Deutsche Bahn 2007 Annual Report DB GROUP 2007 at a GLANCE 11.7

Deutsche Bahn 2007 Annual Report DB GROUP 2007 AT A GLANCE 11.7

BILLION € REVENUES IN PASSENGER TRANSPORT

• # 2 in European rail passenger transport • # 1 in European regional and urban public transport 31.3 • # 1 in bus transport in Germany

BILLION € REVENUES

• DB AG as management holding company • Vertically integrated Group structure • Group portfolio focused on core business 17.9 • Ratings: Moody’s Aa1/Standard & Poor’s AA BILLION € REVENUES IN TRANSPORT AND LOGISTICS

• # 1 in European rail freight transport • # 1 in European combined rail/road transport • # 1 in European land transport 2.9 • # 2 in global air freight • # 3 in global ocean freight • # 6 in global contract logistics BILLION € EBIT

• Successful internal growth • Further growth potential through M&A transactions 1.5 • Cost structures further improved

BILLION € REVENUES IN INFRASTRUCTURE AND SERVICES

• Functioning competition on the rails: about 340 railways using track infra structure • Largest rail track infrastructure in Europe • Efficient services for internal and external customers DB’S MISSION STATEMENT ON TRACK FOR TOMORROW

WHO ARE WE? WE ARE A LEADING MOBILITY AND LOGISTICS COMPANY

We have successfully modernized our company and positioned it for a promising future. We transport people and goods in end-to-end mobility and logistics chains. We continuously develop mobility and logistics solutions – locally, nationally and globally – as an integrated company with our strong railway at its core. We structure and operate the transport networks of the future – on land, sea and in the air.

WHAT IS OUR GOAL? WE ARE BECOMING THE WORLD’S LEADING MOBILITY AND LOGISTICS COMPANY

We will offer our customers innovative and individualized mobility and logistics solutions from a single source. We will intelligently link together the various modes of transport in an economical and ecological way. We will set standards for quality and customer satisfaction in our markets. We will thus further expand our leading market positions.

HOW DO WE ACHIEVE THIS? WE CONVINCE CUSTOMERS, EMPLOYEES AND INVESTORS

Customer-oriented: We do everything to help each of our customers reach their goals in a simple, reliable and safe way. Business-oriented: We place the sustainable increase of our Group’s value at the core of all of our actions – this is how we secure our future. Progressive: We encourage flexibility, a willingness to learn and the courage to question and continuously improve the status quo by offering a motivating work environment and the opportunity to share in the company’s success. Collaborative: We think, work and act together across all functions and business units so we can realize our full potential. Responsible: We are committed to social responsibility and see ourselves as a pioneer of climate-friendly and environmentally sustainable transport. CONTENTS

4 CHAIRMAN’S LETTER 44 GROUP MANAGEMENT REPORT 46 Overview 14 THE MANAGEMENT BOARD 50 Business Environment 53 Development in Relevant Markets 16 REPORT OF THE 58 Business Performance SUPERVISORY BOARD 64 Development of Business Units 79 Financial Situation 20 GROUP INFORMATION 85 Value Management 22 Annual Review 88 Strategy 24 At a Glance 96 Sustainability 25 Financial Communication 106 Technology and Procurement 31 Group Profile 111 Additional Information 118 Risk Management 125 Events After the Balance Sheet Date 127 Outlook 134 CONSOLIDATED FINANCIAL 232 ADDITIONAL INFORMATION STATEMENTS 234 Major Activity Relationships 136 Report of the Management Board Within DB Group 137 Consolidated Statement of Income 235 Development of Investment Grants 138 Consolidated Balance Sheet 238 DB Advisory Board 140 Consolidated Statement of Cash Flows 240 Glossary 141 Consolidated Statement of Changes 242 10-Year Summary in Equity 142 Notes to the Consolidated Financial 244 DB in the Internet Statements 244 Imprint 224 Major Subsidiaries Contacts 227 The Boards of Deutsche Bahn AG Financial Calendar 231 Auditor’s Report

HARTMUT MEHDORN CEO AND CHAIRMAN OF THE MANAGEMENT BOARD OF DEUTSCHE BAHN AG

Dear ladies and gentlemen,

Deutsche Bahn Group and its business units again continued to move ahead in 2007 as we took another step towards realizing our goal of becoming the world’s leading mobility and logistics company.

Our actions are aimed at meeting the needs of a globalized economy, as well as responding to the growing demand for mobility by people in Germany and Europe. And in doing so we also meet the need to further the business development of DB Group on a sustainable basis. During the 2007 financial year we were able for the first time to nearly earn enough to fully cover our cost of capital. And we were also able to once again significantly reduce our debt.

At the same time we were also confronted with difficult developments during 2007. I do not wish to conceal the fact that the wage conflict, which will lead to higher wages, will have a detrimental effect on our years of efforts to renew and restructure the Group. The agreements will impact our cost position and thus our competitiveness. We must – and we will – take effective measures to counter these effects. Because if we don’t, we will allow our competitors to take over our areas of business. And we want to prevent this. The past financial year was once again the best in the history of DB Group: revenues and profits achieved new records. Performance posted by the rail transport sector in Germany continued to develop favorably. This is all the more notable in light of the rates of increase we already recorded in the previous year. Rail is recording more traffic than ever before in Germany.

Both DB Group and non-Group railways are contributing to this ongoing renaissance of rail, supported by the fully open access to our track infrastructure. At the same time, on an overall basis, rail has asserted itself quite well as the most environmentally friendly mode of transport vis-à-vis other modes – and this despite continuing detrimental overall conditions.

In the generally stagnant German passenger transport market, rail transport was again able to defend its market share. All of our business units were able to assert their positions despite the non-recurring favorable effects of the 2006 FIFAWo rl d CupTM, and the burdens arising from the wage conﬂict.

The German freight transport market developed favorably driven by the good econ - omy and booming global trade volumes. Although the pace of growth noted for rail freight transport was not as high as in the previous year, we did see considerable rates of growth for combined transport. The complete opening of the European rail freight transport market in 2007 had a dynamic effect, and at the same time increased the competitive pressures we face.

The strikes we experienced in 2007 also dampened the performance of our freight transport business. In addition to the lost revenues, the mid and long-term effects are especially critical for us. Numerous major clients in rail freight transport are openly considering shifting portions of their transport business to other providers in the future. The key aspect here is to win back the trust of our customers and strengthen customer loyalty. Our sales team is working extremely hard to successfully meet this challenge.

The year under review was also marked by increased construction measures within the rail infrastructure. Within our ProNetz (ProTrack) program we undertook major efforts to upgrade our infrastructure in anticipation of the growth we expect to see in the coming years. Among the measures, we completed work as scheduled in 28 construction corridors and renewed 4,400 kilometers of track. Thanks to an innovative planning process we were able to maintain the punctuality of our trains at a high level of over 90%. In the current year we will continue the ProNetz program on an even more intensive level with work in 64 construction corridors and further strengthen our preventive maintenance measures. Together with the Federal Government, we invested € 3.5 billion in the existing network in 2007. As in the previous year, we tapped all of the available federal funds, even though the governmental accounting process remains complex and not ideally suited to handle the tasks that need to be accomplished. For this reason we urgently need to realize the proposed performance and ﬁnancing agreement with the Federal Government.

In the coming years major emphasis will be placed on the requirements of seaport hinterland transport, which was also one of the main drivers of growth in 2007, as we expand our infrastructure. Forecasts call for container volumes to double in German seaports by 2015. In order to meet this challenge the capacities of the main routes to the hinterlands, in particular, have to be concurrently adjusted to handle the increased volumes of freight. We have developed solutions that should be included in the Freight Transport and Logistics Master Plan being prepared by the Federal Ministry of Transport, Building and Urban Affairs.

During 2007, extensively improved customer offers were again at the center of our activities. In passenger transport we have again expanded our European network with ICE links to Paris since June, and to Copenhagen, Aarhus and Vienna since December. The RailTeam high-speed rail transport alliance that was founded with six other European railways in July will contribute towards offering customers attractive offers between many major European cities and regions. The alliance is the uniﬁed competitive response of Europe’s leading railways to the airlines.

We further expanded our ICE services in 2007, upgraded ﬁrst-class travel, and introduced numerous improvements in the areas of ticketing, customer support and loyalty. The number of BahnCards in circulation broke through the four million mark for the ﬁrst time.

Despite a very intensive competitive environment in regional and urban transport we were able to win numerous tenders and allocations. Frequently the winning factor was DB Group’s system strengths. However, competitive pressure is continuing to rise. A completely liberalized market in Germany stands in contrast to numerous shuttered markets within the European Union. We were denied the opportunity to further expand in the German urban transport market because of a court decision – quite incomprehensible to us – that was taken in the previous year. For this reason we must seize opportunities arising from opened markets outside of Germany, like PanBus, a Danish bus company we purchased during the year under review, and will use as our base for further expansion into the Danish urban transport market. By the end of the year we had fully acquired Chiltern Railways as well as a 50% stake in two joint ventures, London Overground Rail Operations and Wrexham, Shropshire & Marylebone Railway Company. This move marked our successful entry into the attractive British passenger transport market – a further milestone in DB Group’s strategy.

During the 2007 ﬁnancial year the Transport and Logistics division continued to grow as it increased the density of its network in Europe and around the world. This progress underlines our strategy of providing end-to-end transport and logistics services to our customers. In doing so we focus on multimodal transport networks. The acquisitions of EWS, a British rail freight company, Transfesa, a Spanish rail freight company, Spain-Tir, a Spanish freight forwarder, as well as founding the Ger- man-Polish joint venture company, East West Railways, and the Railion Scandinavia joint venture, enabled us to close important gaps.

We intensively focused on broadening our rail freight transport service on a pan- European basis through numerous projects in response to our customers’ requirements. In doing so we placed great importance on Eastern perspectives: we are striving to achieve regularly scheduled transport via the Eurasian land bridge to China. As part of our efforts we have further intensiﬁed our collaboration with Russian Rail ways. The integration of BAX and Startrans, two companies we acquired in 2006, has been almost fully completed. We are now able to handle transport on all of the signiﬁcant global trade routes for our customers and provide them this service from one single source.

The bottom line: 2007 was a busy and moving year for DB Group. Favorable business growth was offset by crippling wage conﬂicts and the ongoing uncertainty regarding the timing and structure of the partial privatization of the Group. The partial privat - ization, with inﬂows of fresh capital for the Group, is, and remains, a vital part of ensuring the unbroken continued favorable development of DB Group – as well for Germany as a business location. We want to – and we must – make further investments in our networks.

The results we achieved in recent years are notable. In our railway business we raised productivity by almost a factor of three in comparison to where it was in 1994, thereby easing the burden on taxpayers by a double-digit billion amount. When DB Netz posts significant profits for the first time for 2007, and at the same time is able to achieve a further increase in its performance, this is proof that our business approach is also the right one for the infrastructure. In the past years we positioned DB Group to prepare it to meet future challenges in a sustainable fashion. We have significantly expanded our range of offers. The company is well structured to meet the challenges posed by globalization, as well as the liberalization process within Europe. And this is why we will once again stay on our ambitious course during the current financial year.

Sincerely yours,

Hartmut Mehdorn CEO and Chairman of the Management Board of Deutsche Bahn AG

STEFAN GARBER DR. NORBERT BENSEL DR. KARL-FRIEDRICH RAUSCH DIETHELM SACK Infrastructure and Services Transport and Logistics Passenger Transport CFO Appointed until: 2010 Appointed until: 2010 Appointed until: 2010 Appointed until: 2011

The résumés of the members of the Management Board are available on our Web page under www.db.de. HARTMUT MEHDORN DR. OTTO WIESHEU MARGRET SUCKALE CEO and Chairman Economic and Political Affairs Personnel and Legal Appointed until: 2011 Appointed until: 2010 Appointed until: 2010 REPORT OF THE SUPERVISORY BOARD

DR. WERNER MÜLLER During the year under review the Supervisory Board carried out all its assigned tasks Chairman of the Supervisory in accordance with legal requirements, the company’s Articles of Association and Board of Deutsche Bahn AG its Rules of Procedure. It comprehensively advised and monitored the Management Board in the management of the Group as well as in the management of the business. The Management Board kept the Supervisory Board regularly informed about Group plans, as well as the commercial, strategic and ﬁnancial development of DB AG and its companies, in an up-to-date and comprehensive manner. All the signiﬁcant business issues were discussed during plenary meetings of the Supervisory Board and relevant committees based on reports submitted by the Management Board. The Chairman of the Supervisory Board maintained close contact with the Chairman of the Management Board, who kept him regularly informed about the Group’s current business developments and pending business decisions.

MEETINGS OF THE SUPERVISORY BOARD During the year under review the Supervisory Board convened for four regular meetings and one special meeting. The meetings of the Supervisory Board were prepared in ad - vance by the Executive Committee, the Personnel Committee and the Audit Committee. The focus of consultations held during plenary meetings was on the development of the Group’s revenues, proﬁts and employment situation, as well as the major capital expenditure, direct investment and divestment projects. In addition, the Supervisory Board also dealt with all of the Management Board’s activities that required their approval, and subsequently granted all of the necessary approvals. In two instances the decisions were taken in writing. • REPORT OF THE SUPERVISORY BOARD 17

During its meeting on March 28, 2007, the Supervisory Board reviewed the Management Report, the 2006 annual financial statements, as well as the Group Management Report and the 2006 consolidated financial statements of DB AG. Furthermore, it also approved the sale of shares held in NUCLEAR CARGO + SERVICE GmbH, as well as shares held in Frachtcontor Junge & Co. GmbH. During its meeting on June 27, 2007, the Supervisory Board approved the sale of Scandlines AG. The Supervisory Board also dealt with the purchase of 100 % of the shares of the English Welsh & Scottish Railway Holding Limited, the acquisition of 50.09 % of the shares of Transportes Ferroviarios Especiales, S.A., as well as 100 % of the shares in Spain-Tir, a Spanish freight forwarder, and, after extensive consultations, gave the approvals necessary for these proposed measures. Furthermore, the Supervisory Board approved expenditures for three converter facilities and the purchase of freight cars for the coal, iron and steel market segment. During the meeting held on September 5, 2007, the Supervisory Board approved the sale of all shares of Aurelis Real Estate GmbH & Co. KG, which was not a part of the Group’s core business, as well as the completion of the Memorandum of Understanding regarding projects to upgrade the Stuttgart hub and the new Wendlingen-Ulm line. In addition, the Supervisory Board also approved the new construction of a freight forwarding facility in Salzburg, and the purchase of freight cars and series 185 locomotives. During a special meeting held on November 15, 2007, which was called in light of current developments at that time, the Supervisory Board comprehensively informed itself about the status of the planned privatization of DB AG’s capital, and the wage conflict with the German Train Drivers’ Union (GDL). During its meeting on December 5, 2007, the Supervisory Board approved the budget plans for the 2008 financial year and took note of the mid-term plans covering the years 2009 to 2012, as well as DB AG’s long-term strategic goals. The Supervisory Board also gave its approval to the sale of Brilliant National Services, Inc., including its subsidiary companies and LA Terminals, Inc., to N.Y. S. National Indemnity Company. It also approved the establishment of the Railion Scandinavia A/Sjoint venture to form a production company that was jointly owned by Railion Danmark A/S and Green Cargo AB. In addition, the Supervisory Board informed itself about the status of the Munich Maglev train project. The documented issues dealt with the approvals to acquire the remaining 49 % in the BAX Global Korea Ltd. joint venture company, as well as the new allocation of real estate assets within DB Group.

MEETINGS OF THE SUPERVISORY BOARD COMMITTEES The Executive Committee of the Supervisory Board convened ﬁve times during the 2007 ﬁnancial year and maintained regular contact to the Management Board to discuss fundamental business policy issues. During these meetings the main focus was on preparing the individual key issues for discussion during the upcoming meetings of the Supervisory Board. Moreover, the Executive Committee received regular reports 18 DEUTSCHE BAHN GROUP •

concerning the status of DB AG’s capital privatization, and, in a special meeting with the Chairman of the German Train Drivers’ Union, kept itself informed regarding the status of the ongoing wage dispute with the GDL. The Audit Committee, which held four meetings and two telephone conferences during the year under review, focused primarily on DB AG’s and DB Group’s financial statements, and prepared the decisions taken by the Supervisory Board re garding the annual financial statements for the 2006 financial year. Additional audit focal points were the quarterly reports, the 2007 half-year report as well as the budget planning for 2008 and the mid-term plans for the years 2009 to 2012. The Chairman of the Audit Committee regularly exchanged information with the Chief Financial Officer and the auditor. The Audit Committee also dealt with accounting and risk management issues, the further development of Corporate Compliance, the integration of BAX Global, issuing of an auditing mandate to the auditor, as well as selected capital expenditure projects, and was also kept informed about the results of the internal audit. During the year under review the Personnel Committee convened three times to prepare the personnel decisions for the Supervisory Board, and also handled the con - tractual issues with the Management Board on behalf of the Super visory Board. The committee chairmen regularly and comprehensively reported to the Super - visory Board about the work of the committees.

CORPORATE GOVERNANCE During its March 28, 2007 meeting the Supervisory Board dealt with the further devel - op ment of DB AG’s Corporate Governance principles and updated them in accor dance with amendments made to the German Corporate Governance Codex. Furthermore, in its December 5, 2007 meeting it extensively examined the results of the efﬁciency review.

ANNUAL FINANCIAL STATEMENTS The annual financial statements and the Management Report of DB AG prepared by the Management Board as well as the consolidated financial statements and the Group Management Report as of December 31, 2007 were examined by the auditor ap pointed by the Annual General Meeting, PwC PricewaterhouseCoopers Aktien gesell schaft Wirtschaftsprüfungsgesellschaft, Berlin, and received an unqualified audit certificate. In addition, as part of the annual audit the auditor also examined the risk management system as required in accordance with the German Act on Control and Transparency (KonTraG) and raised no objections. The auditor’s report was the subject of the Audit Committee meeting held on March 26, 2008 and was presented and extensively discussed during the Supervisory Board’s balance sheet meeting held on March 28, 2008 in the presence of the auditors, who signed the report. The auditors reported on the significant aspects of their exami- nations and were available to answer questions. The Supervisory Board accepted the results of the audit. The Supervisory Board reviewed the annual financial statements and the Manage- ment Report of DB AG, as well as the consolidated financial statements along with the • REPORT OF THE SUPERVISORY BOARD 19

Group Management Report for the 2007 financial year, as well as the proposed allocation of distributable profits. No objections were raised. The annual financial statements of DB AG for the 2007 financial year were approved and they are thereby established. The auditor also examined the report prepared by the Management Board on re lations with affiliated companies. The auditor issued the report an unqualified audit certificate and reported on the audit results. The Supervisory Board also examined this report and raised no objections to the Management Board’s declaration at the end of the report, nor to the results of the audit conducted by PwC.

CHANGES IN THE MEMBERSHIP OF THE SUPERVISORY BOARD AND THE MANAGEMENT BOARD Mr.Peter Debuschewitz resigned his membership in the Supervisory Board effective June 30, 2007. Mrs.Ute Plambeck succeeded him as member of the Supervisory Board effective August 16, 2007. State Secretary Dr.Bernd Pfaffenbach resigned his membership in the Supervi - sory Board effective January 31, 2008. He was succeeded effective February 1, 2008 by Dr.Walther Otremba, State Secretary in the Federal Ministry of Economics and Tech- nology, who, pursuant to Sec. 9 (2) of Deutsche Bahn AG’s Articles of Incorporation, was appointed to the Supervisory Board by the Federal Republic of Germany. State Secretary Jörg Hennerkes resigned his membership in the Supervisory Board effective January 31, 2008. He was succeeded effective February 1, 2008 by Mr.Matthias von Randow, State Secretary in the Federal Ministry of Transport, Building and Urban Affairs, who, pursuant to Sec. 9 Para 2 of Deutsche Bahn AG’s Articles of Incorporation, was appointed to the Supervisory Board by the Federal Republic of Germany. Effective August 31, 2007, following many years of service to DB AG, Mr. Roland Heinisch retired from DB AG’s Management Board. At this point the Supervisory Board would like to thank all former members of the Management Board and the Supervisory Board for their dedication and constructive work on behalf of the company. The Supervisory Board wishes to thank the Management Board, all employees and employee representatives of DB AG and its afﬁliated companies for their efforts during the year under review.

Berlin, March 2008 For the Supervisory Board

Dr. Werner Müller Chairman

GROUP INFORMATION

22 Annual Review 24 At a Glance 25 Financial Communication 31 Group Profile 22 DEUTSCHE BAHN GROUP •

ANNUAL REVIEW

IN THE YEAR UNDER REVIEW WE AGAIN MADE SOME SMALLER AND BIGGER STEPS TO IMPROVE OUR SERVICES, TO DEVELOP OUR GROUP PORTFOLIO, AND TO START FUTURE-ORIENTED PROJECTS.

JANUARY FEBRUARY MARCH APRIL MAY JUNE

2. As of January 2 ap - 9. On February 9 the re - 14. Since March 14 wire - 1. Since April 1 our “City- 3. On May 3 we present 2. On June 2 the first prox imately one million tick - design of the 30th series ICE 1 less access to the Internet has Ticket” offer is available the 2007 Competition Report. Boeing 747-400 F lands at ets sold in a co-promotion train set is completed, mark - been available to passengers in over 100 cities, while our Frankfurt-Hahn airport, with Tchibo become valid for ing the halfway point of the traveling on ICE trains be - “City mobil” offer is on sale in 6. On May 6 we sign an mark ing the start of the new three months. This offer marks project. tween Frankfurt airport and 30 cities. These offers make agreement with a partner to round-trip service from the continuation of a number Cologne. This adds one of it even easier for DB travelers build a 550-km stretch of the Dubai to Toledo, Ohio via of successful co-promotions. 23. Since February 23 the most highly traveled ICE to use public transport in “North-South Mineral Line” in Hahn. PAGE 69 travelers have been able to use routes to the existing service many cities. Saudi Arabia. Starting in 2010 10. On January 10 the wireless local area network available on the Dortmund– this line will be used to trans- 10. Between June 10 and “Winter Special” promotion (WLAN) service at 25 major Cologne line. 4. Between April 14 and port mineral resources via rail initially until December 28, starts, allowing travel between train stations. Four telecom- May 15 our customers can ben - from the north to the country’s our new “Permanent Special” any two destinations in Ger - munications firms now offer 15. Between March 15 and efit from our “Spring Special” southern seaport. offer will be available as many from € 29. Tickets to their services via our Mobility 23 DB Systems, DBTelematik, promotion that allows 2nd the successor to our Surf & Austria, Denmark, the Czech Net. and DBTelekommunikations - class train trav el between any 21. Between May 21 and Rail online offer, with Republic, the Benelux coun- technik present the latest two destinations in Germany June 3 we offer our “Travel tickets starting at € 29. tries and Switzerland start at 23. On February 23 con- advancements in safety tech- from € 29. Tickets to Austria, Agency Special” in approx. € 39. version work starts on 23 nology at CeBIT. Denmark, the Czech Republic, 3,400 travel agencies autho- 16. On June 16 service mod ern electric locomotives the Bene lux countries and rized to sell DB train tickets. starts on the Betuwe Route, 18. On January 18 hurri- to equip them with the Ger - 18. Between March 18 and Switzer land start at € 39. The offer allows two persons one of the most modern cane Kyrill blasts across Eu - many/Denmark/Sweden mul- 20 DB Schenker presents its one-way 2nd class train travel rail freight connections in rope, dramatically restricting ti-country frequency package. comprehensive range of ser- 17. On April 17 the first between any two destinations Europe. PAGE 71 public activities and rail trans - This step marks a further ad- vices in the area of wine multi-modal logistics center in Germany for just € 49. port. dition of multi-frequency lo - logistics at ProWein, a speci- in Finland is inaugurated in 19. On June 19 the own- comotives to our vehicle fleet. al trade fair show casing the the seaport of Turku. The new 25. On May 25, the pres - ers of Scandlines AG, DB AG 20. Between January 20 world of wine in Düsseldorf. DB-Schenker facility brings ident of SNCF, Anne-Marie and the Danish Ministry of and 28 yachts, weighing 26. On February 26 DB Ur- together truck, plane, ship Idrac, and the CEO of DB AG, Transport and Energy sign hundreds of tons each, have ban Transport signs an agree- 28. On March 28 a railway and rail modes of transport Hartmut Mehdorn, join to - an agreement to sell their been transported by Schenker, ment worth over € 70 million ferry service is inaugurated in one location and also serves gether in Paris to celebrate shares in Scandlines. PAGE 48 and are on display at the to purchase about 285 city, between Sassnitz-Mukran, as a distribution center. the premiere runs of the new “Boot 2007”show in Düssel - interurban and travel buses. Rü gen, and Baltijsk, a Russian high-speed ICE and TGV 21. On June 21 we sign dorf. seaport near Kaliningrad, via connections between Paris– an agreement with RZD, the 28. On February 28 we the “Vilnius.” This is the first Frankfurt/Main and Paris– Russian rail company, to agree to set up a joint venture non-stop connection from Ger- Stuttgart. PAGE 64 cooperate closely in the fields rail freight company based many to Russia. of transport and logistics. in Wroclaw, Poland, with PCC Rail S.A., a Polish rail freight company. PAGE 71 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 23 Annual Review

JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER

1. As of July 1 all of our 1. On August 1 we launch 1. As of September 1all 1. On October 1 the En- 1. As of November 1 the 1. DB Group’s new brand regional trains operate as non- our 1st Class promotion to long-distance trains and all vironment BahnCard 25 goes second edition of our wine structure is now official. smoking trains across Ger - significantly raise the appeal train stations are now non- on sale. It costs € 25 for 2nd list is featured onboard our PAGE 48 many. of traveling 1st class on ICE smoking areas. class, gives users a 25% dis- long-distance trains. In addi - trains. count and is valid for up to tion to popular classics, the 9. December 9 marks 9. On July 9 we agree on 1. Between now and No - 25 weeks. PAGE 102 new list now offers three new the first day of ICE service be- a wage settlement covering 2. On August 2 we sign vember 30 onboard dining wines from renowned wine- tween Berlin and Hamburg to 134,000 employees with the the purchase agreement to features selections by a star 14. The BUGA 2007 ends ries. Denmark, making Copenha gen collective bargaining group acquire Spain-Tir, a Spanish chef. on October 14. A total of and Aarhus ICE destinations representing Transnet and logistics group. PAGE 47 65,000 combination-tickets 13. On November 13 for the first time. PAGE 64 GDBA. PAGE 100 3. On September 3, were sold during the national mem bers of GDL go on strike 3. On August 3 we ship 2,500 young people begin garden show that were valid in our rail freight business. 9. December 9 also 19. On July 19 we sign a 26 Porsche Cayennes to Mos- their training at DB Group. as show tickets and for trans- One day later they shut down marks the start of six times memorandum of understand- cow for the start of the Trans- port to and from the show via passenger transport opera- daily direct ICE service be - ing to realize “Stuttgart 21,” Siberia Rally. The vehicles are 7. On September 7, the our regional transport. In ad- tions. Strike measures im pact- tween Frankfurt/Main and one of the biggest German in - initially transported by truck network control center in dition, DB Schenker was the ing our rail transport busi- Vienna via Nuremberg and frastructure projects. PAGE 73 and then by special rail cars. Frankfurt celebrates its 10th exclusive provider of logistics ness last until November 17. Passau. PAGE 64 birthday. services to the BUGA. 20. On July 20 we conclude 6. On August 6 we con- 24. November 24 marks 19. On December 19 we an agreement to acquire clude the biggest construc - 10. Between September 17. On October 17 2007 the official completion date establish a joint production EWS, the biggest rail freight tion project in North Rhine- 10 and 30, DB Schenker the “2007 Rail Liberaliza - of the major Neu-Ulm 21 con- company for Scandinavia company in the UK. PAGE 47 Westphalia: the renewal of handles the shipping of equip- tion Index” is presented in struction project as we inau- with Green Cargo, a Swedish 24 kilometers of track on the ment and baggage for all Brussels. PAGE 112 gurate operations at the new rail freight company. PAGE 71 26. On July 26 we conclude Dülmen—Appelhülsen line. teams competing in the FIFA and lowered train station. The an agreement to acquire a Women’s World Cup China 24. On October 24 we number of tracks was reduced 19. On December 19 DB majority stake in Transfesa, a 29. On August 29 the DB 2007TM. order 42 “Talent 2”electric from 16 to four and the train Schenker loads the first vehi- Spanish transport and logis- Lounge in the Munich Central traction vehicles for the station was completely rebuilt. cles in Stuttgart for shipment tics firm. PAGE 47 Station is reopened following 13. Between September Nuremberg metro network. to the Detroit Motor Show. ten weeks of construction. 13 and 23 we participate 30. On November 30 31. On July 31 we sign an in the International Motor 30. On October 30 we cel- agreement is reached on key 31. On December 31 we agreement to acquire Pan 29. On August 29 we pres- Show (IAA) in Frankfurt. ebrate the hole-through of elements of a new wage con- conclude the “Lower Saxony is Bus, a Danish bus company. ent our first sustainabil ity the 9,385 Katzenberg tunnel – tract with the Transnet and on the Move” project; 32 sta- PAGE 48 report. PAGE 96 27. On September 27 currently Germany’s biggest GDBA unions. PAGE 100 tions have been modernized. Alliance Pro-Rail presents the tunnel project – with a symbol- “2007 Train Sta tions of the ic unveiling of the two tunnel Year” award to the Berlin Cen- driving machines. PAGE 73 tral Station and the Lands berg Station. PAGE 75 24 DEUTSCHE BAHN GROUP •

AT A GLANCE

Revenues Selected key figures Change € billion 2007 2006 absolute % Financial figures € million 2005 Revenues 31,309 30,053 +1,256 + 4.2 25.1 Revenues comparable 31,066 29,989 +1,077 +3.6 2006 Profit before taxes on income 2,016 1,555 + 461 + 29.6 30.1 Net profit for the year 1,716 1,680 +36 + 2.1 2007 EBITDA 5,690 5,427 + 263 + 4.8 31.3 EBIT 2,895 2,477 + 418 +16.9 EBIT before special items 2,370 2,143 + 227 +10.6 Non-current assets as of Dec 31 42,046 43,360 –1,314 –3.0 EBIT Current assets as of Dec 31 6,483 5,080 +1,403 + 27.6 € billion Total assets as of Dec 31 48,529 48,440 + 89 + 0.2 Equity as of Dec 31 10,953 9,214 +1,739 +18.9 2005 1.4 Financial debt as of Dec 31 18,062 19,881 –1,819 – 9.1 Net financial debt as of Dec 31 16,513 19,586 –3,073 –15.7 2006 2.5 Capital employed 27,393 28,693 –1,300 – 4.5 ROCE 8.7%7.5%–– 2007 2.9 Gross capital expenditures 6,320 6,584 – 264 – 4.0 Net capital expenditures 2,060 2,836 –776 – 27.4 Cash flow from operating activities 3,364 3,678 –314 – 8.5

ROCE Performance figures %

2005 Rail passenger transport 5.0 Passengers (million) 1,835 1,854 –19 –1.0 2006 Transport performance (million pkm) 74,792 74,788 + 4 + 0.0 7. 5 Train kilometers (million train-path km) 694.1 702.7 – 8.6 –1.2 2007 8.7 Rail freight transport Freight carried (million t) 312.8 307.6 +5.2 +1.7 Transport performance (million tkm) 98,794 96,388 + 2,406 + 2.5 Capacity utilization (t per train) 481.4 473.7 +7.7 +1.6 Train kilometers (million train-path km) 205.2 203.5 +1.7 + 0.8

Rail infrastructure Passenger Stations 5,718 5,730 –12 – 0.2 Train kilometers on track infrastructure (million train-path km) 1,049 1,016 +33 +3.2 thereof non-Group railways (147) (128) +19 +14.8 Length of line operated (km) 33,890 34,122 – 232 – 0.7

Bus transport Passengers (million) 779 738 + 41 +5.6 Transport performance (million pkm) 9,099 8,705 +394 + 4.5

Other figures Employees (FTE as of Dec 31) 237,078 229,200 +7,878 +3.4 Rating Moody’s/Standard&Poor’s Aa1/AA Aa1/AA – – GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 25 At a Glance Financial Communication

FINANCIAL COMMUNICATION

Investor relations

As part of our IR activities we have once again made numerous ﬁnancial presentations in key European and Asian ﬁnancial markets. We have been placing more emphasis on holding many one-on-one talks with analysts and key investors. Important information is also available at our website www.db. de/ir.

RATING

Rating agency Long-term rating Short-term rating Moody’s Aa1 outlook “stable” P-1 Standard & Poor’s AA outlook “negative” A-1+

Both Moody’s and Standard& Poor’s reconﬁrmed their ratings during the year under review. Both ratings have remained unchanged since they were ﬁrst issued in 2000. At the end of August 2006 Standard & Poor’s downgraded its outlook from stable to negative because of the public discussions surrounding DB Group’s privatization plans.

BONDS – ISSUES IN YEAR UNDER REVIEW

Volume Term ISIN Issuer Currency in million Coupon Due in years Deutsche Bahn July XS 0311 212 723 Finance B.V. EUR 600 5.00% 2015 12

In July we issued a € 600 million bond with a term of 12 years via our ﬁnance subsidiary Deutsche Bahn Finance B.V., Amsterdam, the Netherlands. The purpose was to reﬁnance a portion of the bonds that became due with a volume of about € 1.6 billion for the full year – including a USD 600 million bond and a CHF 750 million bond from the year 2002. Strong investor interest, particularly from France, Italy and the Netherlands, led to the bond volume being raised ahead of schedule by € 100 million from € 500 million. The bond was issued just before the “credit crisis” started and was the last trans - action that could be placed without a new issue premium on the credit derivative prices.

VALUE MANAGEMENT FIGURES CONTINUED TO IMPROVE Our ﬁnancial management policies are designed to achieve a sustainable increase in our corporate value. We use the return on capital employed ratio (ROCE) as the central performance measure for the development of our Group portfolio as well as for allo- cating capital expenditures. DB Group’s ROCE target is 10 %. We calculate our cost of capital based on a mid-term, pre-tax target capital structure of 8.9 %. 26 DEUTSCHE BAHN GROUP •

Return on Capital Employed € million or % 2007 2006 2005 EBIT before special items 2,370 2,143 1,350 ÷ Capital employed 27,393 28,693 27,013 = ROCE 8.7% 7.5% 5.0%

As further indicators in our value management system we also employ redemption coverage and gearing to supervise our debt. Our mid-term redemption coverage target is 30 %, while our gearing target is to achieve a 1:1 ratio of net ﬁnancial debt to equity capital.

Redemption coverage € million or % 2007 2006 2005 Operating cash flow 4,281 4,171 3,249 ÷ Adjusted net financial debt 20,280 22,412 22,152 = Redemption coverage 21.1% 18.6% 14.7%

Gearing € million or % 2007 2006 2005 Net financial debt 16,513 19,586 19,669 ÷ Equity capital 10,953 9,214 7,675 = Gearing 151% 213% 256% GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 27 Financial Communication

Corporate Governance – transparency and efficiency of corporate management

The term Corporate Governance is internationally understood to mean corporate ma n - agement, control and organization of structures and processes, responsibly performed and directed at the long-term creation of value. The standards of good and responsible corporate management for listed companies in Germany are laid down in the German Corporate Governance Code issued by the German Government Commission in 2002. The Management Board and the Supervisory Board of Deutsche Bahn AG decided on voluntary compliance with the German Corporate Governance Code in the form of our own Corporate Governance Principles. We thus established standards of conduct for the management and supervision of the company as a contribution to providing greater transparency in regard to the national and international capital market. The objective is to enhance the conﬁdence of business partners, investors, employees and the gen - eral public in the company’s management and control system. The current version of Deutsche Bahn AG’s Corporate Governance Principles is accessible on our Internet website. WWW.DB.DE/IR-ENGLISH Deutsche Bahn AG regularly adapts its Corporate Governance Principles to meet changing legal requirements and developments. The changes to the Code made on June 12, 2006 were for the most part formally incorporated into the Principles during the year under review. The points not adopted were: • The inclusion of long-term incentive components in the remuneration system for the Management Board, plus information to the General Meeting on the remu - neration criteria and alterations thereto; • the possibility of dispensing with individualized disclosure of the remuneration of management board members by resolution of the General Meeting adopted by a three-quarters majority; • the publication of a separate remuneration report as part of the Corporate Governance Report; and • individualized disclosure of the remuneration of supervisory board members in the Corporate Governance Report.

Furthermore, rules that had already been implemented within DB Group but had not yet been formally incorporated in DB AG’s Corporate Governance Principles were also included. Accordingly, the authority of the personnel committee was formally adopted in the Corporate Governance Principles to include the following: to discuss and review the structure of the remuneration system; the individualized disclosure of management board remuneration in the Notes to the consolidated ﬁnancial statements; and the timing of the publication of the consolidated ﬁnancial statements and the semi-annual report. 28 DEUTSCHE BAHN GROUP •

COOPERATION BETWEEN THE MANAGEMENT AND SUPERVISORY BOARDS The Management and Supervisory Boards of Deutsche Bahn AG work closely together for the beneﬁt of the company on the basis of the general conditions determined by the German Stock Corporation Act, the Articles of Association, the rules of procedure of the Supervisory and Management Boards as well as the decisions of the corporate bodies. The Management Board coordinates the company’s strategy with the Super - visory Board and, together with the Supervisory Board, monitors the state of the implementation of the strategy at regular intervals. The Management Board keeps the Supervisory Board informed in a regular, timely and comprehensive manner on all relevant matters of planning, business developments, the risk situation and risk man - agement. In particular, it intervenes when the development of business deviates from established plans and objectives. It also reports on the results of internal auditing and compliance activities. MORE DETAILS ON The members of the corporate bodies, and their duties, are listed in the Notes. PAGE 227 FF.

MANAGEMENT BOARD The Management Board is responsible for running the company. It is obliged to act in the interest of the company and to promote an increase in the sustainable value of the company. It provides for adequate risk management and risk controlling. Since Mr. Roland Heinisch stepped down from the Board on September 1, 2007, the Man - agement Board has consisted of seven members. The distribution of business duties was adjusted accordingly and responsibility for the Integrated Systems Rail was transferred to the Chairman of the Board. The members of the Management Board are obliged to disclose without delay any conﬂicts of interest to the Supervisory Board and their Management Board col - leagues. No such conﬂicts occurred during the year under review.

SUPERVISORY BOARD The Supervisory Board advises and supervises the Management Board in the manage - ment of the company. It consists of 20 members, half of whom represent shareholders and half of whom represent employees, as stipulated by the Codetermination Act. Shareholder representatives are chosen in part by shareholders and in part by the Gen - eral Meeting. Employee representatives are elected in accordance with the provisions of the Codetermination Act. The members of the Supervisory Board are independent. Personal and business links of individual Supervisory Board members with MORE DETAILS ON the company are stated in the Consolidated Financial Statements. Conﬂicts of in- PAGE 219 F. terest are to be reported to the Supervisory Board. There were no such conﬂicts of interest during the year under review. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 29 Financial Communication

The Supervisory Board may form committees and has established the following: an Executive Committee, Personnel Committee, Audit Committee and Mediation Com - mittee in accordance with the provisions of the Codetermination Act. The Audit Committee deals with matters of accounting and risk management in particular and assigns an auditor to perform the audit. The work of the Audit Committee is governed by its own rules of procedure. Pursuant to Section 5.6 of the Corporate Governance Principles, the Supervisory Board regularly conducts an efﬁciency review. The evaluation of the written survey revealed that the members of the Supervisory Board mainly believe that the work of the Supervisory Board is very efﬁcient and that the cooperation between the Man - agement and Supervisory Boards functions very well.

REMUNERATION The members of the Management Board and the Supervisory Board are compensated in accordance with their performance. Their remuneration consists of ﬁxed and variable components. The amount of the variable component is closely tied to the performance of DB Group’s operating business. Management Board and Supervisory Board remuneration is individualized and divided into ﬁxed and variable components, as shown in the Notes to the Consolidated Financial and Annual Financial Statements. The em - MORE DETAILS ON ployees’ representatives on the Supervisory Board donate almost all of the remunera- PAGE 219 F. tion they receive as members of the Supervisory Board to the Hans-Böckler Foun da tion. Supplements to the pension provisions for the Management Board are shown as one.

RISK MANAGEMENT Responsible handling of the opportunities and risks arising from business activities is a fundamental principle of good Corporate Governance. As a result, the early identiﬁ - cation and limiting of business risks is of utmost importance to the Management and Supervisory Boards. Both bodies have access to comprehensive reporting and control systems which are being continuously upgraded. The Group-wide integrated risk man - agement system is designed to identify risks at an early stage and make it possible to take countermeasures. The Management and Supervisory Boards are regularly advised SEE RISK MANAGEMENT on the results. REPORT PAGE 118 FF. 30 DEUTSCHE BAHN GROUP •

FINANCIAL COMMUNICATION AND ACCOUNTING Financial communication in the form of regular reports comprises the publication of Consolidated and Annual Financial Statements and the semi-annual report. Our investor relations and corporate communication activities regularly keep interested parties informed of current developments. The dates of the most important regular reports are published in a “Financial Calendar” with sufﬁcient advance notice. We use the Internet to provide swift and comprehensive information.

ACCOUNTING AND AUDITING DB Group accounting has been prepared in accordance with International Financial Reporting Standards (IFRS) since the 2004 financial year. The Consolidated Financial Statements are made available within 90 days after the end of the financial year, and the semi-annual report within 45 days of the end of the six-month period concerned. These measures ensure that the Group’s financial situation is made available in a trans - parent and comprehensible manner.

COMPLIANCE Compliance with legal and ethical principles in business transactions is an integral component of DB AG’s corporate culture. During the year under review the company’s internal rules were reviewed and restructured, and principles applying to the entire Group were established on the basis of the new mission statement. These principles serve as benchmarks for all business decisions and activities conducted by executive and other personnel. They are ordered under the headings of Strategy, Management, Leadership and Ethics, and form the basis for all additional rules. DB AG’s Compliance Department, which was set up in the year 2000, was reorganized in July 2007, and since then has been reporting directly to the Chairman of the Management Board. This step taken by the Management Board ensures that corruption will be combated even more effectively, thereby protecting the entire Group from sanctions, liability risks, and damage to its image.

COMPLIANCE WITH THE PRINCIPLES OF CORPORATE GOVERNANCE DB AG’s Corporate Governance Commissioner reported to the Audit Committee dur ing its meeting on March 27, 2008, and conﬁrmed that the Principles of Corporate Gov er - nance were being implemented and complied with. In conclusion it can be stated that the suggestions and recommendations of the Code and DB AG’s Corporate Governance Principles, which are based on that Code and applicable to the work of the Supervisory and Management Boards, were acted upon. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 31 Financial Communication Group Profile

GROUP PROFILE

Group governance

Within our Group’s structure Deutsche Bahn AG (DB AG) functions as a Group-wide management holding company for the integrated Deutsche Bahn Group (DB Group). The business portfolio is basically divided into nine business units, which report to three Board divisions. The business units are responsible for the conduct of our business operations. Central Group and service functions round out our organizational structure. DB AG has been a stock corporation established in accordance with German law since it was founded in 1994, and therefore has separate management and supervisory structures. The listing on pages 224 to 226 shows the main companies owned directly or indirectly by DB AG as well as the companies we hold stakes in.

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ORGANIZATIONAL STRUCTURE

SUPERVISORY BOARD

MANAGEMENT BOARD

Chairman and CEO CFO Economic and Personnel and Legal Political Affairs

Passenger Transport Infrastructure Transport and and Services Logistics

BUSINESS UNITS/ SEGMENTS

Group functions Long-Distance Transport Track Infrastructure Schenker • Land Transport • Air/Ocean Freight Regional Transport Passenger Stations • Contract Logistics, SCM

Service functions Urban Transport Energy Rail Freight • Rail Freight • Intermodal Services 32 DEUTSCHE BAHN GROUP •

Our markets

DB Group provides national and international services to target markets reflecting our Group brand proposition of “Mobility – Networks – Logistics.”We are active around the world in over 130 countries and in all of the important economic regions. Since the passage of the 1994 German Rail Reform we have completed extensive restructuring and efficiency enhancing measures as well as comprehensive modernization programs to make DB Group a strong performing business enterprise. We strive to achieve further gains in our financial strength in all of our relevant markets by con - vincing our customers of the high quality of our services. We are one of the leading providers of mobility services in Europe. The liberalization of the European passenger transport markets has begun, although its implemen - tation has progressed at varying speeds across Europe. Within the long-distance rail passenger transport segment, Germany is clearly leading the way as its market has opened the furthest. In contrast, regional and urban routes are increasingly being contracted out all across Europe. In this context these markets are progressively evolving into a market with Europe-wide competition. Based on our integrated structure, which makes us the major user of our infrastruc - ture, we have assumed dual responsibilities: we want to further develop rail as a mode of transport and strengthen the transport infrastructure, which plays such a vital role in Germany’s economy. Secondly, we are currently establishing the prerequisites needed to master Europe’s rising volumes of traffic. Anticipating customer demands, we have evolved beyond our classical core business and integrated our transport services in wide-ranging mobility offers. This applies to both international mobility as well as intermodal transport offers or optimized interfaces where different modes of transport meet. Just as in passenger transport, we also strategically positioned ourselves to meet current and future market demands in the transport and logistics area: “DB Schenker” stands for our international logistics competence in clearly defined market segments. We realize opportunities available in fast-growing markets via our comprehensive, internationally oriented range of offers, and in doing so we also ensure that rail freight transport will be fit for the future. Furthermore, by integrating it in high-performing, wide-ranging networks, we also assure customer contacts and unlock new opportunities for growth. The main features of the market and competitive environment in the logistics market are great dynamism and intensive competition, which offer great opportunities for further business development. Demand for international logistical services is rising due to increasing internationalization and the cross-border alignment of production structures and material flows. We can meet this demand with our multimodal transport chains and our integrated offers of sector-oriented solutions. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 33 Group Profile

The successive opening of the European markets, which has already begun – in the rail freight transport sector since 2007 and as of 2010 for cross-border rail passenger transport – is an important strategic prospect for rail transport. This will generate additional opportunities for rail as a mode of transport that we will realize with competitive offers that we will either develop on our own or in collaboration with other railways. This covers a full spectrum of earnings-oriented opportunities we are addressing while we concurrently continue our internal efforts to increase our efﬁciency.

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RELEVANT MARKETS 2007

WORLD • Ocean freight • Air freight • Contract logistics • Rail-bound projects

EUROPE • Land transport • Rail freight transport • Cross-border rail passenger transport • Regional and urban transport

GERMANY • Long-distance transport • Rail infrastructure 34 DEUTSCHE BAHN GROUP •

Passenger Transport Group Division

A SINGLE SOURCE OF COMPREHENSIVE MOBILITY OFFERS One of DB Group’s core competencies is our ability to make convincing mobility offers. Within the Long-Distance Transport, Regional Transport and Urban Transport business units our main focus is on comfortable, customer-friendly, mobility chains. Our range of services covers rail and bus routes, and increasingly important other intermodal mobility products are organized under the “DB Bahn” brand name. Our aim is to intelli - gently link rail offers together, as well as a smooth interface with other modes of transport. One example of this is the excellent way in which we use the BahnCard’s CityTicket function to link our long-distance offers to regional and urban transport systems. Today, based on our strength in our home market, we are already the biggest mobility company in Europe leading in long-distance rail passenger transport as well as in regional and urban transport. Against this backdrop we are placing top priority on our goal of reinforcing and expanding our position as the leading provider of mobility services in Germany.

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PASSENGER TRANSPORT MARKET RANKINGS IN 2006

NO. 2 IN RAIL PASSENGER TRANSPORT NO. 1 IN PUBLIC REGIONAL AND URBAN IN EUROPE PASSENGER TRANSPORT IN EUROPE based on revenues based on revenues 1. SNCF/Keolis 1. Deutsche Bahn 2. Deutsche Bahn SNCF/Keolis 3. First Group 3. Transport for London 4. Trenitalia 4. Veolia 5. National Express 5. RATP

NO. 2 PROVIDER OF PASSENGER TRANSPORT SERVICES IN EUROPE based on revenues 1. SNCF/Keolis 2. Deutsche Bahn 3. British Airways 4. Deutsche Lufthansa 5. Air France-KLM

Information about competitors is based on annual reports/research reports or internal estimates. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 35 Group Profile

LONG-DISTANCE TRANSPORT BUSINESS UNIT

The Long-Distance Transport business unit is a provider of national and cross-boarder € 3,265 MILLION REVENUES long-distance transport services. DB Fernverkehr AG’s regularly scheduled daily € 139 MILLION EBIT service is the business unit’s core business. We want to convince customers of our 15,011 EMPLOYEES offer and expand our share of market based on our customer promise of providing attractively priced, fast and comfortable, city-center connections. DB AutoZug GmbH and CityNightLine CNL AG ﬂank this offer providing car carrier and night train transport services. The inauguration of the high-speed route from Frankfurt and Stuttgart to Paris and the premiere of ICE connections to Vienna, Copenhagen and Aarhus marked the further expansion of our European mobility offer. This is also reﬂected in the establishment of Railteam – an alliance between DB, SNCF, Eurostar, NS WWW.RAILTEAM.EU WWW.THALYS.COM Hispeed, ÖBB, SBB and SNCB – and the expansion of our Thalys operations.

REGIONAL TRANSPORT BUSINESS UNIT

Within the Regional Transport business unit we provide travelers an extensive network € 6,532 MILLION REVENUES of regional connections within metropolitan areas and the surrounding countryside. € 451 MILLION EBIT Integrated transport operations run by DB Regio AG and its subsidiary companies link 24,781 EMPLOYEES together offer planning and service implementation at local levels for rail and bus services in collaboration with contracting agencies and transport associations. Our goal is to offer an integrated urban transport offer that fully meets local transport requirements. We built a streamlined, market-aligned organizational structure based on the principles of customer-orientation and proﬁtability. In the coming 15 years the total volume of ordered services in German regional rail passenger transport will be put out for tenders. We aim to defend our position as the biggest provider of local transport services within Germany with our integrated transport concepts, an up-to-date ﬂeet of vehicles, as well as convincing quality and good service. To achieve this we will optimize our offers bearing in mind the demands of our customers and the contracting organizations. We also want to utilize the existing competitive advantages, for example our competence in the planning, establishment and operation of complex transport systems, to achieve international growth.

URBAN TRANSPORT BUSINESS UNIT

The Urban Transport business unit is responsible for S-Bahn (metro) operations in € 1,879 MILLION REVENUES Berlin and Hamburg, as well as 22 bus companies in Germany. We offer public road € 166 MILLION EBIT passenger transport services independently or on behalf of cities and counties. The 12,221 EMPLOYEES business unit positions us to take advantage of opportunities arising from the liber - alization and further development of a market that is currently still very fragmented. The gradual opening of this market is anticipated to lead to a successive consolidation in the coming years. In addition, we are focusing our attention on growth opportunities available in neighboring European urban transport markets as our opportunities for collaboration within Germany are limited by the current interpretation of cartel law. 36 DEUTSCHE BAHN GROUP •

Transport and Logistics Group Division

GLOBAL LOGISTICS COMPETENCE PLUS RAIL KNOW-HOW Since the successful integration of Schenker in 2002 we are not only the leading provider of European rail freight transport, but also the leading company in the freight forwarding and logistics sectors. In view of current and future customer requirements it is necessary to integrate rail freight services in overlapping logistic service offers. Under the “DB Schenker” brand, which gives us a uniform market image in the international markets, we have positioned ourselves as a strong partner for transport and logistics customers worldwide.

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TRANSPORT AND LOGISTICS MARKET RANKINGS IN 2006

NO. 1 IN RAIL FREIGHT TRANSPORT NO. 1 IN EUROPEAN LAND TRANSPORT based on tkm based on revenues 1. DB Schenker 1. DB Schenker 2. PKP 2. DHL 3. SNCF 3. DSV 4. Trenitalia 4. Dachser 5. RCA 5. Geodis

NO. 2 IN WORLDWIDE AIR FREIGHT NO. 3 IN WORLDWIDE OCEAN FREIGHT based on tonnage based on TEU 1. DHL 1. Kühne & Nagel 2. DB Schenker 2. DHL 3. UPS 3. DB Schenker 4. Panalpina 4. Panalpina 5. Kühne & Nagel 5. UPS

NO.6 IN GLOBAL CONTRACT LOGISTICS based on revenues 1. DHL 2. CEVA Logistics 3. Kühne & Nagel 4. Wincanton 5. Ryder

Information about competitors is based on annual reports/research reports and internal estimates. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 37 Group Profile

DB Schenker offers its customers global solutions using all transport modes along the entire length of the logistics chain, from bulk goods to packages. DB Group has linked together its positions in European rail freight transport and in European land transport with its strong position in the worldwide air and ocean freight business, and in contract logistics and supply chain management. DB Schenker has a leading position in European land transport as well as in global ocean and air freight. Moreover, DB Schenker is the leading provider of rail freight transport in Europe. To further strengthen our competitive position we have continued to make active use of the ongoing consolidation trends on the world logistics markets to round off our operations, not only through organic growth but also by means of strategic acquisitions. For example, during the year under review we further strengthened our position in European land transport by acquiring Spain-Tir. MORE DETAILS ON According to the results of the 2007 Liberalization Index, the degree of market PAGE 47 openings as a result of deregulation has advanced in the North-South corridor much MORE DETAILS ON further than any other. Our Rail Freight business unit is already well positioned there, PAGE 112 and can offer point-to-point transport from Scandinavia to Italy. The acquisition of Brunner Rail way Services GmbH (BRS), a Swiss rail company, has added an extra component to the existing options along the North-South corridor: DB Schenker can now offer a comprehensive range of rail freight services in Switzerland. New opportunities for growth are also opening up along the East-West corridor. We have already positioned ourselves strate gically here, for example by establishing East West Railways together MORE DETAILS ON with PCC, a Polish company. During the year under review we made targeted additions PAGE 71 to our network along these strategically vital corridors.

SCHENKER BUSINESS UNIT

With more than 1,100 locations in over 130 countries, our Schenker business unit is an € 14,057 MILLION acknowledged global player in markets characterized by rapid rates of growth, ﬁerce REVENUES € 453 MILLION EBIT competition and accelerating consolidation. We are a leading company in European land 59,312 EMPLOYEES transport, in the global air and ocean freight business sectors, and in contract logistics. We are determined to retain and further expand these positions in the future. Following the acquisition of BAX, a US logistics company, in the previous year, we have almost completed integrating its activities into our worldwide network. BAX com plements our previous activities excellently in terms of their geographic presence and customer proﬁles. During the year under review we were able to further expand our leading position in European land transport through the acquisition of the freight forwarder Spain-Tir. In air and ocean freight we are making increased use of Dubai, MORE DETAILS ON which is not only a hub for the growing Near and Middle East region, it is also an increas- PAGE 47 ingly vital junction for moving freight from one continent to another. We are an international provider of integrated logistics services, handling the global exchange of goods via land transport, global air and ocean freight services, as well as all the related logistic services. The market expects a logistics provider to supply a range of modular solutions and capacities matching demand at all times – and this for individual 38 DEUTSCHE BAHN GROUP •

projects as well as for global procurement and distribution needs. Our employees prepare seamless solutions tailored to meet the current and future demands of our customers. Our international teams of specialists link together the modules of our entire range of services to build complex value chains in order to ensure reliable ﬂows of goods and information. A company can only meet all of these demands if it can offer proven and established skills related to all modes of transport: • As a European land transport specialist, we connect the major European business regions via a tightly knit network of scheduled line services. • We equally specialized in providing global air and ocean freight solutions as well as all of the related services.

Our integrated logistics centers are located at the crossroads of global ﬂows of goods and serve as effective interfaces between various modes of transport, thereby enabling a wide range of value-added services to take place.

RAIL FREIGHT BUSINESS UNIT

€ 3,878 MILLION During the 2007 ﬁnancial year we adjusted our structures within the rail freight trans- REVENUES port area in order to meet demands posed by our markets and customers. Production € 217 MILLION EBIT 28,874 EMPLOYEES and sales activities have been moved closer to each other. Today, we are already Europe’s biggest and best-performing rail carrier. Cross-border transports already account for nearly 60 % of our business. The European perspective provides us with enormous growth potential. Rail transport can especially leverage its strengths when it comes to long-distance transports and when large volumes of freight have to be consolidated. We have paved the way for this by gaining access to foreign networks and by expanding our cooperative efforts at the international level. Today, we operate an open production system for the transport of single cars and groups of cars, and we use block trains for point-to-point transport services, together with selected extra logistical services (for example rail/road transshipment for bulk goods at railports, or maintenance services). MORE DETAILS ON The acquisition of English Welsh & Scottish Railway Ltd (EWS), the largest rail PAGE 47 freight company in the UK, and Transfesa, meant a signiﬁcant strengthening of our MORE DETAILS ON position in Western Europe and on the Iberian Peninsula. The establishment of East West PAGE 47 Railways together with PCC, a Polish company, opens up growth potential in Eastern Europe and even links us to Asia via the Trans-Siberian Railroad. Our sales organization in the core sectors iron and steel, chemicals, building materials, consumer and industrial goods, and automotive was developed further in 2007. Our customers are now served even more intensively by specialized sector teams as we continue to provide them single source service. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 39 Group Profile

Combined Transport (CT) is the segment with the fastest growth in European rail freight transport. We offer services such as rail traction power, terminal transshipment, provision of rolling stock, as well as rendering extra services to the trade (operators, for warders and shipping companies). We have access to all the important terminals in Germany, to seaport terminals on the North Sea and the Baltic Sea, and to terminals in other countries. Together with our partner operators, our CT network extends from Europe’s seaport to the hinterlands providing shipping lines, freight forwarders and carriers with rapid maritime and CT connections throughout Germany as well as optimal connec - tions to the European block train network. Our participation in the terminal network in China provided us access to the Chinese rail market and secured us a share of the rapidly growing Chinese container market. It is also another active step towards the establishment of a land link between Europe and China via Russia. Since 2007 the CT business has tracked the ﬂow of goods in Europe along three main European corridors (Central, East-West and North-South). Sales and production units located along these routes offer our customers tailor-made solutions from a single source.

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RAIL FREIGHT TRANSPORT: ALIGNED WITH EUROPE

DB Schenker Major international partnerships/affiliates Key transport axes 40 DEUTSCHE BAHN GROUP •

Infrastructure and Services Group Division

A STRONG BACKBONE FOR EFFICIENT RAIL TRANSPORT IN GERMANY The key prerequisites for smooth functioning rail transport are a high-quality infra - structure and reliable and affordable services – and, correspondingly, for the long-term competitiveness of the rail system. We bundled together all of our activities related to infrastructure and services in order to optimize our organizational structure. The Infra - structure and Services Group division comprises passenger stations, the track infrastructure and our extensive services in the areas of service, facility management, ﬂeet management, IT, telematics, vehicle maintenance and construction project activities. The purpose of this move is to further simplify the interfaces, particularly between infra - structure companies and their business relations with providers of infrastructure-related services as well as vis-à-vis local authorities involved in our infrastructure activities. The division’s business units operate in the market under the “DB Netze” brand name. DB Netze provides a comprehensive range of rail, energy, data and service networks on the basis of the optimized interplay of infrastructure and services, and thus creates a uniﬁed single framework for a successful rail business.

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“OPEN ACCESS” IN GERMANY

• The passage of the 1994 German Rail Reform established Train kilometers of non-Group railways using the DB network Profile of train-path kilometers the principle of non-discriminatory access to Germany’s million train-path km % rail infrastructure. 2007 147 86 • Germany has a leading position across Europe in this 2006 128 area: the independent “Rail Liberalization Index Bahn 2007” confirms the overall high degree of market lib- 2005 110

eralization achieved in Germany in comparison to the 2004 88 14 rest of Europe. 2003 70

• The Federal Network Agency (Bundesnetzagentur) is 2002 50 responsible for ensuring that access to the rail infra- 2001 39 DB Group companies structure takes place on a non-discriminatory basis. 2000 26 Non-Group railways PAGE 113 Total: 1,049 million train- 1999 20 path km • In connection with the drawing up of the 2008 rail net- 1998 13 work schedule, all train path disputes were settle ami- 2006 to 2007: +3.2 % cably during the coordination. Train path disputes can arise when two rail companies want to use the same stretch of track at the same time. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 41 Group Profile

TRACK INFRASTRUCTURE BUSINESS UNIT

Within the Track Infrastructure business unit, DB Netz AG is the service provider to € 617 MILLION EXTERNAL REVENUES currently about 340 – including 310 non-Group – rail transport companies (RTC). All € 3,908 MILLION of them use the German rail network that is almost 34,000 km long and the largest in INTERNAL REVENUES all of Europe. Its central location gives it great importance in Europe’s transport sector. € 478 MILLION EBIT 39,780 EMPLOYEES Since 1994, and in accordance with section 6 of the General Railways Act (Allgemeines Eisenbahngesetz; AEG), Germany’s rail network has been open to use by all RTCs registered in Germany. DB Netz AG itself ensures non-discriminatory access to its infrastructure. The train-path kilometers traveled by non-Group railways have been increasing strongly for years. The most important task of the Track Infrastructure business unit is to provide the foundation for safe and reliable rail operations based on a high-quality rail network that is structured to meet the needs of RTCs. DB Netz AG is responsible for the operation of the high-performance railway infrastructure (long-distance/major metropolitan areas network, regional networks, marshalling yards and maintenance facilities). At the same time, it is also responsible for the marketing of customer-oriented track usage offers, drawing up timetables in close cooperation with customers, as well as maintaining and repairing the infrastructure. This also involves the further development of the rail infrastructure by investing in the existing rail network, in modern command and control technology, as well as building new lines and upgrading old ones. Funding pro - vided by federal and state governments to ﬁnance the infrastructure plays a central role.

PASSENGER STATIONS BUSINESS UNIT

Our passenger stations are the gateways to the world of rail transport, as well as hubs € 328 MILLION linking together various modes of transport. They are also marketplaces and calling EXTERNAL REVENUES € 654 MILLION cards for cities and regions. The scope of the business unit’s activities includes the opera- INTERNAL REVENUES tion of passenger stations as traffic stations as well as the development and marketing € 170 MILLION EBIT 4,537 EMPLOYEES of the floor space within the stations. Acting as an independent firm, DB Station & Ser- vice AG provides non-discriminatory access to its infrastructure. The number of station stops of non-Group railways has been rising strongly for years. Since the start of the German rail reform, the passenger stations have been continually refurbished and modernized to meet the needs of travelers and station visitors. These efforts have focused on providing comprehensive and competent service, high levels of security, good customer information and a functional layout, without losing sight of increased earning power, especially for heavily frequented stations. 42 DEUTSCHE BAHN GROUP •

SERVICES BUSINESS UNIT

€ 99 MILLION The Services business unit consists of six different service segments: DBVehicle Main - EXTERNAL REVENUES tenance, DB Systems, DB Services, DB Fleet Management, DB Communications € 2,545 MILLION INTERNAL REVENUES Technology and DB Security. The business unit’s transport-related services are provided € 120 MILLION EBIT to both Group and non-Group customers, with the former representing the overwhelm- 26,808 EMPLOYEES ing majority. The services portfolio is nationwide and customer-oriented, and bundles together individual services in a complete service package. On the basis of our core competencies (comprehensive service range, command of complex rail systems, integration in the value creation chain of internal customers) we can offer services of standardized quality from one source, and also extend our head start in know-how about rail-related services. • DBVehicle Maintenance is responsible for the heavy maintenance of rail vehicles, and provides the following services to Group and non-Group customers at 15 locations: conversion, modernization, upgrading trains, as well as overhaul work on components like wheel sets, bogies and brake systems. • DB Systel is DB Group’s provider of IT and telecommunications services, and as a full-service provider develops and operates pioneering IT and telecommunications solutions for the passenger travel and logistics markets. Its portfolio covers the entire IT value chain – from consultancy and concept development through devel - opment to operation and support services. It looks after around 80,000 IT users and operates more than 380 IT systems in one of Europe’s biggest computer centers. It is also responsible for digital radio circuits such as GSM-R, which are vital for safety and provide coverage along about 24,500 kilometers of track. • DB Services is our systems provider of services related to real estate and transport. The range of services offered includes professional technical and infrastructure- related facility management for commercial, administrative, transport and industrial buildings and property. Its range of services also covers the provision of clean and ready-to-use trains, including the cleaning of around 15,000 passenger trains every day. It also provides various services related to track maintenance (e.g. vegetation control, securing of construction sites, etc.). DB Services also works for shipping companies, airport operators and airlines. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 43 Group Profile

• DB Fleet Management provides mobility and ﬂeet management services to DB Group, the German army, and other companies. With around 100,000 vehicles DB Fleet Management, together with its afﬁliated companies, is one of the leading national providers of mobility at the road/rail interface, and rounds off the mobility chain with services before and after the use of rail. The DB Rent subsidiary offers a comprehensive mobility network in 90 cities, with around 1,600 vehicles, available from its DB Carsharing service. The innovative “Call a Bike” bicycle rental service is also offered by DB Rent. • DB Communications Technology is our specialist provider of nationwide technical support services. Their range of services includes the maintenance and repair of IT and network technology, security technology and passenger information facilities, automatic ticketing machines as well as printing and information logistics. • DB Security bundles together the security functions within DB Group and provides comprehensive and professional security services for travelers, employees, freight, Group facilities and real estate. DB Security is the leading provider of security services for public transport facilities in Germany.

ENERGY BUSINESS UNIT

DB Energy is responsible for supplying DB Group and other companies with all energy- € 454 MILLION EXTERNAL REVENUES related services and providing a single source for the corresponding technology know- € 1,664 MILLION how and control technology. In accomplishing this task, DB Energy relies on a compre- INTERNAL REVENUES hensive and technically complex infrastructure. As an independent energy manager it € 161 MILLION EBIT ensures the smooth operation of all facilities. It provides traction power and fuel on a non- 1,611 EMPLOYEES discriminatory basis to all railways in Germany.

GROUP MANAGEMENT REPORT

46 Overview 50 Business Environment 53 Development in Relevant Markets 58 Business Performance 64 Development of Business Units 79 Financial Situation 85 Value Management 88 Strategy 96 Sustainability 106 Technology and Procurement 111 Additional Information 118 Risk Management 125 Events After the Balance Sheet Date 127 Outlook 46 DEUTSCHE BAHN GROUP •

OVERVIEW

BUSINESS CONTINUED TO DEVELOP FAVORABLY IN THE 2007 FINANCIAL YEAR • GROUP PORTFOLIO FURTHER OPTIMIZED • BRAND ARCHITECTURE REVISED

Deutsche Bahn remained on track for success in 2007

Selected key figures Change € million 2007 2006 absolute % Revenues 31,309 30,053 +1,256 + 4.2 Revenues – comparable 31,066 29,989 +1,077 +3.6 EBIT 2,895 2,477 + 418 +16.9 EBIT before special items 2,370 2,143 + 227 +10.6 Net profit for the year 1,716 1,680 +36 + 2.1 ROCE 8.7%7.5%––

The 2007 financial year was generally very favorable as DB Group continued to ad vance successfully: MORE DETAILS ON • Performance developed favorably PAGE 53 FF. • Revenues and profits improved once again MORE DETAILS ON PAGE 58 FF. • Business units continued to move ahead MORE DETAILS ON • Our key value management figure, ROCE, almost at PAGE 64 FF. the level of our cost of capital MORE DETAILS ON PAGE 85 FF. During the year under review our performance was primarily driven by good overall economic conditions, comprehensive improvements of our products and services, the expansion of our range of offers in the European rail transport sector, the impact of the new rail infrastructure that became operational in the previous year, the further growth of our international transport and logistics business, as well as the additional progress we made to further enhance our efficiency. In addition to the numerous positive factors, an analysis of 2007 should also take into consideration some negative factors that impacted our business. Right at the beginning of the year under review our rail activities in Germany were significantly impaired by the effects of hurricane Kyrill. The positive effects of the 2006 FIFAWorld CupTM on our performance were missing in mid-2007. During the second half of the year DB Group was involved in very difficult wage negotiations. Extensive strikes took place during the course of these negotiations and caused very great uncertainty among our customers. In addition, as in the previous year, the year under review was marked by numerous special items, including the divestments of Scandlines and Aurelis. While the development of our business in 2006, especially our revenues, was still heavily influenced by the acquisition of BAX, changes arising from additions to our scope of consolidation were not as notable during the year under review. The companies we acquired during the 2007 financial year, that strengthened especially our position in the European rail freight transport sector, did not yet generate any significant effects in 2007. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 47 Overview

Group portfolio further optimized

During the year under review we further optimized the Group’s portfolio by making carefully selected acquisitions and divestments. These transactions enabled us, above all, to strengthen our competitive capabilities in particular in the rail freight sector beyond organic growth.

Among the key transactions that took place during the year under review were: • ACQUISITION OF EWS: We signed the contract to purchase 100 % of the shares of English Welsh & Scottish Railway Holdings Limited (EWS), London, United Kingdom, in July 2007. The purchase price was € 335 million. As the biggest rail freight company in the UK, and one of Europe’s biggest rail freight companies, EWS specializes in wagonload transport in the fields of energy, industrial goods and building material freight. EWS is also active in France via its sub sidiary company, Euro Cargo Rail. This profile means that EWS is a very good strategic fit to our European rail freight transport network. During the year under review EWS was included into our consolidated results with its balance sheet. • ACQUISITION OF TRANSFESA: In July 2007 we also acquired a 50.9 % majority stake in Transportes Ferroviarios Especiales S.A. (Transfesa), a Spanish company based in Madrid. RENFE, the Spanish national railway, and SNCF, the French national railway, retained their holdings as Transfesa’s minority shareholders. Transfesa is an internationally active transport and logistics company specializing in rail and road transport in the automotive, bulk goods and general cargo categories. Due to its extensive presence in the Iberian economic area, and as an opera - tor of axle change facilities, Transfesa provides us ideal access to Spain and Portugal. This acquisition expands our position as the leading rail freight transport company in Europe and makes a major contribution towards optimizing freight transport in the direction of Southwest Europe. Transfesa was not included in the Group’s consolidated results during the year under review as the transaction is still pending approval from regulatory authorities. • ACQUISITION OF SPAIN-TIR: In August 2007 we signed an agreement to acquire 100 % of the shares in Spain-Tir, a Spanish logistics group. The purchase price was € 143 million. This acquisition enables Schenker to further expand its European land transport network, and especially on the Iberian Peninsula. Over the past 30 years Spain-Tir has grown to become a leading supplier in the Spanish and Por - tuguese land transport sector. The company operates its own network on the Iberian Peninsula consisting of 19 branch offices, of which 16 are in Spain and three in Portugal, as well as 92,000 square meters of storage space. The network also includes 46 franchisees. Spain-Tir was included in the Group’s scope of consolidation during the year under review as of October 1, 2007. 48 DEUTSCHE BAHN GROUP •

• ACQUISITION OF PAN BUS: During July 2007 we signed an agreement to purchase Pan Bus, a Danish bus company based in Viborg. The purchase price was about € 7 million. Pan Bus is one of the oldest urban transport companies in Denmark and operates urban and regional routes in Viborg and Limfjord. Together with Pan Bus our urban transport unit will demonstrate that it is a strong performing and reliable provider of transport services, and thus an alternative within the Danish market. • SALE OF SCANDLINES: In June 2007 we signed an agreement selling our share in Scandlines AG to a consortium consisting of Allianz Capital Partners, 3i Group and Deutsche Seereederei. DB AG previously held a 50 % stake in Scandlines AG. The sale represents a further concentration on our core business activities in the transport market. The agreed sales price for 100 % of the shares totaled € 1.6 billion, of which we received € 793 million. • SALE OF AURELIS: In August 2007 we signed an agreement selling our shares in Aurelis Real Estate GmbH & Co. KG to a consortium consisting of Hochtief Projekt- entwicklung GmbH and Redwood Grove International L.P. The agreed sales price was € 1,640 million. Aurelis develops and utilizes non-core-use properties. At the time of the sale the company’s portfolio consisted of 1,500 properties representing about 27 million square meters located primarily in major metropolitan areas in Germany. • SALE OF FCJ: Effective January 1, 2007 we sold Frachtcontor Junge-Gruppe (FCJ) to Beteiligungsgesellschaft Frachtcontor Junge GmbH i. Gr. The sale price was € 16 million. • SALE OF NCS: Effective January 1, 2007 we sold the NUCLEAR CARGO + SERVICE Group (NCS) to Compagnie Daher S.A. The sale price was € 20 million.

DB Group’s brand architecture revised

We revised our brand architecture during the year under review. Starting in December Passenger Transport products were ofﬁcially rebranded as “DB Bahn” (DB Rail) prod - ucts. The new brand for the Infrastructure and Services board division is “DB Netze” (DB Networks), and “DB Schenker” is now the brand we are using for our worldwide transport and logistics activities. The new market appearance supports the Group’s strategy based on international- ism and interlocking networks. It ensures a simple, clear and uniﬁed presentation of the Group to the public. The market appearance builds upon the successful positioning of the previous Group brands. The future Group brand combines the well-known DB symbol and the words “Mobility, Networks, Logistics.” A separate market appearance GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 49 Overview

strengthens the importance of the individual divisions. For Passenger Transport the emphasis is on its integrated mobility chain strategy: for this reason Long-Distance, Regional and Urban Transport, as well as Car Sharing and Call a Bike, are shown below the “DB Bahn” brand. The “DB Netze” brand stands for the interaction between Infra - structure and Services to provide sustainable transport systems. This division develops and operates a nationwide offer of transport, energy, data and service networks. Schenker and Rail Freight Transport operate as “DB Schenker.” This brand unites the competence of a globally successful provider of integrated logistics services with the success of Europe’s biggest rail freight transport company.

[ i ]

GROUP BRAND “DB” AND THREE DIVISION BRANDS “DB BAHN,” “DB NETZE” AND “DB SCHENKER”

NEW BRAND ARCHITECTURE

GROUP

DIVISION

MARKET Passenger mobility: Infrastructure and Ser- Transport and Logis- Includes all services vices: Includes track tics: Includes world- and products of the infrastructure, passen- wide offer of integrat- entire mobility chain, ger stations, energy ed solutions: rail including ICE, IC, and maintenance facil- freight, land transport, Regional and S-Bahn ities, technical plat- air and ocean freight (metro) transport as forms as well as facili - as well as contract lo - well as Call a Bike and ty management, fleet gistics. Carsharing. management solutions, information services and cleanliness and safety. 50 DEUTSCHE BAHN GROUP •

BUSINESS ENVIRONMENT

SUPPORT FROM OVERALL ECONOMIC DEVELOPMENT • ENERGY PRICES CONTINUED TO CLIMB • EURO HIT NEW RECORD TO US DOLLAR

The vast majority of our passenger transport business, as well as our freight transport business, are highly dependent on economic developments within our home market of Germany. Growth drivers in 2007 in Germany were only slightly weaker than in 2006, with the exception of consumer spending, which remained below the previous year’s level. Our globally oriented freight forwarding and logistics activities once again beneﬁted from strong and dynamic ﬂows of global trade, which were barely diminished in 2007.

Business development remained favorable

Total economic development: Increase in gross domestic product (GDP) % 2007 2006 World1) 3.4 3.8 USA 2.1 2.9 Japan 1.9 2.2 China 11.1 10.8 Eurozone 2.6 2.9 Germany 2.5 2.9

1) Sum of selected industrialized and newly industrializing countries. Data for 2007 is based on information and estimates available on February 13, 2008. Source: German Institute for Economic Research; Federal Statistical Office, Germany.

Despite higher crude oil prices, the global economy grew at an almost unchanged pace in 2007, although it did slow during the course of the year. This was mainly caused by the decelerating economy in the USA arising from effects linked to the crisis in the real estate and ﬁnancial markets. This fact, coupled with the steep increase in the value of the euro, dampened exports in the Eurozone and slowed the overall rate of economic growth, despite the continuing favorable development seen in the domestic economy. Asia was once again the fastest growing region with China’s economy posting a faster rate of growth than the high level recorded in the previous year. Economic developments within the Eurozone were comparable as growth was mainly driven by domestic demand. The gross domestic product (GDP) of the new member states of the European Union (EU) grew by about 6 % and was once again more dynamic than in the rest of the EU. The economic upswing in Germany continued in 2007, albeit less strongly than in 2006. In light of the decelerating expansion of the global economy and the strong euro, exports and domestic demand grew at a slower pace in comparison to the previous year’s ﬁgures, although they remained at high levels. Companies’ good sales and earnings outlooks plus increased capacity utilization rates led to a sharp rise in capital expenditures for plant and equipment. Investments in new construction continued to grow – although at a slower pace. The number of employed persons, especially those holding GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 51 Business Environment

jobs requiring mandatory social insurance contributions, increased noticeably. Growth was restrained by a decline in consumer spending due to the increase in the VAT rate, higher inﬂation, and an increase in the rate of savings.

Energy prices reached new peaks

Following an initial decline, the price of crude oil almost doubled over the course of the year. In mid-January the price of the American benchmark West Texas Intermediate (WTI) fell briefly below 50 US dollars (USD)/barrel (bbl). However, by mid-November the price had almost reached 100 USD/bbl. The average annual price of crude oil in 2007 was over 72 USD/bbl, or slightly more than 10 % over the comparable price noted for the previous year. Although the increase of the euro vis-à-vis the dollar was able to offset a large portion of the higher oil price within the Eurozone, nevertheless, even when calculated on a €/bbl basis, oil prices were higher at the end of 2007 than at the end of the previous year. Ongoing high demand for oil driven by the economic expansion of the emerging markets, as well as production cuts made by Organization of the Petroleum Exporting Countries (OPEC), caused the market to tighten. In addition, costs to explore and tap new fields have risen very sharply due to shortages of material and personnel as well as to project delays caused by technical and political reasons. In addition, prices paid for 50 hertz power on the futures markets also rose sharply over the course of 2007 and climbed by more than 25 % after hitting their lows in Feb - ruary. Towards the end of the year a new high of € 62/MWh was recorded for the year 2008. Prices were mainly driven by higher oil prices as well as soaring coal prices, which have more than doubled on a dollar basis. Furthermore, prices for emissions rights also increased. After hitting their lows at the start of the year they stabilized at a mid-range level of € 21–24/t for the second trading period (2008–2012). The year 2007 did not pro - vide any additional impetus for the first trading period (2005–2007). Emissions rights for the first trading period became almost worthless due to an excessive supply of rights.

Euro set new record

The exchange rate of the euro vis-à-vis the US dollar and other major currencies climbed continuously over the course of the year. This movement was driven by the opposite development of less-than-one-year interest rates and the expectations that short-term interest rates in the USA would fall below those in the Eurozone. In November the euro was valued at almost 1.50 USD, the highest level posted by the common European currency since its introduction in 1999. 52 DEUTSCHE BAHN GROUP •

Long and short-term interest rates developed unevenly

Short-term interest rates in the Eurozone tracked the economic upswing in the EU and rose over the course of the year by about one percentage point. At the end of the year the three-month rate stood at 4.5 %. Long-term interest rates tracked short-term rates until the middle of the year with the ten-year Bund yielding 4.675 % at its peak. The start of the subprime crisis in the USA and the ensuing liquidity bottlenecks in the interbank market caused major pressure on both the international equity and credit markets. Demand for sovereign bonds was driven by investors seeking a safe haven, which subsequently led to higher prices and lower yields for bonds. At the end of the year the yield on the ten-year Bund stood at 4.35 %. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 53 Business Environment Development in Relevant Markets

DEVELOPMENT IN RELEVANT MARKETS

RAIL PASSENGER TRANSPORT CONTINUED TO GAIN MODERATELY • RAIL FREIGHT TRANSPORT RECORDED STRONG GROWTH • DB RAIL INFRA- STRUCTURE ONCE AGAIN MORE HEAVILY USED BY NON-GROUP RAILWAYS • INTERNATIONAL LOGISTICS MARKETS POSTED UNINTERRUPTED HIGH PACE OF GROWTH

Passenger rail transport continued to grow in Germany

German passenger transport market Growth rates Market share % based on transport performance 2007 2006 2007 2006 Rail passenger transport + 0.4 +3.8 9.5 9.5 DB Group (+ 0.0) (+3.1) (9.0) (9.0) Non-Group railways (+ 9.0) (+ 25.0) (0.5) (0.5) Public road passenger transport + 0.0 + 0.9 9.2 9.2 DB Group (+ 4.5) (– 4.2) (1.1) (1.0) Motorized individual transport – 0.5 –1.7 80.0 80.1 Air transport (domestic) +7.6 + 4.1 1.3 1.2 Total market – 0.3 –1.0 100.0 100.0

Data for 2007 is based on information and estimates available on February 13, 2008. Source: Federal Statistical Office, Germany, DB calculations.

Based on DB figures, the German passenger transport market (consisting of all motorized vehicles: motorized individual transport, rail, public road passenger transport as well as domestic air transport) remained close to the previous year’s level in 2007. This development was mainly driven by stabilization noted in the motorized individual transport sector, which only felt the impact of higher fuel costs in the final third of the year. On an overall basis, rail passenger transport was able to once again post moderate growth and hold its market share in the face of a difficult environment. This development received support from the favorable economic growth and the resulting relief noted in the labor market. Despite major disturbances caused by strikes and announcements of planned strikes in the second half of the year, the rail passenger transport companies within DB Group were able to maintain the high performance levels recorded in the previous year. We also believe that non-Group railways noted a sharp increase in de - MORE DETAILS ON PAGES mand in 2007, although this increase was likely to have been lower than in the previous 65 (LONG-DISTANCE year because they started operating fewer new routes gained earlier from successful TRANSPORT), tenders. Based on transport performance, we estimate that non-Group railways hold 66 (REGIONAL TRANSPORT) AND a 9.6 % share of the local rail passenger transport market (previous year: 8.9 %). 68 (URBAN TRANSPORT) Performance in the public road passenger transport sector remained close to the previous year’s level in 2007. Slight declines in non-scheduled transports were offset by gains in regularly scheduled bus, streetcar and subway transport, although the shrink- ing number of schoolchildren using these services is gradually becoming noticeable.

Transport performance generated by the bus companies within DB Group rose as RBB MORE DETAILS ON once again was included in the scope of consolidation. PAGE 58 54 DEUTSCHE BAHN GROUP •

Accelerated growth in domestic air transport was mainly driven by a further expansion of offers available in the low-price ﬂight market. Demand in this sector received a boost in the last quarter of 2007 as passengers increasingly switched from rail to air transport as they became increasingly concerned about the wage dispute and its impact on our rail activities.

Rail freight transport continued to post strong growth

German freight transport market Growth rates Market share % based on transport performance 2007 2006 2007 2006 Rail freight transport +7.1 +12.1 17.3 17.3 DB Group1) (+ 2.9) (+ 9.5) (13.9) (14.5) Non-Group railways (+ 28.7) (+ 27.9) (3.4) (2.8) Road freight transport + 8.0 +7.3 70.5 69.8 Inland waterway transport +1.4 – 0.2 9.8 10.3 Long-distance pipelines +1.5 –5.4 2.4 2.6 Total market +7.0 + 6.9 100.0 100.0

1) Railion Deutschland AG and RBH Logistics GmbH. Data for 2007 is based on information and estimates available on February 13, 2008. Source: Federal Statistical Office, Germany, DB calculations.

In 2007 the freight transport markets in Germany (rail, road, inland waterway transport and long-distance pipelines) continued to grow at basically the same dynamic pace noted in the previous year. Transport performance once again grew in comparison to the already high level of growth recorded in 2006. Unchanged strong foreign trade and further favorable development of investments kept the rate of production increases at a high level and boosted demand for transport services. The strong euro as well as the sharp increases in crude oil and energy prices had a dampening effect. Furthermore, capacity bottlenecks noted across all modes of transport continued to burden business. Although the pace of growth posted by freight railways in Germany declined slightly, it did continue, however, at a high level. While national transports recorded growth, the most signiﬁcant growth was posted by international transports. Following its strong increase in the previous year as it advanced by 0.8 percentage points, rail held its market share in 2007. Growth was once again mainly driven by combined transport, although notable increases were recorded for the following categories: agricultural GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 55 Development in Relevant Markets

commodities, chemical products, stones/earths, as well as iron and non-ferrous metals. DB Group com panies active in the rail freight transport business were able to record further growth. When comparing growth figures for 2007 with 2006 it should be MORE DETAILS ON PAGE 72 FF. noted that the business results of RBH Logistics GmbH were included in the Group’s consolidated results for the first time in 2006. In addition, gains were dampened at the end of the year as produc tion of crude steel declined, and from the effects of the wage conflict. Growth of transport performance generated by non-Group railways accelerated slightly over the same year-ago figure. In addition to a sharp rise in domestic transports, the uninterrupted expansion of Germany’s international trade led a very strong increase, above all, in cross-border transports. It is estimated that non-Group railways held barely 20 % of the rail freight transport market in 2007. Part of this increase was due to shifts made because of the wage dispute. MORE DETAILS ON Following strong results noted in 2006, transport performance posted by road PAGE 100 FF. freight transport (German and foreign trucks – including cabotage routes in Germany) grew at a faster pace in 2007. Transport performance noted for foreign trucks, which dominate cross-border routes, once again grew at a faster pace than the figure noted for their German competitors. Foreign trucks represented over 33 % of total transport performance of the road freight transport sector. Performance was driven on one hand by positive economic conditions including ongoing strong foreign trade and growing domestic demand. On the other hand, growth was burdened by significantly higher costs (especially diesel fuel prices, and personnel costs due to the new regulations covering driving and resting times). In addition, average road toll rates per truck rose by about one cent per kilometer driven. Following two weak years, growth posted by the inland waterway transport segment rose slightly in 2007. After getting off to a strong start, compared to declines seen in the previous year, growth weakened over the course of the year. Favorable effects stemming from good economic conditions helped to offset negative weather-related effects (low water levels) of this very weather-dependent mode of transport. The sector was further burdened by restrictions arising from handling problems experienced in the seaports of Rotterdam and Antwerp, as well as sharply higher prices for gas oil. After transport performance increased at a faster pace in both the road and rail freight transport segments than in the inland waterway transport segment, it was unable to maintain its share of market, which fell below 10 % for the first time. 56 DEUTSCHE BAHN GROUP •

Non-group railways once again used DB rail infrastructure more intensely

Selected key figures Change DB rail infrastructure in Germany 2007 2006 absolute % Rail transport companies 338 352 –14 – 4.0 DB Group 28 24 + 4 +16.7 Non-Group railways 310 328 –18 –5.5 Train kilometers on track infrastructure (million train-path km) 1,049 1,016 +33 +3.2 DB Group 902 888 +14 +1.6 Non-Group railways 147 128 +19 +14.8 Station stops (million stops) 142.4 143.8 –1.4 – 0.9 DB Group 124.0 128.2 – 4.2 –3.3 Non-Group railways 18.4 15.6 + 2.8 +17.9

Ever growing numbers of non-Group railways are taking advantage of the 1994 market liberalization to increasingly utilize DB’s rail infrastructure within Germany. Despite the fact that their number declined a bit in 2007, they remained at a very high level. The development of the key figures relevant for our rail infrastructure companies is dependent on their customers’ operational programs and, accordingly, on developments noted in the transport markets. Transport performance generated by DB Group and non-Group customers in the rail passenger and freight transport segments determines the utilization of the existing infrastructure and thus demand for products and MORE DETAILS ON PAGE services. Demand for train-path rose further in 2007. The total number of recorded 74 (DEMAND FOR TRAIN- station stops was slightly less than in the previous year. The transport performance PATH) AND PAGE 75 (STA- TION STOPS) figures turned in by our infrastructure companies are indirectly influenced by the heavy market pressures facing their customers. This is due to intensive inter- and intramodal competition in the transport market and the related mobility and logistics markets. Furthermore, the development of retail trade also plays a very important role in these activities. The mix of shops and the goods and services available in our passenger stations competes with department stores, offers available in pedestrian zones, marketplaces, as well as other outlets within the retail and food and beverage industries. Total sales recorded by retailers in Germany declined by about 2 % during the year under review.

Dynamic development of the international transport and logistics markets

Global trade ﬂows continued to develop favorably and were driven by the high level of growth seen in the global economy. In this environment, Schenker business unit’s relevant markets again posted notable growth rates of 5 % to 8 % in 2007, and we were once

MORE DETAILS ON again able to disproportionately participate in our key markets’ growth during the year PAGE 70 under review. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 57 Development in Relevant Markets

EUROPEAN LAND TRANSPORT The unbroken favorable economic development, which was especially noticeable in the Eurozone of Western Europe, as well as the continuation of the economic upswing in Eastern Europe, had a positive effect on the European land transport market. This in turn led to continued high demand for transport services in road freight transport, which grew by over 7 %. Rapid growth was especially notable on the cross-border routes. As a result of the uninterrupted high demand for transport services we also noted a tightening of shipping space capacities. Furthermore, the market was also characterized by unchanged high prices for diesel fuel and limited availability of truck drivers. Freight forwarders, however, were unable to fully pass on their higher operating costs to their customers. The market remains very fragmented, despite continuing signs of consolidation, especially through acquisitions.

AIR FREIGHT During the year under review the global air freight market once again posted stable growth rates of about 5 %. Routes between Asia and North America and within Asia showed extremely positive developments. The market for routes originating in North America stagnated for the ﬂow of goods to Europe as well as to Asia. On the other hand, the route with the greatest volume, Asia–Europe, posted very stable growth. Shipping volumes from Europe grew due to good economic conditions with a strong increase posted by German exports to Asia and America, in particular.

OCEAN FREIGHT The worldwide ocean freight market, which expanded by about 8 %, was driven by exports from Asia, especially exports from China to Europe and America as well as inner-Asian routes. As before, signiﬁcantly higher shipping volumes were exported from Asia rather than imported into Asia. The unpaired transport ﬂows led to lower shipping tariffs on routes originating in Europe and America to Asia. However, on routes from Asia, especially those to Europe, the shipping lines did raise their rates. Due to the very intensive levels of competition in the freight forwarding business it was frequently impossible to pass on higher rates to customers. The ocean freight market was also marked by a consolidation of shipping lines on the procurement side, and by aggres- sive competition to retain and win shipping volume on the sales side.

CONTRACT LOGISTICS Demand for added-value services and supply chain management solutions within the contract logistics/supply chain management segment again rose sharply by about 7 % during the year under review. The market is increasingly demanding a ﬂexible approach towards solutions for international, customized processes, which should also be cost- efﬁcient at the same time. The key competencies customers are looking for here are in - dustry know-how, extensive IT competence, innovative abilities and access to global networks. 58 DEUTSCHE BAHN GROUP •

BUSINESS PERFORMANCE

REVENUES ROSE SIGNIFICANTLY BY 4.2% TO € 31.3 BILLION (3.6% ON A COMPARABLE BASIS) • INTERNATIONAL BUSINESS SHARE GREW TO 35% • EBIT CONTINUED TO IMPROVE

Major changes made in comparison to previous year

The growth of revenues and profits in the 2007 financial year was not significantly in - fluenced by changes made to the scope of consolidation. However, the following changes are relevant for comparative purposes: • Following the dissolution of the intalliance AG joint venture company with üstra Hannoversche Verkehrsbetriebe AG, the Regionalbus Braunschweig GmbH (RBB) was transferred back into DB Group, and currently belongs to the Urban Trans port business unit. • Since October 1, 2007, the results of Spain-Tir were included in the consolidated Group results during the year under review. • Effective January 1, 2007, we sold Frachtcontor Junge-Gruppe (FCJ) to Beteiligungs- gesellschaft Frachtcontor Junge GmbH i. Gr.; and NUCLEAR CARGO + SERVICE- Gruppe (NCS) to Compagnie Daher S.A. • Our holdings in Fertrans AG and Fertrans GmbH (together Fertrans), and Schenker Russija have been included in the scope of fully consolidated companies as of the year under review.

Revenues posted major increase

Revenues Revenues Change € billion € million 2007 2006 absolute % DB Group – effective 31,309 30,053 +1,256 + 4.2 2005 – Fertrans, RBB, Schenker Russija and 25.1 Spain-Tir (2007 each), and FCJ and 2006 NCS (2006 each) 243 64 +179 - 30.1 DB Group – comparable basis 31,066 29,989 +1,077 +3.6 2007 31.3 We were able to further increase overall Group revenues in comparison to the same year- ago period. The vast majority of the increase was driven by our business operations and only 0.6 percentage points of our growth arose from changes to our scope of consoli - dation. The rise in revenues was primarily attributable to the continuing favorable performance generated by our rail transport and global freight forwarding and logistics business. Burdens on revenues were posed by hurricane Kyrill, the non-recurring positive impact on revenues generated by the 2006 FIFAWorld CupTM in 2007, and the GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 59 Business Performance

wage dispute at the end of the year. In addition, we also had to partially absorb nega- MORE DETAILS ON tive currency exchange effects in conjunction with the development of the US dollar PAGE 100 FF. exchange rate.

Revenues by business unit Change € million 2007 2006 absolute % Long-Distance Transport 3,265 3,234 +31 +1.0 Regional Transport 6,532 6,480 +52 + 0.8 Urban Transport 1,879 1,805 +74 + 4.1 Schenker 14,057 13,232 + 825 + 6.2 Rail Freight 3,878 3,802 +76 + 2.0 Track Infrastructure 617 548 + 69 +12.6 Passenger Stations 328 310 +18 +5.8 Services 99 94 +5 +5.3 Energy 454 362 + 92 + 25.4 Other 200 186 +14 +7.5

Our business units developed very favorably and all of them contributed to the increase in revenues. The absolute biggest gains were recorded by the Schenker, Energy, Rail Freight, Urban Transport and the Track Infrastructure business units. The Regional Transport, Long-Distance Transport and Passenger Stations business units also devel - oped favorably. Detailed information about the performance of the individual business units may be found in the chapter “Business Units.” MORE DETAILS ON The breakdown of revenues by business units remains basically unchanged from PAGE 64 FF. its structure in the previous year.

Revenues by region Change € million 2007 2006 absolute % Germany 20,464 19,857 + 607 +3.1 Europe (excluding Germany) 6,719 5,968 +751 +12.6 North America 1,827 1,769 +58 +3.3 Asia/Pacific 1,967 2,180 – 213 – 9.8 Rest of world 332 279 +53 +19.0

The share of revenues generated by business activities outside of Germany increased slightly during the year under review from 34 % to 35 %. Developments in the North American and Asia/Pacific regions were heavily impacted by negative exchange rate effects of approximately € 250 million. Furthermore, as part of the complete integration of the BAX companies into DB Group, the assignment of business activities to certain regions has been changed, thereby limiting a region-by-region comparison with the previous year’s figures. This has led to a region-based redefinition of internal revenues that became external revenues and vice versa. This has resulted in a negative effect on the growth of external revenues shown for the Asia/Pacific region. 60 DEUTSCHE BAHN GROUP •

[ i ]

REVENUE STRUCTURE 2007

By region By division By business units % % %2007 65 37 Long-Distance Transport 10.4 Regional Transport 20.9 5 Urban Transport 6.0 22 1 Schenker 44.9 Rail Freight 12.4 57 Track Infrastructure 2.0 6 1 6 Passenger Stations 1.0 Services 0.3 Germany Transport and Logistics Energy 1.5 Europe (excluding Germany) Passenger Transport North America Infrastructure and Services Other 0.6 Asia/Pacific Others Rest of world

Income rose faster than expenses

Development of income and expenses Change € million 2007 2006 absolute % Total income 36,473 34,802 +1,671 + 4.8 thereof other operating income (3,219) (2,859) (+360) (+12.6)

Cost of materials –17,166 –16,449 –717 + 4.4 Personnel expenses – 9,913 – 9,782 –131 +1.3 Depreciation – 2,795 – 2,950 +155 –5.3 Other operating expenses –3,704 –3,144 –560 +17.8 Total expenses –33,578 –32,325 –1,253 +3.9 Operating profit (EBIT) 2,895 2,477 + 418 +16.9

Driven by the favorable development of revenues, total income also rose notably. The development of other operating income, which was significantly higher than the same year-ago figure, is mainly attributable to the sale of holdings during the year under review. Declines in income were noted in income from Federal grants received by DB Netz AG, the writing back of reserves, as well as remaining income received. It should be noted that the item other operating income included the one-time effect of € 256 million stemming from the Federal Administrative Court’s decision on payment for provision of rail police services by the Federal Border Police (Bundesgrenzschutz) in the previous year. The development of our expenses reflects the successes we achieved with Group- wide measures implemented to increase efficiency and improve our costs structure, GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 61 Business Performance

although they were more than offset by effects stemming from the expansion of business activities within the Schenker business unit, higher maintenance costs for the track infrastructure and our fleet of vehicles, as well as higher energy prices. This is reflected, in particular, in the notable increase shown in our cost of materials. Personnel expenses were slightly higher than the same year-ago figure. Favorable effects from additional measures to increase efficiency were more than offset by the increase in the average annual number of employees and the already visible consequences of the wage agreement concluded during the year under review in the form of a one- time payment. The decrease in depreciation stemmed primarily from the lower total volume of unscheduled depreciation taken, which was € 110 million less than in the same year- ago period. This change was mainly driven by higher depreciation taken in the previous year for passenger cars and track installations. Other operating expenses rose notably during the year under review. The reasons for the increase include provisions made for potential losses in our Regional Transport business unit, higher rental expenses and higher prices for other purchased services. MORE DETAILS ON PAGE 67

Operating profit continued to improve

EBIT Change EBIT € million 2007 2006 absolute % € billion EBIT 2,895 2,477 + 418 +16.9 Special items noted in the individual 2005 1.4 financial year 525 334 +191 +57.2 EBIT before special items 2,370 2,143 + 227 +10.6 2006 2.5 EBIT share Fertrans, RBB, Schenker Russija and Spain-Tir (2007 each) 2007 2.9 or FCJ and NCS (2006 each) 3 21 –18 – 85.7

The EBIT figure is a key measure of performance for DB Group and its business units. As a result of the previously mentioned developments we were able to further improve our EBIT significantly during the year under review. As in the previous year, the development of EBIT was noticeably influenced by special items during the year under review, which were even higher than in 2006. Nevertheless, both our EBIT, as well as EBIT before special items, were significantly better than the same year-ago figures. Special items recorded in 2006 were mainly associated with the one-time effects stemming from the Federal Administrative Court’s decision regarding payment for the provision of rail police services by the Federal Border Police (Bundesgrenzschutz), as well as the sale of participations. The biggest favorable special items stemmed from the sale of Scand - lines and Aurelis. The allocation of € 310 million to reserves for potential losses in our MORE DETAILS ON Regional Transport business unit, of which € 270 million were adjusted as a special PAGE 67 item, lowered the total amount of special items. 62 DEUTSCHE BAHN GROUP •

EBIT by business unit Change € million 2007 2006 absolute % Long-Distance Transport 139 124 +15 +12.1 Regional Transport 451 690 – 239 –34.6 Urban Transport 166 154 +12 +7.8 Schenker 453 367 + 86 + 23.4 Rail Freight 217 242 – 25 –10.3 Track Infrastructure 478 100 +378 – Passenger Stations 170 136 +34 + 25.0 Services 120 31 + 89 – Energy 161 166 –5 –3.0 Other/consolidation 540 467 +73 +15.6

At the business unit level the Track Infrastructure, Services, Schenker and Passenger Stations business units posted the most signiﬁcant increases in proﬁts on an absolute basis. However, the Long-Distance Transport and Urban Transport business units also developed favorably. Reduced earnings were noted for the Regional Transport, Rail Freight and Energy business units. The item Other/consolidation showed a slight in - crease that was mainly driven by effects linked to the sale of Scandlines and Aurelis. Detailed information about the performance of the individual business units may MORE DETAILS ON be found in the chapter “Business Units.” PAGE 64 FF

Profits improved further

Development of profit figures Change € million 2007 2006 absolute % Operating profit (EBIT) 2,895 2,477 + 418 +16.9 Financial results – 879 – 922 + 43 – 4.7 Profit before taxes on income 2,016 1,555 + 461 + 29.6 Taxes on income –300 125 – 425 – Net profit for the year 1,716 1,680 +36 + 2.1

Profit before taxes on income once again rose notably and was driven by the further significant increase in our EBIT figure. Our financial result also improved as of December 31, 2007, due mainly to a € 33 million rise in interest income. This in turn was favorably driven by the higher level of interest rates on the income side, and our lower average debt level for the year coupled with a lower level of associated costs on the expense side. Furthermore, the profit figure for companies accounted for using the equity method also rose by € 14 million. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 63 Business Performance

Despite a notable decline in the tax item, our net profit for the year improved further. In comparison to the tax item shown as of December 31, 2006, the figure as of December 31, 2007 reflected changes arising from the reform of corporate taxation in Germany, which will lead to a reduction in the tax rate applied on income as of 2008. This change is reflected in the calculation used to determine deferred taxes during the year under review, which now uses a reduced rate of 30.5 % for DB Group instead of the previous tax rate of 40.0 %. The negative effects of this on DB Group amount to about € 430 million. Deferred taxes shown in the previous year, which reflected additional future usage possibilities based on temporary differences and losses carried forward, had more than offset the actual tax expense. This was no longer the case during the year under review due to the aforementioned approved reduction in the taxation rate on income and a further increase in our actual tax expense. Net results attributable to minority interests was € 15 million and remained the same as in the previous year. The above-mentioned developments boosted total net profits by € 36 million to € 1,701 million (2006: € 1,665 million) after deduction of amounts owed to minority interests. This led to an improved earnings per share figure of € 3.96 (2006: € 3.87). 64 DEUTSCHE BAHN GROUP •

DEVELOPMENT OF BUSINESS UNITS

Long-Distance Transport business unit

Selected key figures Change € million 2007 2006 absolute % Rail transport performance (million pkm) 34,137 34,458 –321 – 0.9 Passengers rail (million) 118.7 119.9 –1.2 –1.0 Capacity utilization (%) 42.06 42.97 – – External revenues 3,265 3,234 +31 +1.0 EBIT 139 124 +15 +12.1 Gross capital expenditures 126 262 –136 –51.9 Employees (FTE as of December 31) 15,011 14,641 +370 + 2.5

MAJOR EVENTS • The inauguration of new ICE direct connections from Frankfurt and Stuttgart to Paris, from Frankfurt via Nuremberg to Vienna, as well as from Berlin and Hamburg to Copenhagen/Aarhus marked a further strengthening of our leading position in cross-border European rail passenger transport. In addition, we ac- WWW.THALYS.COM quired a stake in Thalys International, a rail service between Paris, Brussels, Amsterdam and Cologne that is jointly run by the Belgian, French, Dutch and German railways. • We joined together with SNCF (France), Eurostar (UK, France and Belgium), NS Hispeed (the Netherlands), ÖBB (Austria), SBB (Switzerland) and SNCB (Belgium) WWW.RAILTEAM.EU to establish Railteam. The shared goal of this rail alliance is to make internation - al travel as easy and as comfortable as possible. • The BahnCard set a new record as the number of cardholders broke through the 4 million level for the first time as we signed up 300,000 new customers during the year under review. In December we doubled the number of rewards available in our bahn.bonus program to over 80. At the end of 2007 more than two million BahnCard customers were participating in the bahn.bonus program, more than twice as many as in the same year-ago period. • Public acceptance of our special price offers remains high. During the year under review we launched revised versions of our “Winter-Special” and “Spring-Special” offers. The permanent special offer (“Dauer-Spezial”) joined our family of special offers for the first time. Moreover, we launched our Environmental BahnCard25 SEE CHAPTER (Umwelt BahnCard25 ), that lets customers convert their points into environ- ON SUSTAINABILITY, mental rewards. PAGE 96 FF. • We expanded our “City Ticket” and “City mobil” offers that allow persons traveling via DB to conveniently use public transport in cities where their journey starts and ends. • We further optimized our ICE fleet: five ICE 3 train sets were upgraded for French routes as were ten ICE TD train sets for the Danish routes. We continued the comprehensive redesign of the ICE 1 fleet we initiated in 2005. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 65 Development of Business Units

• First class travel was made even more attractive as we hired and trained 200 new employees as part of our measures to improve service. The DB Lounge located in the Munich Central Station was expanded to twice its original size and rebuilt to include a separate area for ﬁrst class passengers. On board the trains we are once again offering menu selections prepared by well-known chefs, as well as an appropriately revised wine list.

PERFORMANCE DEVELOPMENT Transport performance posted by the Long-Distance Transport business unit contracted slightly during the year under review. Furthermore, the number of passengers also declined marginally during the year under review. The decline was mainly due to the negative effects of hurricane Kyrill, the non-recurrence of the Soccer World Cup effects, and the wage conflict, and could not be fully offset. In particular, the insecurity felt by our customers due to the wage conflict and its related consequences made a notably MORE DETAILS ON negative impact on performance. Although we recorded favorable effects from our pro- PAGE 100 F. motional price offers, the continued optimization of our schedule, the inauguration of faster connections to Paris, and the benefits of the first-time full-year effect of the new infrastructure measures – the Berlin North-South tunnel, the high-speed Nuremberg– Ingolstadt–Munich line) that began operations at the end of May 2006, we were unable to fully offset the negative effects. The share of ICE traffic in transport performance rose slightly to 64 % (2006: 63 %).

BUSINESS DEVELOPMENT Despite the slight decline in performance we were, however, able to achieve a further in - crease in our external revenues due to our decisive management of revenues. The favor - able development of proﬁts was due to rising external revenues and a one-time effect from the sale of vehicles, and could more than offset the overall higher level of expenses than noted in the same year-ago period. The cost of materials, in particular, rose primarily be - cause of higher expenses for maintenance, track usage and energy . Gross capital expenditures made were below the previous year’s levels. This was mainly because we had completed the purchase of series ICE 3 and ICE T trains in the MORE DETAILS ON previous year. Detailed information may be found in the chapter “Capital expenditures.” PAGE 81 FF. 66 DEUTSCHE BAHN GROUP •

Regional Transport business unit

Selected key figures Change € million 2007 2006 absolute % Rail transport performance (million pkm) 35,292 35,069 + 223 + 0.6 Passengers rail (million) 1,206 1,215 – 9 – 0.7 External revenues 6,532 6,480 +52 + 0.8 thereof from ordered-service contracts (4,147) (4,203) (–56) (–1.3) EBIT 451 690 – 239 –34.6 Gross capital expenditures 459 380 +79 + 20.8 Employees (FTE as of December 31) 24,781 25,700 – 919 –3.6

MAJOR EVENTS • Our price offers met with unchanging favorable response. The number of statewide use tickets (Ländertickets) rose again during the year under review and notably exceeded the ten million mark. • We continued the decisive modernization of our local transport ﬂeet. Among other measures, we placed an order for more than 53 additional bi-level cars valued at about € 70 million for the S-Bahn (metro) Dresden. • After winning the tender, the Hanse Express successfully started service on the Hamburg–Rostock route, where 25 new bi-level cars are now in operation. • As part of preparations for the 2007 National Garden Show (Bundesgartenschau) in Gera we modernized track systems, passenger stations and connection hubs with municipal local transport along the Mid-Germany-Connection (Mitte-Ger many- Verbindung). • During the year under review an amendment to the German Regional Restruc- MORE DETAILS ON turing Act was approved. PAGE 111

PERFORMANCE DEVELOPMENT Despite the tender-related losses of routes to competitors and the one-time effect by the 2006 FIFAWorld CupTM, the Regional Transport business unit was able to increase its transport performance marginally during the year under review. The gain was driven by good conditions in the labor market, continually rising fuel prices, and the unbroken success of the Ländertickets and other flat-rate offers. Factors dragging performance down were the relatively weak development of personal income and the wage con - MORE DETAILS ON flict, which also caused major difficulties for this business unit. The number of travelers PAGE 100 F. declined slightly during the year under review.

TENDERS AND TRANSPORT CONTRACTS During the year under review the contracting organizations put out 33.1 million train-path kilometers to tender, of which we won about 70 %. The following tenders were won: E-Track infrastructure Wuerzburg (5.9 million train kilometers [train-km] p.a.), Munich– Passau (2.6 million train-km p.a.), RB Mosel (2.4 million train-km p.a.), Cottbus–Leipzig (1.3 million train-km p.a.). Furthermore, we were able to successfully conclude three procure- GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 67 Development of Business Units

ment procedures: VRN (Bergstrasse) (1.3 million train-km p.a.), Pellenz–Eifel- and Moselweinbahn (0.7 million train-km p.a.) and Eastern Track Infrastructure Schleswig- Holstein (7.0 million train-km p.a.).

BUSINESS DEVELOPMENT Business once again developed favorably as revenues were slightly higher than the previous year’s figure. The slight increase was solely due to higher farebox revenues achieved primarily in the transport association sector. The ordered-services fees once again declined slightly. Profits were burdened during the year under review by the creation of reserves for € 310 million in potential losses based on long-term transport contracts that have been signed thus far. Due to the anticipated effects of higher energy prices, and personal costs arising from the concluded wage agreements – which cannot be offset by gains in the income area – these transport contracts were reevaluated during the year under review. Driven by the overall favorable growth of revenues and further progress in reducing costs, our EBIT figure would have improved if it hadn’t been impacted by the special effect caused by the creation of reserves. Gross capital expenditures made were significantly higher than in the same year- ago period. The expansion of our gross capital expenditures is linked to the procurement of vehicles needed for tenders we won and requirements for existing transport contracts. Detailed information may be found in the chapter “Capital expenditures”. MORE DETAILS ON PAGE 81 FF.

Urban Transport business unit

Selected key figures Change € million 2007 2006 absolute % Rail transport performance (million pkm) 5,362 5,262 +100 +1.9 Passengers rail (million) 540.5 549.8 – 9.3 –1.7 Bus Transport performance (million pkm) 8,228 7,882 +346 + 4.4 Passengers bus (million) 722.6 683.1 +39.5 +5.8 External revenues 1,879 1,805 +74 + 4.1 thereof from ordered-service contracts (336) (348) (–12) (–3.4) EBIT 166 154 +12 + 7.8 Gross capital expenditures 107 98 + 9 + 9.2 Employees (FTE as of December 31) 12,221 12,238 –17 – 0.1

MAJOR EVENTS • The acquisition of the Pan Bus, a Danish bus company, marked the expansion of our activities across national borders. Pan Bus operates urban and regional routes in the southern Danish cities of Viborg and Limfjord with 120 employees and a ﬂeet of 58 buses. • We issued a major procurement order worth more than € 70 million for 285 city, interurban and travel buses as we further expanded our bus ﬂeet. 68 DEUTSCHE BAHN GROUP •

• Our bus companies achieved top scores for customer satisfaction: more than 70 % of the passengers said they were satisﬁed with the bus companies’ performance. • The transport contract to provide S-Bahn (metro) service for the Hamburg direct current network by S-Bahn Hamburg GmbH was extended until the schedule change date in December 2017.

PERFORMANCE DEVELOPMENT On an overall basis the S-Bahn (metro) rail companies within the Urban Transport busi - ness unit were once again able to increase their transport performance during the year under review; although the number of passengers declined slightly. Growth seen at the S-Bahn Berlin more than offset developments noted for the S-Bahn Hamburg. Our performance was dampened by the one-time effect resulting from the FIFAWorld CupTM in 2006, the weak development of personal income as well as burdens associated MORE DETAILS ON with the wage conﬂict. On the other hand, good labor market conditions and high PAGE 100 F. fuel prices had a favorable effect. The increase in transport performance and the higher number of passengers in the MORE DETAILS ON bus sector is due to the integration of RBB. When viewed on a comparable basis, PAGE 58 transport performance as well as the number of passengers remained at the levels noted in the previous year.

TENDERS We noted a further increase in competition in the bus line service segment, which has become apparent in previous and still open invitations to tender bids. During the year under review services with a total volume of 30.6 million commercial-use kilometers were tendered out. Our winning share declined to 28 % (2006: 33 %).

BUSINESS DEVELOPMENT Within the Urban Transport business the Berlin and Hamburg S-Bahn (metro) lines, as well as our bus business, have developed well in terms of revenues and contributions to profits. The volume of ordered-service fees declined in the S-Bahn (metro) segment. Here the non-recurrence of the one-time effect associated with the new evaluation of risks taken for the S-Bahn (metro) Berlin in the previous year was noticeable as it had driven a notable increase in ordered-service fees in 2006. In contrast to ordered-service fees, we noted a favorable development in farebox revenues. Furthermore, the integration of RBB in our bus business made a significant contribution towards the increase in external revenues. The development of external revenues posted by the S-Bahn (metro) Hamburg was also favorable due to performance and tariff-related reasons. In addition, the volume of ordered-service fees also rose here. In terms of profits, the difficulties experienced by the metro lines led to a slight de cline in profits, which was more than offset by an increase in profits generated by our bus business and led to a higher EBIT figure.

MORE DETAILS ON Gross capital expenditures made were higher than the previous year’s levels. PAGE 81 FF. Detailed information may be found in the chapter “Capital expenditures.” GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 69 Development of Business Units

Schenker business unit

Selected key figures Change € million 2007 2006 absolute % Shipment volume in European land transport (thousand) 69,568 68,809 +759 +1.1 Air freight volume (thousand t) 1,291 1,190 +101 + 8.5 Ocean freight volume (thousand TEU)1,4551,275+180+14.1 External revenues 14,057 13,232 + 825 + 6.2 EBIT 453 367 + 86 + 23.4 Gross capital expenditures 227 227 0 0.0 Employees (FTE as of December 31) 59,312 54,905 + 4,407 + 8.0

MAJOR EVENTS • The acquisition of Spain-Tir marked a further strengthening of our Europe-wide logistics networks as we expanded our strategic competitive position on routes to and from the Iberian Peninsula. Furthermore, we acquired the less-than-carload and land transport business of Spedition F. W. Neukirch GmbH & Co. KG, a freight forwarder based in Bremen. • We intensiﬁed our collaboration with global brands within the automobile industry: in Bremen we started up operation of a supplier park for Daimler, while Porsche assigned us the task of providing its Russian dealer network with original parts and accessories, and in Germany we continued to provide preassembled and just-in- sequence delivery of instrument panels to the Ford plant in Cologne. • Since June we have been offering a weekly air connection between Dubai, Hahn (near Frankfurt/Main) and Toledo, Ohio, for our freight customers in the auto - motive, electronics, machinery and apparel industries. Our biggest hub for the US market is located in Toledo. • The expansion of the European network continued to advance as we opened multimodal logistics centers in Turku, Finland, and Thessaloniki, Greece, as well as new terminals in Duisburg – the world’s biggest inland port – and in the Rostock seaport. • The opening of a new logistics center in Ichikawa during the year under review further bolstered our competitive position in Japan. The center, which is located near Tokyo, features 15,000 square meters of freight handling area and complements the network of 24 support centers across Japan which we established with our partner Seino Transportation. Schenker set up a joint venture with Gemadept, the biggest freight forwarder in Vietnam, to serve the fast growing Vietnamese market. 70 DEUTSCHE BAHN GROUP •

PERFORMANCE DEVELOPMENT Once again the Schenker business unit was able to continue on its successful course of expansion in all sectors of business and regions during the year under review. Schenker thereby asserted its position as one of the world’s leading providers of integrated logistics services. Within the European land transport sector we were able to further increase national and international shipping volumes. We exceeded the market pace of growth in both the air freight and ocean freight markets as we recorded robust rates of growth for almost all of our routes. As in the previous year, regional focal points remained on routes ori g - inating in Asia, and inner-Asian routes. Our Contract Logistics/Supply Chain Management business also remained succes s- ful, and posted signiﬁcant gains in Asia and North America. The year under review was marked by the successful implementation of multipurpose logistics solutions for internationally active customers in the key automotive, high-tech and consumer goods industries. Beyond that we were able to further expand our capacities for logistical services in the growth markets located around the world.

BUSINESS DEVELOPMENT Our business development also remained favorable during the year under review: external revenues rose further. Our European land transport business again posted double-digit growth, which was driven by further gains in shipping volumes and price measures taken in our existing business. Despite the impact of negative currency exchange rate effects, our air and ocean freight segments posted additional gains. The increase in revenues seen in both the ocean and air freight segments was mainly driven by favorable growth of shipping volumes. Logistical services continued to expand at a very dynamic rate and posted nearly double-digit growth. The European region once again made the biggest contribution to revenues of all the regions, followed by the Asian and American regions with similar shares. Our profit situation was generally favorable. Within the European land transport sector we noted high demand for transport services coupled with tight capacities of shipping space, and unchanged high pressure on margins driven by intense competition, especially in the area of tenders. Nevertheless, we were able to further improve our income situation. Profits also rose in our air/ocean freight and logistics sectors and were higher than in the same year-ago period. However, in ocean freight business we noted that the ongoing dynamic development of the market has led to a further intensification of competition that has resulted in a renewed increase in pressure on margins. Gross capital expenditures made were at the previous year’s level, and reflected

MORE DETAILS ON the further expansion of our networks. Detailed information may be found in the chap- PAGE 81 FF. ter “Capital expenditures”. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 71 Development of Business Units

Rail Freight business unit

Selected key figures Change € million 2007 2006 absolute % Transport performance (million tkm) 98,794 96,388 + 2,406 + 2.5 Freight carried (million t) 312.8 307.6 +5.2 +1.7 Capacity utilization (per train) 481.4 473.7 +7.7 +1.6 External revenues 3,878 3,802 +76 + 2.0 EBIT 217 242 – 25 –10.3 Gross capital expenditures 196 157 +39 + 24.8 Employees (FTE as of December 31) 28,874 24,257 + 4,617 +19.0

MAJOR EVENTS • With the start of the 2007 financial year we merged the activities of the previous Railion and Stinnes business units into the new Rail Freight business unit. • The acquisition of the English Welsh & Scottish Railway Holding Limited (EWS) as well as the purchase of a majority stake in Transportes Ferroviarios Especiales (Transfesa), a Spanish firm, during the year under review further bolstered our MORE DETAILS ON leading position as an internationally active transport company, above all in the PAGE 47 European rail freight transport sector along the central transport corridors. • Following 15 years of construction, the Dutch inaugurated operation of the Betuwe Line, one of the most modern freight transport lines in Europe, in June. The newly built rail line, which is solely for freight transports, connects the Rotterdam seaport with the Ruhr region and cuts travel time by one and a half hours to three hours. • The East West Railways Sp.z.o.o. was founded in February as a joint venture company with PCC Rail SA, a Breslau-based Polish rail freight company. The new firm was formed to expand national and cross-border freight transport between Germany and Poland. • In June we signed an agreement with RZD, the Russian rail company, to foster closer cooperation in the areas of transport and logistics. • Our network was expanded by the addition of Switzerland. Railion Switzerland was formed from Brunner Railway Services GmbH, a company we acquired at the start of the year. This move allows us to now offer single car transports in addition to block train transports between Germany and Switzerland. • Together with Green Cargo, a Swedish rail freight company, we founded a joint production company for Scandinavia. Railion Scandinavia A/S will use end-to-end trains to enhance the performance of rail transports between Scandinavia and Central Europe. 72 DEUTSCHE BAHN GROUP •

PERFORMANCE DEVELOPMENT The Rail Freight business unit was once again able to improve its transport performance during the year under review. The improvement was almost solely driven by Railion Deutschland. Growth during the year under review was dampened at the end of the year as production of crude steel declined thus playing a lesser role for our business, and the MORE DETAILS ON consequences of the wage conflict were felt. PAGE 100 F. During the year under review Railion Deutschland was able to exceed the good results posted in the previous year due primarily to the influence of favorable economic conditions. Our European positioning is paying off, cross-border routes showed stronger development than domestic routes. With a share of just above 60 % these routes are the focal point of transport demand. On the other hand, the unbroken high levels of intensive competition and the consequences of the wage conflict had a dampening effect on growth. The greatest gains seen in conventional carload transport were posted by forestry products, iron and steel, chemical products, as well as mineral commodities/building materials. Notable losses, on the other hand, were recorded, as was the case for all other modes of transport, for petroleum-based products. As in the two previous years, combined transport grew at a faster pace than conventional carload transport. Transport performance noted for combined transport rose by about 9 %. The number of block trains totaled more than 2,100 per week, and was significantly higher than in the previous year. Growth was mainly driven by the rising number of routes in the inter - national sector – especially in the direction of Italy and Austria as well as to and from Scandinavia.

BUSINESS DEVELOPMENT The favorable development of performance took place along with a further increase in revenues, especially at Railion Deutschland, thereby continuing the trend noted in the previous year, which was supported by ongoing good economic conditions in industries that are relevant for rail. On the other hand, burdens on performance stemming from MORE DETAILS ON the wage conflict as well as the related uncertainty experienced by our customers, PAGE 100 F. and the sale of NCS, which was carried in the previous year’s figure with a value of € 43 million, had an opposite effect on revenues. The further rise in revenues was not apparent in the development of profits due to burdens on performance stemming from the sale of a Stinnes participation that resulted in a negative € 65 million effect on results. Excluding this one-time effect, the increase in revenues and further cost cutting measures would have led to a favorable development of EBIT. Gross capital expenditures were significantly higher than the previous year’s levels. The increase was primarily driven by the continuation of our multi-year mod -

MORE DETAILS ON ernization program for electrical locomotives. Detailed information may be found in PAGE 81 FF. the chapter “Capital expenditures.” GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 73 Development of Business Units

Track Infrastructure business unit

Selected key figures Change € million 2007 2006 absolute % Train kilometers on track infrastructure (million train-path km) 1,049 1,016 +33 +3.2 thereof non-Group railways (147) (128) (+19) (+14.8) Internal revenues 3,908 3,825 + 83 + 2.2 External revenues 617 548 + 69 +12.6 EBIT 478 100 +378 – Gross capital expenditures 4,433 4,419 +14 + 0.3 Employees (FTE as of December 31) 39,780 41,356 –1,576 –3.8

MAJOR EVENTS • Our new “ProNetz” (“ProTrack”) infrastructure program was initiated during the year under review and enables us to upgrade the infrastructure to meet the future challenges arising from heavy increases in transport needs. Core elements of the program are the close linkage of maintenance and capital expenditures as well as the expansion of preventive measures in the existing rail network. • During the year under review an agreement in principle was reached with the Federal Government and the State of Baden-Württemberg on about € 4.8 billion in capital expenditures for the construction of a new high-speed line between Stuttgart and Ulm as well as for the “Stuttgart 21” project to build a high-performing drive train station in the state’s capital of Stuttgart. The completion of the major “Neu-Ulm 21” project in November represents a further important step towards the realization of the European rail corridor extending from Paris–Stuttgart– Augsburg–Munich to Vienna. • The favorable development of rail passenger transport and the increased volume of freight transports were also reﬂected in the number of requests for train path allocations in the 2008 track infrastructure schedule. DB Netz AG noted a 3.1% increase in demand for train path, which rose to 9,222 lines for freight transport, and a 5.7 % rise in passenger transport to 37,398 lines. In total, DB Netz AG organized 46,620 lines for the coming year’s schedule. • Due to the rapidly growing volume of ocean freight and the resulting increase in hinterland transports we worked together with seaports to develop a “Rail Seaport Hinterland Transport Masterplan.” New and upgrading projects, like the “Y Line” linking Bremen/Hamburg with Hanover, and other minor investment measures, are needed to ensure that the rail network will have the capacities needed to handle future volumes. • In October the breakthrough was achieved in the 9,385-meter-long Katzenberg tunnel, which is currently the biggest tunnel project in Germany. This marked an important milestone towards realizing higher speeds and shorter travel times, especially on the stretch between Karlsruhe and Basel. 74 DEUTSCHE BAHN GROUP •

• Following about three years of construction the more than 700-meter-long new tube of the Busch tunnel became an ofﬁcial part of the track network. The structure, which has cost more than € 50 million, is an integral part of the internationally important and upgraded Cologne–Aachen-Border line.

PERFORMANCE DEVELOPMENT The positive development of performance noted for rail transport in Germany is also reﬂected in the increased demand for train path allocation. During the year under review the Track Infrastructure business unit observed another signiﬁcant rise in train path usage by non-Group railways, as well as by intra-Group railways, especially in the rail freight transport sector. The share of demand for train path by non-Group railways rose slightly to 14 % of total demand.

BUSINESS DEVELOPMENT Revenues generated by Group customers once again represented the greatest share of total internal revenues due to their overall importance. These revenues rose during the year under review because of, among other reasons, Group demand for train path. External revenues also rose over the comparable year-ago period, and were driven by non-Group customers’ increased demand for train path in comparison to the same year- ago period. Furthermore, tariff adjustments made within the framework of the 2007 train path pricing system also impacted on both internal and external revenues. Expenses for maintenance work remained at an unchanged high level, necessitated by the network’s high levels of quality and availability, and were increased again during the year under review within the framework of our “ProNetz” program. On the other hand, personnel expenses and depreciation declined. Our EBIT figure was driven during the year under review by expanded revenues as well as by the successes achieved by our measures to increase efficiency, which were especially notable in our lower personnel expenses. Moreover, depreciation also declined. In total we were able to achieve a significant increase in our EBIT figure. Our modernization program continued with major emphasis on the existing network, and command and control technology. Gross capital expenditures made remained

MORE DETAILS ON at the previous year’s high level. Detailed information may be found in the chapter PAGE 81 FF. “Capital expenditures.” GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 75 Development of Business Units

Passenger Stations business unit

Selected key figures Change € million 2007 2006 absolute % Station stops in million 140.2 141.5 –1.3 – 0.9 thereof non-Group railways (16.2) (15.6) (+ 0.6) (+3.8) Internal revenues 654 640 +14 + 2.2 External revenues 328 310 +18 +5.8 EBIT 170 136 + 34 + 25.0 Gross capital expenditures 350 643 – 293 – 45.6 Employees (FTE as of December 31) 4,537 4,557 – 20 – 0.4

MAJOR EVENTS • Within the framework of the Stuttgart 21 project, a major infrastructure measure, rail transport in Stuttgart will be completely restructured. Among the new improvements are three new passenger stations (central station, airport-fair grounds and S-Bahn (metro) station) that will ensure the high performance capabilities of the new rail hub. • The modernization of the central stations in Göttingen and Lübeck as well as the Euro Central Station in Saarbrücken was successfully completed. • We installed the ﬁrst multiprovider model, with the participation of four leading telecommunications companies, in the most heavily frequented passenger stations to permit travelers to access the Internet via WLAN during the year under review. • The Alliance Pro-Rail (Allianz pro Schiene) organization awarded the Berlin Central Station and the Landsberg Station the “2007 Train Stations of the Year” because they are “impressive examples of rail transport’s ability to adapt and of its modernity.” The Dresden Central Station, which was designed by Lord Norman Foster, received the “Renault Trafﬁc Future Award 2007.” • During the year under review we decided to sell 490 non-essential to train operations, passenger concourse buildings to an investor group. In collaboration with the individual municipalities, private capital and specialized expertise should be brought together to provide positive impetus to develop attractive areas around passenger stations.

PERFORMANCE DEVELOPMENT The number of station stops declined slightly during the year under review because of the mild decline in demand by intra-Group companies due to lost tenders. On the other hand, demand by non-Group railways grew again due to tenders they had won. 76 DEUTSCHE BAHN GROUP •

BUSINESS DEVELOPMENT Internal revenues remained unchanged as the greatest contributor to total revenues due to the heavy weighting of intra-Group customers. These were slightly higher than the previous year’s level. The Passenger Stations business unit was also able to further increase its external revenues during the year under review due to increased revenues from rentals and higher station usage fees paid by non-Group customers. The key driver for this was the start of operations of the North-South connection in Berlin at the end of May 2006. During the year under review this had a ﬁrst-time impact on results on a full-year basis. In addition, the number of station stops made by non-Group railways continued to rise. Our EBIT also developed favorably due mainly to higher external revenues as well as our decisive cost management measures. Our modernization programs were also continued during the year under review. Gross capital expenditures made were below the previous year’s level. The decline was due to the inauguration of operations of the major Berlin hub project with its North- South connection in the previous year. Detailed information may be found in the chap- MORE DETAILS ON ter “Capital expenditures.” PAGE 81 FF.

Services business unit

Selected key figures Change € million 2007 2006 absolute % Internal revenues 2,545 2,349 +196 + 8.3 External revenues 99 94 +5 +5.3 EBIT 120 31 + 89 – Gross capital expenditures 281 242 +39 +16.1 Employees (FTE as of December 31) 26,808 26,689 +119 + 0.4

MAJOR EVENTS • We bundled together our competencies in the ﬁelds of information technology (IT) and telecommunications (TK) under the roof of our newly founded DB Systel GmbH during the year under review. As a result of this merger we created one of the biggest captive IT/TK service providers in Europe with about 5,100 employees. • The bicycle rental system, Call a Bike, noted a signiﬁcant increase in customers. Since last summer our rental bicycles have also been available in Stuttgart and Karlsruhe just as they already have been for the past few years in Berlin, Frankfurt am Main, Cologne and Munich. • DB Services continued to further expand its external business activities. Numerous collaboration agreements were signed in the System Services, Vehicle Service, Fa cil - ity Management and Special Industrial Services categories. In addition, DB Services received the “2007 Facility Management Operator Prize” during the EXPO Real (international trade fair for commercial real estate). GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 77 Development of Business Units

BUSINESS DEVELOPMENT The development of the Services business unit is primarily marked by its support function on behalf of intra-Group customers. For this reason, the major portion of total revenues was once again contributed by internal revenues. These revenues rose during the year under review. Non-Group Revenues also rose during the year under review and posted a slight gain. External revenues were once again mainly driven by DB FuhrparkService (fleet services) and DB Systel. In viewing the development of the EBIT figure it should be taken into consideration that the impact on profits of efficiency measures taken as part of our “Qualify” program in the previous year were no longer being realized by the service companies, however were being passed on to the customers in the form of price adjustments. This resulted in a negative one-time effect in the previous year. The favorable development of our business during the year under review is also due to the implementation of additional efficiency programs. Furthermore, the good level of orders recorded by DB Fahrzeuginstandhaltung (vehicle maintenance) also made a positive contribution to profits. Gross capital expenditures were higher than the previous year’s levels. Detailed information may be found in the chapter “Capital expenditures.” MORE DETAILS ON PAGE 81 FF.

Energy business unit

Selected key figures Change € million 2007 2006 absolute % Internal revenues 1,664 1,652 +12 + 0.7 External revenues 454 362 + 92 + 25.4 EBIT 161 166 – 5 – 3.0 Gross capital expenditures 178 103 +75 +72.8 Employees (FTE as of December 31) 1,611 1,628 –17 –1.0

MAJOR EVENTS • DB Energy took control of the completely renovated central switching hub in Cologne. During the six-year construction period € 24 million were invested in numerous measures including a computer-assisted control system to monitor and control the supply of traction power. • The blind current compensation facility, which has been operating in Dresden since the end of March, saves capital expenditures and maintenance costs in

addition to energy – and it also cuts CO2 emissions by about 4,500 tons per year. In comparison to a transformer the bank of capacitors delivers blind current with almost no losses. 78 DEUTSCHE BAHN GROUP •

BUSINESS DEVELOPMENT Internal revenues remained unchanged as the greatest contributor to total revenues earned by the Energy business unit due to the weighting of intra-Group customers. Internal revenues rose slightly during the year under review. We were able to signiﬁcant- ly increase external revenues. Our Energy Services product played a major role in the favorable development noted in 2007. Furthermore, energy sales rose because of additional non-Group rail transports, which drove sales of 16.7-hertz traction power. The development of revenues also reﬂected – albeit marginally – higher costs for obtaining power, which had to be passed on to our customers. Despite the favorable development of revenues, our EBIT for the year under review was slightly below the previous year’s level. Here, the effect of dissolving € 26 million in reserves for shutdowns and clean-ups in the previous year was noticeable and did not reoccur during the year under review. The favorable development of revenues coupled with tight cost management could not completely offset this decline.

MORE DETAILS ON Gross capital expenditures were higher than the previous year’s levels. Detailed PAGE 81 FF. information may be found in the chapter “Capital expenditures.” GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 79 Development of Business Units Financial Situation

FINANCIAL SITUATION

EXCELLENT RATINGS RECONFIRMED DURING YEAR UNDER REVIEW • NET DEBT CONTINUED TO DECLINE • GROSS CAPITAL EXPENDITURES AGAIN AT HIGH LEVEL • BALANCE SHEET STRUCTURE GENERALLY STABLE • EQUITY CAPITAL RATIO IMPROVED TO 22.6%

Financial management

DB AG’s Treasury serves as the central treasury for DB Group. This structure ensures that all Group companies are able to borrow and invest funds at optimal conditions. Before obtaining funds externally, we first conduct intra-Group financing transactions. When borrowing external funds, DB AG takes out short-term loans in its own name, whereas long-term capital is generally obtained through the company’s financing company, Deutsche Bahn Finance B.V., Amsterdam, the Netherlands. These funds are passed on to the Group companies as time deposits or loans. This concept enables us to pool risks and resources for the entire Group, as well as to consolidate our expertise, realize synergy effects, and minimize refinancing costs. We have a long-term debt issuance program of € 10 billion, under which approximately € 2.4 billion were still available for placement as of December 31, 2007. With respect to short-term financing, as in the previous year, a multi-currency multi-issuer commercial paper program of over € 2 billion was available and had not been tapped as of December 31, 2007, as well as guaranteed unused credit facilities of about € 2.1 billion. The credit facilities serve as back-up to secure the commercial paper program. In addition, credit facilities of € 1,042 million were also available for our operational business as of the date of record. These credit facilities, which are available to our subsid - iaries located around the world, include the provision of working capital, as well as sureties for payment. No major leasing transactions were concluded during the year under review. DB Group’s creditworthiness is regularly examined by the rating agencies Standard & Poor’s (S & P) and Moody’s. During the year under review these rating agencies conducted their annual rating reviews and subsequently reconfirmed DB AG’s outstanding credit ratings: Long-term category: Moody’s “Aa1/stable”, S &P “A A /negative”; Short- term category: Moody’s “P-1”, S &P “A-1+”. The ratings have remained unchanged since they were first issued in 2000. At the end of August S & P revised its outlook from “stable” to “negative” due to public discussions surrounding the planned privatization of DB Group. 80 DEUTSCHE BAHN GROUP •

Consolidated statement of cash flows

Summary Change € million 2007 2006 absolute % Cash flow from operating activities 3,364 3,678 –314 – 8.5 Cash flow from investing activities – 87 –3,404 +3,317 – 97.4 Cash flow from financing activities – 2,093 – 278 –1,815 – Net change in cash and cash equivalents +1,254 –10 +1,264 – Cash and cash equivalents as of Dec 31 1,549 295 +1,254 –

Despite the unbroken favorable development of our business during the year under review, coupled with a € 461 million improved profit before taxes on income, our cash flow from operating activities declined during the year under review. This was due to the increase in trade receivables arising from the expansion of business activities in the Schenker business unit. Within the cash flow from investing activities, outflows for capital expenditures for property, plant and equipment as well as intangible assets and financial assets were almost offset by inflows from the sale of plant and equipment, intangible assets, as well as investment grants. As a result, the notable outflow of funds recorded in the previous year has been converted into a far lower figure for the year under review. The payments made for property, plant and equipment as well as intangible assets amounted to € 6,248 million, or € 336 million below the previous year’s value (2006: € 6,584 million). In accordance with the relevant legal regulations, our capital expenditures in infrastruc - ture are generally financed by means of interest-free Federal loans, investment grants netted with properties and – to a lesser extent – funds obtained under the Local, Regional and Municipal Traffic Financing Act and the Railway Crossings Act, as well as internally generated funds. Inflows from investment grants rose significantly by € 512 million to € 4,260 million (2006: € 3,748 million) during the year under review. However, some of these funds should be assigned to investment grants that were already made during the previous year. Our cash flow from financing activities reflects our activities to repay financial debt. Following net inflow of € 1,285 million from the issuance and redemption of bonds in the previous year, we recorded a net outflow of € 1,050 million during the year under review. Net outflow of funds arising from the borrowing and repayment of bank loans and commercial paper was € 737 million and below the outflow of € 1,101 million noted in the previous year. Payments made to repay interest-free loans totaled € 311 million, and were below the previous year’s level (2006: € 362 million). Total outflows from financing activities were significantly higher than the previous year’s figure. On December 31, 2007 DB Group had significantly more cash and cash equiva lents at its disposal than it did on December 31, 2006. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 81 Financial Situation

Net financial debt

Change Net financial debt € million 31.12.2007 31.12.2006 absolute % € billion Non-current financial debt 16,228 17,165 – 937 –5.5 thereof interest-free loans (3,282) (3,292) (–10) (– 0.3) 2005 19.7 Current financial debt 1,834 2,716 – 882 –32.5 thereof interest-free loans (275) (308) (–33) (–10.7) 2006 19.6 Financial debt 18,062 19,881 –1,819 – 9.1 – Cash and cash equivalents 1,549 295 +1,254 – 2007 16.5 Net financial debt 16,513 19,586 –3,073 –15.7

Financial debt is understood to include all interest-bearing liabilities including interest- free Federal loans to finance infrastructure projects. During the year under review financial debt, excluding interest-free loans, fell significantly by € 1,776 million to € 14,505 million. In accordance with IFRS, the present value assigned to interest-free loans de - clined by € 43 million to € 3,557 million. This means that, including interest-free loans, our financial debt contracted significantly. The decline in financial debt was mainly driven by a reduction in amounts owed to banks (– € 410 million) and the volume of bonds outstanding (– € 1,001 million) as well as the complete repayment of commercial paper issued as of December 31, 2007 (– € 357 million). Due to the concurrent and significant increase in cash and cash equivalents (+ € 1,254 million), our net financial debt was also sharply lower. This meant that we were able to finance the acquisitions we made during the year under review without MORE DETAILS ON increasing our debt levels. PAGE 47 F.

Capital expenditures

Gross capital expenditures Gross capital expenditures by business unit Change % € million 2007 2006 absolute % 82 Long-Distance Transport 126 262 –136 –51.9 Regional Transport 459 380 +79 + 20.8 Urban Transport 107 98 + 9 + 9.2 11 Schenker 227 227 – – Rail Freight 196 157 +39 + 24.8 7 0 Track Infrastructure 4,433 4,419 +14 + 0.3 Passenger Stations 350 643 – 293 – 45.6 Services 281 242 +39 +16.1 Energy 178 103 +75 +72.8 Infrastructure and Services Other/consolidation –37 53 – 90 – Passenger Transport DB Group 6,320 6,584 – 264 – 4.0 Transport and Logistics Non-repayable investment grants Others from third parties 4,260 3,748 +512 +13.7 Net capital expenditures 2,060 2,836 –776 – 27.4 82 DEUTSCHE BAHN GROUP •

During the year under review we continued to advance on our modernization course that was accompanied once again with high gross capital expenditures, although total outlays were slightly below the previous year’s level. This was mainly due to the conclusion of major infrastructure projects and extensive purchases of new ICE train sets in the previous year. In viewing the development of investments grants it is important to note that about € 250 million were for measures in the previous year, although the funds were only received during the year under review. Major emphasis was placed on measures to improve performance and efficiency in the infrastructure area, station modernization measures, as well as the further rejuvenation of our vehicle fleets in the rail and bus transport area. In addition, we also invested in the further development of the logistics networks within the Schenker business unit. Within the Long-Distance Transport business unit the focus was on the redesign of the ICE 1 and the upgrading of ICE trains for operation in France. Within the Regional Transport business unit key emphasis was placed on the procurement of electric multiple units of the 423 and 425 series for S-Bahn (metro) transport, and the purchase of bi-level cars and diesel multiple units for the Nuremberg diesel network. The Urban Transport business unit focused on purchasing new buses and making capital expenditures to improve the operations and information system used by the S-Bahn (metro) Berlin. The lion’s share of capital expenditures made by the Schenker business unit were made in Europe, where the emphasis was on building and expanding freight forwarding facilities. This created the prerequisites for efficiently handling shipping volume and growing the business in the areas of land transport and logistics. Other focal points were in the IT area. The main emphasis in the Rail Freight business unit was once again on the pro - curement of electric locomotives within the framework of the multi-year modernization programs and the market-oriented modernization of the freight car park. Within the Track Infrastructure business unit the main focus was on measures to strengthen the performance of the existing network, as well as for command and control technology. Other areas of emphasis were major projects like Nuremberg–Erfurt, Erfurt–Halle/Leipzig, Karlsruhe–Basel, City-Tunnel Leipzig, Augsburg–Olching, Saarbrücken–Ludwigshafen as well as the start of operation of the GSM-R-Basis Net - work and the expansion of additional routes offering GSM-R. Within the Passenger Stations business unit key emphasis was placed on completion work and expansion projects at the Berlin Central Station/gantry-style buildings, the Leipzig City-Tunnel as well as the further modernization work across the country (including the “Modernization Offensive North Rhine-Westphalia” and “Lower Saxony Is OnThe Move” projects”). Within the Services business unit, DB Fuhrpark (rolling stock) invested in replacing rolling stock, while DB Systel invested in replacing and expanding hardware and software. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 83 Financial Situation

The focus of capital expenditures made in the Energy business unit was on the nationwide renewal of sub-stations within the 110-kV traction current network, as well as the construction of switching locations. The structure of capital expenditures was again dominated by the business units within the Infrastructure and Services Group division, and within the business units, once again, by the Track Infrastructure business unit. The division accounted for 82 % of gross capital expenditures made in 2007 (2006: 82 %) with the Track Infrastructure business unit alone responsible for 70 % (2006: 67 %). Business units in the Passenger Transport Group division represented 11 % (2006: 11%) and the business units within the Transport and Logistics Group division had a 7 % share (2006: 6 %).

Balance sheet

Balance sheet structure % 31.12. 2007 31.12. 2006 Asset side structure Non-current assets 86.6 89.5 Current assets 13.4 10.5 Total assets 100.0 100.0

Equity and liabilities side structure Equity 22.6 19.0 Non-current liabilities 52.8 54.4 Current liabilities 24.6 26.6 Total assets 100.0 100.0

As of December 31, 2007 total assets rose slightly by € 89 million, or 0.2 % to € 48,529 million (as of December 31, 2006: € 48,440 million). The non-current assets totaled € 42,046 million, and a significant 3.0 % (€ 1,314 million) below the same year-ago figure (as of December 31, 2006: € 43,360 million). This was mainly driven by the € 1,393 million decline in property, plant and equipment to € 38,069 million (as of December 31, 2006: € 39,462 million) due to the spin-off of the Aurelis real estate portfolio. MORE DETAILS ON The € 1,403 million increase in current assets as of December 31, 2007 to € 6,483 PAGE 48 million was due to the rise in trade receivables (+ € 308 million) because of the expansion of business activities within the Schenker business unit and the significantly higher level of cash and cash equivalents (+ € 1,254 million). Structurally, there was a further shift towards current assets. 84 DEUTSCHE BAHN GROUP •

The major changes to equity and liabilities during the year under review were related to equity and financial debt. Equity increased due to earnings by € 1,739 million to € 10,953 million, with a corresponding change in the equity ratio. Both non-current and current liabilities declined significantly as of December 31, 2007. Within the outside capital structure – including the Federal Government’s interest-free loans shown for infrastructure financing – the share of total assets represented by non-current liabilities declined slightly. In line with our emphasis on mainly congruent maturity financing, the percentage of current liabilities fell slightly as of December 31, 2007, and was once again significantly lower than non-current liabilities. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 85 Financial Situation Value Management

VALUE MANAGEMENT

CONTINUOUS PROGRESS: ROCE RISES TO 8.7% • REDEMPTION COVERAGE AND GEARING IMPROVE FURTHER

ROCE concept as a value-oriented control instrument conforming to capital market requirements

ROCE Change ROCE € million or % 2007 2006 absolute % % EBIT 2,895 2,477 + 418 +16.9 – Special items of the individual 2005 5.0 financial year 525 334 +191 +57.2 EBIT before special items 2,370 2,143 + 227 +10.6 2006 7. 5 ÷ Capital employed 27,393 28,693 –1,300 – 4.5 = ROCE 8.7%7.5%––2007 8.7

Within the framework of our value management activities, we evaluate the prospects for business units and capital expenditure programs with respect for their strategic potentials, as well as their contributions to the long-term increase in our enterprise value. Our return on capital employed (ROCE) is the primary tool used in this context for value-oriented steering of resources. We use target returns to manage DB Group as well as individual business units, taking the nature and risk of each operating business into consideration. We measure the performance of our business activities against these target returns. Furthermore, we also use these targets as a basis for planning purposes and our capital expenditures programs. As a minimum, the target returns are set at the level of the weighted average cost of capital (WA C C ) before taxes. The cost of capital is derived in conformity with capital market conditions, taking the mid-term nature of the control concept into consideration. We estimate the pre-tax cost of capital to be 8.9 % based on a mid-term target capital structure. DB Group’s mid- term ROCE target was set at 10 %. To enable better comparability of accounting periods we use EBIT that has been adjusted for special items to calculate our ROCE, our key value management figure. We were able to once again improve our ROCE figure during the year under review due to the significant improvement noted for EBIT before special items. The decline in MORE DETAILS ON capital employed also contributed to the increase in our return on capital. This was main- PAGE 61 ly driven by the decline in fixed assets arising from the sale of Aurelis. MORE DETAILS ON Capital employed represents the interest-bearing operational capital employed by PAGE 48 DB Group. 86 DEUTSCHE BAHN GROUP •

Derivation of capital employed from the balance sheet Change € million 2007 2006 absolute % Based on assets Property, plant and equipment/ intangible assets 39,855 41,081 –1,226 –3.0 + Inventories 784 710 +74 +10.4 + Receivables/other assets 4,263 4,196 + 67 +1.6 – Other liabilities 7,577 7,499 +78 +1.0 – Other provisions 6,766 6,388 +378 +5.9 – Deferred income 3,166 3,407 – 241 –7.1 Capital employed 27,393 28,693 –1,300 – 4.5

Based on equity and liabilities Equity 10,953 9,214 +1,739 +18.9 + Financial debt 18,062 19,881 –1,819 – 9.1 + Retirement benefit obligations 1,594 1,514 + 80 +5.3 + Liabilities from derivatives 274 465 –191 – 41.1 + Deferred tax liabilities 137 72 + 65 + 90.3 – Assets from derivatives 79 30 + 49 +163 – Deferred tax assets 1,644 1,800 –156 – 8.7 – Financial assets 355 328 + 27 + 8.2 – Cash and cash equivalents 1,549 295 +1,254 – Capital employed 27,393 28,693 –1,300 – 4.5

Redemption coverage and gearing improve again

Redemption coverage Redemption coverage/gearing Change % € million or % 2007 2006 absolute % EBIT before special items 2,370 2,143 + 227 +10.6 2005 + Net operating interest1), 2) –832 –907 +75 –8.3 14.7 + Depreciation2) 2,743 2,935 –192 – 6.5 2006 = Operating cash flow 4,281 4,171 +110 + 2.6 18.6 Net financial debt 16,513 19,586 –3,073 –15.7 2007 + Present value of operating leases 3,767 2,826 + 941 +33.3 21.1 ÷ Adjusted net financial debt 20,280 22,412 – 2,132 – 9.5 = Redemption coverage 21.1% 18.6% – –

Gearing Financial debt 18,062 19,881 –1,819 – 9.1 % – Cash and cash equivalents 1,549 295 +1,254 – = Net financial debt 16,513 19,586 –3,073 –15.7 2005 256 ÷ Book value of equity 10,953 9,214 +1,739 +18.9 = Gearing 151% 213% – – 2006 213 1) To properly determine redemption coverage we utilize net operating interest by eliminating those components of 2007 151 net interest income/expense related to the compounding of non-current liabilities and provisions and the reversal of deferred income. 2) Adjusted for special items. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 87 Value Management

The key figures for controlling the level of debt are redemption coverage (ratio of oper - ating cash flow to adjusted net financial debt – including present value of liabilities from operating leases) and gearing (the ratio of net financial debt to equity). We strive for a level of debt commensurate with our outstanding current credit rating. The mid- term goal for redemption coverage is 30 %. For gearing our target is an equity to debt ratio of 1:1. During the year under review we increased our redemption coverage compared to the previous year. The increase was primarily driven by the reduction in adjusted net financial debt. The significant decline in net financial debt also made it possible to offset the increase in the present value of the operating leases. This increase was due mainly to higher minimum leasing payments from operating lease contracts related to the acquisition of EWS, as well as the expansion of business activities within the Schenker business unit. The increase in cash flow from operating activities also contributed to the improvement in redemption coverage. Gearing improved significantly in comparison to the previous year due to the increase in equity coupled with a very sharp decrease in net financial debt. 88 DEUTSCHE BAHN GROUP •

STRATEGY

DB GROUP IS AIMING TO BECOME THE WORLD’S LEADING MOBILITY AND LOGISTICS COMPANY • MAINTAINING AND EXPANDING OUR LEADING MARKET POSITIONS IN ALL RELEVANT MARKETS • SYSTEMATIC FURTHER DEVELOPMENT OF OUR RAIL BUSINESS AND LOGISTICS COMPETENCE

With the passage of the German Rail Reform Act in 1994 we took on the task of converting the former Federal Railways into a commercial enterprise. During the earlier years we placed special emphasis on modernizing the rail business and eliminating the investment backlog that had accumulated over decades. In the interim we have achieved a lasting improvement in our service offers, quality and our proﬁtability due to our resolute cost management and the continual optimization of our processes combined with numerous modernization measures.

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DB GROUP’S BUSINESS APPROACH

DB GROUP

PASSENGER TRANSPORT TRANSPORT AND LOGISTICS

INTEGRATED SYSTEMS RAIL

INFRASTRUCTURE AND SERVICES

We are established as an integrated Group with regard to our business portfolio, and consider our focus on interrelated business units as a signiﬁcant success factor. The primary tasks facing our rail activities are maintaining our strong market position in passenger and freight transport, as well as improving our intermodal competitiveness. Our Group’s integrated structure is a fundamental prerequisite for accepting comprehensive responsibility for the further development of the overall rail system. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 89 Strategy

In addition to furthering the development of the rail system in Germany, our home mar - ket, we have also successively added to and expanded our portfolio in the European rail market, as well as in the worldwide freight forwarding and logistics business. These steps have enabled us to further align DB Group’s activities with changing and more demanding customer requirements as we made targeted enhancements to our core busi - ness. The acquisitions of Schenker (2002) and BAX (2006), in particular, unlocked additional potential for us to expand in European land transport, in the international air and ocean freight business, and in the ﬁeld of contract logistics. The acquisitions of EWS and Transfesa during the year under review marked a further expansion of our position in the European rail freight transport sector. Today, we have already achieved leading market positions in all of the relevant transport segments.

DB GROUP HAS SET ITSELF THE GOAL OF BECOMING THE WORLD’S LEADING MOBILITY AND LOGISTICS COMPANY Today, we move people and freight via seamless mobility and logistics chains, thanks to our integrated operation of transport and infrastructure elements, as well as our intelli- gent economical and ecological linkage of all modes of transport. We are involved in creating and operating the transport networks of the future: the rail infrastructure in Germany, passenger transport in Germany – and increasingly in Europe – rail freight transport and land transport in Europe as well as air and ocean freight around the world. We have set ourselves the goal of becoming the world’s leading mobility and lo - gistics company. We will achieve this goal by further upgrading and expanding our trans - port networks to meet future market requirements – and we are setting benchmarks in our markets as we move toward our goal. We aim to achieve our goals by advancing in three key categories: expanding our transport network, continuously upgrading our existing business, and realizing the beneﬁts of synergies.

(1) EXPANDING OUR TRANSPORT NETWORKS The continuous evolution of our transport networks to meet changing customer needs and general competitive conditions, as well as the shifts in our societal environment, is of decisive importance towards maintaining and expanding our leading market positions. The major emphasis of our planned activities is primarily driven by three developments: • The globalization of industrial structures involving far-reaching relocations of production sites leads us to anticipate that the transport and logistics sector will grow at a faster pace than GDP. In order to meet the sharply rising demand for rail freight services, especially for seaport hinterland freight transport, we will take 90 DEUTSCHE BAHN GROUP •

carefully selected measures to expand the rail infrastructure in Germany. Our cus - tomers’ demands for complex and globally linked logistics solutions have also risen as a result of globalization. In response, we intend to take steps, including additional acquisitions, to further strengthen our contract logistics business and global freight forwarding business. We are developing offers involving the opera - tion of complex local transport networks in order to meet the growing demand in emerging markets for customized speciﬁc solutions that meet the requirements of their individual transport markets. Our core competencies in the ﬁeld of rail transport have increasingly proven to be a decisive competitive advantage vis-à-vis competing providers of transport services. • Rapidly rising demand for mobility and logistics services, and the corresponding effects on the environment – and especially climate change – poses a major future challenge to providers of these services. The sustainability aspects of the services being offered plays an important role in providers’ ability to offer mobility and logistical services at competitive prices in the face of rising energy costs, without endangering the attainment of climate protection goals. We will improve our range of mobility and logistics offers, which are already delivering a lower climate impact

today than competitive offers, by further lowering our CO2 emissions across the Group, and increasingly link the rail mode of transport with other modes of trans- SEE CHAPTER ON port. SUSTAINABILITY, • The EU member states are obliged to ensure that the complete liberalization of the PAGE 96 FF. individual rail freight transport markets takes place as of 2007. Accordingly, we will further expand our European rail freight transport network via alliances and acquisitions in order to permanently ensure our leading market position. The market opening for cross-border routes in the passenger rail transport sector MORE DETAILS ON will begin in 2010. This means that in the future we will have the same oppor- PAGE 114 FF. tunities in the European rail market that international transport companies have already actively enjoyed for years in Germany due to the open access to the German market. Our goal is to play a major role in structuring the rail transport networks in Europe. For this reason we are planning to expand the European long-distance rail network by primarily collaborating with other national railways. Moreover, we will selectively expand our activities in the European local public transport market to the extent that we can realize lasting competitive advantages there. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 91 Strategy

(2) CONTINUOUSLY UPGRADING OUR EXISTING BUSINESS Based on the restructuring successes we have achieved in recent years, we will identify additional areas with the potential for improvement and then realize this potential in order to further enhance the performance of our transport networks. The majority of the im provements will take place on a cross-divisional and intermodal basis. For example, we will further improve the profitability and quality of the activities within the individual business units as we move towards achieving one of our goals: attaining a significant increase in the quality of the rail business in Germany. A key element here is improving the punctuality in rail passenger and freight transport. To this end, we launched a Group-wide program in 2007, “Qualify 2007,” that is intended to signifi cant ly improve the reliability and performance capabilities of our rail network.

(3) REALIZING THE BENEFITS OF SYNERGIES INHERENT IN A LARGE GROUP We intend to better coordinate the individual activities within our Group so we can provide our customers with even more attractive offers, and so we can beneﬁt from cross- selling opportunities. The improved coordination of our activities will enable us to realize further opportunities to cut costs and achieve greater savings. One example here is that we intend to realize additional beneﬁts of scale by bundling procurement requirements. Additionally, we will further optimize the entire rail system and use technical improvements to reduce costs. We anticipate that bundling all of the Group’s energy requirements will lead to further synergy-driven improvements in buying power beyond the already high level we currently have. Within the business units in the Passenger Transport group division we plan to combine all of the individual offers in a single mobility platform and then add supplementary services that will make “door-to-door” mobility possible across all of Germany, thereby creating a competitive alternative to traveling by car. We will focus on realizing more cross-selling opportunities in the Transport and Logistics Group division, which arise on a cross-business unit basis, and will increasingly bundle together the various offers available within the Group to create products. Particular focus will be placed on exploiting the synergy effects that exist between rail freight transport, freight for - warding and logistics activities. Within the Infrastructure and Services Group division we will achieve savings by coordinating existing processes and procedures. This way we will, for example, be able to better integrate our information technology and our telecommunications network activities. Furthermore, infrastructure-related services should be better integrated into the process used by providers of infrastructure services to provide these very services. 92 DEUTSCHE BAHN GROUP •

INTEGRATED MOBILITY IN GERMANY AND POSITIONING IN EUROPE Further growth is anticipated in the rail passenger transport sector within Europe. The liberalization of the markets in the local and long-distance passenger transport sectors has begun, but has progressed at varying speeds across Europe. In long-distance rail passenger transport, Germany, with its open market access, has assumed a clear leadership position within Europe. In contrast, the number of tender offers for regional transport routes has also been rising in other countries. Against this backdrop, our ﬁrst priority continues to be the defense of our position in our home market of Germany. This means further developing our individual Long- Distance Transport, Regional Transport, and Urban Transport business units, as well as networking them more closely together and creating intermodal mobility offers including back-up systems for information, ticketing and settlement. The further development of the BahnCard into a mobility card, consistent fares through to the level of the various public transport associations, as well as the operations of DB Carsharing and “Call a Bike” have enhanced the appeal of our offers, which are increasingly extending beyond rail and bus transport. In addition, we will gradually continue to expand cross-border transport and, if the occasion arises, take advantage of opportunities to enter foreign markets to further internationalize our activities. Accord- ingly, we are also emphasizing the further development of www.bahn.de to make it a comprehensive mobility-booking platform for viewing Europe-wide train connections as well as almost all public local transport connections in Germany. Our goal for the Long-Distance Transport business unit is to ensure a highly competitive offering of fast, high-frequency connections between German metropolitan areas and other European countries. In this context, we rely on the classical advantages of rail systems: rapid and relaxed travel, comfortable transport from city center to city center, including a lot of time for personal use. Our offers feature open access to systems, thereby allowing customers to ﬂexibly organize their travel arrangements. We have given priority to further improving the quality of our information and performance. Fur- thermore, we are continually developing our service and price concepts, along with our methods to increase customer loyalty, in target group-oriented ways. In the cross- border transport sector we will continue to intensify our cooperation with rail companies in neighboring countries. As part of these efforts, we joined together with some of these MORE DETAILS ON companies during the year under review to establish RailTeam. PAGE 64 The goal for the Regional Transport and Urban Transport business units is to con - tinue providing attractively priced offers to ensure smooth mobility in both urban areas and the countryside. This requires continual improvements in productivity, quality and service. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 93 Strategy

Currently, the German urban transport market is still highly fragmented and characterized by municipal providers. The gradual opening of this market leads to expectations that it will see a successive consolidation process in the coming years. Due to the fact that our opportunities for collaboration within Germany are limited by the current interpretation of antitrust law, we are looking at the prospects for growth opportunities in neighboring European urban transport markets, and for winning tenders in Germany.

ENSURING RELIABLE, ATTRACTIVE AND AFFORDABLE INFRASTRUCTURE AND SERVICES The rail infrastructure determines the long-term ability of rail-linked travel to compete as a mode of transport to a considerable extent. The central task here consists of providing high-quality, safe and reliable rail operations that are designed to meet the requirements of rail companies, thereby enhancing the competitiveness of rail as a mode of transport. Our range of services, and the corresponding pricing systems to use the infrastructure, have been designed on a non-discriminatory basis. We strive to maintain a long-term sustainable and modern infrastructure partner - ship with the Federal Government based on a service and financing agreement in order to ensure the high quality of our infrastructure, and the targeted further development of the rail network within Germany over the long term. This agreement should accommodate our business interests together with the Federal Government’s constitutional obligation to ensure the rail infrastructure. The Track Infrastructure business unit is facing the challenge of increasing performance capabilities to accommodate rapidly growing transport flows along the main corridors. Another aspect is the cost-optimized and needs-oriented modernization of the infrastructure. The implementation will take place as part of our “Net 21”strategy, which is the strategic foundation for high-quality, reliable and safe rail-based transport. Selected expansion projects and new construction are intended to eliminate bottlenecks and achieve significant improvements in performance. Sufficient capacities should be created to accommodate future transport developments. In the Passenger Stations business unit we are continuing our usage- and needs- based modernization measures in close cooperation with the Federal Government and the respective regional administrative bodies. We are also moving forward with our programs for safety, cleanliness and service. As part of these programs we are imple- menting differentiated developmental concepts for various categories of stations. We see potential to increase rental income at high traffic locations. We will continue to sell off weakly used concourse buildings. Concurrently, we will continue making changes as needed to affected traffic stations’ infrastructures. 94 DEUTSCHE BAHN GROUP •

Our Energy business unit secures rail transport companies’offers by providing them very safe supplies of electrical and diesel traction energy. Our procurement advantages, which are secured by long-term agreements, and successful energy services make major contributions towards maintaining energy prices as stable as possible for the rail mode, despite rising commodity prices. The Services business unit makes a considerable contribution to the value chain for the overall rail system because of its high-quality activities in the areas of vehicle maintenance, telecommunications services, facility management and rolling stock man - agement. Once again, the main focus continues to be on the further optimization of the business unit’s offer.

HIGH-PERFORMANCE GLOBAL NETWORKS AND LOGISTICS COMPETENCE The international transport and logistics markets are growth markets with increasing consolidation tendencies. Customers are increasingly demanding complete coverage of global transport ﬂows, intermodal offers and additional logistical services. We will have to strengthen our position in key markets and add new logistical services to our current services portfolio if we are to remain competitive and proﬁtable over the long term. To achieve this goal we will systematically further develop our logistics competence and drive the expansion, as well as the linkage, of our transport networks in the coming years. Our primary goal is to realize cross-business-unit potential by further development of integrated products. We will continue to develop comprehensive solutions for key businesses like automotive, chemical/pharmaceutical and industrial. Integrated services should be bolstered and placed in the market. These services include Rail Logistics at Schenker, seaport hinterland transport, and solutions in combined transport as well as railports. Beyond this, the integration of key account sales activities will unlock cross- sell potential between the individual business units. We are the market leader in the European land transport market. Our strategic program, “Market Leadership,” is focused on expanding the further expansion of the European network in the South and Southeast regions, in addition to the UK. In addition to the further development of the land transport network in terms of network performance and density, the products Full Truck Load (FTL), Rail Logistics and Forwarding, as well as – regionally limited – Parcel should be established or expanded, respectively. The strategic goal is to attain market leadership in the European FTL segment. We plan to reach this goal by building a European network in the core countries of Finland, Sweden, Austria, the Netherlands and Germany, with an eye on all of Europe. This approach can be supplemented, in particular, by making acquisitions in South and Southeast Europe and the UK. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 95 Strategy

Following the successful integration of BAX’s business activities, we turned our attention to further reinforcing our position as a leading provider of air and ocean freight services along the vital Asian and trans-Pacific trade lanes. In addition, we will further standardize our processes and bundle freight orders in order to realize benefits from synergies. The goal here is to expand our leading market positions in ocean and air freight by continually growing at a faster pace than the overall market. The ongoing liberalization of the European rail freight transport markets is leading to an intensification of competition in the international transport sector, which has been already noted in the national transport sector for a long time. The rail freight transport business unit is well positioned to handle the rising demand for cross-border routes. For example, we offer end-to-end transport services on the North-South corridor from Scandinavia to Italy. The acquisitions of EWS, a British rail freight company, and its French subsidiary, ECR, along with Transfesa on the Iberian peninsula, as well as the founding of East West Railways in Poland, have opened the doors to totally new high-quality rail freight offers on the East-West corridor. The expansion of sales competence in Europe and the further development of the Railport concept have contributed towards the desired stabilization of our share of the intramodal transport market and an increase of our share of the intermodal market. Our long-term goal is to hold the leading position in the rail-based transport market for bulk goods in Europe. Combined Transport is the fastest growing segment in the European rail freight transport market. We are the leader in this market. We will systematically further develop our activities in order to reinforce our position. The execution of the combined transport business model, with its stronger focus on the high-traffic European rail corridors, will lead to higher productivity and quality and ultimately to greater customer satisfaction. We are participating in the expansion of seaport hinterland transport by ensuring our access to continental/maritime terminal capacities and by expanding a hub to secure the link between the hinterlands and the western seaports. 96 DEUTSCHE BAHN GROUP •

SUSTAINABILITY

DB GROUP PUBLISHED ITS FIRST SUSTAINABILITY REPORT • WAGE AGREE- MENT WITH TRANSNET, THE TRANSPORT WORKERS’ UNION (GDBA), AND THE GERMAN TRAIN DRIVERS’ UNION (GDL) REACHED, AND BENCHMARK SET FOR A NEW PAY STRUCTURE • FURTHER CUTS IN ENERGY CONSUMPTION OF 20% BY 2020

DB Group is increasingly focused on responding to the challenges of globalization, scarcer resources, climate change, deregulation and changing demographic structures. Only an energy-efﬁcient company can also control its cost development and secure its market position, maintain its workforce and, at the same time, protect the climate. DB Group is facing its social responsibilities with a sustainability-oriented corporate policy. We acknowledge the principles of sustainable, future-oriented management with our sustainability management policies. Our ﬁrst integrated sustainability report appeared in 2007, and provided an overall view of environmental, as well as personnel and social themes; it also replaces the previously separate environmental as well as em - ployee and social reports. The Sustainability Report will appear every two years. A WWW.DB.DE/NACH - printed version complements the detailed Internet version. HALTIGKEITSBERICHT

Employees

Employees by business unit Change FTE as of Dec 31 2007 2006 absolute % Long-Distance Transport 15,011 14,641 +370 + 2.5 Regional Transport 24,781 25,700 – 919 –3.6 Urban Transport 12,221 12,238 –17 – 0.1 Schenker 59,312 54,905 + 4,407 + 8.0 Rail Freight 28,874 24,257 + 4,617 +19.0 Track Infrastructure 39,780 41,356 –1,576 –3.8 Passenger Stations 4,537 4,557 – 20 – 0.4 Services 26,808 26,689 +119 + 0.4 Energy 1,611 1,628 –17 –1.0 Other 24,143 23,229 + 914 +3.9 DB Group 237,078 229,200 +7,878 +3.4

The number of employees is calculated on the basis of full-time employees (FTE) positions to permit better comparability within DB Group and over time. Figures for part- time employees are converted into figures for equivalent full-time employees in accordance with their share of the normal annual working time. As of December 31, 2007, the number of employees had risen in comparison to the same year-ago date, due mainly to the acquisition of EWS, with approximately 4,650 employees, in the Rail Freight business unit, and further growth at the Schenker business unit. On a compa rable basis the number of employees is slightly above the same year-ago level, reflecting further progress in improving efficiency in our rail business. The percentage of DB employees outside Germany increased again, up to 23 % (2006: 20 %). GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 97 Sustainability

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EMPLOYEES’ STRUCTURE (AS OF DECEMBER 31, 2007)

By Region By Division By business unit Dec 31, % % %2007 77 31 Long-Distance Transport 6.3 Regional Transport 10.4 Urban Transport 5.2 13 22 Schenker 25.0 Rail Freight 12.2 4 10 Track Infrastructure 16.8 5 1 37 Passenger Stations 1.9 Services 11.3 Germany Transport and Logistics Energy 0.7 Rest of Europe Infrastructure and Services North America Passenger Transport Other 10.2 Asia/Pacific Other Rest of world

HUMAN RESOURCES STRATEGY SUPPORTS BUSINESS STRATEGY The goal of our human resources strategy is to support DB Group’s business strategy, effectively and comprehensively. Our employees are of key importance as we advance towards becoming the leading international provider of mobility and logistical ser - vices. They are the ones who convince our customers anew every day and confront the challenges of the future. An efﬁcient approach to personnel management encourages employees in their current tasks and, at the same time, sets the right emphases for the future. For this reason, DB Group’s personnel strategy has the following four core areas: (1) increasing employees’ identiﬁcation with the Group; (2) internationalization; (3) coming to grips with demographic changes; and (4) business and future-oriented employee management. We implement our personnel strategy with a total of ten human resources initiatives.

(1) IDENTIFICATION OF EMPLOYEES Our employees are the face of DB Group. How we view ourselves is driven by the ﬁve values of our new Group mission statement which, at the same time, make a promise about the attitude of every employee: customer-oriented, business-like, progressive, collaborative and responsible. Shared values and goals also create the basis for the iden - ti ﬁcation of our employees, who represent DB Group internally and externally. 98 DEUTSCHE BAHN GROUP •

In a successful business culture, employees identify with their company and its performance. The goal of our “We are DB” initiative is to promote this, and we have organized events and workshops to ﬁll the “We are DB” concept with life. Dedicated managers play an important role as motivating examples for employees. To provide orientation, especially in times of ever faster change, the collective understanding of the leadership role in DB Group was further developed as a central element of our executive staff development. The new management principles provide support in guiding employees in line with the Group’s mission statement. Operational executives, in particular, are key for the success of the business as they are responsible for operations and have a direct effect on employee motivation. The goal of the “Operating Executives” initiative is to strengthen these managers in their self-image and their roles over the long term. This is because all management instruments will also be applied to them, thereby leading to improved communications and networking.

(2) INTERNATIONALIZATION As a leading global mobility and logistics company, we are active in over 150 countries, and in the interim one out of every five employees works outside Germany. In the future, the demand for employees to fill international assignments will rise along with the number of employees and managers being transferred abroad. In order to meet these demands, we founded the “International Recruiting/International Personnel Development” initiative. Diversity management and qualifying employees in foreign languages and inter- cultural competence also play a major role. In addition, we have further developed our international exchange program for the targeted recruitment of qualified graduates, encouraged internships both abroad and in Germany, and strengthened our cooperation programs with prestigious universities, such as the Massachusetts Institute of Technology (MIT) and Stanford University.

(3) DEMOGRAPHIC CHANGE Demographic change is a central topic of our human resource management. Already today, one-third of our employees in Germany are 50 years old and over, and we expect that their share will nearly double by 2015. At the same time, the number of school- leavers will decline by about 15 % – reducing the potential pool of talent to select junior employees from. Demographic developments demand new strategies to secure young talent, to present ourselves as an attractive employer, and to ensure the loyalty and longer employment of our employees. A total of four initiatives are devoted to these themes. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 99 Sustainability

Within the framework of the “Employment Opportunities During Times of Demo- graphic Change” initiative a “Demographic Monitor” has been developed to provide an early warning system for all business units within DB Group. The increasing shortage of skilled labor in particular trades will present us with great challenges in the coming years. Using recommendations contained in the DB Experience (50plus) initiative, we aim to ensure that our employees remain actively employed longer. The goal of the initiative is to retain the valuable know-how and vast experience of older employees for the company through qualiﬁcation programs, by creating networks to foster internal and external exchanges of information, and through personnel development measures that are ﬂexible enough to adjust to the various phases of an individual employee’s life.

COMPREHENSIVE TRAINING OPPORTUNITIES FOR YOUNG PEOPLE During the year under review about 2,300 young people began their training in one of over 25 DB Group training courses. In addition, a further 230 young people have taken up a dual course of studies (combining academic instruction with on-site work experience) with us as one of the largest employers and educators. The more than 60,000 applications we receive on average every year underlines the attraction and high qual - ity of our training, and has made us one of the biggest educators in Germany. As the need for trainees will increase by around 50 % in the next five to seven years, we must also find new recruiting avenues. This is where the “Transition Management School and Profession” initiative comes in to support young people as they enter the world of work. The core of the initiative is the newly conceived cooperation program with schools. The goal here is to strengthen the individual occupational orientation of young people, as well as to build a feeling of loyalty towards our company amongst junior skilled workers at an early stage, by using plant visits, student internships, job applicant training ses- sions, IT fitness tests, as well as regular exchanges of information with teachers. We offer school-leavers without basic skills our entry qualification program “Chance plus,” which has operated since 2004 with an ever-increasing number of participants. This internship program with a duration of almost one year has already prepared 500 young people to enter the world of work since it was founded. Upon completion of the program three-quarters of the graduates entered a regular trainee program or went straight into a job.

BETTER COMPATIBILITY OF CAREER AND FAMILY Employees who can harmonize their family responsibilities with their tasks at work perform better and are more motivated in their jobs. This is the reason behind our “Career and Family” initiative that aims to increase our appeal as a competitive, modern employer, 100 DEUTSCHE BAHN GROUP •

in particular to skilled and managerial female employees. We not only anchored the compatibility of career and family in the new management principles, we also entered into a voluntary agreement with the works committee and strengthened our engage- ment in external family-based networks, like the “Alliance for the Family” group. Our aim is to introduce modern instruments into a family-conscious human resources policy in order to better take the personalizing of working hours within shift systems in daily working life into account. We promote reentry following family-based absences, and support families by offering multifaceted services. In doing so, we focus on child- care, as well as on family members who also need care.

CAMPAIGN “1,000 TRAIN DRIVERS NEEDED” Due to the favorable developments seen in the rail transport business we launched our “1,000 Train Drivers Needed” campaign in September 2007. By the end of November 2007 we had received about 10,000 applications, from which we selected about 5,600 promising candidates. We will probably hire at least 1,000 new people from this group for the newly founded DB BahnService GmbH.

(4) BUSINESS AND FUTURE-ORIENTED PERSONNEL MANAGEMENT The development of DB Group demands continuous examination and further development of organizations and processes through comprehensive change management. With the opening of our Employees Service Center in February 2007, we bundled together our standardized personnel processes. This means that persons with personnel responsibilities can be more strongly positioned as locally based business partners, without being distracted by administrative tasks. Readiness for the future means education ﬁrst and foremost. Attractive educational offers not only enhance qualiﬁcations, they can also raise commitment, willingness to perform, and loyalty to the company.

THE 2007 WAGE AGREEMENT AND NEW PAY STRUCTURE The year’s highest pay settlement was reached on July 9, 2007 with the collective bargaining association (BA) consisting of the TRANSNET and the Gewerkschaft Deutscher Bundesbahnbeamten und Anwärter (GDBA) unions. The settlement includes a pay rise of 4.5 % effective as of January 1, 2008, and runs for 19 months and includes an additional bonus payment of € 600 for 2007. The leadership of the German Train Drivers’ Union (Gewerkschaft Deutscher Lokomotivführer; GDL) refused to participate in the wage negotiations. Instead, they set out their requirements for entering into negotiations and attempted to achieve their demands by work stoppages. In order to find a solution to this, DB Group’s most difficult wage conflict, a mediation process was initiated in August 2007 involving DB Group and all three unions. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 101 Sustainability

Parallel to the negotiations with the GDL, the basics of a new wage structure were agreed with the BA on November 29, 2007. The negotiations had been suspended during the pay negotiations. In the future, criteria such as qualifications, level of responsibility, experience and individual performance can be taken into account even more strongly. For these structural improvements, DB Group will, once again, make additional funds available. The new wage agreement will consist of a basic wage agreement and, most likely, six separate function-specific wage agreements. The basic wage agreement combines the rules that apply to all groups of employees. Individual pay and working conditions for jobs and/or groups of jobs with comparable working conditions should be defined within the function-specific wage agreements. Details of the new wage structure will be determined in future negotiations. The new system should be introduced during the course of 2008. Furthermore, guidelines for future wage policy were agreed with the BA, whereby, in particular, working hours should be arranged to be more worker- friendly. On January 30, 2008 negotiations with the GDL over a wage agreement for train drivers were also completed. Further details can be found in the Supplemental Report. MORE DETAILS ON PAGE 125

Environment

In the light of ever rising mobility and transport needs, the impacts on the environ- WWW.DB.DE/UMWELT ment and the atmosphere caused by the transport sector should be kept as low as possible. We feel obligated to observe the principles of sustainable, responsible activity in a business and societal environment. An economical, social and ecologically justified environmental policy pays its way, and not only for the environment and so ci- ety. It is also the key to our own business success. This is reflected in our sustainabil - ity management approach to business. In an ecological comparison with other modes of transport, rail transport offers significant advantages. In addition to technical safety, quality performance and service orientation, they are a proven important factor for our customers when selecting a mode of travel and/or transport. And it is exactly for this reason that rail also plays a central role in transport policy considerations affecting the configuration of future-capable mobility and logistical structures in Germany and Europe. In the face of the growth forecasts for flows of traffic and transport in the coming years and decades, the importance of environmentally friendly rail in securing a sustainable comprehensive transport system will continue to rise. 102 DEUTSCHE BAHN GROUP •

NEW OFFERS UNDERLINE RAIL’S ENVIRONMENTAL FRIENDLINESS The conscientious handling of our resources is becoming ever more strongly anchored in the public’s awareness. The subject of climate protection is becoming more meaning- ful for customers, especially because each person can make a personal contribution. On our online travel information site, we have made it possible for users to create a per - sonal, route-based, environmental balance sheet for each journey in Germany. Plans call for the Environmental Mobility Check to be broadened in the future to include international routes. With its integrated approach, DB Group strengthens environmentally friendly rail transport. About 161,000 Umwelt BahnCards (Environmental Bahncards) were sold between October 1 and December 8 in the year under review. This is proof that people consciously choose climate-friendly rail transport. Since 2007, BahnCard hold - ers have also been able to apply the bonus points they collect to climate protection. Our environmental premiums include free bicycle transport, green energy credits or an initial Call a Bike credit.

ENERGY CONSUMPTION AND CO2 EMISSIONS FURTHER REDUCED One of our goals, from a business point of view, is to optimize our consumption of resources. Since 1990, we have signiﬁcantly reduced our speciﬁc primary energy consumption in the area of rail transport. For this reason we decided in 2007 to once again raise

our goals for reducing climate-damaging carbon dioxide (CO2 ) emissions; between 2002

and 2020, we aim to reduce speciﬁc rail transport CO2 emissions by 20 % instead of the originally planned 15 %. This will enable rail transport to further increase its environmental lead over the other modes of transport.

Selected key figures – rail transport Change 2007 2006 absolute % Specific primary energy consumption rail passenger transport (MJ/pkm) 1.16 1.21 – 0.05 – 4.1 Specific primary energy consumption rail freight transport (MJ/tkm) 0.43 0.45 – 0.02 – 4.4 Specific carbon dioxide emissions rail passenger transport (g/pkm) 64.9 65.6 – 0.7 –1.1 Specific carbon dioxide emissions rail freight transport (g/tkm) 23.7 24.3 – 0.6 – 2.5 Emission of soot particles by rail diesel vehicles used for rail transport (t) 259 281 – 22 –7.8

Data for 2007 is based on information and estimates available on February 15, 2008. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 103 Sustainability

During the year under review we were able to further reduce the speciﬁc transport- related CO2 emissions in rail passenger and in rail freight transport compared to the same year-ago period. Based on preliminary data, we have reduced speciﬁc CO2 emissions by 12.8 % since we launched our Climate Protection Program 2020.

The emissions of the greenhouse gas CO2 per capita was reduced by 1.1% to about 65 grams per passenger kilometer in rail passenger transport. Although the same ﬁgure for long-distance transport increased slightly by 2.8 %, speciﬁc regional transport CO2 emissions went down by 3.3 %. Rail freight transport values improved by 2.5 % to 23.7 grams of CO2 per ton kilometer. These represent further contributions by rail transport towards protecting our climate, and mark a further increase in rail transport’s environmental lead.

We do whatever we can to reduce CO2. In the case of vehicle engineering the answer is lightweight construction, aerodynamics and innovative traction power concepts that lead to CO2 reductions. Additionally, modern electric vehicles can convert braking energy into electricity using Braking Energy Recovery Systems. This meant that in the year under review 844 gigawatt hours (GWh) of electricity were saved. Furthermore, in the climate protection program the energy mix and the effectiveness of the generation and conversion of power play a role. Following the introduction of energy-efficient driving methods into scheduled passenger transport back in 2004, these energy-saving measures have now become a successfully established part of the daily routine of freight transports. Our train drivers have been trained in the “Save Energy” (“EnergieSparen”) program where they learn how they can save energy just by being more aware of how they drive. They can mon - itor their energy consumption using a display in the driver’s cab. Since 2005 more energy- aware driving styles have led to savings of 72 GWh of electricity and 4.6 million liters of diesel fuel, or about 57,000 tons of CO2. EcoTransIT is an Internet-based tool that lets companies determine which WWW.ECOTRANSIT.ORG form of transport allows them to ship their goods to destinations in Germany and other European countries via the most environmentally friendly way. In addition to our rail business, we are conducting a project for the entire DB Group – including the freight forwarding and logistics area, and the stationary pro - cesses – covering specific climate protection goals up to 2020 and backing these up with measures. Here we are striving for a 20 % reduction in specific CO2 emissions between 2006 and 2020. 104 DEUTSCHE BAHN GROUP •

STRONGER COMMITMENT TO REDUCING EMISSIONS OF DIESEL PARTICLES We have managed to reduce diesel particle emissions and fuel consumption by a total of 85 % since 1990 due to the electrification of routes, the use of new diesel vehicles and modern engines. Particle emissions by diesel vehicles in rail transport declined further during the year under review. However, further far-reaching efforts are needed. For this reason we are participating in the testing of new engines and exhaust gas treatment concepts for new and existing vehicles. From 2012 on stricter limits will apply for newly introduced diesel engines for rail vehicles, above all for nitrous oxide, which will require further advances in technological measures by manufacturers. The “Testing of Innovative Exhaust Gas Treatment for Rail Diesel Vehicles,” or LOCEX, pilot project was successfully launched in 2006. In collaboration with an engine maker, and as part of the project, a series 294 shunting locomotive, which is widely used throughout Germany, was equipped with a combination device consisting of a particle filter and SCR (Selective Catalytic Reduction) catalyst to reduce particles and nitrous oxide in exhaust gases. The bench tests were completed in December 2007. The vehicle will begin test operation in the spring of 2008. Final results are expected in 2009. Particle filters were tested in various series of vehicles used in regional transport. Series VT642, 646 and 648 vehicles are currently undergoing bench tests. We also expanded our fleet of low-exhaust buses in urban transport in 2007. For conventional diesel engines we will install SCR technology to reduce nitrous oxide emissions, as well as diesel particle filters, in ten buses. We also increased our fleet of low-exhaust, low-noise, gas-driven buses from 270 to 300.

FURTHER IMPROVEMENTS IN NOISE ABATEMENT We are continuing to advance towards our goal of cutting rail transport noise pollution to half of their 2000 levels by 2020. This is all the more challenging as we will further increase transport performance in rail passenger transport and especially in rail freight transport. Against this backdrop we are continuing to implement the Federal Govern - ment’s noise abatement campaign. During the year under review 35.1 km of noise protection walls were erected along existing lines and noise abatement measures were carried out in 4,200 apartments. In addition, 191.6 km of train-path were modernized. In 2007, for the ﬁrst time, the Federal Government made € 100 million available for noise abatement in the existing network. Reducing noise at its source is still particularly important. In 2007 the Federal Government partially opened the noise abatement program by making € 10 million in funding available from the program in 2008 to support pilot and innovative projects to reduce noise by modifying freight cars. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 105 Sustainability

In the rail freight transport sector we have focused on the composite brake shoe since 2001, and in the interim newly acquired vehicles are equipped with it. In conjunc tion with smooth tracks, composite brake shoes reduce perceived noise by half. In the mean- time, over 3,300 cars have been equipped with the so-called “Whisper Brakes,” and by the end of 2009 plans call for a further 5,000 freight cars to be ﬁtted with this technology. From 2007 onwards, existing freight cars will also be modiﬁed accordingly. Additionally, we are continuing to develop other types of composite brake shoes to reduce freight car noise.

NEW RESEARCH PROJECT AIMS TO FURTHER REDUCE NOISE AT ITS SOURCE In December 2007 the new research project, “Quiet Train on Real Track” (Leiser Zug auf realem Gleis, LZarG), sponsored by the Federal Ministry of Economics and under our overall supervision, was launched. Industrial firms, universities and users work together in the project to develop and test new technologies. The principal aim is to reduce the emission of sound from wheel and rail. For this purpose, low-noise com - ponents are being examined which could be easily introduced into existing systems. The research project is focusing closely on the interplay between infrastructure and rolling stock. This interaction, in particular, should now be utilized in the LZarG project to achieve significant improvements in noise abatement. Components that individually may only lead to slight reductions in noise, may bring significant relief when they are combined. 106 DEUTSCHE BAHN GROUP •

TECHNOLOGY AND PROCUREMENT

FUTURE-ORIENTED FURTHER DEVELOPMENT OF COMMAND AND CONTROL TECHNOLOGY • INTEROPERABILITY OF VEHICLE PARK EXPANDED • PROCUREMENT PROGRAM AGAIN AT A HIGH LEVEL

The rail business is characterized by extensive depth of production, a high level of committed resources and capital, as well as very complex network structures. The individual technical components – from rail lines, to equipment, facilities and operating sites, through to rolling stock – are of major importance in achieving a smooth inter - action of the individual elements and a steady increase in production efﬁciency. The introduction of technical innovations, the optimization of the efﬁciency of individual elements and adjustments to customer demands, create interdependencies that have to be taken into account. For this reason, we bundled all of the relevant subjects – like technology and procurement, quality management, environmental protection and safety – into the “Integrated Systems Rail” division.

Technology

Rail transport, thanks to the wheel/rail system with its rail-borne wheels, and its train security systems, has a significant advantage over other modes of transport. In order to update this high safety standard, we continually improve our systems and processes. In 2007 we used standardized processes to decisively make further progress in a Group- wide improvement program and implement a Group-wide system to audit product and service quality. The bundling together of business-unit-specific or cross-Group standards in the areas of quality, occupational health and safety, hazardous goods, emergency management/fire prevention and environmental protection in a single integrated management system (IMS) was concluded in the business units and service centers. This step enables us to improve the quality of our performance and ensure an effective and efficient Group-wide workflow as we continuously optimize our processes and reduce complexity.

FUTURE-ORIENTED FURTHER DEVELOPMENT OF COMMAND AND CONTROL TECHNOLOGY In conjunction with the implementation of the “Technical Speciﬁcations for Inter oper - ability” (TSI) mandated by the EU, we will be introducing the European Train Control System (ETCS) over the long-term on high-speed lines and European freight transport corridors. ETCS replaces previous systems like the Continuous Train Control System (LZB) and the Intermittent Train Control System (PZB). We will equip selected routes with both systems as solutions during the required transition periods. At the core of GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 107 Technology and Procurement

the technical realization is a new interface between the electronic interlockings (ESTW) and the route control centers for LZB and ETCS. During the year under review we expanded pilot operation of ETCS on the Berlin–Leipzig pilot route, which was originally launched in December 2005, to include two further stretches. The total length of the line equipped with ETCS and LZB is currently about 160 km. Within the framework of our ﬁrst European-wide tender for ETCS equipment, contracts were awarded for the Paris–Eastern France–South West Germany (POS) North route in December 2007. POS North is the German section of the high-speed line from Frankfurt to Paris. Upgraded stretches equipped with ETCS allow trains to travel at speeds of up to 200 km/h. During the year under review we began preliminary planning to equip the longest stretch of the Rotterdam–Genoa European Corridor, from Emmerich to Basel, in Germany, with ETCS. Work includes a concept for integrating ETCS into existing opera - tions. This involves a step-by-step implementation of ETCS sections that must guar - antee an uninterrupted high level of efﬁciency of the affected sections of the network. For this reason we determined the technical and operational requirements that have to be met to install ETCS. The equipping of the European corridor will probably be the biggest European ETCS project until 2015.

VEHICLE CONCEPTS FOR USE IN GERMANY AND ABROAD Modern, low-cost and flexibly usable rolling stock give us competitive advantages in regional and long-distance transport, as well as in freight transport. We developed a platform concept “EMUnew” (“ETneu”) to further develop multiple units for local transport. A modular concept lets us respond flexibly to varying customer demands in new procurement offers. Advantages can be realized, in particular, because of the greatest possible standardization of modules and components and because of large-volume offers. Furthermore, the platform concept allows rolling stock to be modified at favorable prices. The tender process for the new train concept was completed during the year under review. Orders were given to two manufacturers for a total of 400 “Lirex” and “Talent 2” vehicles. The vehicles are multisystem-capable for cross-border operations. In mid-2007 we inaugurated service on two new high-speed routes for ICE 3 POS and TGV POS. Our engineers and technicians handled the preliminary work as well as the certification of ICE 3 POS and TGV POS in France and Germany. The main focus here was on integrating the different automatic train control systems and installing magnetic disc brakes in the TGV. 108 DEUTSCHE BAHN GROUP •

During the year under review we awarded a manufacturing consortium a contract to equip 26 series 189 locomotives, with ETCS and concurrently equip them with the Dutch AT B train security system and have them certiﬁed for use in the Netherlands. Fol low - ing the conversion of the locomotives we will be able to run cross-border freight trains between the Rotterdam seaport and the North Rhine-Westphalia industrial region with out stopping to switch locomotives. Furthermore, the diesel ICEs were also converted to international use on the Berlin to Denmark line via Hamburg, as were the electric ICEs with tilting technology for the route to Austria.

ENGINEERING SERVICES PROVIDER WITH A COMPLEX RANGE OF SERVICES With its special expertise, which is unique in Europe, our engineering services provider, DB Systemtechnik, offers DB Group and non-Group customers tailor-made solutions to all railway engineering problems arising at the interface between rolling stock and the infrastructure during actual operations. With its market-oriented service spectrum, DB Systemtechnik makes a significant contribution to its customers’ success and supports the Group’s internationalization with its competitive offers to markets outside of Germany. During the year under review our technical experts handled the certification of the wide-gauge Euro 4000 locomotive, which will be deployed in Spain, on behalf of a customer. Together with the Schweizerische Bundesbahnen (SBB), DB Systemtechnik exam - ined a new generation of the Cisalpino on behalf of a customer. The research program was structured so that test results also showed individual country-specific features. Plans call for the Cisalpino II to be used for rail transport between Switzerland and Italy. In 2007, DB Systemtechnik took over coordination of the complete testing and trial runs program for certification of the Coradia-Lirex train set, which will be deployed in the Augsburg area starting in December 2008.

Procurement

During the year under review we were able to realize signiﬁcant savings in the acquisition of equipment, vehicle spare parts, as well as maintenance and logistical services by means of cross-business-unit procurement and optimization projects. In the next step, among other measures, we centralized the strategic purchase of spare parts into a separate unit. Integrated acquisition teams consisting of technicians, buyers, users, value analysts and logistics experts ensure a comprehensive overview of the acquisition process. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 109 Technology and Procurement

As a result, despite a very tight market, we were able to secure our supply of wheel- set components. This was supported by corresponding global sourcing activities used to develop new suppliers, which will be continued and expanded in 2008. Total procurement during the year under review amounted to € 21.2 billion. Next to the € 10.4 billion spent on freight and shipping services, the naturally largest category of costs as we are in the logistics business, the main focus was once again on the category of industrial products, with a procurement volume of € 3.7 billion, and construc - tion and engineering services, with a procurement volume of € 3.5 billion. Our usage of third-party services declined as procurement volume noted for this category amounted to € 1.6 billion. In the area of cable-and-pipe-bound power and fuel total procurement volume reached € 2.0 billion, which was the same level as in the previous year – despite higher energy prices. More than half of the procurement volume (excluding freight and shipping services), or € 7.2 billion, was allocated to small and mid-sized companies. More than 90 %, or € 2.7 billion, allotted for building purposes went to mid-sized companies. This once again made us one of the biggest investors in Germany during the year under review as we made a significant contribution towards securing jobs. In line with our major capital expenditures, significant orders were placed, in particular, in the infrastructure area as well as for the further modernization of our rolling stock. Among the largest orders placed during the year under review were: • Vehicle spare parts worth € 550 million and vehicles valued at € 968 million. The vehicles include 100 series (BR) 428, 440, 442 and 427 electric multiple units, and 50 BR 648 diesel multiple units for regional transport. We also purchased 134 bi-level cars worth € 180 million for regional transport. We signed contracts for freight transport vehicles totaling € 117 million for 1,200 freight cars (including flat wagons with bogies, automobile transporters and bulk freight cars). • In addition, tenders were put out for construction of several viaducts in 2007, and total projects for about € 120 million were awarded. Within the framework of the German Unification Transport Project (Verkehrsprojekte Deutsche Einheit; VDE) 8.1, from Erfurt to Leipzig, the Ilmtal Bridge railroad overpass, the Truckental Bridge and the Weißenbrunn railway overpass were allocated. Under VDE 8.2 the Scherkondetal Bridge and the Unstruttal Bridge (a two-lane, pre-stressed con crete hollow box bridge, 2,700 m long and with a maximum pillar height of 55 m) were also allocated. • The planned Berlin Brandenburg International Airport (BBI) will have a train station with six platforms, three of which will be located directly under the terminal. The order to build the engineering structures and the track connection from the airport to the rail network was issued in 2007. Total cost will be about € 100 million. The tendering process for the required technical equipment has begun. 110 DEUTSCHE BAHN GROUP •

• Within the framework of the “Package Tender Train Path Building Services” project, a total of 400,000 m in track improvements, 318,000 m in track bed up - grading and 87,000 m of planning improvements as well as the corresponding related work such as deep drainage, peripheral paths and level crossings, as well as the relevant logistical services, were procured for the long-distance and major metropolitan area networks, the regional networks and the South-East Bavaria Railway (SüdostBayernBahn) network. The “Package Tender Train Path Building Services” project is a part of the 2007 track installation program of DB Netz AG, with a total cost of € 1,300 million. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 111 Technology and Procurement Additional Information

ADDITIONAL INFORMATION

REGIONAL RESTRUCTURING ACT AMENDED IN 2007 • ADJUSTMENTS TO PROPERTY ALLOCATIONS WITHIN DB GROUP • OWNER PREPARING DECISION REGARDING PARTIAL PRIVATIZATION OF DB AG • CHANGES IN REGULATORY ENVIRONMENT • EUROPEAN LEGAL STRUCTURES REGARDING EUROPEAN RAIL SECTOR CONTINUED TO EVOLVE • NEW REGULATIONS PASSED FOR LOCAL PUBLIC TRANSPORT • TRANSPORT AGREEMENT WITH BERLIN AND BRANDENBURG LED TO COMPLAINT ABOUT ALLEGED ILLEGAL FINANCIAL AID • COMPANIES IN FREIGHT FORWARDING INDUSTRY UNDER INVESTIGATION

Amendment to the German Regional Restructuring Act is passed

The German Regional Restructuring Act (Regionalisierungsgesetz; RegG) regulates the amounts and allocation of funds for financing of regional transport services. The Federal states primarily tap these resources for ordering and financing local rail passenger transport services. The 2006 Accompanying Budget Act (Haushaltsbegleitgesetz) suspended the legally defined annual upward adjustment of appropriations for regional funding and reduced total funding earmarked for 2007 from € 7.3 billion to € 6.7 billion. During the year under review negotiations between the Federal Government and the states were concluded regarding a second amendment to the German Regional Restructuring Act. The amended version calls for annual increases of 1.5 % to take place again as of 2009 based on an initial figure of € 6.7 billion. In addition, the amendment calls for states to prepare annual accounting statements showing how the funds were used. The next review of the regional funding measures by the Federal Government is planned for 2014 with the results of the review taking effect as of 2015.

Adjustments to property allocations within DB Group

DB AG and the Federal Republic of Germany have agreed that ownership of DB Group’s real estate assets should be transferred proportionately to DB Group’s respective rail transport and rail infrastructure companies, based on their operational usage. Non-com- mercially used real estate will be assigned to DB Netz AG. The allocation of the individual properties, or shares of property, involving a total area of about 211 million square meters, as well as the related rights and obligations ac - cruing to the DB Group companies DB Regio AG, DB Fernverkehr AG, Railion Deutsch- land AG, DB Fahrzeuginstandhaltung GmbH and DB Netz AG was implemented on a regional basis in agreement with the affected companies and with the involvement of the German Railway Fund. The reallocation took effect retroactively as of January 1, 2007, following the conclusion of a divestment and takeover agreement. 112 DEUTSCHE BAHN GROUP •

As agreed with the Federal Government, DB Group will establish the land registry prerequisites to ﬁnalize the allocations within a three-year period. This project will be carried out on a cross-Group basis by DB’s Corporate Real Estate Management department.

Owner’s decision regarding partial privatization of DBAG in preparation

Based on a resolution passed by the German Parliament (Bundestag) on November 24, 2006, the Federal Government and Parliament agreed to allow private investors to invest in DB AG during the current legislative period. The Federal Government is currently studying speciﬁc partial privatization options. Within the framework of these activities, on November 12, 2007 the Coalition Board asked the German Federal Minister of Transport to examine various privatization models. The results of this study will be presented to the Coalition Board. The owner will decide on further action in the spring of 2008.

“2007 Rail Liberalization Index” shows that European rail markets are continuing to open up

Access barriers to Europe’s rail markets are falling and Germany is a leader in opening WWW.DB.DE/LIBERALIS its market to competition. The “2007 Rail Liberalization Index” is proof that markets IERUNGSINDEX in all European countries are opening, however they are doing so at differing speeds. The Index also shows that access conditions for competitors in Germany are exemplary – in both the passenger transport and freight transport sectors. The index was prepared by IBM Global Business Services in collaboration with Professor Christian Kirchner, of Humboldt University, Berlin. The Index is the ﬁrst study that compares and evaluates the liberalization levels in 27 countries – 25 EU member states plus Switzerland and Norway. Another new aspect of the Index is that it examined the effects of the complete opening of the European rail freight transport markets as of January 1, 2007. The authors concluded that competition is possible in each of the countries reviewed. However, they found that not all of the EU requirements have been met in a few cases. The extensive analysis also presents two separate indices for the ﬁrst time: for freight transport and passenger transport in the European rail market. The study showed that there are greater differences in the access conditions within passenger transport than in freight transport. Germany was among the highest of the 26 rated countries in terms of the liberalization level in passenger transport. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 113 Additional Information

Regulation of the rail sector in Germany

Pursuant to amendments made to the third amended version of the German General Railways Act (Allgemeines Eisenbahngesetz; AEG), as of January 1, 2006 responsibility for regulating access to the railroad infrastructure was transferred from the Federal Railways Agency (Eisenbahn-Bundesamt; EBA) to the Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railroads (Bundesnetzagentur für Elektrizität, Gas, Telekommunikation, Post und Eisenbahnen). The Federal Network Agency is required to submit a report every schedule period to the Federal Govern- ment that presents their activities during the most recent schedule period as well as the situation and developments within their area of responsibility. The Federal Railways Agency will continue to monitor the observance of guidelines regarding the unbundling of infrastructure and transport services.

HIGHER ADMINISTRATIVE COURT IN MÜNSTER CONFIRMED CENTRAL PORTIONS OF SNB 2008 On November 20, 2006 the Federal Network Agency announced its objections to some of the items contained in the 2008 Conditions for the Usage of the Rail Network (Schie- nennetz-Benutzungsbedingungen; SNB) and instructed DB Netz AG to alter SNB 2008 accordingly. The objections included the structure of the incentive system used for the track usage charges as well as the exclusion of freight transports on the new Nuremberg– Ingolstadt–Munich line and the North–South connection in Berlin. On March 26, 2007 the Higher Administrative Court in Münster granted the motion submitted by DB Netz AG to postpone implementation of the requested changes.

FEDERAL NETWORK AGENCY CONTESTS CHANGES TO DB NETZ AG’S USAGE CONDITIONS On November 12, 2007 the Federal Network Agency resubmitted objections to some of the changes made to the Conditions for Usage of the Rail Network (Schienennetz-Benutzungs- bedingungen; SNB), and Conditions for Usage of the Service Facilities (Nutzungs be - dingungen für Serviceeinrichtungen; NBS) prepared by DB Netz AG for the 2009 schedule period. For the ﬁrst time the Agency also evaluated parts of the access-relevant sections of DB AG’s technical-operational rules and regulations and reserved the right to conduct a separate review of this material. The proceedings were still open as of the date of this report. Other open proceedings initiated by the Federal Network Agency relate to objections to usage conditions applying to the Deutsche Umschlaggesellschaft Schiene-Strasse (DUSS) mbH and the Usedomer Bäderbahn GmbH (UBB). In the interim incontestable verdicts have been handed down by the Higher Administrative Court pertaining to provisional legal protection for the NBS by DUSS, as well as SNB and NBS as prepared by DB Netz AG. In its decisions the Court reinforced the right of the rail infrastructure companies to structure their usage conditions and at the same time clearly deﬁned ex- ante the limits of the regulatory agency’s authority. 114 DEUTSCHE BAHN GROUP •

FEDERAL NETWORK AGENCY REVIEWED STATION PRICE SYSTEM During the year under review the Federal Network Agency submitted numerous requests for information to DB Station & Service AG, thereby initiating an in-depth review of the station pricing system. As of the time this report was prepared the Agency was still engaged in evaluating the requested materials.

European legal framework in rail sector continued to evolve

During 2007 the legal framework for the European rail sector made further advances in important areas with the passage of the third railway package and the new EU directive concerning public passenger transport services. The impact of the new EU legal acts, which have a far-reaching effect on European railways, is generally seen as favorable. The key subject areas are brieﬂy presented as follows.

LIBERALIZATION OF CROSS-BORDER RAIL PASSENGER TRANSPORT The directive obliges European Union (EU) member states to permit cross-border rail passenger transports as of January 1, 2010. This means that, for the first time, railway companies will be allowed to independently operate cross-border rail passenger transport services outside of cooperation agreements. In contrast to the rail freight transport market, which has been open to competition across all of Europe since January 1, 2007, the directive does not foresee an opening of national markets for rail passenger transport. This means that – to the extent that other national regulations do not exist – foreign railways cannot offer routes solely within the national borders of another European country. This also means that, even after 2010, the opening of Europe’s rail markets will continue to lag behind the liberalization level that has long been achieved in Germany. A target date for the liberalization of national routes was not set. Plans only call for the EU Commission to submit a report by the end of 2012 that will, among other issues, address a possible further opening of the rail passenger transport markets. Starting in 2010 railway companies will be allowed to sell tickets permitting passengers to embark and disembark from their trains on national stretches within other countries on cross-border routes. Member states may, however, restrict this in order to protect routes of social and societal relevance to the local economy. The directive thus includes an option for member states to limit access to their local markets as well as another option to impose a fee on cross-border routes, which will be used to finance socially and socie- tally relevant routes. However, when viewed as a whole, the limitations should not pose a danger to the profitability of cross-border passenger transport services. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 115 Additional Information

PASSENGER RIGHTS IN RAIL TRANSPORT SECTOR The new EU Passenger Rights Directive on Rail Transport will take effect across all of Europe on December 3, 2009. It is, however, foreseen that member states may exclude strictly national routes from a large portion of the directive’s requirements until 2024. They may also exclude their regional and urban transport for an unlimited period. The directive primarily regulates obligations of railway companies to provide information; it defines the liability of railway companies in the event of delays, and vis-à-vis handicapped passengers. In the future, passengers will be entitled to a 25 % refund of the ticket price after a delay of one hour and 50 % after a delay of two hours. Even without the new rules set out by the new EU directive, our customers have long benefited from extensive passenger rights. Many aspects of the European Passenger Rights Directive establish an objective balance between the interests of passengers and the commercial interests of the railway companies, which are engaged in sharp intermodal competition with air and car travel. In order to achieve a uniform standard of protection for passengers within Europe, and to avoid placing a one-sided burden on individual railway companies in an opening European market, member states should refrain from tightening the EU directive by adding national rules to it. A critical aspect for rail transport is the fact that the requirements of the Passenger Rights Directive go far beyond the comparable requirements for air transport. The European Air Passenger Directive, for example, only foresees payment for damages if a flight is cancelled and not if it is delayed.

A EUROPEAN TRAIN DRIVER LICENSE The EU directive for the certification of train drivers established uniform minimum requirements for the certification of every train driver in Europe, goals for train driver training programs, as well as the testing and certification procedures. The mutual recognition of the corresponding drivers licenses is especially intended to ease handling of international routes. During the first phase, all international train drivers should obtain an EU driver’s license by December 2010. This does, however, require extensive preparatory work by the European Rail Agency, the Member State and involved rail companies, which should take place on a timely coordinated basis. The directive is to be adopted as national law by the Member States by December 4, 2009, although it does intentionally provide Member States with a broader scope for structuring national laws. 116 DEUTSCHE BAHN GROUP •

New local public passenger transport regulation takes effect

The new EU Regulation 1370/2007 of the European Parliament and of the Council on public passenger transport services by rail and by road was published in the Official Journal of the European Union on December 3, 2007, and will become effective on December 3, 2009. The compromise reached after years of negotiations at the European level contains generally appropriate solutions and contributes to furthering legal safety in the field of local public passenger transport services. The new regulation covers rules pertaining to the length of contracts and to mandatory provisions that must be included in transport contracts as well as rules regarding related tender processes. The regulation allows the responsible public authorities the option of choosing between awarding transport contracts directly or by a more formal process. In cases of direct awards the term of the awarded contract will be shorter, and more stringent transparency requirements must be observed. Contracts awarded to internal operators – operators under the control of the responsible authorities – may continue to be awarded directly. In this case, however, the internal operator’s range of activities will, as a matter of principle, be limited to the territory of the granting authority. On a positive note, it should be recog - nized that the new regulation basically confirms the right of continuance for transport contracts concluded prior to the date the new EU regulation took effect.

Dispute over Berlin and Brandenburg transport contract compensation

In August 2003 Connex Regiobahn GmbH (Connex) submitted a complaint to the European Commission wherein they alleged that certain payments made constituted illegal state aid. The speciﬁc cause and subject of the proceedings is a concluded transport contract between DB Regio AG and the states of Brandenburg and Berlin. Connex alleges that the contractually agreed payments received by DB Regio AG are state aid and as such must be reported per respective European legal requirements because the contract was awarded directly without a tender procedure. In a letter dated February 14, 2005 the European Commission advised the Federal Republic of Germany that they had initiated a preliminary investigation into this complaint pursuant to Article 4 of EU Regulation 659/1999. Based on a ruling passed on October 23, 2007 the commission initiated a formal investigation and has requested the Federal Republic of Germany to respond to the allegations. The initiation of a formal investi - gation is an administrative step and does not anticipate the results of the Commission’s investigation in any way. If the results of the investigation were negative, the European Commission would request the Federal Republic of Germany to demand a refund of the alleged overpayment related to compensation arising from the transport contract, plus accrued interest. We are of the opinion that the transport contract was in accordance with laws pertaining to state aid and did not contain any excess compensation. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 117 Additional Information

Companies in the freight forwarding industry under investigation

The European Commission, the US Department of Justice as well as anti-trust authorities in Canada, South Africa, New Zealand and Switzerland have launched investigations of the freight forwarding industry for allegedly conspiring to limit competition in the fields of land, ocean and air freight. In connection with these investigations, extensive house searches of numerous freight forwarding companies and associations took place on October 11, 2007, including searches of Schenker AG’s business premises and numerous national Schenker companies. Furthermore, various requests for information from responsible local authorities were directed to individual local subsidiaries of Schenker and BAX Global. DB AG is supporting the responsible cartel authorities in the execution of their duties. In response to the official investigation, the facts of the case are being comprehensively and thoroughly investigated and will be resolved within the Group. The internal clarification of the facts is currently taking place. It is anticipated that the investigations by the cartel authorities will not be completed before the end of 2009. DB AG conducts regular training courses on anti-trust issues. Moreover, compliance- related training continues to be intensified. 118 DEUTSCHE BAHN GROUP •

RISK MANAGEMENT

INTEGRATED RISK MANAGEMENT ENSURES TRANSPARENCY • ACTIVE RISK MANAGEMENT • RISK PORTFOLIO FREE OF EXISTENCE-THREATENING RISKS

Our business activities involve opportunities as well as risks. Our business policy is simultaneously directed at seizing opportunities and actively controlling identiﬁed risks through our risk management system. The necessary information for this is prepared in our integrated risk management system, which conforms to the legal requirements of the German Control and Transparency Act in the Corporate Sector (Gesetz zur Kontrolle und Transparenz im Unternehmensbereich; KonTraG). This system is con - tinuously further developed.

Opportunities arising from internal measures or improved market and business environment

To secure our corporate strategy of profit-based growth, we have implemented comprehensive packages of measures as part of Group-wide or business-unit-specific programs, which we anticipate will ensure or improve our performance quality, efficiency and cost structures. Here we also see opportunities for further organic growth, which are likely to be reflected in further improvements in our results and key financial ratios. Despite the high level of competition in our markets, we also recognize market- related opportunities in being able to actively shape foreseeable market consolidations from leading competitive positions. In doing so, we want to exploit the possibilities offered by the process of consolidation and globalization currently taking place in the logistics industry. Furthermore, we have positioned ourselves to be extremely well prepared for an environment of opening markets in European rail transport, so that we are able to exploit any opportunities that arise. In this context we also refer to state- MORE DETAILS ON ments made in the chapter “Strategy”. PAGE 88 FF. The general conditions of the relevant macroeconomic environment could develop by and large more favorably than anticipated. The resulting variations would have a positive impact on DB Group and its business units. Corresponding estimates for the MORE DETAILS ON 2008 financial year are provided in the chapter “Outlook.” PAGE 127 FF.

Integrated risk management system

The principles of risk policy are set by Group management and implemented at DB AG and its subsidiaries. Within the framework of our early risk detection system, quarterly reports are submitted to DB AG’s Management Board and Supervisory Board. Risks that arise suddenly or negative developments must be reported immediately. Planned acquisitions are subject to additional special monitoring. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 119 Risk Management

Within DB Group’s risk management system all risks are shown in a risk portfolio as well as in a detailed listing, taking materiality thresholds into account. The risks mentioned in the risk report are categorized and classified based on the probability of occurrence. In addition to the possible consequences, the analysis also contains approaches to and the costs of countermeasures. In terms of organization, Group controlling is the risk management coordination center within DB Group. In the context of Group financing, which is strictly oriented to our operating business, the Group Treasury bears responsibility for the limitation and monitoring of the resultant credit, market price and liquidity risks. By consolidating the related transactions (money market, securities, foreign exchange or derivative transactions) at DB AG level, the associated risks are centrally controlled and limited. Group Treasury is organized to conform with the “Minimum Requirements for Risk Management” (MaRisk) formulated for financial institutions and, applying the criteria derived from these guidelines, fulfils all requirements of the KonTraG.

Active risk management within DB Group

Our business actions are aligned with active risk management. In particular, the risks for DB Group include:

MARKET RISKS Market risks include, among other things, the development of the economy and the partially cyclical changes in demand, as well as general market trends. A key inﬂuencer of passenger transport is the overall development of major eco - nomic factors, such as private consumption levels and the level of employment. Further- more, we are engaged in intensive intermodal competition where motorized private transport is still the dominant competitor. In order to assert ourselves in this market environment – i.e. to retain existing customers and to gain new ones – we introduced extensive measures and have already implemented some of them. It is especially important to us that we are able to compensate for the customers we lost due to the labor dispute. We are continuously improving our service performance in order to strengthen our competitive position. On our customer offer side, we optimize the structure of our scheduled services as part of our regular schedule updates. We were able to substantially cut travel times on many routes as we started operation of new rail infrastructure. We use numerous special offers and promotions to improve our customers’ perception of our prices. The further development of punctuality, which is subject to strict monitoring, continues to be quite important. 120 DEUTSCHE BAHN GROUP •

Intensive intramodal competition exists for long-term service contracts in the regional and urban transport sector. A key influencing factor in the development of this market is the level of regionalization funds provided by the Federal Government over the medium term to states. These funds form the basis for ordering routes from transport companies by the individual states. Reductions in this area can have a serious impact on our activities. Among other measures, we work to offset these reductions by increasing our farebox revenues. We have observed the increasing importance of the subsidiaries of major international corporations within the structure of market participants. A risk of tender losses exists here, especially because some companies are prepared to pay market entry premiums, or base their bids on ambitious assumptions. However, we can see that ordering organizations are becoming increasingly aware of the negative consequences involved here. In addition, we are continuously optimizing our tender management and cost structures so we can submit attractive bids that make economic sense. Additional burdens in the area of personnel costs, which only affect our subsidiary companies, can make it more difficult for us to compete successfully. In rail freight transport the most critical factor is freight demand for consumer goods, coal, iron and steel, oil, chemical products and construction materials. These, on the one hand, are subject to cyclical fluctuations. On the other hand, we must consider structural changes in the production structures of our customers, who are frequently involved in global competition. In addition to the increasing intensity of intramodal competition, particularly in the block train sector, there is also considerable intermodal competitive pressure. This situation is being aggravated by the increasing market sig - nificance of low-cost truck fleets from the new EU member states. In an isolated analysis of rail freight transport we can see market risks arising from the necessity to adjust to the increasing intensity of intermodal competition. We react to this with intensive measures to further improve our efficiency and reduce costs. Furthermore, we are optimizing our range of rail-related services and integrating rail freight transport into a comprehensive range of logistics services. The dynamic consolidation processes within the logistics industry and further increases in customer demands particularly impact our activities in the logistics segment. From a position of competitive strength we view the coming consolidation processes as an opportunity to not only defend our market positions, but also to strengthen them. The continued expansion of our networks via acquisitions, together with the opening of logistics centers, are at the core of our activities. Due to the special nature of our business, the Schenker business unit is subject to risks arising from the submission of clearance declarations to airlines, which could lead to serious consequences in individual cases. Over the past few years the rules for granting customs guarantees have been continuously revised and improved. In addition, Schenker GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 121 Risk Management

attaches great importance to the strict observance of country-specific safety regulations governing the conveyance of air and sea freight. Furthermore, country-related practices in the clearance of shipments must also be taken into account. Across the entire DB Group we combat risks arising from changing customer demand or shifts in traffic flows with intensive market observation and by continuously upgrading our portfolio. In regard to market risks related to changing legal conditions at domestic or international levels, we actively submit our position into preliminary consultations and discussions. The development of the energy markets impacts on our activities. Depending on the state of the markets, cost increases can only be passed on to customers to a limited ex tent. We counter this risk by employing suitable derivative financial instruments. MORE DETAILS ON PAGE 181 FF.

OPERATING RISKS In the rail transport sector DB Group operates a technologically complex, networked production system. Risks arise for our rail activities due to service interruptions, in particular because of the resulting decline in punctuality. A significant reduction in punctuality in long-distance transport diminishes the perceived quality of the service and can lead to a loss of customers. In addition, we have obligated ourselves to compensate customers if they encounter delays that exceed a certain time. In the future this issue will be affected by tighter restrictions arising from new pan-European regulations. The specific structure of the new conditions at national level is still open, and MORE DETAILS ON we are actively engaged in the related discussions to avoid any adverse effects on the PAGE 115 rail mode of transport. Within the regional transport business there is a risk of fines by the respective contracting organization in the event of train cancellations or insufficient levels of on-time operation. Here again, there is a possibility in the future of compensatory payments based on legal provisions. In rail freight transport reliable punctuality of shipments is an important criterion for selecting the mode of transport. In addition, irregularities may occur during the conduct of transport operations, such as violations of customs regulations, and theft. We combat these risks by employing qualified customs coordinators, as well as a special system that immediately notifies us when tax assessments are received. We generally counter the risk of service interruptions with systematic maintenance and the use of qualified staff, coupled with continuous quality assurance and the im - provement of our processes. The nature of the rail business as an open system, however, means that we have limited influence on certain factors that have a potentially negative impact on our flow of operations. In this case, we strive to limit the possible consequences. 122 DEUTSCHE BAHN GROUP •

We maintain an intensive quality dialog with the respective suppliers and business partners because the quality of our own efforts greatly depends on the reliability of the means of production employed, services purchased and the performance quality of our partners.

PROJECT RISKS The modernization of the overall rail system involves high amounts of capital expenditures as well as a large number of highly complex projects. Changes in the legal framework, delays in implementation or necessary adjustments during the frequent multi- year project terms can result in project risks that have a cross-business unit impact due to the networked production structures. We take such risks into account by intensively monitoring our projects. This particularly applies to our major projects.

INFRASTRUCTURE FINANCING A key element of the German Rail Reform is the Federal Government’s constitutional obligation to finance the infrastructure. The crucial elements are not only a sufficient amount of resources, but also the predictability of future resources. Overall, we strive for a long-term, sustainable, and modern infrastructure partnership with the Federal Government that accommodates both our business interests as the owner and operator of the infrastructure – which is available to third parties on a non-discriminatory basis – and the Federal Government’s constitutional obligation to ensure the rail infrastructure. In addition, the implementation processes should be significantly streamlined. To this end, we want to commit ourselves to maintaining the high quality of our existing network infrastructure.

FINANCIAL RISKS We counter risks associated with interest, foreign exchange and energy prices from operational business with, among other things, original and derivative ﬁnancial instruments. These instruments are explained in the Notes.

LEGAL AND CONTRACTUAL RISKS Legal risks may arise, for instance, in the form of claims for damages and from legal disputes. These frequently arise from construction projects and real estate transactions. Provisions are made for legal and contractual risks after estimating the respective probability of occurrence. The actual utilization of these provisions depends on whether the risks materialize to the extent as set forth in our current estimates. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 123 Risk Management

PERSONNEL RISKS Our employees and their skills are of key importance for the future success of DB Group. Our remuneration system and personnel development programs and measures are aimed at enhancing the loyalty of our employees and motivating them to turn in top performance. Unwanted staff departures in DB Group are at a consistently low level. This, on the one hand, reflects our efforts to enhance the commitment and iden tification of employees with the Group. On the other hand, it shows our attractiveness as an employer. Furthermore, we are faced with increasing competition for highly qualified specialists and executives. Among the measures we are taking, we are meeting this challenge by maintaining close contacts to universities and through our recruiting mea - sures. During the processes to integrate newly acquired companies we concentrate our efforts on raising the loyalty of employees in key positions. Our personnel costs in comparison to those of our competitors are of decisive importance for us in order to assert ourselves in our competitive environment. Additional one-sided burdens in this area, for example wage agreements that exceed our competitors’ levels, worsen our competitive position.

IT RISKS Insufﬁcient ITmanagement can lead to serious interruptions of operations. We employ a wide range of methods and means to minimize these risks. Ongoing system architecture monitoring and regular renewal of hardware platforms ensure that our information technology always optimally meets changing business demands and conforms to the latest state of technology. High availability in IToperations is guaranteed by distributed and redundant systems for operations and data backup, by means of a fail-safe network coupling, together with partly outsourced tape backup and separate administrations. This safeguards crit - ical business processes and IT processes, and prevents serious breakdowns. Our wide area network (WA N ) is designed redundantly wherever required by security and business continuity.

GENERAL ENVIRONMENTAL RISKS Our political, legal and social environment is subject to ongoing change. Sufﬁcient planning safety for our future Group activities requires stable overall conditions. We strive to inﬂuence these conditions positively, and eliminate existing disadvantages through open dialog. Among the disadvantages facing rail transport are one-sided burdens arising from tax disadvantages as well as making payments to compensate for delays. 124 DEUTSCHE BAHN GROUP •

Risk portfolio free of existence-threatening risks

During the year under review, as in the previous year, the main areas of risk were generated by the high project volume in the infrastructure sector, as well as the intensive level of competition in project- and market-related risks. Regular in-depth analyses are carried out for this purpose. Operational countermeasures included extensive business-unit-specific, and Group-wide, efficiency and rationalization programs. In addition, we are continuing to systematically develop our offers in the business units. To hedge against unavoidable risks, we also take out insurance policies to limit the effects of possible financial consequences from damage claims and liability risks on DB Group. Based on our current assessment of risks, countermeasures, hedges and provisions, no risks are discernible that would threaten the existence of DB Group, now or in the foreseeable future. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 125 Risk Management Events After the Balance Sheet Date

EVENTS AFTER THE BALANCE SHEET DATE

ENTRY INTO BRITISH RAIL PASSENGER TRANSPORT • TRAIN DRIVER WAGE AGREEMENT REACHED WITH GDL

Deutsche Bahn enters British rail passenger transport

DB AG will acquire Laing Rail Ltd. from John Laing Plc. The purchase contract was signed on January 18, 2008. Subject to the required approvals from the authorities and boards, DB AG will acquire Laing Rail and 100 % of its subsidiary, Chiltern Railways Ltd. (Chiltern), and 50 % of two joint ventures: London Overground Rail Operations Ltd. and Wrexham, Shropshire and Marylebone Railways Ltd. Chiltern is the fastest growing rail transport company in the UK. On behalf of the British Ministry of Transport, it is primarily engaged in the operation of commuter trains between London and Birmingham as well as between London and Aylesbury. This acquisition means that we will be operating substantial rail passenger transports outside of Germany for the first time. At the same time this step significantly reinforces our position in the European market while laying the foundation for future growth. Once the transaction has been finalized all of the acquired activities will become part of our Regional Transport business unit.

Train driver wage agreement reached with GDL

Wage negotiations between DB AG and the German Train Drivers’ Union (GDL) were concluded at the end of January. It is foreseen that the wage agreement with the GDL will take effect on March 1, 2008. The terms of the wage agreement with the GDL call for a one-time payment of € 800 for the period covering July 1, 2007 to February 29, 2008, an 8 % increase in pay starting in March 2008 and an additional increase of 3 % starting as of September 1, 2008. In addition, a new remuneration structure for train drivers will be introduced as of March 2008. Moreover, the number of weekly hours worked by train drivers will be reduced by one hour to 40 hours starting February 1, 2009. The contract is effective retroactively to July 1, 2007 and ends on January 31, 2009. A separate wage agreement establishing long-term autonomy on the one hand and securing that there will be no inconsistency and conﬂicts on the other hand is the pre - requisite for the train driver wage settlement to become effective and binding. Further - more, all three rail unions have to conclude a cooperation agreement deﬁning how they will collaborate during future wage negotiations. 126 DEUTSCHE BAHN GROUP •

Acquisition of WBN Waggonbau Niesky

In January 2008 our bid was accepted for acquiring all of the shares of WBNWaggonbau Niesky GmbH, a maker of freight cars, from its owners. The insolvent company, which is based in Niesky near Görlitz, Germany, had ﬁled for bankruptcy in October 2007. Bankruptcy proceedings were opened at the start of 2008. WBNWaggonbau Niesky makes a wide range of freight cars as well as components for freight cars. The Saxony-based company employs 253 people, making it one of the biggest employers in the region. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 127 Events After the Balance Sheet Date Outlook

OUTLOOK

ECONOMIC UPSWING TO CONTINUE AT WEAKER PACE • REVENUES AND PROFITS EXPECTED TO EXPAND • FAVORABLE DEVELOPMENT FORECAST TO CONTINUE IN 2009 FINANCIAL YEAR

Economic outlook

Based on estimates available from economic research institutes at the time this report was prepared, it is anticipated that overall economic conditions in Germany will continue to be favorable in 2008, albeit weaker. Forecasts call for economic development in Germany to grow in line with expectations foreseen for the world’s industrialized nations. We expect that growth will be notably stronger in the emerging markets. The following estimates regarding economic development in 2008 are based on the assumption that overall global political developments will remain stable. Although the pace of global economic growth may diminish slightly, it will still remain strong. It is anticipated that overall economic growth in the USA in 2008 will expand at a slightly weaker rate than the tepid growth recorded in 2007. Japan’s economy is also expected to grow at a slower rate. The pace of expansion in China will decelerate somewhat, due to weaker foreign demand and rising interest rates. The rate of economic growth in the remaining East Asian countries is expected to ease slightly due to weaker global economic conditions, although domestic demand will remain robust. Economic expansion will continue within the Eurozone, however its pace will decelerate due to the weakening expansion of the global economy and the strong euro. We estimate that the growth rate of real GDP in 2008 will decline to about 2 %. The upswing in capital expenditures is expected to slow noticeably. On the other hand, private consumption is likely to grow at a relatively robust pace. Disposable real income levels will rise appreciably driven by rising employment and higher wage agreements. Growth with be restrained by the faster pace of inflation. We anticipate that the collective GDP of the new EU member states in Eastern and Central Europe will continue to be signifi - cantly higher than average growth in the EU, although the pace of growth – due primarily to an economic slowdown in the Eurozone – could slow a bit. Current estimates call for economic conditions to continue improving in Germany in 2008, although at a slower pace. Average annual growth of German GDP will advance by about 1.5 %. Following an unimpressive 2007, the major driver in 2008 will be consumer spending supported by rising employment, higher real income levels and consumers’ increasing willingness to go out and shop. In contrast, almost none of the other sectors of the economy will contribute to growth. Capital expenditures for plant, equipment and construction will expand at a weaker pace than in the previous year. Exports will rise at a slightly lower rate as the global economy cools slightly. In contrast, imports will grow at a faster pace reflecting rising domestic demand in the consumer goods sector. We anticipate that the rate of inflation will remain at the previous year’s level in 2008. 128 DEUTSCHE BAHN GROUP •

Uncertainties that may influence the forecasts made above include the amount of time until the current turbulence in the financial markets subsides, as we could see declines in both exports and capital spending levels if the disruptions continue longer than currently estimated. Furthermore, the revival of private consumption could almost come to a halt if consumer confidence in the economy is shaken.

Anticipated developments in the relevant markets

In 2008 economic conditions influencing the passenger transport and freight transport segments will develop differently in Germany as the pace of growth noted for foreign trade, spending on plant and equipment, and thus production levels of the manufacturing sector, in particular, will decline. In contrast, conditions in the labor market will improve further as will real income levels and private consumption. The sharp increases in fuel prices seen in the previous two years will level off. Against this backdrop we anticipate that the passenger transport market will grow slightly. Private motorized transport will benefit from the ongoing recovery in the labor market, and rising real income levels will be the primary factor driving total market de - velopment. Following two strong years of growth, we believe that inner-German air travel is likely to weaken and level off at a moderate rate of growth. In contrast to 2007, we anticipate that the rail transport segment will see a sharp increase in its transport performance in 2008. Although the favorable effects on the German freight transport market stemming from good economic conditions will slacken in 2008, they will, however, remain bene - ficial on an overall basis. Growth rates in foreign trade will not be as strong as the figures recorded in 2007. The pace of growth of production in the manufacturing industry is expected to remain more dynamic than overall economic growth in Germany. In contrast, following the strong rates of growth noted in the previous two years for crude steel production, which is especially important for the rail freight transport segment, we do not believe that we will see further gains in 2008. In light of this situation we expect that freight transport in Germany will grow at a weaker pace than noted in 2007. We further anticipate that sharp hikes in fuel, energy and personnel costs will lead to notable in - creases in transport prices in 2008, despite the unchanged high level of intense com - petition. We believe that the global transport and logistics markets will also post strong growth in 2008 driven again by trade on routes from Asia to Europe and North America. In addition, volume gains will be supported by rapidly growing transport volumes within Asia. The land transport market in Europe – especially in Eastern Europe – will continue to grow. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 129 Outlook

Anticipated development of the procurement markets

We do not expect to experience any fundamental bottlenecks in procurement during the current financial year. The further development of energy prices will play a decisive role. In general, we expect to see further increases in prices for energy, commodities, and construction. Despite these developments, we do not foresee major price fluctuations over the short-term in our relevant procurement markets. However, significant supplier and service provider industries are undergoing or facing major structural changes. This applies in particular to suppliers of rolling stock, command and control technology, and the construction industry. Structural changes in certain industries could lead to less favorable procurement conditions in the medium term, which would be mainly reflected in prices. We do not yet anticipate that we will experience any significant consequences in 2008 arising from the consolidation trend observed among freight forwarders in the ocean and air freight segments.

ENERGY MARKETS NOT SHOWING ANY FUNDAMENTAL SIGNS OF EASING In the coming years the growing global demand for energy will lead to very tense and highly volatile conditions in both the primary energy and the electricity markets. The price of coal is expected to remain at an unchanged high level in 2008 as demand increases yet again, making it unlikely that we will see a sustainable decline in the price level. A further increase in prices for CO2 certificates is likely to put further pressure on the price of coal-generated electricity, which will also influence prices for electricity. In contrast, spot market prices for natural gas are mainly influenced by local condi - tions. In light of unbroken high demand and uncertainties in the market, we currently see no reason to anticipate a sustainable decline in the natural gas prices. International demand for oil and refinery products will remain at their current record levels. Moreover, we do not foresee a sustainable increase in refinery capacities taking place, as additional capacities going onstream in Asia are immediately absorbed by demand in the region. Forward prices on the European Energy Exchange (EEX) in Germany indicate that prices will continue to rise steadily in the coming years. The reasons for this are devel - opments in the primary energy markets, pending new investments in power plant capaci - ties, further rising prices for CO2 emissions certificates, as well as significantly higher trading prices in neighboring European countries. At the same time, we anticipate that prices will remain highly volatile, which creates opportunities for short-term drops in prices. 130 DEUTSCHE BAHN GROUP •

Anticipated development of important business conditions

No signiﬁcant impact is expected to arise from discussions about, or pending changes in, key business conditions in the 2008 ﬁnancial year. Compared to the rest of Europe, Germany has already demonstrably taken a leading position today in regard to liberalization with its open market access to the domestic rail infrastructure that has been in place since 1994. We therefore welcome all progress towards a comprehensive conver- gence based on standards that have already been achieved nationally. The pan-European liberalization of market access is a major prerequisite for strengthening the position of rail in intermodal competition for long-range international transport. The harmoniza- tion of competitive conditions for the different modes of transport remains a further task for transport policy. We will continue our involvement on behalf of the rail transport sector in all policy debates regarding key transport issues.

Anticipated business development

Anticipated development in the 2008 financial year € million 2007 2008 Revenues – comparable 31,066 EBIT 2,895 EBIT before special items 2,370 Gross capital expenditures 6,320 ROCE 8.7%

Once again, our primary business goal for the 2008 ﬁnancial year is to achieve a further improvement in our key ﬁgures: ROCE, redemption coverage and gearing.

DB GROUP Based on current estimates, we anticipate that revenues will rise further by about 5 % on a comparable basis during the current financial year. This figure does not include, in particular, effects related to acquisitions – EWS, Spain-Tir and Transfesa – made during the year under review. We anticipate that the further favorable development of our revenues will also be reflected in the development of our EBIT figure. Due to the extensive special items noted during the year under review we anticipate that the EBIT figure for the 2008 financial year will not attain the figure posted for the 2007 financial year. Without special items, we anticipate that the improvement in our earnings will not be as strong in the 2008 financial year as they were in previous years. We anticipate that negative impacts here will be caused in particular by higher costs for material and personnel, as well as the planned reduction of regionalization funds, coupled with rising levels of competition, especially in the areas of regional transport, rail freight transport as well as international transport and logistics. Due to the currently anticipated further increase in EBIT before special items, we expect to see an additional improvement in our ROCE figure. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 131 Outlook

We will continue our modernization activities at an unbroken high level of capital expenditures, which will be slightly higher than in the year under review.

Business units

Anticipated development in the 2008 financial year Revenues EBIT Long-Distance Transport Regional Transport Urban Transport Schenker Rail Freight Track Infrastructure Passenger Stations Services Energy

LONG-DISTANCE TRANSPORT We anticipate seeing a continuation of the favorable trends noted in the previous ﬁnancial years within the Long-Distance Transport business unit. However, compensating for the negative effects of the wage conﬂict will be a core challenge facing us in 2008. We anticipate that we record gains in transport performance, revenues and earnings. We expect that these gains will be driven by the further expansion and improvement of our offers. Furthermore, we will also continue our special offer measures.

REGIONAL TRANSPORT We expect development of the Regional Transport business unit to post a slight decline in 2008 based on transport performance and revenues. The increase in farebox revenues will be unable to fully offset declines related to lower levels of ordered services and lost routes. Due to the negative special item noted in the year under review, and further efﬁciency gains achieved, we expect our EBIT to increase once again in the 2008 ﬁnan- cial year.

URBAN TRANSPORT We expect that overall development of the Urban Transport business unit will remain at the previous year’s level. Revenues are anticipated to further rise slightly and be driven by effects including better performance by the S-Bahn (metro) Hamburg. On the earnings side, we expect EBIT to remain at the level noted in 2007.

SCHENKER Based on our forecasts, the Schenker business unit will also continue to grow during the 2008 ﬁnancial year, and once more make the biggest contribution towards the growth of DB Group’s revenues. We anticipate that the European land transport and air/ocean 132 DEUTSCHE BAHN GROUP •

freight businesses, as well as the contract logistics operations will contribute to higher performance and revenue ﬁgures. This development is also expected to have a favorable inﬂuence on EBIT. Competitive pressures will, however, remain unchanged.

RAIL FREIGHT Following unbroken growth noted during the year under review, we believe development in the Rail Freight Transport business unit will stabilize, so that revenues and transport performance, in particular, will increase again on a comparable level. Combined transport will remain the main driver of growth. Due to the non-recurrence of the negative special item noted during the year under review, and the ongoing favorable development of performance, we expect our EBIT ﬁgure to rise despite higher costs and unrelent - ingly high competitive pressures.

TRACK INFRASTRUCTURE External revenues in the Track Infrastructure business unit will also rise during the 2008 ﬁnancial year as non-Group railways once again further increase their usage of our rail infrastructure. Furthermore, we also anticipate favorable effects to be generated from rising demand, especially within the rail freight transport sector. However, the cut in Federal funding for regional transport services will dampen results. EBIT will be favorably inﬂuenced by increased revenues as well as by further rationalization measures.

PASSENGER STATIONS We anticipate that external revenues generated by the Passenger Stations business unit will be above the level noted during the year under review and be driven by rising demand on the part of non-Group railways and pricing measures. Results are expected to be restrained by lower rental revenues than in the same year-ago period due to the sale of passenger reception buildings in 2007. We expect to see proﬁts rise slightly due to the continuation of our cost management efforts.

SERVICES Due to the further expansion of non-Group business activities, we expect to see the Services business unit’s external revenues climb further. Our profits will be dampened as we pass on the benefits of increased efficiency to customers in the form of lower prices, which in turn is anticipated to lead to a lower EBIT figure.

ENERGY Revenue development trends noted during the year under review are also anticipated to continue in the 2008 ﬁnancial year, allowing external revenues to surpass the previous year’s level. The level of proﬁts noted in the previous year is not likely to be attained in 2008. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 133 Outlook

Expected financial situation

We will also continue our capital expenditures program at a high level in the 2008 financial year. The Track Infrastructure business unit will once again be the focal point of these activities. In tandem with the further development of Federal funding for infrastructure investments, the volume of capital expenditures made by the Track Infra- structure business unit should initially stabilize. We anticipate that the entire capital expenditures program – taking into full consideration third-party financing of infra - structure needs – will be completely structured on the basis of internal financing in the 2008 financial year. Based on our forecasts for the 2008 financial year our internal finan c - ing resources will more than fully cover our operational financial needs once again, and we will also be able to further reduce our financial debt.

Expectations regarding developments in the 2009 financial year

In accordance with German Accounting Standard (GAS) 15, we are also providing an estimate for the year following the current financial year. However, considerable fore- casting uncertainties currently exist with respect to anticipated market, competitive and business environment conditions. Based on the assumption that significant trends will continue throughout the 2008 financial year, we expect that we will also record further increases in our revenues and EBIT before special items for the 2009 financial year. Based on current expectations, our ROCE will continue to advance towards the goal we have set.

These estimates are, as always, subject to the following reservations set forth below.

Forward-looking statements This Management Report contains statements and forecasts pertaining to the future development of DB Group, its business units and individual companies. These forecasts are estimates we made based on information that was available at the current time. Actual developments and currently expected results may vary in the event that assumptions that form the basis for the forecasts do not take place, or risks – for example, those presented in the Risk Report – actually occur.

Deutsche Bahn Group does not intend or assume any obligation to update the statements made within this Manage - ment Report.

CONSOLIDATED FINANCIAL STATEMENTS

136 Report of the Management Board 137 Consolidated Statement of Income 138 Consolidated Balance Sheet 140 Consolidated Statement of Cash Flows 141 Consolidated Statement of Changes in Equity 142 Notes to the Consolidated Financial Statements 224 Major Subsidiaries 227 The Boards of Deutsche Bahn AG 231 Auditor’s Report 136 DEUTSCHE BAHN GROUP •

REPORT OF THE MANAGEMENT BOARD

The Management Board of Deutsche Bahn AG is responsible In line with the requirements of the German Control and Trans- for the preparation, completeness and accuracy of the con- parency Act in the Corporate Sector (Gesetz zur Kontrolle und solidated financial statements and the Group management Transparenz im Unternehmensbereich; KonTraG), the pur- report. pose of our risk management system is to ensure that the The consolidated financial statements for the period Management Board is able to identify potential risks at an ended December 31, 2007 have been prepared in accordance early stage and initiate countermeasures where appropriate. with the International Financial Reporting Standards (IFRS) In accordance with the resolution of the shareholders’ meeting, as they have to be applied in the European Union (EU), sup- PricewaterhouseCoopers Aktiengesellschaft Wirtschafts- plemented by the regulations of the German commercial prüfungsgesellschaft has audited the consolidated financial law according to section 315 a (1) German Commercial Code statements prepared in accordance with IFRS and the Group (Handelsgesetzbuch; HGB). The previous year’s figures management report, and has issued an unqualified auditor’s have been established using the same principles. The Group report. management report contains an analysis of the net assets, The consolidated financial statements, the Group man- financial position and results of operations of the Group as agement report and the audit report have been extensively well as further explanations which have to be provided in discussed in the Audit Committee and the meeting of the accordance with the regulations of the German Commercial Supervisory Board on the adoption of the Group financial Code. statement in the presence of the auditor. The Report of the The internal management and control systems as well as Supervisory Board (pages 16 to 19 of this Annual Report) sets the use of uniform accounting and valuation guidelines out the result of the examination by the Supervisory Board. throughout the Group guarantee the adequacy of the consolidated financial statements and the Group management report. Compliance with statutory regulations, the internal The Management Board guidelines of the Group as well as the reliability and func- tionality of the control systems are continuously monitored throughout the Group. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 137 Report of the Management Board Consolidated Statement of Income

CONSOLIDATED STATEMENT OF INCOME

January 1 through December 31 € million Note 2007 2006 Revenues (1) 31,309 30,053 Inventory changes and internally produced and capitalized assets (2) 1,945 1,890 Overall performance 33,254 31,943 Other operating income (3) 3,219 2,859 Cost of materials (4) –17,166 –16,449 Personnel expenses (5) – 9,913 – 9,782 Depreciation (6) –2,795 –2,950 Other operating expenses (7) –3,704 –3,144 Operating profit (EBIT) 2,895 2,477

Result from investments accounted for using the equity method (8) 32 18 Net interest income (9) –908 –941 Other financial result (10) –3 1 Financial result –879 –922

Profit before taxes on income 2,016 1,555 Taxes on income (11) –300 125 Net profit for the year 1,716 1,680

Net result attributable to: shareholders of Deutsche Bahn AG 1,701 1,665 minority interests 15 15

Earnings per share (€ per share) (12) undiluted 3.96 3.87 diluted 3.96 3.87 138 DEUTSCHE BAHN GROUP •

CONSOLIDATED BALANCE SHEET

Assets

As of December 31 € million Note 2007 2006 Non-current assets Property, plant and equipment (13) 38,069 39,462 Intangible assets (14) 1,786 1,619 Investments accounted for using the equity method (15) 231 178 Available-for-sale financial assets (17) 124 150 Receivables and other assets (19) 166 128 Derivative financial instruments (21) 26 23 Deferred tax assets (16) 1,644 1,800 42,046 43,360

Current assets Inventories (18) 784 710 Available-for-sale financial assets 00 Trade receivables (19) 3,500 3,192 Receivables and other assets (19) 482 643 Current tax receivables (20) 115 83 Derivative financial instruments (21) 53 7 Cash and cash equivalents (22) 1,549 295 Available-for-sale assets (23) 0 150 6,483 5,080

Total assets 48,529 48,440 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 139 Balance Sheet

Equity and liabilities

As of December 31 € million Note 2007 2006 Equity Subscribed capital (24) 2,150 2,150 Reserves (25) 5,320 5,265 Retained earnings (26) 3,431 1,743 Equity attributable to shareholders of Deutsche Bahn AG 10,901 9,158 Minority interests (27) 52 56 10,953 9,214

Non-current liabilities Financial debt (28) 16,228 17,165 Other liabilities (29) 400 437 Derivative financial instruments (21) 225 207 Retirement benefit obligations (32) 1,594 1,514 Other provisions (33) 4,368 3,993 Deferred income (34) 2,660 2,931 Deferred tax liabilities (16) 137 72 25,612 26,319

Current liabilities Financial debt (28) 1,834 2,716 Trade liabilities (29) 3,725 3,568 Other liabilities (29) 3,299 3,411 Current tax liabilities (30) 153 80 Derivative financial instruments (21) 49 258 Other provisions (33) 2,398 2,395 Deferred income (34) 506 476 Available-for-sale liabilities (23) 0 3 11,964 12,907

Total assets 48,529 48,440 140 DEUTSCHE BAHN GROUP •

CONSOLIDATED STATEMENT OF CASH FLOWS

January 1 through December 31 € million Note 2007 2006 Profit before taxes on income 2,016 1,555 Depreciation on property, plant and equipment and intangible assets 2,795 2,950 Write-ups/write-downs on non-current financial assets 30 Result on disposal of property, plant and equipment and intangible assets –350 –100 Result on disposal of financial assets –655 –51 Result on sale of consolidated companies 33 – 24 Interest and dividend income –333 –341 Interest expense 1,233 1,274 Foreign currency result 14 4 Result from investments accounted for using the equity method –32 –18 Other non-cash expenses and income –203 –396 Changes in inventories, receivables and other assets –74 106 Changes in liabilities and deferred income – 89 – 227 Cash generated from operating activities 4,358 4,732 Interest received 81 60 Dividends and capital distribution received 19 18 Interest paid – 923 –1,032 Taxes on income paid –171 –100 Cash flow from operating activities 3,364 3,678

Proceeds from the disposal of property, plant and equipment and intangible assets 1,487 549 Payments for purchases of property, plant and equipment and intangible assets – 6,248 – 6,584 Proceeds from investment grants 4,260 3,748 Payments for repaid investment grants –167 – 234 Proceeds from the sale of financial assets 24 70 Payments for purchases of financial assets –27 –27 Proceeds from the sale of shares in consolidated companies less net cash and cash equivalents diverted 271 18 Payments for acquisition of shares in consolidated companies less net cash and cash equivalents acquired –479 –949 Proceeds from the disposal of investments accounted for using the equity method 793 5 Payments for additions to investments accounted for using the equity method –1 0 Cash flow from investing activities – 87 –3,404

Proceeds from capital increase 10 Payments for return of capital 0–122 Distribution of profits to minority interests –12 –12 Repayment of capital amounts under finance leases –72 –64 Proceeds from issue of bonds 594 1,703 Payments for redemption of bonds –1,644 – 418 Proceeds from interest-free government loans 88 98 Payments for redemption of interest-free government loans –311 –362 Proceeds from borrowings and commercial paper 51 454 Repayment of borrowings and commercial paper –788 –1,555 Cash flow from financing activities – 2,093 – 278

Net decrease in cash and cash equivalents 1,184 – 4

Cash and cash equivalents at the beginning of the period (22) 295 305 Changes in cash and cash equivalents due to changes in the scope of consolidation 15 1 Changes in funds due to changes in exchange rates 55 –7 Cash and cash equivalents at the end of the period (22) 1,549 295 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 141 Statement of Cash Flows Statement of Changes in Equity

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

€ million Sub- Reserves Retained Equity at- Minority Total scribed Capital Currency Fair value Fair value Other Total earnings tributable interests equity capital reserves trans- reserve reserve move- reserves to share- lation for for ments holders of securities cash flow Deutsche hedges1) Bahn AG As of Jan 1, 2007 2,150 5,310 – 20 0 – 26 1 5,265 1,743 9,158 56 9,214 + Capital introduced 0000000 0011 – Capital decrease 0000000 0000 – Reduction of capital reserves 0000000 0000 – Dividend payments 0000000 00–12–12 +/– Currency translation differences 0 0 –38 0 0 0 –38 0–381–37 +/– Other changes 000091293 –13 80 –9 71 +/– Net profit for the year 0000000 1,701 1,701 15 1,716 As of Dec 31, 2007 2,150 5,310 –58 0 65 3 5,320 3,431 10,901 52 10,953

€ million Sub- Reserves Retained Equity at- Minority Total scribed Capital Currency Fair value Fair value Other Total earnings tributable interests equity capital reserves trans- reserve reserve move- reserves to share- lation for for ments holders of securities cash flow Deutsche hedges1) Bahn AG As of Jan 1, 2006 2,150 5,310 –17 0 –35 1 5,259 84 7,493 182 7,675 + Capital introduced 0000000 0000 – Capital decrease 0000000 0000 – Reduction of capital reserves 0000000 0000 – Dividend payments 0000000 00–12–12 +/– Currency translation differences 00–3000–3 0–3–2–5 +/– Other changes 0000909 –6 3 –127 –124 +/– Net profit for the year 0000000 1,665 1,665 15 1,680 As of Dec 31, 2006 2,150 5,310 – 20 0 – 26 1 5,265 1,743 9,158 56 9,214

1) Equity capital includes deferred taxes 142 DEUTSCHE BAHN GROUP •

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Segment Reporting € million Long-Distance Transport Regional Transport Urban Transport Rail Freight Schenker 2007 2006 2007 2006 2007 2006 2007 20065) 2007 2006 Segment revenues External revenues 3,265 3,234 6,532 6,480 1,879 1,805 3,878 3,802 14,057 13,232 Other external segment revenues 139 121 103 185 64 66 171 190 118 159 Internal segment revenues 191 179 133 143 81 70 499 467 22 19 Total segment revenues 3,595 3,534 6,768 6,808 2,024 1,941 4,548 4,459 14,197 13,410

Segment result (EBIT) 139 124 451 690 166 154 217 242 453 367 Net interest income Result from investments accounted for using the equity method 00301022533 Other financial result Profit before taxes on income Taxes on income Net profit for the year

Segment assets1), 4) 3,238 3,455 4,849 4,702 1,404 1,418 3,969 3,164 5,050 4,708 Investments accounted for using the equity method1) 0041315014148 Total assets1) 3,238 3,455 4,853 4,703 1,407 1,419 4,019 3,178 5,064 4,716 thereof goodwill (0) (0) (1) (1) (5) (1) (301) (160) (923) (866) Segment liabilities1), 4) 960 937 1,810 1,461 447 466 1,762 1,685 2,460 2,427

Segment capital expenditures 126 262 459 380 122 98 817 159 378 1,207 Additions to assets from acquisition of companies 00001506212151980 Additions to assets from capital expenditures 126 262 459 380 107 98 196 157 227 227 Investment grants received –7 –1 – 64 – 27 –12 – 20 – 6 – 2 0 0 Net capital expenditures 119 261 395 353 95 78 190 155 227 227

Scheduled depreciation2) 366 372 397 407 147 149 237 236 168 174 Impairment losses recognized/reversed2) 22583124801 Other non-cash expenditures2) 124652153028 Other non-cash income2) 14 40 27 99 14 7 18 17 2 3 Employees3) 15,011 14,641 24,781 25,700 12,221 12,238 28,874 24,257 59,312 54,905

1) Segment assets, investments in associated companies and segment liabilities are stated as of Dec 31; the remaining items relate to the reporting period. Investments accounted for using the equity method include shares in Scandlines AG with an amount of €147 million, that were reclassified as of April 1, 2006. 2) The non-cash items are included in the segment result shown and are also disclosed separately. 3) The number of employees represents the average number of employees as at year-end (part-time workforce converted into equivalent full-time workforce).

Segment Reporting by Region January 1 through December 31 Germany € million 2007 2006 Segment revenues 23,598 22,589 thereof external revenues (20,464) (19,857) Segment assets 41,781 44,570 Net capital expenditures 1,985 2,726

1) Due to the complete integration of the BAXcompanies into DB Group, the assignment of business activities to certain regions has been changed thereby limiting a region-by-region comparison with the previous year’s figures. This has led to a region-based redefinition of internal revenues that became external revenues and vice versa. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 143 Notes

Subsidiaries/ Other/ Track Infrastructure Passenger Stations Services Other activities Consolidation DB Group 20076) 2006 20076) 2006 20076) 2006 20076) 20065) 2007 2006 2007 2006

617 548 328 310 99 94 654 548 0 0 31,309 30,053

864 688 118 111 225 226 1,417 1,113 0 0 3,219 2,859 3,908 3,825 654 640 2,545 2,349 4,002 4,140 –12,035 –11,832 0 0 5,389 5,061 1,100 1,061 2,869 2,669 6,073 5,801 –12,035 –11,832 34,528 32,912

478 100 170 136 120 31 730 694 – 29 – 61 2,895 2,477 –908 –941

00002113063218 –3 1 2,016 1,555 –300 125 1,716 1,680

22,293 20,993 3,623 3,401 1,273 1,157 4,059 5,621 –1,460 –503 48,298 48,116

00008115229900231324 22,293 20,993 3,623 3,401 1,281 1,158 4,211 5,920 –1,460 –503 48,529 48,440 (0) (0) (0) (0) (0) (0) (0) (7) (0) (0) (1,230) (1,035) 2,809 2,368 448 496 949 978 6,956 6,894 18,975 21,514 37,576 39,226

4,433 4,419 350 643 281 242 218 212 –77 –56 7,107 7,566

0000000000787982

4,433 4,419 350 643 281 242 218 212 –77 –56 6,320 6,584 –3,839 –3,226 – 255 –393 –1 – 2 –76 –77 0 0 – 4,260 –3,748 594 1,193 95 250 280 240 142 135 –77 –56 2,060 2,836

990 986 133 132 200 188 148 157 –32 –7 2,754 2,794

214612126100041156

4212971718210011190 134692123172567203 0 0314486 39,780 41,356 4,537 4,557 26,808 26,689 25,754 24,857 0 0 237,078 229,200

4) Profit transfer agreements were not assigned to segment assets or liabilities. 5) Previous years’ figures were adjusted. 6) Due to the adjustments to property allocations within DB Group there have been shifts in segment assets mainly between the segments Track Infrastructure and Other/consolidation.

Rest of Europe North America1) Asia/Pacific1) Rest of world Reconciliation DB Group 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 6,783 6,062 1,838 1,785 1,976 2,197 333 279 0 0 34,528 32,912 (6,719) (5,968) (1,827) (1,769) (1,967) (2,180) (332) (279) (0) (0) (31,309) (30,053) 3,231 2,091 561 801 1,370 1,245 120 121 1,235 –712 48,298 48,116 115 119 9 14 22 29 6 4 –77 –56 2,060 2,836 144 DEUTSCHE BAHN GROUP •

Basic principles and methods throughout the entire reporting period with no changes compared with the previous year. Fundamental information The financial year of DB AG and its incorporated sub- Deutsche Bahn AG (referred to in the following as “DB AG”), sidiaries is the same as the calendar year. The consolidated Berlin, and its subsidiaries (together referred to in the follow- financial statements are prepared in euros. Unless otherwise ing as “DB Group”) provide services in the fields of passenger specified, all figures are stated in euro million (€ million). transport, transport and logistics, and operate an extensive rail infrastructure which is also available to non-Group users a) Standards, revisions of standards and interpretations on a non-discriminatory basis. Whereas passenger transport which are the subject of mandatory first-time adoption activities are conducted primarily in the company’s domestic for reporting periods after January 1, 2007 market of Germany, transport and logistics activities are In the year under review, the DB consolidated financial state- conducted on a worldwide basis. In November 2007, DB ments take account of all new and revised standards and Group acquired all shares in English Welsh& Scottish Rail- interpretations which are the subject of initial binding adop- way Holding Limited (referred to in the following as “EWS”), tion starting January 1, 2007, which are also relevant for DB London, UK. EWS is the largest British rail freight company Group and which have not been the subject of early adoption and one of the largest freight transport companies in Eu- in previous periods. The changes to the standards have been rope. DB Group had previously acquired the Spanish recognized in accordance with the transitional regulations. freight company Spain-Tir, Barcelona, Spain, at the end of Initial adoption of these new regulations has not had any September 2007. material impact on the consolidated financial statements. DB AG, Potsdamer Platz 2, 10785 Berlin, is a joint stock They are set out in the following: corporation (Aktiengesellschaft); its shares are held en- • IFRS 7: Financial Instruments: Disclosures tirely by the Federal Republic of Germany (also referred to The disclosure obligations regarding the financial instru- in the following as the “Federal Government”). The company ments of industrial companies as well as of banks and similar is maintained under the number HRB 50000 in the com- financial institutions have been revised with the introduc- mercial register of the local court (Amtsgericht) Berlin- tion of IFRS 7. The disclosure obligations previously included Charlottenburg. DB Group has issued securities in accor- in IAS 30 (Disclosures in the Financial Statements of Banks dance with section 2 (1) sentence 1 of the Securities Trading and Similar Financial Institutions) and IAS 32 (Financial Act (Wertpapierhandelsgesetz; WpHG); these securities Instruments: Presentation) are replaced and extended by are traded on organized markets in accordance with section IFRS 7; in future, they are applicable for all sectors. The new 2 (5) WpHG. rulings will result in a considerable increase in the disclosures These consolidated financial statements have been pre- in the Notes with regard to financial instruments in the con- pared by the Management Board, and will be handed over to solidated financial statements. the Supervisory Board for the Supervisory Board meeting • IAS 1: Presentation of Financial Statements – Disclosures on March 28, 2008. concerning Capital Additional disclosure requirements with regard to the aims, Principles of preparing financial statements instruments and processes in capital management have been The consolidated financial statements are prepared on the included in IAS 1. IAS 1 was adopted by DB Group in the 2006 basis of section 315a HGB and in accordance with the Inter- financial year. national Financial Reporting Standards (IFRS) as adopted • IFRIC 7: Application of the Adjustment Rate under IAS 29 by the EU and their interpretation by the International Financial Reporting in Hyperinflationary Economies Financial Reporting Interpretations Committee (IFRIC). IFRIC 7 provides information regarding the application of The accounting standards have been consistently applied IAS 29 in a reporting period in which the functional currency GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 145 Notes

becomes hyperinflationary. The application of IFRIC 7 does • IAS 27: Consolidated and Separate Financial State- not have any impact on the consolidated financial statements. ments (revised January 2008; applicable for reporting • IFRIC 9: Reassessment of Embedded Derivatives periods starting July 1, 2009) IFRIC 9 specifies that, at the point at which the contract is • IFRS 2: “Amendments to IFRS 2 Share-Based Payments – taken out, it is necessary to establish whether there is an Vesting Conditions and Cancellation” (applicable for embedded derivative which has to be shown separately. A reporting periods starting January 1, 2009) reassessment only has to take place at a later date if changes • IFRS 3: Business Combinations (revised January 2008; in the contract conditions result in a major change in cash applicable for business combinations for which the time flows. The interpretation does not have any material impact of acquisition is after January 1, 2010) on the consolidated financial statements. IAS 9 was adopted • IFRS 8: Business Segments (applicable for reporting by DB Group in the 2006 financial year. periods starting January 1, 2009) • IFRIC 10: Interim Financial Reporting and Impairment • IFRIC 11: IFRS 2 – Transactions with Treasury Shares According to IFRIC 10, it is not permitted for impairments and Shares of Group Companies (applicable for report- which have been recognized in relation to goodwill, in relation ing periods starting March 1, 2007) to investments in equity instruments and financial assets • IFRIC 12: Service Concession Arrangements (to be which have been valued at cost in an interim reporting period to adopted for reporting periods starting January 1, 2008) be reversed at a later balance sheet date. • IFRIC 13: Customer Loyalty Programs (to be adopted The standards, addenda to standards and interpretations for reporting periods starting July 1, 2008) which are currently not relevant for DB Group and which are • IFRIC 14: The Limit on a Defined Benefit Asset, Minimum subject to binding adoption starting January 1, 2007 are set Funding Requirements and Their Interaction (applicable out in the following: for reporting periods starting January 1, 2008) • IFRIC 8: Scope of IFRS 2 IFRIC 8 specifies that IFRS 2 is also applicable in those cases IAS 1 mainly contains formal changes with regard to desig- in which the consideration issued for issued shares cannot be nations and contents of individual components of financial clearly established or is lower than the value of issued shares. statements. The standard will have an impact on the presentation of the financial statements of DB Group. b) Standards, revisions of standards and interpretations IAS 23 (revised March 2007) specifies that borrowing which have been agreed at the time of the report but interest which is directly attributable to the acquisition, which are not yet the subject of mandatory adoption and construction or production of a “qualified asset” within the which have not been the subject of early adoption terms of IAS 23 will have to be capitalized in future. The • IAS 1: Presentation of Financial Statements (to be option which has previously existed with regard to the capi- adopted for reporting periods starting January 1, 2009) talization of borrowing costs no longer exists. In the past, • IAS 23: Borrowing Costs (revised March 2007; to be borrowing costs have been treated as an expense. DB Group adopted for reporting periods starting January 1, 2009) is currently reviewing the impact attributable to future • IAS 32: “Amendments to IAS 32 Financial Instruments: application on the consolidated financial statements. Presentation and IAS 1Presentation of Financial State- IAS 32 (revised February 2008) specifies whether a finan- ments – Puttable Financial Instruments and Obligations cial instrument has to be classified as equity or a liability at the Arising on Liquidation” (applicable for reporting periods issuer. Under certain conditions, the new version of IAS 32 starting January 1, 2009) also enables financial instruments which can be terminated to be recognized as equity. 146 DEUTSCHE BAHN GROUP •

IAS 27 (revised January 2008) governs the treatment of share IFRIC 13 deals with the recognition and measurement of purchases and sales after acquiring and retaining the possi- premium credits granted to customers for purchasing pro- bility of control. In future, losses which are attributable to ducts and services. minorities and which exceed the value of minorities shown IFRIC 14 provides general guidelines with regard to in the balance sheet have to be presented as negative carry- determining the upper limit of the surplus of a pension fund ing amounts in consolidated equity. There will be adjust- which can be recognized as an asset in accordance with IAS 19. ments for future transactions. DB Group is currently reviewing the effects of the future IFRS 2 (revised January 2008) contains clarifications application of the two latter interpretations on the consoli- and a more precise definition of conditions for exercising dated financial statements. with regard to equity-linked compensation agreements. IFRS 3 (revised January 2008) contains regulations par- Structure of the balance sheet ticularly with regard to purchase price components, with and the income statement regard to the treatment of minority interests and goodwill Assets and liabilities are stated in the balance sheet either as and also with regard to the extent of assets, liabilities and current or non-current items. Assets and liabilities are classi- contingent liabilities to be recognized. We do not anticipate fied as current if they are realized or due within twelve any major changes with regard to previous reporting. months after the end of the reporting period. The structure IFRS 8 governs reporting with regard to the operating of the balance sheet takes account of the requirements of segments of an enterprise; the rules previously included in the ordinance relating to the structure of the financial state- IAS 14 (Segment Reporting) will be replaced by IFRS 8. In our ments of transport companies. The income statement uses opinion, IFRS 8 will not result in any fundamental adjust- the structure of the cost summary method. ments compared with the current segment reporting. IFRIC 11 deals with questions of treating stock-based remuneration agreements in which treasury shares or shares of other Group companies have been granted. We are not assuming any major impact for DB Group. IFRIC 12 deals with the accounting treatment of service concession arrangements between the public sector (the licensor) and a private company (the operator). This is applicable for arrangements if the client controls or regulates what services the operator provides with the infrastructure, to whom the operator provides the services and also the price at which the operator provides the services. At the end of the contract term, the infrastructure has to be transferred to the licensor. The regulations cover infrastructure which has been set up by the operator or acquired from an external party, and also existing infrastructure to which the licensor provides access. We are not assuming any major impact for DB Group. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 147 Notes

Principles underlying the consolidated Changes in segment allocation financial statements With effect from January 1, 2007 the former segment Railion and the transport-related activities of DB Mobility Logistics Comparability with the previous year AG (formerly Stinnes AG), which previously were allocated After due consideration is given to the following issues, the to the segment “Holdings/Others,”were combined to form financial information presented for the 2007 financial year is the Rail Freight segment. The previous year figures have been comparable with the financial information for the previous adjusted accordingly. The amounts of the adjustments were year period: of minor significance.

Changes in the group of consolidated companies Consolidation methods For the 2007 financial year, changes in the group of consoli- a) Consolidation principles dated companies, and in particular the acquisition of EWS DB AG and all companies (subsidiaries) whose financial and and Spain-Tir, have resulted in financial information in the business policy can be determined by DB AG are fully con- balance sheet, the income statement, the cash flow state- solidated in the consolidated financial statements of DB AG. ment as well as segment reporting which is not directly They are incorporated in the consolidated financial state- comparable with that of the previous period. Detailed infor- ments at the point at which DB AG acquires the possibility mation relating to these acquisitions as well as explanations of control. At most subsidiaries, “control” is defined as a concerning the other transactions are set out in the section situation in which DB AG directly or indirectly holds a major- “Changes in the Group.” ity of voting rights. The reference date for determining the In September 2007, DB Group sold its stake in Aurelis point at which a company is taken out of the scope of consoli- Real Estate to a syndicate comprising the construction group dation is established on the basis of the time at which the Hochtief and the real estate fund Redwood Grove for € 1.6 possibility of control terminates. billion. This resulted in a book profit of € 236 million after For the purpose of uniform accounting, the affiliated creating provisions for remaining obligations of €387 million; companies have applied the accounting guidelines of the this is shown under income from the disposal of property, parent company. plant and equipment. The figure shown for consolidated Minority interests in the shareholders’ equity of sub- net income includes a figure of € 49 million for Aurelis Real sidiaries are shown separately from the shareholders’ equity Estate until the point at which it was sold. The sale of the of the Group shareholders. The extent of the minority inter- Aurelis portfolio resulted in outflows of € 1.0 billion in the ests is calculated as the minority interests applicable at the carrying amounts of real estate. point at which the subsidiary was acquired and also that pro- In August 2007, the two shareholders of the ferry com- portion of the change in the shareholders’ equity of the sub- pany Scandlines AG, namely DB AG and the Danish Transport sidiary since the acquisition attributable to the third party. and Energy Ministry, sold their shares in the company to a Pro rata losses attributable to the minority interests which syndicate consisting of the British capital fund 3i, the German exceed the minority interests in the shareholders’ equity Allianz Capital Partners GmbH and Deutsche Seereederei are ascribed to the shareholders’ equity of the Group share- DSR GmbH. A price of €0.8 billion was achieved for the share holders, unless the external shareholders have a binding of DB AG; this resulted in a book profit of € 0.6 billion. obligation to absorb such losses and are economically and financially in a position to do so. Internal liabilities within the Group as well as expenses and income and intercompany results between fully consolidated companies are completely eliminated. 148 DEUTSCHE BAHN GROUP •

b) Business combinations Associated companies are defined as equity participations All subsidiaries acquired after December 31, 2002 have been for which DB Group is able to exercise a major influence consolidated using the acquisition method under IFRS 3. on the financial and business policy. Major influence is nor- Accordingly, the acquirer shall measure the cost of purchase mally defined as a situation in which DB AG directly or indi- of a business combination as the aggregate of the fair values, rectly holds 20 % to 50 % of the voting rights in these com- at the date of exchange, of assets given, liabilities incurred panies and the related assumption of association is not refuted. or assumed plus any costs directly attributable to the busi- Joint ventures and associated companies are accounted ness combination. The acquired identifiable assets, liabilities for using the equity method. Alternatively, they are valued and contingent obligations are valued under IFRS 3 with in accordance with IFRS 5 if the shares are classified as avail- their fair value at the date of acquisition, irrespective of any able-for-sale. minority interests. Alternatively, acquired long-term assets As part of the process of accounting for participations or groups of assets which are classified as available-for-sale using the equity method, shares in associated companies in accordance with IFRS 5 are shown with their fair value and joint ventures are shown at cost in the consolidated less costs to sell. financial statements, adjusted for the related changes in the Any difference between the purchase costs of the busi- net assets of the associated company and joint venture and ness combination and the acquired assets valued at fair any impairments resulting from the impairment test. Any value is shown as goodwill. If the purchase price is lower than pro rata losses attributable to DB Group which exceed the the fair value of the acquired assets, the difference is shown total investment in the associated company or joint venture, immediately in the income statement. consisting of the amortized equity figure as well as other Minority interests are calculated on a pro rata basis from long-term receivables, are not recognized, unless DB Group the assets, liabilities and contingent obligations valued with has taken on corresponding obligations or made payments. their fair value. Any positive difference between the cost of the purchased If additional minority interests are acquired in compa- shares and the pro rata assets acquired at the point of pur- nies which are already fully consolidated, the difference chase and valued at fair value constitutes goodwill, which is between the pro rata carrying amount of the net assets contained in the amortized equity figure and is thus also attributable to the minorities and the purchase price is subject to the impairment test. If the purchase price is lower shown in DB Group as goodwill. Minority sales correspond- than the fair value following the pro rata assets which have ingly result in a reduction in goodwill and a profit or loss in been acquired, the difference is taken immediately to the the income statement. income statement. Intercompany results attributable to transactions with c) Joint ventures and associated companies associated companies or joint ventures are eliminated on a Joint ventures are defined as companies which are man- pro rata basis. aged by DB AG jointly with another party either directly or indirectly. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 149 Notes

Changes in the Group The additions to the scope of consolidation are twelve new a) Subsidiaries companies which were established in the period under re- Movements in the scope of consolidation of DB AG are view as well as the acquisition of shares in the EWS Group, detailed in the following: the Spanish Spain-Tir Group and F. W. Neukirch (GmbH & Co.) KG. Number German Foreign Total Total The additions attributable to the change in type of 2007 2007 2007 2006 Fully consolidated recognition relate to companies which previously had been subsidiaries recognized at amortized cost of purchase (total carrying 1) As of Jan 1 159 286 445 377 amount € 14 million). Additions 3 54 57 77 Addition due to change The main transactions are detailed in the following: in type of incorporation 24 30 54 6 • With the agreement of July 20, 2007 (closing Novem- Disposals2) 17 42 59 12 ber 13, 2007), DB Group acquired 100 % of the shares in Disposal due to change in type of incorporation 0003 EWS, London, UK. EWS is one of the largest freight As of Dec 31 169 328 497 445 transport companies in Europe, and specializes in wagon load freight in the field of energy management, capital 1) Previous year’s figure adjusted with no impact on the consolidated financial statements goods and construction material. The activities of EWS 2) Including 29 disposals from intra-Group mergers are included in the consolidated group of DB AG as of December 31, 2007. In segment reporting, the activities Activities in connection with the production of installa- are shown in the Rail Freight segment. tions from track infrastructure are to some extent carried • At the end of September 2007, Schenker AG – after the out in the form of a company constituted under civil law necessary official approvals had been awarded – acquired (Gesellschaften bürgerlichen Rechts) (joint ventures). These the Spanish logistics group Spain-Tir, Barcelona, Spain. joint ventures are terminated when the particular project is This company specializes in general cargo, direct trans- completed. They carry out their business activities mainly ports as well as logistics, and is one of the leading players over a period of between one and five years. Because these in the Spanish and Portuguese land transport sector. joint ventures are assessed mainly as jointly conducted activi- Operations in segment reporting are shown in the ties, they are not fully consolidated. Schenker segment. In addition, 28 (previous year: 98) subsidiaries have not • On July 26, 2007, DB AG signed an agreement to acquire been consolidated, as they are of minor significance for the a majority of shares in the Spanish Transportes Ferro- presentation of the net assets, financial position and profits viarios Especiales (Transfesa). Because the necessary of DB Group. They are stated with purchase costs of € 3 mil- official approvals have not been obtained, Transfesa is lion (previous year: €17 million) in the consolidated financial not included in the consolidated financial statements in statements. the year under review.

Additions of companies and parts of companies Overall, expenses of €478 million were incurred in purchasing companies in the 2007 ﬁnancial year (previous year: € 1,144 million). 150 DEUTSCHE BAHN GROUP •

The goodwill is calculated as follows: Purchase price allocation EWS Group The acquired net assets including the adjustments of as- € million thereof sets and liabilities in accordance with IFRS 3 are shown as 31. 12. 2007 thereof EWS Spain-Tir Purchase price follows: Payments 469 329 140 + Outstanding € million Carrying payments 0 0 0 amount Adjustment Fair value + Directly attributable Property, plant and costs 963equipment 482 – 4 478 = Total purchase price 478 335 143 Intangible assets 3 12 15 – Fair value of net Inventories 35 0 35 assets acquired 245 209 36 Receivables and = Goodwill 233 126 107 other assets 168 0 168 Cash and cash equivalents 8 0 8 Goodwill is to a large extent substantiated by the synergy Assets 696 8 704 effects expected for the period after the acquisition. In addi- Financial debt 207 0 207 tion, a considerable proportion of goodwill is attributable to Other liabilities 204 0 204 Other provisions 21 6 27 assets which are not eligible for recognition under IFRS 3, Deferred tax liabilities 57 0 57 and in particular the employee base and the future revenue Liabilities 489 6 495 potential. thereof recognized contingent liabilities in accordance with IFRS 3 (0) (6) (6) Share of third parties 0 0 0 Net assets 207 2 209 Share of DB Group in net assets before acquisition 0 0 0 Net assets acquired 207 2 209

Purchase price paid by cash and cash equivalents 335 0 335 Cash and cash equivalents acquired with acquisitions 8 0 8 Outflow of cash and cash equivalents through acquisitions 327 0 327 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 151 Notes

The purchase price allocation has resulted in the following Purchase price allocation Spain-Tir adjustments relating to assets and liabilities: The acquired net assets including the adjustments of assets and liabilities in accordance with IFRS 3 are shown as follows: € million Adjustment Properties – 4 € million Carrying Customer base 11 amount Adjustment Fair value Trade name 1 Property, plant and Other provisions – 6 equipment 20 0 20 Total 2 Intangible assets 0 16 16 Receivables and other assets 45 0 45 A service life depending on the duration of the agreement Cash and cash and the type of customer contracts is used for the customer equivalents 7 0 7 Assets 72 16 88 base; the brand name is written down over a period of two Financial debt 1 0 1 years. Other liabilities 46 0 46 Deferred tax liabilities 0 5 5 If EWS had been included in DB consolidated ﬁnancial Liabilities 47 5 52 statements as of January 1, 2007, DB Group would have thereof recognized con- reported additional revenues of € 0.7 billion. In view of the tingent liabilities in accordance with IFRS 3 (0) (0) (0) considerable costs involved in determining the IFRS annual Share of third parties 0 0 0 result, the ﬁgure is not disclosed. Net assets 25 11 36 Share of DB Group in net assets before acquisition 0 0 0 Net assets acquired 25 11 36

Purchase price paid by cash and cash equivalents 143 0 143 Cash and cash equivalents acquired with acquisitions 7 0 7 Outflow of cash and cash equivalents through acquisitions 136 0 136

The purchase price allocation has resulted in the following adjustments relating to assets and liabilities:

€ million Adjustment Customer base 16 Deferred taxes (net) –5 Total 11 152 DEUTSCHE BAHN GROUP •

A service life of ten years has been assumed for the customer Of the figure of € 243 million shown for revenues resulting base of Spain-Tir. from additions to the group of consolidated companies, Since initial recognition as of October 1, 2007, Spain-Tir €83 million is attributable to Spain-Tir, €59 million is attrib- contributed revenues of €79 million as well as net profit of utable to Schenker Russija ZAO, € 41 million is attributable € –4 million to the overall Group by the end of the report- to Fertrans AG, € 22 million is attributable to Fertrans ing period. GmbH and € 38 million is attributable to Regionalbus If Spain-Tir had been incorporated in the DB consolidat- Braunschweig GmbH -RBB-. ed financial statements as of January 1, 2007, DB Group would have shown additional revenues of € 165 million and Disposals of companies and parts of companies an additional net profit of € 5 million. The disposals from the scope of consolidation which oc- The following overview shows a summary of the main curred in the period under review resulted overall in a effects on the consolidated income statement arising from reduction of €64 million in revenues. These mainly involve the changes in the group of consolidated companies com- the sales of shares in NUCLEAR CARGO + SERVICE GmbH pared with the previous year period: (incl. equity participations), Frachtcontor Junge & Co. GmbH including its subsidiaries, as well as TRANSKEM € million DB Group thereof due Amounts due SPEDITION GmbH. Jan 1 to to changes in to changes in Dec 31, 2007 the scope of the scope of The sale of the Brilliant-National-Services Group resulted consolidation consolidation in a book loss of € 65 million. 2007 2006 The companies which are no longer included in the scope Revenues 31,309 243 – 64 Inventory changes and of consolidation have had the following cumulative impact internally produced and on the net assets, financial position and results of opera- capitalized assets 1,945 0 –1 tions of DB Group: Overall performance 33,254 243 – 65 Other operating income 3,219 4 –15 Cost of materials –17,166 –194 25 Personnel expenses – 9,913 – 27 26 Depreciation – 2,795 –3 1 Other operating expenses –3,704 – 20 7 Operating profit (EBIT) 2,895 3 – 21 Result from investments accounted for using the equity method 32 0 0 Net interest income – 908 – 2 0 Other financial result –3 0 –1 Financial result – 879 – 2 –1

Profit before taxes on income 2,016 1 – 22 thereof result on disposal of discontinuing operations (0) (0) (0) Taxes on income –300 0 2 Net profit for the year 1,716 1 – 20 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 153 Notes

As of December 31 thereof thereof thereof Fracht- € million 2007 DB Gesundheit Nuclear Cargo contor Junge Sale price Received payments 38 2 20 16 Directly attributable costs 0000 Total sale price 38 2 20 16 Cash and cash equivalents sold with companies 14 2 0 12 Inflow of cash and cash equivalents through divestitures 24 0 20 4

The revenues and proﬁts included up to the point of deconsolidation are broken down in the following:

As of December 31 thereof thereof thereof Fracht- € million 2007 2006 DB Gesundheit Nuclear Cargo contor Junge Revenues 0 64 0 43 21 Net profit for the year 0 20 1 1 18 b) Joint ventures and associated companies which were accounted for using the equity method at the beginning of the financial year (carrying amounts: a total of Number German Foreign Total Total € 40 million). 2007 2007 2007 2006 Joint ventures The most important joint venture for DB Group – namely accounted for using Scandlines AG, Rostock – was sold to a syndicate consisting the equity method of the British capital fund 3i, the German Allianz Capital As of Jan 1 7077 Additions 2020Partners GmbH and Deutsche Seereederei DSR GmbH in Addition due to change August 2007 for a price of €793 million. The sale resulted in in type of incorporation 4481a book profit of € 646 million. Three other associated com- Disposals 1011 Disposal due to change panies were liquidated. in type of incorporation 1010 The following selected financial data are provided for As of Dec 31 11 4 15 7 the major associates and joint ventures; this information

Associated companies has been taken from the consolidated ﬁnancial statements accounted for using or the annual ﬁnancial statements of the relevant compa- the equity method nies for the period ended December 31, 2007. As of Jan 1 40 11 51 58 Additions 1560 Addition due to change in type of incorporation 25 17 42 1 Disposals 2133 Disposal due to change in type of incorporation 0115 As of Dec 31 64 31 95 51

The additions of joint ventures and associated companies comprise eight companies with costs of purchase totaling € 0.4 million. The additions attributable to the change in the type of recognition relate to joint ventures and associated companies 154 DEUTSCHE BAHN GROUP •

Aggregate financial information Equity Net profit € million holding Assets Equity Liabilities Revenues for the year 2007 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Joint ventures ATNAuto Terminal Neuss GmbH & Co. KG, Neuss 50.0% 1112556715140–1

Associated companies Air Terminal Handling S.A., Tremblay en France/France 20.0% 451134111100 ALSTOM Lokomotiven Service GmbH, Stendal2, 4) 49.0% 21221312810262210 Autoport Emden GmbH, Emden 33.3% 230023161500 BLS Cargo AG, Bern/Switzerland2, 4) 19.6 % 123 121 54 50 70 71 118 113 7 4 BwFuhrparkService GmbH, Troisdorf2, 4) 24.9% 95 77 26 27 69 50 174 151 1 2 Container Terminal Dortmund GmbH, Dortmund2, 4) 30.0% 33122210811 CTS Container-Terminal GmbH, Rhein-See-Land-Service, Cologne2, 6) 22.5% 652144292611 DAP Barging B.V., Rotterdam/The Netherlands2, 4) 53.9% 542143312911 DCH Düsseldorfer Container-Hafen GmbH, Düsseldorf2, 6) 62.0% 441143151411 EUROFIMA Europäische Gesellschaft für die Finanzierung von Eisenbahnmaterial, Basle/Switzerland1, 2) 22.6 % 21,354 21,373 630 634 20,724 20,739 0 0 27 29 EuroShuttle A/S i.L., Copenhagen/Denmark4, 5) 26.5% 28 2 26 64 0 Express Air Systems GmbH (EASY), Kriftel 50.0% 471236353401 Güterverkehrszentrum Entwicklungs- gesellschaft Dresden mbH, Dresden2, 3) 24.5% 20211119200000 INTERCONTAINER–INTERFRIGO SA, Basle/Switzerland2, 4) 26.9% 85 87 16 13 70 75 143 177 3 – 6 Kahlgrund-Verkehrs-Gesellschaft mit beschränkter Haftung, Schöllkrippen2, 4) 28.0% 101388267901 Kombiverkehr Deutsche Gesellschaft für kombinierten Güterverkehr mbH & Co. Kommandit- gesellschaft, Frankfurt/Main2, 4) 51.4 % 50 46 16 15 35 31 372 326 2 2 LogCap-IR Grundverwertungsgesellschaft mbH, Vienna/Austria 49.0% 24244419202100 Lokomotion Gesellschaft für Schienentraktion mbH, Munich2, 4) 48.5% 10105456211801 MASPED-RAILOG Vasúti Szállitmányozási Kft, Budapest/Hungary 50.0% 1115111014585211 MASPED-SCHENKER Air & Sea Forwarding Ltd., Budapest/Hungary 50.0% 752154322321 METRANS A.S., Prague/Czech Republic 33.4% 12369614462251391222517 POLZUG Intermodal GmbH, Hamburg3) 33.3% 1196356534121 Rail Traction Company S.p.A., Bozen/Italy2, 4) 29.5% 341276276302510 SSG – Saar-Service-Gesellschaft mit beschränkter Haftung Gesellschaft für Reinigung, Pflege und Sicherheit von Gebäuden, Saarbrücken2, 4) 25.5% 331123111200 TFG Transfracht Internationale Gesellschaft für kombinierten Güterverkehr mbH & Co. KG, Frankfurt/Main 50.1% 37 45 5 7 32 38 253 230 0 4

1) Concerns financing transaction exclusively 2) Figures according to local GAAP 3) Based on preliminary figures 4) Figures for previous financial year 5) No data for 2007 financial year 6) Deviating financial year GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 155 Notes

Currency translation Goodwill and adjustments to the fair values of assets and lia- a) Functional currency and reporting currency bilities due to acquisitions of foreign subsidiaries are treated Currency translation uses the concept of the functional cur- as assets and liabilities of the foreign companies and are trans- rency. The functional currency of all subsidiaries included lated using the exchange rate applicable on the reporting date. in the consolidated financial statements of DB AG is the rele- The annual financial statements of subsidiaries which are vant local currency. domiciled in hyperinflationary economies are translated in The consolidated financial statements are prepared in accordance with IAS 29. No major subsidiary was domiciled euros (reporting currency). in a hyperinflationary economy in the reporting and comparison period. b) Transactions and balances Currency translation differences resulting from the trans- Transactions which are not carried out in the functional cur- lation of shares in a foreign subsidiary and also resulting from rency of a company included in the group of consolidated loans which are part of the net investment in such foreign companies (foreign currency transactions) are translated subsidiaries are shown under shareholders’ equity. When the into the functional currency of the corresponding entity foreign subsidiary is no longer included in the group of con- using the rate applicable at the time of the transaction. solidated companies, the currency translation differences are Exchange rate gains and losses resulting from processing eliminated via the income statement. such transactions and valuing monetary assets and liabilities The following exchange rates are some of the rates used at the rate applicable on the reporting date in the financial for currency translation purposes: statements are recognized in the income statement. € Closing rates Average rates 2007 2006 2007 2006 c) Subsidiaries 1 US Dollar (USD) 0.67930 0.75930 0.72954 0.79635 Subsidiaries whose functional currency is not the euro trans- 1 Pound Sterling (GBP) 1.36361 1.48920 1.46066 1.46678 late their financial statements which are prepared in local cur- 1 Swiss Franc (CHF) 0.60434 0.62232 0.60872 0.63569 1 Hong Kong Dollar rency into the reporting currency (euro) for the purpose of (HKD) 0.08711 0.09765 0.09352 0.10251 being incorporated in the consolidated financial statements 1 Australian Dollar (AUD) 0.59677 0.59913 0.61162 0.59993 of DB AG as follows: Assets and liabilities are translated using 1 Yuan Renminbi (CNY) 0.09300 0.09728 0.09598 0.09990 the exchange rate applicable on the reporting date, income and expenditure are translated using the average rate. Differences resulting from currency translation are shown Recognition of income and expenditure separately under shareholders’ equity. The revenues generated in DB Group relate to the provision The shareholders’ equity which has to be initially consoli- of transport and logistics services, the provision of rail infra- dated as part of an acquisition of foreign subsidiaries is trans- structure, the sale of goods and other services related partic- lated as of the relevant balance sheet date using the historical ularly to rail operations, less turnover tax, discounts and any rate applicable at the time of the acquisition. Any differences concessions. They are recognized with their fair value. resulting from the currency translation are shown separately The services provided by DB Group are normally com- under shareholders’ equity. pleted within a few hours/days. Revenues resulting from the As long as the subsidiary is included in the scope of con- provision of services are therefore recognized as soon as the solidation, the translation differences continue to be shown under consolidated shareholders’ equity. If subsidiaries are no longer included in the scope of consolidation, the corresponding translation differences are eliminated and recognized in the income statement. 156 DEUTSCHE BAHN GROUP •

service has been provided, the extent of the revenues and The following service lives for the main groups of property, the costs is reliably measurable and the economic benefit will plant and equipment are shown in the following: probably accrue to the Group. Dividend income is recognized at the point at which the Years Permanent way structures, tunnels, bridges 75 right to receive the payment arises. Interest income is recog- Track infrastructure 20–25 nized in the income statement using the effective interest Buildings and other constructions 10–50 method in the period in which the income arises. Land improvements 8–20 Signaling equipment 20 All expense and income items are normally recognized Telecommunications equipment 5–20 without being netted, unless the accounting principles under Rolling stock 15–30 Technical equipment, machinery and vehicles 3–25 IFRS permit or require netting. Fixtures and fittings 2–20 Expenses are recognized in the income statement at the point at which the service is used or at the point at which the expenses are incurred. The appropriateness of the chosen depreciation method and the service lives is subject to an annual review. Our expecta- Accounting and valuation methods tions regarding the residual value are also updated annually. a) Property, plant and equipment Investment grants are deducted directly from the cost of Property, plant and equipment is recognized at cost of pur- purchase or cost of production of the assets for which the chase and cost of production less cumulative depreciation, grants have been given. and also with due consideration being given to impairments and reversals of previous impairments. Costs of purchase b) Finance lease assets comprise the purchase price plus ancillary purchase costs Rented and leased assets where the underlying leases are less purchase price reductions. If there are any closure or classified as finance leases under IAS 17 are capitalized with restoration obligations, they are recognized in the costs of the lower of fair value or the present value of minimum lease purchase and production of the property, plant and equip- payments at the start of the lease, and are written down ment, and a provision is shown at the same time. Cost of pro- using straight-line depreciation over the financial service duction comprises individual costs as well as overheads life of the asset or the shorter duration of the lease. which are directly allocatable. Interest on borrowed funds is not included, and instead c) Intangible assets and goodwill is expensed immediately. Turnover tax incurred in connec- Intangible assets acquired for a monetary consideration are tion with the purchase of production of property, plant and recognized at cost of purchase. Intangible assets manufac- equipment is only capitalized if input tax is not permitted to tured in-house are recognized with their cost of production, be deducted. and consist exclusively of software. The costs of the devel- Subsequent costs are capitalized if the expenses enhance opment phase are capitalized if a future economic benefit the economic benefit of the property, plant and equipment accrues to DB Group and if the other capitalization criteria and if the costs can be reliably measured. On the other hand, are satisfied. The costs of production comprise all costs all other repairs or maintenance are expensed. which can be directly allocated and those costs which are Depreciation is taken to the income statement on a incurred in order to prepare the asset for its envisaged use. straight-line basis over the expected service life of the asset. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 157 Notes

Costs of production comprise mainly costs for material and Definition of cash-generating units services, wage and salary costs as well as relevant overheads. Goodwill impairment tests have to be carried out at the level Interest on borrowed funds is not capitalized. Turnover of individual assets as part of the asset impairment test. If it tax incurred in connection with the purchase and produc- is not possible for future cash flows, which are to a large tion of intangible assets is only capitalized if input tax is not extent independent, to be established for individual assets, deductible. so-called cash-generating units (CGUs) have to be formed. Intangible assets (excluding goodwill) are subsequently The criteria for defining the CGUs are based on the structure valued at cost of purchase or cost of production less depre- of the operating business. In DB Group, the CGUs to a large ciation and impairments plus any reversals of previous extent correspond to the operating business units re- impairments. Depreciation is calculated using the straight- spectively segments, whereby further differentiation has line method. The adequacy of the depreciation method and taken place within the Services business unit as a result of the service life are subject to an annual review. different contents. Due to the congruence between manage- The following probable service lives are used as the basis ment structure and legal structure, a cash-generating unit for depreciation on intangible assets: always consists of at least one legal unit. This means that the data necessary for the asset impairment test can be derived Years from annual financial statements and planning data. Franchises, rights, etc. Duration of contract Trademarks Economic life The impairment test for goodwill is carried out at the Brand name Economic life level of a CGU to which this goodwill has been allocated. At Customer base Economic life present, significant goodwill exists in the Schenker and Rail Purchased software 3–5 Software produced in-house 3 Freight CGUs. The goodwill from the acquisitions of EWS and Spain-Tir resulting from the company transactions in Goodwill arises as a positive difference between the costs of the 2007 financial year can be completely and uniquely purchasing the shares and the fair values of the individually allocated to the Rail Freight CGU or the Schenker CGU. acquired assets, absorbed liabilities and contingent liabilities. They are not depreciated; instead, they are subject to an Method annual impairment test. Impairment losses in relation to In the impairment test in accordance with IAS 36, the carrying goodwill are not reversed. amount of an asset, a CGU or for the goodwill impairment test on the basis of a group of CGUs has to be compared with the d) Impairments of assets corresponding recoverable amount. If the carrying amount is IAS 36 governs the impairment test for tangible and intan- no longer covered by the recoverable amount, this results in a gible assets with a certain economic life, which is carried out corresponding impairment. using a so-called indicator-based asset impairment test. Such an asset impairment test has to be carried out when indicators (so-called triggering events) indicate a possible loss of value. In addition, according to IAS 36, goodwill as well as intangible assets with an indefinite service life have to be subjected at least once a year to an impairment test in the form of a goodwill impairment test. 158 DEUTSCHE BAHN GROUP •

The carrying amount of a CGU is established by adding the Asset impairment test carrying amounts of the assets less the liabilities which are Processes which comply with the specific requirements of related to the relevant assets. In addition, for determining IAS 36 have been implemented in order to carry out the asset the carrying amount of a CGU, it is also necessary to recog- impairment test. The service lives of the individual CGUs nize corporate assets and corporate liabilities jointly used by used for the asset impairment test are based on the service several CGUs proportionately, and the net working capital life of the asset or a group of homogenous assets which is necessary for the corresponding CGU must also be taken (are) most significant for the particular CGU and which into consideration. thus provide(s) the CGU with its characteristic nature. In ad- The recoverable amount is defined as the higher of the dition, the process of establishing the service life disregards fair value less costs to sell and the value in use. In the impair- future cash flows which result from major structural changes, ment tests carried out in DB Group, the recoverable amount disinvestment measures or extension investments. Resul- is represented by the value in use. The value in use is estab- tant adjustments to the original plans relate mainly to the lished as the present value of the free cash flows before major new infrastructure projects and expansion of existing interest and taxes attributable to the continuation of a CGU projects, where it is assumed that construction will com- or a group of CGUs. The cash flow forecasts are based on mence after 2007. assumptions which represent the best assessment of The cash flow forecasts take account of internal transfer management with regard to economic conditions. These prices within the Group on the basis of arm’s length assess- cash flow forecasts are based on the medium-term planning ments of the companies involved. The published infra- which is submitted to the Supervisory Board of DB AG and structure prices are applicable for products and services which covers a planning horizon of five years. If cash flow exchanged between transport and infrastructure segments; forecasts are necessary beyond the five-year planning hori- price increases in the period covered by the forecast have zon, a sustainable free cash flow is derived from the plan- also been taken into consideration. ning and is extrapolated on the basis of a growth rate related After the medium-term budget has been adopted in the to the specific market development. In general, a growth Supervisory Board of DB AG, a regular check is carried out rate of 1% p.a. (previous year: 1% p.a.) is assumed. to establish whether there are any impairments affecting A weighted average cost of capital (WAC C ) is used for the CGUs. In addition to this annual cycle, a test is also per- discounting the free cash flows; this reflects the expectation formed if current issues arising from the development in of return on the capital market for providing debt capital business or changes in assumptions indicate that there has and shareholders’ equity to DB Group. In order to maintain been a major deterioration in the value in use. consistency with the process of establishing the free cash The voluntary impairment tests carried out in the period flows before company taxes, a WAC C before corporate taxes under review did not identify any impairment requirement is used. Risks of free cash flows are recognized by a risk- for any CGU. The voluntary asset impairment test carried equivalent capitalization rate. The weighted average cost of out after the medium-term planning was adopted also did capital before taxes is 8.9 % (previous year: 8.8 %). Because not identify any impairment requirement for the CGU. risk and resources are to a large extent networked within DB Group, this WAC C is used uniformly for all CGUs throughout the Group. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 159 Notes

Goodwill impairment test Available-for-sale financial assets A goodwill impairment test must be carried out annually Available-for-sale financial assets are normally recognized for all CGUs or groups of CGUs to which goodwill can be allo- with their fair value. If the fair value of equity instruments cated. Because the goodwill which arises in DB Group as a is not reliably measurable, the available-for-sale financial result of acquisitions can always be clearly allocated to a assets are recognized at cost of purchase less any impairment. CGU, this goodwill impairment test is an integral part of the Shares in non-consolidated subsidiaries and other equity asset impairment test which is always carried out annually investments are also considered to be available-for-sale fi- on a voluntary basis for all CGUs. nancial assets. They are recognized at amortized cost of pur- The goodwill impairment tests carried out for the chase, as the market value of these shares cannot be reliably Schenker and Rail Freight CGUs did not identify any im- determined. pairment requirement. The corresponding amount is re- Available-for-sale long- or short-term securities are presented by the value in use of the CGU, which in turn has recognized with their market values as of the reporting been derived from the medium-term planning of the two date – where such values exist. Changes in fair value are segments. The details relating to methods presented above recognized with no impact on the income statement in the are thus applicable correspondingly. At Schenker, it also has reserve attributable to the marking-to-market of securities. to be borne in mind that separate assumptions relating to the development of the economy, market and competition Receivables and other financial assets as well as currency relations have been made for the relevant Receivables and other financial assets are initially measured international markets. These assumptions have been based at fair value. In general, this is equivalent to the costs of pur- on the external and internal expert assessments available at chase. Long-term interest-free or low-interest receivables the time of the planning. Despite the continuing growth on (receivables due after more than one year) are discounted to the international transport and logistics markets, a growth the present value of future cash flows. Discounted receiv- rate of only 1% per annum has been assumed as the sustain- ables are adjusted for cumulative interest in subsequent able growth rate after the five-year planning period (pre- periods with the effective interest fixed for initial valuation. vious year: 1%). Receivables for which there are substantial objective indications of an impairment are adjusted appropriately. e) Shares in companies accounted Portfolio-based allowances are also recognized in relation to for using the equity method groups of assets; in particular, historical default rates are Shares in associated companies and joint ventures are taken into consideration. accounted for using the equity method in accordance with IAS 28 (Shares in Associated Companies) or in accor- Cash and cash equivalents dance with the option specified in IAS 31 (Shares in Joint This item comprises cash in hand and checks, deposits at Ventures). Based on the Group costs of purchase at the banks which are due on sight, as well as cash and cash equiva- time of the purchase, the figure for the change in share- lents. Balances at banks comprise overnight money as well holders’ equity at the company accounted for using the as time deposits due within three months. equity method attributable to the shares of DB Group is Cash and cash equivalents are recognized with their extrapolated. nominal value. f) Financial assets Arms-length purchases or sales of financial assets are recognized or eliminated on the settlement date. At present, there are the following categories in DB Group in accordance with IAS 39: 160 DEUTSCHE BAHN GROUP •

g) Inventories Deferred taxes are established on the basis of the tax rates All costs which are directly related to the procurement pro- which can be expected for the period in which the deferred cess are capitalized as the costs of purchase of the inventories. tax is realized on the basis of existing laws or laws which The average method is used as the basis for establishing the have in essence been adopted. cost of purchase of fungible and homogeneous raw materials and supplies. Costs of production comprise individual costs j) Financial debt and liabilities as well as the directly allocatable overheads. Current liabilities are normally recognized with their nomi- As of the balance sheet date, inventories are measured nal amount, which corresponds to the fair value at the point with the lower of cost or net realizable value. at which the liability is initially recognized and the amortized costs of purchase up to the date at which the liability is h) Available-for-sale non-current assets settled. Financial debt and other non-current liabilities, when Under IFRS 5, non-current assets are classified as available- initially recognized, are stated with the amount which cor- for-sale non-current assets if their carrying amount is to be responds to the fair value of the received assets, where realized by way of sale and not by way of continued use. This appropriate less transaction costs. Subsequently, they are can be an individual asset, a disposal group or part of a com- stated using amortized costs of purchase using the effective pany. Non-current available-for-sale assets are stated with interest method. The differences between the amount paid the lower of carrying amount or market value less costs out less transaction costs and the amount repaid are recog- which are incurred. nized in the income statement over the life of the liability. Interest-free Federal Government loans which are related i) Deferred taxes to infrastructure capital expenditures are recognized with Deferred taxes are calculated in accordance with IAS 12 the present value of the amounts to be repaid, and are adjusted (Income Taxes). to their nominal repayment amount over their life. The dif- Until the 2006 financial year, the domestic group tax ference between the nominal amount of the loan and the rate used as the basis for calculating deferred taxes was 40 %. present value is recognized as an interest benefit under The Company Tax Reform (Unternehmenssteuerreform) accruals. Interest income attributable to the pro rata rever- will result in the tax rate in Germany being reduced starting sal of these accruals compensate for the interest expense in 2008; accordingly, the new domestic group tax rate of relating to the loans. 30.5 % will be used for calculating the deferred taxes starting Liabilities arising from leases which are classified as in the 2007 financial year. The group tax rate comprises the finance leases in accordance with the allocation criteria of corporation tax rate plus solidarity surcharge and an average IAS 17 are recognized with the present value of minimum trade tax rate. Foreign subsidiaries use their relevant local leasing payments at the beginning of the lease, and are sub- tax rates for calculating deferred taxes. sequently stated under debt in the amount of amortized A deferred tax asset is recognized in accordance with cost of purchase. The leasing installments are broken down IAS 12.24 or IAS 12.34 if, after corresponding deferred tax into an interest component and a repayment component. liabilities have been deducted, it is likely that adequate tax- The interest component of the leasing installment is recog- able income is available. The medium-term planning with nized in the income statement. additional estimates is used as the basis of this process. Deferred tax assets relating to income which can be generated after the medium-term period are not recognized, on the grounds that they cannot be reliably determined. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 161 Notes

k) Employee benefits Payments on the occasion of termination of employment Pension obligations and similar commitments contracts (severance packages) In the Group, there are defined benefit as well as defined con- Severance packages become payable if an employee is re- tribution retirement pension systems. leased from his duties before normal pensionable age or if an The provision for defined benefit retirement benefit sys- employee voluntarily terminates his employment contract tems stated in the balance sheet corresponds to the present in return for a severance package. Severance payments are value of the pension commitment (Defined Benefit Obliga- recognized if there is a demonstrable obligation either to ter- tion; DBO) less any plan assets on the reporting date, adjusted minate the employment agreements of current employees by cumulative actuarial profits and losses which are not re- in accordance with a detailed formal plan which cannot be flected in the income statement and subsequently applicable reversed or to pay severance payments if the employment service time which has not been recognized. The pension contract is voluntarily terminated by employees within the obligation is calculated annually by independent actuarial framework of employment contract termination agreements. experts using the projected unit credit method. Actuarial pro- Severance package obligations for agreements agreed as fits and losses are not recognized if they do not exceed 10 % of of the reporting date are recognized as other liabilities and – if the higher of the obligation or the present value of plan assets they are not yet included in individual agreements and if (10 % corridor rule). The amount which exceeds the corridor is they are part of a restructuring obligation in accordance with recognized over the expected average remaining service lives IAS 37 (Provisions, Contingent Liabilities and Contingent of the employees covered by the plan. Assets) – are stated as other provisions. Subsequently applicable service time is immediately Semi-retirement agreements are based on the so-called recognized in the income statement, unless the changes in block model. The top-up amounts paid in addition to salary the pension plan (retirement pension system) depend on the by DB Group during the semi-retirement period as well as employee remaining in the company for a defined period (the additional contributions to the statutory pension insurance period up to the point at which the rights become vested). In scheme constitute benefits arising upon termination of the this case, the subsequently applicable service time is recognized employment contract. They are shown with their present in the income statement on a straight-line basis over the period value at the point at which the obligation originated. The up to the point at which the rights become vested. compensation backlog (plus the employer’s contributions The expense arising from applying interest to the pension to social insurance) for the additional work performed obligations and the expected income from the plan assets is during the employment phase is also shown with the pres- recognized in financial result. ent value. The expenses attributable to cumulative interest In the case of defined contribution retirement pension on the obligations are shown under personnel expenses. systems, DB Group pays contributions to public-sector or private retirement pension schemes, either voluntarily or as a result of a contractual or statutory obligation. DB Group does not have any additional payment obligations beyond having to pay the contributions. The contributions are recognized in personnel expense when they are due. Advance payments of contributions are recognized as assets to the extent that there is a right for a repayment or reduction of future payment. 162 DEUTSCHE BAHN GROUP •

Other benefits due in the long term Non-current provisions are discounted using market inter- Employees who are covered by the regulations of the collec- est rates. Environmental protection provisions for the reha- tive bargaining agreement with regard to maintaining long- bilitation of existing ecological damage are discounted on the term accounts for the employees of various companies of basis of real interest rates, which are adjusted to reflect the DB Group (referred to in the following as Lzk-TV), are able risk and the period until fulfillment. The difference between to convert the overtime which they have worked into a cre- the nominal value of the expected outflows and the present dit which is maintained in the form of a monetary equiv- value recognized for the environmental protection provi- alent. DB Group has agreed to pay the compensation for the sions of DB AG for novated liabilities for the elimination of additional overtime plus the related employer’s contribu- inherited burdens from the time prior to the foundation of tions to social insurance into the “Fonds zur Sicherung von DB AG is stated under deferred income, and represents the Wertguthaben e.V.” (Wertguthabenfonds – credit fund) interest benefit resulting from the longer-term release of the every month at the point at which the salary payment provision. The cumulative interest expense attributable to becomes due. The credit fund has been established in the other provisions is recognized in financial result. legal form of a registered association as a joint institution of the wage-bargaining parties in accordance with the Wage m) Deferred income Bargaining Act (Tarifvertragsgesetz). The wage bargaining Deferred public-sector grants parties, in their capacities as members of the association, are DB Group receives various public-sector grants, which are responsible for managing and administering the credits. provided in relation to specific assets or on the basis of a spe- The compensation paid to the employees starting with cific performance. The grants are recognized in the balance the beginning of the phase during which the employees are sheet as soon as it is certain that they will be provided and as exempted from their duties is financed out of the credit soon as the conditions necessary for receiving the grants fund. The length of the phase during which the employees have been satisfied. The grants related to assets, and in par- are exempted from their duties is determined by the size of ticular investment grants, are deducted directly from the the credit which has accumulated. assets for which grants have been received. The interest With regard to the credits, no further financial risks are benefit (difference between nominal value and present retained in DB Group when the funds are paid out. value) of interest-free loans are deferred on the basis of the The plan is treated as a defined contribution plan. contractual grant conditions. l) Other provisions Deferred profits from sale-and-lease-back agreements Other provisions are set aside if there is a legal or actual obli- If capital gains have been realized in conjunction with sale- gation resulting from a past event which is more than 50 % and-lease-back agreements and if the subsequent lease has to likely to result in an outflow of resources and if the extent of be classified as a finance lease, these gains are deferred and the obligation can be reliably estimated. If it is likely that a released with an impact on the income statement over the provision will be refunded, for instance as a result of an life of the relevant agreements. insurance policy, the refund is recognized as a separate asset only if it is as good as certain. The income from refunds is not netted with the expenses. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 163 Notes

n) Derivative financial instruments • Derivative financial instruments which do not satisfy Recognition of derivative financial instruments the requirements for recognizing hedges in accordance with At the point at which the contract is concluded, derivative IAS 39 If hedges which in economic terms are used for inter- financial instruments are recognized as a financial asset or a est, currency or price hedging do not satisfy the restrictive financial liability in the balance sheet. Derivative financial requirements of IAS 39 for being recognized as a hedge, the instruments are initially and subsequently measured at fair changes in value are immediately recognized in the income value. The treatment of changes in the fair value depends on statement. the type of the hedged underlying. At the point at which the contract is taken out, derivative financial instruments • Calculation of the fair value The fair value of financial are generally classified as a hedging instrument (a) for hedg- instruments which are traded in an active market is derived ing the fair value of certain assets or liabilities recognized from the market price applicable on the reporting date. In in the balance sheet (fair value hedge) or (b) for hedging the order to calculate the fair value of financial instruments cash flows arising from a contractual obligation or an ex- which are not traded on an active market, common measure- pected transaction (cash flow hedge). ment methods such as option price or present value models are applied and assumptions which were appropriate as a • Fair-value hedges The purpose of fair value hedges is to result of the market conditions on the balance sheet dates provide protection against changes in the value of balance are made. Financial instruments which are not traded in an sheet items. In these cases, the hedge as well as the hedged active market are measured using forecasts based on equiv- risk content of the underlying are recognized with their alent financial instruments which are traded in an active present value. Changes in value are recognized in the income market. The limited negotiability is recognized in the form statement. of mark-ups and mark-downs which are derived from histor- DB Group currently does not have any fair value hedges. ical data. The mean value of bid and offer prices is used. Trades for which no premium has been paid have a fair value • Cash flow hedges Cash flow hedges are used to provide of zero upon conclusion. protection against fluctuations in the cash flows of financial assets or liabilities. When future cash flows are hedged, the Capital management in DB Group hedging instruments are also recognized with their fair (in accordance with IAS 1) value. Changes in value are initially recognized in share- The purpose of financial management of the Group is to holders’ equity with no impact on the income statement, achieve sustainable growth in the enterprise value and also and are only recognized in the income statement at the point to comply with a capital structure which is adequate for at which the corresponding losses or profits from the under- maintaining an excellent rating. lying have an impact on the income statement or the trans- The capital structure is managed on the basis of the gear- actions expire. ing parameter. Gearing is defined as the ratio between net financial debt (financial debt less cash and cash equivalents) and shareholders’ equity. The main instruments for managing the capital structure are: Scheduled repayment of financial debt as well as strengthening of the capital base by way of retained earnings or a capital increase. 164 DEUTSCHE BAHN GROUP •

The medium-term target is gearing of 100 %; i.e. identical per- EBITDA margin centages of net ﬁnancial debt and shareholders’equity. This If the actual EBITDA (Earnings Before Interest, Taxes, objective is unchanged compared with last year. Gearing has Depreciation and Amortization) margin were 10 % lower developed as follows: than the current planning assumption at the end of the planning period, and if this effect also has an impact on the € million 2007 2006 cash ﬂows forecast after this period, there would be no need Financial debt 18,062 19,881 – Cash and cash equivalents 1,549 295 for impairment for the carrying amounts of the property, = Net financial debt 16,513 19,586 plant and equipment and the intangible assets (previous ÷ Carrying amount equity 10,953 9,214 year: € 70 million). = Gearing 151% 213%

Average real growth rate of cash flows Gearing improved compared with the previous year, partic- If the growth rate of operating cash flows assumed after the ularly as a result of the positive development in profits, planning period were to be 10 % lower than the current which boosted shareholders’ equity, and also as a result of assumption – i.e. 0.9 % p.a. instead of the currently assumed the repayment of net financial debt. 1.0 % p.a. – there would be no need for impairment for the property, plant and equipment and the intangible assets (as Critical assessments and appraisals was the case in the previous year). The consolidated financial statements are based on assessments and assumptions relating to the future. Assessments Weighted average costs of capital and appraisals established on this basis are continuously If the capitalization rate before taxes used for calculating the reviewed, and are based on historical experience and other value in use had been 10 % higher than the current assump- factors, including expectations of future events which appear tions (in other words if it had been 9.8% instead of the cur- to be reasonable in the given circumstances. Of course, the rent assumption of 8.9 % (in the previous year 9.7 % instead assessments will not always correspond to subsequent actual of the assumed 8.8 %), the carrying amount of the property, circumstances. plant and equipment would have had to have been impaired The assessments and assumptions which may involve a by around € 40 million (previous year: € 0 million). Good- significant risk in the form of a major adjustment of the carry- will would still be of value in this case. ing amounts of assets and liabilities during the next financial year are discussed in the following. Service life and residual value If the residual value of the cash generating units were to be a) Impairment of cash-generating units 10 % lower at the end of their service lives, the carrying Depending on specific events or circumstances, DB Group amount of the property, plant and equipment and the intan- regularly assesses whether there is any need for impair- gible assets would not decline, as was the case in the pre- ment of a CGU. Fundamental principles and assumptions of vious year. the impairment procedure used in DB Group in accordance with IAS 36 (Impairment of Assets) are detailed in this sec- b) Deferred taxes tion under “Impairments of assets.”We have provided the The calculation of deferred tax assets is generally based on following explanations concerning individual assumptions the medium-term planning. If the sum of net profits planned which have an impact on the value of a CGU: for the medium-term planning period were to decline by 10 % in conjunction with otherwise unchanged tax parameters, deferred tax assets would have to be adjusted by € 159 million (previous year: € 203 million). GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 165 Notes

c) Environmental protection provisions Notes to the income statement The environmental protection provisions relate primarily to the obligation of DB AG to remedy the ecological contam- (1) Revenues ination which arose before January 1, 1994 on the land of the Deutsche Bundesbahn and the former Deutsche Reichs- € million 2007 2006 Revenues from services 30,866 29,725 bahn. The ecological contamination comprises mainly con- thereof ordered-service fees for tamination of soil and groundwater as a result of using the rail transport (4,483) (4,551) properties. The obligation to rehabilitate the property is Revenues from sale of goods 443 328 Total 31,309 30,053 derived from the Federal Soil Protection Act (Bundes- bodenschutzgesetz; BBodSchG), the Water Management Act (Wasserhaushaltsgesetz; WHG), the Land Fill Site Or- Revenues have increased by € 1,256 million (+ 4.2 %). Ad- dinance (Deponieverordnung; DepV) as well as other addi- justed by the major effects arising from changes in the scope tional acts and ordinances. of consolidation, and in particular by the contributions to The provision has been calculated on the basis of a dis- revenues made by the Spain-Tir Group, Fertrans and Schenker counting method using the present value, where rehabilita- Russija ZAO, the increase is 3.6 % (previous year: 7.7 %). tion measures are probable, the rehabilitation costs can be Ordered-service fees relate to fees generated by performance- reliably estimated and no future benefit is expected to be based transport contracts with the Federal states. derived from these measures. Movements in revenues broken down according to busi- The estimation of future rehabilitation costs is subject to ness segments and regions are set out in segment reporting. various uncertainties. In addition to technical developments in the rehabilitation field and the intensity of innova- (2) Changes in inventories and other capitalized tion, changes in the legal background can also have a sub- own work stantial impact on rehabilitation costs. For establishing the € million 2007 2006 amount of the provision stated in the balance sheet, the Inventory changes 29 –51 rehabilitation obligations which are currently physically Internally produced and capitalized assets 1,916 1,941 known or identifiable have been used as the basis for esti- Total 1,945 1,890 mating the expected costs in relation to the current price level. The figure shown for environmental protection provi- Own investments relate mainly to construction and project sions is calculated on the basis of expected cash-effective business in rail infrastructure and also the modernization of outflows and on the basis of the application of a risk-adjusted rolling stock as well as the processing of appropriate spare real interest rate of 0.69 % (previous year: 0.06 % to 1.37 %). parts. If major legal conditions or official covenants result in implementation times of rehabilitation measures which differ considerably from the estimated time corridor, this might result in a changed time horizon for the expected cash outflows, and also to a changed provision. In addition, price increases may also result in a higher provision. 166 DEUTSCHE BAHN GROUP •

(3) Other operating income Income from the reversal of provisions was realized in connection with the maintenance measures which were carried € million 2007 2006 out, revaluations of early retirement obligations as well as Income from the disposal of non-current financial instruments 688 75 environmental burdens. Services for third parties and sales The decline in other income is attributable to the income of materials 641 599 shown under this item last year in connection with the Income from the disposal of property, plant and equipment and intangible assets 513 293 reimbursement of railway police services in the amount of Income from Federal grants1) 336 414 € 256 million. No equivalent income was generated in the Leasing and rental income 212 234 year under review. Income from the release of provisions 178 325 Income from claims for damages and compensation 93 84 (4) Cost of materials Income from the reversal of negative differences 3 18 € million 2007 2006 Other income1) 555 817 Costs of raw materials, consumables Total 3,219 2,859 and supplies 2,237 2,090 Costs of purchased services 11,602 11,289 1) Previous year’s figures adjusted Maintenance expenses 3,327 3,070 Total 17,166 16,449

Major effects on the extent of other operating income in the year under review were attributable to the realization of The adjustments to inventories recorded under cost of book profits in connection with the sale of financial assets. materials amount to €13 million (previous year: €5 million). In the 2007 financial year, DB Group disposed of the compa- Beside the additional inclusion of Spain-Tir, increases nies Scandlines AG, Frachtcontor Junge & Co. GmbH as well compared with the previous year were reported mainly for as NUCLEAR CARGO + SERVICE GmbH (including equity energy costs and the much higher purchased input services participations) within the framework of strategic optimi- in the Schenker segment with correspondingly higher input zations in the portfolio of equity participations. payments. Higher maintenance services were also reported The increase in income from the disposal of property, for the rolling stock as well as infrastructure installations. plant and equipment and intangible assets is essentially attributable to the sale of the Aurelis real estate portfolio (5) Personnel expenses and employees (book profit € 236 million). The income from state grants comprises mainly com- € million 2007 2006 Wages and salaries pensation payments of public-sector bodies in connection Employees 6,801 6,649 with the Railway Crossing Act (Eisenbahnkreuzungsgesetz; Civil servants assigned 1,318 1,326 8,119 7,975 EKrG) and the Municipal Transport Financing Act Social security costs (Gemeindeverkehrsfinanzierungsgesetz; GVFG) as well as Employees 1,287 1,281 compensation payments for equal-height crossings in accor- Civil servants assigned 266 289 dance with an EU ordinance. The grants are received main- Costs of adjusting staffing levels 110 120 Retirement benefit expenses 131 117 ly by rail infrastructure companies. The slight decline com- 1,794 1,807 pared with the previous year is mainly due to lower grants in the Track Infrastructure segment. Total 9,913 9,782 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 167 Notes

The figure stated for personnel expenses includes expense In the event of changes in the scope of consolidation, the of € 626 million for defined contribution plans (previous employees are included on a pro rata basis up to the time of year: € 621 million). deconsolidation or after the date of initial consolidation. The figure stated for personnel adjustment mainly com- The development in the number of employees, based on prises expenses attributable to severance payment and the number of natural persons, is shown in the following: semi-retirement agreements.

The retirement beneﬁt expenses relate to active persons At year end as well as persons who are no longer employed in DB Group 2007 2006 or their surviving dependants. They are attributable primar- Employees 208,610 199,353 Civil servants 40,745 41,913 ily to the service time costs, the employer’s contributions to Subtotal 249,355 241,266 the additional company pension scheme as well as the contributions to Pensions-Sicherungs-Verein aG. The interest Trainees 8,594 8,099 Total 257,949 249,365 expense relating to cumulative interest on the pension obligations and the expected income from the plan assets are shown under ﬁnancial result. For detailed explanations (6) Depreciation regarding the development of pension obligations, please Depreciation relates mainly to the property, plant and refer to the Notes under (32). equipment used as rail infrastructure as well as the rolling The activities of the civil servants in DB Group are based stock. In the income statement, depreciation is shown less on the statutory assignment within the framework of sec- any reversals of previous impairments in the period under tion 2 (12) of the Rail Restructuring Act (Eisenbahnneuord- review. nungsgesetz; ENeuOG). For the work of the assigned civil For further explanations, please refer to the details con- servants, DB AG reimburses to the Federal Railroad Fund cerning the development in property, plant and equipment those costs which would be incurred if a person subject to or intangible assets under Notes (13) and (14). collective bargaining agreements were to be employed as an employee instead of the assigned civil servants (pro forma settlement). The higher personnel expenses are attributable to the increase in the number of employees as well as higher wage settlements. The allocations to personnel provisions have moved in the opposite direction. The development in the number of employees in DB Group, converted to full-time employees in each case, is shown in the following:

FTE At year end Average for the year 2007 2006 2007 2006 Employees 198,314 189,331 191,823 188,475 Civil servants 38,764 39,869 39,533 40,515 Subtotal 237,078 229,200 231,356 228,990

Trainees 8,594 8,099 7,262 7,144 Total 245,672 237,299 238,618 236,134 168 DEUTSCHE BAHN GROUP •

(7) Other operating expenses of the sale of Brenntag activities. The environmental risks which still existed at the companies were taken over by the € million 2007 2006 purchaser. Rental and leasing expenses 952 866 Other purchased services 487 394 The increase in other expenses is mainly attributable to Travel and entertaining expenses 203 201 allocations to the provisions for anticipated losses arising Legal, consultancy and audit fees 195 175 from long-term transport agreements (€ 310 million). Loss from disposal of property, plant and equipment and intangible assets 163 193 Contributions and fees 151 152 (8) Results of companies accounted Insurance expenses 164 173 for using the equity method Damages payable 110 79 Sales promotion and advertising expenses 110 96 The following contributions to profits are recognized in the Other personnel-related expenses 107 106 income statement as a result of shares in companies over Cost of printing and office supplies 85 88 which significant influence can be exercised or which are Other taxes 69 74 Costs of disposals of non-current managed as joint ventures. financial instruments 65 0 Impairments in receivables and € million 2007 2006 other assets 24 4 Joint ventures Research and not capitalized Scandlines AG 0 3 development costs 7 9 Other 0 2 Other 812 534 05 Total 3,704 3,144

Associated companies METRANS AS 14 2 The increased costs for leasing and rents as well as other EUROFIMA AG 16 sourced services reflect mainly operating effects from the Other 17 5 increased level of business activity at Schenker. Higher 32 13 costs were also incurred for rental of rolling stock for Long- Total 32 18 Distance Transport, Regio and Rail Freight. Legal, consultancy and audit fees comprise fees of €19.5 In the year under review, DB AG sold a nominal amount of 1% million for the auditor of the consolidated financial state- of the shares in the European Company for the Financing of ments (previous year: € 18.8 million); of this figure, audits Railroad Rolling Stock (EUROFIMA), Basel, Switzerland. of financial statements accounted for € 9.6 million (pre- The resultant disposal income (€ 6 million) is shown under vious year: € 10.3 million), attestation services accounted operating income. for € 4.8 million (previous year: € 4.4 million), tax consult- Of the profit components shown by METRANS AS, ancy accounted for € 0.3 million (previous year: € 0.5 mil- Prague, Czech Republic, a figure of €6 million is attributable lion) and other services accounted for € 4.8 million (pre- to previous periods. vious year: € 3.6 million). The costs attributable to the disposal of long-term financial instruments include a book loss from the sale of two US companies which had sold their operations as part GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 169 Notes

(9) Net interest income (10) Other financial result

€ million 2007 2006 € million 2007 2006 Interest income Result from equity investments 8 8 Other interest and similar income 91 75 Result from currency exchange gains –102 187 Interest income from the release Result from foreign exchange-based of deferred income 234 258 derivative contracts 88 –191 325 333 Result from other derivative financial instruments 1 – 2 Interest expenses Result from disposal of Other interest and similar expenses – 842 – 886 financial instruments 0 1 Interest accrued on non-current Impairments on financial instruments – 2 – 2 provisions and liabilities – 228 – 235 Miscellaneous financial result 4 0 Interest element of finance Total –3 1 lease payments – 82 – 81 Interest cost of retirement benefit obligations – 81 –72 The result of exchange rate effects is attributable to the con- –1,233 –1,274 version of foreign currency liabilities or receivables with an impact on the income statement using the spot rate applica- Total – 908 – 941 ble on the reference date (IAS 21). The result from exchange rate effects theoretically has to be netted with the result of The increase in short-term interest rates resulted in higher currency-related derivatives. Both parameters have changed other interest income in 2007 compared with the previous appreciably compared with the corresponding previous year year. figures, primarily as a result of the repayment of covered The decline in other interest expenses is mainly attribut- foreign currency bonds of USD 600 million and CHF 750 able to capital market debt which declined on average for the million which took place in 2007, and the redemption-related year. The repayment of a bank loan to Aurelis Real Estate termination of the corresponding hedges. The result of GmbH&Co. KG (€ 1,217 million) at the end of 2006 and the currency-based derivatives comprises the reclassification of repayment of a EUROFIMA loan (€ 256 million) resulted in currency-related changes in the market value of cash flow an improvement in net interest income in 2007. hedges recognized under shareholders’ equity with no im- The interest income and expenses attributable to the pact on the income statement. The result of other derivatives financial assets and liabilities which are not measured at fair relates to the development in the market value of derivatives value through profit or loss amounted to € 79 million (pre- which are not classified as effective hedges in accordance vious year: € 54 million) and € –1,060 million respectively with IAS 39. (previous year: € –1,105 million). (11) Taxes on income

€ million 2007 2006 Effective taxes payable – 234 –122 Income due to lapsing of tax obligations 22 3 Effective taxes on income expenses – 212 –119

Deferred tax income – 88 244 Total –300 125 170 DEUTSCHE BAHN GROUP •

The actual tax expense was incurred in Germany and also at The other effects in the year under review comprise in par- foreign subsidiaries. ticular effects attributable to the fact that domestic taxes on In the year under review, deferred tax income resulted income differ from predicted taxes on income as a result of from additional future possibilities of using temporary dif- different assessment bases used for the individual types of ferences and losses carried forward, particularly within taxes on income. Germany. In addition, a tax expense resulted from the reduction of income tax rates within the framework of the (12) Earnings per share Company Tax Reform starting in 2008 and the related reduc- Under IAS 33 (Earnings per Share), undiluted earnings per tion in the domestic consolidated tax rate for calculating share are calculated by dividing the net profit of DB Group deferred taxes from 40.0 % to 30.5 %. attributable to the shareholders of DB AG by the weighted Starting with the net profit of DB Group before taxes on average number of shares in issue during the financial year. income and the theoretical taxes on income calculated using Undiluted earnings per share correspond to diluted earnings a Group tax rate of 40.0 %, the following reconciles the cal- per share. culated taxes with the actual taxes on income: € million 2007 2006 Net profit for the year 1,716 1,680 € million 2007 2006 thereof attributable to Profit before taxes on income 2,016 1,555 minority interests (15) (15) Tax rate for the Group 40% 40% thereof attributable to shareholders Expected tax expense – 806 – 622 of Deutsche Bahn AG (1,701) (1,665) Additional and used existing temporary differences (previous year: additional Number of issued shares 430,000,000 430,000,000 existing temporary differences) 484 592 Effect of changes in tax legislation – 432 –1 Earnings per share (€/share), undiluted 3.96 3.87 Income not subject to tax 337 33 Earnings per share (€/share), diluted 3.96 3.87 Tax effects related to IAS12.33 146 154 thereof from discontinuing operations (0.00) (0.00) Expenses not deductible for tax purposes – 44 –16 Differences in tax rates of foreign companies 42 29 Other effects – 27 – 44 Taxes on income as reported –300 125

Effective tax rate 14.9% – 8.0%

The reconciliation amount as detailed in IAS 12.33 relates exclusively to additional tax write-downs resulting from the fact that tax-free grants in the IFRS ﬁnancial statements have been deducted directly from the costs of purchasing the assets. It is not permissible for deferred taxes to be created in relation to these temporary differences. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 171 Notes

Notes to the balance sheet

(13) Property, plant and equipment

Property, plant and Land Commer- Permanent Track infra- Rolling Technical Other Advance Total equipment as of cial, office way structure, stock for equipment equipment, payments December 31, 2007 and other structures signaling passenger and operating and assets € million buildings and control and freight machinery and office under con- equipment transport equipment struction Cost of purchase and manufacturing costs As of Jan 1, 2007 5,071 5,492 12,029 14,092 18,747 1,223 3,706 3,023 63,383 Changes in the scope of consolidation –143 115 62 0 549 147 28 123 881 thereof additions (4) (129) (62) (0) (549) (150) (34) (123) (1,051) thereof disposals (–147) (–14) (0) (0) (0) (–3) (– 6) (0) (–170) Additions1) 70 238 387 1,356 447 65 417 3,255 6,235 Investment grants – 2 – 66 – 267 –1,116 – 67 –13 – 25 – 2,704 – 4,260 Transfers –39 –50 –17 224 203 1 84 – 400 6 Transfers related to assets held for sale 000000000 Disposals – 802 – 231 – 8 – 98 – 264 – 27 – 416 – 212 – 2,058 Currency translation differences – 6 –57 0 – 2 0 0 16 –1 –50 As of Dec 31, 2007 4,149 5,441 12,186 14,456 19,615 1,396 3,810 3,084 64,137

Depreciation As of Jan 1, 2007 –308 –1,627 –3,088 –7,029 – 8,467 –733 – 2,203 – 466 – 23,921 Changes in the scope of consolidation 4 –35 – 23 0 –353 –105 2 0 –510 thereof additions (0) (–35) (– 23) (0) (–353) (–108) (– 20) (0) (–539) thereof disposals (4) (0) (0) (0) (0) (3) (22) (0) (29) Scheduled depreciation –1 –187 –174 –723 –1,064 –78 – 405 0 – 2,632 Impairments – 47 –3 – 2 – 4 – 9 0 – 2 –13 –80 Reversal of impairment losses 40034000038 Transfers 2 – 4 0 – 2 –1 13 –14 0 –6 Transfers related to assets held for sale 000000000 Disposals 1 78 6 79 222 27 324 280 1,017 Currency translation differences 3 46 0 0 0 –1 – 22 0 26 As of Dec 31, 2007 –342 –1,732 –3,281 –7,645 – 9,672 – 877 – 2,320 –199 –26,068

Net book value Dec 31, 2007 3,807 3,709 8,905 6,811 9,943 519 1,490 2,885 38,069 Net book value Dec 31, 2006 4,763 3,865 8,941 7,063 10,280 490 1,503 2,557 39,462

1) Including € 204 million for credit items from previous years. 172 DEUTSCHE BAHN GROUP •

Property, plant and Land Commer- Permanent Track infra- Rolling Technical Other Advance Total equipment as of cial, office way structure, stock for equipment equipment, payments December 31, 2006 and other structures signaling passenger and operating and assets € million buildings and control and freight machinery and office under con- equipment transport equipment struction Cost of purchase and manufacturing costs As of Jan 1, 2006 5,124 5,003 10,672 13,191 18,104 1,124 3,508 4,578 61,304 Changes in the scope of consolidation 2 64 00041530223 thereof additions (2) (64) (0) (0) (0) (4) (153) (0) (223) thereof disposals (0) (0) (0) (0) (0) (0) (0) (0) (0) Additions1) 59 302 441 1,355 570 85 451 3,262 6,525 Investment grants –3 – 86 – 294 – 943 – 45 –18 –38 – 2,321 –3,748 Transfers – 22 278 1,222 589 410 55 97 – 2,636 –7 Transfers related to assets held for sale 000000–20–2 Disposals – 88 –71 –12 –100 - 288 – 26 – 449 140 – 894 Currency translation differences –1200–4–1–140–18 As of Dec 31, 2006 5,071 5,492 12,029 14,092 18,747 1,223 3,706 3,023 63,383

Depreciation As of Jan 1, 2006 –303 –1,465 – 2,141 – 6,381 –7,535 – 664 – 2,061 –1,204 – 21,754 Changes in the scope of consolidation 0 –12000–3–1070–122 thereof additions (0) (–12) (0) (0) (0) (–3) (–107) (0) (–122) thereof disposals (0) (0) (0) (0) (0) (0) (0) (0) (0) Scheduled depreciation –15 –182 –178 –718 –1,071 –76 – 416 0 – 2,656 Impairments – 8 – 2 –14 –58 – 94 – 2 – 8 – 4 –190 Reversal of impairment losses 00035000035 Transfers 6 –14 –760 16 9 – 8 10 743 2 Transfers related to assets held for sale 000000202 Disposals 12 46 5 77 222 20 364 –1 745 Currency translation differences 02002013017 As of Dec 31, 2006 –308 –1,627 –3,088 –7,029 – 8,467 –733 – 2,203 – 466 –23,921

Net book value Dec 31, 2006 4,763 3,865 8,941 7,063 10,280 490 1,503 2,557 39,462 Net book value Dec 31, 2005 4,821 3,538 8,531 6,810 10,569 460 1,447 3,374 39,550

1) Including € 234 million for credit items from previous years.

Impairments of € 80 million (previous year: € 190 million) Reversals of € 38 million in relation to previous impairments mainly relate to property of DB Netz AG as well as rolling stock (previous year: € 35 million) related to track installations and of Railion Deutschland AG and DB Regio AG. property of DB Netz AG. The positive book value disposals of € 68 million (previous year: € 140 million) relating to the purchase and production GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 173 Notes

costs of work in progress are attributable to the repayment plant and equipment. Of the decline compared with the pre- of investment grants received and shown as assets in previ- vious year, € 12 million is attributable to disposals from the ous years. Aurelis portfolio. Financial debt was backed by tangible assets with carry- Property, plant and equipment includes rented assets ing amounts of € 207 million (previous year: € 241 million). which are shown separately in the following overview. The This relates primarily to rolling stock which is used for securing rented property, plant and equipment comprises assets which loans of EUROFIMA, and which are used at the operating are substantially but not legally owned by DB Group, so that companies of the Passenger Transport, Regio and Freight Trans- the underlying lease agreements have to be classiﬁed as ﬁnance port segments. There were restrictions of €1million (previous leases. year: € 16 million) relating to disposal rights for property,

Leased assets Land Commer- Permanent Track infra- Rolling Technical Other Total € million cial, office way structure, stock for equipment equipment, and other structures signaling passenger and operating buildings and control and freight machinery and office equipment transport equipment Assets leased from third parties under finance leases Cost of purchase and manufacturing costs 3 803 19 0 1,100 0 47 1,972 Accumulated depreciation 0 –149 – 2 0 – 668 0 –34 – 853 Carrying amount Dec 31, 2007 3 654 17 0 432 0 13 1,119

Cost of purchase and manufacturing costs 3 730 19 0 1,103 0 52 1,907 Accumulated depreciation 0 –120 –1 0 – 605 0 –31 –757 Carrying amount Dec 31, 2006 3 610 18 0 498 0 21 1,150

The ﬁgure shown for the business, operating and other build- an operating lease (mainly land and buildings), have a residual ings under rented property, plant and equipment mainly carrying amount of €816 million as of December 31, 2007 (pre- relates to concourse buildings of DB Station& Service AG. vious year: €1,749 million). The decline is mainly attributable The ﬁgure shown under rolling stock for passenger and freight to the disposal of the Aurelis portfolio. Rental and leasing pay- transport relates mainly to rolling stock used by the trans- ments resulting from the rental and leasing of these assets port companies of DB Group (engines, multiple units, freight are expected to be received in future years as detailed in the wagons). following: The assets which are established retroactively and also on the basis of our own surveys, and which are leased by way of

Expected rental Residual maturity and leasing income Less than 1–2 years 2–3 years 3–4 years 4–5 years More than Total more Total € million 1 year 5 years than 1 year Dec 31, 2007 Minimum lease payments 339 182 157 136 112 903 1,490 1,829

Dec 31, 2006 Minimum lease payments 416 192 168 141 118 716 1,335 1,751 174 DEUTSCHE BAHN GROUP •

(14) Intangible assets

Intangible assets Capitalized Capitalized Purchased Goodwill Payments Total as of December 31, 2007 development development intangible made on € million costs – prod- costs – prod- assets account ucts currently ucts under in use development Cost of purchase and manufacturing costs As of Jan 1, 2007 108 8 1,094 1,049 10 2,269 Changes in the scope of consolidation 0 0 28 246 0 274 thereof additions (0) (0) (30) (246) (0) (276) thereof disposals (0) (0) (– 2) (0) (0) (– 2) Additions 3 2 64 5 11 85 Investment grants 0 0 0 0 0 0 Transfers 4 –5 –3 0 – 2 –6 Transfers related to assets held for sale 0 0 0 0 0 0 Disposals – 48 –1 –155 –13 0 –217 Currency translation differences –3 0 –13 – 42 0 –58 As of Dec 31, 2007 64 4 1,015 1,245 19 2,347

Depreciation As of Jan 1, 2007 – 96 0 –540 –14 0 – 650 Changes in the scope of consolidation – 2 0 0 –1 0 –3 thereof additions (– 2) (0) (–1) (–1) (0) (– 4) thereof disposals (0) (0) (1) (0) (0) (1) Scheduled depreciation –10 0 –111 0 0 –121 Disposals 0 0 0 0 0 0 Reversal of impairment losses 0 0 0 0 0 0 Transfers 1 0 5 0 0 6 Transfers related to assets held for sale 0 0 0 0 0 0 Disposals 48 0 145 0 0 193 Currency translation differences 4 0 10 0 0 14 As of Dec 31, 2007 –55 0 – 491 –15 0 –561

Carrying amount Dec 31, 2007 9 4 524 1,230 19 1,786 Carrying amount Dec 31, 2006 12 8 554 1,035 10 1,619 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 175 Notes

Intangible assets Capitalized Capitalized Purchased Goodwill Payments Total as of December 31, 2006 development development intangible made on € million costs – prod- costs – prod- assets account ucts currently ucts under in use development Cost of purchase and manufacturing costs As of Jan 1, 2006 110 8 992 317 0 1,427 Changes in the scope of consolidation 10 0 142 777 0 929 thereof additions (10) (0) (142) (777) (0) (929) thereof disposals (0) (0) (0) (0) (0) (0) Additions 0 2 44 3 10 59 Investment grants 0 0 0 0 0 0 Transfers 0 –1 9 0 –1 7 Transfers related to assets held for sale 0 0 0 0 0 0 Disposals –12 –1 – 87 0 1 –99 Currency translation differences 0 0 – 6 – 48 0 –54 As of Dec 31, 2006 108 8 1,094 1,049 10 2,269

Depreciation As of Jan 1, 2006 –77 0 – 459 –11 0 –547 Changes in the scope of consolidation – 8 0 – 42 –1 0 –51 thereof additions (– 8) (0) (– 42) (–1) (0) (–51) thereof disposals (0) (0) (0) (0) (0) (0) Scheduled depreciation – 24 0 –114 0 0 –138 Impairments 0 0 0 – 2 0 –2 Reversal of impairment losses 0 0 0 0 0 0 Transfers 0 0 –3 0 0 –3 Transfers related to assets held for sale 0 0 0 0 0 0 Disposals 13 0 73 0 0 86 Currency translation differences 0 0 5 0 0 5 As of Dec 31, 2006 – 96 0 –540 –14 0 – 650

Carrying amount Dec 31, 2006 12 8 554 1,035 10 1,619 Carrying amount Dec 31, 2005 33 8 533 306 0 880

Segment reporting shows the allocation of reported goodwill to the various segments. 176 DEUTSCHE BAHN GROUP •

(15) Shares in companies accounted The losses carried forward are mainly attributable to the tax for using the equity method law treatment of Federal Government grants paid in previous years to DB AG in accordance with section 21 (5) and € million 2007 2006 section 22 (1) Deutsche Bahn Foundation Act (Deutsche As of Jan 1 178 378 Additions 1 0 Bahn Gründungsgesetz; DBGrG) as a contribution. Disposals through sale 0 –5 On the basis of current laws, the domestic losses carried Group share of profit 32 18 forward are vested. Capital increase 0 0 Other equity movements 0 0 The temporary differences which are not permitted to Dividends received –11 –10 be recognized in accordance with IAS 12.24b in conjunction Impairments 0 0 with 12.33 relate exclusively to additional tax depreciation Reversals of impairments 2 0 Transfers 34 –198 from previously received tax-free investment grants. Currency translation differences –5 –5 The following deferred tax assets and deferred tax liabil- As of Dec 31 231 178 ities shown in the balance sheet are applicable in relation to statement and valuation differences for the individual The ﬁgure shown in the balance sheet as of December 31, balance sheet items and tax losses carried forward. 2007 is mainly attributable to the shares held in the associated companies EUROFIMA, Basel, Switzerland, METRANS A.S., Prague, Czech Republic, and BLS Cargo AG, Bern, Switzer- land. The negotiability of the shares in EUROFIMA is limited.

(16) Deferred taxes

€ million 2007 2006 Deferred tax assets in respect of temporary differences 1,593 1,729 Deferred tax assets in respect of tax losses carried forward 51 71 Total 1,644 1,800

No deferred tax assets have been created in relation to the following losses carried forward and temporary differences:

€ million 2007 2006 Tax loss carry-forwards for which no deferred tax asset has been recognized 18,102 18,106 Temporary differences for which no deferred tax asset has been recognized 1,279 3,087 Temporary differences for which IAS 12 paragraph 33 prohibits recognition of a deferred tax asset 5,494 5,858 Total 24,875 27,051 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 177 Notes

€ million Deferred tax assets Deferred tax liabilities 2007 2006 2007 2006 Non-current assets Property, plant and equipment 171 200 284 248 Intangible assets 10 24 15 16 Derivative financial instruments 0 0 2 12 Other financial instruments 2 2 0 1

Current assets Inventories 0137 Trade receivables 12 44 1 2 Current tax receivables 1 4 0 0 Derivative financial instruments 0 0 22 8 Other financial instruments 7 16 1 3 Available for sale 0001

Non-current liabilities Financial debt 280 349 0 0 Other liabilities 104461 Derivative financial instruments 68 88 0 0 Retirement benefit obligations 147 183 4 4 Other provisions 834 1,425 5 5 Deferred income 7310102

Current liabilities Financial debt 21 25 1 7 Trade liabilities 568 0 2 Other liabilities 231 253 10 3 Income tax liabilities 12 12 2 1 Derivative financial instruments 15 100 0 0 Other provisions 336 361 2 2 Deferred income 52100 Liabilities for assets available for sale 13 0 2 0 Tax loss carry-forwards 51 71 0 0 Subtotal 2,295 3,348 398 385 Valuation allowance –390 –1,235 0 0 Offsetting1) –261 –313 –261 –313 Amount stated in the balance sheet 1,644 1,800 137 72

1) To the extent permitted by IAS 12 (Income Taxes)

Tax assets and liabilities are netted if they exist in relation to No deferred tax liabilities have been created in relation to the same tax authority, if they are of identical maturity and temporary differences in connection with shares in subsidi- if they relate to the same tax subject. aries of €998 million (previous year: €782 million), because Deferred tax liabilities of € 28 million shown directly in there are no indications that corresponding proﬁts will be equity (previous year: deferred tax assets of €17 million) are realized in the near future. If deferred taxes were to be included in the ﬁgure shown for deferred taxes in the balance recognized for these timing differences, the relevant with- sheet. holding tax rate, where appropriate using German taxation of 5 % for distributed dividends and capital gains which are generated, would have to be used for calculation purposes. 178 DEUTSCHE BAHN GROUP •

(17) Available-for-sale assets

€ million Investments in subsidiaries Other shareholdings Securities Total 2007 2006 2007 2006 2007 2006 2007 2006 As of Jan 1 17 10 117 122 16 10 150 142 Currency translation differences 0 0 000000 Changes in the scope of consolidation 0 0 000000 thereof additions (0) (0) (0) (0) (0) (0) (0) (0) thereof disposals (0) (0) (0) (0) (0) (0) (0) (0) Additions 1 8 38 12 0 7 39 27 Disposals through sale – 3 –1 – 3 –17 – 8 –1 –14 –19 Other disposals 0 0 – 2000–2 0 Fair value changes 0 0 000000 Reclassifications –11 0 –35000–46 0 Impairment losses 0 0 – 2000–2 0 Other –1 0 0000–1 0 As of Dec 31 3 17 113 117 8 16 124 150 Non-current amount 3 17 113 117 8 16 124 150 Current amount 0 0 000000

(18) Inventories

€ million 2007 2006 Raw materials, consumables and supplies 822 742 Unfinished products, work in progress 206 201 Finished products and goods 38 39 Advance payments 13 13 Value adjustments – 295 – 285 Total 784 710 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 179 Notes

(19) Receivables and other assets

€ million Receivables Advance Trade receivables from financing payments Other assets Total As of Dec 31, 2007 Gross value 3,792 15 124 509 4,440 Value adjustments – 225 0 0 – 67 – 292 Net value 3,567 15 124 442 4,148 thereof due from related parties (33) (3) (0) (96) (132)

As of Dec 31, 2006 Gross value 3,520 33 152 603 4,308 Value adjustments – 280 0 0 – 65 –345 Net value 3,240 33 152 538 3,963 thereof due from related parties (42) (17) (0) (225) (284)

The impairments for the ﬁnancial instruments classiﬁed in accordance with IFRS 7 have developed as follows (IFRS 7.16 ):

€ million Receivables Trade receivables from financing Other assets Total As of Jan 1, 2007 –280 0 –65 –345 Additions –56 0 –17 –73 Release 77 0 13 90 Amounts used 32 0 2 34 Reclassified to current assets 0 0 0 0 Changes in the scope of consolidation 2 0 0 2 Currency translation differences 0 0 0 0 As of Dec 31, 2007 – 225 0 – 67 – 292

As of Jan 1, 2006 –320 –2 –67 –389 Additions –76 0 –8 –84 Release 82 2 6 90 Amounts used 29 0 4 33 Reclassified to current assets 0 0 0 0 Changes in the scope of consolidation 4 0 0 4 Currency translation differences 1 0 0 1 As of Dec 31, 2006 – 280 0 – 65 –345

Individual allowances are created in relation to receivables the age structure of such receivables. Any impairments which if there are objective indications of an impairment. In the are recognized are deducted from ﬁnancial assets on the case of identical receivables (portfolios of receivables) which assets side of the balance sheet. Previous impairments are cannot be identiﬁed as impaired individually, global allow- reversed if the reasons for the original impairments are no ances (based on experience) are recognized on the basis of longer applicable. 180 DEUTSCHE BAHN GROUP •

The total amount of allocations to impairments of € 73 Costs of € 23 million were incurred for the complete de- million (previous year: € 84 million) consists of individual recognition of receivables and other assets (previous year: allowances of €40 million (previous year: €78 million) and € 11 million). global individual allowances of € 33 million (previous year: Income of €2 million was reported for amounts received € 6 million). in relation to previously derecognized receivables and other The reversals have recognized reductions of individual assets (previous year: € 2 million). allowances of € 75 million (previous year: € 80 million) and The following overview shows the maturity structure of reductions of global individual allowances of € 15 million the receivables for the ﬁnancial instruments classiﬁed in (previous year: € 10 million). accordance with IFRS 7 and the advanced payments which have been made:

€ million Residual maturity Less than 1–2 years 2–3 years 3–4 years 4–5 years More than Total more Total 1 year 5 years than 1 year As of Dec 31, 2007 Trade receivables 3,500 19 15 13 7 13 67 3,567 Receivables from financing 3 0 0 4 1 7 12 15 Advance payments 101 23 0 0 0 0 23 124 Other assets 378 6 1 0 0 57 64 442 Total 3,982 48 16 17 8 77 166 4,148

As of Dec 31, 2006 Trade receivables 3,192 9 6 10 9 14 48 3,240 Receivables from financing 15 1 1 5 1 10 18 33 Advance payments 127 25 0 0 0 0 25 152 Other assets 501 5 0 0 0 32 37 538 Total 3,835 40 7 15 10 56 128 3,963

The increase in trade accounts receivable is mainly attribut- The gross amounts of the individually adjusted receivables able to the expansion of operating business in the Schenker as well as the age structure in accordance with IFRS 7.37a segment. are shown in the following: As a result of the large number of customers in the various operating segments, there is no evidence of any concentration of credit risks with trade accounts receivable. The fair values of the receivables and other assets are to a large extent equivalent to the carrying amounts. The maximum default risk is essentially equivalent to the carrying amount in each case. No collateral is normally held. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 181 Notes

€ million neither not value adjusted and overdue within the following period of time (days) thereof gross written down less than 30 30–59 60–89 90–179 180–359 More than value adjusted nor overdue 359 As of Dec 31, 2007 Trade receivables 311 2,232 835 173 76 85 55 25 Receivables from financing 0 14000010 Other assets 71 290 19424710 Total 382 2,536 854 177 78 89 63 35

As of Dec 31, 2006 Trade receivables 451 1,874 808 164 66 60 29 68 Receivables from financing 0 33000000 Other assets 58 401601479 Total 509 2,308 814 164 67 64 36 77

As of the closing date, there are no indications that debtors Volume 2007 2006 of the receivables which are neither impaired nor overdue Other contracts will not meet their payment obligations. Diesel derivatives (1,000 metric tons) 434 547 HSL (1,000 metric tons) 200 240 Hard coal (1,000 metric tons) (20) Receivables attributable to taxes on income of a coal equivalent (“MTCE”) 252 504 The receivables attributable to taxes on income relate mainly USD forward contracts (USD million) 101 0 to advance payments and allowable withholding taxes, for instance allowable German tax on unearned income. The volume of interest swaps and interest/currency swaps declined appreciably in the financial year because several (21) Derivative financial instruments large-volume transactions became due when the underly- The volume of hedges which have been taken out is shown in ing bonds expired. the following overview of nominal values: The nominal value of the currency swaps increased: an increase in the volume of short-term foreign currency refi- € million 2007 2006 nancing resulting from the EWS acquisition led to a corres- Interest-rate-based contracts Interest rate swaps 2,447 4,139 ponding increase in the hedging requirement. In return, the 2,447 4,139 volume of foreign exchange forwards declined, which was attributable to an increase in Group-wide pooling and netting Currency-based contracts Currency swaps 552 259 activities as well as the successful integration of the BAX Currency forward/future contracts 138 233 companies in the Group financing arrangements. Other currency derivatives 0 0 The volume of energy price derivatives declined be- Interest rate/currency swaps 2,111 3,178 2,801 3,670 cause a lower volume of new business was transacted in 2007. The continuing decline of the US dollar against the euro was used for hedging part of the US dollar exchange risk for the sourcing of diesel. 182 DEUTSCHE BAHN GROUP •

All derivative ﬁnancial instruments are marked-to-market on The increase in energy prices over the year 2007 resulted in a the reporting date. The following overview shows the struc- positive development in the value of energy price derivatives. ture of the item stated in the balance sheet depending on the The market values of the cash ﬂow hedges are shown as type of underlying hedge: follows under assets and liabilities:

€ million Assets Liabilities € million Assets Liabilities 2007 2006 2007 2006 2007 2006 2007 2006 Interest-rate-based Interest-rate-based contracts contracts 0000 Interest rate swaps 2 23 5 30 223530 Currency-based contracts Currency-based Currency swaps 10112 contracts Interest/currency swaps 4 4 266 393 Currency swaps 15112 14 5 267 395 Currency forward/ future contracts 3212Other contracts Interest/currency swaps 4 4 266 393 Energy price derivatives 51 0 1 38 22 7 268 397 510138

Other contracts Total 65 5 268 433 Energy price derivatives 55 0 1 38 55 0 1 38 Currency-based contracts 3 4 220 183 Total 79 30 274 465 Other contracts 21000 Non-current portion 24 4 220 183 Interest-rate-based Current portion 41 1 48 250 contracts 1 19 5 24 Currency-based contracts 4 4 220 183 The following tables show the periods within which the Other contracts 21000 Non-current portion 26 23 225 207 hedged cash flows of the underlyings (interest and redemp- Current portion 53 7 49 258 tion payments) will occur or will be reflected in the income statement: Cash flow hedges In order to minimize the interest and exchange rate risk, virtually all variable interest financial liabilities have been converted into fixed-income liabilities, and the foreign currency issues have been transformed into euros. The expiry of several large-volume transactions resulted in a considerable decline in liabilities arising from the cross- currency swaps. This was opposed by an increase in liabilities attributable to the appreciation of the euro against all major currencies. The increase in assets in the case of currency swaps is to a large extent attributable to the appreciation of the euro against sterling in connection with business conducted within the framework of the EWS acquisition. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 183 Notes

Redemption Due in Nominal value (million) 2008 2009 2010 2011 2012 2013–2014 USD 75––1,45020– CHF 250 – – 300 75 – JPY – – – 5,000 5,000 55,000 HKD – – – – 250 250 NOK 400 – – – - – SEK 400 – – – - – DKK 400 – – – - –

Interest payments Due in Nominal value (million) 2008 2009 2010 2011 2012 2013–2014 USD 76 75 75 75 1 – CHF 16 9 9 9 2 – JPY 1,034 1,034 1,034 1,034 964 1,808 HKD 282728272430 NOK 28 – – – - – SEK 22 – – – - – DKK 21––– -–

In the case of interest and interest/currency hedges, the Non-hedge derivatives effectiveness of the hedge is assessed prospectively using As part of Group financing arrangements, interest risks for the Critical Terms Match method. This method is used future financing arrangements have been hedged using in- because the major valuation parameters of the underlying terest derivatives (forward-start interest swaps). Opposite and hedges are identical. The retrospective effectiveness hedges were taken out when the corresponding underly- measurement is carried out as of every balance sheet date by ings were transacted. In addition, early fixed-interest financ- means of the Hypothetical Derivative method. In this ing arrangements have been converted temporarily to a method, the development in value of the hedge which is variable interest arrangement in certain cases in order to actually taken out is compared with the development in avoid cost-of-carry effects. Forward-start interest swaps in value of a theoretical hedge in which all valuation-relevant conjunction with fixed-income bond issues and the tempo- parameters are identical to those of the underlying. In the rary exchange of fixed interest for variable interest do not case of energy price derivatives and foreign exchange hedg- satisfy the requirements for recognition of hedges in accor- ing in connection with diesel sourcing, the effectiveness of dance with IAS 39, and have to be shown as “non-hedge the hedge is assessed prospectively using the linear regres- transactions.” sion. The retrospective measurement of effectiveness is The figure shown for interest derivatives on the assets carried out as of every balance sheet date by means of the and liabilities side of the balance sheet declined. In addition Dollar Offset method. In this method, the changes in the to the expiry of trades, the increase in the level of interest market value of the underlying are compared with the rates is in the Eurozone and the reduction in the remaining changes in the market value of the hedging instrument. The term also contributed to this effect. resultant quotient determines the inefficiency. The market values of the non-hedge derivatives are The inefficiencies of cash flow hedges recognized in the shown under assets and liabilities as follows: income statement (energy price derivatives and foreign exchange hedging for diesel sourcing) amounted to € 1 million in 2007 (previous year: € 0.1 million). 184 DEUTSCHE BAHN GROUP •

€ million Assets Liabilities 2007 2006 2007 2006 2007 2006 Effective interest rate on short-term Interest-rate-based bank deposits (%) 4.30 3.22 contracts Average term of short-term bank deposits Interest rate swaps 2 23 5 30 (months) 0.2 0.1 223530 The interest rates for current bank deposits were in a range Currency-based contracts of between 3.3 % and 4.8 % (previous year: 2.3 % to 3.7 %). Currency swap 5000 Currency forward/ (23) Available-for-sale assets and liabilities future contracts 3212 8212 € million Jan 1, Dec 31, 2007 Disposal Addition 2007 Other contracts Shares in companies Energy price derivatives 4000 accounted for using the 4000 equity method 147 –147 0 0 Receivables and other assets 1 –1 0 0 Total 14 25 6 32 Cash and cash equivalents 2 – 2 0 0 Assets 150 –150 0 0 Interest-rate-based contracts 1 19 5 24 Other liabilities 2 – 2 0 0 Currency-based Retirement benefit contracts 1000 obligations 1 –1 0 0 Non-current portion 2 19 5 24 Liabilities 3 –3 0 0 Current portion 12618

The maximum counterparty default risk resulting from the The disposals of € 147 million relate to the carrying amount derivative ﬁnancial instruments as of the reporting date is of the shares in Scandlines AG, Rostock. € 79 million (previous year: € 30 million). The other items relate to DB GesundheitsService GmbH, The increase in counterparty default risks compared the shares of which were transferred to the purchaser in with the previous year was mainly due to the development January 2007. in the value of the derivative portfolio, and in particular the increase in the positive ﬁgure shown for the energy price (24) Subscribed capital derivatives. The maximum single risk – default risk in rela- The share capital of Deutsche Bahn AG is € 2,150 million, con- tion to individual counterparties – is €19 million, and relates sisting of 430,000,000 no-par-value bearer shares. All shares to a bank with a Moody’s rating of Aa1. For transactions with are held by the Federal Republic of Germany. terms of more than one year, all banks with which there is a counterparty default risk have a Moody’s rating of at least A1.

(22) Cash and cash equivalents

€ million 2007 2006 Cash at banks and in hand 1,534 291 Cash equivalents 15 4 Total 1,549 295 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 185 Notes

(25) Reserves (26) Generated results a) Additional paid-in capital Generated shareholders’ equity contains all net profits gen- Additional paid-in capital comprises reserves which have erated since January 1, 1994 less goodwill netted under HGB not been part of earnings since January 1, 1994. up to December 31, 2002. This item also shows the impact on shareholders’ equity b) Reserve resulting from valuation attributable to the first-time adoption of IFRS if they are not with no impact on profit or loss included in the reserves attributable to valuation with no Reserve for currency translation differences impact on the income statement. The currency translation differences resulting from the method of functional currency (IAS 21) are shown separately as (27) Minorities part of consolidated shareholders’ equity. Minorities comprise the share of third parties in the net assets of consolidated subsidiaries. Reserve for market valuation of securities The reserve includes the market changes of financial (28) Financial debt instruments which have been classified as “available-for- This item shows all interest-bearing liabilities including the sale financial assets” and which have to be recognized with interest-free Federal Government loans stated with their no impact on profit or loss. The reserve has to be reversed to present values. The maturity structure of debt is as follows: the income statement or eliminated when a financial instrument is sold or in the event of a permanent reduction in the market value of a financial instrument.

Reserve attributable to the market valuation of cash flow hedges This item shows the interest- and currency-related changes in the market value of cash ﬂow hedges applicable for effective hedges. The development in the reserve is shown in the following:

€ million 2007 2006 As of Jan 1 – 26 –35 Changes in fair value 225 –165 Reclassifications Financial result – 87 192 Net interest income –1 –10 Cost of materials –1 –1 Changes in deferred taxes – 45 –7 As of Dec 31 65 – 26 186 DEUTSCHE BAHN GROUP •

€ million Residual maturity Less than More than Total more 1 year 1–2 years 2–3 years 3–4 years 4–5 years 5 years than 1 year Total As of Dec 31, 2007 Government loans 275 618 467 223 213 1,761 3,282 3,557 Bonds 1,114 1,361 996 1,186 609 4,966 9,118 10,232 Commercial paper 0 0 000000 Bank borrowings 285 57 2 2 1 814 876 1,161 EUROFIMA loans 0 656 0 0 434 519 1,609 1,609 Finance lease liabilities 140 112 171 68 135 857 1,343 1,483 Other finance liabilities 20 0 0000020 Total 1,834 2,804 1,636 1,479 1,392 8,917 16,228 18,062 thereof due to related companies (289) (1,274) (467) (223) (647) (2,280) (4,891) (5,180)

As of Dec 31, 2006 Government loans 308 248 583 439 208 1,814 3,292 3,600 Bonds 1,450 1,124 1,357 990 1,310 5,002 9,783 11,233 Commercial paper 357 0 00000357 Bank borrowings 506 208 53 2 1 801 1,065 1,571 EUROFIMA loans 0 0 656 0 0 953 1,609 1,609 Finance lease liabilities 70 128 109 169 65 945 1,416 1,486 Other finance liabilities 25 0 0000025 Total 2,716 1,708 2,758 1,600 1,584 9,515 17,165 19,881 thereof due to related companies (327) (248) (1,239) (439) (208) (2,767) (4,901) (5,228)

The following market values are summarized compared do not show any material differences between the carrying with the carrying amounts: amounts and the market values as a result of short maturi- ties and accordingly interest rates which are close to market € million Carrying Fair Carrying Fair interest rates. amount value amount value 2007 2007 2006 2006 Federal Government loans are attributable almost ex- Government loans 3,557 3,516 3,600 3,728 clusively to financing provided by the Federal Republic of Bonds 10,232 10,306 11,233 11,520 Germany for investments in expanding and replacing track. Commercial paper 0 0 357 357 Bank borrowings 1,161 1,161 1,571 1,576 This is based on the responsibility for the transport needs of EUROFIMA loans 1,609 1,652 1,609 1,685 the public (section 87e (4) Basic Law (Grundgesetz; GG)) Finance lease liabilities 1,483 1,507 1,486 1,542 which is anchored in the Basic Law and specified in the Other finance liabilities 20 20 25 25 Total 18,062 18,162 19,881 20,433 Federal Track Expansion Act (Bundesschienenwegeausbau- gesetz; BSchwAG). The loans have been extended as interest- The differences between the carrying amounts and the free loans. market values of the financial debt are due to the usually The interest-free loans have developed as follows: changed market interest rates for debt with a comparable risk profile. Commercial paper and other financial liabilities GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 187 Notes

€ million 2007 2006 The arrangements for repaying the loans are detailed in As of Jan 1 3,600 3,640 individual and collective ﬁnancing agreements. In general, Addition 56 61 the loans are repaid in equal annual installments, which are Repayment –309 –359 Reclassification 39 80 based on the corresponding annual depreciation applicable Cumulative interest 171 178 for the ﬁnanced assets. As of Dec 31 3,557 3,600 The issued bonds consist of the following transactions:

€ million Residual Effective Carrying Carrying Volume Issue maturity interest rate amount Fair value amount Fair value of issue currency in years in % 2007 2007 2006 2006 Unlisted bonds: Total DB AG 67 JPY, USD 3.7–4.5 44 45 47 47 Total DB Finance B.V. 189 HKD, JPY, CHF 4.5–6.5 150 153 159 163 Total 194 198 206 210

Listed bonds of DB Finance B.V.: Bond 1997–2007 511 DEM – 5.850 – – 511 518 Bond 1998–2008 767 DEM 0.4 5.150 767 766 765 776 Bond 1999–2009 1,350 EUR 1.5 5.600 1,344 1,353 1,341 1,373 Bond 2000–2010 1,000 EUR 2.5 6.150 996 1,035 995 1,059 Bond 2001–2008 53 DKK 0.8 5.250 54 54 54 54 Bond 2001–2008 42 SEK 0.85.50042434445 Bond 2001–2008 50 NOK 0.8 7.000 50 51 49 50 Bond 2001–2013 750 EUR 5.9 5.250 745 764 744 791 Bond 2002–2007 512 CHF – 3.350 – – 467 469 Bond 2002–2007 604 USD – 4.700 – – 455 453 Bond 2002–2008 170 CHF 1.0 3.200 151 152 155 157 Bond 2002–2012 500 EUR 4.6 5.500 498 513 498 531 Bond 2002–2008 76 USD 0.0 FRN 51 51 57 57 Bond 2003–2018 1,000 EUR 10.2 5.000 986 990 986 1,034 Bond 2003–2015 700 EUR 7.5 4.600 689 679 688 703 Bond 2004–2011 209 USD 3.5 5.090 169 175 189 189 Bond 2004–2018 300 EUR 10.2 4.850 297 297 297 310 Bond 2004–2007 17 EUR – 3.000 – – 17 17 Bond 2004–2009 17 EUR 1.8 3.500 17 17 17 17 Bond 2004–2016 500 EUR 8.9 4.300 499 478 498 499 Bond 2004–2014 366 JPY 6.9 1.700 302 306 317 317 Bond 2004–2011 197 CHF 4.0 2.300 180 176 185 183 Bond 2006–2011 678 USD 3.0 5.200 542 560 606 607 Bond 2006–2011 316 USD 3.0 5.820 267 280 296 304 Bond 2006–2018 300 EUR 10.2 4.510 306 297 306 310 Bond 2006–2017 500 EUR 9.0 4.116 496 466 495 487 Bond 2007–2019 600 EUR 11.6 5.110 594 605 – – Total 10,042 10,108 11,032 11,310 Adjustments from derivatives –4 – –5 –

Total 10,232 10,306 11,233 11,520 188 DEUTSCHE BAHN GROUP •

Deutsche Bahn Finance B.V., Amsterdam, the Netherlands, respect is a USD 800 million issue, which was used partially issued a € 600 million bond with a term of twelve years in for direct payment of USD payment obligations. July 2007 for partial refinancing of maturing bonds and loans. As part of short-term liquidity management, 129 com- In addition, four maturing bonds of DB Finance B.V., mercial paper issues with terms of between seven and 273 Amsterdam, the Netherlands, for DEM 1,000 million, CHF days were transacted in the 2007 financial year. The average 750 million, USD 600 million and € 17 million in total were amount outstanding was €958 million (previous year: €559 redeemed in 2007. million). Commercial paper in the amount of € 0 was out- Bonds issued in foreign currency were swapped into standing as of the reporting date (previous year: €357 million). euros, and there is accordingly no currency risk attached to Bank debt is detailed in the following table: these original financial instruments. One exception in this

Bank borrowings Residual Effective Carrying Carrying € million maturity interest rate amount Fair value amount Fair value Currency in years in % 2007 2007 2006 2006 Loan 1998–2008 DEM 0.8 4.770 51 51 51 52 Loan 1998–2008 DEM 0.9 4.720 51 51 51 52 Loan 1999–2008 DEM 0.8 4.580 51 51 51 52 Loan 1999–2009 DEM 1.2 4.850 51 51 51 52 Loan 2002–2016 EUR 8.7FRN200200200200 Loan 2002–2022 EUR 14.7FRN200200200200 Loan 2003–2016 EUR 8.7FRN200200200200 Loan 2003–2022 EUR 14.7FRN200200200200 Note loan 1998–2008 DEM 0.35.31051515152 Overdrafts EUR – – 400 400 Other 106 106 116 116 Total 1,161 1,161 1,571 1,576

The decline of € 410 million in bank loans is almost completely attributable to the repayment of overdrafts, which in the previous year amounted to €400 million as of the balance sheet date. Of the figure stated for bank borrowings, €4 million was secured (previous year: € 8 million). As of December 31, 2007, guaranteed loan facilities with a total volume of € 3,142 million (previous year: € 2,859) were available to DB Group. Of this figure, € 2,100 million was applicable to back-up lines for the € 2.0 billion commercial paper program of DB AG and DB Finance B.V. None of these back-up lines had been drawn down as of December 31, 2007. Global credit facilities totaling €1,042 million (previous year: € 784 million) are used for financing the subsidiaries with worldwide operations, primarily in the Schenker segment. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 189 Notes

The liabilities due to EUROFIMA are detailed in the following:

Liabilities due to EUROFIMA Residual Effective Carrying Carrying € million maturity interest rate amount Fair value amount Fair value Currency in years in % 2007 2007 2006 2006 Loan 1997–2009 DEM 2.0 5.625 256 261 256 266 Loan 1999–2009 EUR 1.8 5.750 400 408 400 417 Loan 2000–2014 EUR 6.8 5.970 219 236 219 244 Loan 2001–2014 EUR 6.75.410300313300324 Loan 2002–2012 EUR 4.6 FRN 34 34 34 34 Loan 2002–2012 EUR 4.6 FRN 400 400 400 400 Total 1,609 1,652 1,609 1,685

As was the case last year, no new EUROFIMA loans were € 818 million) related to leasing agreements for various taken out in the year under review. The liabilities due to rolling stock (multiple units, engines, freight cars). These EUROFIMA are secured by way of transfer of ownership of rail agreements have generally been concluded as sale-and-lease- material (rolling stock) in view of the statutes of EUROFIMA. back transactions for achieving advantageous financing Of the figure stated for liabilities attributable to finance conditions with German lessors. leases, €456 million (previous year: €468 million) related to The following table provides information concerning real estate leasing agreements for various concourse build- the main finance leases: ings of DB Station& Service AG and a logistics center of Schenker Deutschland AG, and €779 million (previous year:

€ million Residual Effective Carrying Carrying Nominal maturity interest rate amount Fair value amount Fair value amount Currency in years in % 2007 2007 2006 2006 Finance leases – assets other than real estate ICE 1 multiple units (1994) 119 DEM 0.5 5.75 63 63 69 70 Double-deck coaches (1994) 174 DEM 5.0 5.87 116 121 122 130 ICE 2 multiple units (1997) 184 DEM 3.0 4.50 118 118 126 127 Locomotives/ freight cars (1999) 182 NLG 1.0–5.3 5.69–5.83 109 111 115 120 Freight locomotives (2000) 101 DEM 7.5 5.35 80 85 84 91 Freight locomotives (2000) 154 EUR 9.0 5.40 136 141 140 150 Locomotives (2001) 178 EUR 7.5–9.0 4.87 157 158 162 168 779 797 818 856

Finance leases – real estate Logistics center (1986) 24 DEM 8.0 8.50 8 9 10 12 Concourse buildings (1998) 497 DEM 5.3–14.0 4.00–5.95 448 452 458 474 456 461 468 486

Other 248 249 200 200 Total 1,483 1,507 1,486 1,542

The above ﬁnance leases for engines and multiple units can- assets for the residual value or the higher market value after not be terminated during a ﬁxed basic lease, and have a the end of the lease, whereby the difference between the maximum remaining term of nine years. Most of the con- residual value and the market value at the end of the lease is tracts contain a clause enabling the lessee to purchase the shared between the lessor (25 %) and the lessee (75 %). 190 DEUTSCHE BAHN GROUP •

The finance leases for the concourse buildings of DB Station& carrying amount of an inverter agreement of DB Energie Service AG have a maximum remaining term of 14 years, and GmbH in the amount of €62 million (previous year: €0 mil- cannot be terminated during the fixed lease. At the end of lion). Both agreements are classified as embedded financial the lease, the lessee is able to buy the assets for a fixed price. leases as a result of the fact that the power is procured pri- If this option is not exercised, the lease is extended for a marily by DB Energie GmbH and also in view of the under- second period, at the end of which the lessor has a put lying agreement duration in accordance with IFRIC 4 (De- option for the real estate with regard to the lessee. termining whether an Arrangement Contains a Lease) in The item “Other” also includes the carrying amount of a conjunction with IAS 17. power procurement agreement of DB Energie GmbH worth In the subsequent years, the following payments have to € 143 million (previous year: € 150 million) as well as the be made in connection with finance leases:

€ million Residual maturity Less than More than Total more 1 year 1–2 years 2–3 years 3–4 years 4–5 years 5 years than 1 year Total As of Dec 31, 2007 Minimum lease payments (nominal value) 215 180 234 123 187 994 1,718 1,933 – Future finance charges 75 68 63 55 52 137 375 450 Finance lease liabilities 140 112 171 68 135 857 1,343 1,483

As of Dec 31, 2006 Minimum lease payments (nominal value) 147 199 173 229 117 1,120 1,838 1,985 – Future finance charges 77 71 64 60 52 175 422 499 Finance lease liabilities 70 128 109 169 65 945 1,416 1,486 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 191 Notes

(29) Other liabilities

€ million Residual maturity Less than More than Total more 1 year 1–2 years 2–3 years 3–4 years 4–5 years 5 years than 1 year Total As of Dec 31, 2007 Trade liabilities 3,725 27 22 26 27 224 326 4,051 Other liabilities 3,299 25 13 9 6 21 74 3,373 Total 7,024 52 35 35 33 245 400 7,424 thereof due to related parties (365) (0) (0) (0) (0) (0) (0) (365)

As of Dec 31, 2006 Trade liabilities 3,568 24 24 23 24 233 328 3,896 Other liabilities 3,411 34 14 8 8 45 109 3,520 Total 6,979 58 38 31 32 278 437 7,416 thereof due to related parties (433) (0) (0) (0) (0) (0) (0) (433)

The other liabilities comprise the following: As was the case in the previous year, the other liabilities were not covered. € million 2007 2006 Personnel-related liabilities (30) Income tax liabilities Unused holiday entitlements 245 237 Outstanding overtime 231 228 The income tax liabilities as of December 31, 2007 related Social security 57 52 mainly to obligations to the ﬁscal authorities in Germany, Severance payments 22 24 Christmas bonuses 20 12 the USA, India and Norway. Holiday pay 13 13 Other obligations 468 382 (31) Additional disclosures relating to the financial instruments Other taxes Value-added tax 15 0 Carrying amounts, values and fair values based on valua- Payroll and church taxes, solidarity surcharge 68 67 tion categories. Other taxes 108 152

Interest payable 295 290 Sales discounts 103 99 Deferred construction grants 88 153 Liabilities due to Railway Crossings Act 13 10 Reconveyance obligations 2 2 Other 1,625 1,799 Total 3,373 3,520 192 DEUTSCHE BAHN GROUP •

Categories of financial assets and financial liabilities as of December 31, 2007

Valuation categories (according to IAS 39) Held for trading1) Held to maturity € million Fair value At amortized cost At cost Categories of financial assets and financial liabilities (according to IFRS 7)

Assets Non-current financial assets Shares in affiliated companies (at cost) 0 0 3 Subsidiaries (at cost) 00113 Securities (at fair value) 0 0 0 Available-for-sale financial assets 0 0 116

Trade receivables 000 Receivables from financing 0 0 0 Advance payments and accrued income 0 0 0 Plan assets according to IAS 19 0 0 0 Other miscellaneous assets 0 0 0 Receivables and other assets 0 0 0

Currency-based derivates – hedging 0 0 0 Commodity derivatives – hedging 0 0 0 Interest-based derivatives – non-hedging 1 0 0 Currency-based derivates – non-hedging 1 0 0 Derivative financial instruments 2 0 0

Total 20116

Current financial assets Trade receivables 000 Trade receivables 000

Receivables from financing 0 0 0 Advance payments and accrued income 0 0 0 Receivables from other taxes 0 0 0 Other miscellaneous assets 0 0 0 Other receivables and assets 0 0 0

Currency-based derivates – hedging 0 0 0 Commodity derivatives – hedging 0 0 0 Currency-based derivates – non-hedging 8 0 0 Commodity derivatives – non-hedging 4 0 0 Derivative financial instruments 12 0 0

Cash and cash equivalents 0 0 0 Total 1200

1) Including non-hedge derivatives. DB Group did not apply the fair value option according to IAS 39. Thus the subcategory “held for trading” was used instead of the main category “fair value through profit and loss.” GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 193 Notes

Available for sale Loans and receivables Not attributable to a category Total according to IAS 39 Fair value At cost At amortized cost

0000 3 0000113 8000 8 8000124

00670 67 00120 12 00023 23 00020 20 001232 44 0 0 91 75 166

0003 3 00021 21 0000 1 0000 1 0 0 0 24 26

809199316

003,50003,500 0 0 3,500 0 3,500

0030 3 000101101 00012 12 0 0 332 34 366 0 0 335 147 482

00011 11 00030 30 0000 8 0000 4 00041 53

0 0 1,549 0 1,549 0 0 5,384 188 5,584 194 DEUTSCHE BAHN GROUP •

Categories of financial assets and financial liabilities as of December 31, 2007

Valuation categories (according to IAS 39) Held for trading1) Other liabilities € million Fair value At cost At amortized cost Categories of financial assets and financial liabilities (according to IFRS 7)

Equity and liabilities Non-current financial liabilities Federal loans 0 0 3,282 Bonds 0 0 9,118 Bank liabilities 00876 EUROFIMA loans 001,609 Finance lease liabilities 0 0 0 Financial debt 0 0 14,885

Trade liabilities 006 Other miscellaneous liabilities 0 0 74 Other liabilities 0080

Currency-based derivatives – hedging 0 0 0 Interest-based derivatives – non-hedging 5 0 0 Derivative financial instruments 5 0 0

Total 5 0 14,965

Current financial liabilities Federal loans 00275 Bonds 001,114 Bank liabilities 0 0 285 Finance lease liabilities 0 0 0 Other finacial liabilities 0 0 20 Financial debt 0 0 1,694

Trade liabilities 003,554 Trade liabilities 0 0 3,554

Liabilities from other taxes 0 0 0 Other miscellaneous liabilities 0 0 2,051 Other liabilities 0 0 2,051

Currency-based derivatives – hedging 0 0 0 Currency-based derivatives – non-hedging 1 0 0 Derivative financial instruments 1 0 0 Total 1 0 7,299

Not attributable to a category Total according to IAS 39

0 3,282 0 9,118 0 876 0 1,609 1,343 1,343 1,343 16,228

320 326 0 74 320 400

220 220 0 5 220 225

1,883 16,853

0 275 0 1,114 0 285 140 140 0 20 140 1,834

171 3,725 171 3,725

191 191 1,057 3,108 1,248 3,299

48 48 0 1 48 49 1,607 8,907 196 DEUTSCHE BAHN GROUP •

Categories of financial assets and financial liabilities as of December 31, 2006

Assets Non-current financial assets Shares in affiliated companies (at cost) 0 0 17 Subsidiaries (at cost) 00117 Securities (at cost) 008 Securities (at fair value) 0 0 0 Available-for-sale financial assets 0 0 142

Trade receivables 000 Receivables from financing 0 0 0 Advance payments and accrued income 0 0 0 Other miscellaneous assets 0 0 0 Receivables and other assets 0 0 0

Currency-based derivates – hedging 0 0 0 Interest-based derivatives – non-hedging 19 0 0 Derivative financial instruments 19 0 0

Total 19 0 142

Current financial assets Trade receivables 000 Trade receivables 000

Receivables from financing 0 0 0 Advance payments and accrued income 0 0 0 Receivables from other taxes 0 0 0 Other miscellaneous assets 0 0 0 Other receivables and assets 0 0 0

Currency-based derivates – hedging 0 0 0 Interest-based derivatives – non-hedging 4 0 0 Currency-based derivates – non-hedging 2 0 0 Derivative financial instruments 6 0 0

Cash and cash equivalents 0 0 0 Available-for-sale assets 0 0 0 Total 600

Available for sale Loans and receivables Not attributable to a category Total according to IAS 39 Fair value At cost At amortized cost

0000 17 0000117 0000 8 8000 8 8000150

00480 48 00180 18 00025 25 001027 37 007652128

0004 4 0000 19 0004 23

8 0 76 56 301

003,19203,192 003,19203,192

00150 15 000127127 00054 54 0041235447 0 0 427 216 643

0001 1 0000 4 0000 2 0001 7

002950295 002148150 0 0 3,916 365 4,287 198 DEUTSCHE BAHN GROUP •

Categories of financial assets and financial liabilities as of December 31, 2006

Equity and liabilities Non-current financial liabilities Federal loans 0 0 3,292 Bonds 009,783 Bank liabilities 001,065 EUROFIMA loans 001,609 Finance lease liabilities 0 0 0 Financial debt 0015,749

Trade liabilities 008 Other miscellaneous liabilities 0 0 109 Other liabilities 00117

Currency-based derivatives – hedging 0 0 0 Interest-based derivatives – non-hedging 24 0 0 Derivative financial instruments 24 0 0

Total 24 0 16,186

Current financial liabilities Federal loans 00308 Bonds 0 0 1,450 Commercial paper 00357 Bank liabilities 00506 Finance lease liabilities 0 0 0 Other liabilities 0025 Financial debt 0 0 2,646

Trade liabilities 0 0 3,368 Trade liabilities 0 0 3,368

Liabilities from other taxes 0 0 0 Other miscellaneous liabilities 0 0 2,246 Other liabilities 0 0 2,246

Currency-based derivatives – hedging 0 0 0 Commodity derivatives – hedging 0 0 0 Interest-based derivatives – non-hedging 6 0 0 Currency-based derivatives – non-hedging 2 0 0 Derivative financial instruments 8 0 0

Available-for-sale liabilities 0 0 0

Total 8 0 8,260

Not attributable to a category Total according to IAS 39

0 3,292 0 9,783 0 1,065 0 1,609 1,416 1,416 1,416 17,165

320 328 0 109 320 437

183 183 0 24 183 207

1,599 17,809

0 308 0 1,450 0 357 0 506 70 70 0 25 70 2,716

200 3,568 200 3,568

219 219 946 3,192 1,165 3,411

212 212 38 38 0 6 0 2 250 258

3 3

1,688 9,956 200 DEUTSCHE BAHN GROUP •

Cash and cash equivalents, trade receivables as well as other Foreign currency gains and losses attributable to the trans- receivables mostly have short remaining terms. Accord- lation of foreign currency liabilities are opposed by almost ingly, their carrying amounts as of the closing date closely identical losses/gains attributable to derivatives (see point approximate the fair value. [10] in the Notes). The fair values of other long-term receivables with remaining terms of more than one year are equivalent to the (32) Pension obligations present values of the cash flows associated with the assets. In DB Group, a distinction is made between pensions for Trade liabilities as well as other liabilities normally have employees and pensions for civil servants: short remaining terms; the figures shown in the balance sheet closely approximate the fair values. Pensions for civil servants No held-to-maturity securities are shown as of the balance After they retire, civil servants assigned to the companies sheet date. of DB Group receive pensions from the Federal Railroad The net results according to valuation categories are Fund under the Civil Servants Benefits Act (Beamtenver- detailed in the following: sorgungsgesetz) as a result of their status as civil servants. Only while the assigned civil servants are actively work- € million 2007 2006 ing for DB Group are payments made to the Federal Rail- Held for trading assets and liabilities including non-hedge derivatives 1 – 2 road Fund as part of a pro forma settlement in the same way Held to maturity 0 0 as for newly recruited employees (section 21 [1] DBGrG). Available for sale 630 83 These payments also include notational contributions to Loans and receivables 45 43 Other liabilities – 980 –1,024 the statutory pension insurance scheme as well as notational Total –304 – 900 expenses in accordance with the supplementary benefits wage agreement (Tarifvertrag über die betriebliche Zusatz- The net result mainly comprises foreign currency gains versorgung der Arbeitnehmer der DB AG; ZVersTV). The and losses, impairments and reversals of previous impair- payments made to the Federal Railroad Fund for retirement ments, disposal gains and losses of financial instruments, pensions and supplementary benefits of civil servants are interest income and expenses as well as income from equity defined contribution retirement schemes. participations. The interest attributable to financial instruments is Pensions for employees shown in net interest income (see point [9] in the Notes); The retirement benefit obligations with regard to employees the other components of net result are shown under other mainly relate to the following: financial result. a) Employees who were employed by the Deutsche The net result of financial liabilities in the category Bundesbahn before the company was privatized (January 1, “Other liabilities” includes interest expenses attributable to 1994) enjoy supplementary benefits in view of their former the cumulative interest relating to interest-free loans. membership of the public sector. The employees are entitled to benefits from this additional pension insurance from Deutsche Rentenversicherung Knappschaft-Bahn-See (KBS). As an official authority, KBS has not only assumed responsibility for managing and paying the statutory pension for GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 201 Notes

the employees of Deutsche Bahn; it also continues the € million 2007 2006 additional pension insurance for the transferred employees Funded obligations 1,312 208 who are beneficiaries. Unfunded obligations 1,434 1,556 Total obligation as of Dec 31 2,746 1,764 The Federal Railroad Fund bears the costs of these additional benefits, less the contribution made by the employees Fair value of plan assets as of Dec 31 –1,359 –168 Unrecognized actuarial gains 132 – 82 themselves (section 14 [2] DBGrG). Accordingly, DB AG does Supplementary not recognized service cost –1 0 not set aside any provisions for these public sector benefits: Amount due to the limitation of IAS 19.58 b) Employees of the former Deutsche Reichsbahn and not recognized as an asset 76 0 the employees who have been recruited since January 1, Net liability recognized in the balance sheet 1,594 1,514 1994 receive a company pension from DB AG under the ZVersTV. This supplementary company pension is a defined The increase in the total obligations and in the fair value of benefit scheme. plan assets is mainly attributable to the acquisition of EWS. c) Employees in the Schenker segment mainly have The total pension commitment has developed as follows: a commitment for benefits from a defined contribution employer financed benefit plan which is not salary-linked. € million 2007 2006 Obligations as of Jan 1 1,764 1,631 Depending on the extent of benefits and in the event of Service cost, excluding employee early payment of benefits, capital payments have to be contributions 66 64 made or, if appropriate, pension benefits to be capitalized Employee contributions 3 3 Interest cost 81 72 have to be provided. Pensions paid –54 –51 d) The direct commitments provided to senior executives Outstanding past service cost 3 –3 as a result of employment agreements and the commitments Result on transfer/compensation of retirement benefit obligations –1 – 4 arising from other pension obligations comprise defined Changes –3 0 benefit as well as defined contribution retirement benefit Transfers 2 7 schemes. These are employee as well as employer financed Effect of changes in the scope of consolidation 1,102 57 and are partially or completely covered with plan assets eli- thereof additions (1,114) (57) gible for netting purposes. thereof disposals (–12) (0) e) In addition, there are also employee financed direct Actuarial gains (–)/losses – 208 –12 Currency effects – 9 0 insurance policies, mainly with DEVK Deutsche Eisenbahn Obligations as of Dec 31 2,746 1,764 Versicherung, Lebensversicherungsverein a. G., as well as a purely employee-financed pension fund at DEVK Pensions- The development of the plan assets is detailed in the fonds-AG which is the subject of a collective bargaining following: agreement. These external facilities for a company pension scheme are not relevant for the purpose of creating provisions. Abroad, there are mainly compension-linked defined benefit schemes with and without a link to the period of service with the company. The obligations are financed by provisions and are also proportionately fund-backed or insurance-backed by means of employee as well as employer contributions. The figures stated for pension provisions in the balance sheet are detailed in the following: 202 DEUTSCHE BAHN GROUP •

€ million 2007 2006 € million 2007 2006 Fair value of plan assets as of Jan 1 168 118 Amortization of unrealized profits/losses 9 2 Employer contributions 7 6 Service cost, excluding employee Employee contributions 1 2 contributions 66 64 Expected return on plan assets 8 8 Employee contributions 2 2 Pensions paid –7 – 6 Interest cost 81 72 Result on transfer of retirement Outstanding past service cost 0 –3 benefit obligations 0 – 2 Expected return on plan assets – 8 – 8 Transfers –19 5 Plan shortening –3 0 Effect of changes in the scope Result on transfer of retirement benefit of consolidation 1,209 35 obligations 0 – 2 thereof additions (1,210) (35) Asset ceiling 0 0 thereof disposals (–1) (0) Pension costs 147 127 Actuarial losses –5 4 Currency effects –3 – 2 The interest cost and expected income from the plan Fair value of plan assets as of Dec 31 1,359 168 assets are recorded under ﬁnancial result. The expected income from plan assets has been derived The reported plan assets comprise shares and other securi- on the basis of the income actually generated in the past. ties of € 889 million (previous year: € 59 million), interest- All other items are recognized under personnel expenses. bearing securities of € 199 million (previous year: € 31 mil- The actuarial parameters used for assessing the value of lion), property or other assets used by the company itself most of the pension provision are set out in the following: of € 4 million as well as reinsurance of € 70 million (previous year: € 74 million) and other assets of € 217 million % 2007 2006 Discount rate 5.25/5.80 4.50 (previous year: € 0 million). Expected rate of salary increases 2.50 2.50 The actual income from plan assets amounted to Expected medical cost trend rate 0.00 0.00 € 3 million (previous year: € 12 million). Expected rate of pension increases (dependent on staff group) 2.00/3.20 2.00 Changes in the net pension provisions are detailed in Expected average staff turnover 2.58 2.58 the following: Expected return on plan assets 2.5–8.0 2.5–6.7

€ million 2007 2006 The 2005 G mortality tables of Professor Dr.Klaus Heubeck Provision as of Jan 1 1,514 1,414 Pension expenses 147 127 have been used for valuing the pension obligations for the Employer contributions –7 – 6 German Group companies (discount rate 5.25 %). Country- Pensions paid – 47 – 45 speciﬁc mortality tables have been used for valuing the pen- Effect of changes in the scope of consolidation – 9 22 sion obligations of the other Group companies. thereof additions (0) (22) In 2008, pension payments are expected to be €54 mil- thereof disposals (– 9) (0) lion, and payments into plan assets are expected to be Currency effects – 4 2 Provision as of Dec 31 1,594 1,514 € 6 million.

The expenses to be stated in the income statement are detailed in the following: GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 203 Notes

€ million 2007 2006 2005 Present value of pension obligation as of Dec 31 2,746 1,764 1,631 Fair value of plan assets as of Dec 31 –1,359 –168 –118 Deficit 1,387 1,596 1,513

Experience-based adjustment of pension provisions –11 64 – Experience-based adjustment of plan assets 5 4 –

(33) Other provisions

€ million Environmental Construction protection and project risks Staff-related provisions Decommissioning costs Other 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 As of Jan 1 2,253 2,291 121 146 1,460 1,552 358 379 2,196 2,019 Currency translation differences –5 – 2 0 0 – 2000–1–1 Changes in the scope of consolidation – 41 0 – 4 0 5 16 0 0 – 25 51 thereof additions (4) (0) (0) (0) (6) (16) (0) (0) (19) (51) thereof disposals (– 45) (0) (– 4) (0) (–1) (0) (0) (0) (– 44) (0) Amounts used – 49 – 46 – 4 –10 –506 – 442 –15 –11 –509 –377 Unused amounts reversed –1 – 27 –2 –10 –20 –65 –36 –31 –179 –267 Reclassifications 0 0 0 – 8 – 200026152 Additional amounts provided 4 36 12 4 342 390 9 6 1,333 614 Compounding/ discounting 1 1 0 –1 24 9 16 15 7 5 As of Dec 31 2,162 2,253 123 121 1,301 1,460 332 358 2,848 2,196

The following table breaks down the other provisions into current and non-current amounts, and also details their estimated residual maturity: 204 DEUTSCHE BAHN GROUP •

€ million Residual maturity Less than More than Total more 1 year 1–2 years 2–3 years 3–4 years 4–5 years 5 years than 1 year Total As of Dec 31, 2007 Environmental protection 74 94 102 101 102 1,689 2,088 2,162 Construction and project risks 81 21 2 4 10 5 42 123 Staff-related provisions 435 324 222 194 17 109 866 1,301 Decommissioning costs 6 0 0 0 0 326 326 332 Other 1,802 461 166 110 98 211 1,046 2,848 Total 2,398 900 492 409 227 2,340 4,368 6,766

As of Dec 31, 2006 Environmental protection 80 159 150 155 169 1,540 2,173 2,253 Construction and project risks 71 5 23 4 6 12 50 121 Staff-related provisions 487 337 231 157 121 127 973 1,460 Decommissioning costs 31 0 0 0 0 327 327 358 Other 1,726 311 28 29 11 91 470 2,196 Total 2,395 812 432 345 307 2,097 3,993 6,388

Provisions for environmental protection meeting future requirements and to ensure that the need Of the figure stated for environmental protection provi- to take remedial action can be limited to this future network. sions, € 2,151 million relate to remedial action obligations of The network which is not utilized will be decommissioned. DB AG. DB AG has set up the following programs in order to The 2-stage landfill program will guarantee that land- enable it to meets its remedial action obligations covered by fill sites on rail property are identified and measured in a the provisions for environmental protection: standard manner, and that these landfill sites will be de- • 4-stage soil decontamination program commissioned in accordance with the Landfill Regulation • 3-stage sewerage network program (Deponieverordnung; DepV)/Technical Instructions for Res- • 2-stage landfill shut-down program idential Area Waste (Technische Anleitung Siedlungsabfall; These measures will ensure that the work on investigating TASi) and the German Federal Soil Protection Act (Bundes- and carrying out remedial action will be systematic, cost- bodenschutzgesetz; BBodSchG). efficient and consistent with the legal situation. For the “ecological contamination” provision, the term In the 4-stage soil decontamination program, the con- has been extended from the previous 2020 to 2028 on the tamination in the soil and/or groundwater is localized using basis of various factors, including the long-term remedial the following stages: historical investigation, rough exami- action periods. This has also been accompanied by a post- nation and detailed analysis. The program involves a feasibility ponement of expected claims into later periods. study, implementation and approval planning as well as remedial action, and due consideration is given to technical Staff-related provisions and legal requirements for the remedial action which aims to ensure appropriate utilization. € million 2007 2006 Obligations under employment contracts 822 889 The 3-stage sewerage network program aims to remedy Costs of early retirement/part-time any contamination of soil and/or groundwater resulting working in the run-up to retirement 277 359 from leaks. The program also involves a plan to optimize the Service anniversary provisions 95 96 Other 107 116 existing sewerage network to ensure that it is capable of Total 1,301 1,460 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 205 Notes

The staff-related provisions also include obligations which (34) Deferred income are connected with the employment contracts taken on at € million 2007 2006 the point at which DB AG was founded as of January 1, 1994 Deferred government grants 2,612 2,883 and which relate to wage elements attributable to the com- Deferred revenues 351 321 pany’s previous existence as a public-sector authority. These Deferred profits on sale-and-leaseback obligations comprise charges which can be measured inde- transactions 93 112 Other 109 91 pendently and which do not involve any benefits in return Total 3,165 3,407 and for which offers for compensation have already been Non-current 2,660 2,931 made. The provisions also cover obligations which result Current 506 476 from the status of many employees under labor law and the willingness of DB AG not to terminate employment contracts The deferred Federal Government grants comprise mainly for operational reasons before the end of 2010. In such cases, the interest benefit (difference between the nominal value DB Group will incur losses in the form of personnel ex- and present value) attributable to the interest-free loans; penses which will have to be borne until the employment this has developed as follows during the period under review: contract is terminated or the employee is placed with another company; no reciprocal benefit will be provided in return for € million 2007 2006 As of Jan 1 2,536 2,823 these costs. DB AG has set up a separate subsidiary, namely Additions 32 36 DB JobService GmbH, in order to absorb employees who Reclassifications –32 –57 have been made redundant. Amounts released – 259 – 266 As of Dec 31 2,277 2,536 The provisions set aside to cover early retirement obligations and part-time working in the run-up to retirement cover the obligations arising from collective bargaining agreements, Of the figure shown for the reversal in the year under and have been calculated on the basis of actuarial reports. review, the main item of € 171 million (previous year: € 178 million) is attributable to compensation for the cumulative Decommissioning provisions interest in relation to the present value of interest-free The decommissioning provisions refer mainly to the com- Federal Government loans. The remainder is attributable to pany’s pro rata decommissioning obligation in relation to a the release of amortized deferrals relating to premature one- joint power generation plant. The valuation of the provision off repayments at the present value in 1999 and in 2004. is based on a discount rate of 5.0 % (previous year: 5.0 %). Deferred revenues constitute that part of compensation which is attributable to the period after the balance sheet Other provisions date. The other provisions include provisions for outstanding bil- The deferred profits on sale-and-leaseback transactions lings of transport services, return obligations, litigation relate to concourse buildings of various stations with the risks, decommissioning obligations, anticipated losses, guar- related retail premises as well as rolling stock. antees and warranties as well as other real estate risks and numerous additional aspects which, individually, are of mi- nor significance. Of the figure shown for the increase in other provisions, € 387 million is attributable to obligations in connection with the sale of the Aurelis portfolio, and € 310 million is attributable to anticipated losses due to transport agreements. 206 DEUTSCHE BAHN GROUP •

Notes to the cash flow statement The significant decline in the outflow of cash attributable to investing activities is due to slightly lower outflows for capital The cash flow statement shows the changes in cash and cash expenditures in property, plant and equipment and in partic- equivalents in the year under review, and was prepared in ular to higher inflows attributable to the disposal of property, accordance with IAS 7 (Cash Flow Statements). The cash plant and equipment and intangible assets, an increase in flows are broken down into operating activities, investing net inflows attributable to investment grants as well as higher activities and financing activities. The indirect method has inflows attributable to the disposal of companies accounted been used for showing cash flow from operating activities. for using the equity method and a simultaneous decline in Interest income and interest payments, dividend income the outflows attributable to the acquisition of shares in con- as well as tax payments are stated under operating activities. solidated companies. Cash and cash equivalents include the cash and cash When changes take place in the scope of consolidation equivalents stated in the balance sheet with a residual matu- as a result of the acquisition or sale of companies, the acqui- rity of less than three months (cash in hand, cash deposited sition price which is paid (excluding any liabilities which with the Bundesbank, cash at banks and checks as well as are transferred) less the acquired or sold financial resources securities). are stated as cash flow from investing activities. The other effects of the acquisition or sale on the balance sheet are elim- Cash flow from operating activities inated in the corresponding items of the three categories. The cash flow from operating activities is calculated by adjusting the net profit for the period before taxes by items Cash flow from financing activities which are not cash-effective and by adding the change in The cash flow from financing activities is due to the net in- non-current assets and liabilities. The cash flow from oper- flows and outflows attributable to issued bonds, bank loans ating activities is then established after due consideration is which have been raised as well as inflows attributable to the given to interest and tax payments. raising of interest-free loans and outflows for the redemption The decline in cash flow from operating activities is of interest-free loans. mainly due to the increase in trade accounts receivable, The increase in outflows due to financing activities is whereby earnings before taxes have increased appreciably. mainly caused by the net increase in outflows attributable to the repayment of debt. The balance of outflows attributable Cash flow from investing activities to the redemption and repayment of interest-free loans has The cash flow from investing activities is calculated as the declined slightly compared with the previous year. inflow of funds attributable to the disposal of property, plant and equipment and intangible assets as well as investment grants, and the outflow of funds for capital expenditures in property, plant and equipment and intangible assets as well as non-current financial assets. Inflow of funds attributable to investment grants are shown under investing activities, because there is a close relationship between investment grants which are received and the outflows of funds for capital expenditures in property, plant and equipment. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 207 Notes

Notes on the segment report Rail Freight The activities relating to rail freight transport have been Segment reporting has been prepared in accordance with pooled in the Rail Freight segment. The segment operates IAS 14 (Segment Reporting). Our organization and reporting primarily in Germany, Denmark, the Netherlands and Italy; structure has been used as the basis for breaking down selected this is thus the first time that Intermodal has been operating data in the consolidated financial statements over business as an independent brand which concentrates on combined units and regions. The operations of the Group divisions are transport. covered in the primary reporting format in line with the corporate organization structure of DB Group. The main regions Schenker covered by DB Group are detailed in the segment reporting Schenker has established a global presence as a logistics ser- by regions. vice provider with activities for freight transport, forward- As of January 1, 2007, the former Railion segment and ing and other services. transport-body-related activities of DB Mobility Logistics AG Group (formerly Stinnes AG Group), which previously Track Infrastructure were attributed to the Holdings/Other Operations segment, This segment is responsible for installing, maintaining and have been combined to form the Rail Freight segment. The operating the complete track-related rail infrastructure in previous year figures have been adjusted accordingly. The Germany. amounts of the adjustments were of minor significance. The Group’s operations are conducted in the following Passenger Stations segments: This segment comprises the operation, development and marketing of passenger stations and retail facilities in sta- Long-Distance Transport tions in Germany. This segment comprises the activities for long-distance passenger transport and other services. Most of these transport Services services are provided in Germany. The Services segment is also responsible for the activities of DB FuhrparkService, DB Services and DB Systel (previous Regional Transport year: DB Systems and DB Telematik). These companies pro- This segment comprises the activities for regional passenger vide their services mainly to the other segments of the Group. transport and other services. Most of these transport services are provided in Germany. Subsidiaries/Other activities DB AG with its numerous management, financing and service Urban Transport functions in its capacity as the management holding of DB The Urban Transport segment comprises the S-Bahn (metro) Group is shown in this segment. In addition, this segment transport systems in Berlin and Hamburg as well as urban also comprises DB Energie GmbH, DB ProjektBau GmbH and bus activities. Most of these transport services are provided the other investments and remaining activities. in Germany. Other/Consolidation The data concerning the segments are shown after intra-segment relations have been eliminated. The transactions between the segments (inter-segment relations) are eliminated 208 DEUTSCHE BAHN GROUP •

in the column “Other/Consolidation.”This column also in- operations and available-for-sale liabilities. The figures are cludes reconciliation amounts relating to figures shown in reconciled with the figures stated in the consolidated finan- the consolidated financial statements cial statements by including the liabilities from financing and liabilities related to taxes on income in the column “Other/ Notes to primary segment reporting consolidation.” The segment revenues comprise external revenues, other ex- Segment gross capital expenditures comprise capital external revenues as well as internal segment revenues attrib- penditures related to intangible assets (including acquired utable to the operations of the segment. Inventory changes goodwill) as well as to property, plant and equipment and, and internally produced and capitalized assets are not in- with the additions to assets attributable to company acquisi- cluded in segment revenues; their effect is to reduce segment tions and gross capital expenditures, cover all additions to expenses. the scope of consolidation as of the balance sheet date before The external segment revenues consist exclusively of the investment grants which have been received are taken revenues generated with parties outside the Group. The in- into consideration. ternal segment revenues comprise revenues with other seg- Additions to assets from company acquisitions are shown ments (inter-segment revenues). Market prices are used for as part of segment gross capital expenditures, and comprise establishing the transfer prices for internal transactions. The exclusively the capital expenditures in property, plant and segment expenses include cost of materials and personnel equipment and intangible assets, including the goodwill ac- expenses, depreciation, impairments and reversals of impair- quired as part of company acquisitions. ments, as well as other operating expenses attributable to the The additions to assets attributable to gross capital ex- operations of the segment. penditures comprise the property, plant and equipment and Segment result (operating profit before interest) is defined intangible assets acquired in the financial year by the com- as the difference between segment revenues and segment panies in the scope of consolidation, before the additions to expenses, and is EBIT before financial result (consisting of assets attributable to company acquisitions are taken into results from investments accounted for using the equity consideration. method, net interest income and other financial result) and The net capital expenditures are based on the allocation taxes on income. of the assets to the legal entities, and comprise the additions Segment assets comprise property, plant and equipment, to assets resulting from gross capital expenditures in property, intangible assets, receivables and other assets (excluding plant and equipment as well as the intangible assets less the profit and loss transfer agreements, receivables from financ- deducted investment grants. ing and taxes on income), inventories, derivative financial Depreciation refers to the property, plant and equipment instruments related to operations, available-for-sale assets attributable to the various segments as well as the intangible as well as cash and cash equivalents. The amortized good- assets. will resulting from the acquisition of the relevant companies Impairments which are recognized constitute the amount is shown separately. The figures are reconciled with the fig- of the impairment relating to the property, plant and equip- ures stated in the consolidated financial statements by includ- ment and the intangible assets including any goodwill in- ing the receivables from financing and receivables related to cluded in the segment assets. taxes on income in the column “Other/consolidation.” Reversals of previous impairments which are recognized Segment liabilities comprise the provisions and operating comprise the amount of the reversal in relation to the prop- liabilities (excluding profit and loss transfer agreements, lia- erty, plant and equipment or the intangible assets included bilities from financing and from taxes on income) as well as in segment assets. the derivative financial instruments (liabilities) relating to GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 209 Notes

The other non-cash expenses and income also relate to im- with related counterparty default risks. In the structure and pairments and reversals of previous impairments in relation procedure organization, there is a clear functional and orga- to short-term assets as well as income from the reversal of nization distinction between scheduling and trading on the deferred items if they are segmented. one hand (front office) as well as settlement and monitoring on the other (back office). Group Treasury operates on the Notes to secondary segment reporting global financial markets using the minimum requirements Items are stated under segment income generated with third applicable for risk management (Mindestanforderungen an parties on the basis of the registered offices of the Group das Risikomanagement; MaRisk) of the banks prepared by company providing the service. Only external income items the Federal Financial Supervisory Authority (Bundesanstalt are stated. This logic is used for showing external revenues. für Finanzdienstleistungsaufsicht; BaFin), and is subject to Segment assets are allocated on the basis of the location regular internal and external control. of the assets. The breakdown of contents is equivalent to Derivative financial instruments are used exclusively for that used in the primary reporting format. hedging interest, currency and energy price risks. All indi- Net capital expenditures are also based on the location vidual transactions correspond to on-balance-sheet or antici- of the assets and comprise capital spending on property, plant pated underlyings (for instance bonds, commercial paper, and equipment as well as intangible assets less the relevant purchases of diesel fuel and electricity). The aim is to achieve investment grants. qualification as an effective hedge in accordance with IAS 39. Speculation is not permitted. Ongoing market and risk Risk management and derivative financial instruments assessment takes place as part of risk management. Management of financial and energy price risks As a logistics group with international operations, DB Group Interest rate risks is exposed to financial risks in the form of changes in inter- In line with the length of time that assets are tied up, the est rates and exchange rates. In addition, there are also financial requirement is covered mainly by issuing long- energy price risks on the procurement side as a result of fluc- term and fixed-interest bonds. Interest rate management tuations in the prices of diesel fuel and electricity. One of the comprises a reasonable amount of variable interest for opti- aspects of corporate policy is to actively manage and thus mizing interest costs. Interest rate risks are primarily hedged limit these risks by means of the use of derivative financial by means of interest swaps. instruments. In accordance with IFRS 7, existing interest rates are de- DB AG with its central Group Treasury is responsible for tailed by means of a sensitivity analysis which investigates all financing and hedging transactions of DB Group. It coop- the effects of theoretical changes in market interest rates on erates with the subsidiaries to identify, evaluate and control results and shareholders’equity. financial and energy price risks. At regular intervals, the The sensitivity analysis which has been carried out has Management Board is informed of all types of major finan- taken account of the following financial instruments: cial risks and receives a schedule of all financial instruments • Derivatives designated in cash flow hedges (interest/ as well as the impact on results and the balance sheet. currency hedges) have an impact on the hedge reserve in The Management Board of DB AG has defined principles shareholders’ equity and are therefore taken into consid- for risk management. The guidelines for Group financing eration in the sensitivity calculations relating to share- and for the internal control system contain binding rules for holders’ equity; the use of derivative financial instruments for managing interest rate and foreign exchange risks and the risks of energy price changes, as well as the procedure for dealing 210 DEUTSCHE BAHN GROUP •

• Interest derivatives which are not included in a hedge The currency sensitivity analysis is based on the following in accordance with IAS 39 have an impact on other finan- assumptions: cial result via the change in fair value, and are therefore • The interest/currency swaps which are concluded and the taken into consideration in the sensitivity calculations currency transactions are always allocated to original under- relating to result; lyings. • Floating-rate loans (European Investment Bank (EIB) • All major foreign currency positions arising from oper- and EUROFIMA). ating activities are always 100 % hedged. Exchange rate changes therefore have no effect on result or sharehold- If the level of market interest rates for the exposure had been ers’ equity. 100 basis points higher (lower) as of the balance sheet date, • DB Group is thus only exposed to foreign currency the result would have been € 15 million lower (higher) (pre- receivables or liabilities as a result of currency hedging vious year: € 15 million) and shareholders’ equity would have for energy procurement. Because the regulations and been € 0.5 million lower (higher) (previous year: € 3 million). measures which have been taken and detailed at this point overall mean that there is only an insignificant Foreign currency risks foreign currency risk remaining for DB Group, the cur- The foreign currency risks are attributable to financing mea- rency-related sensitivity analysis is not carried out. sures and operating activities. • DB Group has numerous equity investments in foreign In order to avoid interest rate and foreign currency risks, subsidiaries, whose net assets are exposed to a translation the foreign currency bonds issued within the framework of risk. This translation risk is not perceived to be a foreign Group financing are converted into euro liabilities by means currency risk for the purposes of IFRS 7, and is not hedged. of interest/currency swaps. However, it is not necessary for such bonds to be converted in individual cases if there is a Energy price risks guarantee that the bond can be serviced out of inflows of DB Group is one of the largest consumers of electricity in foreign currency payments. Germany. In addition, the Group also requires considerable We have international operations with our activities in volumes of diesel fuel. The high energy procurement volume the Transport and Logistics Group division, and are thus and the volatility of electricity and mineral oil markets result exposed to operational exchange rate risks. In order to mini- in substantial earnings risks. mize these risks, the subsidiaries take out internal foreign Hedging strategies for controlling and minimizing these exchange transactions with Group Treasury and hedge all risks are implemented as part of active energy price risk major foreign currency positions in their functional curren- management. Financial and energy derivatives are used for cy. Group Treasury in turn hedges its open foreign currency these purposes. Swaps relating to the commodities underly- positions by way of opposite transactions on the financial ing the price formulae (coal and gas) are used as hedges for the markets. risks of price changes for sourcing electricity. Diesel price In order to present foreign currency risks, IFRS 7 requires risks are for instance limited by taking out diesel swaps and a sensitivity analysis which investigates the effects of theo- zero-cost collars (hybrid hedges of diesel price and currency retical changes in foreign currency relations on result and risks and individual hedges of currency risks). shareholders’ equity. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 211 Notes

Energy price risks are quantified by means of sensitivity Liquidity risk analyses in accordance with IFRS 7. These provide infor- Liquidity management involves maintaining adequate liquid mation concerning the effects of theoretical energy price assets, constantly checking the commercial paper market changes on result and shareholders’ equity (in relation to the for ensuring adequate market liquidity and depth and the balance sheet exposure on the balance sheet date). constant availability of financial resources via guaranteed The following assumptions have been made for per- credit facilities of banks (see Note [28]). forming the sensitivity analyses: The following table shows the contractually agreed undis- • In the case of energy price swaps, the effective part is counted interest payments and redemption payments relat- recognized in shareholders’ equity, and the ineffective ing to the original financial liabilities as well as the derivative part is recognized in the income statement. financial instruments with a positive and negative fair value • In the case of options (collars), the intrinsic value consti- of DB Group: tutes the completely effective hedge, so that the intrinsic value is shown in shareholders’ equity. On the other hand, the fair value is not part of the hedge, and is shown in the income statement. • If energy prices at the end of the year had been 10 % lower (higher), cost of materials would have been € 0.2 million higher (lower) (previous year: € 0.2 million) and shareholders’ equity would have been €29 million lower (higher) (previous year: €31million). The theoretical effect of €29 million on shareholders’ equity is attributable to the energy price sensitivities of diesel: € 21 million, coal: € 2 million; heavy fuel oil: €6 million.

Counterparty default risk of interest, currency and energy derivatives Counterparty default risk is defined as possible losses due to the default of counterparties (“worst-case scenario”). It represents the replacement costs (at market values) of the derivative financial instruments for which DB Group has claims against contract partners. The counterparty default risk is monitored and actively managed by way of strict requirements relating to the creditworthiness of the counterparty at the point at which the transactions are concluded and also throughout the entire life of the transactions, and also by way of defining risk limits. 212 DEUTSCHE BAHN GROUP •

€ million 2008 2009 2010 – 2012 2013 – 2017 2018 ff. Fixed/ Re- Fixed/ Re- Fixed/ Re- Fixed/ Re- Fixed/ Re- variable demp- variable demp- variable demp- variable demp- variable demp- interest tion interest tion interest tion interest tion interest tion Financial debt Federal loans – 281 – 663 – 1,053 – 1,312 – 1,643 Bonds 486 1,115 434 1,367 927 2,808 855 2,805 136 2,200 Commercial paper –––––––––– Bank liabilities 52 285 42 57 118 5 172 414 94 400 EUROFIMA loans 87 – 87 656 149 434 59 519 0 – Finance lease liabilities 75 140 68 112 170 374 101 730 36 127 Other financial liabilities – 20–––––––– Trade receivables – 3,725 – 27 – 75 – 224 – 0 Other miscellaneous liabilities – 3,299 – 25 – 28 – 21 – 0 Compulsory information about derivatives Derivative financial liabilities (net/gross settled) Interest/currency derivatives connected with cash flow hedges 82 335 67 5 157 1,164 36 430 0 0 Interest derivatives not connected with hedges 2–0–0–––0– Currency derivatives connected with cash flow hedges – 93–––––––– Currency derivatives not connected with hedges – 38–1–––––– Energy prices derivatives –1–1–1–––0 Derivative financial assets (gross settled) Interest/currency derivatives connected with cash flow hedges 9 92 5 47 3 290400 Interest derivatives not connected with hedges –––––––––– Currency derivatives connected with cash flow hedges – 434–––0–––0 Currency derivatives not connected with hedges – 143–3–5–––0 Energy prices derivatives –––––––––– Voluntary information about derivatives Derivative financial liabilities (net settled) Interest/currency derivatives connected with cash flow hedges –––––––––– Interest derivatives not connected with hedges –1–1–0–––0– Currency derivatives connected with cash flow hedges –––––––––– Currency derivatives not connected with hedges – –1–0–0–0–0 Energy prices derivatives – –33 – – 21 – – 8–0–0 Inflow of funds from gross settled derivative financial instruments Interest/currency derivatives connected with cash flow hedges – 68 –383 –53 –56 –110 –1,002 –13 –359 0 0 Interest derivatives not connected with hedges –––––––––– Currency derivatives connected with cash flow hedges – –537–––0–––0 Currency derivatives not connected with hedges – –184––7––10–––0 Energy prices derivatives –––––––––– Financial guarantees – 133–––––––– GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 213 Notes

This includes all instruments which were held at the end of Other Information 2007 and for which payments had already been agreed. For- eign currency amounts have been translated using the spot (35) Contingent receivables and liabilities rate applicable as of the reference date. The variable interest and guarantee obligations payments attributable to the ﬁnancial instruments have Contingent receivables as of December 31, 2007 amounted been calculated on the basis of the interest rates applicable to € 115 million (previous year: € 144 million), and mainly on December 31, 2007 (previous year: on December 29, 2006). comprised receivables arising from pending processes which Financial liabilities as well as ﬁnancial guarantees which are had not been completed as of the balance sheet date. repayable at any time are allocated to the earliest possible The contingent liabilities are broken down as follows: time segment. € million 2007 2006 Contingent liabilities from Provision of collateral for third-party liabilities 0 1 Provision of warranties 0 1 Other liabilities 182 249 Total 182 251

Other contingent liabilities also comprise risks arising from litigation which had not been stated as provisions because the expected probability of occurrence is less than 50 %. The contingencies attributable to warranties amounted to € 103 million as of December 31, 2007 (previous year: € 142 million) and mainly comprise customs guarantees of foreign Schenker companies which have been provided. On the grounds of suspicion of anti-competition agreements in the ﬁeld of land transport as well as ocean and air freight, the European Commission, the US Ministry of Justice and the antitrust authorities in Canada, South Africa, New Zealand and Switzerland have initiated preliminary investigations against the freight forwarding industry. On October 11, 2007, the premises of several freight forwarding companies and freight forwarding associations were searched, and these searches were also carried out in the business premises of Schenker AG and several Schenker national companies. The investigations of the antitrust authorities are still 214 DEUTSCHE BAHN GROUP •

ongoing; it is not expected that these investigations will be Various companies in DB Group have leased assets, e.g. completed before the end of 2009. At present, because the property, buildings, technical equipment, plant and machin- proceedings have not yet been completed, we are not able to ery as well as operational and business equipment within assess the time at which possible fines might be imposed, the framework of operating lease agreements. If assets relat- nor are we able to assess the potential extent of any such ing to the core business of DB Group have been leased, they fines. This is also applicable with regard to the extent of are generally leased to cover a temporary requirement up to claims for damages as a result of potentially anti-competitive the point at which the ordered material has been made avail- conduct. able for delivery and actually supplied. The terms of the future minimum payments arising from (36) Other financial obligations operating lease agreements are set out in the following table: Capital expenditures in relation to which the company has entered into contractual obligations as of the balance sheet € million 2007 2006 Less than 1 year 875 699 date, but for which no consideration has yet been received, 1–2 years 676 532 are broken down as follows: 2–3 years 566 425 3–4 years 474 321 4–5 years 393 247 € million 2007 2006 More than 5 years 1,638 1,265 Committed capital expenditures Total 4,622 3,489 Property, plant and equipment 4,512 3,980 Intangible assets 14 1 Outstanding capital contributions 284 305 The increase compared with the previous year is also attrib- Total 4,810 4,286 utable to the acquisition of EWS (€ 690 million) as well as new agreements taken out in the Schenker segment. Of the figure shown for outstanding contributions, € 284 million (previous year: €305 million) was attributable to outstanding contributions at EUROFIMA which had not been claimed. The change in relation to the figure stated for the previous year is attributable to exchange rate effects. Of the figure shown for the increase in the order commitment in property, plant and equipment, € 312 million is attributable to the acquisition of EWS as well as a higher investment volume, and relates specifically to construction services, security services and the procurement of new rolling stock. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 215 Notes

(37) Infrastructure and transport contracts The rail infrastructure companies provide non-discrimina- The following notes and information refer to the require- tory access to the rail infrastructure in accordance with sec- ments of SIC-29 (Disclosure – Service Concession Arrange- tion 14 et seq. AEG and charge train path utilization fees to ments). the rail transport companies in accordance with the principles of the Ordinance Governing Use of Rail Infrastructure Infrastructure contracts (Eisenbahninfrastrukturbenutzungsverordnung; EIBV). The In accordance with section 6 of the General Railways Act Federal Network Agency is responsible for monitoring com- (Allgemeines Eisenbahn Gesetz; AEG), the infrastructure pliance with the principles applicable for imposing the line companies which belong to DB Group, and in particular fees in accordance with the EIBV, and is also responsible for DB Netz AG, DB Station & Service AG, DB Energie GmbH, ensuring that these principles are applied in a non-discrimi- have been granted temporary authorization as rail infrastruc- natory manner. ture companies as detailed in section 2 (3) AEG to operate and The above-mentioned infrastructure companies gener- develop the rail infrastructure network in Germany. This ated overall revenues of € 7,013 million in 2007 (previous comprises in detail the authorization to operate the rail net- year: € 6,742 million); of this ﬁgure, € 1,278 million was gen- work, the related power network and the station premises erated with non-Group customers (previous year: € 1,107 related to operations. million). The approvals of the EBA for DB Netz AG and DB Sta- The assets of the rail infrastructure are the legal and eco- tion & Service AG have been provided until December 31, nomic property of the companies. 2048, and the approvals for DB Energie GmbH have been provided until June 30, 2051. Transport contracts The right of the rail infrastructure companies to operate Service licenses and similar approvals which guarantee the the rail infrastructure is connected to various obligations. In general public access to important economic and public particular, the infrastructure companies are obliged to ensure facilities have been granted to companies in DB Group.This that the rail infrastructure is constructed in a safe manner, is applicable particularly for DB Regio AG as well as its sub- that it is maintained in a safe condition and that it is devel- sidiaries which conduct rail passenger operations. oped further in a forward-looking manner. In addition, the infrastructure operators also have to observe statutory duties with regard to noise abatement in the case of any new and expansion projects. DB Group voluntarily participates in the “Rail noise abatement program” for existing lines. 216 DEUTSCHE BAHN GROUP •

DB Regio AG and its subsidiaries provide transport services tract is still running and put out to tender again. This is ap- on the basis of ordered-service contracts. These transport plicable for on average 30 % of the services at the beginning contracts for local passenger transport services are signed of the contract term. After the transport contracts have ex- with the organization which orders the transport services pired, it is expected that the transport services will be put (e.g. Federal states, special-purpose association, local trans- out to competitive tender. port company). These contracts determine the way in which The company enjoys legal and beneficial ownership of the transport service is provided and continued, and also virtually all of the assets necessary for providing the ser- governs the relevant compensation paid for the transport vices, and in particular the rolling stock. As a general rule no services (ordered services fee). special obligations exist after the end of the contract term. The funds necessary for this purpose are made available to the Federal states by the Federal Government in accor- (38) Related-party disclosures dance with the regulations of the Regionalization Act (Re- The following parties are deemed to be related parties of gionalisierungsgesetz; RegG). The total ordered services fees DB Group in accordance with IAS 24 (Related-Party Disclo- amounted to € 4,483 million in the year under review (pre- sures): vious year: € 4,551 million). • the Federal Government in its capacity as the owner of The financially significant rail-related transport agree- all shares in DB AG, ments with annual ordered services fees of more than € 20 • the companies or enterprises subject to the control of the million are explained in the following: Federal Republic of Germany (referred to in the follow- Overall, these transport contracts represent €4,248 mil- ing as “Federal companies”), lion (previous year: € 4,283 million); this corresponds to • affiliated, non-consolidated and associated companies 94.8 % (previous year: 94.1%) of the total ordered services as well as joint ventures of DB Group, as well as fees (see Note [1]). The fact that the ordered services fees • the members of the Management Board and the Super- received are virtually unchanged is due to the fact that an visory Board of DB AG and their close relatives. annual increase of 1.5 % to 2 % for the ordered services fees is opposed by reduced revenues as a result of invitations to tender in virtually all contracts. The transport contracts run for periods of between 10 and 15 years. All transport contracts run until at least 2010. 76 % of the transport contracts run until at least 2013, and 26 % run until at least 2016. The transport contracts can only be terminated by the client before the scheduled end of the term for a compelling reason. In general, a transport contract contains stipulations according to which parts of the transport services can be taken out of the contract while the con- GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 217 Notes

Transactions with related companies and persons are con- Purchases of products and services mainly comprise the fees ducted on an arm’s length basis. paid to the Federal Government within the framework of the The figures attributable to related companies and persons pro forma billing of the allocated civil servants as well as cost are stated under the corresponding items of the “Notes to the refunds for staff secondments in the service provision field. Balance Sheet” with the designation “thereof.” Individual The interest-free loans extended by the Federal Gov- figures are set out in the Notes (19), (28) and (29). ernment in the year under review in accordance with the Details and explanations of transactions between DB BSchwAG are shown with their nominal value under borrow- Group and the Federal Republic of Germany are included in ings. the Notes (3), (5), (9), (13), (32), (36) and (37). The investment grants have been extended via the Trans- Significant economic relations which need to be reported port Infrastructure Financing Company (Verkehrsinfrastruk- separately between DB Group and related companies and turfinanzierungsgesellschaft; VIFG) mainly in accordance persons are explained in the following: with the BSchwAG, the GVFG and the Transport Infrastruc- ture Financing Act (Verkehrsinfrastrukturfinanzierungs- Relationships with the Federal Republic of Germany gesetz; VIFGG). The grants recognized in the income statement relate € million Federal Government mainly to payments provided by the Federal Government 2007 2006 Services received by DB Group for covering excessive burdens borne by DB Group as a Purchase of goods and services 1,622 1,673 result of operating and maintaining equal-height crossings Taking out loans 88 0 with roads of all construction authorities. Investment grants 3,466 3,041 Other grants 240 161 Sales of products and services also comprise services for 5,416 4,875 carrying severely disabled persons, persons who are working on alternative military service and Bundeswehr traffic. Services rendered by DB Group Sales of goods and services 269 242 DB AG has repaid € 311 million interest-free loans to the Lease and rental payments received 11 11 Federal Government in accordance with the BSchwAG; al- Other services rendered 21 314 most all of this payment was covered by the agreed annual Repayment of loans 311 0 Repayment of investment grants 128 262 standard redemption payments. Repayment of other grants 1 14 The decline in uncovered receivables to €96 million (pre- 741 843 vious year: € 225 million) with regard to the Federal Govern-

Other disclosures ment is attributable mainly to realized claims from the trans- Unsecured receivables 96 225 fer of real estate by the BEV. Unsecured liabilities 3,890 3,996 Current total of guarantees received 2,993 3,041 Current total of guarantees granted 7 7 218 DEUTSCHE BAHN GROUP •

In addition to the interest-free loans, which are presented at Relations with Federal companies this point with their present values, the liabilities due to the Most of the transactions carried out in accordance with IAS Federal Government consist of other liabilities in the amount 24 in the period under review and in the corresponding pre- of €333 million (previous year: €396 million); of this figure, vious year period related to operations, and overall were of liabilities attributable to old obligations account for € 0 mil- minor significance for DB Group. The receivables and liab- lion (previous year: € 51 million). ilities which have arisen cancelled each other out almost The guarantees received from the Federal Government completely as of the reporting date. primarily relate to the loans received from EUROFIMA as well as the outstanding contributions and liabilities arising Relations with affiliated, non-consolidated from collective liability of DB AG at EUROFIMA. The guar- companies, associates and joint ventures antees which have been received include a maximum com- In the course of the 2007 financial year, DB Group purchas- mitment of € 2,354 million of the Federal Government for ed products and services worth €177 million (previous year: loans of EUROFIMA. The loan amounted to € 1,609 million €157 million), mainly for purchasing passenger and freight as of the balance sheet date. transport services. Most of this figure, namely €169 million The following agreements were concluded with the (previous year: € 128 million), was attributable to transac- Federal Government in 2007: tions conducted with associates. In the course of the financial year, 16 new financing agree- Interest payments of € 80 million (previous year: € 94 ments were concluded, with a Federal content totaling million) were also incurred in the period under review. This approximately € 1.9 billion. The financing agreements have figure relates almost exclusively to interest payments for the different terms (ranging from one year up to eight years). loans extended by EUROFIMA. Please refer to the details Financing is provided completely in the form of investment under Note (28). grants which do not have to be repaid. DB Group generated revenues of €584 million (previous For the years 2004 to 2008, DB AG has waived its entitle- year: € 507 million) from the sale of products and services. ment to reimbursement of the costs for employees and These revenues were generated mainly in the Rail Freight assigned civil servants which it incurs as a result of the fact segment and comprise revenues generated with transport that employment contracts which were transferred to DB AG services which have been provided. in accordance with section 14 (2) DBGrG cannot be terminated Guarantees totaling €12 million (previous year: €26 mil- (see section 21(5) and (6) DBGrG) although the personnel re- lion) have been extended; of this figure € 11 million (previ- quirements of DB AG has diminished because of technical, ous year: € 15 million) was attributable to joint ventures. operational and organizational measures. An equivalent volume of transactions with related companies was conducted in the previous year period. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 219 Notes

Relations with the Management Board and Compensation of the Management Board Supervisory Board of Deutsche Bahn AG The following section sets out the transactions between € thousand 2007 2006 Total compensation of the DB Group and the members of the Management Board and Management Board1) 17,827 20,143 the Supervisory Board, as well as the companies in which fixed1) 7,637 7,763 1) members of the Management Board or the Supervisory Board variable 10,190 12,380 own a majority interest. short-term1) 14,260 16,710 for retirement provision 3,567 3,433 € thousand 2007 2006 Services rendered by DB Group Compensation of former members of Sales of goods and services 21,118 18,307 the Management Board 1,570 1,385 Lease and rental payments received 0 0 Trade receivables as of Dec 31 149 83 Retirement benefit obligation in respect of former members of the Services received by DB Group Management Board 24,222 25,697 Purchase of goods and services 57,265 52,444 Trade liabilities as of Dec 31 6,948 6,793 1) Roland Heinisch p.r.t.(January 1 – December 31, 2007)

The revenues of € 21,118 thousand (previous year: € 18,307 The overall compensation of the members of the Manage- thousand) generated by DB Group (service provider) mainly ment Board consists of the monetary components of com- comprise transport and freight forwarding services of the pensation, the benefit commitments, the other commitments Rail Freight and Schenker segments; of this figure, € 3,407 as well as ancillary benefits. thousand (previous year: € 4,769 thousand) was generated The compensation is based on a target income which con- with the SMS Group, and € 17,711 thousand (previous year: sists of fixed basic compensation (40 %) and a performance- € 13,538 thousand) was generated with Georgsmarienhütte linked annual directors’ fee (60 %). The fixed income defined Holding GmbH. for each individual is paid out in twelve equal installments, The products and services purchased by DB Group (ser- and the adequacy of this fixed income is regularly reviewed vice recipient) comprise exclusively supplies of Georgs- by the Personnel Committee of the Supervisory Board. marienhütte Holding GmbH. The annual director’s fee is calculated on the basis of a factor linked to the performance of the company as well as an individual performance factor. The factor linked to the performance of the company depends on the success in meeting the financial objectives derived from corporate planning (ROCE and BE II). The individual performance factor reflects the success in meeting specific personal targets. The financial and personal targets are defined at the beginning of each financial year by the Chairman of the Super- visory Board and the Personnel Committee of the Super- visory Board as well as the members of the Management Board. 220 DEUTSCHE BAHN GROUP •

After the end of a financial year, the Group results are used Compensation of the Supervisory Board as the basis of calculating the factors linked to the perfor- The compensation of the Supervisory Board was most recent- mance of the company and the personal performance for ly fixed by way of a resolution of the shareholders’ meeting each member of the Management Board. The target income of June 30, 2006. In addition to being reimbursed for their is attained if the performance component as well as the suc- cash outlays, the members of the Supervisory Board receive cess component are fully met. The compensation calculated annual compensation which consists of a fixed and a perfor- for each member of the Management Board on this basis may mance-linked component. The fixed annual compensation differ from the target income, because the annual director’s is € 20,000.00. fee can be between zero and 260 %. The performance-linked compensation depends on the The benefit commitments amount to1% of the basic salary operating result (EBIT) of the financial year shown in the which is based on the length of service on the Management consolidated financial statements as well as the success Board of DB AG. achieved in meeting certain parameters of operating perfor- The compensation of the Management Board does not mance. The performance-linked compensation of the Super- comprise any mid-term incentives/long-term incentives. The visory Board is subject to a cap of € 13,000. members of the Management Board do not receive any addi- The Chairman of the Supervisory Board receives com- tional compensation for mandates exercised in control bodies pensation equivalent to twice the above figure, and his dep- of other group companies and equity participations. In addi- uty receives compensation equivalent to one and a half times tion to the fixed and variable compensation, a company car the above figure. The members of the Executive, Audit and is placed at the disposal of each member of the Management Personnel Committee also receive additional compensation Board. In addition, DB AG has taken out reinsurance cover for their activity in these committees. for each member of the Management Board. These non-cash In addition, the members of the Supervisory Board can benefits are taxed in the form of non-monetary benefits. choose to receive one BahnCard 100 First or five free travel The short-term emoluments of the members of the Man- vouchers (travel benefits) as well as a payment of € 250.00 agement Board are broken down as follows: for every meeting day of the Supervisory Board and its com- mitees which they attend. € thousand Fixed Variable Other1) Total compen- compen- 2007 2007 € thousand 2007 20061) sation sation Total compensation of the 2007 2007 Supervisory Board 873 875 Hartmut Mehdorn 750 2,215 10 2,975 thereof short-term (873) (875) Dr. Norbert Bensel 550 1,435 17 2,002 thereof fixed (503) – Stefan Garber 400 1,090 30 1,520 thereof performance-related (272) – Roland Heinisch thereof attendance fees (34) (24) (up to August 31, 2007) 267 650 38 955 thereof benefits of pecuniary Dr.Karl-Friedrich Rausch 550 1,335 15 1,900 condition from travel benefits (33) (15) Diethelm Sack 550 1,390 19 1,959 thereof compensation for member- Margret Suckale 400 1,050 20 1,470 ship in Supervisory Boards of Dr. Otto Wiesheu 450 1,025 4 1,479 DB Group companies (including Total 3,917 10,190 153 14,260 attendance fees) (31) (37)

1) Supervisory Board compensation, benefits of pecuniary condition from 1) Total compensation of the Supervisory Board in the 2006 financial year was travel benefits and usage of company cars as well as insurance allowances. shown in total. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 221 Notes

Subject to the resolution being adopted by the shareholders’ In the course of the 2007 financial year, the members of the meeting on March 28, 2008, with regard to approving the Supervisory Board did not receive any compensation or bene- actions of the members of the Supervisory Board, the mem- fits for personally provided services. bers of the Supervisory Board will receive the following compensation for their activity in the 2007 financial year: (39) Events after the balance sheet date On July 26, 2007, DB AG signed an agreement to purchase a € Fixed Variable Atten- Total majority of shares in the Spanish Transportes Ferroviarios compen- compen- dance 2007 sation1) sation1) fees Especiales (Transfesa). This acquisition still has to be ap- 2007 2007 2007 proved by the necessary official authorities. Dr. Werner Müller 60,000 32,400 3,000 95,400 At the end of January 2008, DB AG completed the wage Norbert Hansen 40,000 21,600 2,750 64,350 Georg Brunnhuber 20,000 10,800 1,250 32,050 bargaining negotiations regarding a wage agreement for en- Niels Lund Chrestensen 20,000 10,800 1,000 31,800 gine drivers with the German Locomotive Engineers Union Peter Debuschewitz (Gewerkschaft Deutscher Lokomotivführer; GDL). Before (up to June 30, 2007) 10,000 5,400 500 15,900 Dr. Jürgen Großmann 20,000 10,800 750 31,550 this agreement can come into force, a further collective bar- Horst Hartkorn 20,000 10,800 1,250 32,050 gaining agreement which defines independence in the long Jörg Hennerkes 35,000 18,900 3,500 57,400 term as well as freedom from contradiction and conflict will Jörg Hensel 20,000 10,800 1,250 32,050 Klaus-Dieter Hommel 20,000 10,800 1,000 31,800 have to be signed. In addition, all three DB-relevant trade Günter Kirchheim 30,000 16,200 2,500 48,700 unions will have to sign a cooperation agreement governing Helmut Kleindienst 25,000 13,500 2,250 40,750 their cooperation on the occasion of future collective bargain- Lothar Krauß 25,000 13,500 2,000 40,500 Dr. Jürgen Krumnow 30,000 16,200 2,000 48,200 ing negotiations. The engine driver collective bargaining Vitus Miller 20,000 10,800 1,250 32,050 agreement is due to run from January 1, 2007 to January 31, Heike Moll 20,000 10,800 1,000 31,800 2009, and comprises an 8 % wage increase starting in March Dr. Axel Nawrath 20,000 10,800 1,500 32,300 Dr. Bernd Pfaffenbach 20,000 10,800 2,250 33,050 2008, a further 3 % increase starting September 1, 2008 as Ute Plambeck well as a one-off payment of €800 per employee for the period (since August 16, 2007) 8,333 4,500 750 13,583 between July 2007 and February 2008. Dr. Eggert Voscherau 20,000 10,800 1,000 31,800 Dr. Heinrich Weiss 20,000 10,800 1,000 31,800 Total 503,333 271,800 33,750 808,883

1) Including additional compensation for the Chairman, the Deputy Chairman and membership in committees of the Supervisory Board. 222 DEUTSCHE BAHN GROUP •

On January 18, 2008, DB AG signed an agreement to acquire (40) Exemption of subsidiaries from the disclosure the British rail transport company Laing Rail Ltd. This trans- requirements of the German Commercial Code action comprises Laing Rail Ltd. and its equity participations (Handelsgesetzbuch; HGB) Chiltern Railways (100 %) as well as the two joint ventures The following subsidiaries intend to make use of section 264 London Overground Rail Operations as well as Wrexham, (3) HGB, which provides an exemption from the disclosure Shropshire and Marylebone Railways (50 % in each case). The requirements: acquisition is still subject to the necessary approvals of the relevant bodies and authorities. A. Philippi GmbH, Quierschied AMEROPA-Reisen GmbH, Bad Homburg v.d.H. In January 2008, DB Group was given the go-ahead to Anterist + Schneider Automotive Service GmbH, Saarwellingen purchase all shares in WBN Waggonbau Niesky GmbH, a Anterist & Schneider GmbH, Saarbrücken company which builds rolling stock. The insolvent company Anterist + Schneider Möbel-Logistik GmbH, Saarbrücken which is based in Niesky near Görlitz submitted an insol- ATG Autotransportlogistic Gesellschaft mbH, Eschborn Autokraft GmbH, Kiel vency application in mid-October last year. Insolvency pro- Bayern Express & P.Kühn Berlin GmbH, Berlin ceedings were initiated at the beginning of 2008. BBH BahnBus Hochstift GmbH, Paderborn BRN Busverkehr Rhein-Neckar GmbH, Ludwigshafen BRN Stadtbus GmbH, Ludwigshafen BRS Busverkehr Ruhr-Sieg GmbH, Meschede BTS Kombiwaggon Service GmbH, Mainz BTT BahnTank Transport GmbH, Mainz BVO Busverkehr Ostwestfalen GmbH, Bielefeld BVR Busverkehr Rheinland GmbH, Düsseldorf DB Akademie GmbH, Potsdam DB Bahnbau GmbH, Berlin DB Dialog Telefonservice GmbH, Berlin DB Dienstleistungen GmbH, Berlin DB European Railservice GmbH, Dortmund DB Gastronomie GmbH, Frankfurt/Main DB International GmbH, Berlin DB JobService GmbH, Berlin DB Kommunikationstechnik GmbH, Berlin DB Media & Buch GmbH, Kassel DB Mobility Logistics AG, Berlin (formerly Stinnes AG, Berlin) DB ProjektBau GmbH, Berlin DB Rent GmbH, Frankfurt/Main GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 223 Notes

DB Sechste Vermögensverwaltungsgesellschaft mbH, Berlin RBO Regionalbus Ostbayern GmbH, Regensburg DB Services Immobilien GmbH, Berlin Regional Bus Stuttgart GmbH RBS, Stuttgart DB Sicherheit GmbH, Berlin Regionalbus Braunschweig GmbH -RBB-, Brunswick DB Stadtverkehr GmbH, Frankfurt/Main Regionalverkehr Allgäu GmbH (RVA), Oberstdorf DB Systel GmbH, Frankfurt/Main Regionalverkehr Kurhessen GmbH (RKH), Kassel DB Vertrieb GmbH, Frankfurt/Main Regionalverkehr Oberbayern Gesellschaft mit beschränkter Haftung, Munich DB Zehnte Vermögensverwaltungsgesellschaft mbH, Frankfurt/Main RMV Rhein-Mosel Verkehrsgesellschaft mbH, Koblenz DB Zeitarbeit GmbH, Berlin Roll Spedition Gesellschaft mit beschränkter Haftung, Crailsheim DBFuhrparkService GmbH, Frankfurt/Main RSW Regionalbus Saar-Westpfalz GmbH, Saarbrücken Deutsche Gleis- und Tiefbau GmbH, Berlin RVE Regionalverkehr Euregio Maas-Rhein GmbH, Aachen DVA Deutsche Verkehrs-Assekuranz-Vermittlungs-GmbH, Bad Homburg RVN Regionalverkehr Niederrhein GmbH, Wesel ECO-Trucking GmbH, Coburg RVS Regionalbusverkehr Südwest GmbH, Karlsruhe ELAG Emder Lagerhaus und Automotive GmbH, Emden SBG SüdbadenBus GmbH, Freiburg im Breisgau Europac GmbH, Coburg Schenker (BAX) Europe Holding GmbH, Essen EVAG Emder Verkehrs und Automotive Gesellschaft mbH, Emden SCHENKER AIR TRANSPORT GmbH, Kelsterbach EVB Handelshaus Bour GmbH, Landau in der Pfalz Schenker Aktiengesellschaft, Essen Friedrich Müller Omnibusunternehmen GmbH, Schwäbisch Hall Schenker Automotive RailNet GmbH, Kelsterbach Georg Schulmeyer GmbH, Mörfelden-Walldorf SCHENKER BETEILIGUNGS GmbH, Dortmund GVV Gesellschaft zur Verwaltung von Vermögenswerten mbH, Essen Schenker Deutschland AG, Frankfurt/Main H. Albrecht Speditions Gesellschaft mit beschränkter Haftung, SCHENKER INTERNATIONAL AKTIENGESELLSCHAFT, Essen Frankfurt/Main SCHENKER INTERNATIONAL DEUTSCHLAND GMBH, Kelsterbach Haller Busbetrieb GmbH, Walsrode Schenker NIGHT PLUS GmbH, Wülfrath Hanekamp Busreisen GmbH, Cloppenburg Stinnes Beteiligungs-Verwaltungs GmbH, Essen Heider Stadtverkehr GmbH, Heide Stinnes Immobiliendienst Verwaltungsgesellschaft mbH, Ibb Ingenieur-, Brücken- und Tiefbau GmbH, Dresden Mülheim an der Ruhr Intertec GmbH, Landau in der Pfalz TRANSA Spedition GmbH, Offenbach/Main Intertec Retail Logistics GmbH, Landau in der Pfalz Trilag Geschäftsführungs GmbH, Trier Inter-Union Technohandel GmbH, Landau in der Pfalz Verkehrsgesellschaft mbH Untermain –VU–, Aschaffenburg Johannes R. Weichelt GmbH, Coburg WB Westfalen Bus GmbH, Münster KVB Sigmaringen GmbH, Sigmaringen Weser-Ems Busverkehr GmbH (WEB), Bremen Mair Spedition und Logistik GmbH, Gersthofen Zehlendorfer Eisenbahn- und Hafen GmbH, Berlin MOS Mobile Oberbauschweißtechnik GmbH, Berlin Zentral-Omnibusbahnhof Berlin GmbH, Berlin Nieten Fracht Logistik GmbH, Freilassing NVO Nahverkehr Ostwestfalen GmbH, Halle/Westf. Omnibusverkehr Franken GmbH (OVF), Nuremberg ORN Omnibusverkehr Rhein-Nahe GmbH, Mainz Railion GmbH, Mainz Railog GmbH, Kelsterbach 224 DEUTSCHE BAHN GROUP •

(41) Major subsidiaries The following pages detail the major participations for which the ﬁgures stated for revenues are consistent with IFRS reporting. The complete list of all participations of the DB Group is published in the electronic Federal Gazette.

Major subsidiaries DB Group

Name and domicile Revenues Employees Ownership 2007 as of % € million Dec 31, 2007 Passenger Transport Group division Long-Distance Transport business unit City Night Line CNL AG, Zurich/Switzerland 100.00 65 131 DB Fernverkehr Aktiengesellschaft, Frankfurt/Main 100.00 3,159 13,823 DBAutoZug GmbH, Dortmund 100.00 202 354

Regional Transport business unit DB Regio Aktiengesellschaft, Frankfurt/Main 100.00 5,232 19,177 DB Regio NRW GmbH, Düsseldorf 100.00 1,148 3,619 DB RegioNetz Verkehrs GmbH, Frankfurt/Main 100.00 154 699 DB ZugBus Regionalverkehr Alb-Bodensee GmbH (RAB), Ulm 100.00 281 1,114

Urban Transport business unit Autokraft GmbH, Kiel 100.00 82 631 BRN Busverkehr Rhein-Neckar GmbH, Ludwigshafen 100.00 52 464 Omnibusverkehr Franken GmbH (OVF), Nuremberg 100.00 89 493 ORN Omnibusverkehr Rhein-Nahe GmbH, Mainz 100.00 44 368 RBO Regionalbus Ostbayern GmbH, Regensburg 100.00 65 295 Regional Bus Stuttgart GmbH RBS, Stuttgart 100.00 71 480 Regionalbus Braunschweig GmbH -RBB-, Brunswick 100.00 43 263 Regionalverkehr Kurhessen GmbH (RKH), Kassel 100.00 75 671 Regionalverkehr Oberbayern Gesellschaft mit beschränkter Haftung, Munich 100.00 60 560 RMV Rhein-Mosel Verkehrsgesellschaft mbH, Koblenz 74.90 57 258 RSW Regionalbus Saar-Westpfalz GmbH, Saarbrücken 100.00 61 281 RVS Regionalbusverkehr Südwest GmbH, Karlsruhe 100.00 54 357 S-Bahn Berlin GmbH, Berlin 100.00 530 2,976 S-Bahn Hamburg GmbH, Hamburg 100.00 202 860 SBG SüdbadenBus GmbH, Freiburg im Breisgau 100.00 72 478 Weser-Ems Busverkehr GmbH (WEB), Bremen 100.00 62 334 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 225 Notes

Name and domicile Revenues Employees Ownership 2007 as of % € million Dec 31, 2007 Transport and Logistics Group division Schenker business unit Anterist & Schneider GmbH, Saarbrücken 100.00 102 453 ATG Autotransportlogistic Gesellschaft mbH, Eschborn 100.00 306 60 BAX Global (China) Co Ltd., Suzhou 100.00 178 473 SCHENKER&Co.AG, Vienna/Austria 100.00 697 1,682 Schenker (S.A.) (Pty) Ltd., Isando 100.00 123 525 Schenker A/S, Hvidovre/Denmark 99.14 186 301 SCHENKER AB, Göteborg/Sweden 99.14 1,276 2,502 Schenker Aktiengesellschaft, Essen 100.00 3,186 9,475 Schenker AS, Oslo/Norway 99.14 475 1,406 Schenker Australia Pty. Ltd., Alexandria/Australia 100.00 253 939 Schenker B.V., Tilburg/The Netherlands 100.00 177 594 Schenker Cargo Oy, Turku/Finland 99.14 198 984 Schenker China Ltd., Pudong, Shanghai/China 100.00 362 1,207 Schenker Espana, S.A., Coslada (Madrid)/Spain 100.00 115 305 SCHENKER INDIA PRIVATE LIMITED, New Delhi/India 100.00 118 1,096 Schenker International (HK) Ltd., Hong Kong/China 100.00 652 1,565 SCHENKER INTERNATIONAL B.V., Rotterdam/The Netherlands 100.00 119 246 Schenker Italiana S.p.A., Peschiera/Italy 100.00 435 972 Schenker LTD., London/Great Britain 100.00 336 897 SCHENKER N.V., Antwerp/Belgium 100.00 232 615 Schenker of Canada Ltd., Toronto/Canada 100.00 441 1,604 Schenker OY, Helsinki/Finland 99.14 318 410 Schenker SA, Gennevilliers/France 100.00 569 1,450 Schenker Schweiz AG, Zurich/Switzerland 100.00 123 361 Schenker Singapore (PTE) Ltd., International Forwarders, Singapore/China 100.00 239 1,374 Schenker Sp.zo.o., Warsaw/Poland 98.74 267 1,510 Schenker-Arkas Nakliyat Ve Tic. A.S., Zincirlikuyu/Turkey 55.00 107 352 SCHENKER-JOYAU SAS, Montaigu Cedex/France 99.94 367 3,219 Schenker-Seino Co. Ltd., Tokyo/Japan 60.00 251 384 Stinnes Holding Corporation, Tarrytown/USA1) 100.00 1,684 6,917

Rail Freight business unit BTS Kombiwaggon Service GmbH, Mainz 100.00 56 297 BTT BahnTank Transport GmbH, Mainz 100.00 79 98 DB Mobility Logistics AG, Berlin (formerly Stinnes AG, Berlin) 100.00 85 500 Nieten Fracht Logistik GmbH, Freilassing 100.00 162 45 Railion Danmark A/S, Glostrup 98.00 64 332 Railion Deutschland Aktiengesellschaft, Mainz 98.00 3,659 19,878 Railion Nederland N.V., Utrecht/The Netherlands 98.00 154 988 RBH Logistics GmbH, Gladbeck 98.00 195 864 TRANSA Spedition GmbH, Offenbach/Main 100.00 348 338 226 DEUTSCHE BAHN GROUP •

Name and domicile Revenues Employees Ownership 2007 as of % € million Dec 31, 2007 Infrastructure and Services Group division Track Infrastructure business unit DB Bahnbau GmbH, Berlin 100.00 67 815 DB Netz Aktiengesellschaft, Frankfurt/Main 100.00 4,005 36,058 DB RegioNetz Infrastruktur GmbH, Frankfurt/Main 100.00 59 531 Deutsche Bahn Gleisbau GmbH, Duisburg 100.00 90 450 Deutsche Gleis- und Tiefbau GmbH, Berlin 100.00 164 1,129 Deutsche Umschlaggesellschaft Schiene – Straße (DUSS) mbH, Bodenheim 87.50 37 453 Ibb Ingenieur-, Brücken- und Tiefbau GmbH, Dresden 100.00 70 246

Passenger Stations business unit DB Station & Service Aktiengesellschaft, Berlin 100.00 955 4,528

Energy business unit2) DB Energie GmbH, Frankfurt/Main 100.00 2,052 1,611

Services business unit DB Kommunikationstechnik GmbH, Berlin 100.00 75 1,183 DB Rent GmbH, Frankfurt/Main 100.00 70 143 DB Services Nord GmbH, Hamburg 100.00 41 1,394 DB Services Nordost GmbH, Berlin 100.00 54 2,017 DB Services Süd GmbH, Munich 100.00 42 1,454 DB Services Südost GmbH, Leipzig 100.00 50 3,838 DB Services Südwest GmbH, Frankfurt/Main 100.00 59 1,811 DB Services West GmbH, Cologne 100.00 45 1,227 DB Systel GmbH, Frankfurt/Main 100.00 857 4,602 DBFuhrparkService GmbH, Frankfurt/Main 100.00 150 166

Holdings/Other Operations AMEROPA-REISEN GmbH, Bad Homburg v.d.H.3) 100.00 99 116 DB Dialog Telefonservice GmbH, Berlin3) 100.00 61 1,246 DB International GmbH, Berlin4) 100.00 87 576 DB Media& Buch GmbH, Kassel 100.00 103 0 DB ProjektBau GmbH, Berlin4) 100.00 514 3,666

1) Figures comply with consolidated Group figures from Stinnes Corp. 2) Shown under other activities in the segment report 3) According to the organizational structure consolidated within Passenger Transport Group division 4) According to the organizational structure consolidated within Infrastructure and Services Group division

(42) The Boards of Deutsche Bahn AG The names and mandates of the members of the Supervisory Board and Management Board are set out in the list on the following pages. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 227 Notes

DEUTSCHE BAHN AG

Management Board

Hartmut Mehdorn Roland Heinisch Margret Suckale CEO and Chairman of Management Board, Integrated Systems Rail, Personnel and Legal, Berlin Idstein Berlin a) DB Netz AG (Chairman)1) – up to August 31, 2007 – a) Schenker AG1) DEVK Deutsche Eisenbahn Versicherung DB Gastronomie GmbH (Chairwoman)1) Lebensversicherungsverein a.G. DB JobService GmbH (Chairwoman)1) Dr. Karl-Friedrich Rausch DEVK Deutsche Eisenbahn Versicherung DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. Passenger Transport, Lebensversicherungsverein a.G. Dresdner Bank AG Weiterstadt Sparda-Bank Hamburg eG 1) SAP AG a) DB Fernverkehr AG (Chairman) b) DB International GmbH1) 1) b) Allianz Deutschland AG (Advisory Board) DB Regio AG (Chairman) DB Zeitarbeit GmbH (Advisory Board, Railion Deutschland AG1) Chairwoman)1) 1) Schenker AG DEVK Deutsche Eisenbahn Versicherung Dr. Norbert Bensel DB Mobility Logistics AG (formerly Sach- und HUK-Versicherungsverein a.G. Transport and Logistics, Stinnes AG) 1) Verband der Sparda-Banken e.V. Berlin DB Vertrieb GmbH (Chairman)1) (Advisory Board) a) DB Fernverkehr AG1) S-Bahn Berlin GmbH (Chairman)1) DB Regio AG1) DEVK Allgemeine Versicherungs-AG Railion Deutschland AG (Chairman)1) DEVK Deutsche Eisenbahn Versicherung Dr. Otto Wiesheu Schenker AG (Chairman)1) Sach- und HUK-Versicherungsverein a.G. Economic and Political Affairs, DB Mobility Logistics AG (formerly Zolling Stinnes AG) (Chairman)1) a) DB Sicherheit GmbH1) Diethelm Sack DB Services Immobilien GmbH1) b) DB International GmbH (Chairman)1) DEVK Deutsche Eisenbahn Versicherung CFO, DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. Frankfurt/Main Lebensversicherungsverein a.G. 1) Partner für Berlin Holding Gesellschaft a) Railion Deutschland AG INA-Holding Schaeffler KG (Advisory für Hauptstadt-Marketing mbH Schenker AG1) Board) Praktiker Bau- und Heimwerkermärkte AG DB Mobility Logistics AG (formerly Praktiker Bau- und Heimwerkermärkte Stinnes AG)1) 1) Holding AG DB Services Immobilien GmbH (Chairman) Sparda-Bank Berlin eG DEVK Allgemeine Lebensversicherungs-AG b) BLG LOGISTICS GROUP AG&Co.KG DEVK Deutsche Eisenbahn Versicherung (Advisory Board) Lebensversicherungsverein a.G. IAS Institut für Arbeits- und gbo AG Sozialhygiene Stiftung (Advisory Board) b) DVA Deutsche Verkehrs-Assekuranz- Vermittlungs-GmbH (Chairman)1)

Stefan Garber Infrastructure and Services, Bad Homburg a) DB Station&Service AG (Chairman)1) DB Energie GmbH (Chairman)1) DB ProjektBau GmbH (Chairman)1) 1) DB Services Nordost GmbH (Chairman) 1) Mandate within the Group DB Systel GmbH1) a) Membership in supervisory boards required Arcor Verwaltungs-Aktiengesellschaft by law IDUNA Lebensversicherung a.G. Sparda-Bank Baden-Württemberg eG b) Membership in comparable domestic and b) DB Dienstleistungen GmbH foreign corporate control committees of (Advisory Board, Chairman)1) business enterprises Arcor AG &Co.KG (Partner Committee member)1) Information as of December 31, 2007 or data BLG LOGISTICS GROUP AG&Co.KG of resignation in 2007. If appointed after (Advisory Board) December 31, 2007, the time of appointment Signal Iduna Gruppe (Advisory Board) is used. 228 DEUTSCHE BAHN GROUP •

Supervisory Board

Dr. Günther Saßmannshausen Niels Lund Chrestensen Jörg Hennerkes Honorary Chairman of the Supervisory Board, General Manager of N.L. Chrestensen, State Secretary, Federal Ministry of Hanover Erfurter Samen- und Pflanzenzucht GmbH, Transport, Building and Urban Affairs, Erfurt Berlin a) Funkwerk AG – up to January 31, 2008 – Dr.Werner Müller b) Landesbank Hessen-Thüringen (Advisory a) Fraport AG Chairman of the Supervisory Board, Board Public Companies/Institutions, b) DFS Deutsche Flugsicherung GmbH Chairman of the Management Board of Communes and Savings Banks) (Chairman) EVONIK Industries AG, Thüringer Aufbaubank (Administrative Mülheim an der Ruhr Board) a) Deutsche Steinkohle AG (Chairman)1) Jörg Hensel* EVONIK Degussa GmbH (Chairman)1) Chairman of the Central Works Council EVONIK Immobilien AG1) Peter Debuschewitz* of Railion Deutschland AG, EVONIK STEAG AG (Chairman)1) Management Representative of Deutsche Chairman of the Branch Works Council b) g.e.b.b. Gesellschaft für Entwicklung, Bahn AG for the coordination of stations of DB Mobility Logistics AG (formerly Beschaffung und Betrieb mbH (Chairman) and lines in the State of Berlin, Stinnes AG), Stadler Rail AG (Advisory Board) Taufkirchen Hamm – up to June 30, 2007 – a) Railion Deutschland AG b) DEVK Deutsche Eisenbahn Versicherung DB Mobility Logistics AG (formerly Norbert Hansen* Lebensversicherungsverein a.G. Stinnes AG) Deputy Chairman of the Supervisory Board, (Advisory Board) Chairman of TRANSNET Gewerkschaft GdED, Hamburg Klaus-Dieter Hommel* a) Arcor Verwaltungs-Aktiengesellschaft Dr.-Ing. Dr. E. h. Jürgen Großmann Chairman of the GDBA Transport Workers’ DEVK Deutsche Eisenbahn Versicherung Chairman of the Management Board Union, Lebensversicherungsverein a.G. (Chairman) of RWE AG, Frankfurt/Main DEVK Deutsche Eisenbahn Versicherung Hamburg a) Railion Deutschland AG Sach- und HUK-Versicherungsverein a.G. a) RWE Dea AG (Chairman)1) DEVK Deutsche Eisenbahn Versicherung (Chairman) RWE Energy AG (Chairman)1) Lebensversicherungsverein a.G. DEVK Vermögensvorsorge- und RWE Power AG (Chairman)1) DEVK Deutsche Eisenbahn Versicherung Beteiligungs-AG BATIG Gesellschaft für Beteiligungen mbH Sach- und HUK-Versicherungsverein a.G. British American Tobacco DEVK Pensionsfonds-AG (Germany) GmbH DEVK Rechtsschutz-Versicherungs-AG Georg Brunnhuber British American Tobacco Member of the German Bundestag, (Industrie) GmbH Günter Kirchheim* Oberkochen SURTECO Aktiengesellschaft (Chairman) b) Kreissparkasse Ostalb (Advisory Board) Tognum AG (Chairman) Chairman of the Group Works Council of VOLKSWAGEN AG Deutsche Bahn AG, b) ARDEX GmbH (Advisory Board, Chairman) Chairman of the Central Works Council of EVONIK Trading GmbH DB Netz AG, Hanover Acceptances Limited, Essen London/Great Britain a) DEVK Deutsche Eisenbahn Versicherung Messer Group GmbH Lebensversicherungsverein a.G. DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. Horst Hartkorn* DEVK Pensionsfonds-AG Chairman of the Works Council of S-Bahn DEVK Vermögensvorsorge- und Hamburg GmbH, Beteiligungs-AG (Chairman) Hamburg a) S-Bahn Hamburg GmbH DEVK Deutsche Eisenbahn Versicherung Lebensversicherungsverein a.G. DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 229 Notes

Helmut Kleindienst* Heike Moll* Dr. h. c. Eggert Voscherau Chairman of the Branch Works Council Chairwoman of the Central Works Council of Vice Chairman of the Board of Executive of the Services Business Unit of DB Group, DB Station&Service AG, Directors of BASF Aktiengesellschaft, Chairman of the Works Council of Munich Neustadt DB Dienstleistungen GmbH, a) DB Station&Service AG a) CropEnergies AG (Chairman) Eppstein/Taunus b) DEVK Deutsche Eisenbahn Versicherung HDI Haftpflichtverband b) DB Dienstleistungen GmbH (Advisory Sach- und HUK-Versicherungsverein a.G. der Deutschen Industrie VVaG Board) (Advisory Board) Talanx AG b) Nord Stream AG (Shareholders Committee) Lothar Krauß* Dr. Axel Nawrath Zentrum für Europäische Deputy Chairman of TRANSNET State Secretary in the Federal Ministry of Wirtschaftsforschung GmbH Gewerkschaft GdED, Finance, Rodenbach Berlin Dr.-Ing. E. h. Dipl.-Ing. Heinrich Weiss a) DB Station&Service AG a) KfW IPEX-Bank GmbH DB JobService GmbH Chairman of the Management Board DB Sicherheit GmbH of SMS GmbH, Dr. Walther Otremba DBV-Winterthur Holding AG Hilchenbach-Dahlbruch Sparda-Bank Baden-Württemberg eG State Secretary in the Federal Ministry of a) SMS Demag AG (Chairman)1) (Chairman) Economics and Technological Affairs, COMMERZBANK AG b) DB Dienstleistungen GmbH (Advisory St. Augustin Voith AG Board) – since February 1, 2008 – b) Bombardier Inc., Montreal/Canada DB Zeitarbeit GmbH (Advisory Board) Thyssen-Bornemisza Group, Monaco DEVK Deutsche Eisenbahn Versicherung Dr. Bernd Pfaffenbach Sach- und HUK-Versicherungsverein a.G. State Secretary in the Federal Ministry of (Advisory Board) Economics and Technological Affairs, Wachtberg-Pech Dr. Jürgen Krumnow – up to January 31, 2008 – Former member of the Management Board a) Deutsche Postbank AG of Deutsche Bank AG, Lufthansa Cargo AG Königstein/Taunus a) Hapag-Lloyd AG Ute Plambeck Lenze AG Management Representative TUI AG (Chairman) Deutsche Bahn AG for the Federal States b) Peek & Cloppenburg KG (Advisory Board) of Hamburg/Schleswig-Holstein, Hamburg Vitus Miller* – since August 16, 2007 – Chairman of the Central Works Council of a) Autokraft GmbH Regio/Urban Transport, S-Bahn Hamburg GmbH Stuttgart a) DB Regio AG Matthias von Randow DB Vertrieb GmbH State Secretary, Federal Ministry of b) DB GesundheitsService GmbH Transport, Building and Urban Affairs, (Advisory Board) Berlin – since February 1, 2008 – 230 DEUTSCHE BAHN GROUP •

Executive Committee Dr. Werner Müller (Chairman) Norbert Hansen Matthias von Randow – since February 1, 2008 – Jörg Hennerkes – up to January 31, 2008 – Günter Kirchheim

Audit Committee Dr. Jürgen Krumnow (Chairman) Matthias von Randow – since February 1, 2008 – Jörg Hennerkes – up to January 31, 2008 – Helmut Kleindienst Lothar Krauß

Personnel Committee Dr. Werner Müller (Chairman) Norbert Hansen Matthias von Randow – since February 1, 2008 – Jörg Hennerkes – up to January 31, 2008 – Günter Kirchheim

Mediation Comittee under article 27 section 3 Codetermination Act Dr. Werner Müller (Chairman) Norbert Hansen Matthias von Randow – since February 1, 2008 – Jörg Hennerkes – up to January 31, 2008 – Günter Kirchheim

* Employees’ representative on the Supervisory Board

1) Mandate within the Group a) Membership in other supervisory boards required by law b) Membership in comparable domestic and foreign corporate control committees of business enterprises

Information as of December 31, 2007 or date of resignation in 2007. If appointed after December 31, 2007, the time of appointment is used.

Berlin, February 26, 2008

Deutsche Bahn AG The Management Board GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 231 Notes

AUDITOR’S REPORT

The Consolidated Financial Statements have been audited as evaluating the overall presentation of the consolidated fi- by PricewaterhouseCoopers Aktiengesellschaft Wirtschafts- nancial statements and the group management report. We be- prüfungsgesellschaft, who added the following auditor’s lieve that our audit provides a reasonable basis for our opinion. report1): Our audit has not led to any reservations. “We have audited the consolidated financial statements In our opinion based on the findings of our audit the prepared by Deutsche Bahn Aktiengesellschaft, Berlin, consolidated financial statements comply with the IFRS as comprising the income statement, the balance sheet, state- adopted by the EU, and the additional requirements of Ger- ment of changes in equity, cash flow statement and the notes man commercial law pursuant to § 315a (1) HGB and give a true to the consolidated financial statements, together with and fair view of the net assets, financial position and results the group management report for the business year from of operations of the Group in accordance with these require- January 1 to December 31, 2007. The preparation of the con- ments. The group management report is consistent with the solidated financial statements and the group management consolidated financial statements and as a whole provides a report in accordance with the IFRS, as adopted by the EU, suitable view of the Group’s position and suitably presents and the additional requirements of German commercial law the opportunities and risks of future development.” pursuant to § 315a (1) HGB are the responsibility of the parent Company’s Board of Managing Directors. Our responsibility Berlin, February 27, 2008 is to express an opinion on the consolidated financial statements and on the group management report based on our PricewaterhouseCoopers audit. Aktiengesellschaft We conducted our audit of the consolidated financial Wirtschaftsprüfungsgesellschaft statements in accordance with § 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW). (Gerd Eggemann) (Thomas Kieper) Those standards require that we plan and perform the audit Wirtschaftsprüfer Wirtschaftsprüfer such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of the entities to be included in consolidation, the accounting 1) This English version of the original German version of the auditor’s and consolidation principles used and significant estimates report has been prepared for purposes of convenience only; in case made by the Company’s Board of Managing Directors, as well of doubt the original German version shall prevail.

ADDITIONAL INFORMATION

234 Major Activity Relationships Within DB Group 235 Development of Investment Grants 238 DB Advisory Board 240 Glossary 242 10-Year Summary 234 DEUTSCHE BAHN GROUP •

MAJOR ACTIVITY RELATIONSHIPS WITHIN DB GROUP

The following table shows the major intra-Group activity Energy activities are consolidated: DB Energie GmbH pur- relationships among the segments of the DB Group. The chases all energy products from external sources and then ﬁgures indicate the infrastructure-related offset for the use charges these activities on to the intra-Group consumers, at of train-paths, local infrastructure (including marshalling fair market conditions. Energy cost offset includes both yards and storage sidings) and passenger stations, as well as tractive energy (diesel fuel, rail electricity) and electricity energy cost offset. for stationary facilities (such as switch-track heaters and The offset for infrastructure utilization is billed based on train preheating units of DB Netz AG). the published pricing systems (train-path pricing system, facility pricing system and station pricing system). The activities are rendered by DB Netz AG or DB Station& Service AG. The recipients of intra-Group activities are primarily the railroad companies in the passenger and freight transport area.

€ million Long- Track Distance Regional Urban Rail Infra- Passenger Holdings/ Transport Transport Transport Freight Schenker structure Stations Services Energy Other Train-path utilization –740 –1,927 –173 – 497 0 3,339 0 –1 0 –1 Utilization of local infrastructure –19 – 42 –1 –139 0 203 0 –1 –1 0 Station utilization – 92 –396 – 98 0 0 0 586 0 0 0 Energy allocation – 286 – 625 – 83 – 406 –3 –112 – 62 –10 1,598 –11 GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 235 Major Activity Relationships Development of Investment Grants

DEVELOPMENT OF INVESTMENT GRANTS

Development of investment grants for fixed assets Beginning value End value € million as of Jan 1, 2007 Fund inflow Use of funds Cancellations as of Dec 31, 2007 Deutsche Bahn AG 39,197 4,167 121) –170 43,206 DB Station & Service AG 3,291 255 0 –12 3,534 DB Netz AG 35,379 3,839 –5 –153 39,060 DB Energie GmbH 527 73 17 –5 612

1) Within the framework of the adjustments to property allocation within DB Group investment grants with an amount of € 12 million were transferred from DB AG to DB Netz AG.

The tabular overview shows the development of invest- assets. These are essentially grants from the accounting of rail ment grants in the fixed assets for the rail infrastructure crossing measures between road and rail according to the companies. Railway Crossing Act (Eisenbahnkreuzungsgesetz; EKrG). Investment grants are made for the purpose of acquiring or producing a tangible asset. They are essentially provided Grants under the Municipal Transport Financing Act by the Federal Government in a fund-call procedure. How- (except Federal Government) ever, other entities (Federal states, municipalities, third par- Grants under the Municipal Transport Financing Act ties) also make investment grants to Deutsche Bahn. Once (Gemeindeverkehrsfinanzierungsgesetz; GVFG) are provided the asset is completed, investment grants are capitalized by the Federal state authorities in supplement to Federal and set off against the costs of purchase or manufacture. Government financing and are up to 40 % of the approved This causes the asset to be shown with a reduced book value costs for “Investments for improving transport in munici- and write-downs are correspondingly lower. The grant there- palities” in the meaning of section 1GVFG. Furthermore, a fore relieves the operating result over the entire useful life- planning costs flat rate of 7 % on the total costs eligible for time of the asset. In this case the tax laws speak of a result- grant is also generally paid. But other percentages can also neutral treatment of the grants. be agreed bilaterally with the Federal states. In the following, the essential fundamentals for providing the various types of investment grants are explained in 2. Federal Government grants more detail. and European Union grants Federal Government grants – noise reduction 1. Grants from third parties The Federal Government allocates contributions for “measures Grants from third parties – diminishing the costs to reduce noise on existing rail paths operated by the Federal of purchase or manufacture Government railways.”Grants are paid for active acoustic insu- These contributions from third parties relate to capital lation (investments = acoustic insulation walls) if the noise level expenditures and after being paid in are netted with fixed exceeds specific emission values. 236 DEUTSCHE BAHN GROUP •

Federal Government grants – VIFG funds Federal Government grants – Municipal Transport (Transport Infrastructure Financing Company) Financing Act (local public passenger transport) These are grants for investments in the Federal Govern- These Federal grants concern contributions by the Federal ment railways and are provided through the Transport Infra- Government pursuant to section 11 GVFG for an amount up structure Financing Corporation (Verkehrsinfrastruktur- to 60 % of the costs eligible for grants. ﬁnanzierungsgesellschaft; VIFG). These funds are intended Investment grant portions according to GVFG are basically for rail infrastructure measures and are provided out of capitalized and deducted from the acquisition or manufactur- revenues derived from the route-related truck road tolls ing costs, and expenditure grants are booked to revenues in through the newly founded Federal Government Financing the proper accounting period. The Federal Railway Author- Company (Finanzierungsgesellschaft des Bundes). ity (Eisenbahnbundesamt; EB A) has approved this. Apart from the Federal Government funds according to Federal Government grants – special burdens due GVFG, these Federal Government grants also cover grants to past underinvestment from the so-called Capital City Contract (Hauptstadtvertrag) The Federal Government made grants for special burdens of 1994 and under which the Federal Government partici- due to past underinvestment in accordance with section 22 pates in the additional costs that arose from developing the (1) no. 2 Deutsche Bahn Foundation Act (Deutsche Bahn government and parliament district. Gründungsgesetz; DBGrG) to recuperate investments in the tangible assets and to modernize existing asset items of Federal Government grants – Federal Railway the former Deutsche Reichsbahn (former East German Infrastructure Development Act Railway), bringing the rail network and the entire railway Federal Government costs grants are provided here pursuant infrastructure up to the same standards. Grant of the funds to section 8 BSchwAG for investments in new construction or was limited to nine years as of the date of commencement of expansion of rail lines, or for replacement investments on the business by DB AG and ended as of December 31, 2002. existing Federal railway lines. The individual projects taken Because the overall budget was not reached in the stated into the “Requirements plan for Federal railways” (Bedarfs- agreed time period, after the Federal statutory regulation plan für die Bundesschienenwege) for realization – in coor- became void the Federal Government, the new Federal states/ dination with the Federal Transport Route Plan (Bundes- free states and Deutsche Bahn resolved a new “joint declara- verkehrswegeplan; BVWP) – are contained in the Annex to tion for further reduction of the legacy investments in the section 1BSchwAG. area of the former special assets of DR as of the year 2003”. Furthermore, the Federal Government grants funds from Amongst other things, this stipulated that the not yet ex- the € 2 billion transport program to improve the transport hausted Federal Government funds would be granted infrastructure under an own budget heading. These were according to the regulations of the Federal Railway Infra- resolved in the government cabinet as contributions strength- structure Development Act (Bundesschienenwegeausbau- ening economic development for the years 2005 through gesetz; BschwAG) as non-repayable construction grants in 2008. The program is intended to ensure that urgent transport order to reduce the underinvestment burdens by the year investments can be realized. 2007.

Federal Government grants – civil defense Federal grants are provided here for tasks to which the Bahn is obligated by the Ministry of Transport pursuant to section 10a Transport Provision Act (Verkehrssicherstellungsgesetz; VSG) for civil defense purposes. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 237 Development of Investment Grants

Future Investment Program (Zukunftsinvestitions- programm; ZIP)/UMTS funds These Federal Government grants were provided on the basis of the “Joint Declaration of the Federal Republic of Germany, represented by the Ministry of Transport and the Ministry of Finance and DB AG on the scope of rail investments in the years 2001through 2003” (trilateral agreement). The funds originate from the sale of UMTS wireless licenses and were primarily intended for quality enhance- ment measures on the existing rail network by “remedying slow-speed track sections and the short-term and tangible modernization of the signal and safety engineering.”As from the 2006 ﬁnancial year, there is no longer any own Federal budget heading and funds are no longer drawn. The residual positions are wound up under the heading “BSchwAG”.

Federal Government grants – mandatory rail lines These grants are contributions by the Federal Government for obligations of Deutsche Bahn under section 10 b VSG in conjunction with section 23 VSG to provide rail infrastructure for certain routes. Statutory basis is the EEC Ordinance 1191/69.

Grants – EU funds The European Union grants Deutsche Bahn EU funding on special application and under observance of certain sub- stantiation obligations. Grants allocated here include such for the so-called Trans- European Networks (TEN funds). European Union grants for trans-European networks are also provided for the project “European Rail Trafﬁc Man- agement System (ERTMS)” or “European Train Control Sys- tem (ETCS).” In addition, the EU also provides ﬁnancing grants from the so-called EFRD (European Funds for Regional Develop- ment). A prerequisite for such a grant is a joint promotion concept prepared by the member state and approved by the EU Commission. 238 DEUTSCHE BAHN GROUP •

DB ADVISORY BOARD

Prof. Dr. Gerd Aberle Prof. Dr. Ernst Otto Krasney Prof. Dr. Wulf Schwanhäußer Department of Business Administration and Vice President (ret.) of the Federal Social Court Professor emeritus, University of Aachen; Economics Justus Liebig University, Giessen consultant for rail policy and the transport sector Karl-Ulrich Kuhlo Prof. Dr. Horst Albach Founder of the news channel n-tv Formerly Chair for Business Administration, Prof. Jürgen Siegmann Humboldt University, Berlin; Specialist for rail tracks and operations Dr. Walther Leisler Kiep Former Director of the WZB and President at the Institute for Road and Rail Transport, of the Berlin Academy of Sciences Minister (ret.) TU Berlin

Prof. Dr.Thomas Ehrmann Prof. Dr. Dr.mult. Horst Stuchly Chair for Enterprise Founding and Develop- Heribert Meffert President (ret.) of the Federal Railway ment, University of Münster Former Director of the Institute of Marketing, Authority University of Münster

Prof. Dr. Sylvius Hartwig Prof. Dr. Andreas Troge Professor emeritus, University of Wuppertal Dr. Werner Müller President of the Federal Environmental Chairman of the Supervisory Board Agency of Deutsche Bahn AG Dr.Volker Hauff Federal Minister (ret.); Dr. Jürgen Warnke Senior Vice President of Bearing Point GmbH Prof. Dr. Rüdiger Pohl Federal Minister (ret.); Martin Luther University Halle-Wittenberg Attorney-at-Law Hans Jochen Henke Secretary General of Wirtschaftsrat der Prof. Dr. Dr. F. J. Radermacher Dr. Jürgen Weber CDU e.V. (Economic Council of the CDU) Head of the Research Institute for Applied Chairman of the Supervisory Board Knowledge Processing, University of Ulm of Deutsche Lufthansa AG Prof. Dr. Peter Hommelhoff Institute of German and European Corporate Prof. Dr. Werner Rothengatter Ulrich Weiß and Business Law, University of Heidelberg Institute for Economic Policy and Research, President of Bundesvereinigung Mittel- University of Karlsruhe ständischer Bauunternehmen e.V. (Federal Association of Small and Medium- Prof. Dr. Dr. Christian Kirchner Sized Construction Companies), Bonn Faculty of Law and Economic Science Prof. Dr. Joachim Schwalbach Humboldt University, Berlin Chair for International Management, Humboldt University, Berlin Dr. Wendelin Wiedeking President and CEO of Porsche AG Dr. Dieter Klumpp Member of the Presiding Committee of Verband der Bahnindustrie in Deutschland e.V. (German Rail Industry Federation)

240 DEUTSCHE BAHN GROUP •

GLOSSARY

Financial Glossary

Capital employed Equity ratio Investment grants Comprises properties (including intangible Key financial performance indicator based on Third-party financial investments in specified assets) plus net working capital. the balance sheet structure: expresses equity investment projects without future repayment as a percentage of total assets. requirements. Cash flow statement Representation of movements in cash and Fair value Net capital expenditures cash equivalents during a financial year. Price calculated in efficient markets taking Gross capital expenditures less third-party into account all factors influencing prices, and investment grants, for example for infrastruc- negotiated between knowledgeable, willing ture capital expenditures. Commercial paper program parties in an arm’s length transaction. Contractual framework or sample documen- tation for the issuance of short-term bonds. Rating Gearing An assessment of creditworthiness issued Key financial performance indicator that by rating agents for a company; affects a Credit facilities expresses the ratio of net financial debt to company’s refinancing options and costs. Credit lines arranged with banks that can be equity as a percentage. drawn upon as necessary. Redemption coverage Gross capital expenditures Key financial performance indicator that de- Debt issuance program Total capital expenditure for property, plant scribes the ratio between the ongoing financ- Contractual framework or sample documen- and equipment and intangible assets – irre- ing power and the financial obligations of tation for the issuance of bonds. Ensures high spective of the type of financing. the company (adjusted net financial debt). flexibility in issuing activity.

Hedging Return on capital employed (ROCE) Derivative financial instruments Hedging transactions conducted within the Key ratio used in value-based management. (derivatives) scope of risk management, particularly to Expresses ratio of adjusted EBIT to capital Finance contracts, the value of which depends minimize interest and currency risks. employed as a percentage. on the performance of the underlying assets (reference amounts include, for example, interest rates or commodity prices). Important IFRS (International Financial Scope of consolidation examples include options, futures, forwards Reporting Standards) Group of subsidiaries that are included in a and swaps. Internationally recognized accounting stan- group’s consolidated financial statements. dards. Since 2005, the term IFRS has applied to the entire accounting concept issued by EBIT (earnings before interest Special burden compensation the International Accounting Standards Board. and taxes) Standards issued prior to this continue to Deutsche Bahn received Federal compensa- Adjusted operating income before interest be referred to as International Accounting tion from 1994 to 2002 for the increased cost and taxes. Standards (IAS). of materials and personnel expenses resulting from the inefficient structures inherited from the former Deutsche Reichsbahn. EBITDA (earnings before interest, Interest-free loans taxes, depreciation and amortization) Repayable, yet interest-free loans extended Swap Adjusted operating income before interest, by the German Federal Government. Result taxes, depreciation and amortization. from the financial participation of the Federal A financial transaction in which two coun- Republic of Germany in capital expenditure terparties exchange financing conditions for the extension and replacement of track and in which each party benefits from the Equity method/at-equity accounting infrastructure. other’s cost advantages. Procedure used to account for investments where assets and liabilities are not fully consolidated in the consolidated financial statements. The carrying amount of the investment is adjusted to reflect the development of the pro rata share of equity. GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 241 Glossary

DB-specific terms

Combined rail/road transport “Net 21” (“Netz 21”) Requirement plan network The integrated transport of containers or Our strategic approach for segregating pas- New line construction and expansion contained entire trucks on the roads and rails. senger and freight traffic within the network, in the Federal Transport Infrastructure Plan. to increase line capacity. Existing network Station pricing system The existing rail network – and thus the back- One-stop shopping Transparent and non-discriminatory pricing bone of the infrastructure. Complete offerings of products and services system for the utilization of passenger sta- from one source in line with customer require- tions. The specific station prices depend pri- ments. marily on the performance and furnishings Freight carriers of the respective stations. Companies that are used for the transport of goods. Operating performance Distance traveled by railroad companies on TEU (Twenty-Foot Container the DB Netz AG rail network. Unit of measure: Equivalent Unit) GSM-Rail (Global System for train-path kilometers (train-path km). Standardized twenty-foot-long container unit Mobile Communication – Rail) (1 foot = 30 cm). A special European standard that is based on the GSM standard for mobile cellular technol- Ordering organizations ogy. The platform for the future standardized Generally the German states, which are re- Ton kilometers (tkm) pan-European command and control technol- sponsible for providing local rail passenger Unit of measure for transport performance in ogy in rail transport. transport (Schienenpersonennahverkehr; freight transport: product of freight carried SPNV) and order the respective services from (in metric tons) and mean transport distance transport companies. (km). Hub Principal handling base. Collection point for the handling and the centralization of good Passenger kilometers (pkm) Train-path flows in different directions. Unit of measure for transport performance Route traveled by a train, defined in the time- in passenger transport: product of number of table. passengers and mean travel distance. Intermodal competition Competition with other modes of transport, Train-path pricing system (TPS) e.g. between rail and air transport. “Qualify” Regulates in a transparent and non-discrimi- Our extensive Group-wide program designed natory manner the prices for the utilization to safeguard further improvements in profits. of the rail network by internal and external Interoperability (multisystem The focus is on improvements in efficiency, customers. Takes into account the individual capability) performance quality and utilization of growth characteristics of the infrastructure utilized. The ability of track vehicles to adapt to dif- opportunities. ferent technical standards (e.g. track widths or power systems) and to operate on different Transport contract rail networks with as little delay as possible. “RailPlus” A contract between an ordering organization Extensive new program designed to redevelop and a railroad company regarding the render- and safeguard the future of rail freight ser- ing of local passenger transport services. Intramodal competition vices. Focuses on the utilization and realiza- Competition within a mode of transport, e.g. tion of rationalization and growth potential. within the railway sector. Transport performance Central key performance indicator used to Regionalization Act measure performance rendered in passenger Length of line operated Regulates the payments of the German Federal and freight transport. Unit of measure: The length of the rail network at DB Netz AG – Government to the German states and thus passenger kilometers (pkm) and/or ton kilo- irrespective of the number of parallel tracks. facilitates ordering of local transport services meters (tkm). Unit of measure: kilometers (km). on the roads and rails. 242 DEUTSCHE BAHN GROUP •

10-YEAR SUMMARY

€ million 2007 2006 2005 2004 20031) 20021) 20011) 20001) 1999 1) 1998 1) Consolidated Statement of Income Revenues 31,309 30,053 25,055 23,962 28,228 18,685 15,722 15,465 15,630 15,348 Overall performance 33,254 31,943 26,728 25,890 30,438 20,900 17,535 17,267 17,521 17,104 Other operating income 3,219 2,859 2,366 2,860 3,138 2,830 2,406 3,653 2,511 2,596 Cost of materials –17,166 –16,449 –12,650 –12,054 –15,776 – 9,546 –7,108 – 6,625 – 6,688 – 6,595 Personnel expenses – 9,913 – 9,782 – 9,211 – 9,556 –10,337 – 8,387 –7,487 – 8,475 – 8,285 – 8,389 Depreciation – 2,795 – 2,950 – 2,801 – 2,722 – 2,694 – 2,434 – 2,162 – 2,052 –1,965 –1,737 Other operating expenses –3,704 –3,144 –3,080 –3,274 – 4,316 –3,358 –3,282 –3,436 – 2,790 – 2,546 Operating profit (EBIT) 2,8952,4771,3521,144–––––– Investment income ––––51462–44–55–143 Result from investments accounted for using the equity method 32 18 76 49 –––––– Other financial result –3 1 7 –55–––––– Net interest income – 908 – 941 – 945 – 984 – 637 – 489 –313 – 251 –158 – 89 Profit before taxes on income 2,016 1,555 490 154 –133 – 438 – 409 37 91 201 Net profit for the year 1,716 1,680 611 180 – 245 – 468 – 406 85 87 170

Value Management/ Operating Profit Measures Return on capital employed (ROCE)2) 8.7% 7.5% 5.0% 3.8% 1.5% 0.1% 0.4% 1.6% 0.3% 1.1% EBIT3) adjusted for special items 2,370 2,143 1,350 1,011 465 37 109 450 71 260 Capital employed4) 27,393 28,693 27,013 26,490 30,964 30,428 28,649 27,443 24,911 22,656 EBITDA5) before special burden compensation –––––2,0211,433 1,264 427 35 Special burden compensation –––––4438381,228 1,609 1,962 EBITDA5) 5,690 5,427 4,153 3,866 3,092 2,464 2,271 2,492 2,036 1,997

Cash Flow/Capital Expenditures Cash flow from operating activities 3,364 3,678 2,652 2,736 –––––– Gross capital expenditures 6,320 6,584 6,379 7,238 9,121 9,994 7,110 6,892 8,372 7,660 Net capital expenditures6) 2,060 2,836 2,360 3,251 4,013 5,355 3,307 3,250 3,229 3,040

Asset and Capital Structure Non-current assets 42,046 43,360 42,907 43,200–––––– thereof property, plant and equipment and intangible assets (39,855) (41,081) (40,430) (40,861) (40,093) (38,869) (35,055) (34,071) (32,815) (31,155) thereof deferred tax assets (1,644) (1,800) (1,556) (1,301) –––––– Current assets 6,483 5,080 4,194 4,416–––––– thereof cash and cash equivalents (1,549) (295) (305) (765) (265) (271) (363) (394) (280) (351) Equity 10,953 9,214 7,675 7,067 5,076 5,708 8,436 8,788 8,701 8,528 Non-current liabilities 25,612 26,319 27,963 29,440 30,464 27,779 24,421 21,331 21,149 20,592 thereof retirement benefit obligations and other provisions (5,962) (5,507) (5,575) (5,768) –––––– thereof deferred tax liabilities (137) (72) (46) (17) –––––– Current liabilities 11,964 12,907 11,463 11,109 12,107 12,524 9,090 9,329 7,325 5,803 Total assets 48,529 48,440 47,101 47,616 47,647 46,023 41,962 39,467 37,198 34,961 Net financial debt 16,513 19,586 19,669 19,511–––––– Property, plant and equipment and intangible assets as % of total assets 82.1% 84.8% 85.8% 85.8% 84.1% 84.5% 83.5% 86.3% 88.2% 89.1% Equity ratio7) 22.6% 19.0% 16.3% 14.8% 10.7% 12.4% 20.1% 22.3% 23.5% 24.5% GROUP INFORMATION • GROUP MANAGEMENT REPORT • CONSOLIDATED FINANCIAL STATEMENTS • ADDITIONAL INFORMATION 243 10-Year Summary

2007 2006 2005 2004 20031) 20021) 20011) 20001) 1999 1) 1998 1) Rail Transport Performance

Passenger Transport Passengers (million) 1,835 1,854 1,785 1,695 1,681 1,657 1,702 1,713 1,681 1,669 Long-Distance Transport 119 120 119 115 117 128 136 145 147 149 Regional and Urban Transport 1,717 1,735 1,667 1,580 1,564 1,529 1,566 1,568 1,534 1,520 Transport performance (million pkm) 74,792 74,788 72,554 70,260 69,534 69,848 74,459 74,388 72,846 71,853 Long-Distance Transport 34,137 34,458 33,641 32,330 31,619 33,173 35,342 36,226 34,897 34,562 Regional and Urban Transport 40,654 40,331 38,913 37,930 37,915 36,675 39,117 38,162 37,949 37,291

Freight Transport8) Freight carried (million t9)) 312.8 307.6 274.6 295.3 282.3 289.4 291.3 310.8 289.7 288.7 Transport performance (million tkm9)) 98,794 96,388 88,022 89,494 85,151 82,756 84,716 85,008 75,785 73,273

Total transport performance (million ptkm) 173,586 171,177 160,576 159,754 154,685 152,604 159,175 159,396 148,631 145,126 Train kilometers on track infrastucture (million train-path km) 1,049 1,016 998 1,001 988 967 977 984 977 947

Employees10) Average 231,356 228,990 220,343 229,830 249,251 224,758 219,146 230,615 244,851 259,072 At year end 237,078 229,200 216,389 225,632 242,759 250,690 214,371 222,656 241,638 252,468

1) German GAAP 2) Defined as EBIT/Capital employed 3) Operating profit before interest and taxes 4) Property, plant and equipment plus operating net working capital. Differences in definition according to German GAAP respectively IFRS with regard to treatment of interest-free loans 5) Operating profit before interest, taxes and depreciation (according to German GAAP adjusted for special items) 6) Gross capital expenditures less investment grants from third parties 7) Until 2003 equity including special items 8) Until 1997 including less-than-carload business; from 2000 on including Railion Nederland; from 2001 on including Railion Danmark; from 2006 on including RBH Logistics GmbH 9) Changeover to gross figures in 2006, figures up to 1999 were adjusted accordingly 10) Full-time employees, part-time employees are accounted for on a pro rata basis 244 DEUTSCHE BAHN GROUP •

DB IN THE INTERNET

In addition to the popular travel portal www.bahn.de, we have established the Group portal www.db. de, which is primarily focused on target groups such as Deutsche Bahn business partners, journalists, investors, political opinion leaders and applicants. In the Group portal www.db. de with its themes “Traveling with DB,”“Trans- port & Logistics,”“Business with DB” and “DB Group,”the Internet user is comprehensively informed about the Group and its services, offerings and engagements. As such, the section “Business with DB” provides an overview of the business-to- business services of the Group. The “DB Group” section comprises Group topics such as press, jobs and careers, as well as information on environmental and social activities and an overview of the Group divisions and major subsidiaries. The investor relations Web presence of Deutsche Bahn is also part of the new Group portal and is directly accessible at www.db. de/ir-english. We will continue to gradually expand the content of our Internet presence, and we already offer extensive information for current and potential investors as well as anyone interested in Deutsche Bahn’s operating development.

IMPRINT

CONCEPT, EDITING TYPESETTING PHOTOGRAPHY CONSULTING Deutsche Bahn AG, medienhaus:frankfurt, M. Lautenschläger, Investor Relations Frankfurt/Main Berlin

CONSULTING LITHOGRAPHY PHOTOGRAPHY Mentor Werbeberatung Koch Lichtsatz und Scan, Deutsche Bahn H.-J. Dietz, Wiesbaden DBAG/Lautenschläger Kelkheim DBAG/Kranert (p.23) PRINTING DBAG/Le Roux (p.22) Color-Druck, DESIGN CONCEPT DBAG/Müller-Elsner Leimen Studio Delhi (p.2f., p.239) Konzept und Design, DBAG/Neuhaus (p.22) PROOFREADING Mainz DBAG/Warter (p.22) AdverTEXT, Düsseldorf CONTACTS

INVESTOR RELATIONS CORPORATE COMMUNICATIONS Phone: +49 (0) 30 2 97-6 16 76 Corporate publications, the Report of the Com - Fax: +49 (0) 30 2 97-6 19 59 petition Officer and the Sustainability Report can E-mail: [email protected] be requested from Corporate Communications: Internet: www.db.de/ir-english Fax: +49 (0) 30 2 97-6 19 19 Deutsche Bahn AG E-mail: [email protected] Investor Relations Internet: www.db.de/presse Potsdamer Platz 2 10785 Berlin DB TELEPHONE INFORMATION Germany Deutsche Bahn’s hotline for general telephone requests is available under the telephone number This Annual Report, the Financial Statements +49 (0) 30 2 97-0. of Deutsche Bahn AG and additional information are available on the Internet.

This Annual Report is published in German and English. In case of any discrepancies, the German version shall prevail.

FINANCIAL CALENDAR

AUGUST 18, 2008 Publication of the Interim Report January–June 2008 MARCH 30, 2009 Annual Results Press Conference, Publication of 2008 Annual Report Deutsche Bahn AG Potsdamer Platz 2 10785 Berlin Germany