Extract from the 2014 Jungfraubahn Holding AG Business Report

Important note:
This extract from the official business report was specially prepared for presentation on Internet. It is a considerably shortened version. Please note that the proposals by the Executive Board and Annual General Meeting for approval / resolution refer to the unabridged printed version in the German language. Only the full version is binding. The full version of the report (in German) may be downloaded using the link below.
The report is in some places associated with a view to medium and long-term prospects. All statements relating to the future hold uncertainties. They are projections that reflect the current views of the decision makers. Actual future events and decisions may turn out differently, particularly in relation to changes in environmental conditions. All declarations referring to the future are based on facts current at the time the report was prepared in March 2015.

Dear Shareholders,
Ladies and Gentlemen

The Jungfrau Railway Group is a successful operation. The number of visitors to the Jungfraujoch reached a new record level of 866,000. It was possible to top the profit of the previous year despite adverse weather conditions. Already last year we decided to show how "weatherproof" our staff and facilities are with images in the 2014 annual report. And we have now unintentionally been able to demonstrate that this also applies to our business model

The basis of our group's success is an unchanged traffic revenue of CHF 121.5 million, equal to last year’s figure. The level of revenue could be maintained despite a loss of 9% in winter sport. This was down to good results in the experience mountains business segment as well as the absence of any adverse effects. At CHF 30.4 million, the Jungfrau Railway Group exceeded the previous year’s record by 0.6%.

V-Cableway

Owing to the good course of business in recent years, the uncommitted resources thus generated and our solid grounding in international markets, we are in a position to bear the necessary investment for realization of the V-Cableway. This amounts to CHF 250 million for the Jungfrau Railway Group alone. The investment can not only provide a long-term boost for our company but also ensure the competitiveness of the entire Jungfrau Region in terms of summer and winter tourism. This project, in which our partners the Grindelwald-Männlichen Gondola Cableway and Bernese Oberland Railway are also participating, was the focus of regional interest during 2014. On 24 October 2014, a memorable community meeting about the project was held in the specially prepared indoor ice rink in Grindelwald.. The meeting was attended by 1,476 citizens from a total of 2,570 with voting rights. Over 70% voted in favour of the necessary changes to the municipality's land-use plans. Just days later, on 27 October 2014, the vast majority of the 202 voters present at a meeting in Lauterbrunnen voted for the necessary changes to the "Artificial snow-making Kleine Scheidegg-Wengen" planning bylaws. We are extremely grateful to the local population for the great interest shown in Jungfrau Railways and particularly in our V-Cableway project, as well as for their approval of our future plans.

Unfortunately, despite these ballots it is not yet known whether the V-Cableway can actually be realized. Just one citizen has lodged an appeal against the Municipal Assembly of Grindelwald. The appeal was rejected by the Court of First Instance, but has been submitted to the Administrative Court. Objections to the planning have also been lodged. Some 15 are still pending and must be reviewed by the Local and Regional Planning Authorities. Ultimately decisive for the project however, is the standpoint of the Wärgistal Mountain Cooperative, which must give the new Eiger Express tri-cable continuous cableway – a key element of the V-Cableway – the right to cross its land. A vote by the mountain cooperative on 27 October 2014 fell short by 70 for to 41 against, and the necessary ⅔ majority was not achieved because of the lack of the required quota of cattle grazing rights. Based on the results of ballots in the municipalities, the initially unsuccessful negotiations were taken up again in early 2015. The aim is to ensure a good level of compatibility with the mountain farmers and the best possible protection of the pastures. Additional agreements for the construction phase should create the necessary confidence to provide a basis for a broader agreement among the mountain farmers. The mountain cooperation will hold another ballot in summer 2015. Our strategic focus thus continues to remain on the V-Cableway project.

Promising markets in Asia

On average, 59 groups, or 1720 group travellers per day visited the Jungfraujoch. Business with tour operators from overseas is our strongest income pillar. This is the result of a solidly based, long-term cultivation, primarily in Asia. The CHF - Yen exchange rate is critical for the trend in the number of Japanese guests. The positioning was able to be further enhanced by the strong presence of Jungfrau Railways in the celebrations for 150 years of diplomatic relations between Switzerland and Japan and last summer’s visit to the region by Crown Prince Naruhito. The Jungfraujoch also has an excellent brand strength in many other Asian countries (India, Thailand, Korea). China remains the country with the largest growth potential; however, a fierce price war is being fought there.

Prospects

The Swiss National Bank's decision on 15 January 2015 to abandon defence of the 1 Euro - CHF 1.20 exchange rate has implications for Jungfrau Railways. The number of European visitors to the Jungfraujoch - already on a low level - will continue to decline. Asian markets are only marginally affected by the current turmoil in the currency environment. Travelling to Europe for guests from Asia will still tend to be inexpensive, and thus they will still be able to afford and want to spend a few days in Switzerland, including the trip to the Jungfraujoch. Apart from the Jungfraujoch business segment, we will become increasingly aware that suddenly overnight, holidays in Switzerland became more expensive and holidays abroad cheaper for the Swiss. The initial effects have already been felt in the 2014/2015 winter season. So all in all, 2015 is going to be a challenging year. As countermeasures, we shall focus on strengthening already established marketing tools and the reduction of costs. Short-term special offers would simply dissipate without effect and generate unnecessary costs or even unnecessarily cheapen already initiated transactions. Overall, the opportunities offered in the Jungfraujoch business segment outweigh the risks of a currency-related decline in other business segments.

Thanks

In 2014, our employees once again delivered an excellent performance. Their efforts are extremely impressive. All Jungfrau Railways personnel deserve a special thank you for the commitment shown by each and every one of them! In addition to our employees, we also owe special thanks to our customers as well as the authorities, municipalities, mountain cooperatives, tourism organizations, neighbouring rail & cableways, distributors, suppliers, the International Foundation High Altitude Research Station Jungfraujoch and Gornergrat and all the other partners with whom we are able to maintain fruitful relationships. Finally we wish to express our sincere thanks to our valued shareholders for their trust in our group and their loyalty to Jungfraubahn Holding AG.

Business Report 2014 in German