.00 44.95 Ste Tpt Région Boulogne FR EA 45.37 45.26 45.00 44.95 Keolis Val-de-Saône FR EA 45.37 44.86 45.00 44.95 Sté Tpts Agglom. Chartraine FR EA 45.37 45.27 45.00 44.95 Keolis Vesoul FR EA 45.37 45.27 45.00 44.95 Sté Tpts Agglom. Roannaise FR EA 45.37 45.27 45.00 44.95 Keolis Voyages FR EA 45.37 45.27 45.00 44.95 Ste Tpts Région Dijonnaise FR EA 45.37 44.96 45.00 44.95 Les Cars de Camargue FR EA 45.37 44.83 45.00 44.95 Sté Tpts Robert FR EA 45.37 45.19 45.00 44.95 Les Cars du Bassin de Thau FR EA 45.37 45.27 45.00 44.95 Sté Transports Services Les Cars Roannais FR EA 45.37 45.27 45.00 44.95 Aéroportuaires FR EA 45.37 45.27 45.00 44.95 Les Courriers Bretons FR EA 45.37 45.27 45.00 44.95 STUV FR EA 45.37 23.03 45.00 44.95 Les Courriers Catalans FR EA 45.37 45.26 45.00 44.95 SVTU FR EA 45.37 45.25 45.00 44.95 Les Courriers d’Ile-de-France FR EA 45.37 45.24 45.00 44.95 TAE FR EA 45.37 45.26 45.00 44.95 Les Courriers du Midi FR EA 45.37 45.26 45.00 44.95 Tourisme Garage Vermot FR EA 45.37 45.25 45.00 44.95 Les Courriers Mosellans FR EA 45.37 45.25 45.00 44.95 TPN Voyages FR EA 45.37 45.27 0.00 0.00 Les Courriers Normands FR EA 45.37 45.27 45.00 44.95 TPR FR EA 45.37 45.26 45.00 44.95 Loisirs et Voyages FR EA 45.37 45.27 0.00 0.00 Tpt de la Brière FR EA 45.37 27.07 45.00 44.95 Millau Cars FR EA 45.37 45.21 45.00 44.95 Tpts Communs Métropole Lilloise FR EA 45.37 45.26 45.00 44.95 Monnet Tourisme FR EA 45.37 45.27 45.00 44.95 Tpts Paris-Nice FR EA 45.37 45.27 0.00 0.00 Monts Jura Autocars FR EA 45.37 45.26 45.00 44.95 Train Bleu Saint-Marcellin FR EA 45.37 45.27 45.00 44.95 Normandy Cars FR EA 45.37 45.27 45.00 44.95 Trans. Val-de-Lys FR EA 45.37 45v26 45.00 44.95 Pacific Car FR EA 45.37 45.09 45.00 44.95 Transétude FR EA 45.37 45.27 45.00 44.95 SNCOA FR EA 45.37 45.16 45.00 44.95 Transholding FR EA 45.37 45.27 0.00 0.00 SNT, Comett FR EA 45.37 45.26 45.00 44.95 TransOrly FR EA 45.37 45.27 45.00 44.95 ST2L Westell FR EA 45.37 45.27 45.00 44.95 Transports George’s FR EA 45.37 45.26 45.00 44.95 STAVS FR EA 45.37 44.90 45.00 44.95 Transports Urbains de Reims FR EA 45.37 44.58 45.00 44.95 STC (Cagnes) FR EA 45.37 45.23 45.00 44.95 TransRoissy FR EA 45.37 45.27 45.00 44.95 STEFIM FR EA 45.37 45.27 45.00 44.95 Transthermal FR EA 45.37 45.27 0.00 0.00 STU du Lot-et-Garonne FR EA 45.37 45.27 45.00 44.95 Transtub FR EA 45.37 45.21 45.00 44.95

SNCF — FINANCIAL report 2007 - 133 36. SCOPE OF CONSOLIDATION

Country M PC PI PC PI Country M PC PI PC PI YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 2007 2007 2006 2006 2007 2007 2006 2006

TVB FR EA 45.37 45.27 45.00 44.95 Moselbahn ALL NC 0.00 0.00 45.00 44.95 Var Tour FR EA 45.37 42.80 45.00 44.95 Rhenus Keolis Gmbh ALL NC 0.00 0.00 45.00 44.95 Via Autoroute FR EA 45.37 45.27 45.00 44.95 Rhenus Keolis Vervaltung ALL NC 0.00 0.00 45.00 44.95 Via Normandie FR EA 45.37 45.27 45.00 44.95 Sotram Martigues FR NC 0.00 0.00 45.00 44.95 Voyages Buchet FR EA 45.37 45.27 45.00 44.95 SRTA FR NC 0.00 0.00 45.00 44.95 Voyages Dourlens FR EA 45.37 45.27 45.00 44.95 Stadtverkehr Martin Becker ALL NC 0.00 0.00 45.00 44.95 Voyages Monnet FR EA 45.37 45.27 45.00 44.5 Zweibrücken ALL NC 0.00 0.00 45.00 44.95 VS Voyages FR EA 45.37 45.13 45.00 44.95 Zwickau ALL NC 0.00 0.00 45.00 44.95 Kéolis proportionately consolidated subsidiaries Sté des Tpts du Littoral de Toulon FR NC 0.00 0.00 45.00 44.95 CTCOP FR EA 45.37 22.63 45.00 44.95 Sté Rennaise Tpts et Services FR NC 0.00 0.00 45.00 44.95 Extertalbahn ALL EA 45.37 33.95 45.00 44.95 Sté Tpts Communs Nîmois FR NC 0.00 0.00 45.00 44.95 First / Keolis Holdings Ltd GB EA 45.37 20.37 45.00 44.95 First / Keolis Transpennine TRANSPORT and LOGISTICS Holding Ltd GB EA 45.37 20.37 45.00 44.95 First / Keolis Transpennine Ltd GB EA 45.37 20.37 45.00 44.95 Cargo Docks ITA FC 100.00 100.00 100.00 100.00 Govia GB EA 45.37 15.84 45.00 44.95 Compagnie Modalohr London & South Eastern Express Holding FR FC 51.00 51.00 51.00 51.00 Railway - LSER GB EA 45.37 15.84 45.00 44.95 Sté de Gestion du Terminal New Southern Railway GB EA 45.37 15.84 45.00 44.95 d’Aiton FR FC 65.00 33.15 65.00 33.15 Orgebus FR EA 45.37 22.51 45.00 44.95 Sté Propriétaire Wagons SEAG FR EA 45.37 22.63 45.00 44.95 Modalohr FR FC 100.00 51.00 100.00 51.00 STA Chauny FR EA 45.37 22.63 45.00 44.95 CTC FR FC 73.07 66.34 100.00 77.57 SEACA FR EA 45.37 22.63 45.00 44.95 Districhrono FR FC 100.00 100.00 100.00 100.00 Slivia Inc CAN EA 45.37 18.11 45.00 44.95 Écorail FR FC 100.00 100.00 99.99 99.99 Syntus PB EA 45.37 22.63 0.00 0.00 Edifret FR FC 100.00 100.00 99.84 99.84 Thameslink GB EA 45.37 15.84 45.00 44.95 France Wagons FR FC 100.00 100.00 100.00 100.00 Trans Pistes FR EA 45.37 18.11 45.00 44.95 Freight Europe UK GB FC 100.00 100.00 100.00 100.00 Transévry FR EA 45.37 17.85 45.00 44.95 Froidcombi FR FC 49.00 49.00 48.93 48.93 West Midlands GB EA 45.37 15.84 0.00 0.00 Ain Express FR FC 69.85 30.11 69.85 30.11 Kéolis associates Aisne Express FR FC 100.00 43.08 100.00 43.08 Eastbourne Buses GB EA 45.37 9.05 45.00 44.95 Alpes Maritimes Express FR FC 100.00 43.11 100.00 43.11 Netlog ALL EA 45.37 14.94 45.00 44.95 Artois Express FR FC 49.90 21.51 49.90 21.51 Scodec FR EA 45.37 15.84 45.00 44.95 Audas Distribution FR FC 100.00 43.11 100.00 43.11 TICE FR EA 45.37 8.52 45.00 44.95 Aveyron Express FR FC 100.00 43.11 100.00 43.11 Bad Kreuznach Bus ALL NC 0.00 0.00 45.00 44.95 Blazy FR FC 100.00 43.11 100.00 43.11 Cars Jura Sud FR NC 0.00 0.00 45.00 44.95 BM Chimie FR FC 100.00 43.11 100.00 43.11 Freiberg ALL NC 0.00 0.00 45.00 44.95 BM Luxembourg LUX FC 100.00 43.11 100.00 43.11 Groupe Ernest Planche FR NC 0.00 0.00 45.00 44.95 BM Services FR FC 100.00 43.11 0.00 0.00 ECR Idar-Oberstein ALL NC 0.00 0.00 45.00 44.95 Bouches-du-Rhône Express FR FC 100.00 43.11 100.00 43.11 Martin Becker ALL NC 0.00 0.00 45.00 44.95 Bourgey-Montreuil (Holding) FR FC 100.00 43.11 100.00 43.11 Martin Becker Vervaltung ALL NC 0.00 0.00 45.00 44.95 Bourgey-Montreuil Alimentaire FR FC 100.00 43.11 100.00 43.11 MJ 70 FR NC 0.00 0.00 45.00 44.95 Bourgey-Montreuil Alsace FR FC 100.00 43.11 100.00 43.11 MJ90 FR NC 0.00 0.00 45.00 44.95 Bourgey-Montreuil Aquitaine FR FC 100.00 43.11 100.00 43.11

134 - CONSOLIDATED FINANCIAL STATEMENTs Country M PC PI PC PI Country M PC PI PC PI YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 2007 2007 2006 2006 2007 2007 2006 2006

Bourgey-Montreuil Atlantique FR FC 99.97 43.10 99.97 43.10 Calberson International FR FC 100.00 43.11 100.00 43.11 Bourgey-Montreuil Calberson Location FR FC 100.00 43.11 100.00 43.11 Automotive Est FR FC 100.00 43.11 100.00 43.11 Calberson Loiret FR FC 100.00 43.11 100.00 43.11 Bourgey-Montreuil Calberson Lorraine FR FC 100.00 43.10 100.00 43.11 Automotive Ouest FR FC 100.00 43.11 100.00 43.11 Calberson Méditerranée FR FC 100.00 43.11 100.00 43.11 Bourgey-Montreuil Auvergne FR FC 100.00 43.11 100.00 43.11 Calberson Moselle FR FC 100.00 43.11 100.00 43.11 Bourgey-Montreuil Deutschland ALL FC 100.00 43.11 100.00 43.11 Calberson Normandie FR FC 100.00 43.11 100.00 43.11 Bourgey-Montreuil Calberson Oise FR FC 100.00 43.11 100.00 43.11 Équipement 1 FR FC 100.00 43.11 100.00 43.11 Calberson Paris FR FC 99.99 43.11 99.99 43.11 Bourgey-Montreuil Calberson Picardie FR FC 100.00 43.11 100.00 43.11 Équipement 2 FR FC 100.00 43.11 100.00 43.11 Calberson Rhône Alpes FR FC 100.00 43.11 100.00 43.11 Bourgey-Montreuil Calberson Romania ROU FC 100.00 43.11 100.00 43.11 Équipement 3 FR FC 100.00 43.11 100.00 43.11 Calberson Roussillon FR FC 100.00 43.11 100.00 43.11 Bourgey-Montreuil Francilienne FR FC 100.00 43.11 100.00 43.11 Calberson SAS FR FC 100.00 43.11 100.00 43.11 Bourgey-Montreuil Ile-de-France FR FC 100.00 43.11 100.00 43.11 Calberson Seine et Marne FR FC 100.00 43.11 100.00 43.11 Bourgey-Montreuil Italia ITA FC 99.75 43.00 100.00 43.11 Calberson Seine-Saint-Denis FR FC 100.00 43.11 100.00 43.11 Bourgey-Montreuil Limousin FR FC 100.00 43.11 100.00 43.11 Calberson Slovakia SLO FC 100.00 43.11 0.00 0.00 Bourgey-Montreuil Lorraine FR FC 100.00 43.11 100.00 43.11 Calberson Sud-Ouest FR FC 100.00 43.11 100.00 43.11 Bourgey-Montreuil Nord FR FC 100.00 43.11 100.00 43.11 Calberson Yvelines FR FC 100.00 43.11 100.00 43.11 Bourgey-Montreuil Normandie FR FC 100.00 43.11 100.00 43.11 Calopération FR FC 100.00 43.11 0.00 0.00 EEX Bourgey-Montreuil Picardie FR FC 99.96 43.09 99.96 43.09 Calvados Express FR FC 100.00 43.11 100.00 43.11 Bourgey-Montreuil Presse FR FC 100.00 43.11 100.00 43.11 Cargo Link AB SUE FC 93.89 40.48 0.00 0.00 EEX Bourgey-Montreuil Provence FR FC 100.00 43.11 100.00 43.11 Chaveneau Bernis Transport FR v 99.92 31.18 99.91 31.17 Bourgey-Montreuil Rhône-Alpes FR FC 100.00 43.11 100.00 43.11 Combined Logistics, Inc Bourgey Montreuil Savoie FR FC 100.00 43.11 100.00 43.11 New 2006 USA FC 100.00 43.11 0.00 0.00 EEX Bourgey-Montreuil Spécialités FR FC 100.00 43.11 100.00 43.11 Compagnie européenne Calberson Alsace FR FC 100.00 43.11 100.00 43.11 de services R.TCH FC 100.00 43.11 100.00 43.11 Calberson Ardennes FR FC 99.90 43.07 99.90 43.07 Creneau SA FR FC 100.00 43.11 100.00 43.11 Calberson Armorique FR FC 100.00 43.11 100.00 43.11 Drôme Express FR FC 100.00 43.11 100.00 43.11 Calberson Aube FR FC 95.02 40.97 95.02 40.97 Dusolier Calberson FR FC 100.00 43.09 100.00 43.09 Calberson Autun FR FC 100.00 43.11 100.00 43.11 Euromatic Belgium B FC 100.00 43.11 100.00 43.11 Calberson Auvergne FR FC 100.00 43.11 100.00 43.11 Exceed AB SUE FC 100.00 43.11 0.00 0.00 EEX Calberson Bretagne FR FC 100.00 43.11 100.00 43.11 Exceed Denmark A/S DAN FC 100.00 43.11 0.00 0.00 EEX Calberson Eure-et-Loir FR FC 99.04 42.70 99.03 42.69 Exceed Finland Oy FIN FC 100.00 43.11 0.00 0.00 EEX Calberson Europe Ile-de-France FR FC 100.00 43.11 100.00 43.11 Exceed Sweden AB SUE FC 100.00 43.11 0.00 0.00 EEX Calberson Europe Nord FR FC 100.00 43.11 100.00 43.11 Express Seine et Marne FR FC 100.00 43.11 100.00 43.11 Calberson Europe Rhône-Alpes FR FC 100.00 43.11 100.00 43.11 Flandre Express FR FC 100.00 43.11 100.00 43.11 Calberson FM FR FC 100.00 43.11 100.00 43.11 Fortec Distribution Network Ltd GB FC 100.00 43.11 100.00 43.11 Calberson GE FR FC 99.97 43.11 100.00 43.11 France Location Distribution FR FC 100.00 43.11 100.00 43.11 Calberson Grèce GRE FC 52.00 22.42 52.00 22.42 Freight Management Calberson Hainaut FR FC 100.00 43.11 100.00 43.11 France SAS FR FC 100.00 43.11 0.00 0.00 EEX Calberson Hungaria HON FC 100.00 43.11 100.00 43.11 Gard Express FR FC 100.00 43.11 100.00 43.11 Calberson Ile-de-France FR FC 100.00 43.11 100.00 43.11 Geodis Afrique FR FC 100.00 43.11 100.00 43.11

SNCF — FINANCIAL report 2007 - 135 36. SCOPE OF CONSOLIDATION

Country M PC PI PC PI Country M PC PI PC PI YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 2007 2007 2006 2006 2007 2007 2006 2006

Geodis Antilles FR FC 100.00 43.11 99.87 43.04 Geodis Overseas (Thaïland) Ltd THAI FC 100.00 43,11 100.00 43.11 Geodis Belgium NV B FC 100.00 43.11 100.00 43.11 Geodis Overseas Geodis BM Rakotrans R.TCH FC 52.00 22.42 52.00 22.42 Hong-Kong Ltd HK FC 100.00 43.11 99.95 43.09 Geodis BM Réseau FR FC 100.00 43.11 100.00 43.11 Geodis Overseas India INDE FC 100.00 43.11 100.00 43.11 Geodis BM Unitrans POL FC 52.00 22.42 52.00 22.42 Geodis Overseas International Geodis Calberson Lipetsk RUSS FC 100.00 43.11 100.00 43.11 Freight Forwarding CHI FC 100.00 43.11 100.00 43.11 Geodis Cameroun CAM FC 90.18 38.88 90.18 38.88 Geodis Overseas Maroc MAR FC 100.00 43.11 100.00 43.10 Geodis Co Ltd R. DE COR FC 100.00 43.11 100.00 43.11 Geodis Overseas Mexico MEX FC 100.00 43.11 100.00 43.11 Geodis Côte-d’Ivoire COT.IV FC 100.00 43.11 100.00 43.11 Geodis Overseas Polynésie POL. FR FC 93.85 40.45 93.83 40.44 Geodis Deutschland ALL FC 99.99 43.11 100.00 43.11 Geodis Overseas PT Indonesia INDO FC 90.00 38.80 90.00 38.80 Geodis Division Messagerie Geodis Overseas Pte Ltd SIN FC 100.00 43.11 100.00 43.11 Services FR FC 100.00 43.11 100.00 43.11 Geodis Overseas Réunion FR FC 89.95 38.78 89.95 38.77 Geodis Freight Forwarding FR FC 100.00 43.11 0.00 0.00 EEX Geodis Overseas Transport Geodis Gestion Immobilière FR FC 100.00 43.11 100.00 43.11 (Thaïland) THAI FC 100.00 43.11 100.00 43.11 Geodis Holding BV HOL FC 98.71 43.11 100.00 43.11 Geodis Projets FR FC 100.00 43.11 100.00 43.11 Geodis Holding Italia ITA FC 100.00 43.11 100.00 43.11 Geodis SA FR FC 42.62 43.11 43.11 43.11 Geodis Holdings UK Limited GB FC 100.00 43.11 100.00 43.11 Geodis Sénégal SENE FC 100.00 43.11 100.00 43.11 Geodis Iberia ESP FC 99.44 42.11 99.44 42.87 Geodis Solutions FR FC 100.00 43.11 100.00 43.11 Geodis Ile-de-France Service FR FC 99.99 43.11 99.99 43.11 Geodis Tchad TCH FC 100.00 43.11 100.00 43.11 Geodis Immobiliare Italia ITA FC 100.00 43.11 100.00 43.11 Geodis Trate SRL ITA FC 100.00 43.11 100.00 43.11 Geodis International FR FC 100.00 43.11 100.00 43.11 Geodis UK Ltd GB FC 100.00 43.11 100.00 43.11 Geodis Interservices FR FC 100.00 43.11 100.00 43.11 Geodis Vitesse Netherlands BV HOL FC 99.40 43.11 100.00 43.11 Geodis Ireland Ltd IRL FC 100.00 43.11 100.00 43v11 Geodis Wilson Amsterdam BV PB FC 100.00 43.11 0.00 0.00 EEX Geodis Logistics FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Argentina SA ARG FC 100.00 43.11 0.00 0.00 EEX Geodis Logistics Geodis Wilson Australia Champagne-Ardenne-Est FR FC 100.00 43.11 99.99 43.11 Holdings Pty Ltd AUS FC 100.00 43.11 0.00 0.00 EEX Geodis Logistics Euromatic FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Bangladesh Ltd BANG FC 60.00 25.87 0.00 0.00 EEX Geodis Logistics Europarts FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Belgium NV B FC 100.00 43.11 0.00 0.00 EEX Geodis Logistics Ile-de-France FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Canada Limited CAN FC 100.00 43.11 0.00 0.00 EEX Geodis Logistics Maroc MAR FC 99.90 43.06 99.90 43.06 Geodis Wilson Chile SA CHILI FC 99.50 42.90 0.00 0.00 EEX Geodis Logistics Méditerranée FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Combined Geodis Logistics Nord FR FC 100.00 43.11 100.00 43.11 Logistics HK Ltd CHI FC 100.00 43.11 0.00 0.00 EEX Geodis Logistics Nord-Ouest FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Denmark A/S DAN FC 100.00 43.11 0.00 0.00 EEX Geodis Logistics Ouest FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Europoort BV PB FC 100.00 43.11 0.00 0.00 EEX Geodis Logistics Polska POL FC 100.00 43.11 100.00 43.11 Geodis Wilson Far East Ltd CHI FC 100.00 43.11 0.00 0.00 EEX Geodis Logistics Rhône-Alpes FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Finland Oy FIN FC 100.00 43.11 0.00 0.00 EEX Geodis Logistics Sud FR FC 100.00 43.11 100.00 43.11 Geodis Wilson France FR FC 99.99 43.11 99.98 43.10 Geodis Logistics Sud-Ouest FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Freight Geodis Magyarorszag Management Holdings AB SUE FC 100.00 43.11 0.00 0.00 EEX Logisztikai Kft HON FC 100.00 43.11 100.00 43.11 Geodis Wilson Freight Geodis Networks FR FC 100.00 43.11 100.00 43.11 Management Sdn Bhd MAL FC 100.00 43.11 100.00 43.11 Geodis Oil and Gaz FR FC 100.00 43.11 100.00 43.11 Geodis Freight Management FR FC 100.00 43.11 0.00 0.00 EEX Geodis Overseas (Taïwan) Ltd TWN FC 100.00 43.11 100.00 43.11 Geodis Wilson Germany Gmbh ALL FC 100.00 43.11 0.00 0.00 EEX

136 - CONSOLIDATED FINANCIAL STATEMENTs Country M PC PI PC PI Country M PC PI PC PI YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 2007 2007 2006 2006 2007 2007 2006 2006

Geodis Wilson Holding AB SUE FC 100.00 43.11 0.00 0.00 EEX Paris 8 FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Hong Kong Ltd CHI FC 100.00 43.11 0.00 0.00 EEX Polar Air & SeaCargo Oy FIN FC 100.00 43.11 0.00 0.00 EEX Geodis Wilson Korea Ltd COR FC 100.00 43.11 0.00 0.00 EEX Provence Express FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Malaysia Quercy Express FR FC 100.00 43.11 0.00 0.00 EEX SDN BHD MAL FC 100.00 43.11 0.00 0.00 EEX Rhône Dauphiné Express FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Netherlands BV HOL FC 100.00 43.11 0.00 0.00 EEX SMTR Calberson FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Norway AS NOR FC 100.00 43.11 0.00 0.00 EEX SCI BM Chelles FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Overseas AB SUE FC 100.00 43.11 0.00 0.00 EEX SCI BM Le Fontanil FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Pty Ltd Australia AUS FC 100.00 43.11 0.00 0.00 EEX SCI BM Mery FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Rotterdam BV HOL FC 100.00 43.11 0.00 0.00 EEX SCI BM Salaise FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Shanghai Ltd CHI FC 100.00 43.11 0.00 0.00 EEX SCI Borny FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Singapore SCI CEL FR FC 100.00 43.11 100.00 43.11 Pte Ltd SIN FC 100.00 43.11 0.00 0.00 EEX SCI Charval FR FC 100.00 43.11 99.50 42.90 Geodis Wilson Spain ESP FC 100.00 42.87 100.00 42.87 SCI Danjoutin FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Sweden AB SUE FC 100.00 43.11 0.00 0.00 EEX SCI de la Brèche FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Taiwan Ltd TWN FC 100.00 43.11 0.00 0.00 EEX SCI de la Poudriere FR FC 100.00 43.11 100.00 43.11 Geodis Wilson Thailand Ltd THAI FC 100.00 43.11 0.00 0.00 EEX SCI de Vaux FR FC 100.00 43.11 100.00 43.11 Geodis Wilson UK Ltd GB FC 100.00 43.11 0.00 0.00 EEX SCI du Rouvray FR FC 100.00 43.11 100.00 43.11 Geodis Wilson USA Inc USA FC 100.00 43.11 0.00 0.00 EEX SCI Etupes FR FC 99.90 43.07 99.90 43.07 Geodis Wilson SCI Horizons FR FC 100.00 43.11 100.00 43.11 New Zealand Ltd N.ZEL FC 100.00 43.11 0.00 0.00 EEX SCI Immolog FR FC 100.00 43.11 100.00 43.11 Geodis Zust Ambrosetti ITA FC 100.00 43.11 100.00 43.11 SCI JCC FR FC 100.00 43.11 100.00 43.11 Geosiap Cameroun CAM FC 100.00 43.11 100.00 43.11 SCI Le Polygone FR FC 100.00 43.11 100.00 43.11 GIE BM Combi FR FC 100.00 43.09 100.00 43.11 SCI Le Revard FR FC 66.70 28.76 66.70 28.76 GIE France Express FR FC 74.23 30.63 69.21 30.18 SCI Ouest FR FC 100.00 43.11 100.00 43.11 Gironde Express FR FC 100.00 43.11 100.00 43.11 SCI Région Alsace FR FC 100.00 43.11 100.00 43.11 GW Freight Management Brazil BRE FC 100.00 43.11 0.00 0.00 EEX SCI Région Bretagne FR FC 100.00 43.11 100.00 43.11 Haute Provence Express FR FC 100.00 43.11 100.00 43.11 SCI Région Champagne Helu Trans Malaysia MAL FC 100.00 43.11 100.00 43.11 Ardennes FR FC 100.00 43.11 100.00 43.11 Hérault Express FR FC 100.00 43.11 100.00 43.11 SCI Région Ile-de-France FR FC 100.00 43.11 100.00 43.11 Immobilière Geodis I FR FC 100.00 43.11 100.00 43.11 SCI Région Normandie FR FC 100.00 43.11 100.00 43.11 Immobilière Geodis II Logistics FR FC 100.00 43.11 100.00 43.11 SCI Région Sud-Est FR FC 100.00 43.11 100.00 43.11 J. Boots SCI Région Sud-Ouest FR FC 100.00 43.11 100.00 43.11 Exploitatiemaatschappij BV PB FC 100.00 43.11 0.00 0.00 EEX SCI Royneau Le Coudray FR FC 100.00 42.70 98.38 42.00 Le Bois Chaland FR FC 100.00 43.11 100.00 43.11 SCI SVIG FR FC 99.97 43.10 99.97 43.10 Les Rouleurs du Cambresis FR FC 100.00 43.11 100.00 43.11 SCI Voujeaucourt FR FC 100.00 43.11 100.00 43.11 Mancelle d’Emballage Industriel FR FC 99.60 42.94 99.40 42.85 SD Calberson FR FC 99.97 43.10 99.97 43.10 Messagerie Parisienne du Livre FR FC 100.00 43.11 100.00 43.11 Seine Express FR FC 100.00 43.11 100.00 43.11 MG Transports FR FC 99.90 43.07 99.90 43.07 Setcargo FR FC 100.00 43.11 100.00 43.11 MGL FR FC 99.91 43.07 99.91 43.07 Shanghaï E &T Calberson PLC FR FC 100.00 43.11 100.00 43.11 Overseas CHI FC 89.87 38.74 74.89 32.27 Pan European Transport Ltd IRL FC 100.00 43.11 100.00 43.11 SLV FR FC 100.00 43.11 100.00 43.11 Pan European Transport UK GB FC 100.00 43.11 100.00 43.11 SNC Bercy FR FC 100.00 70.99 100.00 70.99

SNCF — FINANCIAL report 2007 - 137 36. SCOPE OF CONSOLIDATION

Country M PC PI PC PI Country M PC PI PC PI YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 2007 2007 2006 2006 2007 2007 2006 2006

SNTN Calberson FR FC 100.00 43.11 100.00 43.11 SNCF Fret Benelux B FC 100.00 100.00 100.00 100.00 Speditionsservice Oy FIN FC 100.00 43.11 0.00 0.00 EEX SNCF Fret Deutschland Gmbh ALL FC 100.00 100.00 100.00 100.00 TCL Cameroun CAM FC 100.00 43.11 100.00 43.10 SNCF Fret Italia srl ITA FC 100.00 100.00 100.00 100.00 TCL Houston USA FC 88.63 38.20 88.63 38.20 Stesimaf FR FC 80.00 86.78 80.00 86.78 TCL Tchad TCH FC 100.00 43.11 100.00 43.10 STSI FR FC 99.46 99.46 99.46 99.46 Transports Bernis FR FC 67.66 29.17 67.66 29.17 AAT FR FC 100.00 81.95 100.00 81.96 Transports J. Savin FR FC 100.00 43.11 100.00 43.11 Akidis FR FC 100.00 81.95 100.00 81.96 Transwaters FR FC 50.00 21.56 0.00 0.00 ECR Batrans FR FC 100.00 81.95 100.00 81.96 Val Express FR FC 100.00 43.11 100.00 43.11 CAAT FR FC 100.00 81.95 100.00 81.96 Valenda FR FC 100.00 43.11 100.00 43.11 Car & Commercial GB FC 100.00 81.95 100.00 81.96 Van der Laan Transport HOL FC 100.00 43.11 100.00 43.11 Car & Commercial Deliveries GB FC 100.00 81.95 100.00 81.96 Var Express FR FC 100.00 43.11 100.00 43.11 Car & Commercial Land GB FC 100.00 81.95 100.00 81.96 Vellave de Transport FR FC 98.04 42.27 98.04 42.27 Cobatrans FR FC 96.00 78.67 96.00 78.68 Vitesse Logistics BV HOL FC 100.00 43.11 100.00 43.11 Cofital FR FC 100.00 81.95 100.00 81.96 Vitesse Onroerend Goed BV HOL FC 100.00 43.11 100.00 43.11 Cogewip FR FC 100.00 80.39 100.00 80.67 Vitesse Pharmaceuticals Egerland France FR FC 51.00 49.83 51.00 49.83 Distribution BV HOL FC 100.00 43.11 100.00 43.11 Ferrus Immo FR FC 100.00 81.95 100.00 81.96 Walbaum FR FC 99.76 43.01 99.75 43.00 Helf ALL FC 94.95 78.64 95.96 78.62 Waren Shipping FR FC 100.00 43.11 100.00 43.11 Norferrus FR FC 100.00 81.95 100.00 81.96 Wilson Denmark Normanche FR FC 100.00 81.95 100.00 81.96 Holding A/S STP DAN FC 100.00 43.11 0.00 0.00 EEX Ortrans FR FC 100.00 81.95 100.00 81.96 Logistra FR FC 100.00 100.00 99.80 99.80 Rhône Ferrus FR FC 100.00 81.95 100.00 81.96 Naviland Cargo FR FC 99.96 99.96 95.21 94.50 SNTC FR FC 100.00 81.95 100.00 81.96 Rouch Intermodal FR FC 100.00 99.15 100.00 99.14 Setrada FR FC 100.00 81.95 100.00 81.96 SARI FR FC 65.68 54.87 65.68 56.88 Sogewag FR FC 100.00 78.29 100.00 79.34 SCI Ceretif FR FC 98.00 65.02 98.00 69.21 Somedat FR FC 100.00 81.95 100.00 81.96 Challenge International Soptrans FR FC 100.00 81.95 100.00 81.96 Belgium B FC 99.95 66.40 99.95 66.40 Sopyrim FR FC 100.00 81.95 100.00 81.96 Challenge International Sotraf FR FC 100.00 81.95 100.00 81.96 Méditerranée FR FC 100.00 66.44 100.00 66.44 STVA SA FR FC 82.23 81.95 82.22 81.96 Challenge International SA FR FC 66.44 66.44 66.44 66.44 STVA UK GB FC 100.00 81.95 100.00 81.96 Challenge Overseas Caraïbes FR FC 65.92 43.80 65.92 43.80 Tethys FR FC 100.00 81.95 100.00 81.96 Coquelle Gourdin FR FC 98.33 98.28 98.33 97.65 Transportvoiture B FC 99.95 81.91 99.95 81.92 Feron de Clebsattel FR FC 99.95 99.95 97.97 99.30 Uniroute FR FC 100.00 81.95 100.00 81.96 Fondimare FR FC 100.00 66.44 100.00 66.44 Val Ferrus FR FC 80.00 65.56 80.00 65.57 SCI FGH FR FC 75.00 62.97 75.00 73.47 Valtrans FR FC 80.00 65.56 80.00 65.57 Sealogis FR FC 100.00 100.00 100.00 100.00 Veva TUR FC 51.00 41.79 50.00 40.98 CME SFC FR FC 99.98 99.93 99.98 99.28 Vilogistique FR FC 100.00 81.95 0.00 0.00 ECR Somap FR FC 81.75 81.71 81.75 81.09 Transengrais FR FC 100.00 89.82 0.00 0.00 ECO XP LOG FR FC 99.91 66.38 99.91 66.38 Transinformatique FR FC 99.84 66.24 99.84 60.22 Séfergie FR FC 100.00 99.16 100.00 99.14 Transport Logistique Partenaires FR FC 100.00 100.00 100.00 100.00 SEGI FR FC 100.00 99.15 99.99 99.14 CFD Industrie FR FC 100.00 100.00 100.00 100.00 SGW FR FC 99.96 99.96 99.94 99.94 Gemafer FR FC 100.00 100.00 100.00 100.00

138 - CONSOLIDATED FINANCIAL STATEMENTs Country M PC PI PC PI Country M PC PI PC PI YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 2007 2007 2006 2006 2007 2007 2006 2006

Instit. de Form. Eur. Multimodal FR FC 100.00 100.00 100.00 100.00 Grimaldi ACL France FR PC 40.00 39.98 0.00 0.00 ECR Locorem B FC 100.00 100.00 100.00 100.00 HF FR PC 50.00 49.98 0.00 0.00 ECR LSI FR FC 100.00 100.00 100.00 100.00 Cadefer ESP EA 20.00 20.00 20.00 20.00 VFLI FR FC 100.00 100.00 100.00 100.00 CWS FR EA 33.93 33.93 33.93 33.93 VFLI Cargo FR FC 100.00 100.00 100.00 100.00 Agrofreight AUT EA 12.40 12.28 25.00 12.40 VFLI Romania ROU FC 100.00 100.00 100.00 100.00 Cical FR EA 24.79 18.40 49.98 24.07 VFM (absorbée par VFLI SA) FR FC 100.00 100.00 100.00 100.00 Ermechem FR EA 66.59 64.03 66.59 68.97 AFA ITA PC 50.00 50.00 50.00 50.00 Brixia Zust SRL ITA EA 30.00 12.93 30.00 12.93 Logistica FR PC 50.00 50.00 50.00 50.00 Cogip FR EA 34.00 14.66 34.00 14.66 Ateliers d’Orval FR PC 49.60 49.10 66.14 64.21 Noyon FR EA 35.59 15.35 35.59 15.35 Chemfreight Gmbh AUT PC 24.80 24.55 24.80 24.80 Novatrans FR EA 39.46 39.92 49.93 49.06 Compagnie des Conteneurs Rail Euro Concept ALL EA 50.00 50.00 50.00 50.00 Réservoirs FR PC 49.60 49.09 66.14 64.20 Sibelit LUX EA 42.50 42.50 42.50 42.50 Ermefret Berlin ALL PC 49.60 49.10 49.60 49.60 Sideuropa ITA EA 50.00 50.00 50.00 50.00 Ermefret Italie ITA PC 66.23 65.90 66.14 76.02 Mostva POL EA 50.00 40.98 50.00 40.97 Ermewa (Berlin) ALL PC 49.60 49.10 49.60 49.60 Setram ESP EA 25.00 20.49 25.00 20.49 Ermewa (Genève) SUI PC 49.60 49.10 49.60 49.60 Transfesa ESP EA 20.20 16.55 20.20 16.55 Ermewa (Paris) FR PC 49.60 49.10 66.14 64.21 Werner Egerland ALL EA 20.00 16.39 20.00 16.39 Ermewa Ferroviaire FR PC 49.60 49.10 66.14 64.21 Ermefer Genève SWIT NC 0.00 0.00 49.60 49.60 RDI Ermewa France FR PC 49.60 49.10 66.14 64.21 Axis et associés FR NC 0.00 0.00 49.00 21.12 RDI Ermewa Iberica ESP PC 49.60 49.10 66.14 64.21 Belgitrans B NC 0.00 0.00 100.00 43.11 RLI Ermewa Intermodal FR PC 49.60 49.10 66.14 64.21 Bourgey Montreuil Dauphiné FR NC 0.00 0.00 100.00 43.11 RME Eurotainer Inc USA PC 49.60 49.10 66.14 64.21 Bourgey Montreuil Ouest FR NC 0.00 0.00 100.00 43.11 RME Eurotainer Asie SIN PC 49.60 49.10 66.14 64.22 CHENUE à la Croix de Lorraine FR NC 0.00 0.00 100.00 43.11 RDI Eurotainer SAS FR PC 49.60 49.10 66.14 64.21 Geodis Logistics Center CV HOL NC 0.00 0.00 98.53 42.48 RLI Eurotainer Shanghai CHI PC 49.60 49.10 66.14 64.21 Geodis Logistics Taïwan TWN NC 0.00 0.00 100.00 43.11 RLI EVS FR PC 34.79 34.54 66.14 66.79 Geodis Overseas Services FR NC 0.00 0.00 100.00 43.11 RLI Férifos FR PC 49.60 49.10 66.14 64.21 GIE Financière Geodis FR NC 0.00 0.00 100.00 43.11 RLI Financière Ermewa SUI PC 49.60 49.10 49.60 49.60 Les Transports Delisle FR NC 0.00 0.00 99.99 43.11 RDI Groupe Ermewa SUI PC 49.60 49.10 49.60 49.60 Picardie Express FR NC 0.00 0.00 100.00 43.11 RME Pgesco SUI PC 46.60 49.10 0.00 0.00 ECO SCI BM Craywick FR NC 0.00 0.00 100.00 43.11 RLI SEP Transpul FR PC 49.60 20.38 66.14 26.65 SCI Charlotte FR NC 0.00 0.00 100.00 43.11 RDI SEP Union Wagons FR PC 49.60 39.67 66.14 51.88 SCI Gilly La Tarentaise FR NC 0.00 0.00 82.50 35.57 RLI TMF FR PC 37.20 36.82 66.14 48.16 Société des Entrepôts TMF Cita Belgium B PC 49.60 36.79 66.14 48.11 Paris-Sud (SEPS) FR NC 0.00 0.00 100.00 43.11 RLI TMF Cita Deutschland ALL PC 44.64 33.11 66.14 43.30 Waren Brokers FR NC 0.00 0.00 100.00 43.11 RLI TMF Cita Nederland HOL PC 49.60 36.82 66v14 48.16 United Consolidation Transucre FR PC 69.76 69.46 66.14 78.53 Service AB SUE FC 100.00 43.11 0.00 0.00 ECE Unifer FR PC 49.60 49.10 66.14 64.21 Soyer Devaux FR NC 0.00 0.00 100.00 66.44 RME Geodis Overseas Tunisie TUN PC 50.00 21.55 50.00 21.55 DAT FR NC 0.00 0.00 49.99 40.97 RDI Geodis Wilson UAE LLC E.A.U IG 80.00 34.49 0.00 0.00 EEX Desbrugères FR NC 0.00 0.00 100.00 100.00 RME Thales Geodis Fertis FR NC 0.00 0.00 100.00 100.00 RME Freight & Logistics FR PC 50v00 21,56 50.00 21.56 Locotract FR NC 0.00 0.00 100.00 100.00 RME

SNCF — FINANCIAL report 2007 - 139 36. SCOPE OF CONSOLIDATION

Country M PC PI PC PI Country M PC PI PC PI YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR 2007 2007 2006 2006 2007 2007 2006 2006

Serma FR NI 0.00 0.00 100.00 100.00 RME MVA Beijing CHI EA 25.00 17.93 25.00 17.93 Kuo Tung TWN NI 0.00 0.00 50.00 35.87 RLI ENGINEERING and INFRASTRUCTURE COMMON OPERATIONS Arep FR FC 100.00 100.00 99.99 99.99 Arep Ville FR FC 100.00 100.00 100.00 99.99 GIE Eurail Test FR FC 90.00 90.00 100.00 100.00 Inexia FR FC 100.00 100.00 100.00 100.00 Gie Financière Sceta FR FC 100.00 94.25 100.00 93.16 SNCF International FR FC 100.00 100.00 100.00 100.00 SCI du Cercle FR FC 100.00 100.00 100.00 100.00 Citilabs Inc USA FC 68.88 24.70 27.75 20.03 CME SCI Ney FR FC 100.00 99.00 100.00 99.99 Citilabs Ltd GB FC 68.88 24.70 27.75 20.03 CME Seafrance FR FC 100.00 100.00 100.00 100.00 Canarail consultant CAN PC 39.86 28.48 50.00 28.48 Novedis-ICF FR FC 100.00 100.00 100.00 100.00 Consulcio Consultor Systra CHILI PC 20.00 14.35 20.00 17.93 ICF FR FC 100.00 100.00 100.00 100.00 Financière Systra FR PC 50.00 50.00 50.00 50.00 SNC Monceau FR FC 99.00 99.00 100.00 99.99 Foncière du Coq FR PC 50.00 35.87 50.00 35.87 SNC Vézélay FR FC 100.00 100.00 100.00 100.00 Mexistra MEX PC 50.00 35.87 50.00 35.87 SNCF Conseil FR FC 100.00 100.00 0.00 0v00 ECR MVA Asia HK PC 50.00 35.87 50.00 35.87 SNCF Participations FR FC 100.00 100.00 100.00 100.00 MVA Consulting Group GB PC 50.00 35.87 50.00 35.87 Espaces Ferroviaires MVA Hong Kong Ltd HK PC 50.00 35.87 50.00 35.87 Aménagement FR FC 99.99 99.99 99.99 99.99 MVA Ltd GB PC 50.00 35.87 50.00 35.87 Espaces Ferroviaires MVA Shenzen HK PC 50.00 35.87 50.00 35.87 Résidences du Rail FR FC 100.00 100.00 100.00 100.00 MVA Singapour SIN PC 50.00 35.87 50.00 35.87 Espaces Ferroviaires MVA Thaïlande THAI PC 49.99 35.86 50.00 35.86 Transactions FR FC 99.80 99.80 99.80 99.80 RWPM Saoudi Arabia AR.S PC 21.75 13.86 0.00 0.00 SCI La Chapelle FR FC 100.00 100.00 100.00 100.00 SNSR-PMA JV Saoudi Arabia AR.S PC 21,75 13.86 0.00 0.00 Ste Nationale d’Espaces Soget USA PC 50.00 35.87 50.00 35.87 Ferroviaires FR FC 100.00 100.00 100.00 100.00 Sotec Ingénierie FR PC 32.50 23.31 50.00 23.31 SPFRD FR FC 100.00 100.00 100.00 100.00 Systra Algérie ALG PC 50.00 35.87 0.00 0.00 Orfea- SERHR FR PC 50.00 50.00 50.00 50.00 Systra Asia Pacific Ltd HK PC 45.00 32.28 50.00 32.28 Eurofima SUI EA 22.60 22.60 23.60 23.60 Systra Consulting USA PC 50.00 35.87 50.00 35v87 France Rail Publicité (FRP) FR EA 20.00 20.00 20.00 20.00 Systra Consulting Co Ltd CHI PC 50.00 35.87 50.00 35.87 France Bus Publicité (FRP) FR EA 20.00 20.00 20.00 20.00 Systra GCP SA ESP PC 27.50 19.73 50.00 19.73 Landimat FR EA 20.00 20.00 20.00 20.00 Systra Inc USA PC 50.00 35.87 50.00 35.87 Semapa FR NC 0.00 0.00 20.00 20.00 Systra Ingeneria SL ESP PC 47.50 35.87 50.00 35.87 Systra Ltd GB PC 50.00 35.87 50.00 35.87 Systra Maroc MAR PC 49.90 35.79 50.00 35.79 Systra MVA India Pte Ltd INDE PC 50.00 35.87 50.00 35.87 Systra Philippines PHIL PC 32.97 23.65 50.00 23.65 Systra SA FR PC 50.00 35.87 50.00 35.87 Systra Singapore Pte Ltd SIN PC 50.00 35.87 50.00 35.87 Systra Sotecni Spa ITA PC 50.00 35.87 50.00 35.87 Systra Venezuela VEN PC 50.00 35.87 50.00 35.87 Systra Cade CHILI PC 25.00 17.93 25.00 17.93 AREP Architecture FR EA 25.00 25.00 0.00 0.00 ECO

140 - CONSOLIDATED FINANCIAL STATEMENTs 3 7. TRANSITION NOTE: IMPACT OF FIRST-TIME ADOPTION OF IFRS

Pursuant to IFRS 1, this note sets out the principles adopted by SNCF – fair value as “deemed cost”: certain items of property, plant and Group in the preparation of its IFRS opening balance sheet as at equipment were recorded in the Group’s opening balance sheet at a 1 January 2006. It also presents divergences with French GAAP pre- fair value revaluation determined at a date prior to that of the opening viously adopted by the Group and their quantified impact on the 2006 balance sheet (see point 38.2 F); opening balance sheet, 2006 net profit and the 2006 closing balance – financial instruments: IAS 39 is applied with effect from 1 January sheet. 2006.

37-1 FIRST-TIME ADOPTION OF IFRS 37-2 CHANGES TO PREVIOUSLY ISSUED TRANSITION INFORMATION The Group prepared its opening balance sheet on a retrospective basis as if it had always applied IFRS. As such, the Group performed the A number of changes have been made to the transition note issued following adjustments as at 1 January 2006 to its accounts previously with the 2007 interim financial statements. These changes relate to: prepared in accordance with CRC Regulation 99-02 issued by the • The harmonisation of calculation methods for employee benefit- French Accounting Regulation Committee: related assets and liabilities. The negative impact of IFRS transition – elimination of assets and liabilities recognised in accordance with the on pensions and other employee benefits (impact A) was increased former standards base that do not satisfy IFRS definitions or criteria; by €38 million in equity attributable to equity holders of the parent – recognition and measurement in accordance with IFRS of all assets as at 1 January 2006, €95 million in the 2006 Income Statement and and liabilities satisfying the definitions and recognition criteria of this €133 million in equity attributable to equity holders of the parent as standards base; at 31 December 2006. This impact is recorded in full in the balance – reclassification of certain balance sheet items, notably to comply sheet heading “Non-current employee benefits” as at 1 January with the current/non-current distinction. 2006 and in “Finance costs” in the 2006 Income Statement. It is The impact of all these adjustments was recognised directly in total split between balance sheet assets and liabilities as at 31 December equity as at 1 January 2006. 2006. On transition to IFRS, the Group also adapted the presentation of its • The resetting of measurement parameters for certain financial instru- financial statements, identifying a number of analytical balances in ments at fair value. The negative impact of financial instruments on the Income Statement (see Note 4.26 for details of the classification equity attributable to equity holders of the parent as at 31 December principles applied). 2006 (impact E) increased by €21 million compared to preliminary issued information. In preparing its opening balance sheet, the Group elected to apply the • The reclassification in the balance sheet of accrued interest receivable/­ following specific transition options offered by IFRS 1: payable and financial assets at fair value through profit or loss. – retirement benefit commitments: actuarial gains and losses previously deferred in accordance with the corridor method were recognised in full in provisions for contingencies and losses via an offsetting entry in equity; – cumulative translation differences: cumulative translation differences recognised prior to 1 January 2006 in respect of foreign subsidiaries were transferred to consolidated reserves and will not be released to profit or loss at a later date on the removal of the subsidiary from the scope of consolidation; – business combinations: the Group did not restate business combina- tions performed prior to 1 January 2006 and applies IFRS 3 as from this date;

SNCF — FINANCIAL report 2007 - 141 37. TRANSITION NOTE: IMPACT OF FIRST-TIME ADOPTION OF IFRS

The impact of these changes on the balance sheet as at 31 December 2006 is presented below.

In € millions 31/12/2006 Breakdown of changes Preliminary Final Change IAS19 IAS 32/39 Financial Instruments information IFRS Employee benefit Net Net (1) (2) Fair value Goodwill 227 227 Intangible assets 217 217 Property, plant and equipment 19,687 19,687 Non-current RFF receivable 3,675 3,675 Non-current expected payments 88,970 88,938 – 32 – 32 Non-current financial assets 975 881 – 94 48 – 142 Investments in associates 237 237 Deferred tax assets 538 538 Non-current assets 114,525 114,399 – 126 – 32 48 – 142 Inventories and work-in-progress 482 482 Operating receivables 5,885 5,770 – 11 5 – 11 5 Current RFF receivable 1,497 1,497 Current expected payments 3,534 3,534 Current financial assets 653 1,097 444 322 115 7 Cash and cash equivalents 3,421 3,051 – 370 – 370 Current assets 15,471 15,431 – 40 – 48 7 Assets classified as held for sale 420 420 TOTAL ASSETS 130,417 130,250 – 166 – 32 – 135 Equity attributable to equity holders of the parent – 24,096 – 24,250 – 154 – 133 – 21 Minority interests 238 238 Total equity – 23,857 – 24,011 – 154 – 133 – 21 Non-current employee benefits 111,539 111,640 101 101 Other non-current provisions 445 445 Non-current financial liabilities 19,188 18,999 – 189 – 189 Deferred tax liabilities 65 65 Non-current liabilities 131,237 131,149 – 88 101 – 189 Current employee benefits 5,016 5,016 Other current provisions 304 304 Operating payables 12,301 12,134 – 167 – 167 Current financial liabilities 5,418 5,660 242 167 75 Current liabilities 23,037 23,113 75 75 Liabilities directly associated with assets classified as held for sale TOTAL EQUITY AND LIABILITIES 130,417 130,250 – 166 –32 –135 (1) Reclassification of assets at fair value through profit or loss – (2) Reclassification of accrued interest receivable/payable. The impact of transition on the financial statements presented below takes account of these changes.

142 - CONSOLIDATED FINANCIAL STATEMENTs 37-3 IMPACT ON NET ASSETS OF THE GROUP AS AT 1 JANUARY 2006

The main restatements, net of tax, to the opening IFRS balance sheet are as follows:

In € millions Equity attributable Minority Total to equity holders interests equity of the parent

SNCF French GAAP 4,761 209 4,970

A - Pensions and other employee benefits – 31,847 – 31,847 B - Property, plant and equipment 2,484 2,484 C - Add-back of the Special Debt Account – 4 1 4 – 4 1 4 D - Scope of consolidation 291 291 E - Financial instruments – 328 – 2 – 330 F - Remeasurement (IFRS 1 “deemed cost”) 1 0 1 1 0 1 G - Other restatements 45 11 56 H - Income tax expense 0 0 Total IFRS restatements – 29,669 9 – 29,660

SNCF IFRS – 24,907 218 – 24,689

SNCF — FINANCIAL report 2007 - 143 37. TRANSITION NOTE: IMPACT OF FIRST-TIME ADOPTION OF IFRS

37-4 IMPACT ON THE OPENING BALANCE SHEET AS AT 1 JANUARY 2006

The main restatements to the previously published balance sheet prepared in accordance with French GAAP, in preparing the opening IFRS balance sheet of SNCF Group, are as follows:

In € millions 99-02 A B C D E F G H Total IFRS IFRS Format Pension and other PP&E Add-back of the Scope of Financial IFRS 1 Other Deferred IFRS employee benefits Special Debt Account consolidation instruments remeasurement restatements tax restatements Goodwill 1 0 0 – 10 7 5 6 5 1 6 5 Intangible assets 1 8 6 0 1 8 – 49 – 40 1 4 5 Property, plant and equipment 17,481 1,269 1 0 6 1 0 3 1 5 5 1,633 1 9 , 11 4 Non-current RFF receivable 4,997 8 7 0 8 7 5,084 Non-current expected payments 79,288 8,155 87,443 87,443 Non-current financial assets 5 6 6 0 1 5 4 – 0 2 3 3 – 15 3 7 3 9 3 9 Investments in associates 2 2 5 3 – 12 4 3 0 2 5 2 5 0 Deferred tax assets 4 3 2 2 0 – 3 1 4 4 Non-current assets 23,598 79,291 1,259 8,309 1 0 7 3 2 5 1 0 1 1 9 6 – 3 89,585 113,183 Inventories and work-in-progress 4 5 3 – 1 – 1 4 5 2 Operating receivables 4,880 0 0 1 0 1,392 – 11 8 4 5 1,329 6,209 Current RFF receivable 1,813 – 0 – 0 1,813 Current expected payments 3,285 3 7 2 – 3,657 3,657 Current financial assets 2,397 – 189 – 1, 526 1 3 – 1,712 6 8 5 Cash and cash equivalents 2,402 1 2 – 3 – 0 2,402 Current assets 11,945 3,285 0 1 9 3 – 133 – 1 1 6 4 4 3,273 15,218 Assets classified as held for sale 8 1 4 2 2 2 2 TOTAL assets 35,543 82,577 1,266 8,502 – 27 – 209 1 0 1 2 5 3 – 3 92,879 128,422 Equity attributable to equity holders of the parent 4,761 – 31,847 2,484 – 4 1 4 2 9 1 – 328 1 0 1 4 5 0 –29,669 – 24,907 Minority interests 2 0 9 – 2 11 9 2 1 8 Total equity 4,971 – 31,847 2,484 – 414 2 9 1 – 330 1 0 1 5 6 0 – 29,660 – 24,689 Non-current employee benefits 1 7 8 109,486 – 6 109,480 109,658 Other non-current provisions 4 1 0 – 3 – 3 4 0 6 Non-current financial liabilities 10,506 8,698 – 23 9 1 0 3 5 9,620 20,126 Deferred tax liabilities 3 6 3 0 1 1 – 3 3 0 6 6 Non-current liabilities 11,130 109,486 3 0 8,698 – 23 9 1 1 2 7 – 3 119,127 130,257 Current employee benefits 4,953 4,953 4,953 Other current provisions 1,416 – 1,128 5 2 – 8 1 2 – 1,072 3 4 5 Operating payables 11,698 – 16 – 1 2 0 1 0 1 9 7 – 366 1 2 3 – 1 7 2 11,526 Current financial liabilities 6,327 2 0 8 – 544 3 3 6 – 297 6,030 Current liabilities 19,442 4,937 – 1,247 2 1 8 – 294 – 372 1 7 1 3,413 22,854 Liabilities directly associated with assets classified as held for sale TOTAL EQUITY AND LIABILITIES 35,543 82,577 1,266 8,502 – 27 2 0 9 1 0 1 2 5 4 – 3 92,879 128,422

144 - CONSOLIDATED FINANCIAL STATEMENTs In € millions 99-02 A B C D E F G H Total IFRS IFRS Format Pension and other PP&E Add-back of the Scope of Financial IFRS 1 Other Deferred IFRS employee benefits Special Debt Account consolidation instruments remeasurement restatements tax restatements Goodwill 1 0 0 – 10 7 5 6 5 1 6 5 Intangible assets 1 8 6 0 1 8 – 49 – 40 1 4 5 Property, plant and equipment 17,481 1,269 1 0 6 1 0 3 1 5 5 1,633 1 9 , 11 4 Non-current RFF receivable 4,997 8 7 0 8 7 5,084 Non-current expected payments 79,288 8,155 87,443 87,443 Non-current financial assets 5 6 6 0 1 5 4 – 0 2 3 3 – 15 3 7 3 9 3 9 Investments in associates 2 2 5 3 – 12 4 3 0 2 5 2 5 0 Deferred tax assets 4 3 2 2 0 – 3 1 4 4 Non-current assets 23,598 79,291 1,259 8,309 1 0 7 3 2 5 1 0 1 1 9 6 – 3 89,585 113,183 Inventories and work-in-progress 4 5 3 – 1 – 1 4 5 2 Operating receivables 4,880 0 0 1 0 1,392 – 11 8 4 5 1,329 6,209 Current RFF receivable 1,813 – 0 – 0 1,813 Current expected payments 3,285 3 7 2 – 3,657 3,657 Current financial assets 2,397 – 189 – 1, 526 1 3 – 1,712 6 8 5 Cash and cash equivalents 2,402 1 2 – 3 – 0 2,402 Current assets 11,945 3,285 0 1 9 3 – 133 – 1 1 6 4 4 3,273 15,218 Assets classified as held for sale 8 1 4 2 2 2 2 TOTAL assets 35,543 82,577 1,266 8,502 – 27 – 209 1 0 1 2 5 3 – 3 92,879 128,422 Equity attributable to equity holders of the parent 4,761 – 31,847 2,484 – 4 1 4 2 9 1 – 328 1 0 1 4 5 0 –29,669 – 24,907 Minority interests 2 0 9 – 2 11 9 2 1 8 Total equity 4,971 – 31,847 2,484 – 414 2 9 1 – 330 1 0 1 5 6 0 – 29,660 – 24,689 Non-current employee benefits 1 7 8 109,486 – 6 109,480 109,658 Other non-current provisions 4 1 0 – 3 – 3 4 0 6 Non-current financial liabilities 10,506 8,698 – 23 9 1 0 3 5 9,620 20,126 Deferred tax liabilities 3 6 3 0 1 1 – 3 3 0 6 6 Non-current liabilities 11,130 109,486 3 0 8,698 – 23 9 1 1 2 7 – 3 119,127 130,257 Current employee benefits 4,953 4,953 4,953 Other current provisions 1,416 – 1,128 5 2 – 8 1 2 – 1,072 3 4 5 Operating payables 11,698 – 16 – 1 2 0 1 0 1 9 7 – 366 1 2 3 – 1 7 2 11,526 Current financial liabilities 6,327 2 0 8 – 544 3 3 6 – 297 6,030 Current liabilities 19,442 4,937 – 1,247 2 1 8 – 294 – 372 1 7 1 3,413 22,854 Liabilities directly associated with assets classified as held for sale TOTAL EQUITY AND LIABILITIES 35,543 82,577 1,266 8,502 – 27 2 0 9 1 0 1 2 5 4 – 3 92,879 128,422

SNCF — FINANCIAL report 2007 - 145 37. TRANSITION NOTE: IMPACT OF FIRST-TIME ADOPTION OF IFRS

37-5 IMPACT ON 2006 NET PROFIT

IFRS restatements to 2006 net profit of the Group had a total negative impact of €484 million, entirely attributable to equity holders of the parent.

In € millions Equity attributable Minority Total to equity holders interests equity of the parent

SNCF French GAAP 6 5 2 3 7 6 8 9

A - Pensions and other employee benefits – 354 – 354 B - Property, plant and equipment – 2 0 1 – 2 0 1 C - Add-back of the Special Debt Account – 50 – 50 D - Scope of consolidation 4 4 E - Financial instruments 11 0 11 0 F - Remeasurement (IFRS 1 “deemed cost”) G - Other restatements 7 0 8 H - Income tax expense 1 1 Total IFRS restatements – 484 0 – 484

SNCF IFRS 1 6 8 3 7 2 0 5

146 - CONSOLIDATED FINANCIAL STATEMENTs 37-6 IMPACT ON THE INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006

In € millions French Pensions PP&E Add-back of Scope of Other IFRS GAAP IFRS and other Special Debt consolidation restatements format employee Account benefits

Revenue 21,968 4 – 7 21,965 Employee benefits expense – 9,238 997 – 50 – 2 – 8,292 Purchases and other income and – 10,845 1 88 23 15 – 10,719 expenses Gross profit 1,885 998 88 – 23 6 2,954 Depreciation, amort. and provisions – 981 – 235 32 – 10 – 1,194 Current operating profit 904 998 – 148 9 – 4 1,760 Impairment losses – 675 – 42 16 – 701 Net proceeds from asset disposals 302 – 12 4 – 0 293 Operating profit 531 998 – 202 13 12 1,352 Finance costs – 321 – 1,351 – 50 – 9 113 – 1,618 Net profit before tax from ordinary activities 210 – 353 –202 – 50 4 125 – 266 Income tax expense 448 0 – 0 448 Share of profits of associates 30 – 1 0 – 6 23 Net profit from ordinary activities 688 – 354 – 201 – 50 4 119 205 Net profit attributable 37 1 37 to minority interests Net profit attributable 652 – 354 – 201 – 50 4 118 168 to equity holders of the parent

37-7 IMPACT ON NET ASSETS OF THE GROUP AS AT 31 DECEMBER 2006

In € millions Equity attributable Minority Total to equity holders interests equity of the parent

SNCF French GAAP 5,864 2 3 1 6,095

A - Pensions and other employee benefits – 32,194 – 32,194 B - Property, plant and equipment 2,293 2,293 C - Add-back of the Special Debt Account – 464 – 464 D - Scope of consolidation 2 9 6 2 9 6 E - Financial instruments – 1 7 6 – 8 – 1 8 4 F - Remeasurement (IFRS 1 "deemed cost") 9 7 9 7 G - Other restatements 3 7 1 5 5 3 H - Income tax expense – 2 – 2 Total IFRS restatements – 30,113 7 – 30,106

SNCF IFRS – 24,250 2 3 8 – 24,011

SNCF — FINANCIAL report 2007 - 147 37. TRANSITION NOTE: IMPACT OF FIRST-TIME ADOPTION OF IFRS

37-8 IMPACT ON THE BALANCE SHEET AS AT 31 DECEMBER 2006

in € millions 99-02 A B C D E F G H Total IFRS IFRS Format Pension and other PP&E Add-back of the Scope of Financial IFRS 1 Other Deferred IFRS employee benefits Special Debt Account consolidation instruments remeasurement restatements tax restatements Goodwill 1 5 5 1 – 10 8 1 7 2 2 2 7 Intangible assets 2 5 7 0 0 4 – 45 – 40 2 1 7 Property, plant and equipment 18,232 1,086 4 3 1 5 4 1 7 3 1,455 19,687 Non-current RFF receivable 3,645 3 0 0 3 0 3,675 Non-current expected payments 80,931 8,007 88,938 88,938 Non-current financial assets 5 3 5 – 1 1 7 4 2 6 2 6 0 2 9 8 8 8 1 Investments in associates 2 1 7 3 4 1 3 2 0 2 3 7 Deferred tax assets 5 4 9 3 0 – 0 – 14 – 12 5 3 8 Non-current assets 23,590 80,934 1,088 8,181 4 6 9 6 1 4 8 2 8 2 – 14 90,761 114,399 Inventories and work-in-progress 4 8 2 0 – 0 – 0 4 8 2 Operating receivables 4,501 0 – 0 1,461 –203 11 1,269 5,770 Current RFF receivable 1,497 – 0 – 0 1,497 Current expected payments 3,336 1 9 8 – 3,534 3,534 Current financial assets 2,487 – 1 0 8 – 1,683 1 2 2 – 51 7 – 1,712 1,097 Cash and cash equivalents 3,428 0 1 – 8 0 – 6 3,051 Current assets 12,395 3,336 0 9 0 – 220 – 89 – 51 1 8 3,084 15,431 Assets classified as held for sale 4 0 9 – 1 1 3 11 4 2 0 TOTAL assets 36,394 84,270 1,087 8,271 – 1 7 4 7 9 7 3 1 2 – 14 93,856 130,250 Equity attributable to equity holders of the parent 5,864 – 32,194 2,293 – 464 2 9 6 – 1 7 6 9 7 3 7 – 2 – 30,113 – 24,250 Minority interests 2 3 1 – 8 1 5 8 2 3 8 Total equity 6,094 – 32,194 2,293 – 464 2 9 6 – 1 8 4 9 7 5 3 – 2 – 30,106 – 24,011 Non-current employee benefits 1 7 6 111,466 – 1 111,464 111,640 Other non-current provisions 4 6 1 – 16 – 16 4 4 5 Non-current financial liabilities 9,823 8,619 – 4 5 5 4 6 9,176 18,999 Deferred tax liabilities 4 4 3 4 0 – 1 – 12 2 0 6 5 Non-current liabilities 10,505 111,466 3 4 8,619 – 4 5 5 4 – 13 – 12 120,644 131,149

Current employee benefits 5,016 5,016 5,016 Other current provisions 1,391 –1,102 1 5 – 15 1 4 – 1,087 3 0 4 Operating payables 12,407 – 17 – 1 3 8 3 3 4 – 570 11 8 – 273 12,134 Current financial liabilities 5,997 11 6 – 8 1 6 2 2 1 1 4 1 – 337 5,660 Current liabilities 19,795 4,999 – 1,240 1 1 6 – 467 – 364 2 7 3 3,318 23,113 Liabilities directly associated with assets classified as held for sale TOTAL EQUITY AND LIABILITIES 36,394 84,270 1,087 8,271 – 1 7 5 7 9 7 3 1 3 – 14 93,856 130,250

148 - CONSOLIDATED FINANCIAL STATEMENTs in € millions 99-02 A B C D E F G H Total IFRS IFRS Format Pension and other PP&E Add-back of the Scope of Financial IFRS 1 Other Deferred IFRS employee benefits Special Debt Account consolidation instruments remeasurement restatements tax restatements Goodwill 1 5 5 1 – 10 8 1 7 2 2 2 7 Intangible assets 2 5 7 0 0 4 – 45 – 40 2 1 7 Property, plant and equipment 18,232 1,086 4 3 1 5 4 1 7 3 1,455 19,687 Non-current RFF receivable 3,645 3 0 0 3 0 3,675 Non-current expected payments 80,931 8,007 88,938 88,938 Non-current financial assets 5 3 5 – 1 1 7 4 2 6 2 6 0 2 9 8 8 8 1 Investments in associates 2 1 7 3 4 1 3 2 0 2 3 7 Deferred tax assets 5 4 9 3 0 – 0 – 14 – 12 5 3 8 Non-current assets 23,590 80,934 1,088 8,181 4 6 9 6 1 4 8 2 8 2 – 14 90,761 114,399 Inventories and work-in-progress 4 8 2 0 – 0 – 0 4 8 2 Operating receivables 4,501 0 – 0 1,461 –203 11 1,269 5,770 Current RFF receivable 1,497 – 0 – 0 1,497 Current expected payments 3,336 1 9 8 – 3,534 3,534 Current financial assets 2,487 – 1 0 8 – 1,683 1 2 2 – 51 7 – 1,712 1,097 Cash and cash equivalents 3,428 0 1 – 8 0 – 6 3,051 Current assets 12,395 3,336 0 9 0 – 220 – 89 – 51 1 8 3,084 15,431 Assets classified as held for sale 4 0 9 – 1 1 3 11 4 2 0 TOTAL assets 36,394 84,270 1,087 8,271 – 1 7 4 7 9 7 3 1 2 – 14 93,856 130,250 Equity attributable to equity holders of the parent 5,864 – 32,194 2,293 – 464 2 9 6 – 1 7 6 9 7 3 7 – 2 – 30,113 – 24,250 Minority interests 2 3 1 – 8 1 5 8 2 3 8 Total equity 6,094 – 32,194 2,293 – 464 2 9 6 – 1 8 4 9 7 5 3 – 2 – 30,106 – 24,011 Non-current employee benefits 1 7 6 111,466 – 1 111,464 111,640 Other non-current provisions 4 6 1 – 16 – 16 4 4 5 Non-current financial liabilities 9,823 8,619 – 4 5 5 4 6 9,176 18,999 Deferred tax liabilities 4 4 3 4 0 – 1 – 12 2 0 6 5 Non-current liabilities 10,505 111,466 3 4 8,619 – 4 5 5 4 – 13 – 12 120,644 131,149

Current employee benefits 5,016 5,016 5,016 Other current provisions 1,391 –1,102 1 5 – 15 1 4 – 1,087 3 0 4 Operating payables 12,407 – 17 – 1 3 8 3 3 4 – 570 11 8 – 273 12,134 Current financial liabilities 5,997 11 6 – 8 1 6 2 2 1 1 4 1 – 337 5,660 Current liabilities 19,795 4,999 – 1,240 1 1 6 – 467 – 364 2 7 3 3,318 23,113 Liabilities directly associated with assets classified as held for sale TOTAL EQUITY AND LIABILITIES 36,394 84,270 1,087 8,271 – 1 7 5 7 9 7 3 1 3 – 14 93,856 130,250

SNCF — FINANCIAL report 2007 - 149 37. TRANSITION NOTE: IMPACT OF FIRST-TIME ADOPTION OF IFRS

37-9 DESCRIPTION OF THE MAIN The provision amount was estimated based on the following assump- RESTATEMENTS tions (identical as at 31 December 2005 and 2006):

The main restatements have been grouped together by nature and are Gross discount rate 4.25% presented below. Inflation rate 2.0% 37-9-1 Pensions and other employee benefits Mortality table: Senior Management Fund and social welfare initiatives TPG93 Four types of employee-benefit obligation have been recognised in the opening IFRS balance sheet in respect of the specific regimes within Mortality table: active and retired employees with work-related injuries the parent company. Their impact on equity and 2006 net profit is as TD 88-90 Mortality table: widows of employees with follows: TV 88-90 work-related injuries In € millions Equity 2006 Equity 01/01/2006 net profit 31/12/2006 18 – 29 years old: 2.0% Employee turnover 30 – 41 years old: 0.0% 42 – 49 years old: 0.3% Pension obligations – 27,902 – 313 – 28,215 49 – 55 years old: 0.9% o/w provisions – 110,475 – 2,008 – 112,483 o/w assets 82,573 1,695 84,268 Provident benefits – 2,994 – 52 – 3,046 Gross rate of salary increase + 3.5% Compensation for work- Gross rate of pension increase + 2.0% related injuries – 594 20 – 574 Social welfare initiatives – 350 – 8 – 358 On this basis, SNCF pension obligations total €110.5 billion as at Total parent company impact – 31,840 – 354 – 32,194 31 December 2005. In accordance with the option offered by IFRS 1, o/w provisions – 114,413 – 2,048 – 116,461 the Group reduced cumulative actuarial gains and losses under the corridor method to nil at the opening balance sheet date. o/w assets 82,573 1,694 84,267

The SNCF pension regime also receives third-party contributions. Pension obligations Benefits are therefore partially financed by employee contributions, Article 30 of the SNCF terms of reference has defined, since 1 January inter-regime compensation and a contribution from the French State 1970, the terms and conditions under which the financial balance of pursuant to Article 30. The estimation of the discounted present value the regime is assured. of future payments expected by SNCF in this respect is complex. An Benefits paid under the SNCF pension regime are funded by: estimate for an open population taking into account assumed trends in – a contribution equal to 36.29% of payroll costs (known as T1 + T2, set employee numbers over a 20-year period commencing 31 December by the Decree of 27 February 1991 – employee contribution of 7.85% 2006 and the adjustment of starting salaries, led to the attribution of and employer contribution of 28.44%); a value of €82.6 billion as at 31 December 2005, recognised in assets – an additional employer contribution (T3) to fully cover the expense of in the opening balance sheet in respect of payments expected from supplementary benefits granted by SNCF since 1990 in comparison third-parties. with the benchmark regime. In 2006, this rate was 5.29%; – any revenue from compensation received from national pension regimes; – the French State subsidy with respect to Article 30 of the SNCF terms of reference. Under a defined benefit scheme, the pension obligation must be provided in full in the IFRS consolidated balance sheet.

150 - CONSOLIDATED FINANCIAL STATEMENTs The impact of this restatement on the opening balance sheet and the balance sheet as at 31 December 2006 is as follows:

In € millions 01/01/2006 31/12/2006

Total obligation 110,475 112,491 – Plan amendments not amortised +/– Actuarial gains and losses not amortised – 8 Provision recognised 110,475 112,483

Expected payments 82,573 84,268

Impact on Equity – 27,902 – 28,215

The increase in the obligation and the provision in 2006 breaks down as follows:

In € millions Net obligation Plan amendments Actuarial gains Net provision not amortised and losses not amortised

Interest cost 27,902 27,902 Current service cost 1,165 1,165 Benefits paid 478 478 Past service cost – 1,465 – 1,465 New amendments 136 – 1 3 6 Amendments amortised 136 136 New actuarial gains and losses Actuarial gains and losses amortised 8 – 8 Differences on actuarial gains and losses amortised Movement in 2006 322 – 8 314

As at 31 December 2006 28,223 – 8 28,215

The impact on 2006 consolidated net profit is negative €314 million, The supplementary health care guarantees and the specific allowances comprising a negative impact of €1,165 million on finance costs and a are funded by the contributions of active and retired employees and positive impact of €851 million on operating profit. employer contributions for these employees. The obligation presented as at 31 December 2005 in the French GAAP Provident regime published financial statements concerned specific allowances relating The Company self-finances provident benefits provided to active and to the retirement period. retired employees, via the SNCF provident fund and the SNCF senior Additional analyses conducted in 2006 as part of IFRS transition revealed management provident fund. that supplementary guarantees for retired employees were indirectly fun- Benefits include the reimbursement of medical costs, temporary ded through an SNCF contribution estimated at 2.71% of total pension accommodation allowances, retirement allowances and death allowan- costs. Pursuant to IAS 19, this financing represents a post-employment ces. A portion of these guarantees are covered by the bilateral natio- benefit and the amount of the related obligation must also be provided. nal compensation mechanism under the Social Security healthcare Provident obligations were valued based on the same actuarial regime. assumptions used to value pension obligations.

SNCF — FINANCIAL report 2007 - 151 37. TRANSITION NOTE: IMPACT OF FIRST-TIME ADOPTION OF IFRS

The impact of the recognition of provident obligations in full on the opening balance sheet and the balance sheet as at 31 December 2006 is as follows:

In € millions 01/01/2006 31/12/2006

Total obligation 2,994 3,062 +/– Actuarial gains and losses not amortised – 1 6 Provision recognised 2,994 3,046

The movement in the commitment and provision for 2006 can be explained as follows:

In € millions Net obligation Actuarial gains Net provision and losses not amortised

As at 1 January 2006 2,994 2,994

Interest cost 126 126 Current service cost 53 53 Benefits paid – 127 – 127 New actuarial gains and losses 16 – 1 6 Actuarial gains and losses amortised

Movement in 2006 68 – 16 52

As at 31 December 2006 3,062 – 16 3,046

The impact on 2006 consolidated net profit is negative €52 million, Compensation for work-related injuries comprising a negative impact of €126 million on finance costs and a The Company self-finances compensation for work-related injuries positive impact of €74 million on operating profit. owed to active and retired employees. Compensation paid to retired employees and surviving spouses are considered by SNCF as supplementary pension payments. Therefore, the probable present value of these supplementary pension payments was included in off-balance sheet commitments under French GAAP. They are covered by an additional provision in the opening IFRS balance sheet.

152 - CONSOLIDATED FINANCIAL STATEMENTs The impact of this restatement on the opening balance sheet and the balance sheet as at 31 December 2006 is as follows:

In € millions 01/01/2006 31/12/2006

Total obligation 594 574 +/– Actuarial gains and losses not amortised Provision recognised 594 574

The movement in the obligation and the provision in 2006 breaks down as follows:

In € millions Net obligation Actuarial gains Net provision and losses not amortised

As at 1 January 2006 594 594

Interest cost 25 25 Current service cost Benefits paid – 62 – 62 New actuarial gains and losses 17 –17 Actuarial gains and losses amortised 17 17

Movement in 2006 – 20 – 20

As at 31 December 2006 574 574

The impact on 2006 consolidated net profit is €20 million, comprising a negative impact of €25 million on finance costs and a positive impact of €45 million on operating profit.

Social welfare initiatives The Company self-finances social welfare initiatives which, outside the not disclosed as at 31 December 2005 under French GAAP). SNCF framework, fall under ordinary law regimes. The impact of this restatement on the opening balance sheet and the A number of social welfare beneficiaries are retired rail workers. The balance sheet as at 31 December 2006 is as follows: analysis of the social welfare regime as part of IFRS transition iden- tified post-employment benefits with respect to family allowances, pensioner housing improvements and retirement home maintenance expenses, for a total of €350 million at the end of 2005 (information In € millions 01/01/2006 31/12/2006

Total obligation 350 358 +/– Actuarial gains and losses not amortised Provision recognised 350 358

SNCF — FINANCIAL report 2007 - 153 37. TRANSITION NOTE: IMPACT OF FIRST-TIME ADOPTION OF IFRS

The movement in the obligation and the provision in 2006 breaks down as follows:

In € millions Net obligation Actuarial gains Net provision and losses not amortised

As at 1 January 2006 350 350

Interest cost 15 15 Current service cost 7 7 Benefits paid – 14 – 14 New actuarial gains and losses Actuarial gains and losses amortised

Movement in 2006 8 8

As at 31 December 2006 358 358

The impact on 2006 consolidated net profit is negative €8 million, comprising a negative impact of €15 million on finance costs and a positive impact of €7 million on operating profit.

Other employee obligations SNCF employees (active employees and their beneficiaries and retired certain circumstances at prices different from market prices. SNCF employees) receive travel privileges which enable them to travel under does not consider these travel privileges to have a material impact on its production resources. 37-9-2 Property, plant and equipment

in € millions Equity Change in 2006 Equity 01/01/2006 consolidation net profit 31/12/2006 scope

Rolling stock 1,643 – 4 – 179 1,460 Fixed installations – 269 9 4 – 256 Provision for major repairs 1,110 5 – 26 1,089 Total impact 2,484 10 – 201 2,293

Under French GAAP, the Group recorded property, plant and equipment – the components approach separately identified for accounting purposes in accordance with policies partly consistent with IFRS: makes a distinction between major components of asset items with – the accounting life adopted was the useful life, that is the period during different useful lives. which the Group expected to use the asset;

154 - CONSOLIDATED FINANCIAL STATEMENTs Two areas of divergence led to the recording of a restatement for the carrying amount of rolling stock (before 2005, rolling stock was consi- preparation of the opening IFRS balance sheet as at 1 January 2006: dered to comprise a single component and was depreciated over – the prospective implementation of the components approach under periods of between 15 and 30 years); French GAAP (in accordance with the “reallocation of net carrying – the provision for major repairs recorded under French GAAP was amounts” option offered by the French Accounting Regulation Com- reversed in full in the opening balance sheet and replaced by an over­ mittee, the CRC), led to the performance of a retroactive calculation haul work component in assets. under IFRS, which notably resulted in a significant increase in the net A breakdown of rolling stock by component under each standards base is presented below:

French GAAP IFRS Structure Interior Structure Interior Overhaul fittings fittings work

Locomotives 100% 80 % 20% over 30 years over 30 years over 15 years

Motorised railcars 80% 20% 60% 20% 20% over 30 years over 15 years over 30 years over 15 years over 15 years

Carriages 75% 25% 50% 25% 25% over 10 over 30 years over 15 years over 30 years over 15 years to 15 years

TGV 90% 10% 80% 10% 10% over 30 years over 15 years over 30 years over 15 years over 15 years

Fixed installations were broken down as follows:

Simple Building Complex Building French IFRS French IFRS GAAP GAAP

Building shell 40% over 50 years 65% over 50 years Enclosures 85% over 30 years 25% over 25 years 90% over 30 years Light work 15% over 25 years 25% over 25 years Fixtures and fittings 7.5% over 15 years 10% over 15 years Technical work 10% over 15 years 7.5% over 15 years 10% over 15 years 10% over 15 years

SNCF — FINANCIAL report 2007 - 155 37. TRANSITION NOTE: IMPACT OF FIRST-TIME ADOPTION OF IFRS

37-9-3 Special debt account Special Debt Account assets and liabilities are included in the IFRS In accordance with the corporate plan (“contrat de plan”) signed by the accounts of the Group. French State and SNCF in 1990, a Special Debt Account was set up The debt was initially recorded at its historical amount and is subse- on 1 January 1991 in order to isolate a portion of SNCF’s debt. Under quently recognised at amortised cost based on its effective interest French GAAP, the Special Debt Accounts were not, as a result, included rate; related derivatives are recorded in the balance sheet at fair value in the consolidated financial statements. through profit or loss. With a view to the preparation of SNCF’s opening IFRS balance sheet The Group recorded a financial asset in respect of payments receivable as at 1 January 2006, the French State and SNCF confirmed the current for the repayment of the debt transferred to the Special Debt Account. practice at this date regarding the financing and management of the These payments receivable were initially valued based on a retrospective debt transferred to the Special Debt Account. In particular, the French calculation of their value since the first transfer to the Special Debt State will continue to contribute to the amortisation and servicing of Account; they are subsequently recognised at amortised cost based the debt transferred to the Special Debt Account, as it has done since on their effective interest rate. Derivatives mirroring those relating to 1991, through annual payments determined by relevant Finance Acts, the debt are recorded in the balance sheet at fair value through profit until the extinction of this debt and SNCF will contribute each year to or loss. the amortisation and servicing of the debt transferred to the Special The impact on equity and 2006 net profit of the Group is as follows: Debt Account in an amount equal to 2.6% of the annual payment of the French State.

In € millions Equity 2006 Equity 01/01/2006 net profit 31/12/2006

Payments receivable 8,527 8,205 Debts transferred to the Special Debt Account 8,941 8,669 Total impact – 414 – 5 0 – 464

37-9-4 Financial instruments the application of hedge accounting. Fair value gains and losses on The application in the opening balance sheet of IAS 32 and IAS 39 led these derivatives are recorded in profit or loss. to the recognition of: – Trading financial assets and available-for-sale assets at fair value, – all derivatives at fair value in the opening balance sheet. Certain deri- with fair value gains and losses recognised in profit or loss for tra- vatives qualify for fair value hedge accounting with respect to debts ding assets and in equity for available-for-sale assets. Where there is or the RFF receivable. Fair value gains and losses on such derivatives objective indication of a loss in value of these securities, the cumulative are therefore recorded in profit or loss of the period. They are offset loss recognised in equity is taken to profit or loss. by fair value gains and losses on the hedged risk of the debt or the – Certain borrowings at fair value where they include detachable underlying receivable. Certain other derivatives qualify for cash flow embedded derivatives or in order to facilitate the implementation hedge accounting. Fair value gains and losses on these derivatives of a hedging relationship, where financial instruments are linked to are therefore recorded in equity for the effective portion of the hedge borrowings. and in profit or loss for the ineffective portion. Finally, certain deriva- The impact on equity and 2006 net profit of the Group is as follows: tives do not satisfy the documentation and effectiveness criteria for

In € millions Equity 2006 Movement Equity 01/01/2006 net profit in available 31/12/2006 reserves

Total impact – 328 110 43 – 17 6

156 - CONSOLIDATED FINANCIAL STATEMENTs 37-9-5 IFRS 1 revaluations A number of presentation reclassifications were also performed in the In accordance with the option offered by IFRS 1, the Group revalued 2006 Income Statement: around ten items of property, plant and equipment. As permitted by – as exceptional income (IAS 1) does not exist under IFRS, the income paragraph 17 of this standard, the amount recorded in the opening and expense items making up this heading were reclassified in balance sheet corresponds to a fair value revaluation performed prior other Income Statement headings and primarily operating profit and, to the opening balance sheet date in the individual accounts of the where appropriate, finance costs. companies concerned. In general: The total impact of these revaluations in the opening IFRS balance – capital gains and losses on disposals were reclassified in “Net pro- sheet is +€101 million on equity attributable to equity holders of the ceeds from asset disposals”, presented between Current operating parent. These revaluations concern non-depreciable assets (mainly profit and Operating profit; land) in the amount of €56 million. – exceptional movements in provisions were transferred to “Employee benefits expense” for employee-related risks, to “Income tax 37-9-6 Other restatements expense” for tax-related risks and to “Depreciation, amortisation and Other restatements performed in the opening balance sheet primarily provisions, net” in all other cases; concern the cancellation of goodwill amortisation recorded in 2006 – other exceptional income and expense items were reclassified on an under French GAAP, in so far as goodwill is not amortised under IFRS 3. individual basis to the Income Statement line corresponding to their nature. – Under IFRS, capitalised production (IAS 18) does not qualify as 37.10 DESCRIPTION OF THE MAIN IFRS income and cannot therefore be presented on a separate line of RECLASSIFICATIONS the Income Statement. It was reclassified as a reduction in corres- ponding expenses (mainly employee benefits expense and external In order to comply with IFRS presentation standards, the Group per- purchases). formed a number of reclassifications in the opening balance sheet and primarily: – the break up of the “Financial assets” heading under French GAAP into “Non-current financial assets” and “Current financial assets”, according to the period during which the Group intends to hold the assets; – the break up of the “RFF receivable” into a current and non-current portion; – the reclassification of Employee-related services asset and liability accounts as current accounts in financial assets and liabilities; – the presentation of deferred tax assets and liabilities on separate lines; these amounts were presented pursuant to French GAAP in “Other debtor accounts” and “Non-current provisions” respectively; – the break up of “financial liabilities” into a current and non-current portion;

SNCF — FINANCIAL report 2007 - 157 STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31, 2007

This is a free translation into English of the statutory auditors’ report issued in the French language and is provided solely for the convenience of English speaking readers. This report includes information specifically required by French law in all audit reports, whether qualified or not, and this is presented below the opinion on the financial statements. This information includes explanatory paragraphs discussing the auditors’ assessments of certain significant accounting matters. These assessments were made for the purpose of issuing an opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the consolidated financial statements. The report also includes information relating to the specific verification of information in the group management report. This report should be read in conjunction with, and is construed in accordance with French law and pro- fessional auditing standards applicable in France

In compliance with the assignment entrusted to us, we have audited In our opinion, except for the matters described above, the consolida- the accompanying consolidated financial statements of SNCF, for the ted financial statements present fairly, in all material respects, the year ended December 31, 2007. financial position of the Company at December 31, 2007 and the results of its operations for the year then ended, in accordance with These consolidated financial statements have been approved by the IFRS standards as adopted by the European Union. Board of Directors. Our role is to express an opinion on these financial statements based on our audit. Without reconsidering our opinion expressed above, we draw your attention to the matters discussed in Note 3 and Note 4.11 to the These consolidated financial statements have been prepared for the consolidated financial statements relating, respectively, to the develo- first time in accordance with IFRS standards as adopted by the Euro- pment of the employee pension fund and medical care benefits, and pean Union. These consolidated financial statements include compara- the termination of the special debt account ‘Service Annexe d’Amortis- tive information restated in accordance with the same standards in sement de la Dette’ and there impact on the yearend accounts. respect of the financial year 2006. II. Justification of assessments I. Opinion on the consolidated financial statements In accordance with the requirements of article L. 823-9 of French Com- pany Law (Code de commerce) relating to the justification of our Except as discussed in the following paragraph, we conducted our assessments, we bring to your attention the following matters: audit in accordance with the professional standards applicable in France; those standards require that we plan and perform the audit to Notes 4.2 and Note 10 to the consolidated financial statements set out obtain reasonable assurance about whether the consolidated financial the principles for excluding from the consolidation the ESH entities statements are free of material misstatement. An audit includes exa- along with their related main accounting captions. As part of our asses- mining, on a test basis, evidence supporting the amounts and disclo- sment of financial statements taken as a whole, we ensured of the sures in these consolidated financial statements. An audit also inclu- adequateness of information relating to this subject. des assessing the accounting principles used and significant estimates The assessments were thus made in the context of the performance made by the management, as well as evaluating the overall financial of our audit of the consolidated financial statements taken as a whole statements presentation. We believe that our audit provides a reaso- and therefore contributed to the formation of our qualified audit opi- nable basis for our opinion. nion expressed in the first part of this report.

The SNCF performed Impairments tests on fixed assets as described III. Specific verification in Note 26 of the financial statements. Concerning Freight activity, where no forecasted cash flows were available and considering the In accordance with professional standards applicable in France, we valuation method used for the rolling material, we are not able to give have also verified the information given in the group management an opinion on the recoverable amount of the fixed assets whose net report. value amounts to 1,2 billion euros. Except for the effect, if any, of the matters described above, we have As indicated in Note 8 of the financial statements relating to tangible no other matters to report regarding its fair presentation and confor- assets, the arbitration committee gave its conclusions on the devolu- mity with the consolidated financial statements. tion of fixed assets between RFF and SNCF. In view of the fact that no full agreement has been settled between the two parties, no financial or accounting impact has been recorded in the yearend accounts. We Paris La Défense, March 19, 2008 are not able to assess the consequences on the consolidated financial statements at December 31, 2007. The Statutory Auditors

These two qualifications were mentioned in our 2006 Statutory Audi- ERNST & YOUNG AUDIT MAZARS & GUÉRARD tors’ Report on the consolidated financial statements dated April 11, Francis GIDOIN Marie-Laure PHILIPPART 2007. Christine VITRAC Gilles RAINAUT

158 - COMPANY FINANCIAL STATEMENTS SNCF — financial report 2007 - 159 COMPANY FINANCIAL STATEMENTS In € millions

160 - COMPANY FINANCIAL STATEMENTS contents

BALANCE SHEET as at 31 december 2007 162 INCOME STATEMENT 164 STATEMENT OF CASH FLOWS 165

SNCF — financial report - 161 COMPany financial statements

BALANCE SHEET AS AT 31 DECEMBER 2007 French GAAP

ASSETS Appendix 31/12/2007 31/12/2006

Intangible assets 3 250 169 Property, plant and equipment 3 16,820 15,881 Reseau Ferre de France (RFF) receivable 4 3,713 5,142 cdp receivable (1) 4 8,060 Other long-term investments 5 6,673 6,306 Total non-current assets 35,516 27,498

Inventory and work-in-progress 6 585 452 Operating receivables 7 8,512 6,449

Special debt account – assets 213 Employee-related benefits service account 27 72 1,682 Assets Marketable securities 8 3,330 2,372 Cash and cash equivalents 70 71 Total current assets 12,569 11,239

Prepayments and deferred charges 9 163 169 Bond redemption premiums 7 7 Unrealised foreign exchange losses 10 972 38 Total assets 49,227 38,951

(1) Offset for the same amount in loans and borrowings (SAAD liabilities; see specific paragraph in Note 2).

162 - COMPANY FINANCIAL STATEMENTS LIABILITIES AND EQUITY Appendix 31/12/2007 31/12/2006

Share capital 4,971 4,971 Revaluation reserve 70 70 Retained earnings 920 368 Net profit for the year 997 137 Net position 11 6,957 5,547

Investment subsidies 5,736 4,051 Regulated provisions 34 39 Total equity 11 12,728 9,636

Provisions for contingencies and losses 12 2,189 3,028 Loans and borrowings (2) 13 20,504 13,412 Operating liabilities 15 10,262 9,224

Special debt account – liabilities 194 employee-related benefits service account Liabilities 27 229 797

Accruals and deferred income 16 2,331 2,362 unrealised foreign exchange gains 10 984 300 Total equity and liabilities 49,227 38,951

(2) ) Including the add-back of borrowings following the SAAD extinction: €8,060 million (offset for the same amount in the CDP receivable; see specific paragraph in Note 2).

SNCF — financial report 2007 - 163 COMPany financial statements

INCOME STATEMENT French GAAP

Appendix 2007 2006

Revenue 1 7 17,406 16,743

Capitalised production and production for stock 1,214 1,083 Purchases and external charges 18 – 8,119 – 7,600 Added value 10,501 10,226

Other operating income 19 101 121 Taxes and duties other than income tax – 707 – 752 Employee benefits expense 20 – 8,229 – 8,107 Gross operating profit 1,665 1,487

Net depreciation, amortisation and provisions 21 – 835 – 765 Other management expenses – 25 – 20 Net operating profit 805 702 Finance costs (1) 22 113 – 25 Net profit from ordinary activities (2) 918 677

Exceptional income 23 27 – 603 Profit from tax grouping regime 2 4 51 64 Net profit for the year 997 138

(1) Including one-off dividends paid by SNCF Participations: €260 million. The net finance costs, excluding SNCF Participations dividends, amounts to – €147 million. (2) 2007 net profit from ordinary activities, excluding one-off dividends paid by SNCF Participations, amounts to €658 million.

164 - COMPANY FINANCIAL STATEMENTS STATEMENT OF CASH FLOWS French GAAP

Appendix 31/12/2007 31/12/2006 31/12/2006 pro forma (a) Net income 997 138 138

Adjustments for non-cash items and items not related to operating activities: – Net depreciation, amortisation and provisions 1,117 1,600 1,600 (excluding current asset provisions) – Gains (losses) on disposal of assets – 206 – 173 – 173 – Other – 7 – 9 – 9 Cash flow from company operations (*) 26 1,900 1,555 1,555

Change in working capital 243 – 134 – 227 (A) Net cash from operating activities 26 2,142 1,421 1,329

Purchases of intangible assets and property, –2,624 – 2,565 – 2,565 plant and equipment Change in investment – 11 8 88 88 capital requirements (**) Equity purchases Other long-term investment purchases – 241 – 202 – 202 Sub-total (1) – 2,982 – 2,679 – 2,679

Proceeds on disposal of intangible assets and property, 529 318 318 plant and equipment Equity sales 8 1 1 Other long-term investment sales 19 125 125 Sub-total (2) 557 444 444 (B) Net cash used in investing activities (1) + (2) 26 – 2,426 – 2,235 – 2,235

Share capital increase 450 450 New loans secured 389 1,777 1,777 Loan repayments, net (***) – 1,348 – 1,222 – 1,222 Investment subsidies received 885 852 852 Change in marketable securities (****) – 499 148 148 Change in cash borrowings (****) 281 – 618 – 618 Other changes – 9 8 – 1 74 – 3 (C) Net cash from/(used in) financing activities 26 – 390 1,212 1,384 Increase/(decrease) in cash and cash equivalents (A+B+C) 26 – 673 398 477

Opening cash and cash equivalents 1,137 739 703 Closing cash and cash equivalents 464 1,137 1,180 (maturing in less than 3 months)

SNCF — financial report 2007 - 165 COMPany financial statements

(*) Cash flow from operating activities amounted to €1,884 million after restating charges/reversals to provisions for current assets (– €16 million in 2007). Cash flow from ordinary activities, excluding one-off dividends, amounts to €1,624 million. (**) Change in suppliers of fixed assets. (***) Including loan repayments: – € 2,709 million net of receipts on the RFF receivable: + €1,353 million (****) Portion with an initial maturity of more than 3 months.

(a) A 2006 pro forma statement was prepared following the reclassification: – in “Cash and cash equivalents” of current accounts previously classified in “Working capital requirements”; – in “Other changes - Net cash from financing activities” of financial accounts previously classified in “Working capital requirements”.

The difference between balance sheet cash and closing cash and cash equivalents (maturing in less than 3 months) breaks down as follows:

31/12/2007 Closing cash and cash equivalents (maturing in less than 3 months) 464 Cash borrowings maturing in less than 3 months 2,646 Deposits paid maturing in less than 3 months – 574 Marketable securities maturing in more than 3 months 858 Accrued interest payable maturing in 3 months or less 6 Balance sheet cash (Cash and cash equivalents and marketable securities) 3,400

166 - COMPANY FINANCIAL STATEMENTS STATUTORY AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS Year ended December 31, 2007

This is a free translation into English of the statutory auditors’ report issued in the French language and is provided solely for the convenience of English speaking readers. This report includes information specifically required by French law in all audit reports, whether qualified or not, and this is presented below the opinion on the financial statements. This information includes explanatory paragraphs discussing the auditors’ assessments of certain significant accounting matters. These assessments were made for the purpose of issuing an opinion on the financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the consolidated financial statements. The report also includes information relating to the specific verification of information in the group management report. This report should be read in conjunction with, and is construed in accordance with French law and professional audi- ting standards applicable in France.

In compliance with the assignment entrusted to us, we hereby report to Without reconsidering our opinion expressed above, we draw your you, for the year ended December 31, 2007, on: attention to the matters discussed in Note 2, Note 25 and Note 27 to - the audit of the accompanying annual financial statements of SNCF, the consolidated financial statements and there impact on the yearend - the justification of our assessments, accounts relating to respectively: - the specific verifications and information required by law. - The change in accounting principle as regard the cancellation of the provision for major maintenance expenses and its substitution by the These annual financial statements have been approved by the Board of component parts ‘scheduled maintenance’ for the rolling material and Directors. Our role is to express an opinion on these financial state- new component parts for the facilities (Note 2) ; ments based on our audit. - The termination of the special debt account ‘Service Annexe d’Amor- tissement de la Dette’ (Note 2); I. Opinion on the financial statements - The development of the employee pension fund and medical care benefits (Note 25 and Note 27). Except as discussed in the following paragraph, we conducted our audit in accordance with the professional standards applicable in II. Justification of assessments France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the annual financial state- In accordance with the requirements of article L. 823-9 of French Com- ments are free of material misstatement. An audit includes examining, pany Law (Code de commerce) relating to the justification of our on a test basis, evidence supporting the amounts and disclosures in assessments, we bring to your attention the following matters: the annual financial statements. An audit also includes assessing the As part of our assessment of the accounting principles and the signifi- accounting principles used and significant estimates made by the cant estimates, we ensured of the proper application of the change in management, as well as evaluating the overall financial statements accounting principle along with the information provided in Note 2 to presentation. We believe that our audit provides a reasonable basis for the financial statements. our opinion. The assessments were thus made in the context of the performance The SNCF performed Impairments tests on fixed assets as described of our audit of the financial statements taken as a whole and therefore in Note 2 of the financial statements. Concerning Freight activity, contributed to the formation of our qualified audit opinion expressed in where no forecasted cash flows were available and considering the the first part of this report. valuation method used for the rolling material, we are not able to give an opinion on the recoverable amount of the fixed assets whose net III. Specific verifications and information value amounts to 1,2 billion euros. We have also performed the specific verifications required by law in As indicated in Note 3 of the financial statements relating to tangible accordance with professional standards applicable in France. assets, the arbitration committee gave its conclusions on the devolu- Except for the effect, if any, of the matters described above, we have tion of fixed assets between RFF and SNCF. In view of the fact that no no other matters to report regarding the fair presentation and the full agreement has been settled between the two parties, no financial conformity with the financial statements of the information given in or accounting impact has been recorded in the yearend accounts. We the Directors’ Report with respect to the financial position and the are not able to assess the consequences on the consolidated financial financial statements. statements at December 31, 2007.

These two qualifications were mentioned in our 2006 Statutory Audi- Paris La Défense, March 19, 2008 tors’ Report on the financial statements dated April 11, 2007. The Statutory Auditors In our opinion, except for the matters described above, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2007 and the results of its opera- ERNST & YOUNG AUDIT MAZARS & GUÉRARD tions for the year then ended, in accordance with the accounting rules Francis GIDOIN Marie-Laure PHILIPPART and principles applicable in France. Christine VITRAC Gilles RAINAUT

SNCF — financial report 2007 - 167 REPORT ON SNCF GROUP CORPORATE GOVERNANCE AND INTERNAL CONTROL

As a public issuer, SNCF is subject to Article 122 of the French Financial The main internal control developments mentioned in the 2007 report Security Act of 1 August 2003, as amended. concern: – the dissemination of the risk management procedure to all Group The report on SNCF Group corporate governance and internal control entities, with the roll-out of a regional structure for internal control meets the SNCF obligations with respect to the public disclosure of coordination; information on the terms and conditions governing the preparation – the first risk mapping update; and organisation of the Board of Directors’ work and internal control – the reinforcement of control mechanisms covering the major endeavours procedures. central to the company’s transformation (investments, information system projects, safety, etc.). This report, prepared by the Audit and Risk Department for financial year 2007, was presented to the Board of Directors on 19 March 2008. It describes the progress made in setting up a quality internal control function, to which SNCF has long been committed, not only in terms This report is available on simple request from the SNCF Audit and Risk of financial reporting reliability but also in regard to all operating activity. Department, 8 rue des Pirogues de Bercy – 75012 PARIS.

The report is based on the work of the AMF (French Securities Regulator) designated working group responsible for the selection and adaptation of an internal control framework, and an application guide covering internal control for accounting and financial information published in January 2007. The framework provides for the classification of internal control procedures according to the four aims determined by the working group: compliance with laws and regulations, application of directives set by the Chairman and Executive Management, proper functioning of the company’s internal control processes, and financial reporting reliability. SNCF Direction de la Communication 34 rue du Commandant Mouchotte 75699 Paris Cedex 14 www.sncf.com

Credit photo Christophe Recoura - SNCF Image bank

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This financial report is published in French and English. It is also available at our web site: www.sncf.com