Condensed consolidated interim financial statements

FNM Group Joint Stock Company Registered Office in Milan - Piazzale Cadorna 14 Share capital €230,000,000.00 fully paid up Condensed consolidated inte...

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Joint Stock Company Registered Office in Milan - Piazzale Cadorna 14 Share capital €230,000,000.00 fully paid up

Condensed consolidated interim financial statements FNM Group at 30 June 2019

CORPORATE BODIES Board of Directors Chairman

Andrea Gibelli

Deputy Chairman

Gianantonio Battista Arnoldi

Directors

Giuseppe Bonomi Tiziana Bortot Mirja Cartia D’Asero

Board of Statutory Auditors Chairman

Paolo Prandi

Regular Auditors

Massimo Codari Giussi Mainetti

General Manager

Marco Giovanni Piuri

Financial Reporting Officer

Valentina Montanari

Independent Auditor

PricewaterhouseCoopers SpA

GROUP MAP

FERROVIENORD SpA

100%

100%

20%

50%

FNM Autoservizi SpA

80% NORD_ING Srl

E-Vai Srl

ATV Srl

40%

Autoservizi Pasqualini Srl

66%

100%

La Linea 80 Scarl Malpensa Interm odale Srl

34%

100%

100% TILO SA

50%

Trenord Srl

50%

51%

Martini Bus Srl

La Linea SpA

50%

CMC MESTA SA

100%

60%

58%

40%

50%

NUO V O TRAS P O RTO TRIV ENETO S rl

100%

49%

SeMS Srl (in liquidazione)

68,5%

Eurocom bi Srl (in liquidazione)

76%

Nord Energia SpA

DB Cargo Italia Srl

51%

Conam Srl NORDCOM SpA

Om nibus Partecipazioni Srl

FUORIMURO Srl

Locoitalia Srl

49%

ASF Autolinee Srl

SHARE NEWS Market segment Sector

Standard (MTA Class 1) Milan Stock Exchange Transport

Ordinary shares

434,902,568

ISIN

IT0000060886

Significant shareholders at 30 June 2019 (pursuant to article 123-ter, paragraph 1, letter c) of the Consolidated Law on Finance) Lombardy region

No. shares

%

250,390,250

57.574%

Ferrovie dello Stato Italiane

64,109,831

14.741%

Anima Sgr

21,817,417

5.017%

During the first half of 2019, the FNM share held up, recording a price variation that was practically neutral (+0.1%) and a total positive return equal to +4.5%. Market capitalisation of the share at 30 June 2019 was equal to €215.9 million and the price per share was equal to €0.4965 (closing price). The minimum price for the half year was equal to €0.479 p.a. and the maximum price equal to €0.566 p.a. (on an intraday basis). The dividend with deducted coupon on 3 June and paid on 5 June 2019 was €0.0225 per share, for a total value of €9,785,308. After the poor closing of 2018, the Italian market reversed this trend, recording considerable growth in the first quarter, followed by three months which were more prudent but resulted in the half year ending positively: Ftse Mib +15.9%, Ftse Mid Cap +8.4%, Star +13.6%, Ftse Small Cap 8.4%. Average daily trading of the share was down slightly compared to the second half of 2018: approximately 163 thousand versus 170 thousand. Only two sessions in the first six months of the year involved volumes of over 500 thousand shares, and so trading of the share was stable and constant. During the first half of the year, approximately 21 million shares were traded, corresponding to 5% of the share capital. The average weighted price was equal to €0.53 per share.

SUMMARY PERFORMANCE INDICATORS FNM GROUP CONSOLIDATED DATA Amounts in thousands of euros

30/06/2019

30/06/2018

148,178

147,523

655

0.4%

Ebitda*

36,607

35,662

945

2.6%

Operating income*

16,223

16,271

(48)

-0.3%

Earnings before tax*

18,656

22,369

(3,713)

-16.6%

Net profit for the period*

14,575

18,685

(4,110)

-22.0%

Shareholders' equity (A)

437,119

424,863

12,256

2.9%

23,843

22,484

1,359

6.0%

460,962

447,347

13,615

3.0%

(42,838)

-16.6%

Revenues*

(Net financial position)/Net financial debt (B) ** Net invested capital (A+B) Capitalisation

215,929

258,767

Change

Change %

Investments 52,023 24,445 27,578 112.8% * For a greater understanding of changes in the period, the value of this item, also for the period relative to the first half of 2018 includes the month of the 6 months of the subsidiary ATV. * The breakdown of this item may be found in note 21 to the condensed consolidated interim financial statements; net financial debt for 2018 was adjusted to take into account the effects arising from the adoption of IFRS 16.

INDEX Control bodies Group map Information about the share Shareholders Summary performance indicators Report and Condensed Consolidated Interim Financial Statements at 30 June 2019 Introduction 1. Group profile at 30 June 2019 2. Consolidated operating and financial performance 3. Economic performance of business segments 4. FNM Group human resources 5. Main risks and uncertainties to which the Group is exposed 6. Most relevant litigation and other information 7. Main events 8. Significant events after 30 June 2019 9. Outlook

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1 1 3 11 16 16 17 19 20 20

Condensed consolidated interim financial statements - Consolidated statement of financial position - Consolidated income statement - Other consolidated comprehensive Income - Changes in consolidated shareholders’ equity - Consolidated statement of cash flows - Notes to the condensed consolidated interim financial statements at 30 June 2019

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21 22 23 23 24 25

Certification of the condensed consolidated interim financial statements

FNM Group

REPORT AND CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

at 30 June 2019

INTRODUCTION With reference to the six months ended at 30 June 2019 (hereinafter the "First half of 2019"), the figures in the Interim Report and comments therein aim to provide an overview of the financial position, performance and cash flows of the Group, relative changes in the period as well as significant events affecting the result for the period.

1. GROUP PROFILE AT 30 JUNE 2019 FNM is the leading integrated transport and mobility group in Lombardy and Northern Italy with companies active in five regions. It is the most important non-state Italian investor in the sector. The FNM Group operates, through investments with a controlling stake and/or with joint control or through associates, in the public rail transport sector through FERROVIENORD, NORD_ING and Trenord, in road transport through FNM Autoservizi, Omnibus Partecipazioni, ATV and La Linea, in rail freight transport through DB Cargo Italia, Fuorimuro, Locoitalia and Malpensa Intermodale, in sustainable mobility with E-Vai car sharing, in ICT with NordCom and in the energy sector with NORD ENERGIA. FNM has a role as holding of the Group, providing corporate services for investee companies, and also carries out operations through the lease of assets used by investee companies operating in the local public transport and freight transport sectors, and the management of its real estate equity. During the first half of 2019, activities began to dispose of investments held in Locoitalia and Fuorimuro, with the sale planned before the end of the year. Therefore, the condensed consolidated interim financial statements at 30 June 2019 record the accounting effects indicated in IFRS 5, as indicated in the notes to the condensed consolidated interim financial statements. Following the addendum to partner agreements signed on 12 February 2018 by FNM and AMT S.p.A., the investee Azienda Trasporti Verona S.r.l. is considered a subsidiary, from this date. Consequently, it has been consolidated on a line-by-line basis since February 2018.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 1

FNM Group

1.1

LOCAL PUBLIC TRANSPORT

The Group's core business is Local Public Transport. Through its subsidiaries and jointly controlled companies, the Group operates in three business segments concerning local public transport: 1. Railway infrastructure management, the companies operating in this business segment are: ▪

FERROVIENORD S.p.A. - which is responsible for managing the railway infrastructure on the basis of a concession expiring on 31 October 2060;



NORD_ING S.r.l. – which is responsible for planning, as well as technical and administrative support regarding network investments;

2. Passenger road transport, the companies operating in this business segment are: ▪

Ferrovie Nord Milano Autoservizi S.p.A. – the concession company managing public road transport in the Provinces of Varese and Brescia, and holder, along with ASF Autolinee S.r.l. in a joint venture, of a service contract for public road transport services in the Province of Como and operator assisting Trenord for "train replacement" activities;



Azienda Trasporti Verona S.r.l. - a company that provides urban public road transport services in the municipalities of Verona and Legnago and extra-urban services throughout the province of Verona;



La Linea S.p.A. - a company operating in the Veneto area in the local public road transport sector, which also hires out buses with driver, also through subsidiaries and/or investees;



Omnibus Partecipazioni S.r.l. - a jointly controlled company that holds 49% of the shares in ASF Autolinee S.r.l. and is jointly owned by the Arriva Italia Group.

3. Trasporto ferroviario, the company operating in this sector is Trenord S.r.l (50% controlled by Trenitalia S.p.A.) - operator of rail transport services in the Lombardy Region, as well as operator of "Brenner" railway services in collaboration with Deutsche Bahn and Österreische Bundes Bahn;

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 2

FNM Group

The "Local Public Transport" sector contributed to net profit for the first half of the year through the subsidiaries Ferrovie Nord Milano Autoservizi S.p.A., Azienda Trasporti Verona S.r.l., La Linea S.p.A., consolidated on a line-by-line basis, and to operating income and net financial income, through the jointly controlled investees Trenord S.r.l. and Omnibus Partecipazioni S.r.l., accounted for using the equity method under the item “Net profit of companies accounted for using the equity method”.

1.2

OTHER BUSINESS SEGMENTS

As already stated, the Parent Company FNM S.p.A., in accordance with its objectives set out in the articles of association carries out the activity of (i) hiring rolling stock to investee companies operating in the LPT and freight transport segment, (ii) administrative service provider for its subsidiaries and, lastly (iii) management of its real estate equity. Furthermore, the FNM Group operational divisions extend to segments other than those mentioned. It is active in the sectors of sustainable mobility (through the subsidiary E-Vai S.r.l.) and Information & Communication Technology with the joint venture NordCom S.p.A., that operates for the FNM Group and third parties; it is also present in the specialist electricity transport segment (through the jointly controlled company NORD ENERGIA S.p.A. and its subsidiary CMC MeSta S.A.) and in the rail freight transport sector (through the subsidiary Locoitalia S.r.l. and its investees DB Cargo Italia S.r.l. and FuoriMuro Servizi Portuali and Ferroviari S.r.l.). As further described in Note 4 to the Condensed consolidated interim financial statements, due to the jointly controlled companies NORD ENERGIA S.p.A., NordCom S.p.A., FuoriMuro Servizi Portuali and Ferroviari S.r.l. (IFRS 11) and the investee DB Cargo Italia S.r.l. being accounted for using the equity method, "Other segments of activity" contributed to profit for the half year under the item “Net profit of companies accounted for using the equity method”.

2 2.1

CONSOLIDATED OPERATING AND FINANCIAL PERFORMANCE FINANCIAL HIGHLIGHTS

Total profit for the half year amounted to €13,865 million, compared to €18,796 million for the first half of 2018. During the first half of 2019, as in the comparative period of 2018, no profit from discontinued operations was recorded.

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

The reclassified income statement for the half year, compared with the corresponding half year period of 2018, is reported below. For completeness of disclosure, the items "costs for funded investments" and “grants for funded investments" which, in application of IFRIC 12, record amounts of funded investments made during the year and their corresponding grants, are stated net of the item other income, in the reclassified income statement reported below.

June 2019

June 2018

Difference

133,975

126,387

7,588

14,203

15,551

(1,348)

TOTAL REVENUES AND OTHER INCOME

148,178

141,938

6,240

External operating costs

(49,245)

(48,997)

(248)

ADDED VALUE

98,933

92,941

5,992

Personnel costs

(62,326)

(57,795)

(4,531)

36,607

35,146

1,461

(20,384)

(18,506)

(1,878)

OPERATING INCOME

16,223

16,640

(417)

Net financial income

(1,188)

4

(1,192)

3,621

5,995

(2,374)

EARNINGS BEFORE TAX

18,656

22,639

(3,983)

Income tax

(4,081)

(3,843)

(238)

PROFIT FROM CONTINUING OPERATIONS

14,575

18,796

(4,221)

-

-

-

14,575

18,796

(4,221)

Amounts in thousands of euros

Revenues from sales and services Other revenues and income

GROSS OPERATING MARGIN Amortisation, depreciation and allocations

Result of companies accounted for using the equity method

PROFIT FROM DISCONTINUED OPERATIONS TOTAL PROFIT FOR THE PERIOD

For a better understanding of changes for the period, including the effects of consolidation of the company ATV starting from February 2018, the consolidated income statement is presented below, in order to obtain a scope of consolidation comparable with figures for the previous year, consolidating ATV starting from the beginning of 2018.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 4

FNM Group January 2018 ATV

June 2018 pro-forma ATV

June 2019

June 2018

133,975

126,387

5,400

131,787

2,188

14,203

15,551

185

15,736

(1,533)

TOTAL REVENUES AND OTHER INCOME

148,178

141,938

5,585

147,523

655

External operating costs

(49,245)

(48,997)

(1,727)

(50,724)

1,479

ADDED VALUE

98,933

92,941

3,858

96,799

2,134

Personnel costs

(62,326)

(57,795)

(3,342)

(61,137)

(1,189)

36,607

35,146

516

35,662

945

(20,384)

(18,506)

(885)

(19,391)

(993)

OPERATING INCOME

16,223

16,640

(369)

16,271

(48)

Net financial income

(1,188)

4

(12)

(8)

(1,180)

Amounts in thousands of euros

Revenues from sales and services Other revenues and income

GROSS OPERATING MARGIN Amortisation, depreciation and allocations

Result of companies accounted for using the equity method

Difference

3,621

5,995

111

6,106

(2,485)

EARNINGS BEFORE TAX

18,656

22,639

(270)

22,369

(3,713)

Income tax

(4,081)

(3,843)

159

(3,684)

(397)

PROFIT FROM CONTINUING OPERATIONS

14,575

18,796

(111)

18,685

(4,110)

PROFIT FROM DISCONTINUED OPERATIONS TOTAL PROFIT FOR THE PERIOD

-

-

-

-

-

14,575

18,796

(111)

18,685

(4,110)

All comments on the Income Statement reported below, refer to the pro-forma Income Statement which considers the entire period, also for ATV, presented in brief below:

Amounts in thousands of euros

Revenues from sales and services

June 2019

June 2018 pro-forma ATV

Difference

133,975

131,787

2,188

14,203

15,736

(1,533)

TOTAL REVENUES AND OTHER INCOME

148,178

147,523

655

External operating costs

(49,245)

(50,724)

1,479

ADDED VALUE

98,933

96,799

2,134

Personnel costs

(62,326)

(61,137)

(1,189)

36,607

35,662

945

(20,384)

(19,391)

(993)

OPERATING INCOME

16,223

16,271

(48)

Net financial income

(1,188)

(8)

(1,180)

3,621

6,106

(2,485)

EARNINGS BEFORE TAX

18,656

22,369

(3,713)

Income tax

(4,081)

(3,684)

(397)

PROFIT FROM CONTINUING OPERATIONS

14,575

18,685

(4,110)

-

-

-

14,575

18,685

(4,110)

Other revenues and income

GROSS OPERATING MARGIN Amortisation, depreciation and allocations

Result of companies accounted for using the equity method

PROFIT FROM DISCONTINUED OPERATIONS TOTAL PROFIT FOR THE PERIOD

Revenues from sales and services recorded a net increase of €2,188 thousand, attributable to: -

revenues relative to transport services increased in relation to the higher number of

replacement services undertaken for €1,051 thousand, and more bus hire services for €203 thousand;

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

-

revenues for services invoiced increased by €544 thousand due to the sale of the contract to

purchase 5 Stadler trains to Consorzio EAV; -

revenues from the hire of rolling stock increased by €527 thousand mainly regarding the hire of

locomotives by the subsidiary Locoitalia for €208 thousand and the hire of 4-carriage TSR trains to Trenord, for which the supply was completed in January 2018, for €220 thousand; -

revenues relative to bus services increased, due to the start-up of a new service for the Venice

wharves, for €433 thousand; -

amounts indicated in the service contract for the management of infrastructure operated by

FERROVIENORD decreased by €593 thousand. Other revenues and income reported a net decrease of €1,533 thousand; The main changes are as follows: -

in the comparative half year period, a capital gain had been recorded from the sale to GDF

System S.r.l. of areas next to Affori Station, Milan, for €2,315 thousand; -

capital grants for the period went up by €177 thousand regarding higher investments in buses,

made during 2018; -

the item "sale of warehouse materials", which refers to the sale of obsolete material that may

no longer be used for maintenance activities, increased by €112 thousand. External operating costs recorded a net decrease of €1,479 thousand, due to the following main reasons: -

a decrease of €1,378 thousand in costs for railway infrastructure maintenance;

-

a decrease of €826 thousand in costs relative to operating lease payments, in particular relative

to property management, of €649 thousand due to the adoption of the new accounting standard IFRS 16; -

an increase of €901 thousand in costs because of higher subcontracts to third parties, in

particular by the investees ATV and La Linea; -

in the current half year, €710 thousand was released from the provision for risks, following the

settlement of litigation with third parties. Personnel costs increased by €1,189 thousand, due to higher provisions as an estimate of costs to renew the National Collective Bargaining Agreement for the Railway/Tram sector, expired on 31 December 2017, and due to an increase in the average number of staff, from 2,237 to 2,241 in the first half of 2019.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 6

FNM Group

The item amortisation, depreciation and allocations recorded a net increase of €993 thousand compared to the comparative period of 2018, mainly concerning the amortisation/depreciation of the right of use recognised following the adoption of IFRS 16, equal to €788 thousand. Total operating income was equal to €16,223 thousand, compared to €16,271 thousand in 2018, with a net decrease of €48 thousand. Total net financial income was negative by €1,188 thousand compared to €8 thousand in the first half of 2018; the next table analyses the breakdown of this result: Amounts in thousands of euros

June 2019

June 2018

Difference

36 (125) 304 (367) (192) (871) 27

12 107 323 (357) (169) 88

24 (232) (19) (10) (23) (871) (61)

(1,188)

4

(1,192)

Financial income and borrowing costs from liquidity management Financial income and borrowing costs from finance leases Income from the Finlombarda special treasury management contract Interest on the debenture loan Borrowing costs from the actuarial calculation of post-employment benefit Charges and fees on loans Other financial income and borrowing costs Net financial income

Net financial income included €871 thousand of interest expense and commission due to the non-use of pooled funding undersigned by the Parent Company in August 2018, as well as €367 thousand of interest expense accrued on the “FNM S.p.A. 2015 – 2020” corporate bond, and €304 thousand, as income from the treasury management contract, signed with Finlombarda. Companies accounted for using the equity method recorded a profit of €3,621, compared to a profit of €6,106 thousand in the first half of 2018; this item, as already described in full, refers to the contribution of joint ventures, and of the investee DB Cargo Italia S.r.l. to the statement of comprehensive income for the period and breaks down as follows: Amounts in thousands of euros

June 2019

June 2018

Difference

Trenord Srl * NORD ENERGIA SpA ** DB Cargo Italia Srl Omnibus Partecipazioni Srl *** NordCom SpA Conam Srl SeMS Srl in liquidation Fuorimuro Srl

1,146 1,921 801 77 24 21 18 (387)

3,729 1,472 681 488 (143) 21 12 (154)

(2,583) 449 120 (411) 167 6 (233)

Result of companies measured with the equity method

3,621

6,106

(2,485)

* includes the result of TILO SA ** includes the result of CMC MeSta SA *** includes the result of ASF Autolinee Srl

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 7

FNM Group

The result of the investee Trenord is due to the following main changes in the period: -

an increase in traffic revenues, of €6,600 thousand, regarding the positive trend of the airport service, and the increase in demand and improvement in the service, which led to a reduction in the value of bonuses paid out to service users;

-

an increase in revenues from the Service contract of €6,200 thousand in relation to lower penalties and deductions, partly offset by lower amounts for cyclical maintenance and tolls being recharged, and the change in consideration due to service remodulation.

-

an increase in personnel costs of €5,100, relative to the higher number of FTE and contract alignments;

-

an increase in operating costs of €11,400 relative to the higher number of replacement train services (€+3,400 thousand), cleaning services (€+1,700 thousand) hire of rolling stock (€+2,500 thousand) and services to other railway companies (€+ 1,000 thousand).

The result of the investee Fuorimuro includes the alignment to the lower sale value, as provided for in IFRS 5. Earnings before taxes amounted to €18,656 thousand, compared to €22,369 in the first half of 2018. Income taxes, equal to €4,081 thousand, went up by €397 thousand compared to the comparative half year period of 2018, in relation to higher taxable income.

Group operations are affected by seasonal trends which are limited, as they only refer to activities in the LPT sector, in provinces impacted by tourism trends, such as Verona and Venice.

2.2

INVESTMENTS

Total investments in the half year amounted to €52,023 thousand compared to €24,445 thousand in the first half of the previous year. The detail for the most significant aggregates is as follows: •

investments with public funds were made for a total of €36,605 thousand (€6,553 thousand in

the comparative half year period), which refer to activities to renew rolling stock for €23,751 thousand, including amounts paid as an advance, and to modernise and consolidate infrastructure for €11,854 thousand, in particular renewal of the superstructure along the Bovisa – Seveso – Mariano Comense stretches, the development of the supporting structure for the network line and development of the Malpensa T2 – Line RFI Sempione railway connection, extraordinary maintenance on the platforms at Canzo-Asso, Cittiglio, Laveno-Mombello, Cocquio-Trevisago, Barasso-Comerio, Novate Milanese and Milano Quarto Oggiaro facilities, renewal of the switch points of Milano Bovisa and Saronno facilities, works to modernise the station at Garbagnate Milanese, and works to consolidate the Milano Affori – Varedo railway stretch; Condensed Consolidated Interim Financial Statements at 30 June 2019

page 8

FNM Group



investments with own funds totalled €16,418 thousand (€17,892 thousand in the first half of

2017) and mainly refer to the purchase of 3, E191 Vectron DC electric trains (€10,358 thousand), the commissioning of 13 new buses and minibuses (with relative fittings) for €2,705 thousand, as well as advances paid for the supply of 4, E494 TRAXX DC electric locomotives (€1,182 thousand) and the development of the car park next to the Affori Station in Milan (€964 thousand).

2.3

RECLASSIFIED STATEMENT OF FINANCIAL POSITION

The reclassified statement of financial position at 30 June 2019, compared to 31 December 2018, is presented below:

Amounts in thousands of euros

30/06/2019

31/12/2018

7,940

6,967

Trade receivables

77,352

70,247

Other current receivables

85,216

80,982

(60,214)

(63,476)

(101,970)

(90,390)

8,324

4,330

432,795

452,778

Investments

80,120

83,442

Non-current receivables

26,880

26,752

Non-current provisions and payables

(87,157)

(117,691)

NET INVESTED CAPITAL

460,962

449,611

Own funds

437,119

435,171

23,843

14,440

460,962

449,611

Inventories

Trade payables Other current payables Net Working Capital Net non-current assets

Net financial position/(net financial debt) TOTAL SOURCES

On 1 January 2019, the new accounting standard IFRS 16 was adopted, leading to an increase in financial liabilities and net, non-current assets. For a better understanding of changes in the period, the table of the reclassified statement of financial position at 30 June 2019 compared with the position at 31 December 2018, which reflects the effects of the adoption of the new standard, is presented below:

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 9

FNM Group

Amounts in thousands of euros

30/06/2019 31/12/2018- IFRS 16

Inventories

7,940

6,967

Trade receivables

77,352

70,247

Other current receivables

85,216

80,982

(60,214)

(63,476)

(101,970)

(90,390)

8,324

4,330

432,795

460,822

Investments

80,120

83,442

Non-current receivables

26,880

26,752

Non-current provisions and payables

(87,157)

(117,691)

NET INVESTED CAPITAL

460,962

457,655

Own funds

437,119

435,171

23,843

22,484

460,962

457,655

Trade payables Other current payables Net Working Capital Net non-current assets

Net financial position/(net financial debt) TOTAL SOURCES

For detailed analysis of main changes in the consolidated statement of financial position of the Group, reference is made to the Notes to the condensed consolidated interim financial statements. Group financial debt at 30 June 2019 and 31 December 2018 and 31 December 2018 adjusted for the effects of IFRS 16 is broken down as follows:

Net financial position

30/06/2019

31/12/2018 31/12/2018 PRO-FORMA IFRS 16

Liquidity

143,383

137,316

137,316

Current financial receivables

107,758

74,374

74,374

(143,624)

(96,664)

(98,188)

107,517

115,026

113,502

(131,360)

(129,466)

(135,986)

(23,843)

(14,440)

(22,484)

Current financial debt Net current financial debt Non-current financial debt Net financial debt

At 30 June 2019, net financial debt amounted to €23,843 thousand, compared to €22,484 thousand at 31 December 2018 (IFRS 16 pro-forma); the change is mainly due to: -

the increase in current financial receivables relative to the opening of a 12-month term deposit for €40,000, equal to the amount collected on 18 April 2019 to settle the transaction relative to the “CONFEMI” lawsuit, as further described in section 6 on the "Most relevant litigation and other information". The sums collected, in agreement with the Region of Lombardy, will be used from 2020 for infrastructure modernisation works; regarding sums collected, financial

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 10

FNM Group

payables increased for the same amount, recognised as advances received for infrastructure modernisation works; -

the increase in current financial debt as a result of the recognition of a financial payable due to the Region of Lombardy, not present at 31 December 2018, for the portion of the interim payment on the programme to renew rolling stock not yet accrued but already paid as an advance to the supplier, as provided for in the contract, equal to €18,207 thousand, partially offset by the decrease in debt due to the closure of the factoring agreement signed in 2018 by the subsidiary ATV and intended to provide funding for the bus investments plan, equal to €5,280 thousand and minus the giro account balance due to investees in joint ventures, equal to €4,268 thousand;

-

the decrease in non-current financial debt, following the reclassification of the financial liability of the subsidiary Locoitalia, equal to €3,488 thousand, as provided for by IFRS 5, as already stated in section 1 and more extensively reported in Note 17 of the Notes to the Condensed consolidated interim financial statements.

3

ECONOMIC PERFORMANCE OF BUSINESS SEGMENTS

The following table shows the Revenues and EBITDA for consolidated business segments: H1 2019 Amounts in thousands of euros

Management of railway infrastructure

Passenger transport by road

Sustainable Mobility

Sector revenues Inter-segment sales Grants for funded investments

59,849 (2,985) 12,601

56,815 (2,172)

Revenues from third parties

69,465

54,643

599

EBITDA EBITDA %

9,707 27%

5,647 15%

Operating income

8,703

163

1,510 (911)

H1 2018 (PRO-FORMA ATV)

Holding

41,356 (6,031)

Eliminations

(12,099) 12,099

Total

147,431

Management of railway infrastructure

Passenger transport by road

Sustainable Mobility

Holding

Eliminations

Total

61,618 (2,707) 6,859

54,662 (1,699)

12,601 35,325

160,032

65,770

52,963

228

35,115

154,076

(763) -2%

22,016 60%

36,607

10,760 30%

4,589 13%

(1,038) -3%

21,351 60%

35,662

(873)

8,230

16,223

9,859

(126)

(1,124)

7,662

16,271

1,128 (900)

41,124 (6,009)

(11,315) 11,315

147,217 6,859

Management of railway infrastructure The “Railway infrastructure management" segment includes activities to manage railway infrastructure, , the Milan and Iseo branches, based on a concession, as well as terminal design and management activities. With Regional Council Resolution No. X/4823 of 15 February 2016, the Region of Lombardy ordered the Concession to FERROVIENORD S.p.A. for the construction, operation and management of the Regional Railway Network from be renewed from 18 March 2016 to 31 October 2060.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 11

FNM Group

The Concession agreement includes construction, management and maintenance of railway infrastructure, network upgrading and modernisation, traffic management and capacity allocation. The concessionaire also has the role of acquiring and managing, on a non-exclusive basis, the fleet necessary to provide railway services and the enhancement of railway assets including those of historical value. The concessionaire is also assigned the tasks regulated by the Investment Programme Agreement, Service Contract or other administrative provision. Activities are carried out by the subsidiary FERROVIENORD, together with the subsidiary NORD_ING, that oversees the routine and extraordinary maintenance of the railway network, expansion works and the start-up of new facilities. Terminal management is overseen by the subsidiary Malpensa intermodale, a company established in December 2018, which took over the management of the Sacconago terminal, in the municipality of Busto Arsizio (Varese). Segment revenues went down from €58,911 thousand to €56,864 thousand, while grants for investments went up from €6,859 thousand to €12,601 thousand. Revenues include the consideration from the infrastructure management service contract, which went up from €45,495 thousand to €44,902 thousand, also regarding the decrease contemplated by contract efficiency. The reduction in segment EBITDA is mainly due to the capital gain from the sale of areas adjacent to the Milan Affori station, equal to €1,485 thousand, recorded in the first half of 2018.

Passenger transport by road The "Passenger road transport" segment mainly includes: -

the subsidiary FNM AUTOSERVIZI, that manages Local Public Transport in the provinces of Varese, Brescia and Como, and also carries out train replacement services, for the railway services provided by Trenord. In particular, LPT activities in the provinces of Varese and Brescia are carried out under concession (extended to 31 October 2019 and 31 December 2019 respectively, i.e. the date when the new operator took charge of the service), while in the province of Como, these activities are governed by a service contract, with duration until 31 December 2019, i.e. the date of acceptance of the service by the new operator.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 12

FNM Group

In the first half of 2019, production totalled €2.943 million bus/km compared to 2.963 million bus/km in the first half of 2018. Revenues from ticket sales amounted to €2,038 thousand compared to €2,064 thousand for the same period in 2018; public grants for concessions regarding the provinces of Brescia and Varese totalled €2,302 thousand, and the amount for activities carried out in the province of Como was equal to €1,509 thousand, unchanged compared to the previous year. As regards future deadlines of contracts to assign LPT services in provinces in the Region of Lombardy, any loss of services would have a considerable impact on the company's turnover, but would also proportionally reduce costs. This is because the company being awarded the contract, based on applicable legislation, would take over personnel as well as resources used for the service, while the depots belongings to the subsidiary would not change ownership, without any obligation to transfer them, nor constraints on their being used by the company taking over the contract. -

the subsidiary Azienda Trasporti Verona, that mainly operates in the passenger road transport sector in the municipality and province of Verona; the company is held jointly by FNM and Azienda Mobilità Trasporti S.p.A. Consideration from service contracts amounted to €17,987 thousand, compared to €17,947 thousand in the first half of 2018. Revenues from the sale of tickets and travel passes went up from €16,494 thousand to €16,912 thousand in the first half of 2018. In relation to production figures, in the first half of 2019 there was an increase of 2.3% in carried passengers (36.4 million compared to 37.3 million in 2018), with substantially stable figures for buses/km travelled. In December 2017, an invitation to tender with restricted procedure was published, to select a public transport operator Verona and the province. The tender, basically for services currently provided by ATV, will award two lots (an urban lot with service for Catullo airport, and an extraurban lot which includes the Municipality of Legnago). On 11 January 2018, the investee company filed an appeal with the Regional Administrative Court against the call for tenders and the related Provincial Council of Verona resolution, contesting both the type of tender provided for by the notice and the division of the tender in lots. The date of the first hearing still has to be set.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 13

FNM Group

During the first half of 2019, the Province continued in any case to collect data prior to preparing the tender specifications, such as information on personnel and fares, and an appointed expert began an appraisal of the buses. -

the subsidiary La Linea S.p.A., a company operating in the Veneto area in the local public road transport sector, which also hires out buses with driver, also through subsidiaries and/or investees; revenues relative to transport services for the first half of 2019 refer to the companies ACTV and AVM (a total of €2,424 thousand, in the province of Venice), ATV (€2,058 thousand in the Verona area), Busitalia (€1,134 thousand in the Padova area) and Dolomiti Bus (€843 thousand in the Belluno area). In terms of output value, in the first half of 2019, 2.8 million km, corresponding to approximately 50% of transit indicated in the budget, were managed on a subcontract basis.

Improved EBITDA in the "Passenger road transport" segment is due to the effect of a higher number of replacement services undertaken, for €1,051 thousand, as well as the impact of the adoption of the new standard IFRS 16, which resulted in a reduction in operating lease payments equal to €639 thousand and an increase in amortisation and depreciation for €625 thousand, as well as borrowing costs, for €51 thousand.

Sustainable Mobility The "Sustainable mobility" segment refers entirely to the company E-VAI which, through the carsharing service with electric and hybrid vehicles, aims to complete the public mobility service and in particular railway service, based on traditional and innovative business models. In the first half of 2019, operating volumes in the long-standing car sharing 1.0 station based business segment were mainly stable, in relation to which the contract to manage the Lombardy car sharing service signed with FERROVIENORD, as part of the undertaking with the Region of Lombardy to provide an ecofriendly car sharing service, continued, with a relative payment of €900 thousand, unchanged compared to the previous year. During the half year, activities related to the E-Vai 3.0 project and the two new lines E-Vai 2.0 Comunità and E-Vai 4.0 Corporate continued, with the expansion of the E-Vai 3.0 model defined according to market needs, featuring dedicated services for local administrations and private companies.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 14

FNM Group

The innovation of the service models managed by the investee, which may also be combined in the near future, was also recognised by the European Community. In fact, E-Vai is taking part in two European projects, I-SharE LIFE and CarE-Service Horizon 2020, in relation to which grants equal to €310 thousand were recognised in the financial statements. At 30 June 2019, the fleet consisted of a total of 175 vehicles, of which 50 for the I-SharE LIFE project. Results relative to the Mobility Management business line for the first half of 2019 were aligned with the previous year: commission payable to the investee amounted to €26 thousand.

Holding The "Holding" segment refers to sectors of activities where FNM operates directly, including the hire of rolling stock to investees active in local public transport and freight transport; this sector also includes activities carried out by the subsidiary Locoitalia. Types of revenues refer to: -

administration services, i.e. the management of service contracts with investees for centralised corporate activities, including in particular: the organisation and provision of accounting services, personnel administration, human resources management, corporate secretarial services, legal services and advice, treasury, planning and control, ICT, procurement and contract services, communication, as well as general services. The relevant revenues, entirely attributable to intercompany transactions, amounted to €4,640 thousand, compared to €4,894 thousand in the first half of 2018;

-

the hire of rolling stock, with lease income going up from €26,380 thousand to €26,695 thousand; in this regard, due to the adoption of IAS 17, income from this item is broken down into lease payments receivable (revenues) for operating leases and interest income (financial income) for finance leases, which in the period were equal to €205 thousand compared to €257 thousand in the first half of 2018;

-

property management, relative to lease rental of owned properties, such as the building in Piazzale Cadorna, the commercial premises in the Milan Cadorna Station, the buildings at Iseo, the parking area in Novate and the warehouse in Solbiate Comasco. With the exception of Milan Cadorna station leases, the other contracts are with Group companies. Relevant revenues were equal to €742 thousand, compared to €744 thousand for the comparative period of 2018;

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 15

FNM Group

-

management of advertising spaces, relative to income from the sale of advertising space on the Digital signage network, and through traditional channels, such as display stands at stations, for a total of €355 thousand, unchanged compared to the first half of 2018.

4

FNM GROUP HUMAN RESOURCES

FNM GROUP HUMAN RESOURCES The average number of employees of FNM and companies included in the scope of consolidation (FERROVIENORD, Ferrovie Nord Milano Autoservizi, NORD_ING, E-Vai, ATV, La Linea and Locoitalia), recorded in the first half of 2019, amounted to 2,241, compared to 2,237 in the first half of the previous year.

INDUSTRIAL RELATIONS At a corporate level, negotiations with trade union representatives present in the company led to an agreement for flexible working and a stable organisational solution for FNM employees, while also staring an experimental stage at the companies FERROVIENORD and Nord_Ing. FERROVIENORD also entered into an agreement regulating the salary profiles of agents in the Transit sector, to align them with the new organisation and professional competencies required by this sector.

5

MAIN RISKS AND UNCERTAINTIES TO WHICH THE GROUP IS EXPOSED

In carrying out its activities, the Company and Group are exposed to external risks and uncertainties, deriving from external factors connected to the general macroeconomic context in addition to those specific to the operating segments in which operations are carried out, in addition to risks deriving from strategic and internal management choices. As part of its own Internal Control and Risk Management System, FNM S.p.A. has developed a risk management model, the main purpose being to adopt a systematic approach to identify the Group's priority risks, evaluating their potential negative effects in advance and taking the most appropriate actions to mitigate them.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 16

FNM Group

Operations in the first half of 2019 did not change the risk scenarios defined in the annual report and separate and consolidated financial statements at 31 December 2018, to which reference is made for further details.

6

MOST RELEVANT LITIGATION AND OTHER INFORMATION

Updated information on the most relevant litigation is provided below; based on the opinion of appointed consultants, charges are not expected in addition to those already reflected in the consolidated financial statements at 31 December 2018: Litigation concerning some contracts with FERROVIENORD As regards ongoing litigation with the suppliers Costruzioni Napoletane in liquidation (formerly De Lieto Costruzioni S.r.l.) and COGEL S.p.A. in liquidation, following positive rulings, the guarantees for some contracts totalling €3,250 thousand were collected in 2011 and 2012, with economic effects that have not yet been recognised. As regards the De Lieto contract, the Court of Cassation confirmed the second instance ruling in favour of the investee. However, Allianz filed an appeal to have the ruling withdrawn; FERROVIENORD filed to appear in court; a hearing has not yet been set. At the same time, the contractors included judgements aimed at recognising the reserves for which FERROVIENORD had made a counterclaim for damages suffered. In its ruling against the supplier Costruzioni Napoletane, the Court confirmed the validity of the settlement agreement and declared the contract as lawfully terminated, arranging for an additional appraisal to determine reciprocal amounts to pay and receive. In July 2018, the expert appointed by the Judge filed his report, identifying two different amounts as owing by FERROVIENORD: if the Judge considers some objections made by the investee as having grounds, the latter will be required to pay the counterparty €1,415,839; if instead said exceptions are rejected, the amount to pay will be €3,229,224. As already described in the report on operations at 31 December 2018, during the second half of 2019, the parties reached a settlement agreement, under which FERROVIENORD paid the amount of €1,589,700 plus VAT to settle the claims made by the plaintiff in favour of the liquidation; the ruling RG 75325/2014 was closed, with fees paid and the court-appointed expert's fees paid in full by FERROVIENORD.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 17

FNM Group

As regards the ruling with Cogel, described in the 2018 annual report, the Court of Appeal, in a ruling published on 1 February 2018, ordered FERROVIENORD to pay Cogel the remaining value of the works, amounting to €1,310,954 and not €7,468,695 as had been ruled instead by the Court of the first instance. The Court also confirmed the first instance ruling to the extent in which it ordered Cogel to pay the Affori penalty and the Busto Arsizio insurance. Lastly, FERROVIENORD, jointly and severally with Cogel, must pay legal fees in favour of Generali Italia S.p.A., for the total amount of €25,560 with any additional sums as required by law and flat-rate reimbursement. Generali Italia appealed against the ruling before the Court of Cassation, requesting FERROVIENORD to return, together with Cogel, or individually, the amount of €680,407 plus interest and revaluation (equal to the sum already paid as a guarantee). Subsequently, Cogel also appealed against this ruling, requesting the recognition of default interest pursuant to Legislative Decree 231/2002 for €963,369 (in addition to legal interest already paid in the second instance in its favour). FERROVIENORD appealed against the second instance ruling, rejecting the claim for compensation estimated to be €3,332,155. The date for the hearing has not yet been set.

CONFEMI As already described in full in the 2018 Annual Report, to which reference is made, on 16 May 2018, following lengthy and complex negotiations, a settlement agreement was formalised in which the CONFEMI Consortium undertook to pay FERROVIENORD €42,000 thousand, and to waive the clauses contained in the transaction of 4 April 2008, waiving all claims, on receiving payment. Considering the doubts that arose following the signing of this agreement, as to whether or not the sum of €42,000 was subject to VAT, FERROVIENORD filed a request with the Revenue Agency for an opinion, pursuant to article 11, paragraph 1, letter A, Law no. 212/2000. The Revenue Agency, in its reply, established on 27 March 2019 that VAT was not due on the amount and, according to agreements, CONFEMI paid the sum of €42,000 thousand on 18 April 2019. In accordance with the settlement agreement, the parties withdrew from the above rulings, as follows: -

on 17 July 2019, a notice was filed with the President of the Court of Appeal, Civil Section I, General Register 1484/2018 (litigation with partners), declaring that in the hearing of 25 September 2019, the summoned parties will not appear, withdrawing from the case pursuant to article 309 of the Code of Civil Procedure;

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 18

FNM Group

-

as regards the appeal to have the ruling overturned, the Court of Cassation Civil Section I issued decree 19140/2019 of 17 July 2019, declaring the ruling as cancelled by waiver;

-

on 12 July 2019, ruling 3119/2019 of the Court of Appeal of Milan was filed, declaring the cancellation of proceedings, no. 4195/2017 in the General Register.

Tax inspections and assessments With reference to the proceedings with the Customs Agency regarding the appeal filed by the Customs Agency of Como to overturn ruling no. 155/2016 of the Provincial Tax Commission of Como, in favour of the company, filed on 20 April 2016, after several adjournments, a hearing to discuss the ruling before the Regional Tax Commission was set for 13 June 2019. During the hearing of 13 June 2019, a new date for the hearing was set, in order to continue the case. Taking into account the uncertainty associated with subsequent judgements, the Directors of the subsidiary considered it appropriate to keep the provision for risks allocated in previous years, amounting to €3,694 thousand, in the financial statements.

7

SIGNIFICANT EVENTS

On 17 April 2019, the Shareholders' Meeting approved the proposal of the separate financial statements of the Parent Company and consolidated results of the Group for 2018, and resolved to allocate profit for the year as follows: -

€1,215,585 to the legal reserve;

-

€9,785,308 as an ordinary dividend to Shareholders, to ensure a remuneration of €0.0225 for each ordinary share outstanding;

-

€13,310,810 to the extraordinary reserve.

The dividend was paid on 5 June 2019, with detached coupon date of 3 June 2019 and record date of 4 June 2019. On 17 May 2019, the Board of Directors of FERROVIENORD S.p.A. approved the programme to purchase rolling stock (Additional Purchase Programme). In particular, the decision taken by the Regional Council no. XI/1619 of 15 May 2019 (DGR 2019) appoints FERROVIENORD to purchase 10 medium-capacity Pop type trains, and 5, high-capacity Rock type trains, of which the technical characteristics are detailed in the decision DGR 2019 - through TRENITALIA S.p.A. transferring application contracts based on framework agreements already signed with it to FERROVIENORD. This Additional Purchase Programme, like the Original Purchase Programme, approved by the ruling of the Regional Council no. X/6932 of 24 July 2017, is covered by the regional budget, with a total amount of resources, amounting to €1,607 million, provided for in Regional Law 22/2017. Condensed Consolidated Interim Financial Statements at 30 June 2019

page 19

FNM Group

Contracts between FERROVIENORD and TRENITALIA for 10, medium capacity, Pop type trains were transferred on 1 July 2019, and for 5, high-capacity Rock type trains on 25 July 2019.

8

SIGNIFICANT EVENTS AFTER 30 JUNE 2019

As regards significant events after 30 June 2019, reference is made to the Notes to the Condensed consolidated interim financial statements (Note 44).

9

MANAGEMENT OUTLOOK

At present, in the absence of significant events which are not currently foreseeable, the trend for the second half of the year is expected to basically be in line with that of the first half of the year. Therefore, it is expected that in overall terms, the result for the year will be in line with forecasts for the year. Milan, 31 July 2019 The Board of Directors

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 20

Joint Stock Company Registered Office in Milan - Piazzale Cadorna 14 Share capital €230,000,000.00 fully paid up

Condensed Consolidated Interim Financial Statements at 30 June 2019

Consolidated Statement of Financial Position Consolidated Income Statement Other Consolidated Comprehensive Income Changes in Consolidated Shareholders’ Equity Consolidated Statement of Cash Flows Notes to the Condensed Consolidated Interim Financial Statements

FNM Group

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30.06.2019 Amounts in thousands of euros

Notes

ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets Goodwill Right of use Investments measured with the equity method Investments in other companies Financial receivables

30/06/2019

31/12/2018

Change

5 6 7 8 9 9 10 10 11 11 38 15 14

411,201 7,850 6,353 7,391 74,747 5,373 511 509 5,000 5,000 16,731 4,549 89 539,795

437,354 9,066 6,358 0 78,062 5,380 998 996 5,000 5,000 16,106 4,549 99 562,972

(26,153) (1,216) (5) 7,391 (3,315) (7) (487) (487) 0 0 625 0 (10) (23,177)

12 13 13 14 14 15 10 10 11 11 16

7,940 77,352 58,829 56,930 13,311 1,422 64,454 24,454 43,304 43,304 143,383 394,785 26,864 961,444

6,967 70,247 50,172 79,767 12,781 1,215 31,039 31,039 43,335 43,335 137,316 369,886 0 932,858

973 7,105 8,657 (22,837) 530 207 33,415 (6,585) (31) (31) 6,067 24,899 26,864 28,586

230,000 7,788 173,030 (8,136) 68 14,788 417,538

230,000 7,788 154,333 (6,474) 64 28,477 414,188

0 0 18,697 (1,662) 4 (13,689) 3,350

SHAREHOLDERS' EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTEREST19,581

20,983

(1,402)

of which: to Related Parties Financial Receivables measured at fair value in the income statement of which: to Related Parties Deferred Tax Assets Tax receivables Other Receivables TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories Trade Receivables of which: to Related Parties Other Receivables of which: to Related Parties Tax receivables Financial receivables of which: to Related Parties Financial Receivables measured at fair value in the income statement of which: to Related Parties Cash and cash equivalents TOTAL CURRENT ASSETS Assets held for sale TOTAL ASSETS

17

LIABILITIES Share capital Other reserves Reserve for indivisible profit Reserve for actuarial gains/(losses) Translation reserve Profit for the period SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE GROUP

TOTAL SHAREHOLDERS' EQUITY NON-CURRENT LIABILITIES Payables to banks Financial Payables of which: to Related Parties Other liabilities of which: to Related Parties Deferred tax liabilities Provisions for risks and charges Post-employment benefit TOTAL NON-CURRENT LIABILITIES CURRENT LIABILITIES Payables to banks Financial Payables of which: to Related Parties Trade payables of which: to Related Parties Tax payables (duties) Tax payables Other liabilities of which: to Related Parties Provisions for risks and charges TOTAL CURRENT LIABILITIES Liabilities related to assets held for sale TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

Condensed Consolidated Interim Financial Statements at 30 June 2019

18

437,119

435,171

1,948

19 20 20 22 22 38 23 24

49,892 81,468 64,086 28,353 13,488 1,039 31,970 25,795 218,517

50,034 79,432 64,079 68,841 54,311 1,384 22,698 24,768 247,157

(142) 2,036 7 (40,488) (40,823) (345) 9,272 1,027 (28,640)

19 20 20 25 25 26 26 27 27 23

304 143,320 136,131 60,214 4,614 4,972 4,317 65,663 35,950 14,245 293,035 12,773 961,444

431 96,233 84,227 63,476 4,131 175 3,742 64,600 33,449 21,873 250,530 932,858

(127) 47,087 51,904 (3,262) 483 4,797 575 1,063 2,501 (7,628) 42,505 12,773 28,586

17

page 21

FNM Group

CONSOLIDATED INCOME STATEMENT FOR THE FIRST HALF OF 2019 Amounts in thousands of euros

Notes

Revenues from sales and services

H1 2018

Change

133,975 88,067 5,311 4,031 12,601 12,601 8,145 3,536

126,387 87,496 5,042 4,017 6,859 6,859 10,203 3,602

7,588 571 269 14 5,742 5,742 (2,058) (66)

160,032

148,491

11,541

(10,599) (33,106) (4,056) (62,326) (20,384) (5,540) (11,854)

(9,262) (33,887) (4,032) (57,795) (18,506) (5,848) (6,553)

(1,337) 781 (24) (4,531) (1,878) 308 (5,301)

(143,809)

(131,851)

(11,958)

16,223

16,640

(417)

36 36 37 37

569 488 (1,757) (368) (1,188)

718 593 (714) (359) 4

(149) (105) (1,043) (9) (1,192)

41

3,621

5,995

(2,374)

18,656

22,639

(3,983)

(4,081)

(3,843)

(238)

14,575

18,796

(4,221)

-

-

-

PROFIT FOR THE PERIOD

14,575

18,796

(4,221)

Profit/(loss) attributable to NON-CONTROLLING interest PROFIT attributable to Parent Company owners

(213) 14,788

(140) 18,936

(73) (4,148)

-

-

-

0.03 0.03

0.04 0.04

(0.01) (0.01)

-

-

-

of which: to Related Parties Grants of which: to Related Parties Grants for funded investments of which: to Related Parties Other income of which: to Related Parties

28 28 29 29 5 5 30 30

H1 2019

TOTAL REVENUES AND OTHER INCOME Raw materials, consumables and goods used Service costs of which: to Related Parties Personnel costs Amortisation, depreciation and impairment Other operating costs of which: to Related Parties Costs for funded investments

31 32 32 33 34 35 35 5

TOTAL COSTS OPERATING INCOME Financial income of which: to Related Parties Borrowing costs of which: to Related Parties NET FINANCIAL INCOME Net profit of companies measured with the equity method

EARNINGS BEFORE TAX Income tax

38

NET PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS NET PROFIT FROM DISCONTINUED OPERATIONS

43

Profit/(loss) attributable to NON-CONTROLLING interest for discontinued operations PROFIT attributable to Parent Company owners for discontinued operations

Earnings per share attributable to group owners Basic earnings per share (euro) Diluted earnings per share (euro) Earnings per share attributable to group owners for discontinued operations Basic earnings per share (euro) Diluted earnings per share (euro)

Condensed Consolidated Interim Financial Statements at 30 June 2019

39 39

page 22

FNM Group

OTHER CONSOLIDATED COMPREHENSIVE INCOME Amounts in thousands of euros

Notes 30/06/2019

PROFIT FOR THE PERIOD

30/06/2018

14,575

18,796

(2,007) 562 (1,445)

520 (145) 375

Other components of companies consolidated on a line-by-line basis Post-employment benefit actuarial gain/(loss) Tax effect Total components that will not be reclassified in the operating result for the period Total components that will be reclassified in the operating result for the period

-

Total companies consolidated on a line-by-line basis

-

(1,445)

375

1,623 (453) 1,170

Other components of companies consolidated with the equity method Post-employment benefit actuarial gain/(loss) of companies measured with the equity method Tax effect Total components that will not be reclassified in the operating result for the period

9

(869) 242 (627)

Gains/(losses) arising from the translation of financial statements of foreign companies Total components that will be reclassified in the operating result for the period

9

4 4

(9) (9)

(623)

1,161

(2,068)

1,536

TOTAL COMPREHENSIVE INCOME

12,507

20,332

Comprehensive loss attributable to NON-CONTROLLING interest COMPREHENSIVE profit attributable to Parent Company owners

(601) 13,108

(29) 20,361

Total companies consolidated with the equity method Total other comprehensive income

42

CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY Amounts in thousands of euros

Balance 01.01.2018

Share capital

230,000

Other reserves

Indivisible Profits/Losses

Profit/Loss for the period

130,194

(6,556)

25

(6,474) (1,684)

Allocation of 2017 profit Distribution of dividends Put option recognition Change in the scope of consolidation Balance 30.06.2018

230,000

7,788

34,993 (8,698) (2,431) 504 154,562

Balance 01.01.2019

230,000

7,788

154,333

Total Comprehensive Income Allocation of 2018 profit Distribution of dividends Change in the scope of consolidation 230,000

Translation reserve

7,788

Total Comprehensive Income

Balance 30.06.2019

Reserve for actuarial gains/losses

7,788

(7,990)

34

1,434

(9)

28,477 (9,785) 5

22

173,030

(8,136)

Condensed Consolidated Interim Financial Statements at 30 June 2019

Shareholders' Shareholders' equity equity attributable Total shareholders’ attributable to the to non-controlling equity group interest

34,993

395,019

1,911

396,930

18,936

20,361

(29)

20,332

(34,993)

18,936

(8,698) (2,431) 504 404,755

18,695 20,108

(9,167) (2,431) 19,199 424,863

64

28,477

414,188

20,983

435,171

4

14,788

13,108

(601)

12,507

(28,477)

(9,785) 27

(750) (51)

(10,535) (24)

417,538

19,581

437,119

68

14,788

(469)

page 23

FNM Group

CONSOLIDATED STATEMENT OF CASH FLOWS Amounts in thousands of euros

Notes

Cash flow from operating activities Operating result Income tax Net profit of companies measured with the equity method Amortisation for the period Depreciation for the period Depreciation of right of use Provisions for risks and charges Releases of provisions for risks and charges Provision for bad debts Capital gains from the disposal of property, plant and equipment Cash gains from the disposal of assets held for sale Capital grants for the period Interest income Interest expense Other non-monetary income

38 41 6 5 7 23 23 34 30 30 29 36 37 30

Cash flow from income activities Net change in Post-employment benefit Net change in the provision for bad debts Change in the provision for risks and charges (Increase)/Decrease in trade receivables (Increase)/(Decrease) in inventories (Increase)/(Decrease) in other receivables Increase/(Decrease) in trade payables Increase in other liabilities Net change in deferred tax assets/liabilities Total cash flow from operating activities Cash flow from investing activities Investments in intangible assets Investments in own property, plant and equipment Increase/(Decrease) in trade payables for investments Investment in funded rolling stock Increase in financial receivables for services under concession Decrease in financial receivables for services under concession - revenues received Disposal value of property, plant and equipment Investments in Equity investments Dividends distributed by investees measured with the equity method Other changes in financial receivables Collection of interest income Reimbursement of receivables for finance leases Increase in financial receivables for liquidity management from Finlombarda Acquisition of La Linea net of cash held Acquisition of ATV net of cash held Total cash flow from investing activities Cash flow from assets held for sale Decease in assets held for sale

24 0 23 13 12 14 25 27 38

6 5 25 11 11

41 10 10 11

17

Total cash flow from assets held for sale Cash flow from/(for) financing activities Reimbursement of payables for finance leases Interest paid Increase/(Decrease) in payables to banks Interest on the debenture loan paid Increase/(Decrease) in other financial liabilities Dividends paid to FNM shareholders Dividends paid to third parties

20 19 20 20 18 18

Total cash flow from/(for) financing activities Liquidity generated (+) / absorbed (-) Cash and cash equivalents at the start of the period IFRS 9 - first-time adoption IFRS 5 Cash and cash equivalents at the end of the period Liquidità generata (+) / assorbita (-)

Condensed Consolidated Interim Financial Statements at 30 June 2019

16 16 16 16

30/06/2019

30/06/2018

Total

Total

14,575 4,081 (3,621) 1,852 17,663 788 5,764 (710) 80 (54) (1,826) (569) 1,757 (49)

18,796 3,843 (5,995) 1,660 16,813 5,179 (183) (2,315) (1,587) (718) 714 (49)

39,731

36,158

(1,168) (864) (7,605) (973) (4,847) (2,467) 981 -

(1,219) (119) (4,257) 8,223 202 7,447 11,698 8,793 (193)

22,788

66,733

(636) (15,782) 3,102 (11,876) (11,854) 17,954 272 (101) 5,840 24 600 948 -

(381) (17,511) (34,277) (681) (5,872) 13,023 205 (479) 7,781 679 620 (323) 337 8,172

(11,509)

(28,707)

-

5,675

-

5,675

(1,669) (742) (608) (365) 10,054 (9,785) (750)

(1,081) (150) 9,708 (322) 29,851 (8,698) (469)

(3,865)

28,839

7,414 137,316 (1,347) 143,383 7,414

72,540 88,494 (667) 160,367 72,540

page 24

FNM Group

NOTES TO THE CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS AT 30.06.2019 Note 1

General information

Group activities Companies belonging to the FNM Group (hereinafter the "Group"), mainly carry out activities in the sector of passenger road transport and railway infrastructure management; other activities carried out by the Group refer to sustainable mobility and the management of central activities of the company FNM S.p.A. (hereinafter also the "Parent Company" or "FNM"). Reference is made to Note 4 for a more detailed analysis of the effect on segment reporting of jointly controlled entities being accounted for using the equity method, operating in particular in the passenger rail transport and energy sectors (management of the Mendrisio - Cagno line) and information & communication technology. The Parent Company, domiciled in P.le Cadorna, 14 – MILAN, is listed on the Standard Class 1 market of the Milan Stock Exchange (ISIN IT0000060886). Introduction These condensed consolidated interim financial statements at 30 June 2019 have been prepared pursuant to article 154 - ter of the Consolidated Law on Finance amended by Legislative Decree no. 195 of 6 November 2007, implementing Directive 2004/109/EC (also known as the Transparency Directive) and in order to provide information on the financial position, performance and cash flows of the Company and Group. These condensed consolidated interim financial statements have been prepared in compliance with International Accounting Standards (IFRS) issued by the International Accounting Standards Board and endorsed by the European Union, and drafted in accordance with IAS 34 - Interim Reporting, adopting the same accounting standards as those used to prepare the consolidated financial statements at 31 December 2018, supplemented by standards applicable from 1 January 2019, as indicated in Note 2. IFRS also include international accounting standards (IAS) still in force, as well as all interpretation documents issued by the International Financial Reporting Interpretations Committee (IFRIC), formerly known as the Standing Interpretations Committee (SIC). For this purpose, the figures of financial statements of consolidated investees have been appropriately reclassified and restated. As a partial exception to IAS 34, these condensed interim financial statements present detailed rather than summary tables, in order to provide a better and clearer view of the economic/financial dynamics occurring during the half year. The notes are presented according to the reporting required by IAS 34, including additions considered useful for a clearer understanding of the interim financial statements. The condensed consolidated interim financial statements at 30 June 2019 must be read together with the consolidated financial statements prepared by FNM at 31 December 2018. Figures in the condensed consolidated interim financial statements and statement of cash flows for the half year are compared with the same half year period of the previous year. The net financial position and items of the consolidated statement of financial position at 30 June 2019 are compared with corresponding figures at 31 December 2018. With reference to IAS 1, the Directors - considering the economic outlook, capitalisation and financial position of the Group, confirm that it operates on a going concern basis, and that the condensed consolidated interim financial statements have been prepared using the accounting standards of a group in operation.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 25

FNM Group

Note 2 - Presentation, accounting standards and measurement criteria In preparing these condensed consolidated interim financial statements, the same accounting standards and measurement criteria used to prepare the consolidated financial statements at 31 December 2018 were used, to which reference is made for further details, with the exception of the adoption of the new accounting standard IFRS 16, as described below. The preparation of the condensed consolidated interim financial statements requires management to make estimates and assumptions which have an impact on the values of revenues, costs, balance sheet assets and liabilities and on information regarding contingent assets and liabilities at the reporting date. If these management estimates and assumptions, which are based on the best assessment made by Directors, differ from the actual situation, they will be changed as appropriate in the period in which the circumstances change. Some measurement processes, in particular more complex ones such as the determination of impairment or non-current assets, are generally made in full only when preparing the annual financial statements, when all the information that might be needed is available, except in cases where there are impairment indicators that require immediate evaluation of possible impairment losses. Specifically, during the first half of 2019, no impairment indicators were identified requiring impairment testing for the condensed consolidated interim financial statements. During the half year under review, no transfers took place among various levels of the fair value hierarchical scale used to measure the fair value of financial instruments, and there were no changes in the classification of financial assets compared to 31 December 2018. To provide a greater clarity of presentation and guarantee the comparability of data, income for general expenses on investments made as part of the Programme Contract with the Region of Lombardy were reclassified from the item "Other income" to the item "Grants for funded investments", without this changing the result and shareholders' equity approved at 30 June 2018 and 31 December 2018. IFRS accounting standards, amendments and interpretations adopted from 1 January 2019 The following IFRS accounting standards, amendments and interpretations were adopted for the first time by the Group, starting from 1 January 2019: • On 13 January 2016, the IASB published the standard IFRS 16 – Leases to replace IAS 17 – Leases, as well as the interpretations IFRIC 4 Determining whether an Agreement contains a Lease, SIC – 15 Operating Leases – Incentives and SIC – 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The new standard provides a new definition of lease and introduces a criterion based on the control (right of use) of an asset, to make a distinction between lease agreements, and service agreements, identifying the following as discriminating aspects: identification of the asset, the right to replace the asset, the right to substantially obtain all economic benefits from its use and the right to control the asset underlying the agreement. The standard establishes a single model for the recognition and measurement of lease agreements for the lessee, which requires the recognition of the leased asset, also of an operating lease, under assets, with a financial liability as a contra-entry. The standard also allows for agreements concerning low-value assets and agreements with a duration of 12 months or less not to be recognised as lease agreements. On the other hand, the standard does not include significant changes for lessors.

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

The standard applies as of 1 January 2019. The Group used the practical expedient envisaged in IFRS 16:C3 which makes it possible to adopt conclusions reached in the past based on IFRIC 4 and IAS 17 concerning the quantification of an operating lease for a specific contract. This practical expedient was selected for all contracts, as envisaged by IFRS 16:C4. The process to implement the standard was completed. The IT infrastructure for accounting management of the standard was configured and administration and control processes for critical areas covered by the standard were aligned. The Group has opted to adopt the standard retrospectively, however recognising the cumulative effect arising from the adoption in shareholders' equity at 1 January 2019, as provided for in IFRS 16:C7-C13. In particular, as regards lease agreements previously classified as operating leases, the Group recognised the following: a) a financial liability, equal to the present value of future payments outstanding at the transition date, discounted using for each agreement the incremental borrowing rate applicable at the transition date; b) a right of use equal to the value of the financial liability at the transition date, net of any accruals and deferrals referred to the lease and recognised in the statement of financial position at the end of the reporting period. During the measurement of lease liabilities, the Group discounted payments due for leases, using the marginal lending rate at 1 January 2019. The weighted average of the adopted rate was 1.47%. The rate was defined considering the duration of lease agreements, characteristics of the economic environment in which the contract was stipulated and the credit adjustment. For contracts with a renewal option at the end of the non-cancellation period, the Group opted to only consider the non-cancellation period, based on evaluations made that leading to the reasonable assumption that the renewal option will not be exercised. For contracts with renewal options that may be automatically exercised at the end of the non-cancellation period and from which both parties cannot give notice, the duration is considered as the maximum, usually longer than the time horizon covered by the Group's industrial plan. The next table shows the estimated impacts of the adoption of IFRS 16 at the transition date: Amounts in thousands of euros

Impact at the transition date (01.01.2019)

ASSETS NON-CURRENT ASSETS Right of use - software Right of use - Buildings Right of use - plant and machinery Right of use - Other assets

68 7,178 277 521

TOTAL ASSETS

8,044 LIABILITIES

SHAREHOLDERS' EQUITY

0

NON-CURRENT LIABILITIES Financial liabilities for non-current leases

6,520

CURRENT LIABILITIES Financial liabilities for current leases

1,524

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

8,044

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 27

FNM Group

The adoption of the modified retrospective method did not have any impact on Shareholders' equity at the date of first-time adoption. The impact of the adoption of the new standard on profit before taxes relative to the first half of 2019, equal to €19 thousand of higher costs, is summarised below: Amounts in thousands of euros

H1 2019

TOTAL REVENUES AND OTHER INCOME

-

Service costs

826 21 (788)

of which: to Related Parties Amortisation, depreciation and impairment TOTAL COSTS

38

OPERATING INCOME

38

Borrowing costs of which: to Related Parties NET FINANCIAL INCOME

(57) (1) (57)

EARNINGS BEFORE TAX

(19)

To aid understanding of the effects of the first-time adoption of the standard, the next table presents a reconciliation of future commitments relative to lease agreements of the 2018 financial statements and the impact arising from the adoption of IFRS 16 at 1 January 2019: Amounts in thousands of euros

01/01/2019

Commitments for operating leases at 31 December 2018

8,811

Payments for short-term leases (exemption) Payments for low-value leases (exemption)

(285) (547)

Non-discounted financial liabilities for leases at 1 January 2019

7,979

Discounting effect

65

Financial liabilities for leases at 1 January 2019

8,044

Current value of liabilities for finance leases at 31 December 2018

4,952

Financial liabilities for leases at the transition date to IFRS 16 (1 January 2019)

12,996

of which current financial liabilities of which non-current financial liabilities

10,189 2,807

In adopting IFRS 16, the Group used the exemption contemplated in IFRS 16:5(a) in relation to short-term leases. Similarly, the Group used the exemption contemplated in IFRS 16:5(b) as regards lease agreements for which the underlying asset is a low -value asset (i.e. assets underlying the lease agreement which do not exceed €5,000 when new). Contracts for which the exemption was applied mainly refer to the following categories: o Computers, telephones and tablets; o Printers; o Other electronic devices. Condensed Consolidated Interim Financial Statements at 30 June 2019

page 28

FNM Group

For these contracts, the introduction of IFRS 16 did not result in the recognition of the financial liability of the lease and relative right of use, but the lease payments will be recognised in the income statement on a line-by-line basis for the duration of the respective contracts. With reference to transition rules, the Group used the following practical expedients, which are available if the modified retrospective transition method is adopted. o The exclusion of direct initial costs from the measurement of the right of use at 1 January 2019. o The use of information present at the transition date to determine the lease term, with particular reference to exercising the options of extension and early closing. • On 12 October 2017, the IASB published an amendment to IFRS 9 “Prepayment Features with Negative Compensation (Amendments to IFRS 9)”. This document specifies that instruments with early repayment could meet the Solely Payments of Principal and Interest (“SPPI”) test which are characteristic of contract cash flows, also if the “reasonable additional compensation” to pay in the case of early reimbursement is “negative compensation” for the lender. The adoption of this amendment did not have any significant effect on the condensed consolidated interim financial statements. • On 7 June 2017, the IASB published the interpretation Uncertainty over Income Tax Treatments (IFRIC Interpretation 23). The interpretation deals with uncertainties over tax treatment for income tax. In particular, the interpretation requires an entity to analyse uncertain tax treatments (individually or as a whole, depending on the characteristics), assuming that the tax authority will examine the tax position and will have full knowledge of all relevant information when doing so. If the entity concludes that it is not probable that a particular tax treatment is accepted by the tax authority, the entity has to reflect the uncertainty of the measurement of its own current and deferred income taxes. Moreover, the document does not contain any disclosure obligation, but states that the entity shall establish whether it will be necessary to provide information on considerations made by management and relative to the uncertainty of the tax treatment, as provided for by IAS 1. The adoption of this document did not therefore have any effects on the consolidated financial statements of the Group. • On 12 December 2017, the IASB published the document “Annual Improvements to IFRSs 2015-2017 Cycle” which implements the amendments to some standards as part of the annual improvement process. The main amendments concern: o IFRS 3 Business Combinations and IFRS 11 Joint Arrangements: the amendment clarifies that when an entity obtains control of a business which represents a joint operation, it must remeasure the interest previously held in that business. Instead, this process is not applied if joint control is obtained. o IAS 12 Income Taxes: the amendment clarifies that all tax effects related to dividends (including payments on financial instruments classified in shareholders' equity) should be recognised consistently with the transaction generating such profits (income statement, OCI or shareholders' equity). o IAS 23 Borrowing costs: the amendment clarifies that in the case of loans which still exist even after the relative qualifying asset is already ready for use or sale, said loans become a part of the loans used to calculate borrowing costs. The adoption of this amendment did not therefore have any effects on the consolidated financial statements of the Group.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 29

FNM Group



On 7 February 2018, the IASB published the document “Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)”. The document clarifies how an entity must recognise an amendment (i.e. a curtailment or settlement) to a defined benefits plan. The amendments require the entity to revise its assumptions and remeasure the liability or negative asset arising from the plan. The amendments clarify that after the occurrence of such an event, an entity must use revised assumptions to measure the current service cost and interests for the rest of the reporting period subsequent to the event. The adoption of this amendment did not therefore have any effects on the consolidated financial statements of the Group.

• On 12 October 2017, the IASB published the document “Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)”. This document clarifies the need to adopt IFRS 9, including requirements concerning impairment and other long-term interests in associates and joint ventures, for which the equity method is not applied. The adoption of this amendment did not therefore have any effects on the consolidated financial statements of the Group. IFRS accounting standards, amendments and interpretations not yet endorsed by the European Union At the end of the reporting period, competent bodies of the European Union had not completed the approval process necessary to adopt the amendments and standards described below. •

o o o o o o

On 18 May 2017, the IASB published IFRS 17 – Insurance Contracts which is to replace IFRS 4 – Insurance Contracts. The purpose of the new standard is to guarantee that an entity provides relative information which faithfully represents the rights and obligations arising from insurance contracts issued. The IASB has developed a standard to eliminate inconsistencies and weaknesses in existing accounting policies, providing a single principle-based framework, in order to consider all types of insurance contract, including reinsurance contracts, held by an insurance undertaking. The new standard also establishes requirements for presentation and disclosure in order to improve comparability between entities belonging to this sector. The new standard measures an insurance contract based on a General Model or a simplified version of this model called the Premium Allocation Approach (PAA). The main characteristics of the General Model are: estimates and assumptions of future cash flows are always current; the measurement reflects the time value of money; estimates are based on an extensive use of observable market information; a current and explicit measurement of risk exists; expected profit is deferred and aggregated in groups of insurance contracts on initial recognition; and, expected profit is recognised in the contract coverage period, considering adjustments arising from changes in assumptions concerning cash flows relative to each group of contracts. The PAA requires the measurement of the liability for the remaining coverage of a group of insurance contracts on condition that, at the time of initial recognition, the entity expects the liability to reasonably represent an approximation of the General Model. Contracts of one year or less are automatically suitable for the PAA. Simplifications arising from the adoption of the PAA do not apply to the measurement of liabilities for claims, which instead are measured using the General Model. However, it is not necessary to discount those cash flows if the balance to pay or receive is expected within one year from the date when the claim was made.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 30

FNM Group

The entity shall apply the new standard to insurance contracts issued, including reinsurance contracts issued, to reinsurance contracts held and also to investment contracts with a discretionary participation feature (DPF). The standard applies starting from 1 January 2021 but early adoption is permitted, only for entities that adopt IFRS 9 – Financial Instruments and IFRS 15 – Revenue from Contracts with Customers. The Directors do not expect the adoption of these amendments to have a significant effect on the condensed consolidated interim financial statements of the Group. •

On 22 October 2018, the IASB published the document “Definition of a Business (Amendments to IFRS 3)”. The document provides some clarifications of the definition of a business for the purpose of adopting IFRS 3. In particular, the amendment clarifies that while a business usually produces output, the presence of output is not strictly necessary to identify a business in the presence of an acquired set of activities/processes and assets. However, to meet the definition of a business, an acquired set of activities/processes and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. For this purpose, the IASB has replaced the wording "ability to create outputs" with the wording "ability to contribute to creating outputs" to clarify that a business may exist also without the presence of all inputs and processes necessary to create outputs. The amendment also introduced a "concentration test" which is optional for the entity, to determine whether or not an acquired set of activities/processes and assets is a business. If the test outcome is positive, the acquired set of activities/processes and assets is not a business and no further controls are required. If the test outcome is negative, the entity shall carry out additional analyses on the acquired activities/processes and assets to identify if they are a business. For this purpose, the amendment has added numerous examples to IFRS 3, to aid understanding of the practical application of the new definition of business in specific cases. The amendments apply to all business combinations and acquisitions of assets after 1 January 2020, but early adoption is permitted. The Directors do not expect the adoption of this amendment to have effects on the condensed consolidated interim financial statements of the Group.

• On 31 October 2018, the IASB published the document “Definition of Material (Amendments to IAS 1 and IAS 8)”. The document introduces an amendment to the definition of "material" contained in IAS 1 – Presentation of Financial Statements and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors. The purpose of this amendment is to make the definition of "material" more specific and to introduce the concept of “obscured information” along with the concepts of omitted or misstated information already contained in the above two standards. The amendment clarifies that information is “obscured” if described in such a way as to have - for primary uses of general purpose financial statements - an effect similar to that produced if such information had been omitted or misstated. Amendments apply to all operations taking place after 1 January 2020, and Directors do not expect the adoption of this amendment to have a significant effect on the consolidated financial statements of the Group. •

On 11 September 2014, the IASB published an amendment to IFRS 10 and IAS 28 Sales or Contribution of Assets between an Investor and its Associate or Joint Venture. The document was published to solve the current conflict between IAS 28 and IFRS 10. As provided for in IAS 28, the gain or loss resulting from the sale or disposal of a nonmonetary asset to a joint venture or associate in exchange for an equity interest in the latter is limited to the equity interest held in the joint venture or associate by other investors not involved in the transaction. On the contrary, IFRS 10 provides for the recognition of the entire gain or loss in the case of a loss of control of a subsidiary, also if the entity continues to hold a non-controlling interest, including in this case the sale or disposal of a subsidiary to

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 31

FNM Group

a joint venture or associate. The amendments introduced require, in the case of a sale/disposal of an asset or a subsidiary to a joint venture or associate, that the gain or loss to recognise in the financial statements of the transferor/transferee is measured depending on whether assets or the subsidiary sold/transferred are a business or otherwise, according to the definition in IFRS 3. If the assets or the subsidiary sold/transferred are a business, the entity must recognise the gain or loss for the entire equity interest previously held; if they are not defined as a business, the portion of loss or gain relative to the equity interest still held by the entity must be eliminated. At present, the IASB has suspended the adoption of this amendment. The Directors do not expect the adoption of these amendments to have a significant effect on the condensed consolidated interim financial statements of the Group.

Note 3 Scope of consolidation The scope of consolidation includes the Financial Statements at 30 June 2019 of FNM S.p.A., its subsidiaries, entities for which the company has joint control and those entities over which it has significant influence. Subsidiaries are companies over which the Group has the power to exercise control, i.e. it simultaneously has the following three factors: (a) it has power; (b) it is exposed to, or has the rights to, variable returns arising from its involvement with said entity; (c) it has the capacity to use power to influence the amount of such variable returns; similarly, joint ventures are companies over which the Group exercise joint control with another investor and for which contractual or partner agreements exist for the joint management of activities. Joint ventures (identified in Attachment 1 to these notes) operate in sectors other than the operating segments of the Group and their activities are developed with a specialist partner, with whom financial, management and strategic decisions about significant operations are shared, also backed up by partner agreements in which joint control of the investees is established. Subsidiaries are consolidated on a line-by-line basis. With this method, the total amount of assets, liabilities, costs and revenues is recorded (regardless of the scale of the investment held) and the portion of shareholders' equity and result for the period are attributed to non-controlling interest, in specific items of the consolidated financial statements. Intergroup transactions and profit not realised between Group companies are eliminated. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment loss of the asset. As regards the consolidation of jointly controlled companies, FNM, in preparing interim and annual consolidated financial disclosure, consolidates the joint ventures Trenord S.r.l. (and its investee company TILO S.A.), NordCom S.p.A., NORD ENERGIA S.p.A. (and the subsidiary CMC MeSta S.A.), SeMS S.r.l. in liquidation, Omnibus Partecipazioni S.r.l., FuoriMuro Servizi Portuali e Ferroviari S.r.l. and Conam S.r.l. using the equity method.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 32

FNM Group

Associates DB Cargo Italia S.r.l. and ASF Autolinee S.r.l. were also consolidated by applying the "equity method". Considering the intentions of Parent Company management to sell the subsidiary Locoitalia S.r.l. and joint venture Fuorimuro S.r.l., and the negotiations underway with potential buyers, relative assets and liabilities were reclassified as "Assets held for sale" and "Liabilities related to assets held for sale" and were measured in compliance with IFRS 5. The economic results of joint ventures or associates are therefore recognised in the consolidated income statement under the item "Net profit of companies accounted for using the equity method” (Note 41). Reference is made to Attachment 1 for information on the list of companies included in the scope of consolidation, their registered office, percentages held, type of control and consolidation method adopted.

Note 4

Consolidated statement of comprehensive income per sector

With reference to business segments in which the Group operates through subsidiaries, the following four sectors of activity are most significant: -

-

-

-

management of centralised services (Operational holding): (i) the hire of rolling stock to investees operating in the local public transport and goods transport sectors(ii) provider of administration services to own subsidiaries and (iii) property management; management of railway infrastructure: concerning the maintenance and development of new plants for passenger transport for the line under concession from the Region of Lombardy. The consideration for this activity is established in the "Infrastructure Management Service Contract" stipulated with the Region of Lombardy; passenger road transport: the provision of Local Public Transport with buses, in various provinces of Lombardy and Veneto, and in the city of Verona. As part of these activities, the Group realised revenues from the sale of tickets, payments for sub-contracts, regional grants for activities carried out in the provinces of Varese and Brescia and payments for the service contract in the city and province of Verona, and in the province of Como; car sharing services and sustainable mobility.

The following tables present the economic data of the Group as regards the four sectors of activity described above, also considering that the sectors “Passenger rail transport" and "Energy"- managed through joint venture agreements which are consolidated using the equity method, contribute to net profit for the period, as indicated in the item "Net profit of companies accounted for using the equity method". In particular: • "Passenger rail transport" concerns local public transport in the Region of Lombardy. As part of this activity, the Group realised revenues from the Service Contract stipulated with the Region of Lombardy for provision of the transport service, and revenues from the sale of tickets. This activity is managed by the joint venture Trenord S.r.l.;

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 33

FNM Group

• activity in the energy sector refers to the management of the Mendrisio – Cagno merchant line, in relation to which the Group realised revenues from the sale of the interconnection capacity. This activity is managed by the joint venture NORD ENERGIA S.p.A.. H1 2019

Management of railway infrastructure

Holding

Sector revenues Inter-segment sales Grants for funded investments

41,356 (6,031)

Revenues from third parties

Passenger transport by road

Sustainable Mobility

Eliminations

Total from continuing operations

59,849 (2,985) 12,601

56,815 (2,172)

35,325

69,465

54,643

599

Sector costs Inter-segment purchases Costs for funded investments

(28,017) 922

(56,910) 8,002 (11,854)

(57,432) 2,952

(1,622) 150

Net costs of third parties

(27,095)

(60,762)

(54,480)

(1,472)

(143,809)

Operating income

8,230

8,703

163

(873)

16,223

Net financial income

(996)

(51)

(137)

(4)

(1,188)

1,510 (911)

(12,099) 12,099

12,601 160,032 12,026 (12,026)

3,621 18,656 (4,081) 14,575 14,575

Management of railway infrastructure

Holding

Sector revenues Inter-segment sales Grants for funded investments

41,124 (6,009)

Revenues from third parties

(131,955) (11,854)

Net profit of companies measured with the equity method Earnings before tax Taxes Result for the period from continuing operations Result from discontinued operations Net profit for the period

H1 2018

147,431

Passenger transport by road

Sustainable Mobility

Eliminations

Total from continuing operations

61,618 (2,707) 6,859

49,077 (1,699)

35,115

65,770

47,378

228

Sector costs Inter-segment purchases Costs for funded investments

(28,659) 1,206

(57,063) 7,705 (6,553)

(49,492) 2,357

(1,499) 147

Net costs of third parties

(27,453)

(55,911)

(47,135)

(1,352)

(131,851)

7,662

9,859

243

(1,124)

16,640

52

(26)

(20)

(2)

4

Operating income Net financial income

1,128 (900)

(11,315) 11,315

141,632 6,859 148,491

11,447 (11,447)

Net profit of companies measured with the equity method Earnings before tax Taxes Result for the period from continuing operations Result from discontinued operations Net profit for the period

(125,266) (32) (6,553)

5,995 22,639 (3,843) 18,796 18,796

Transactions between sectors take place at arm's length. Management uses the parameter Operating income to measure segment performance.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 34

FNM Group

During the half year under review, no significant changes in the financial position or performance of the above operating segments took place, compared to figures at 31 December 2018.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 35

FNM Group

CONSOLIDATED STATEMENT OF FINANCIAL POSITION For a better understanding of changes in the period, the consolidated statement of financial position with pro-forma figures at 31 December 2018 including the effects of the adoption of the new standard IFRS 16 at 1 January 2019 is presented below. Amounts in thousands of euros

Notes

ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets Goodwill Right of use Partecipazioni valutate con il metodo del patrimonio netto Investments in other companies Financial receivables of which: to Related Parties Crediti Finanziari valutati al Fair Value a conto economico of which: to Related Parties Deferred Tax Assets Tax receivables Other Receivables TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories Trade Receivables of which: to Related Parties Other Receivables of which: to Related Parties Tax receivables Financial receivables of which: to Related Parties Crediti Finanziari valutati al Fair Value a conto economico of which: to Related Parties Cash and cash equivalents TOTAL CURRENT ASSETS Assets held for sale TOTAL ASSETS

30/06/2019

31/12/2018 PRO-FORMA IFRS 16

Change

5 6 7 8 9 9 10 10 11 11 38 15 14

411,201 7,850 6,353 7,391 74,747 5,373 511 509 5,000 5,000 16,731 4,549 89 539,795

437,354 9,066 6,358 8,044 78,062 5,380 998 996 5,000 5,000 16,106 4,549 99 571,016

(26,153) (1,216) (5) (653) (3,315) (7) (487) (487) 0 0 625 0 (10) (31,221)

12 13 13 14 14 15 10 10 11 11 16

7,940 77,352 58,829 56,930 13,311 1,422 64,454 24,454 43,304 43,304 143,383 394,785 26,864 961,444

6,967 70,247 50,172 79,767 12,781 1,215 31,039 31,039 43,335 43,335 137,316 369,886 0 940,902

973 7,105 8,657 (22,837) 530 207 33,415 (6,585) (31) (31) 6,067 24,899 26,864 20,542

230,000 7,788 173,030 (8,136) 68 14,788 417,538

230,000 7,788 154,333 (6,474) 64 28,477 414,188

0 0 18,697 (1,662) 4 (13,689) 3,350

19,581

20,983

(1,402)

18

437,119

435,171

1,948

19 20 20 22 22 38 23 24

49,892 81,468 64,086 28,353 13,488 1,039 31,970 25,795 218,517

50,034 85,952 64,079 68,841 54,311 1,384 22,698 24,768 253,677

(142) (4,484) 7 (40,488) (40,823) (345) 9,272 1,027 (35,160)

19 20 20 25 25 26 26 27 27 23

304 143,320 136,131 60,214 4,614 4,972 4,317 65,663 35,950 14,245 293,035 12,773 961,444

431 97,757 84,227 63,476 4,131 175 3,742 64,600 33,449 21,873 252,054 940,902

(127) 45,563 51,904 (3,262) 483 4,797 575 1,063 2,501 (7,628) 40,981 12,773 20,542

17

LIABILITIES Share capital Other reserves Reserve for indivisible profit Reserve for actuarial gains/(losses) Translation reserve Profit for the period SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE GROUP SHAREHOLDERS' EQUITY ATTRIBUTABLE TO NONCONTROLLING INTEREST TOTAL SHAREHOLDERS' EQUITY NON-CURRENT LIABILITIES Payables to banks Financial Payables of which: to Related Parties Other liabilities of which: to Related Parties Deferred tax liabilities Provisions for risks and charges Post-employment benefit TOTAL NON-CURRENT LIABILITIES CURRENT LIABILITIES Payables to banks Financial Payables of which: to Related Parties Trade payables of which: to Related Parties Tax payables (duties) Tax payables Other liabilities of which: to Related Parties Provisions for risks and charges TOTAL CURRENT LIABILITIES Liabilities related to assets held for sale TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

As indicated in Note 4, the effects of the first-time adoption of IFRS 16 at 1 January 2019 refer to the recognition of Rights of use for €8,044 thousand, non-current financial liabilities for €6,520 thousand and current financial liabilities for €1,524 thousand.

Note 5 Property, plant and equipment At 1 January 2019, property, plant and equipment, net of relative accumulated depreciation, comprised the following: 01.01.2019 Description Historical cost

Accumulated depreciation

Carrying amount

Land and buildings Plant and machinery Industrial and commercial equipment Other assets Assets in the course of construction and advances

51,876 185,553 10,777 580,764 11,917

(16,303) (141,930) (9,502) (235,798)

35,573 43,623 1,275 344,966 11,917

Total property, plant and equipment

840,887

(403,533)

437,354

Changes for the first half of 2019 are shown below: Description

Net value at 01.01.2019 Investments using own funds Transfers of gross value Disposals: Gross disposal Disposals: Use of accumulated depreciation Depreciation charges IFRS 5 - Locoitalia: Historical cost IFRS 5 - Locoitalia: Fund Net value at 30.06.2019

Land and buildings

Plant and Machinery

Industrial and commercial equipment

Other assets

Assets in the course of construction and advances

Total

35,573

43,623

1,275

344,966

11,917

437,354

77

8,163 1,980 (8) 6 (13,470) (19,284) 2,591

4,794 (2,417)

15,782

(220) 4 (482)

2,748 437 (3,635) 3,635 (3,521)

324,944

6,933

34,875

43,287

(190)

1,162

(3,863) 3,645 (17,663) (26,645) 2,591

(7,361)

411,201

At 30 June 2019, property, plant and equipment, net of relative accumulated depreciation, comprised the following: 30.06.2019 Description Historical cost

Accumulated depreciation

Carrying amount

Land and buildings Plant and machinery Industrial and commercial equipment Other assets Assets in the course of construction and advances

51,656 185,103 10,854 571,615 6,933

(16,781) (141,816) (9,692) (246,671)

34,875 43,287 1,162 324,944 6,933

Total property, plant and equipment

826,161

(414,960)

411,201

Land and buildings The change in this item for the period is mainly due to the recognition of depreciation charges. Plant and machinery Increases in the item “Plant and machinery” (€2,748 thousand) mainly concern the commissioning of 13 new buses and minibuses, for €2,705 thousand (with relative fittings). Transfers from the item “Assets in the course of construction and advances" refer to equipment for railway infrastructure maintenance, for €465 thousand, and the registration of a bus for €437 thousand.

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

Disposals for the period refer entirely to the sale of buses which can no longer be used, already fully depreciated. The item also decreased due to the recognition of depreciation charges for the period. Industrial and commercial equipment This item increased due to the purchase of equipment used for railway infrastructure maintenance and decreased due to the recognition of depreciation charges for the period. Other assets The item "Other assets" includes rolling stock, vehicles and leased assets. The increase in the half year, equal to €8,163 thousand, mainly refers to the purchase of 3, new E191 Vectron DC electric trains (€8,048 thousand). As regards rolling stock, following commissioning, investments incurred in the previous year, amounting to €1,980 thousand, were transferred from "Assets in the course of construction and advances”. Assets in the course of construction and advances Increases mainly refer to advances paid for the supply of 1, E191 Vectron DC electric train (€2,310 thousand), the supply of 4, E494 TRAXX DC electric trains (€1,182 thousand) and the development of the car park next to Affori Station in Milan (€964 thousand).

If property, plant and equipment had been recognised net of relative capital grants as indicated in Note 22 and Note 27, the effect on the condensed consolidated interim financial statements at 30 June 2019 would have been the following: 2019

Carrying amount

Value net of the grant

Grant

Land and buildings Plant and machinery Industrial and commercial equipment Other assets Assets in the course of construction and advances

34,875 43,287 1,162 324,944 6,933

(6,363) (18,597)

Total property, plant and equipment

411,201

(28,818)

(3,858)

28,512 24,690 1,162 321,086 6,933 382,383

In the first half of 2019, no internal or external factors requiring impairment testing were identified. Grants for funded investments In compliance with IFRIC 12, investments for infrastructure and rolling stock, entirely funded by the Region of Lombardy, are not entered under "Property, plant and equipment", but instead are recognised as costs for the year, as provided for by IFRS 15. The amount of these investments, in the half year under review, was equal to €11,854 thousand, compared to €6,553 thousand in the same period of 2018, and refer to infrastructure modernisation and development works, in particular: renewal of the superstructure along the Bovisa – Seveso – Mariano Comense stretches, development of the network line support system, development of the Malpensa T2 – Linea RFI Sempione railway connection, extraordinary maintenance for platforms at Canzo-Asso, Cittiglio, Laveno-Mombello, Cocquio-Trevisago, Barasso-Comerio, Novate Milanese and Milano Quarto Oggiaro facilities, renewal of the switch points of Milano Bovisa and Saronno facilities, works to modernise the station at Garbagnate Milanese, and works to consolidate the Milano Affori – Varedo railway stretch.

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

In addition, the sum of €23,757 thousand was recognised as advances to suppliers, relative to funded investments to renew rolling stock, as planned in the rolling stock purchase programme for the regional railway service for 2017 – 2032.

Note 6 Intangible assets At 1 January 2019, intangible assets comprised the following: 01.01.2019 Description Historical cost

Accumulated amortisation

Net value

Assets in the course of construction and advances Others Non-compensated assets

2,296 27,599 46,140

(20,948) (46,021)

2,296 6,651 119

Total intangible assets

76,035

(66,969)

9,066

Changes in the first half of 2019 are as follows: Description

Net value at 01.01.2019 Acquisitions Transfers Depreciation charges

Assets in the course of construction and advances

Non-compensated assets

Other

Total

2,296

6,651

142 (1,915)

494 1,915 (1,851)

(1)

(1,852)

7,209

118

7,850

Net value at 30.06.2019

523

119

9,066 636

Therefore at 30 June 2019, intangible assets comprised the following: 30.06.2019 Description Historical cost

Accumulated amortisation

Net value

Assets in the course of construction and advances Others Non-compensated assets

523 30,008 46,140

(22,799) (46,022)

523 7,209 118

Total intangible assets

76,671

(68,821)

7,850

Assets in the course of construction and advances Increases in the item "Assets in the course of construction and advances", equal to €142 thousand, mainly refer to the activation of the IT system to manage the new accounting standard IFRS 16, for €61 thousand, digitalisation of work orders on the SAP HANA platform, as well as the implementation of additional modules for SAP software, managed by FNM and used by Trenord for €22 thousand. During the half year, project activities were completed and the implemented modules used, therefore costs incurred in 2018 relative to the SAP R3 upgrade to the S/4 HANA version, for €1,692 thousand, the development of management software to manage railway transit for €104 thousand, additional SAP modules used by FNM in its administration service for €41 thousand, the aforementioned SAP management software managed by FNM and used by Trenord for €33 thousand, assets relative to identity assessment tools for €24 thousand, additional SAP HR management software modules for €21 thousand, were transferred to the category "Other fixed assets".

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

Other The increase in the half year, equal to €494 thousand, mainly refers to costs for the upgrade of SAP R3 to the S/4 HANA version for €107 thousand, additional SAP HR management software modules for €85 thousand, the development of management software for rail transit for €86 thousand, additional SAP modules which FNM uses in its administration service for €73 thousand, assets relative to identity assessment tools for €35 thousand and additional SAP management software modules, managed by FNM and used by Trenord S.r.l., for €33 thousand. Non-compensated assets The adoption of IFRIC 12 implies that non-compensated assets are classified under the item “Intangible assets”; the change in the half year is determined only based on depreciation charges. In the first half of 2019, no internal or external factors requiring impairment testing were identified.

Note 7 Goodwill Goodwill recognised refers to the subsidiaries indicated below: Description

31.12.2018

Increases

2019 changes (Impairment)

Reclassifications

Locoitalia S.r.l. Azienda Trasporti Verona S.r.l. La Linea S.p.A.

5 3,627 2,726

(5)

Total Goodwill

6,358

(5)

30.06.2019

3,627 2,726 6,353

As regards the goodwill of ATV, following purchase price allocation activities carried out following the acquisition of the investment (2 May 2017), as defined by IFRS 3 (revised) and IAS 38, an amount of €5,501, including the goodwill recognised for the subsidiary La Linea 80, was accounted for. During 2018, impairment testing resulted in impairment equal to €1,873 thousand. The goodwill recognised for the subsidiary La Linea derives from the difference between the price paid and the fair value of the investment, following purchase price allocation activities at the date of acquisition of the investment (1 January 2018). In the first half of 2019, no internal or external factors requiring impairment testing were identified.

Note 8 Right of use At 1 January 2019, the item "Right of use" identified following the new accounting standard IFRS 16 was broken down as follows:

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 40

FNM Group 01.01.2019 Description Historical cost

Accumulated amortisation

Net value

Right of use - software Right of use - buildings Right of use - plant and machinery Right of use - other assets

68 7,178 277 521

68 7,178 277 521

Total intangible assets

8,044

8,044

Changes in the first half of 2019 are as follows: Description

Net value at 01.01.2019

Right of use software

Right of use buildings 68

7,178

(19)

(11) (615)

49

6,552

Acquisitions Reduction in payment Depreciation charges IFRS 5 - Locoitalia: Historical cost IFRS 5 - Locoitalia: Fund Net value at 30.06.2019

Right of use - plant Right of use - other and machinery assets

Total

277

521

107

47

154

(50)

(105) (9) 2

(11) (789) (9) 2

334

456

7,391

8,044

Therefore at 30 June 2019, intangible assets comprised the following: 30.06.2019 Description Historical cost

Accumulated amortisation

Net value

Right of use - software Right of use - buildings Right of use - plant and machinery Right of use - other assets

68 7,167 384 561

(19) (615) (50) (105)

49 6,552 334 456

Total intangible assets

8,180

(789)

7,391

Note 9 Investments Changes in the first half of 2019 can be analysed as follows:

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 41

FNM Group Changes Description

01.01.2019 Carrying amount Increases Decreases

Investments in jointly controlled entities: Trenord Srl NordCom SpA Nord Energia SpA SeMS Srl Omnibus Partecipazioni Srl FuoriMuro Servizi Portuali e Ferroviari Srl Conam S.r.l.

42,007 7,054 14,586 251 6,032 929 120

(4,723) (137) (980)

Total investments in jointly controlled entities

70,979

6,732 181 170

Investments in associates: DB Cargo Italia S.r.l. Autotrasporti Pasqualini S.r.l. Servizi Trasporti Interregionali S.p.A. Garda Trasporti scarl in liquidation Total investments in associates Total investments Other investments: Consorzio ELIO ATAP

Translation reserve

1,146 24 1,921 18 77 (387) 21

4

(5,840)

2,820

4

55

801

7,083

55

801

78,062

(5,785)

3,621

Reserve for actuarial gains/(losses)

IFRS 5 reclassification

(607) (3) (1)

30.06.2019 Carrying amount

42,550 7,075 11,783 132 5,129

(12) (2)

(530)

(625)

(530)

139 66,808

7,588 181 170

7,939 4

(625)

(530)

74,747

4 2

STECAV Rete Fidi Liguria Società Consortile Azienda Trasporti Veneto Orientale S.p.A. Aeroporto Valerio Catullo di Verona Villafranca Fap SpA Cosmo Scarl Trasporti Brescia Nord Sviluppo Artigiano Imprese Artigiane Soc. Coop.

2 7 5,272 40 39 7 3 2 2

Total investments in other companies

5,380

Total investments

Operating result

83,442

4 2 2 (7) 5,272 40 39 7 3 2 2

(5,785)

3,621

4

(625)

(7)

5,373

(537)

80,120

Changes in the half year relative to the "Reserve for actuarial gains/losses" refer to the effect of measurement using the "equity" method on the change in actuarial gains and losses recognised in the financial statements of joint ventures directly in the Statement of Comprehensive Income, in accordance with IAS 19. The main changes in the half year, other than from the recognition of the contribution to the condensed consolidated interim financial statements arising from profit for the half year and the above-mentioned "Reserve for actuarial gains/losses" are reported below: Trenord S.r.l. The item "Translation reserve, positive for €4 thousand, refers to the translation into Euro of the financial statements of the investee TILO S.A., which prepares its financial reporting using the Swiss franc as the money of account. The translation was carried out, adopting an average exchange rate for the period (equal to 1.12943) to income statement items, and the spot exchange rate at 30 June (1.11050) to assets and liabilities. NORD ENERGIA S.p.A. The decrease in the investment, equal to €4.723 million, was due to the distribution of the dividend by the investee. SeMS S.r.l. in liquidation The decrease in the investment, equal to €137 thousand, was due to the distribution of an interim dividend by the investee on the liquidation result. Omnibus Partecipazioni S.r.l. A 49.037% investment in ASF Autolinee is held by the FNM Group through Omnibus Partecipazioni S.r.l. (investee in the FNM joint venture, held 50%) with 49% and FERROVIENORD S.p.A. with 0.037%; as ASF Autolinee is the only asset held by Omnibus Partecipazioni S.r.l., the FNM Group has

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 42

FNM Group

24.537% of ASF Autolinee, which was therefore recognised for a total of €5.129 million in the consolidated statement of financial position at 30 June 2019. The decrease in the value of the investment, equal to €980 thousand, was due to the distribution of the dividend by the investee. Fuorimuro Servizi Portuali e Ferroviari S.r.l. Following the clear intent of management to proceed with the sale of the investment, as indicated in Note 17 Assets held for sale, the investment was reclassified under assets held for sale, as required by IFRS 5, also adjusting it to the expected sale value.

Note 10 Current and non-current financial receivables This item can be broken down as follows: Description

30.06.2019 Current

Non-current

Term deposits Others

2

Financial receivables

2

Financial receivables for services under concession Receivables for finance leases Financial receivables for interest from related parties (MINUS) IFRS 9 Impairment provision

509

Total

40,000

40,000 2

40,000

40,002

22,988 1,472 40 (46)

22,988 1,981 40 (46)

Financial receivables from related parties (Note 40)

509

24,454

24,963

Total

511

64,454

64,965

Description

31.12.2018 Current

Non-current

Others

2

Financial receivables

2

Financial receivables for services under concession Receivables for finance leases Financial receivables and interest from related parties (MINUS) IFRS 9 Impairment provision Financial receivables from related parties (Note 40) Total

Total 2 -

2

996

29,088 1,933 64 (46) 31,039

29,088 2,929 64 (46) 32,035

998

31,039

32,037

996

During 2018, following the signing of the settlement agreement between FERROVIENORD and CONFEMI, described in full in the report on operations, section 6, “Most relevant litigation and other information” to which reference is made, on 18 April 2019, the agreed sum of €40,000 thousand was collected. In agreement with the Region of Lombardy, and based on the planned use for infrastructure modernisation works from 2020 onwards, the amount was transferred to a 12-month "Term deposit". This deposit was set up on 16 May 2019 and is interest bearing at a nominal annual rate of 0.18%. In accordance with IFRIC 12, the item "Financial receivables for services under concession" includes the portion of grants recognised, corresponding to investments made according to the completion percentage, not yet collected at the end of the reporting period.

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

The next table shows the change in this item, in the half year under review: Description

Amount

Financial receivables for services under concession 01.01.2019

29,088

Grants received in the year Receivable for costs incurred in the period and not funded (Note 5)

(17,954) 12,601

Financial receivables for services under concession 30.06.2019

23,735

The above mentioned financial receivables are included in the net financial position, prepared based on CONSOB notice no. 6064293 of 28 July 2006 (Note 21). Finance lease agreements receivable are for locomotives hired out to investees belonging to the FNM Group. Details of minimum future payments of finance leases by due date and reconciliation with the relative present value, equal to the payable recognised in the condensed consolidated interim financial statements, are provided below: Future minimum lease inflows

30.06.2019

31.12.2018

Under 1 year 1 - 5 years

1,580 523

2,114 1,047

Total

2,103

3,161

Future interest income

(122)

(232)

Present value of receivables relating to finance leases

1,981

2,929

Receivables relative to leases have variable interest rates; consequently, their fair value approximates the carrying amount. Rates relative to receivables from related parties for leases, exposed to interest rate risk, are revised over a period of less than six months. Finance lease agreements, and sub-leases, are indicated in the next table: Type/Lessee Finance/ DB Cargo Italia Finance/ Trenord Finance/ DB Cargo Italia Finance/ Trenord Finance/ DB Cargo Italia Finance/ Trenord Finance/ Trenord Finance/ Trenord

Subject 2 DE 520 Locomotives 1 DE 520 Locomotives 2 DE 520 Locomotives 2 DE 520 Locomotives 4 DE 520 Locomotives 3 DE 520 Locomotives Equipment for 2 DE520 Locomotives Equipment for 4 DE520 Locomotives

Sub-leasing YES NO NO YES YES NO YES NO

Contract start date/end date 01/01/2018 31/12/2020 01/01/2005 31/12/2019 01/01/2018 31/12/2020 01/01/2007 31/12/2019 01/01/2018 31/12/2020 01/01/2005 31/12/2019 01/01/2012 31/12/2019 01/07/2015 31/12/2019

Including future minimum payments

Interest

Present value

392

22

370

70

1

68

392

39

354

140

4

136

784

48

736

210

5

205

51

2

49

64

1

63

2,103

122

1,981

Effective rates of the return on receivables are indicated below: Description Receivable Special Treasury Management Contract Receivables for finance leases

Condensed Consolidated Interim Financial Statements at 30 June 2019

30/06/2019

30/06/2018

1.32% 1.59% - 13.76%

1.32% 2.96% - 13.9%

page 44

FNM Group

Note 11 Current and non-current financial receivables measured at fair value Description

Non-current

30.06.2019 Current

Total

Financial receivable from Finlombarda - Special treasury management contract

5,000

43,304

48,304

Financial receivables measured at fair value in the income statement from related parties (Note 40)

5,000

43,304

48,304

Total Financial receivables measured at FV in the income statement

5,000

43,304

48,304

Description

Non-current

31.12.2018 Current

Total

Financial receivable from Finlombarda - Special treasury management contract

5,000

43,335

48,335

Financial receivables measured at fair value in the income statement from related parties (Note 40)

5,000

43,335

48,335

Total Financial receivables measured at FV in the income statement

5,000

43,335

48,335

The item "Financial receivables from Finlombarda – Special treasury management contract" refers to the credit facility for Finlombarda S.p.A. of cash surpluses identified following the issue of the corporate bond, in 2015 for €58,000 thousand, up to use for the investment plan concerning the purchase of rolling stock at the end of investment activities relative to these financial resources. The item also includes the receivable for interest income of €304 thousand. The long-term portion results from the contract obligation to manage a minimum of €5,000 thousand, up to contract expiry, scheduled for 31 July 2020, in order to allow for the adequate diversification of invested amounts. The receivable was classified under financial assets at fair value recognised in the income statement, as the cash flows are not solely payments of principal and interest on the principal amount outstanding.

Note 12 Inventories The next table shows how this item is broken down: Description Superstructure material Bus spare parts Spare parts for contact lines, apparatus, control units and telephones Diesel and lubricants Other auxiliary materials (MINUS: Provision for inventory impairment) Total

30.06.2019

31.12.2018

5,122 2,992 1,733 310 760 (2,977)

4,629 2,990 1,433 428 370 (2,883)

7,940

6,967

The increase in the item is mainly due to procurement for maintenance works planned on railway infrastructure. Following specific analysis of the rotation indexes of materials, the provision for inventory writedown at 31 December 2018 was considered appropriate.

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

Note 13 Trade receivables Current

Description

30.06.2019

31.12.2018

Receivables from customers - gross (MINUS) Provision for bad debts (MINUS) IFRS 9 Impairment provision

21,518 (2,897) (98)

22,990 (2,817) (98)

Trade receivables from third parties

18,523

20,075

Receivables from related parties - gross (MINUS) IFRS 9 Impairment provision

58,898 (69)

50,241 (69)

Trade receivables from related parties (Note 40)

58,829

50,172

Total

77,352

70,247

Trade receivables from third parties The change in the item "Trade receivables - gross" is mainly due to different collection times of the vehicle service contract of the Province and Municipality of Verona. The fair value of receivables, obtained by adjusting their nominal value through the provision for bad debts (allocated to estimate the risk of the uncollectability of receivables existing at the end of each reporting period) approximates the carrying amount of the receivables at 30 June 2019 and 31 December 2018. Trade receivables from related parties The increase in gross trade receivables from related parties, equal to 8,657 thousand compared to 31 December 2018, mainly refers to higher amounts due from the Region of Lombardy for €10,899 thousand, partially offset by lower amounts receivable from Consorzio Elio and Trenord (€1,163 thousand and €894 thousand respectively). The higher receivable from the Region of Lombardy is mainly due to different collection times compared to 31 December 2018, the receivable for the last month of the Service Contract (June 2019) which was collected on 1 July, and the amount owed by the Region of Lombardy as the balance for 2018, not yet invoiced at 30 June 2019 on the 2016-2022 Service Contract, which is pending the signing of the report for the year ended 2018, expected in August.

Note 14 Other current and non-current receivables This item can be broken down as follows: Description Receivables for advances to suppliers on interim payments for funded trains Tax receivables Receivable for contract advance Receivables from INPs for sick leave costs Receivables from grants to purchase buses Receivables from the State for grants Miscellaneous receivables (MINUS) Provision for bad debts (MINUS) IFRS 9 Impairment provision

30.06.2019 Current

Non-current

Total

18,207 8,732 3,405 2,647 731 102 9,928 (97) (36)

18,207 8,732 3,405 2,647 731 102 10,017 (97) (36)

43,619

43,708

Receivables from related parties (MINUS) IFRS 9 Impairment provision

13,348 (37)

13,348 (37)

Other receivables from related parties (Note 40)

13,311

13,311

56,930

57,019

Other receivables from third parties

Total

Condensed Consolidated Interim Financial Statements at 30 June 2019

89

89

89

page 46

FNM Group Description

31.12.2018 Current

Non-current

CONFEMI receivables Tax receivables Receivables from grants to purchase buses Receivables from INPS for sick leave costs Receivables from the State for grants Miscellaneous receivables (MINUS) Provision for bad debts (MINUS) IFRS 9 Impairment provision Other receivables from third parties

99

99

Receivables from related parties (MINUS) IFRS 9 Impairment provision Other receivables from related parties (Note 40) Total

99

Total

42,000 8,446 5,280 2,083 102 9,208 (97) (36)

42,000 8,446 5,280 2,083 102 9,307 (97) (36)

66,986

67,085

12,818 (37)

12,818 (37)

12,781

12,781

79,767

79,866

The “CONFEMI receivable” was collected in full on 18 April 2019 (Note 10). The item “Receivables for advances to suppliers regarding interim payments for funded trains" is equal to €18,207 thousand, attributable in full to the portion of the advance on interim payments of contracts concerning the "Rolling stock purchase programme for the regional railway service for 2017 – 2032", the portion accrued in the income statement in the first half of 2019 was equal to €5,544 thousand. Current tax receivables mainly refer to VAT receivables already requested as a refund for €7,223 thousand (unchanged compared to 31 December 2018), as well as receivables due from the financial administration for the refund of excise duty on diesel fuel (€1,212 thousand). The VAT receivable for which a refund has already been requested refers to refund applications filed by the Company on 27 April 2017 for the first quarter of 2017, for €1,723 thousand, and on 24 April 2018 in the VAT return relative to the 2017 tax period, for €5,500 thousand. Tax payables at 31 December 2018 also included VAT receivables to use in offsetting for €143 thousand (€419 thousand payable at 30 June 2019) (Note 26). The item “Receivable for contract advances" refers to the receivable due following the adoption of penalties relative to a contract for the supply of rolling stock, that will be used to offset the supply of technical material relative to purchased rolling stock. The item receivables from INPS (Italian social security) is equal to €2,647 thousand (€2,083 thousand at 31 December 2018), and refers to receivables from social security institutes, mainly in relation to the recovery of costs incurred for sick pay for employees, with the year 2013 recognised in the current year, used to offset costs in July. Receivables for Government grants refer to grants for investments to make to cover general expenses sustained by the Group for infrastructure modernisation. The item "Current sundry receivables” includes: - €1,261 thousand (€3,936 thousand at 31 December 2018) as advances to suppliers; the change compared to 31 December 2018, is mainly due to the settlement of litigation with the supplier De Lieto, €2,191 thousand paid to subcontractors and employees of the company De Lieto Costruzioni Generali S.r.l. were therefore offset with the "Payable to suppliers" relative to services invoiced before termination of the contract, and not yet settled for €5,737 thousand (Note 24). During 2011, following the payment order issued by the Court of Milan, FERROVIENORD collected €2,569 thousand from Allianz S.p.A. as enforcement of the guarantee relative to the above contract. As the collected amount referred to an investment

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 47

FNM Group

made with public funds, it was recognised in the item "Non-current financial payables" (Note 17). - €1,906 thousand (not present at 31 December 2018) as deferrals for additional month salaries not yet paid to employees; - €1,708 thousand (€1,060 thousand at 31 December 2018) as deferrals for insurance premiums. The increase in receivables from related parties (Note 40), mainly refers to higher receivables from the Trenord joint venture for €1,834 thousand, partially offset by lower Group VAT receivables equal to €720 thousand compared to €1,938 thousand at 31 December 2018.

Note 15 Tax receivables Description Tax receivables

Description Tax receivables

Non-current 4,549

Non-current 4,549

30.06.2019 Current

Total

1,422

31.12.2018 Current 1,215

5,971

Total 5,764

Non-current tax receivables mainly concern the receivable which the Parent requested as a refund, pursuant to Decree Law no. 16 of 2 March 2012, amended and converted to Law no. 44 of 26 April 2012, in relation to the higher corporate income tax paid by the Group in 2007 – 2011 following the previous regime of the complete non-deductibility of regional income tax relative to personnel costs. The item "Current tax receivables" includes receivables from the Revenue Agency for corporate income tax and regional production tax, for €499 thousand and €923 thousand respectively (€327 thousand and €889 thousand at 31 December 2018 respectively).

Note 16 Cash and cash equivalents The next table shows how this item is broken down: Description Bank and postal deposits

30.06.2019

31.12.2018

(MINUS) IFRS 9 Impairment provision Cash and cash on hand

144,000 (695) 78

137,457 (695) 554

Total

143,383

137,316

The FNM Group manages cash and cash equivalents through cash pooling: on a daily basis the balances of current bank accounts of individual companies, apart from the consolidated companies ATV and La Linea (including its subsidiary Martini Bus), are transferred to the current accounts of the Parent Company, that concurrently credits/debits the giro account of individual subsidiaries. Therefore, in relation to bank deposits equal to €144,000 thousand and short-term payables to banks equal to €304 thousand (Note 19), and non-current payables for €49,892, the Group had payables in giro accounts - including interest - for €20,462 thousand (€24,762 thousand at 31 December 2018), of which €7,973 thousand (€13,303 thousand at 31 December 2018) to NORD ENERGIA, €6,422 thousand (€4,111 thousand at 31 December 2018) to NordCom and €370 thousand (€527 thousand at 31 December 2018) to SeMS, in addition to €5,496 thousand (€6,756 thousand at 31 December 2018) to company entities (Note 20).

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 48

FNM Group

The change in the item is analysed in more detail by nature of component in the statement of cash flows.

Note 17 Assets held for sale Considering the intentions of Parent Company management to sell the subsidiary Locoitalia S.r.l. and joint venture Fuorimuro S.r.l., and the negotiations underway with potential buyers, relative assets and liabilities were reclassified as "Assets held for sale" and "Liabilities related to assets held for sale" and were measured in compliance with IFRS 5. As regards the sale of the investment in Fuorimuro, the measurement of the investment reflects the fair value resulting from the negotiation with the counterparty. Amounts in thousands of euros

Notes

ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets Goodwill Right of use Investments measured with the equity method Investments in other companies Deferred Tax Assets Tax receivables Other Receivables TOTAL NON-CURRENT ASSETS

5 6 7 8 9 9 38 15 14

CURRENT ASSETS Inventories Trade Receivables of which: to Related Parties Other Receivables Cash and cash equivalents TOTAL CURRENT ASSETS Assets held for sale TOTAL ASSETS

12 13 13 14 16 17

IFRS 5

(24,054) 0 (5) (7) (530) (7) (189) 0 (35) (24,827)

(420) (394) (270) (1,347) (2,037) 26,864 0

LIABILITIES SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE GROUP

22

SHAREHOLDERS' EQUITY ATTRIBUTABLE TO NONCONTROLLING INTEREST TOTAL SHAREHOLDERS' EQUITY NON-CURRENT LIABILITIES Financial Payables of which: to Related Parties Post-employment benefit TOTAL NON-CURRENT LIABILITIES CURRENT LIABILITIES Payables to banks Financial Payables Trade payables Tax payables Other liabilities of which: to Related Parties Provisions for risks and charges TOTAL CURRENT LIABILITIES Liabilities related to assets held for sale TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

Condensed Consolidated Interim Financial Statements at 30 June 2019

18

22

20 20 24

(3,461) (7) (6) (3,467)

19 20 25 26 27 27 23

(90) (428) (8,220) (1) (376) (117) (213) (9,328) 12,773 0

17

page 49

FNM Group

Note 18 Shareholders' equity Shareholders' Total Equity Shareholders' Total attributable to equity shareholders’ nonProfit/Loss for attributable to equity controlling the period the group interest

Shareholders' equity attributable to Majority Shareholders Description Share capital Other reserves

Balance 01.01.2018

230,000

7,788

Indivisible Profits/Losses

130,194

Total Comprehensive Income Allocation of 2017 profit Distribution of dividends Put option recognition Change in the scope of consolidation Balance 30.06.2018

230,000

Balance 31.12.2018

230,000

(7,990)

34

34,993

395,019

1,911

396,930

1,434

(9)

18,936

20,361

(29)

20,332

(34,993)

18,695 20,108

(9,167) (2,431) 19,199 424,863

7,788

(6,556)

25

18,936

(8,698) (2,431) 504 404,755

7,788

154,333

(6,474)

64

28,477

414,188

20,983

435,171

(1,684)

4

14,788

13,108

(601)

12,507

(28,477)

(9,785) 27

(750) (51)

(10,535) (24)

417,538

19,581

437,119

Allocation of 2018 profit Distribution of dividends Change in the scope of consolidation 230,000

Translation reserve

34,993 (8,698) (2,431) 504 154,562

Total Comprehensive Income

Balance 30.06.2019

Reserve for actuarial gains/losses

7,788

28,477 (9,785) 5

22

173,030

(8,136)

68

14,788

(469)

On 17 April 2019, the Shareholders' Meeting approved the proposal of the separate financial statements of the Parent Company and consolidated results of the Group for 2018, and resolved to allocate profit for the year as follows: - €1,215,585 to the legal reserve; - €9,785,308 as an ordinary dividend to Shareholders, to ensure a remuneration of €0.0225 for each ordinary share outstanding; - €13,310,810 to the extraordinary reserve. The dividend was paid on 5 June 2019, with detached coupon date of 3 June 2019 and record date of 4 June 2019. When acquiring the investment in La Linea, FNM signed an agreement with the seller, granting the latter the right to sell FNM shares held in the company La Linea (28.73%). This option may be exercised as from 1 January 2024 for the payment of a consideration that will be determined at this date, based on the market value of the shares to sell. The present value of the fair value of these shares was therefore recognised as a reduction of Group shareholders' equity, with a contra-entry under noncurrent financial payables (Note 16). Changes in shareholders' equity attributable to non-controlling interest are presented below:

Balance at 01.01.2019

Eurocombi 24% (147)

Locoitalia 49% 2,030

Change in the scope of consolidation Distribution of dividends Result for the period Reserve for Actuarial Gains/Losses IFRS 5 - Locoitalia Balance at 30.06.2019

(147)

La Linea 49%

ATV 50.00%

Total

2,860

16,240

20,983

(111)

111 (81)

(51) (750) (213) (307)

(51) (750) (213) (388) 0

1,919

2,890

14,919

19,581

Note 19 Current and non-current payables to banks Payables to banks are broken down as follows:

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 50

FNM Group Description

30.06.2019 Current

Non-current

Total

Term Loan Facility Other payables to banks for loans

49,570 322

304

49,570 626

Payables to banks

49,892

304

50,196

Descrizione

31.12.2018 Correnti

Non Correnti

Totale

Term Loan Facility Altri debiti verso banche per finanziamenti

49.530 504

431

49.530 935

Debiti verso banche

50.034

431

50.465

The “Term Loan Facility” concerns the facility granted for the loan agreement signed on 7 August 2018 between FNM and a pool of leading banks for a total of €200,000 thousand. In particular, the amount recognised at 30 June 2019 refers to €50,000 thousand furnished on 14 September 2018 and accounted for using the amortised cost method. The additional two lines, “Capex Facility”, for a maximum of €100,000 thousand and “Revolving Credit Facility”, for a maximum of €50,000 thousand, have not yet been used. The main terms and conditions of the Loan Contract are as follows: - Duration: with reference to the Term Loan Facility and Capex Facility, 7 years from the date of signing the loan agreement; for the Revolving Credit Facility, 6 years from the above date; - interest rate: on an annual basis and equal, for all lines, to the EURIBOR plus a margin of 1.30%; - Commission for non-use: on an annual basis and equal for all lines, to 35% of the margin; - Guarantees: not required; - Financial covenants: calculated based on the consolidated financial statements of FNM (annual and interim): • net financial position/shareholders' equity: not above 1 • net financial position/EBITDA: not above 4 • EBITDA/net borrowing costs: not below 7.

Note 20 Current and non-current financial payables Financial payables are detailed below: Description Payables for lease agreements IFRS 16 Payables to the Ministry of Transport Giro account La Linea put option financial payable Payables for finance lease agreements Other financial payables

30.06.2019 Current

Non-current

3,250

164 265

7,361 5,821 5,232 2,478 164 3,515

Financial payables

17,382

7,189

24,571

Payables to Bond holders Payables to the Lombardy Region Giro account Payables for lease agreements

58,000 6,079 7

326 120,499 15,263 43

58,326 126,578 15,263 50

Financial payables to related parties (Note 40)

64,086

136,131

200,217

Total

81,468

143,320

224,788

Condensed Consolidated Interim Financial Statements at 30 June 2019

5,833 5,821

Total

1,528 5,232

2,478

page 51

FNM Group Description Payables for finance lease agreements Payables to the Ministry of Transport Giro account La Linea put option financial payable Other financial payables

Non-current 3,669 5,821

31.12.2018 Current 1,283

Total

2,462 3,401

5,395

4,952 5,821 5,328 2,462 8,796

Financial payables

15,353

12,006

27,359

Payables to Bond holders Payables to the Lombardy Region Giro account

58,000 6,079

323 64,469 19,435

58,323 70,548 19,435

Financial payables to related parties (Note 40)

64,079

84,227

148,306

Total

79,432

96,233

175,665

5,328

The items “Payables to the Ministry of Transport" and "Payables to the Region of Lombardy" mainly refer to the portion of grants in excess of investments made by the Group, received from the Ministry of Transport and Region of Lombardy. The Group recognises this amount as suspended under financial liabilities, pending the receipt of notice from the counterparties of use of the higher advance received. The item “Payables to the Region of Lombardy", under current liabilities, mainly refers to the excess of grants paid by the Region for investments made by the Group, for the portion already allocated to investments and not yet paid to suppliers. The increase compared to 31 December 2018 is mainly related to the recognition, as an advance received from infrastructure modernisation works, following the collection of sums arising from the settlement agreement signed with Consorzio CONFEMI (Note 10), and the advance portion on interim payments for contracts relative to the "Rolling stock purchase programme for the regional railway service for 2017 – 2032”, equal to €18,207 thousand. The item "Third-party giro account" refers to the giro account for cash pooling with the Supplementary FNM scheme. The item "Financial payable Put Option La Linea” refers to the present value of the fair value of La Linea shares indicated in the Put Option. When acquiring the investment in La Linea, FNM signed an agreement with the seller, granting the latter the right to sell FNM shares held in the company La Linea (28.73%). This option may be exercised as from 1 January 2024 for the payment of a consideration that will be determined at this date, based on the market value of the shares to sell. The present value of the fair value of these shares was therefore recognised with a contra-entry reduction of Group shareholders' equity (Note 18). The item Other financial payables, due after 12 months, refer to amounts collected following the enforcement of guarantees provided in relation to contracts which ended following the default of the counterparties Costruzioni Napoletane in liquidation (formerly De Lieto Costruzioni) (€2,569 thousand) (Note 14) and COGEL (€681 thousand), as detailed in section 6 of the report on operations, to which reference is made. If the relative disputes were settled with a positive outcome for the Group, the amounts indicated could be used to make additional investments, subject to authorisation from the Region of Lombardy. The decrease in Other financial payables, due within 12 months, is wholly attributable to the amount, reimbursed during the half year by the subsidiary ATV to the factor. The purpose of the factoring agreement was to hedge the bus investment plan. The item "Payable to bond holders" refers entirely to the corporate bond “FNM S.p.A. 2015 – 2020”, issued on 21 July 2015 and subscribed in full by Finlombarda S.p.A. (Note 37).

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 52

FNM Group

The item "Giro accounts with related parties" mainly refers to the balance payable of the giro account between FNM and investees in joint ventures; the change mainly refers to the decrease in the balance of the giro account regarding NORD ENERGIA S.p.A., equal to €5,331 thousand, regarding the Pension Scheme for €1,164 thousand and SeMS S.r.l. in liquidation for €158 thousand, partially offset by the increase in the payable to NordCom S.p.A., equal to €2,311 thousand and to Trenord, equal to €151 thousand. The due date of non-current financial payables is indicated below: Description

30.06.2019

31.12.2018

Between 1 and 2 years Between 2 and 5 years Over 5 years

1,464 79,293 711

436 74,725 4,271

Total

81,468

79,432

The fair values of these financial liabilities approximate their carrying amount. Details of minimum future payments of finance leases and reconciliation with the relative present value, equal to the payable recognised in the financial statements, are provided below: Minimum future lease payments

30.06.2019

31.12.2018

Under 1 year 2 - 5 years Over 5 years

268

1,453 2,318 1,933

Total

268

5,704

Future interest expense

(104)

(752)

164

4,952

Present value of payables relative to finance leases

The present value of financial liabilities relative to finance leases is as follows: Present value of payables relative to finance leases

30.06.2019

31.12.2018

Under 1 year 1 - 5 years Over 5 years

164

1,283 1,861 1,808

Total

164

4,952

Finance leases (lease agreements in which the Group is lessee in 2019) are summarised in the next table. Type/Lessor

Subject

Value of the asset

Sub-leasing

Finance/MPS Leasing

2 DE 520 Locomotives

702 YES

Finance/MPS Leasing

8 DE 520 Locomotives equipment

178 YES

Finance/MPS Leasing

4 E 640 Locomotives

0 YES

Condensed Consolidated Interim Financial Statements at 30 June 2019

Contract start date/end date 01/10/200401/07/2019 01/09/201531/12/2019 01/10/200401/07/2019

Payment future minimum amounts

Interest

Present value

57

57

-

83 -

81

164

128

128

-

268

104

164

page 53

FNM Group

Note 21 Net financial position The breakdown of net financial debt, according to CONSOB Notice 6064293 of July 2006, and relative notes referring to the Statement of Financial Position are provided below: Description

30.06.2019

31.12.2018

A. Cash B. Bank and postal deposits

78 143,305

554 136,762

D. Liquidity (A+B)

143,383

137,316

E. Current financial receivables

107,758

74,374

F. Current bank payables G. Current portion of non-current debt H. Other current financial payables

(304) (2,061) (141,259)

(431) (1,606) (94,627)

I. Current financial debt (F+G+H)

(143,624)

(96,664)

J. Net current financial debt (D+E+I)

107,517

115,026

K. Non-current bank payables L. Bonds issued M. Other non-current financial payables

(49,892) (58,000) (23,468)

(50,034) (58,000) (21,432)

O. Net financial debt (J+M)

(23,843)

(14,440)

Notes 16 16

10 - 11 19 20 20

19 20 20

For a better understanding of changes in the Net financial position, figures at 31 December 2018, including effects recognised at 1 January 2019 arising from the adoption of IFRs 16, are presented below. Description

30.06.2019

31.12.2018 PRO-FORMA IFRS 16

A. Cash B. Bank and postal deposits

78 143,305

554 136,762

D. Liquidity (A+B)

143,383

137,316

E. Current financial receivables

107,758

74,374

F. Current bank payables G. Current portion of non-current debt H. Other current financial payables

(304) (2,061) (141,259)

(431) (3,130) (94,627)

I. Current financial debt (F+G+H)

(143,624)

(98,188)

J. Net current financial debt (D+E+I)

107,517

113,502

K. Non-current bank payables L. Bonds issued M. Other non-current financial payables

(49,892) (58,000) (23,468)

(50,034) (58,000) (27,952)

O. Net financial debt (J+M)

(23,843)

(22,484)

Notes

16 16

10 - 11 19 20 20

19 20 20

Note 22 Other non-current liabilities Other non-current liabilities are broken down as follows: Description

30.06.2019

31.12.2018

Capital grants Other liabilities

13,486 1,379

12,886 1,644

Non-current liabilities

14,865

14,530

Payables to the Lombardy Region Capital grants Lombardy Region Other liabilities

12,603 885

40,000 13,323 988

Non-current liabilities to related parties (Note 40)

13,488

54,311

Total

28,353

68,841

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 54

FNM Group

The item "Capital grants" concerns the non-current portion of loans received by the subsidiary ATV of the Veneto region for the purchase of new buses for urban and extraurban transport (€12,329 thousand) besides loans received in 2001 pursuant to Law 270/97 from the Ministry of Public Works to redevelop the Cadorna Station in Milan (€1,158 thousand). The item "Other liabilities" includes €576 thousand, the deferred income relative to future maintenance costs for own rolling stock, with advances collected by lessees during 2017. “Capital grants - Region of Lombardy" mainly refer to grants from the Region of Lombardy for the purchase of rolling stock for €2,603 thousand, for the renovation of property in piazza Cadorna in Milan for €4,296 thousand, for the purchase of buses for €4,157 thousand and for the development of the “La civiltà di Golasecca” (The Golasecca Civilisation) museum equal to €236 thousand. The decrease in the period is due to the recognition of the grant in the Consolidated Income Statement, according to procedures indicated in the accounting standard. The item "Other liabilities to related parties" includes the non-current portion of amounts invoiced to NORD ENERGIA S.p.A., as payment relative to the construction and use of the Mendrisio – Cagno long-distance line, equal to €508 thousand, recognised in the income statement based on the useful economic life of the line (13 years). This item also includes the payable to companies in joint ventures for corporate income tax requested as a refund in relation to deductible regional production tax, equal to 353 thousand.

Note 23 Provisions for risks and charges Provisions for risks and charges comprise the following: Description

Cyclical maintenance

Additional charges PII Affori

Personnel

Balance 01.01.2019

33,601

2,000

Increases Uses IFRS 5 Locoitalia Releases

4,314 (2,333) (213)

1,450 (111)

Balance 30.06.2019

35,369

3,339

1,940

Other risks 7,030

44,571

(710)

5,764 (3,197) (213) (710)

5,567

46,215

(753)

1,940

Total

Provisions for risks and charges comprise the following: Description

30.06.2019

31.12.2018

Current Non-current

14,245 31,970

21,873 22,698

Total

46,215

44,571

Cyclical maintenance With reference to rolling stock, owned by the Region of Lombardy, the subsidiary FERROVIENORD is the operator of the job order for the purchase of rolling stock, and is also responsible for maintenance of equipment in order to guarantee the effective operation of the service, with particular reference to cyclical maintenance. As regards this maintenance, which is scheduled based on years of use and kilometres travelled, the Group allocated provisions to cyclical maintenance of €4.3 million, with use in the year amounting to €2.3 million.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 55

FNM Group

Personnel During the half year, provisions for €1,450 thousand were made as an estimate of salary increases for 2019 for employees employed under the National Collective Bargaining Agreement for the Railway/Tram sector (expired on 31 December 2017). With reference to the renewal of the National Collective Bargaining Agreement for the Railway/Tram sector, based on an assessment of negotiations underway and the economic terms of previous contract renewals, the Group had made allocations in previous years for an amount equal to €294 thousand. During 2017 and 2018, as part of negotiations with trade union organisations, some contractual aspects were defined, determining some welfare payments and contributions for families. This led to use of the fund for €111 thousand. Charges for the Affori Redevelopment Programme As regards the sale of areas next to the Affori Station in Milan, the FNM Group undertook to carry out activities related to the redevelopment programme (clean up of land, development of urban infrastructure works, movement of the electric power unit); the estimate of these future costs to be paid by the Group was equal to €1,940 thousand. Other risks The provision for other risks at 30 June 2019 included: - €3,694 thousand, allocated in previous years, as the risk estimate from the dispute with the Customs Agency described in paragraph 6 of the report on operations, to which reference is made; - €242 thousand for insurance payouts for claims; during previous years, provisions for €249 thousand had been allocated as an estimate of the costs incurred by the Group regarding claims not covered by insurance policies stipulated, as these were below the contract excess; during the period, €7 thousand of the fund was used. - €2,336 thousand, as an estimate of the risk of losing lawsuits in litigation with third parties; €753 thousand of the fund was used in the year. Reference is made to the report on operations for information about other business and tax litigation pending or occurring in the half year; provisions for risks and changes at 30 June 2019 are, in this context, considered suitable for the risks of losing lawsuits referred to in the report on operations.

Note 24 Post-employment benefit Description

30.06.2019

31.12.2018

Current value of Post-employment benefit liabilities, calculated based on demographic and financial assumptions

25,795

24,768

Total

25,795

24,768

The amount of the cost recognised in the income statement relative to this item is broken down as follows: Description

30.06.2019

31.12.2018

Costs for service Interest (Note 38)

127 192

251 352

Total

319

603

Actuarial gains and losses arising from changes in assumptions and changes in final and hypothesized data, starting from the year ended 31 December 2011, are recognised in the statement of comprehensive income in a specific reserve of shareholders' equity called "Reserve for actuarial gains/(losses)" (Note 39). Condensed Consolidated Interim Financial Statements at 30 June 2019

page 56

FNM Group

The change in the liability relative to post-employment benefit is shown below: Description

30.06.2019

31.12.2018

Payable at the start of the year

24,768

13,955

Cost for services Actuarial gain Cost for interest Uses Transfers Consolidation of ATV Consolidation of La Linea IFRS 5 Locoitalia

127 2,007 192 (1,293)

251 (644) 352 (3,140) (33) 11,930 2,097

Payable at the end of the year

25,795

(6)

24,768

The following main actuarial assumptions were used: Description

30.06.2019

Discount rate Annual salary increase rate Annual inflation rate Annual rate of increase in Post-employment benefit

31.12.2018 0.80 1.50 1.50 2.64

1.50 1.50 1.50 2.64

Assumptions concerning mortality are based on the probability of death of the Italian population identified by ISTAT in 2000, by gender. These probabilities were reduced by 25% to take account of the average characteristics of the population. The annual discounting rate, used to determine the present value of the obligation, was inferred from the Iboxx 10+ Eurozone Corporate AA index (0.80% at 30 June 2019 compared to 1.50% at 31 December 2018) according to ESMA provisions; this increase led to a considerable actuarial gain with a consequent decrease in the liability. The change in actuarial gains and losses concerning investees accounted for with the equity method led to a change in the book value of the investment (Note 9) with the above-mentioned shareholders' equity reserve item "Reserve for actuarial gains/losses" as a direct contra-entry.

Note 25 Trade payables Trade payables are broken down as follows: Description

30.06.2019

31.12.2018

Payables for invoices received Payables for invoices to receive

34,569 21,031

35,587 23,758

Trade payables

55,600

59,345

4,614

4,131

Trade payables related parties Trade payables related parties (Note 40) Total

4,614

4,131

60,214

63,476

The decrease in trade payables is mainly due to the reduction in the payable to the supplier De Lieto (equal to €5,737 thousand) following the settlement of the dispute in the first half of the year.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 57

FNM Group

The item includes payables to Cogel S.p.A. (equal to €2,569 thousand), in relation to which litigation is ongoing, and for which no liabilities in addition to provisions already allocated (Note 22) are expected.

Note 26 Tax payables Tax payables are broken down as follows: Description

30.06.2019

31.12.2018

Corporate income tax Regional production tax

4,035 937

Current tax payables (duties)

4,972

175

Personal income tax and withheld tax VAT Other

3,599 419 299

3,568

Tax payables

4,317

3,742

5 170

174

The increase refers to the estimate of corporate income tax and regional production tax, in accordance with IAS 34 (Note 38). The increase compared to 31 December 2018 is due to the higher cost for regional production tax and corporate income tax for the year, compared to advances paid.

Note 27 Other non-current liabilities Other current liabilities are broken down as follows: Description

30.06.2019

31.12.2018

Payables to personnel Payables to social security institutes Deferred income Capital grants Advances from customers Entities Payables to the Ministry of Transport and Infrastructure Deferral capital gains Other liabilities

16,553 5,534 3,870 934 209 128 86 8 2,391

14,363 4,243 7,441 1,746 203 92 85 57 2,921

Current liabilities

29,713

31,151

Payables to Joint Ventures/Associates Capital grants Lombardy Region Payable to the Pension Fund Payables to the Lombardy Region

33,498 1,799 653

31,053 1,789 492 115

Current liabilities to related parties (Note 40)

35,950

33,449

Total

65,663

64,600

The item “Payables to personnel” went up by €2,190 thousand compared to 31 December 2018, as it included portions of months' salaries and bonuses to be paid in the second half of the year. For the same reason, the item "Payables to social security institutes” increased. The item “Deferred income" decreased compared to deferred income relative to customers' annual and monthly travel passes, equal to €1,868 thousand (€5,490 thousand at 31 December 2018). The item "Capital grants" mainly refers to grants for buses, received from the Veneto Region.

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

The item "Other liabilities" includes €1,648 thousand for the current portion of deferred income relative to future maintenance costs for own rolling stock, with advances collected by lessees during the second half of the previous year. The item "Payables to joint ventures" refers to payables for services provided to the Group and to corporate income tax advances paid to the Parent Company by investees in joint ventures (NordCom, Nord Energia and Omnibus). The increase in the period mainly refers to the payable to the subsidiary Trenord for cyclical maintenance carried out on TSR trains (€2,333 thousand). The item "Capital grants Region of Lombardy" mainly refers to grants from the Region of Lombardy for the purchase of rolling stock (€950 thousand) and for the purchase of buses (€506 thousand). No purchase commitments for property, plant or machinery were recorded.

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 59

FNM Group

CONSOLIDATED INCOME STATEMENT For a better understanding of changes in the period, the pro-forma consolidated income statement, including the pre-consolidation period of ATV in the 2018 financial year is presented below. Control of the subsidiary ATV was acquired on 12 February 2018; previously this investee was consolidated using the equity method. Comments below refer to the pro-forma first half of 2018.

Amounts in thousands of euros

Notes

Revenues from sales and services

ATV JANUARY 2018

H1 2019

Change

133,975 88,067 5,311 4,031 12,601 12,601 8,145 3,536

5,322 78 185 -

126,387 87,496 5,042 4,017 6,859 6,859 10,203 3,602

131,709 87,496 5,120 4,017 6,859 6,859 10,388 3,602

2,266 571 191 14 5,742 5,742 (2,243) (66)

160,032

5,585

148,491

154,076

5,956

(10,599) (33,106) (4,056) (62,326) (20,384) (5,540) (11,854)

(902) (759) (3,342) (885) (66) -

(9,262) (33,887) (4,032) (57,795) (18,506) (5,848) (6,553)

(10,164) (34,646) (4,032) (61,137) (19,391) (5,914) (6,553)

(435) 1,540 (24) (1,189) (993) 374 (5,301)

(143,809)

(5,954)

(131,851)

(137,805)

(6,004)

16,223

(369)

16,640

16,271

(48)

36 36 37 37

569 488 (1,757) (368) (1,188)

3 (15) (12)

718 593 (714) (359) 4

721 593 (729) (359) (8)

(152) (105) (1,028) (9) (1,180)

41

3,621

111

5,995

6,106

(2,485)

18,656

(270)

22,639

22,369

(3,713)

(4,081)

159

(3,843)

(3,684)

(397)

14,575

(111)

18,796

18,685

(4,110)

-

-

-

-

-

PROFIT FOR THE PERIOD

14,575

(111)

18,796

18,685

(4,110)

Result attributable to NON-CONTROLLING interest PROFIT attributable to Parent Company owners

(213) 14,788

(111) -

(140) 18,936

(251) 18,936

(132) (3,978)

-

-

-

of which: to Related Parties Grants of which: to Related Parties Grants for funded investments of which: to Related Parties Other income of which: to Related Parties

28 28 29 29 5 5 30 30

H1 2018 PROFORMA*

H1 2018

TOTAL REVENUES AND OTHER INCOME Raw materials, consumables and goods used Service costs of which: to Related Parties Personnel costs Amortisation, depreciation and impairment Other operating costs of which: to Related Parties Costs for funded investments

31 32 32 33 34 35 35 5

TOTAL COSTS OPERATING INCOME Financial income of which: to Related Parties Borrowing costs of which: to Related Parties NET FINANCIAL INCOME Net profit of companies measured with the equity method

EARNINGS BEFORE TAX Income tax

38

NET PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS NET PROFIT FROM DISCONTINUED OPERATIONS

Result attributable to NON-CONTROLLING interest for discontinued operations PROFIT attributable to Parent Company owners for discontinued operations

Condensed Consolidated Interim Financial Statements at 30 June 2019

-

page 60

FNM Group

Note 28 Revenues from sales and services The next table shows the breakdown of this item: Description

H1 2019

H1 2018

Vehicle traffic products Revenues from vehicle service contract Services invoiced Property income Hire of rolling stock Revenues from terminal handling

23,264 19,355 2,555 322 266 146

20,796 16,295 1,167 330 303

Revenues from sales and services

45,908

38,891

Infrastructure management service contract Car Sharing Hire of rolling stock Services invoiced Train replacements Network access revenues

44,902 900 31,609 6,355 3,552 749

45,495 900 31,082 6,783 2,501 735

Revenues from sales and services from related parties (Note 40)

88,067

87,496

133,975

126,387

Total

Revenues from sales and services to third parties went up by €1,695 thousand compared to the comparative half year period of 2018, regarding the following changes: -

-

revenues for services invoiced increased by €544 thousand due to the sale of the contract to purchase 5 Stadler trains to Consorzio EAV, as well as €203 thousand regarding higher revenues from bus hire services; since January 2019, a new passenger road transport sector has been started for the Venice wharves, for €432 thousand; revenues for terminal handling equal to €146 thousand, relative to the subsidiary Malpensa Intermodale, were not present in the scope of consolidation for the first half of 2018;

With reference to "Revenues for sales and services to related parties" the following is reported: Infrastructure management service contract Service contract revenues decreased by €593 thousand regarding the decrease of the amount due to contract efficiency and the recalculation of the catalogue amount for actual transit provided and number of stations at which the service is provided. Hire of rolling stock Revenues for the hire of rolling stock went up by €527 thousand, mainly for the hire to Trenord S.r.l. of 4-body TSR trains, with the supply completed in January 2018 (€220 thousand) and the ISTAT alignment of the Coradia fleet (€94 thousand), as well as the hire to Fuorimuro of locomotives for €208 thousand. Services invoiced This item includes revenues for services provided to investees by the Parent Company, which went down by €270 thousand, mainly in relation to the contract with the investee Trenord.

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

Train replacements The item refers to the consideration invoiced to Consorzio Elio for buses provided to replace the train service; income for train replacement services amounted to €3,552 thousand compared to €2,501 thousand in the first half of 2018, due to increased extraordinary transit.

Note 29 Grants The next table shows the breakdown of this item: Description

H1 2019

Grants for the renewal of the National Collective Bargaining Agreement, other Regions Grants for current expenses Other grants

H1 2018 141 237 902

137 191 697

Grants

1,280

1,025

Grants for current expenses, Lombardy Region Grants for the renewal of the National Collective Bargaining Agreement, Lombardy Region Other grants, Lombardy Region

2,301 806 924

2,302 822 893

Grants to related parties (Note 40)

4,031

4,017

Total

5,311

5,042

Other grants regarding third parties went up by €177 thousand in relation to funded investments in buses, made during 2018. Grants regarding related parties were basically unchanged compared to the comparative period. As regards analysis of the item "Grants for funded investments” reference is made to note 5.

Note 30 Other income The next table shows the breakdown of this item: Description

H1 2019

H1 2018

Income from lease payments Provision of services Contingencies Insurance payouts Fines and penalties Recover of diesel excise duty Sale of inventory materials Capital gain on property, plant and equipment Capital gains lease-back Capital gains on the disposal of assets held for sale Other income

1,138 793 398 257 219 668 115 54 49 217

1,179 686 245 363 191 713 3 145 49 2,315 230

Other income

4,609

6,601

Miscellaneous income from related parties

3,536

3,602

Other income from related parties (Note 40)

3,536

3,602

Total

8,145

10,203

The item "Other income" decreased by €2,177 thousand; the main changes are reported below: -

in the first half of the previous year, the item "capital gain from assets held for sale" had been recorded, mainly for the recognition of the capital gain from the sale to GDF System S.r.l. of areas next to Affori Station, Milan, for €2,315 thousand;

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

-

the item "sale of warehouse materials", which refers to the sale of obsolete material that may no longer be used for maintenance activities increased by €112 thousand.

The item “Miscellaneous income from related parties” includes income from the recovery of costs for Railway infrastructure Planning and Project Management, carried out through funding of the Region of Lombardy. As a result of more activities in the half year period, this item increased to €506 thousand compared to the comparative period of 2018.

Note 31 Raw materials, consumables and goods used The next table shows the breakdown of this item, by company: Description ATV S.p.A. FERROVIENORD S.p,A FNM Autoservizi S.p.A. La Linea S.p.A. Total

H1 2019

H1 2018 6,003 2,063 1,740 793

5,134 1,698 1,740 690

10,599

9,262

The increase in costs for materials of the investee ATV was basically unchanged. The increase in costs for materials of the investee FERROVIENORD, amounting to €365 thousand is mainly due to lower costs for materials for maintenance work compared to the comparative half year period of 2018. As concerns costs of FNM Autoservizi S.p.A., costs for diesel fuel equal to €1,430 thousand, went up by €46 thousand compared to the first half of 2018 (€1,384 thousand), due to the increase in the average cost (equal to €1,120/lire compared to €1,109 euro/litre in 2018), partially offset by the decrease in production volumes, as well as an improvement in average consumption (2.43 km/litre compared to 2.374 km/litre in 2018).

Note 32 Service costs This item is broken down as follows:

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 63

FNM Group Description

30/06/2019

Third-party services - Maintenance Utilities Employee expenses Cost of the hire of rolling stock and buses Cleaning costs Various third-party services Insurance Consulting services Legal and notary fees Vehicle management Security service fees Property management Commercial fees Third-party services - Maintenance of rolling stock Third-party services - Maintenance of buses Temporary staff IT costs Other charges

30/06/2018

6,682 3,118 2,625 2,204 2,033 1,760 1,590 1,184 571 1,051 1,119 285 994 481 1,508 407 366 1,072

8,425 2,906 2,393 1,735 1,918 1,004 1,515 1,601 930 1,023 1,017 876 702 415 1,667 378 344 1,006

29,050

29,855

Costs for related-party services

4,056

4,032

Costs for related-party services (Note 40)

4,056

4,032

33,106

33,887

Service costs

Total

“Costs for services to third parties" reported a net decrease of €1,539 thousand compared to the first half of 2018, mainly due to the following reasons: -

a decrease, equal to €1,743 thousand, in costs for railway infrastructure maintenance, following the postponement of some infrastructure consolidation works to the second half of the year; a decrease, equal to €649 thousand, in costs relative to property management, as a result of the adoption of the new accounting standard IFRS 16; an increase, equal to €469 thousand, for a higher number of vehicle service subcontracts to third parties; an increase, equal to €432 thousand, in costs for third-party activities relative to the management of transport services for Venice wharves.

"Costs for services from related parties" mainly refer to costs for IT services charged by the joint venture investee NordCom, as well as fees to corporate boards, and are basically in line with costs of the comparative period.

Note 33 Personnel costs This item is broken down as follows: Description

H1 2019

H1 2018

Salaries and wages Social security payments Provision for the supplementary pension scheme Other costs Provision for Post-employment benefit liabilities Allocation to the National Collective Bargaining Agreement (CCNL) provision Consensual termination of employment

44,831 12,525 2,849 748 127 1,059 187

42,170 11,254 2,716 474 130 894 157

Total

62,326

57,795

Personnel costs report an overall net increase of €1,189 thousand. The item includes the provision for €1,059 thousand as an estimate of costs for renewal of the National Collective Bargaining Agreement for the Railway/Tram sector, expired on 31 December 2017. The National Collective Bargaining Agreement for the Railway/Tram sector is applied to all Group employees, apart from E-Vai and La Linea employees, to whom the National Collective Bargaining Condensed Consolidated Interim Financial Statements at 30 June 2019

page 64

FNM Group

Agreement for Commerce applies, Locoitalia employees, to whom the National Collective Bargaining Agreement for the Logistics, Goods Transport and Shipment sector applies, Martini Bus employees, to whom the National Collective Bargaining Agreement for the Garages sector applies, and senior managers, to whom the contract for senior managers of industrial companies applies.

Note 34 Amortisation, depreciation and impairment The next table shows the breakdown of this item: Description

H1 2019

H1 2018

Depreciation Amortisation Depreciation of right of use Impairment of receivables

17,663 1,852 788 81

16,813 1,660

Amortisation, depreciation and impairment

20,384

18,506

Total amortisation, depreciation and impairment

20,384

18,506

33

This item increased as regards the right of use, recognised as from 1 January 2019, following the adoption of the new accounting standard IFRS 16.

Note 35 Other operating costs The next table shows the breakdown of this item: Description

H1 2019

H1 2018

Provision for risks and charges Taxes and duties Release of provisions for risks Contingent liabilities Losses on receivables Capital losses on property, plant and equipment Other charges

4,318 938 (710) 168

4,285 837

826

80 22 11 613

Other operating costs

5,540

5,848

Total

5,540

5,848

The item "Provision for risks and charges" reported a net increase of €0.2 million, following higher provisions, relative to the fund for the cyclical maintenance of rolling stock, following the commissioning of TSR trains. During the half year,€710 thousand of the provision for risks for litigation with third parties was released. The item "Other operating costs" went up by €336 thousand, mainly regarding higher membership fees, for €155 thousand, duties and taxes for €60 thousand, and contingent liabilities for €83 thousand.

Note 36 Financial income Financial income accrued on:

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 65

FNM Group Description

H1 2019

H1 2018

Bank current accounts and deposits Other financial income

36 45

14 111

Financial income

81

125

Financial income from the special treasury management contract Active finance lease agreements Other financial income

304 176 8

323 257 13

Financial income from related parties (Note 40)

488

593

Total

569

718

Financial income from the special treasury management contract Financial income refers to interest income on financial resources granted to Finlombarda S.p.A., and regulated in the "Special treasury management contract" (Note 11). Provisions were interest-bearing at a rate of 1.32%, equal to the rate actually accrued for sums deposited in sight and term deposits.

Note 37 Borrowing costs Borrowing costs accrued on: Description Borrowing costs of loans Charges for non-use of loans Lease agreements payable Post-employment benefit (Note 24) Others

H1 2019

H1 2018 478 393 300 192 26

150 182 23

1,389

355

Borrowing costs on the corporate bond Lease agreements payable Borrowing costs, giro accounts

367 1

357

Borrowing costs with related parties (Note 40)

368

359

1,757

714

Borrowing costs

Total

2

Loans payable This item includes borrowing costs for the loan taken out by the Parent Company on 7 August 2018, and disbursed only for the Term Loan Facility on 14 September 2018, and calculated at the contract interest rate equal to the six-month Euribor plus a spread of 1.3%, adjusted to the internal rate of return equal to 1.47%, for adoption of the amortised cost criterion. During the period, fees for the non-use of the two lines “Capex Facility” and “Revolving Credit Facility” were recognised, amounting to €343 thousand, calculated applying a rate of 35% of the margin, equal to 0.455% (Note 19). Fees for non-use of the €50,000 loan entered into with the EIB, for €50 thousand, calculated applying an annual fixed rate of 0.2% were recognised. Borrowing costs on the corporate bond This item includes borrowing costs on the corporate bond, issued on 21 July 2015, and wholly subscribed by the associate Finlombarda S.p.A. (Note 15). The variable rate in the period was equal to 1.264%, calculated as the sum of the spread equal to 150 bps and the six-month Euribor with 360 bps, which was negative in the reference period by 0.236%.

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

Note 38 Taxes and duties The next table shows the breakdown of this item: Description

H1 2019

H1 2018

Current Deferred tax assets/ liabilities

4,677 (596)

4,033 (190)

Total

4,081

3,843

Taxes estimated for the first half of 2019 amounted to €4,081 thousand compared to €3,843 thousand in the first half of 2018. Reference is made to the Notes to the 2018 Consolidated financial statements for the composition of temporary differences giving rise to the balance of receivables for deferred tax assets, of which the change in the half year was equal to €596 thousand. Deferred tax assets directly recognised in shareholders' equity regarding the recognition of actuarial gains/losses was equal to €562 thousand.

Note 39 Earnings per share Earnings per share are calculated dividing the result attributable to shareholders of the Parent Company by the average weighted number of ordinary shares issued, excluding any treasury shares purchased from this calculation. Description Profit attributable to parent company owners in euros Average weighted number of shares Basic earnings per share in hundredths of euros

30/06/2019 14,788,000 434,902,568 0.03

30/06/2018 18,936,000 434,902,568 0.04

Diluted earnings per share coincide with basic earnings per share.

Note 40 Related-party transactions The Group is controlled by the Region of Lombardy, which holds 57.57%. 14.74% is held by Ferrovie dello Stato S.p.A. and the remaining interest is listed on the Standard Class 1 market of the Milan Stock Exchange. Therefore all transactions with the Region of Lombardy are reported under related-party transactions; in this regard, related-party transactions also include transactions with companies over which the Group has joint control and with associates, consolidated using the equity method. Transactions with related parties, taking place at arm's length, are presented below:

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 67

FNM Group 30/06/2019 Description

Notes

31/12/2018

Related parties

Total

Absolute value

Related parties

Total

Impact %

Absolute value

Impact %

STATEMENT OF FINANCIAL POSITION Non-current financial receivables 10 Non-current financial receivables measured at FV11 Trade receivables 13 Other current receivables 14 Current financial receivables 10 Financial Receivables measured at FV 10 Non-current financial payables 20 Other non-current liabilities 22 Current financial payables 20 Trade payables 25 Other current liabilities 27

511 5,000 77,352 56,930 64,454 43,304 81,468 28,353 143,320 60,214 65,663

509 5,000 58,829 13,311 24,454 43,304 64,086 13,488 136,131 4,614 35,950

99.6% 100.0% 76.1% 23.4% 37.9% 100.0% 78.7% 47.6% 95.0% 7.7% 54.7%

998 5,000 70,247 79,767 31,039 43,335 79,432 68,841 96,233 63,476 64,600

H1 2019 Description

Notes

Total

99.8% 100.0% 71.4% 16.0% 100.0% 100.0% 80.7% 78.9% 87.5% 6.5% 51.8%

H1 2018

Related parties Absolute value

996 5,000 50,172 12,781 31,039 43,335 64,079 54,311 84,227 4,131 33,449

Total

Impact %

Related parties Absolute value

Impact %

INCOME STATEMENT Revenues from sales and services Grants Grants for funded investments Other income Service costs Financial income Borrowing costs

28 29 5 30 32 36 37

133,975 5,311 12,601 8,145 (33,106) 569 (1,757)

88,067 4,031 12,601 3,536 (4,056) 488 (368)

65.7% 75.9% 100.0% 43.4% 12.3% 85.8% 20.9%

126,387 5,042 6,859 10,203 (33,887) 718 (714)

87,496 4,017 6,859 3,602 (4,032) 593 (359)

69.2% 79.7% 100.0% 35.3% 11.9% 82.6% 50.3%

The increase in “Trade receivables from related parties" is mainly due to the higher amount of the receivable due from the Region of Lombardy for €10,899 thousand, partially offset by the lower amount of receivables from Consorzio Elio and Trenord (€1,163 thousand and €894 thousand respectively). "Other current receivables from related parties" refer to receivables from the Region of Lombardy for investment grants and amounts to cover personnel costs for renewal of the National Collective Bargaining Agreement for the Railway/Tram sector", and to receivables for services provided to investees in joint ventures, as well as Group VAT receivables. (Note 14). The item "Financial receivables" includes, as provided for in IFRIC 12, portions of grants not yet collected and held to fund investments in infrastructure modernisation and rolling stock (Note 10). The item "Financial receivables measured at fair value" includes the receivable from Finlombarda for the Special treasury management contract, relative to the cash surpluses identified following the issue of the corporate bond (Note 11). The increase in the item “Current financial payables to related parties" mainly refers to the increase in the payable to the Region of Lombardy relative to the surplus grants paid by the Region for investments made by the Group, for the portion already allocated to investments and not yet paid to suppliers. This increase is partially offset by the reduction in the balance of the giro account held with NORD ENERGIA S.p.A., the Pension Scheme and SeMS S.r.l. in liquidation, partially offset by the increase in the balance due from NordCom S.p.A. and Trenord (Note 20). The item "Other current liabilities" refers to for payables for services provided to the Group and advances on corporate income tax paid to the Parent Company by investees in joint ventures, as well as capital grants obtained from the Region of Lombardy for the purchase of rolling stock and buses. Condensed Consolidated Interim Financial Statements at 30 June 2019

page 68

FNM Group

The increase in the period mainly refers to the payable to the subsidiary Trenord for cyclical maintenance carried out on TSR trains in the half year (Note 27).

Note 41 Net profit of companies accounted for using the equity method Details of the result of companies accounted for using the equity method at 30 June 2019 and 30 June 2018 are reported below: Description

H1 2019

H1 2018

Trenord Srl NordCom SpA Nord Energia SpA SeMS Srl Omnibus Partecipazioni Srl DB Cargo Italia S.r.l. ATV S.r.l. Fuorimuro S.r.l. Conam S.r.l.

1,146 24 1,921 18 77 801 (387) 21

3,729 (143) 1,472 12 488 681 (111) (154) 21

Total

3,621

5,995

Reference is made to the report on operations for analysis of the performance of investments in joint ventures and events affecting the profitability of the above-mentioned investees.

Note 42 Result from OCI Details of relative items recorded in shareholders' equity at 30 June 2019 and 30 June 2018 are reported below: Description

Gross value

2019 Tax (Charge)/Benefit

Net value

Gross value

2018 Tax (Charge)/Benefit

Net value

Post-employment benefit actuarial gain/(loss) Post-employment benefit actuarial gain/(loss) of companies Gains/(losses) arising from the translation of financial

(2,007) (869) 4

562 242

(1,445) (627) 4

520 1,623 (9)

(145) (453)

375 1,170 (9)

Total

(2,872)

804

(2,068)

2,134

(598)

1,536

Post-employment benefit actuarial gain/(loss) Starting from the preparation of the separate financial statements at 31 December 2011, actuarial gains/(losses) are not recognised the income statement, but in a specific reserve of shareholders' equity, net of the tax effect, recognised in the statement of comprehensive income for the half year. Translation reserve Reference is made to Note 9.

Note 43 Significant non-recurrent events and transactions In the opinion of the Directors, no non-current transactions occurred in the half year, nor in the comparative half year period of 2018.

Condensed Consolidated Interim Financial Statements at 30 June 2019

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FNM Group

Note 44 Subsequent events As regards subsequent events, the following is reported: -

on 22 July 2019, FNM signed a non-binding letter of intent with its controlling partner, the Region of Lombardy, describing the scenario currently assumed by the parties in relation to a Potential Operation, being studied at present, that would create the first integrated hub for rail and road mobility in Lombardy. This Potential operation could be developed through the Region of Lombardy selling its entire investment in Milano Serravalle - Milano Tangenziali S.p.A. to the Company. As well as relative evaluation and financial aspects to be defined in future negotiations between the parties, the Potential Operation will consider, among others, the outcome of due diligence activities.

-

On 31 July 2019, the Board of Directors of FNM resolved to sell the investment held in Locoitalia S.r.l. (51%) giving the Chairman the most extensive and necessary powers to define and sign the preliminary contract of sale with Railpool GmbH. The overall sale price was set at €6,006 thousand, with a capital gain estimated for the portion held of approximately €900 thousand. The pricing was assessed also based on a fairness opinion provided by an independent party. The sale of the investment will become effective on 1 October 2019;

-

on 31 July 2019, the Board of Directors of FNM resolved to sell its investment (49%) held in Fuorimuro Servizi Portuali e Ferroviari S.r.l. , giving the Chairman the most extensive and necessary powers to define and sign with Tenor S.r.l. or another company indicated by said, a private agreement concerning the terms and conditions of the sale. The total price of the sale has been set at €530 thousand. The value of the investment recognised in the financial statements at 30 June 2019 was adjusted to the expected sale value (Note 9), identifying an overall capital loss of €200 thousand, besides earnings for the period.

Milan, 31 July 2019 The Board of Directors

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 70

FNM Group

ATTACHMENT 1 TO THE NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AT 30 JUNE 2019 Name

Registered office

Type of control

Consolidation method

Percentage of ownership

FERROVIENORD S.p.A.

Milano - p.le Cadorna 14

Subsidiary

Consolidated on a line-by-line basis

100.0%

NORD_ING S.r.l.

Milano - p.le Cadorna 14

Subsidiary

Consolidated on a line-by-line basis

100.0%

FNM Autoservizi S.p.A.

Milano - p.le Cadorna 14

Subsidiary

Consolidated on a line-by-line basis

100.0%

E-Vai S.r.l.

Milano - p.le Cadorna 14

Subsidiary

Consolidated on a line-by-line basis

100.0%

Nuovo Trasporto Triveneto S.r.l.

Milano - p.le Cadorna 14

Subsidiary

Consolidated on a line-by-line basis

100.0%

Malpensa Intermodale S.r.l.

Milano - p.le Cadorna 14

Subsidiary

Consolidated on a line-by-line basis

100.0%

Eurocombi S.r.l. in liquidation

Milano - p.le Cadorna 14

Subsidiary

Consolidated on a line-by-line basis

76.0%

Locoitalia S.r.l.

Genova - Via Boccanegra 15/2

Subsidiary

Consolidated on a line-by-line basis

51.0%

Azienda Trasporti Verona S.r.l.

Verona - Lungadige Galtarossa 5

Joint Venture

Consolidated on a line-by-line basis

50.0%

La Linea 80 Scarl

Belluno - via Garibaldi 77

Subsidiary

Consolidated on a line-by-line basis

50.34%

La Linea S.p.A.

Venezia - Via della Fisica 30

Subsidiary

Consolidated on a line-by-line basis

51.0%

Martini Bus S.r.l.

Venezia - Via Mutinelli 11

Subsidiary

Consolidated on a line-by-line basis

51.0%

Conam S.r.l.

Schio VI - Via Enrico Fermi 13

Subsidiary

Consolidation of Shareholders' Equity

25.5%

Trenord S.r.l.

Milano - p.le Cadorna 14

Joint Venture

Consolidation of Shareholders' Equity

50.0%

NordCom S.p.A.

Milano - p.le Cadorna 14

Joint Venture

Consolidation of Shareholders' Equity

58.0%

NORD ENERGIA S.p.A.

Milano - p.le Cadorna 14

Joint Venture

Consolidation of Shareholders' Equity

60.0%

CMC MeSta SA

Bellinzona CH - Viale Officina 10 Joint Venture

Consolidation of Shareholders' Equity

60.0%

SeMS S.r.l. in liquidation

Milano - p.le Cadorna 14

Joint Venture

Consolidation of Shareholders' Equity

68.5%

Omnibus Partecipazioni S.r.l.

Milano - p.le Cadorna 14

Joint Venture

Consolidation of Shareholders' Equity

50.0%

TILO SA

Bellinzona CH - Via Portaccia 1a Joint Venture

Consolidation of Shareholders' Equity

25.0%

FuoriMuro Servizi Portuali e Ferroviari S.r.l.

Genova - Via Boccanegra 15/2

Joint Venture

Consolidation of Shareholders' Equity

49.0%

DB Cargo Italia S.r.l.

Milano - p.le Cadorna 14

Associate

Consolidation of Shareholders' Equity

40.0%

ASF Autolinee S.r.l.

Como - via Asiago 16/18

Associate

Consolidation of Shareholders' Equity

24.5%

Condensed Consolidated Interim Financial Statements at 30 June 2019

page 71

REPORT ON LIMITED AUDITING FNMSpA

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS JUNE 2019

AT

30

Report on the limited auditing of the condensed consolidated interim financial statements

To shareholders of FNMSpA

Introduction

We performed a limited audit of the attached condensed consolidated interim financial statements, comprising the statement of financial position, the income statement, the statement of other comprehensive income, the statement of changes in shareholders' equity, the cash flow statement and notes of FNM SpA and subsidiaries ("FNM Group") at 30 June 2019. The Directors are responsible for preparing the condensed consolidated interim financial statements in compliance with the international accounting standard for interim financial reporting (IAS 34) adopted by the European Union. Our responsibility is to express findings on these condensed consolidated interim financial statements based on our limited audit.

Scope of the limited audit

We conducted our audit in accordance with the limited audit criteria recommended by Consob in Ruling no. 10867 of 31 July 1997. The limited audit of the condensed consolidated interim financial statements involved conducting interviews, mainly with personnel of the company responsible for financial and accounting aspects, financial statement analysis and other limited audit procedures. The scope of a limited audit is basically more restricted than that of a full audit conducted in compliance with international accounting standards (ISA Italy), and therefore, does not give us the assurance that all significant facts that could have been identified by conducting a complete audit have come to our knowledge. Therefore, we have not issued an opinion on the condensed consolidated interim financial statements.

PricewaterhouseCoopers SpA

Registered and administrative offices: Milan 20149 Via Monte Rosa 91 Tel. 0277851 Fax 027785240 Company capital Euro 6,890,000.00 fully paid up. Tax code, VAT number and registration with the Milan Companies' Register 12.979880155 Registered with the Auditors' Register no. 119644 - Other offices: Ancona 60131 Via Sandro Totti 1 Tel 07121311 - Bari 70122. Via Abate Gimma 72. Tel 08056402 11 - Bologna 40126 Via Angelo Finelli 8 Tel 0516186211 Brescia 25123 Via Borgo Pietro Wuhrer 23 Tel 0303697501 - Catania 95129 Corso Italia 302 Tel 0957532311- Florence 50121 Viale Gramsci 15 Tel 0552482811 Genoa 16121 Piazza Piccapietra 9 Tel 0102.9041-Naples 80121 Via dei Mille 16 Tel 08136181- Padova 35138 Via Vicenza 4 Tel 049873481 - Palermo 90141 Via Marchese Ugo 6o Tel 091349737 - Parma 43121 Viale Tanara 20/A Tel 0521275911- Pescara 65127 Piazza Ettore Troilo 8 Tel 0854545711 - Rome 00154 Largo Fochetti 29 Tel 06570251 -Turin 10122 Corso Palestro 10 Tel 011556771- Trento 38122. Viale della Costituzione 33 Tel 0461237004 - Treviso 31100 Viale Felissent 60 Tel 0422696911 - Trieste 34125 Via Cesare Battisti 18 Tel 0403480 781 - Udine 33100 Via Poscolle 43 Tel. 0432.25789 - Varese 21100 Via Albuzzi 43 Tel. 03322.85039 - Verona 37135 Via Francia 21/C Tel. 0458263001 -Vicenza 36100 Piazza Pontelandolfo 9 Tel 0444393311

www.pwc.com/it

Conclusions

BASED ON THE LIMITED AUDIT CONDUCTED, WE DID NOT IDENTIFY ANY ASPECTS LEADING US TO CONSIDER THAT THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF THE FNM GROUP AT 30 JUNE 2019, REGARDING ALL SIGNIFICANT ASPECTS, WERE NOT PREPARED IN COMPLIANCE WITH THE INTERNATIONAL ACCOUNTING STANDARD APPLICABLE TO INTERIM FINANCIAL REPORTING (IAS 34) ADOPTED BY THE EUROPEAN UNION.

Milan, 5 August 2019 PricewaterhouseCoopers SpA

[illegible signature] ALESSANDRO TURRIS (Statutory auditor)