Toward the future. With solutions from HOCHTIEF.

Transcription

1 Annual Report 2011 Toward the future. With solutions from HOCHTIEF. HOCHTIEF Annual Report 2011 Turning Vision into Value.

2 Contents Information for Our Shareholders Letter from the CEO... 8 Report of the Supervisory Board Executive Board Boards Corporate governance HOCHTIEF stock Group Management Report Group Situation Business activities and Group structure Markets and operating environment Orders and work done in Strategy Sustainability Research and development Employees Procurement Measuring return on capital: Return on net assets Value added Financial Statements and Notes Contents of the HOCHTIEF Group consolidated financial statements Consolidated statement of earnings Consolidated statement of comprehensive income Consolidated balance sheet Consolidated statement of cash flows Consolidated statement of changes in equity Responsibility statement Auditors report Financial Review Financial review HOCHTIEF Aktiengesellschaft (holding company): Financial review Explanatory report of the Executive Board Segment Reporting Segment reporting Corporate divisions: HOCHTIEF Americas HOCHTIEF Asia Pacific HOCHTIEF Europe HOCHTIEF Concessions Risk Report, Forecast and Postbalance-sheet Events Risk report Looking ahead: Outlook and opportunities Forward-looking statements Post-balance-sheet events Declaration on corporate governance Notes to the Consolidated Financial Statements Accounting principles Explanatory notes to the consolidated statement of earnings Explanatory notes to the consolidated balance sheet Other disclosures Further Information Index Glossary Five year summary Publication details and credits Financial calendar

3 Our Company at a Glance in 2011 HOCHTIEF Aktiengesellschaft Corpo HOCHTIEF Americas Division HOCHTIEF Asia Pacific Division The HOCHTIEF Americas division combines the activities of HOCHTIEF s companies in the US and Canada. Through its subsidiary Turner, HOCHTIEF has firmly established itself as the leading general builder in the USA, the world s largest construction market. Turner holds the lead position in the high-growth segments of healthcare and education as well as in the green building segment. Consolidating its presence in North America, HOCHTIEF acquired the civil engineering company Flatiron in Ranking among the top ten providers in US transportation infrastructure construction and undertaking projects in the USA and Canada, Flatiron is the ideal addition to our construction services portfolio. Flatiron also gives HOCHTIEF a foundation on which to build its activities in the growth segment of public-private partnership infrastructure projects. E.E. Cruz and Company joined the HOCHTIEF Group in Further enhancing our position in the growing market for US infrastructure projects, E.E. Cruz specializes in heavy construction projects in the New York metropolitan area. The HOCHTIEF Asia Pacific division coordinates our activities in the Asia-Pacific region. HOCHTIEF holds the leading position in the Australian market through its majority share in the Leighton Group. Capabilities include construction, contract mining, operations and maintenance, and development services in the infrastructure, resources and property markets. Our Australian subsidiary operates through Leighton Contractors, Thiess, John Holland, and Leighton Properties in Australia, through Leighton Asia in Hong Kong and Southeast Asia, and through Leighton Middle East and Africa in the Gulf region and in Africa. Leighton is among the leading operators and managers in contract mining. It is also one of the industry leaders in infrastructure construction. This includes roadbuilding works alongside contracts for the water and energy industry. Building from a strong base in its home market of Australia, Leighton is expanding construction service activities in selected Asian countries, the Gulf region, and Africa. In November 2011, our subsidiary Turner purchased a majority stake in Clark Builders, Canada, effective January 1, Clark Builders specializes in the construction of administration, commercial and education buildings together with sports facilities in western and northern Canada. The acquisition enables us to benefit even more fully from the growth in Canadian building construction. *For further information on the HOCHTIEF divisions, please see 3 Annual Report 2011

4 rate Headquarters (management holding company)* HOCHTIEF Europe Division HOCHTIEF Concessions Division The HOCHTIEF Europe division oversees the Group s business in Europe and other high-growth regions around the world under the leadership of HOCHTIEF Solutions AG. The company designs, develops, builds, operates, and manages infrastructure projects, real estate, and facilities. Capabilities include real estate development, building construction together with civil and structural engineering, logistics services, property and asset management, and services provided through our facility and energy management units. HOCHTIEF Solutions focuses on lucrative growth markets such as energy and transportation infrastructure along with highquality real estate. We provide clients with cutting-edge, onestop solutions based on above-average quality standards. HOCHTIEF Solutions pools our expertise in design, development, construction, and services to maximize added value for clients. In many segments and regions, the company ranks among the market and innovation leaders. HOCHTIEF Concessions AG combines HOCHTIEF AirPort GmbH and HOCHTIEF PPP Solutions GmbH and is one of the world s leading industrial infrastructure investors. The two subsidiaries have a long and successful track record in developing and undertaking concessions and operation projects in the airports, roads, and social infrastructure segments. HOCHTIEF AirPort manages airports all over the world. As well as looking after the Group s interests in Athens, Budapest, Düsseldorf, Hamburg, Sydney, and Tirana airports, the company is also general manager in charge of developing holdings in the investment partnership HOCHTIEF AirPort Capital GmbH & Co. KGaA. The portfolio airports served a total of 94.7 million passengers in HOCHTIEF PPP Solutions designs, finances, builds, and operates infrastructure projects in the public building, road transportation, and renewable energy segments on a public-private partnership (PPP) basis. At the end of 2011, the portfolio included eight roads with a total length of around 800 kilometers, 111 schools and training centers, over 20 public administration and public safety facilities in Germany, the UK, Ireland, and Canada, as well as two German geothermal energy projects. Our company at a glance 4 Annual Report 2011

5 Turning Vision into Value HOCHTIEF is one of the leading international providers of construction-related services. We deliver integrated services for infrastructure projects, real estate, and facilities. Thanks to its global network, HOCHTIEF is on the map in all the world s major markets. We believe in sustainable growth and take on responsibility. HOCHTIEF offers a portfolio comprising the three modules developing, building, and operating. Our well-coordinated capabilities allow us to offer clients premium quality and solutions individually tailored to their needs. Our company s expert staff create value for clients, shareholders, and HOCHTIEF alike. We stand out in the market with our innovative, unique solutions: We attach great importance to a partnership-based approach in all our dealings with clients, subcontractors, and other stake - holders. In-house collaboration as well as the close-knit crosslinking of our companies generate synergies and open up new perspectives for the Group. HOCHTIEF delivers tailor-made solutions to the societal challenges of our time. A great many examples can be found in the photo spreads in our Annual Report. Annual Report

6 The challenge: Sustainable infrastructure for dependable energy supplies Our solution: Development, construction, and operation of offshore wind farms

7 The result: You ve got the power. Wherever and whenever you need it. Information for Our Shareholders HOCHTIEF focuses on tapping into the potential inherent in expanding and transforming energy infrastructure across the globe. What s required are power plants that generate energy from renewable sources, storage systems for the energy generated from these alternative sources, and supply networks to transport this energy to consumers. That s a tall order and HOCHTIEF is the ideal partner to fill it. How? We have established our position in the expanding offshore wind power market, for example, and we participate in numerous projects. That also entails investing in the development of our own special-purpose equipment, such as the Thor jack-up platform used in installing wind turbines (see also page 65).

8 Information for Our Shareholders Dr. Frank Stieler, Chairman of the Executive Board (CEO) I am delighted to report to you today for the first time as Chairman of the Executive Board on HOCHTIEF s 2011 fiscal year. Let me begin on a personal note. Although 2011 was certainly not an easy year, I take great pleasure in performing my new role. HOCHTIEF is a fascinating company with great development potential and highly competent and motivated employees. My thanks go first and foremost to them for their dedication and commitment was an eventful year for HOCHTIEF and a year of transition. Rarely has so much changed in our company. With ACS, we once again have a major shareholder. There were many changes on the Executive Board, Supervisory Board, and Group Works Council. This gives us the opportunity to tackle the challenges ahead with renewed energy. The Supervisory Board supports our plans. ACS is a very active shareholder, with whom we enjoy a constructive exchange of ideas. We treat changes as opportunities to advance our company. The year under review was shaped by stability in our operating business as much as by nonrecurring items needed to deal with inherited issues. Despite all the obstacles, we have managed to position HOCHTIEF in attractive markets all over the world as well as in highgrowth segments. Following strong new orders in the fourth quarter of 2011, the order backlog and work done exceeded the levels of record year The very high order backlog gives our company a forward order book of more than 22 months. By contrast, profit before taxes fell to a pre-tax loss of EUR 127 million due to nonrecurring items that we were unable to fully offset, and we had to report a consolidated net loss of EUR 160 million. We were confronted with developments, the full extent and consequences of which were not foreseeable at the start of the reporting year, and which had a negative impact on our balance sheet: In the first half of 2011, our Australian subsidiary Leighton had to take charges on two major projects. Impairment testing on the carrying amount of the investment in Habtoor Leighton Group in Dubai resulted in recognition of an additional impairment loss. Combined, these effects resulted in a collapse in earnings at Leighton. We took the following action: The events led to a change in the company s management. The Group s risk management system was carefully reviewed. The main weaknesses have been dealt with. The business of the Habtoor Leighton Group has been realigned. In addition, turmoil on the financial markets and massive economic problems in Greece coupled with uncertainty about the country s future development have impacted on negotiations for the sale of our airport activities and prevented us from concluding the transaction. We are still committed to selling the airport stakes, but are unable to say when the transaction will take place. Until it does, we continue to profit as we have been from the good business development at our airports. Of course, we are not happy with the earnings figures for However, HOCHTIEF s operational strength is yet again plain to see: Our HOCHTIEF Americas division had a successful fiscal year. Turner confirmed its leading role in a number of segments of the US building construction market. With its majority share in the Canadian construction company Clark Builders through Turner, HOCHTIEF is strategically expanding its portfolio in North America. Our subsidiary Flatiron received orders in the USA and Canada for various transportation and infrastructure projects. The HOCHTIEF Asia Pacific division resumed successful operating performance in the second half of We therefore anticipate that the Leighton Group will return to its former strength in 2012, thanks to the many projects won in Australia and Asia in the reporting year, for instance, in the infrastructure and contract mining segments. 8 Annual Report 2011

9 Information for Our Shareholders The new HOCHTIEF Europe division brings together the development, design, construction, and operation of infrastructure projects, real estate and facilities under the umbrella of HOCHTIEF Solutions AG. The first quarter of 2012 has also seen the integration of our public-private partnership activities in the division, thereby completing the restructuring process which began in The division s operational units received a large number of orders in the reporting year for the development and construction of residential properties, office real estate, and nursing care facilities as well as urban districts. We similarly achieved good project results in the infrastructure segment and increased our presence in the expanding market segment of offshore wind farms. We are taking over the facility and energy management for a number of clients as a long-term partner. HOCHTIEF Concessions was also significantly affected by nonrecurring factors. While the airports business performed very well, the Greek and Chilean toll road projects impacted on the consolidated results. With the exception of Athens International Airport, our six airport holdings recorded growth in passenger numbers. In the social infrastructure segment, subsidiary HOCHTIEF PPP Solutions secured further orders to develop, build, and subsequently operate schools and daycare facilities in Germany and the UK. In the roads segment, we have commenced work on expanding the A8 expressway between Ulm and Augsburg. HOCHTIEF is well prepared to meet the challenges of the future. As a global construction services provider, we are ideally positioned with our divisions for the markets in Europe, the Americas, and Asia. Our extensive service portfolio, our technical expertise, and our decades of experience pave the way for HOCHTIEF s ongoing business success. In fiscal 2012, we expect to generate, from our operating business, both profit before taxes and consolidated net profit slightly below the record levels set in The events of the reporting year also impacted on HOCHTIEF stock. After the positive trend at the end of 2010, the price fell by almost EUR 19 (30 percent) over the course of 2011, closing the year at EUR However, the majority of analysts remain upbeat about HOCHTIEF s performance over the medium and long term. Confidence in our potential is bolstered by HOCHTIEF s continued top credit standing. Our financial strategy remains value-driven and conservative, with a strong equity base and clear profitability targets in capital investment at its heart. It is my firm conviction that an investment in HOCHTIEF is a very good choice, and you will profit from our company s successes again in the future. Thank you for your confidence. I will be pleased to see you stay loyal to us and continue to support us on the way ahead with HOCHTIEF. We are confident the way is now clear for new successes with our strategy. The motto of this report encapsulates it perfectly: Toward the future. With solutions from HOCHTIEF. Our products and services help to master the challenges facing society today. To this end, we have developed viable business models and are focusing on three strategic growth areas: creating sustainable energy infrastructure, shaping major cities, and building state-of-the-art transportation infrastructure. These areas continue to grow even in times of crisis and offer HOCHTIEF excellent opportunities. Essen, February 28, 2012 Dr. Frank Stieler Annual Report

10 Information for Our Shareholders Report of the Supervisory Board Manfred Wennemer, Chairman of the Supervisory Board Throughout fiscal year 2011, the Supervisory Board performed the tasks required of it by law, under the Company s Articles of Association, and under the Supervisory Board s Code of Procedure. The Supervisory Board regularly advised and continuously oversaw the Executive Board in its management of the Company and was involved in all decisions of fundamental importance. The Executive Board provided the Supervisory Board with regular written and verbal reports containing timely and comprehensive information on the key aspects of business performance, significant transactions, and the current results of operations, including information on the risk position and risk management. In the reporting period, the Supervisory Board held four ordinary meetings, four extraordinary meetings, and its constitutive meeting following the election of the new shareholder representatives by the General Shareholders Meeting. All members of the Supervisory Board have attended at least half of the meetings during their term in office. The Supervisory Board passed the resolutions required by law or the Articles of Association, with decisions taken on the basis of the detailed reports and proposed resolutions submitted by the Executive Board. The Executive Board also reported on particularly significant projects and transactions outside of meetings. If necessary, decisions were taken by way of a circular resolution. The Chairman of the Supervisory Board was in constant contact with the Chairman of the Executive Board, enabling events of exceptional importance for the position and development of the Group to be discussed immediately. The effects of the global financial market crisis with its new European dimension were once again a central topic of discussion. Beyond the macroeconomic situation, the Supervisory Board turned its attention to the specific effects of the European financial crisis in Greece (assessment of possible risks on road construction projects), the related delays to the sale of the airport unit, and market conditions in the USA and Australia/ Asia, including the impact of the natural disasters in Australia and the crisis in Japan (Fukushima). In spite of these negative developments, the Group reported strong order books, with movements in the exchange rate of the euro, the US dollar, and the Australian dollar being significant factors at play here. In this context, the Supervisory Board welcomed the negotiation at in some cases better terms of the new credit facilities totaling EUR 2 billion, which ensure the Group s liquidity into With a view to becoming more independent of crisisscale developments, one central topic covered in the course of the strategy discussion was the expansion of the Group s position in regional growth markets and the focus on growing technology segments. A majority interest was acquired in Clark Builders in Canada (strong economic growth, booming construction sector), HOCHTIEF continues to pursue its existing interests in projects worth billions in the Gulf states, and new projects were won in selected countries in the Asia-Pacific region. In the coming years, HOCHTIEF is set to benefit from long-term trends (particularly projects related to transforming energy supplies, shaping major cities, and developing transport). The Supervisory Board also devoted attention to the Group s restructuring, the streamlining of its units, as well as the increased cooperation and tighter exchange of experience across continents (ability to withstand individual economic slumps, competitive advantages). 10 Annual Report 2011

11 Information for Our Shareholders As in previous years, margins and competition analyses were a focal point of discussion, viewed against the background of the different business models in the USA (construction management), Australia (contract mining segment), and Europe (original construction business). One key topic in this context was the structure of the medium-term corporate planning with its integrated strategy and financial planning process as well as valuebased management parameters such as RONA. The first half of the year through to the General Shareholders Meeting was dominated by the completion of the takeover offer from ACS Actividades de Construcción y Servicios, S.A. (ACS). ACS has now increased its direct interest to just under 50 percent. The fresh election and restructuring of the Supervisory Board, in particular the nomination of candidates for election by the General Shareholders Meeting, and the changes on the Executive Board (Chairman of the Executive Board: Dr. Stieler; severance agreement: Dr. Lütkestratkötter), including as a result of the exercise of termination rights under change-of-control clauses (Dr. Lohr, Dr. Noé; second half of the year: Dr. Rohr; new appointment: Mr. Sassenfeld) and the signing of settlement agreements due to possible claims arising from retention plans with Dr. Lütkestratkötter, Dr. Lohr, Dr. Noé, and Dr. Rohr, were key issues in this context. The Supervisory Board dealt in detail with the Executive Board compensation system, simplifying and changing it significantly. Exchange rate movements and their impact on key figures were a recurring topic of discussion in the HOCHTIEF Americas division. As a result of the weakening of the US dollar compared with the previous year, the exchange rate had tangible negative effects on the principal key figures despite encouraging increases in new orders, work done, as well as divisional and external sales in US dollars. Operating earnings and profit before taxes are significantly higher year on year and therefore also contribute to an improvement in margins even though the positive market trend expected in the USA in the second half of the year failed to materialize. The Supervisory Board was supportive of Turner s acquisition of a majority interest in Canadian construction company Clark Builders. Clark Builders has a nationwide expansion strategy and together with Turner intends to tap the potential in the Canadian construction market. Flatiron s cooperation with HOCHTIEF Solutions on tunnel construction and with Dragados (an ACS subsidiary) in joint ventures made encouraging progress. The results of civil engineering company E.E. Cruz beat the forecasts contained in the business plan in The Supervisory Board also dealt with the different business models (construction management/self performer) and the need in the USA to change the composition of the consortium that provides the guarantee facilities due to ACS s increased equity interest in HOCHTIEF. A key topic of discussion in the HOCHTIEF Asia Pacific division was the profit warning issued by Leighton Holdings Limited (LHL) in the first quarter and the resulting need for a capital raising. The profit warning was the result of additional costs on the Brisbane Airport Link and Victorian Desalination Plant projects as well as the impairment loss on the shares in the Habtoor Leighton Group. The investigation by the Australian regulatory authority, the ASIC (timing of the financial market report on additional costs), also received attention. In the third quarter, LHL returned to profit. It is encouraging to see that, in light of the substantial order backlog and the still excellent market prospects in the Asia-Pacific region, LHL expects to continue performing well, especially in the commodity segment. Further topics of discussion included Leighton s activities in the Middle East (Habtoor Leighton Group) and India, the performance of the companies there, and the future market outlook. Not least of all, the Supervisory Board looked positively on the restructuring of the management and the board lineup at Leighton, which had been necessitated by the events. Annual Report

12 Information for Our Shareholders The Supervisory Board devoted particular attention and consideration to the disposal activities in the HOCHTIEF Concessions division. The plan here had been to sell the entire division, but in the course of the year it was scaled back to disposing of HOCHTIEF AirPort GmbH. The diverse nature of activities was not attractive to potential buyers. The option of a stock market flotation was also abandoned in view of the situation on the financial markets in the second half of As the transaction could not be completed in 2011, the activities in connection with the sale are being continued in From an operational standpoint, the airports segment saw a rise in total passenger numbers at the airports; only at Athens Airport was there a decline in numbers. The Supervisory Board also discussed developments in the roads segment, where the economic crisis in Greece was a factor in the Maliakos-Kleidi and Elefsina-Patras-Tsakona toll road projects performing significantly less favorably than planned. The Supervisory Board s aim was to ensure that long-term solutions are found in the course of the negotiations with the Greek government. In order to foster synergies within the Group and make it easier to sell the airport unit, the Supervisory Board approved the transfer of the infrastructure/ PPP activities to HOCHTIEF Solutions AG. As in the previous year, the Supervisory Board devoted attention in the HOCHTIEF Europe division to the implementation of the restructuring of business activities in Europe, in doing so discussing the performance of building construction operations in Germany and possible risks in project development, although at HOCHTIEF these are mitigated by high pre-marketing rates. The expansion of new business areas, particularly offshore activities (wind farms) and possible plans in the renewable energy sector, was discussed at length. Overall, the Supervisory Board supported the strategy of continuing to focus HOCHTIEF Europe on high-margin markets and optimizing the way in which it is organized. The topics covered in the regular reports included the Elbe Philharmonic Hall project in Hamburg, the execution of the Rheinhallen project in Cologne, and the encouraging performance from aurelis Real Estate, where disposals are scheduled to take place before 2012 is out. At the end of the year, the Supervisory Board also turned its attention to the succession arrangements for the Executive Board of HOCHTIEF Solutions AG, from which two members stepped down under existing change-of-control clauses. As in previous years, the Supervisory Board kept abreast of claims and variation orders, the ongoing improvements in the compliance structure, and audit activity. The Supervisory Board continually monitored implementation of German Corporate Governance Code requirements as well as development of the corporate governance standards. In accordance with Section 3.10 of the German Corporate Governance Code, the Execu tive Board provides a joint Executive Board and Supervisory Board report on corporate governance in the next section of this report. The Supervisory Board has formed seven committees, whose members are listed in the Boards section. The committees are tasked with preparing topics and decisions on the agenda at Supervisory Board meetings. In some cases, they also exercise decision-making powers transferred to them by the Supervisory Board. The Supervisory Board was regularly informed about the committees work by their respective chairperson. The Audit Committee met three times in fiscal year It looked in detail at the quarterly reports and the annual Financial Statements and prepared to issue the audit engagement, including the focal points of the audit and the fee agreement. It devoted particular attention to Group risk management and the internal control system in relation to the financial reporting process. The committee also dealt with compliance issues as well as Internal Auditing s audit findings and audit planning. The Human Resources Committee met six times. It dealt with decisions on Executive Board succession and prepared the Supervisory Board s personnel-related decisions. It also devoted attention to the overhauled 12 Annual Report 2011

13 Report of the Supervisory Board Information for Our Shareholders compensation system and new contracts for the Execu tive Board as well as the amount of Executive Board compensation. The Nomination Committee held two meetings and suggested suitable candidates to the Supervisory Board for the nominations the latter would put to the General Shareholders Meeting in May 2011 for the election of the new Supervisory Board. The Strategy Committee met once. It dealt with corporate strategy and development. The Ad-hoc Committee was formed in fall 2010 following the announcement of the voluntary public takeover offer from ACS Actividades de Construcción y Servicios, S.A. It met only once in fiscal year 2011 and was dissolved in May This committee addressed all upcoming issues and decisions relating to the takeover offer and passed the necessary resolutions within the ambit of the powers given to it by the Supervisory Board. At its constitutive meeting, the newly elected Supervisory Board formed a further committee, the Supervisory Board Executive Committee. The Executive Committee prepared the Supervisory Board s meetings, in particular its decisions on transactions requiring approval. In addition, the Executive Committee was regularly briefed by the Executive Board about significant transactions. Once again, there was no need to convene a meeting of the Mediation Committee pursuant to Section 27 (3) of the Codetermination Act (MitbestG) in fiscal year In December 2010, ACS Actividades de Construcción y Servicios, S.A., published its voluntary public takeover offer for all HOCHTIEF shares not held by ACS. In February 2011, after the acceptance period had expired, ACS informed the Company that its share of the voting rights in HOCHTIEF Aktiengesellschaft exceeded the 30 percent threshold. Throughout fiscal year 2011, Mr. Altozano and Mr. Fernández Verdes were members of both our Company s Supervisory Board and the Management Committee at ACS. However, neither gentleman was a member of the above-mentioned Ad-hoc Committee, which addressed all upcoming issues and decisions relating to the takeover offer. To this extent, no discussions were held or resolutions adopted by the full Supervisory Board where Mr. Altozano and Mr. Fernández Verdes faced a conflict of interest. Equally, there were no other conflicts of interest involving members of the Supervisory Board. The annual Financial Statements prepared for HOCHTIEF Aktiengesellschaft by the Executive Board in accordance with the German Commercial Code (HGB), the Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS), and the combined HOCHTIEF Aktiengesellschaft and Group Management Report for fiscal year 2011, together with the bookkeeping system, were audited by and received an unqualified auditors report from Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, the auditors appointed by the General Shareholders Meeting on May 12, 2011 and instructed by the Supervisory Board to perform the audit of the annual Financial Statements and Consolidated Financial Statements. The above-mentioned statements, the Annual Report, the proposal on the use of net profit, and the auditor s reports were sent to all members of the Supervisory Board in good time prior to the meeting of the Audit Committee on February 24, 2012 and the Supervisory Board s financial statements meeting on February 28, The Executive Board also provided verbal explanations at these meetings, while the auditors responsible reported on the main findings of the audit including on the internal control and risk management system and were available to provide further informa- Annual Report

14 Information for Our Shareholders tion. The Audit Committee scrutinized these statements and reports prior to the Supervisory Board s meeting and recommended that the Supervisory Board approve the annual Financial Statements, the Consolidated Financial Statements, and the combined Management Report. The Supervisory Board thoroughly examined the annual Financial Statements, the Consolidated Financial Statements, the combined Company and Group Management Report, and the proposal on the use of net profit and concluded on completion of its examination that there were no objections to be raised. Following its own appraisal and taking account of the Audit Committee s report, the Supervisory Board approved the results of the auditor s audit of the annual Financial Statements and Consolidated Financial Statements. The Supervisory Board has approved and thus adopted the annual Financial Statements and approved the Consolidated Financial Statements. It concurs with the proposal on the use of net profit submitted by the Executive Board. The report on relationships with affiliated companies prepared by the Executive Board for the period from June 1, 2011 to December 31, 2011 in accordance with Section 312 of the Stock Corporations Act (AktG) was audited by the auditor. This report and the auditor s report were sent to all members of the Supervisory Board in good time ahead of the financial statements meeting on February 28, The auditors who signed the audit report took part in the Supervisory Board s discussions on these documents and reported on the main findings of the audit. The Supervisory Board examined the report on relationships with affiliated companies and found it to be in order. The auditor issued the auditors report required by Section 313 (3) AktG as follows: On completion of our audit and assessment in accordance with professional standards, we confirm that the factual statements in the report are correct. The Supervisory Board received for inspection and approved the auditor s audit findings. On completion of its examination, the Supervisory Board does not raise any objections to the declaration issued by the Executive Board at the end of the report regarding relationships with affiliated companies. Mr. Bremkamp, Mr. Binder, Mr. Kalkofen, Prof. Dr. Keitel, Mr. Neubauer, Mr. Paech, Prof. Dr. von Pierer, Prof. Dr. Simson, and Mr. Todenhöfer stepped down from the Supervisory Board at the end of the election period on May 12, Mr. Peters stepped down from the Supervisory Board effective midnight on November 15, The Supervisory Board thanked these gentlemen for their years of dedicated service and expert advice. The remaining shareholder representatives were reelected as members of the Supervisory Board by resolution of the General Shareholders Meeting of May 12, Mr. Abdulla Abdulaziz Turki Al-Subaie, Mr. Thomas Eichelmann, Mr. Pedro López Jiménez, Mr. José Luis del Valle Pérez, and Dr. Eggert Voscherau were elected to succeed the outgoing shareholder representatives. 14 Annual Report 2011

15 Report of the Supervisory Board Information for Our Shareholders The employees elected Mr. Ulrich Best, Mr. Johannes Howorka, Mr. Siegfried Müller, and Mr. Olaf Wendler to succeed the outgoing employee representatives on the Supervisory Board. The remaining employee representatives were reelected as members of the Supervisory Board. Following Mr. Peters departure from the Supervisory Board, Mr. Nikolaus Graf von Matuschka, the person chosen to be his alternate, was elected a member of the Supervisory Board effective November 16, The Supervisory Board expresses its thanks and appreciation to the Executive Board, the Group company management teams, and all employees for their work in Essen, February 28, 2012 At its constitutive meeting, the Supervisory Board elected Mr. Manfred Wennemer to be its Chairman and Mr. Ulrich Best to be its Deputy Chairman. Four Executive Board members stepped down in the course of the fiscal year: Dr. Herbert Lütkestratkötter on May 12, 2011, Dr. Peter Noé on June 30, 2011, Dr. Burkhard Lohr on October 18, 2011, and Dr. Martin Rohr on December 31, On behalf of the Supervisory Board Manfred Wennemer Chairman The Supervisory Board appointed Dr. Frank Stieler Chairman of the Executive Board effective May 12, 2011 and Mr. Peter Sassenfeld a member of the Executive Board effective November 1, On February 28, 2012, the Supervisory Board appointed Mr. Pedro López Jiménez a deputy for an Executive Board member for the period until March 2, 2012 in accordance with Section 105 (2) of the German Stock Corporations Act (AktG). Mr. Pedro López Jiménez did not take part in the adoption of this resolution. Annual Report

16 Information for Our Shareholders We re working on solutions for today s challenges. The HOCHTIEF Aktiengesellschaft Executive Board: Peter Sassenfeld and Dr. Frank Stieler (Chairman of the Executive Board).

17 Executive Board Information for Our Shareholders Dr. jur. Frank Stieler (53) has been Chairman of the Executive Board of HOCHTIEF Aktiengesellschaft since May He holds a doctorate in law and is in charge of the HOCHTIEF Europe and HOCHTIEF Asia Pacific divisions as well as the publicprivate partnership segment. He is additionally responsible for the Corporate Development, Corporate Communications, Corporate Auditing/Corporate Organization departments as well as for corporate governance/compliance. Frank Stieler has been a member of the Executive Board since March Peter Sassenfeld (45) joined the HOCHTIEF Aktiengesellschaft Executive Board as Chief Financial Officer (CFO) in November He holds a degree in business administration and is in charge of Corporate Controlling, Corporate Accounting, Corporate Finance/Investor Relations, the Corporate Department Tax, and Corporate Insurance as well as the subsidiary HOCHTIEF Insurance Broking and Risk Management Solutions. Furthermore, until a new Chief Operating Officer (COO) is appointed, he is responsible for the HOCHTIEF Americas division and the subsidiary HOCHTIEF AirPort. Dr.-Ing. Herbert Lütkestratkötter (61), not pictured, became Deputy Chairman of the Executive Board in December In April 2007 he took over as Chairman of the Executive Board of HOCHTIEF Aktiengesellschaft. His term of office ended as of the end of the General Shareholders Meeting on May 12, Dr. rer. pol. Peter Noé (54), not pictured, was a member of the HOCHTIEF Aktiengesellschaft Executive Board from February 2002 to June 30, Dr. rer. pol. Burkhard Lohr (48), not pictured, was on the HOCHTIEF Aktiengesellschaft Executive Board from January 2006 to October 18, Prof. Dr.-Ing. Martin Rohr (56), not pictured, joined the HOCHTIEF Aktiengesellschaft Executive Board in June 2004 and left on December 31, Annual Report

18 Information for Our Shareholders Boards * Supervisory Board member representing employees a) Membership in other supervisory boards prescribed by law (as of December 31, 2010) b) Membership in comparable domestic and international corporate governing bodies (as of December 31, 2011) Reporting date for memberships: December 31, 2011, or date of departure if membership ended during the course of the year Supervisory Board Manfred Wennemer Bensheim, Chairman (from May 12, 2011) of the Supervisory Board of HOCHTIEF Aktiengesellschaft Former Chairman of the Executive Board of Continental Aktiengesellschaft, Hanover a) Allianz Deutschland AG Knorr-Bremse AG b) Charter International plc Leighton Holdings Limited NV BEKAERT SA Springer Science + Business Media SA (Chairman) Ulrich Best* Cologne, Deputy Chairman, Chairman of the Group Works Council of HOCHTIEF Aktiengesellschaft (from May 12, 2011) Abdulla Abdulaziz Turki Al-Subaie Doha, Managing Director & Board Member Qatar Railways (from May 12, 2011) b) Barwa International (Chairman) Barwa New Cairo (Chairman) Barwa Real Estate Qatar Computer & Engineering Company Ángel García Altozano Madrid, Director General Corporativo, ACS, Actividades de Construcción y Servicios, S.A., Madrid b) Abertis Infraestructuras, S.A. Abertis Telecom, S.A. ACS Servicios y Concesiones, S.L. ACS Servicios, Comunicaciones y Energía, S.L. Admirabilia, S.L. (Chairman) Clece, S.A. Dragados, S.A. Iridium Concesiones de Infraestructuras, S.A. Trebol International B.V. Urbaser, S.A. Xfera Móviles, S.A. (Chairman) Gregor Asshoff* Frankfurt am Main, attorney-at-law and head of the Policy and Fundamental Issues department, Construction, Agricultural and Environmental Employees Union a) HOCHTIEF Solutions AG Zusatzversorgungskasse des Gerüstbaugewerbes VvaG Alois Binder* Wyhl, Member of the Works Council, HOCHTIEF Solutions AG, Southwest Division (until May 12, 2011) Detlev Bremkamp Munich, Chairman (until May 12, 2011) Management consultant, former member of the Board of Management, Allianz AG, Munich (until May 12, 2011) a) Asea Brown Boveri AG HSH Nordbank AG SSI AG-Sun Shine Investments b) Allianz Lebensversicherungs AG Mondial Assistance S.A.S. José Luis del Valle Pérez Madrid, Board Member, Director and Secretary of ACS, Actividades de Construcción y Servicios, S.A., Madrid (from May 12, 2011) b) ACS Servicios y Concesiones, S.L. ACS Servicios, Comunicaciones y Energía, S.L. Clece S.A. Cobra Gestión de Infraestructuras. S.L.U. Dragados, S.A. Iridium Concesiones de Infraestructuras, S.A. Urbaser, S.A. Thomas Eichelmann Munich, Chief Executive Officer of ATON GmbH, Hallbergmoos (from May 12, 2011) a) EDAG GmbH & Co. KGaA FFT GmbH & Co. KGaA HAEMA AG V-Bank AG b) ATON US Inc. OrthoScan, Inc. J.S. Redpath Holdings, Inc. Marcelino Fernández Verdes Madrid, CEO of the Construction, Concessions and Environment and Logistics Areas of ACS Group b) ACS Servicios y Concesiones, S.L. (Chairman and CEO) Clece, S.A. Dragados, S.A. (Chairman and CEO) Iridium Concesiones de Infraestructuras, S.A. Urbaser, S.A. Johannes Howorka* Königs Wusterhausen, Member of the Works Council, HOCHTIEF Solutions AG, Facility Management, Works Council Northeast (from May 12, 2011) Lutz Kalkofen* Essen, Managerial Employee, HOCHTIEF Aktiengesellschaft, Essen (until May 12, 2011) b) Builders Credit Reinsurance Company S.A. Professor Dr.-Ing. Dr.-Ing. E.h. Hans-Peter Keitel Essen, President, Federation of German Industry (BDI), former Chairman of the Executive Board of HOCHTIEF Aktiengesellschaft (until May 12, 2011) a) Commerzbank AG National-Bank AG ThyssenKrupp AG b) RAG-Stiftung Pedro López Jiménez Madrid, Member of the Board and Director of ACS, Actividades de Construcción y Servicios, S.A., Madrid (from May 12, 2011) b) ACS Servicios y Concesiones, S.L. ACS Servicios, Comunicaciones y Energía, S.L. Dragados, S.A. (Vice Chairman) Grupo Empresarial Ence, S.A. Nikolaus Graf von Matuschka* Aldenhoven/Jüchen, Spokesman of the Regional Management, HOCHTIEF Solutions AG, Facility Management Northwest, Düsseldorf (from November 16, 2011) 18 Annual Report 2011

19 Information for Our Shareholders Siegfried Müller* Duisburg, Chairman of the Works Council Corporate Headquarters (from May 12, 2011) Raimund Neubauer* Essen, Works Council Chairman, HOCHTIEF Solutions AG, West Division (until May 12, 2011) Udo Paech* Berlin, Member of the Works Council, HOCHTIEF Solutions AG, Northeast Division (until May 12, 2011) Gerrit Pennings* Kirchheim, Works Council Chairman, HOCHTIEF Solutions AG, Facility Management, South Region (until May 12, 2011) Gerhard Peters* Bad Nauheim, Deputy Chairman of the Supervisory Board (until May 12, 2011), Member of the Supervisory Board (until November 15, 2011) Managerial Employee, HOCHTIEF Solutions AG Professor Dr. jur. Dr.-Ing. E.h. Heinrich v. Pierer Erlangen, Managing Director, Pierer Consulting GmbH, Erlangen (until May 12, 2011) a) Berenberg Bank Georgsmarienhütte Holding GmbH b) Koc Holding A.S. Professor Dr. rer. nat. Dipl.-Chem. Wilhelm Simson Munich, chemist, former Chairman of the Board of Management, E.ON AG, Düsseldorf, Düsseldorf (until May 12, 2011) b) Freudenberg & Co. Kommanditgesellschaft Tilman Todenhöfer Madrid, Managing Partner, Robert Bosch Industrietreuhand KG, Stuttgart (until May 12, 2011) a) Deutsche Bank AG Robert Bosch GmbH b) Robert Bosch Internationale Beteiligungen AG (President of the Administrative Board) Dr. h.c. Eggert Voscherau Wachenheim, Chairman of the Supervisory Board of BASF SE, former Deputy Chairman of the Board of Executive Directors of BASF Aktiengesellschaft and BASF SE, Ludwigshafen (from May 12, 2011) a) BASF SE, Ludwigshafen (Chairman) ZEW, Zentrum für Europäische Wirtschaftsforschung, Mannheim Olaf Wendler* Sülzetal, Head of Human Resources Coordination Shell Construction/Industrial Construction, HOCHTIEF Solutions AG (from May 12, 2011) a) HOCHTIEF Solutions AG Supervisory Board Committees Ad-hoc Committee (until May 12, 2011) Detlev Bremkamp (Chairman) Gerhard Peters (Deputy Chairman) Professor Dr.-Ing. Dr.-Ing. E.h. Hans-Peter Keitel Raimund Neubauer Professor Dr. jur. Dr.-Ing. E.h. Heinrich v. Pierer Klaus Wiesehügel Nomination Committee Manfred Wennemer (Chairman, from May 12, 2011) Detlev Bremkamp (Chairman, until May 12, 2011) Marcelino Fernández Verdes Professor Dr.-Ing. Dr.-Ing. E.h. Hans-Peter Keitel (until May 12, 2011) Dr. h.c. Eggert Voscherau (from May 12, 2011) Human Resources Committee Manfred Wennemer (Chairman, from May 12, 2011) Detlev Bremkamp (Chairman, until May 12, 2011) Gerhard Peters (Deputy Chairman, until May 12, 2011) Alois Binder (until May 12, 2011) Marcelino Fernández Verdes Professor Dr.-Ing. Dr.-Ing. E.h. Hans-Peter Keitel (until May 12, 2011) Dr. Eggert Voscherau (from May 12, 2011) Olaf Wendler (from May 12, 2011) Klaus Wiesehügel (from May 12, 2011) Executive Committee (from May 12, 2011) Manfred Wennemer (Chairman) Ángel García Altozano Gregor Asshoff Marcelino Fernández Verdes Olaf Wendler Klaus Wiesehügel Audit Committee Ángel García Altozano (Chairman) Ulrich Best (Deputy Chairman, from May 12, 2011) Gerhard Peters (Deputy Chairman, until May 12, 2011) Gregor Asshoff (from May 12, 2011) Alois Binder (until May 12, 2011) José Luis del Valle Pérez (from May 12, 2011) Thomas Eichelmann (from May 12, 2011) Raimund Neubauer (until May 12, 2011) Gerrit Pennings (from May 12, 2011) Professor Dr. jur. Dr.-Ing. E.h. Heinrich v. Pierer (until May 12, 2011) Tilman Todenhöfer (until May 12, 2011) Klaus Wiesehügel* Königswinter, National Chairman of the Construction, Agricultural and Environmental Employees Union, Frankfurt am Main a) Zusatzversorgungskasse des Baugewerbes AG (Chairman) b) Landwirtschaftliche Rentenbank Annual Report

20 Information for Our Shareholders Strategy Committee Manfred Wennemer (Chairman, from May 12, 2011) Detlev Bremkamp (Chairman, until May 12, 2011) Ulrich Best (Deputy Chairman, from May 12, 2011) Gerhard Peters (Deputy Chairman, until May 12, 2011) Ángel García Altozano Gregor Asshoff (until May 12, 2011) Thomas Eichelmann (from May 12, 2011) Marcelino Fernández Verdes (from May 12, 2011) Johannes Howorka (from May 12, 2011) Professor Dr.-Ing. Dr.-Ing. E.h. Hans-Peter Keitel (until May 12, 2011) Pedro López Jiménez (from May 12, 2011) Siegfried Müller (from May 12, 2011) Raimund Neubauer (until May 12, 2011) Udo Paech (until May 12, 2011) Gerrit Pennings Professor Dr. jur. Dr.-Ing. E.h. Heinrich v. Pierer (until May 12, 2011) Olaf Wendler (from May 12, 2011) Mediation Committee pursuant to Sec. 27 (3) of the Codetermination Act (MitbestG) Manfred Wennemer (Chairman, from May 12, 2011) Detlev Bremkamp (Chairman, until May 12, 2011) Ulrich Best (Deputy Chairman, from May 12, 2011) Gerhard Peters (Deputy Chairman, until May 12, 2011) Johannes Howorka (from May 12, 2011) Professor Dr.-Ing. Dr.-Ing. E.h. Hans-Peter Keitel (until May 12, 2011) Dr. h.c. Eggert Voscherau (from May 12, 2011) Klaus Wiesehügel (until May 12, 2011) Executive Board Dr. Frank Stieler Eppstein, Chairman of the Executive Board of HOCHTIEF Aktiengesellschaft, Essen (Chairman from May 12, 2011) a) HOCHTIEF Solutions AG (Chairman) b) HOCHTIEF AUSTRALIA HOLDINGS Ltd. Leighton Holdings Limited The Turner Corporation Dr.-Ing. Herbert Lütkestratkötter Essen, Chairman of the Executive Board of HOCHTIEF Aktiengesellschaft, Essen (Chairman until May 12, 2011) a) HOCHTIEF Solutions AG HeidelbergCement AG TÜV Rheinland Holding AG b) Leighton Holdings Limited Dr. rer. pol. Burkhard Lohr Haltern am See, Member of the Executive Board and Executive for Labor Relations of HOCHTIEF Aktiengesellschaft, Essen (until October 18, 2011) a) HOCHTIEF Concessions AG HOCHTIEF Solutions AG b) Leighton Holdings Limited Dr. rer. pol. Peter Noé Essen, Member of the Executive Board of HOCHTIEF Aktiengesellschaft, Essen (until June 30, 2011) a) Flughafen Düsseldorf GmbH (Chairman) HOCHTIEF Concessions AG (Chairman) b) HOCHTIEF AUSTRALIA HOLDINGS Ltd. Leighton Holdings Limited (Deputy Chairman) Professor Dr.-Ing. Martin Rohr Düsseldorf, Member of the Executive Board and Executive for Labor Relations (from November 17, 2011) of HOCHTIEF Aktiengesellschaft, Essen (until December 31, 2011) a) Flughafen Hamburg GmbH (Deputy Chairman) HOCHTIEF Concessions AG (Chairman) HOCHTIEF Solutions AG b) Flatiron Holding, Inc. The Turner Corporation Peter Sassenfeld Düsseldorf, Member of the Executive Board (from November 1, 2011) and Executive for Labor Relations (from January 1, 2012) of HOCHTIEF Aktiengesellschaft, Essen a) HOCHTIEF Solutions AG b) HOCHTIEF AUSTRALIA HOLDINGS Ltd. Leighton Holdings Limited Representative Director Attorney-at-law Hartmut Paulsen, Düsseldorf 20 Annual Report 2011

21 Boards Information for Our Shareholders Group Executive Committee The reporting period saw the formation of the Group Executive Committee. This comprises the Executive Board of HOCHTIEF Aktiengesellschaft and the chief executive officers of the Group s four main subsidiaries. The Committee is tasked with coordinating international activities, establishing joint initiatives and programs, and discussing general matters of relevance to the Group. This creates a common basis for the Group s further development, which is reflected in the strategic planning. At the same time, communications and the exchange of expertise are improved and synergies leveraged. The Group Executive Committee meets at monthly intervals. Dr. Frank Stieler Chairman of the Executive Board (CEO) of HOCHTIEF Aktiengesellschaft, Essen Peter Sassenfeld Member of the Executive Board (CFO) of HOCHTIEF Aktiengesellschaft, Essen Peter Davoren President and Chief Executive Officer Turner Construction Company, New York Tom Rademacher Chief Executive Officer of Flatiron Construction Corp., Delaware Hamish Tyrwhitt Chief Executive Officer of Leighton Holdings Limited, Sydney Bernd Romanski Member of the Executive Board of HOCHTIEF Solutions AG, Essen Annual Report

22 Information for Our Shareholders Corporate Governance We once again submitted an unconditional declaration of compliance with the German Corporate Governance Code in February In accordance with the Code, the Executive Board reports jointly with and on behalf of the Supervisory Board on corporate governance at HOCHTIEF. Responsible corporate governance is a central underlying principle of management at HOCHTIEF. Corporate governance refers to responsible and transparent enterprise management and control geared to long-term financial success. The German Corporate Governance Code is our model in this regard. With one exception in the second half of 2011, we have fully complied with all of the Code s recommendations since In February 2012, the Executive Board and Supervisory Board published the annual Compliance Declaration pursuant to Section 161 of the German Stock Corporations Act (AktG). The Compliance Declaration is reprinted at the end of this section. Corporate governance at HOCHTIEF is a commitment taking in all parts of the Group. Good corporate governance is the foundation for confidence among investors, the financial markets, business partners, the workforce, and the public in the management and supervision of the business. For further information about our corporate governance practices, please see the Corporate Governance section of our website, Other information provided includes our Articles of Association, Code of Conduct, all past compliance declarations, and the current Declaration on Corporate Governance pursuant to Section 289a of the German Commercial Code, together with all HOCHTIEF press releases and ad-hoc announcements. The Executive Board and Supervisory Board paid a great deal of attention to meeting the Code s recommendations during the year under review as in previous years. The unconditional declaration of compliance submitted in March 2011 continued to apply until June In July 2011, the declaration had to be qualified in one aspect for the second half of The change on the Executive Board and the consequent reallocation of responsibilities for Executive Board portfolios resulted in timing conflicts. So that the Executive Board was able to explain the interim reports in person, it was necessary to publish the reports a few days later than the 45-day deadline laid down in the fourth sentence of Section of the Code. From 2012, financial reports will once again be published by the deadlines recommended in the Code. The Chairman of the Supervisory Board outlined the main points of the Executive Board compensation system and any changes to it at the General Shareholders Meeting in May This will be repeated at the 2012 meeting. At its constitutive meeting of May 12, 2011, on enacting revised Rules of Procedure for the Supervisory Board Nomination Committee, the Supervisory Board reaffirmed the objectives regarding the composition of the Supervisory Board as adopted in 2010: The Supervisory Board is to be composed in such a way that its members as a group possess the knowledge, ability, and expert experience required to properly complete its tasks. Consideration is to be given in this regard to the specifics of the enterprise, taking into account the international activities of the enterprise, potential conflicts of interest, the age limit specified by the Supervisory Board, and diversity. As of December 31, 2011, the number of shares in the Company and related financial instruments held directly or indirectly by members of the Executive Board and of the Supervisory Board was less than one percent of the shares issued by HOCHTIEF (Section 6.6 of the Code). The composition of the Supervisory Board is already highly international on the shareholder representatives side, with Messrs. Altozano, Al-Subaie, Fernández Verdes, López Jiménez, and del Valle Pérez. As yet, there is no female member of the Supervisory Board. The Supervisory Board intends to encourage the election of women into its ranks at the next elections both as employee and shareholder representatives. With re- 22 Annual Report 2011

23 Information for Our Shareholders gard to the shareholder representatives on the Supervisory Board, however, the decision on this remains subject to vote at the General Shareholders Meeting. The Supervisory Board is composed in such a way that its members as a group possess the knowledge, ability, and expert experience required to properly complete its tasks. One focus of corporate governance activities during the year again related to the onward development of our compliance system. This ensures that all organizational precautions are in place to secure compliance with the rules by the Company, its decision-making bodies, and workforce with regard to economic crime and notably corruption. Compliance has long been an essential management and supervisory responsibility at HOCHTIEF. All employees of Group companies are required to observe the HOCHTIEF Code of Conduct and internal directives. The HOCHTIEF Code of Conduct provides guidance on responsible practices for our employees, bringing together in binding form the key rules on conduct. It applies both for internal dealings with each other and for external relations with business partners, subcontractors, and public authorities. Alongside the HOCHTIEF Code of Conduct, we have also adopted a Code of Conduct for Business Partners. This lays down minimum standards based on the principles of the UN Global Compact, the ILO Conventions, and other multilateral frameworks. The HOCHTIEF compliance system established in 2008 furnishes all employees with advice and support in complying with the law as well as internal Company rules. The system also coordinates measures and sanctions in the event of noncompliance. Responsibility for compliance lies with the Chairman of the Executive Board of HOCHTIEF Aktiengesellschaft. The Chief Compliance Officer regularly reports to the Executive Board and annually submits a report to the Supervisory Board s Audit Committee. The compliance system team supports HOCHTIEF employees with targeted information, personal advice, and regular training. Training is provided both in the classroom and using interactive e-learning programs on subjects such as combating corruption, compliance in practice, and preventing illegal forms of employment. As a further, supplementary compliance element, HOCHTIEF has over many years developed and operated a whistleblower system based around an internal and from 2009 also an external hotline. This provides employees and others such as clients and subcontractors with a confidential means of reporting irregularities. The internal hotline puts callers in contact with a Group compliance officer. Calls to the external hotline are taken by an independent law firm specializing in criminal law. Confidentiality is assured at all times. Compensation report The Compensation Report forms an integral part of the combined Management Report. Executive Board compensation for the 2011 fiscal year The Executive Board compensation system is geared toward long-term, sustainable management goals. Total compensation for members of the Executive Board is set by the Supervisory Board. The compensation system for the Executive Board is also decided and regularly reviewed by the Supervisory Board. The Supervisory Board s Human Resources Committee prepares the relevant motions for resolution by the full Supervisory Board. The compensation for members of the Executive Board who took up office before 2011 was made up as follows in 2011: 1. A fixed salary 2. Non-cash benefits 3. Annual performance-linked compensation 4. The share-based Long-term Incentive Plan A company pension plan 6. Change-of-control benefits The individual components of the Executive Board compensation are determined as follows: Annual Report

24 Information for Our Shareholders 1. The fixed salary is paid in equal monthly amounts. 2. The non-cash benefits mostly comprise amounts to be recognized for tax purposes for private use of company cars and other non-cash benefits. 3. The annual performance-linked compensation for Executive Board members depends on consolidated net profit and personal performance. The performance-linked compensation consists of the company bonus (60 percent) and an individual bonus (40 percent) assuming full compliance with targets. Performance-linked compensation is capped at 200 percent of the fixed annual compensation. Members of the Executive Board, like other members of the workforce, can also have part of their performance-linked compensation withheld in favor of pension entitlements (deferred compensation). Members of the Executive Board have made varying use of this option. each stock award and for a further two-year exercise period, a monetary claim against the Company equal to the closing price of HOCHTIEF stock on the last day of stock market trading prior to the exercise date. The value of entitlements under the Long-term Incentive Plan 2011 is capped (at a 50 percent increase in the share price) so that the amount of compensation stays appropriate in the event of extraordinary, unforeseeable developments. The plan has also granted SARs and stock awards to members of upper management. Additional information on the plans is provided on pages 16 to 19. The long-term incentive plans granted to Executive Board members resulted in the following expense: *See glossary on page 212. The Supervisory Board is authorized to settle 50 percent of the net amount of performance-linked compensation by transferring shares in HOCHTIEF Aktiengesellschaft subject to a two-year bar. 4. Executive Board compensation also includes participation in the Company s long-term incentive plans* (LTIPs). These comprise grants of stock appreciation rights (SARs) and stock awards (phantom stock). If the applicable exercise targets are met after a fouryear waiting period, the 2011 stock appreciation rights grant the Executive Board members a monetary claim against the Company, which they can exercise over the then following three years. The amount of the claim depends on the development of the share price within the waiting and exercise periods. In addition, relative and absolute performance targets, which cannot be modified retroactively, have to be met. (EUR thousand) Dr. Stieler Dr. Lütkestratkötter Dr. Lohr Dr. Noé Dr. Rohr Executive Board total Expense under long-term incentive plans Of which: From special right of termination/termination agreement , , ,173 5, , ,849 3, , ,831 3, , ,092 3, , ,275 15, ,068 The members of the Executive Board departing in fiscal 2011 received EUR 3,624,000 in long-term incentive plan settlements. The terms of the 2011 stock awards provide that, after the three-year waiting period, those entitled have, for 24 Annual Report 2011

25 Corporate Governance Information for Our Shareholders 5. All Executive Board members who took office before 2011 have a company pension plan in the form of individual pension awards setting the minimum pension age at 60. The pension amount is determined as a percentage of fixed compensation, the percentage rising with each member s term of office. The maximum amount for the Executive Board members is 65 percent of their final fixed compensation. Surviving dependants receive 60 percent of the pension. Executive Board members whose contract is not extended or is prematurely terminated before they reach the age of 50 receive a transitional benefit payable until the commencement of regular pension payments and equaling 50 percent of the pension entitlement accumulated prior to leaving the Company or 75 percent in the case of members leaving at age 50 or older; where applicable, other income is partly deductible from the transitional benefit. Dr. Lütkestratkötter, Dr. Lohr, and Dr. Noé have received pension awards for their work on the Leighton Board. Leighton incurred an expense of EUR 10,000 for this purpose for Dr. Lütkestratkötter and EUR 11,000 each for Dr. Lohr and Dr. Noé in the 2010/2011 fiscal year. 6. For the event of shareholders obtaining control of HOCHTIEF Aktiengesellschaft as defined in Sections 29 and 30 of the German Securities Acquisition and Takeover Act (WpÜG), all members of the Executive Board who took up office before 2008 were entitled to resign from office and simultaneously terminate their contracts at six months notice. The members of the Executive Board were each similarly entitled in the event of other takeover-like contingencies specified in their contracts (among other things, the obtaining of a majority of voting rights at general shareholders meetings). Executive Board members also had such a right if confronted by sustained and substantial pressure from shareholders demanding that they resign or take specific action which the members concerned were unable to reconcile with their personal responsibility for the exercise of office. For the event of their contracts being terminated by notice, terminated by mutual agreement or expiring within nine months following a takeover, the individual contracts provided that the departing Executive Board members would receive in compensation for termination of their contracts a severance award equaling two-and-a-half years benefits comprising their fixed annual compensation plus performancelinked compensation in the amount budgeted for in their contracts. If an Executive Board member s contract had more than two-and-a-half years left to run from the effective date of termination, the severance award increased. No earlier than two-and-a-half years following termination of their contracts, the departed Executive Board members are paid a contractual transitional benefit in accordance with their contractual pension arrangements. Regarding all entitlements under their contractual pension arrangements, the departed Executive Board members are treated as if their contract had three years left to run from the termination date. Regarding any entitlements under the Company s long-term incentive plans, the departed Executive Board members have or had a right to demand settlement of entitlements under plans currently in force. In the event of departed Executive Board members not exercising the right to settlement, the plans continue to run in accordance with the plan conditions. The conditions for exercise of this option by the members of the Executive Board were satisfied for the first time based on the ACS notification of February 9, 2011, according to which ACS held in total percent of the shares or voting rights in HOCHTIEF Aktiengesellschaft following the voluntary public takeover offer. Dr. Lohr and Dr. Noé exercised the right and left the Company during Dr. Lütkestratkötter left the services of the Company by mutual agreement as of the end of the General Shareholders Meeting on May 12, His contract ended on November 30, The conditions for exercise were satisfied for a second time on acquisition by ACS of more than half of Annual Report

26 Information for Our Shareholders (EUR thousand) the voting capital present at the General Shareholders Meeting of May 12, Dr. Rohr exercised this special right of termination in November By resolution of the Supervisory Board, the period of notice for termination of his appointment was shortened to December 31, 2011, with the result that Dr. Rohr s term of office as member of the Company s Executive Board terminated at that date. Effects of special right of termination/ termination agreement The special right of termination granted to Dr. Stieler Severance benefits Release expense Provision for transitional benefit was withdrawn by mutual agreement on his appointment as Chairman of the Executive Board. Additional pension provision (service cost) Dr. Lütkestratkötter 4, ,358 Dr. Lohr 3, Dr. Noé 2, Dr. Rohr 2, Executive Board total 13,196 1,314 1,741 2, The variable compensation is computed on the basis of the following equally weighted components: RONA (absolute), RONA delta relative to a minimum rate of return, consolidated net profit (absolute) and consolidated net profit delta relative to a minimum net profit. Target attainment for all four components can range between zero and 200 percent of the budgeted figure. In addition to these financial targets, the Supervisory Board annually stipulates up to four strategic targets that apply uniformly for all members of the Executive Board. The Supervisory Board has the right to adjust overall target attainment with regard to the financial targets upward or downward according to its assessment of target attainment with regard to the strategic targets. Overall target attainment for the first twelve months was set at at least 100 percent for Mr. Peter Sassenfeld. The resulting variable compensation is settled in three equal parts as follows: a. Cash settlement (short-term incentive component) b. Transfer of shares in HOCHTIEF Aktiengesellschaft in the net amount, subject to a two-year bar (longterm incentive component I) c. Granting of an annual long-term incentive plan (long-term incentive component II). The Supervisory Board adopted a resolution during fiscal 2011 establishing a new compensation system with regard to performance-linked compensation and company pension benefits for new members of the Executive Board. Additionally, the new Executive Board contract does not provide for any change-of-control or transition benefits. The first such contract was signed with Mr. Peter Sassenfeld. The individual compensation components are determined as follows for new members of the Executive Board: 1. The fixed salary is paid in equal monthly amounts. 2. The non-cash benefits mostly comprise amounts to be recognized for tax purposes for private use of company cars and other non-cash benefits. 4. Executive Board members receive a company pension plan in the form of an individual pension award setting the minimum pension age at 65. The pension amount is determined as a percentage of fixed compensation, the percentage rising with the number of years in office. The maximum amount is 65 percent of each Executive Board member s final fixed compensation. Surviving depend ants receive 60 percent of the pension. 5. If their contract is not extended, Executive Board members receive a severance award equaling one year s fixed annual compensation. For the severance award to be payable, an Executive Board member must on termination of contract be in at least the second term of office as a member of the Executive Board and be under the age of 65. If an individual s service on the Executive Board is prematurely terminated, severance awards will not exceed the value of two years annual compensation (severance cap) and compensation will not be payable for more than the remaining term of the contract. 26 Annual Report 2011

27 Corporate Governance Information for Our Shareholders On the basis of the above, compensation for the individual members of the Executive Board was as follows (excluding the effects of the special right of termination/termination agreement; see page 26): Cash compensation Variable pay components combining a long-term incentive effect with an element of risk Pension benefits (EUR thousand) Fixed salary Noncash and other additional benefits Performancelinked compensation/ short-term incentive component (cashsettled)** Performance-linked compensation/ long-term incentive component I (sharebased with two-year bar)**,*** LTIP 2011/long-term incentive component II Stock apprecia tion rights (SARs) Stock awards Qty. Value**** Qty. Value**** Transfers to pension provision Service cost Interest expense Total compensation including pension benefits Dr. Stieler , , , , , ,995 Dr. Lütkestratkötter (until May 12, 2011) Dr. Lohr (until Oct. 18, 2011) Dr. Noé (until June 30, 2011) , , , ,065 18, , , , , , , , , , , , , , ,061 Dr. Rohr , , , , , ,115 Sassenfeld (since Nov. 1, 2011) Executive Board total * ***** , , , ,200 1,516 1, , , ,905 68, ,800 1,432 1, ,015****** *Refund of expenses in connection with termination of previous executive board mandate. **100 percent target attainment was assumed for the individual bonus. A corresponding Supervisory Board resolution will be adopted by May ***Payment subject to the condition that the Supervisory Board exercises its right to settle alternatively in shares. ****Value at grant date as per actuarial appraisal. *****Under agreement to grant at least 100 percent for the first 12 months, Mr. Sassenfeld is entitled to an LTIP grant (long-term incentive component II) of EUR 58,000 in May ******Including the granting of the third tranche of the Retention Stock Award Plan (RSA 2008), total compensation including pension benefits exceptionally came to EUR 17,874,000 in The present value of pension benefits for current and former Executive Board members is EUR 59,967,000 (2010: EUR 53,163,000). This amount is fully covered by plan assets in the form of pension liability insurance entitlements and the HOCHTIEF Pension Trust e. V. (CTA). Payments to former members of the Executive Board and their surviving dependants were EUR 5,273,000 in 2011 (2010: EUR 3,699,000). EUR 52,909,000 (2010: EUR 37,767,000) in provisions have been recognized for pension obligations to former members of the Executive Board and their surviving dependants. (EUR thousand) Present value of pension benefits Dr. Stieler , Dr. Lütkestratkötter , ,940 Dr. Lohr , ,934 Dr. Noé , ,628 Dr. Rohr , ,274 Sassenfeld Executive Board total , ,396 Annual Report

28 Information for Our Shareholders Executive Board compensation for past fiscal years Amounts paid in 2011 for offices held within the Group comprised EUR 35,000 in fixed compensation to Dr. Noé and EUR 906,000 in additional performance-linked compensation paid retroactively for FY 2010 (EUR 120,000 to Dr. Stieler, EUR 196,000 to Dr. Lohr, EUR 326,000 to Dr. Lütkestratkötter, EUR 144,000 to Dr. Noé and EUR 120,000 to Dr. Rohr). Supervisory Board compensation Supervisory Board compensation is determined at the General Shareholders Meeting and is governed by Section 18 of the Company s Articles of Association. Compensation for fiscal 2011 based on the proposal for the use of net profit tabled at the General Shareholders Meeting in May 2012 is shown in the table below. Supervisory Board compensation (EUR thousand) Fixed remuneration Variable remuneration Attendance fees Total Manfred Wennemer Ulrich Best Abdulla Abdulaziz Al-Subaie Ángel García Altozano Gregor Asshoff Alois Binder Detlev Bremkamp José Luis del Valle Pérez Thomas Eichelmann Marcelino Fernández Verdes Johannes Howorka Lutz Kalkofen Prof. Dr. Hans-Peter Keitel Pedro López Jiménez Siegfried Müller Raimund Neubauer Udo Paech Gerrit Pennings Gerhard Peters Prof. Dr. Heinrich von Pierer Professor Dr. Wilhelm Simson Tilman Todenhöfer Nikolaus Graf von Matuschka Dr. Eggert Voscherau Olaf Wendler Klaus Wiesehügel Supervisory Board total Annual Report 2011

29 Corporate Governance Information for Our Shareholders Compliance Declaration pursuant to Section 161 of the German Stock Corporations Act After due appraisal, the Executive Board and Supervisory Board of HOCHTIEF Aktiengesellschaft submit their compliance declaration for 2011 as follows: HOCHTIEF Aktiengesellschaft complies in full with the recommendations of the Government Commission on the German Corporate Governance Code dated May 26, 2010 and published on July 2, 2010 by the German Ministry of Justice in the official section of the electronic Bundesanzeiger (Federal Official Gazette). Similarly, following submission of the last Compliance Declaration in March 2011, HOCHTIEF Aktiengesellschaft complied with all recommendations of the Code dated May 26, 2010 with one exception. This was published in July 2011, when the Compliance Declaration dated March 2011 was supplemented to state that the recommendation in the fourth sentence of Section of the Code would be only partially applied in the second half of The interim report for the first half of calendar year 2011 was not published within 45 days of the end of the reporting period, but rather a few days later. It is a matter of importance to the Executive Board to explain the interim reports personally when they are published. As a result of the change and the new areas of responsibility on the Executive Board as well as the associated date conflicts, its personal explanation could only be assured by postponing the publication date by a few days. The Company will comply with this recommendation again in the future. Essen, February 2012 HOCHTIEF Aktiengesellschaft For the Supervisory Board For the Executive Board Manfred Wennemer Dr. Frank Stieler Peter Sassenfeld Annual Report

30 The challenge: To present stunning performances in their best light A case in point: With theater lighting, producing spectacular effects while saving energy was long considered a tough call. At the Staatstheater in Hanover, the energy management experts from HOCHTIEF took center stage when it came to designing and implementing a lighting concept that could meet those exacting demands. They replaced the conventional light bulbs with 1,500 LEDs and fine-tuned the control system. The result: Energy bills for the lighting were slashed by up to 80 percent. The project earned HOCHTIEF the European Energy Service Award a performance worthy of standing ovations. Our solution: A star-quality l ighting system that delivers both drama and energy performance 30 Annual Report 2011

31 HOCHTIEF Stock Information for Our Shareholders HOCHTIEF stock at close of 2011: EUR (down 30 percent; MDAX down 12 percent) ACS succeeds with takeover offer and holds around 49 percent of all HOCHTIEF shares No dividend proposed for 2011 due to earnings situation Stock market After an overall positive trend on the stock markets in 2010 despite some uncertainties, prices fell worldwide in The negative trend in the overall economy made itself felt right from the first half of the year and resulted in great uncertainty in the markets in the second half of In the first quarter of 2011, improved economic indicators in the United States and buoyant merger and acquisition activities kept the stock markets climbing, until the earthquake in Japan, unrest in the Middle East and North Africa, and the ongoing debt crisis in the euro zone triggered a significant correction. Good performances by the majority of companies in the first quarter held up prices. But in the second quarter, stock markets continued to be burdened by the debt crisis in Europe, rising inflation, with benchmark interest rates increased by the European Central Bank and the Bank of China, and growing signs of faltering growth in the United States. In the third quarter, increasing uncertainty about Greece s ability to service its debts, rising yields on Spanish and Italian government bonds, the downgrading of the United States credit rating by Standard & Poor s, and weaker economic indicators in Europe, the United States, and China led to a collapse of share prices. The second rescue package for Greece and emergency measures by the European Central Bank and the US Federal Reserve only briefly stabilized the markets. In the fourth quarter, markets recovered some of the ground lost in the third quarter, reassured by new governments in Italy, Spain, and Greece, two cuts in benchmark interest rates, provision of extensive liquidity by the European Central Bank, and improved US economic data. Nevertheless, prevailing uncertainties could not be eliminated. By the end of the year, stock markets had come under strain from record interest rates on Italian and Spanish government bonds, the downgrading of country ratings, weaker economic data in the euro zone, a slowdown in growth in China, and company profit warnings. At the start of May, Germany s DAX index rose to an annual high of 7,527 points, then falling around 33 percent to its low of 5,072 in September. The DAX closed the year at 5,898 points, 15 percent lower than its close on December 31, 2010 (6,914 points). The picture was different in the USA, where the US S&P 500 remained unchanged against the end of 2010, but was down eight percent compared with its high in April. The pan-european markets and Australian share indices also delivered a weaker performance. The Euro STOXX 50 lost 17 percent (while falling 25 percent compared with the highs reached in February 2011), and the Australian ASX All Ordinaries 15 percent (while falling 19 percent compared with the highs reached in April 2011). The STOXX Europe 600 Construction & Materials Index, which reflects the share price performance of the biggest companies in the European construction industry, fell by 20 percent compared with the start of the year. The construction sector s performance was therefore similar to that of the European market as a whole. Indexed performance of international stock indexes in % 100 % 090 % 080 % 070 % Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. MDAX DAX 30 S&P 500 Euro Stoxx 50 ASX All Ordinaries Stoxx Europe 600 Construction & Materials Euro STOXX Euro STOXX 50 ASX All Ordinaries S&P 500 Germany MDAX Germany DAX Annual Report

32 Information for Our Shareholders HOCHTIEF stock: Historical performance Key figures Number of shares million 77.0* 77.0* Market capitalization EUR million 3,441.9* 4,892.6* High EUR Low EUR Close EUR Shares traded (average per day on Xetra) 330, ,668 Dividend per share EUR 0** 2.00 Total dividends EUR million Earnings per share EUR (2.18) 4.31 *as of year-end **proposed dividend per share Key data on HOCHTIEF stock ISIN DE Stock symbol HOT Ticker symbol Reuters: HOTG:DE, Bloomberg: HOT GY Trading segment at Frankfurt Prime Standard The price of HOCHTIEF stock fell by almost EUR 19 (30 percent) over the course of 2011, closing the year at EUR In April, it reached an annual high of EUR 76.55, up 20 percent compared with the closing price as of December 31, It recorded its annual low of EUR in November. The MDAX which is the benchmark for HOCHTIEF and which comprises the 50 largest shares from more traditional sectors, apart from the DAX stocks decreased by 12 percent in In the first few months of 2011, HOCHTIEF stock initially benefited from sustained increases in operating results, published record profit before taxes and record consolidated net profit for fiscal year 2010, sustained high new orders and order backlogs, as well as the purchase of shares by major shareholders ACS and Qatar Holding. The profit warning by our Australian subsidiary Leighton in April 2011 substantially reduced HOCHTIEF s earnings forecast, thus causing the downward trend in HOCHTIEF stock as the year progressed. This continued until the end of the year owing to the generally negative trend on the stock markets and the fact that we have not yet sold our airport activities, as originally planned for Indexed performance of HOCHTIEF stock in % Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 110 % 100 % 090 % 080 % 070 % HOCHTIEF MDAX DAX % 32 Annual Report 2011

33 HOCHTIEF Stock Information for Our Shareholders Absolute performance and trading volumes of HOCHTIEF stock in 2011 Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec HOCHTIEF stock: Month range (based on end-of-day prices) (EUR) End-of-day prices (EUR) Especially in light of the current climate, our investors welcome our extensive international reach, which will continue to give us access to excellent growth opportunities in attractive markets. Our Group s forward order book of more than 22 months and continued high level of new orders confirm our strategy. The average daily trading volume of HOCHTIEF stock on Xetra in the reporting period was 330,323 shares (2010: 440,668 shares), a decrease of 25 percent from the prior year. HOCHTIEF is listed in the Prime Standard segment on the Frankfurt Stock Exchange and a constituent member of the MDAX index, in which it ranked 18th, with a weighting of 1.90 percent, due to the above-average price drop in 2011 and the low free float (2010: fourth, with a weighting of 3.89 percent). Weighting of HOCHTIEF stock (December 31, 2011) Weighting Rank Stock in index MDAX STOXX Europe n/a 600 STOXX Europe 600 Construction & Materials 1.25 n/a 24 Dow Jones Sustainability World Enlarged Dow Jones Sustain ability Europe MSCI World ,345 1,615 Annual Report

34 Information for Our Shareholders *For further information, please see Dow Jones Sustainability Indexes HOCHTIEF s eligibility for inclusion in the respected Dow Jones Sustainability Indexes was reaffirmed in the reporting year. We are the only German construction services company listed in the Europe Index. In addition, our shares are listed in the World Enlarged Index. This is a reward from the financial market for our commitment to sustainability in line with standards of good economic, ecological, and social conduct. HOCHTIEF stock thus appeals to investors who structure their portfolios in compliance with strict sustainability criteria. Since 2008, HOCHTIEF has also been a member of the Ethibel Sustainability Index Excellence Europe*. Dividends HOCHTIEF has a longstanding dividend policy geared to earnings and liquidity. In view of the consolidated net loss in the year under review, the Executive Board and the Supervisory Board of HOCHTIEF Aktiengesellschaft are proposing not to distribute a dividend for fiscal In light of the good prospects for fiscal 2012, we aim to stay the course with our dividend policy and continue to let shareholders participate adequately in the success of our business. ACS remains HOCHTIEF s largest shareholder In December 2010, ACS Actividades de Construcción y Servicios, S.A., published a voluntary public takeover offer for all HOCHTIEF shares not held by ACS. Following expiration of the acceptance period, ACS announced in February 2011 that its share of the voting rights or the proportion of HOCHTIEF shares it held amounted to percent on February 4, Ownership structure Ownership structure (as of December 2011) Free float % Treasury stock 4.44 % Qatar Holding % ACS* % *ACS ACTIVIDADES DE CONSTRUCCIÓN Y SERVICIOS, S.A., Madrid At the end of the reporting year, there were 76,999,999 issued shares. Of these shares, percent were held by ACS, percent were held by Qatar Holding, and 4.44 percent were held by HOCHTIEF Aktiengesellschaft as treasury stock. Free float HOCHTIEF stock, according to the definition of Deutsche Börse AG, amounted to percent as of December 31, This definition includes all shares except those held by ACS, Qatar Holding, and by HOCHTIEF as treasury stock. 34 Annual Report 2011

35 HOCHTIEF Stock Information for Our Shareholders Regional distribution (as of December 2011) France/Benelux 3.6 % Scandinavia 3.8 % UK/Ireland 4.6 % North America 8.8 % Qatar 10.0 % Rest of Europe 2.2 % Other 0.8 % Germany 16.6 % Spain/Portugal 49.6 % In terms of regions, investors in Spain and Portugal accounted for over 49 percent of shares, primarily due to the Spanish major shareholder. Shareholders in Germany held some 17 percent of capital stock, including HOCHTIEF Aktiengesellschaft s treasury stock. Ten percent is attributable to Qatar due to the second major shareholder, almost nine percent to investors in North America, and the remaining 14 or so percent primarily to other European investors. Analyst recommendations As of the end of 2011, the company was covered by 18 analysts* (2010: 15). Nine analysts rated HOCHTIEF stock at buy (2010: eleven) as of the year-end, and eight at hold (2010: four). One analyst placed HOCHTIEF at sell (2010: none). Thus the majority of analysts remain upbeat about HOCHTIEF s performance over the medium and long term. As of the same date, analysts covering us had set our target share price on average at EUR 55.41, and thus 24 percent higher than the closing price as of December 31, Investor relations Through our investor relations work, we provide the capital market with transparent, full, and timely information on all events relevant to the market with the aim of continuing to increase trust in the quality of our management and facilitating a fair assessment of the company s situation. We therefore place great emphasis on intensive contact with institutional and private investors. In the course of 2011, we presented HOCHTIEF s strategy at 17 roadshows as well as 22 investor and analyst conferences. The Executive Board also used four conference calls for timely reporting on key current developments of our company. We provide the capital market with detailed information on individual segments and activities of our Group by attending conferences devoted to specific areas. Last year, for example, we participated in conferences on topics such as real estate and infrastructure, where we had the opportunity to selectively address specialized groups of investors and inform them about our activities and our strategy. We also took the opportunity again to attend three conferences for small shareholders and thus continue our in-depth dialog with this particular stakeholder group. On our website, we publish all annual and interim reports, the latest analyst forecasts and all the presentations used. To contact HOCHTIEF Investor Relations or see the events planned in the financial calendar, please visit *Analyst reports by BHF Bank and Deutsche Bank were disregarded, as at the end of 2011 these banks or affiliates of these banks were engaged as advisers to HOCHTIEF and therefore no recommendations for HOCHTIEF stock were issued by the analysts. Analysts who ceased to rate HOCHTIEF stock at the end of 2011 for example, because the analysts responsible changed (Bank of America Merrill Lynch, Berenberg, City, Kepler) were similarly disregarded. Annual Report

36 The challenge: Build quality homes in tune with modern cities Our solution: Standout urban residences with their own unique flair

37 The result: Refreshing residential oases without the long commute Group Management Report Group Situation Demographic shifts, the demands on infrastructure that new technologies bring, and the changing needs of modern living spaces all represent special challenges in urban areas. They also present a wealth of growth opportunities for HOCHTIEF. Our contemporary urban buildings combine metropolitan life with attractive housing and set new benchmarks in energy technology. Our projects include residences, nursing care developments, and offices as well as urban district development. We can also operate and manage these projects. One example: the WaterHouses in Hamburg (see also page 113).

38 Combined Company and Group Management Report Business activities and Group structure Group Management Report Group Situation Group structure 2011 Corporate Headquarters (strategic management holding company) Divisions HOCHTIEF Americas HOCHTIEF Asia Pacific HOCHTIEF Europe HOCHTIEF Concessions *For further information on the divisions business activities, please see pages 3 and 4 as well as pages 101 to 119. **For further information on our product and service portfolio, please see page 53. Business activities of the HOCHTIEF Group* HOCHTIEF is an international provider of constructionrelated services, providing end-to-end service for infrastructure projects, real estate, and facilities. The Group covers the value chain through three modules develop, build, and operate.** Maximum value is created for clients and the company when we are responsible for all the modules on a project. Alternatively, our services are also available as separate packages. Ever closer cooperation between our corporate units generates further added value. In addition, we work together with qualified partners who meet exacting requirements. Our Group has a presence in all key regional construction markets around the globe, including large parts of Europe, the Americas, Australia as well as the Asia- Pacific and Gulf regions. This broad international footprint is unrivalled in the construction industry worldwide, a fact reaffirmed for fiscal 2011 by statistics from the Engineering News-Record trade journal. This international footprint helps us to make up for regional market fluc tuations elsewhere. Group structure in 2011 Effective January 1, 2011, HOCHTIEF further streamlined and simplified its Group structure. Since then, we have provided our services worldwide through the HOCHTIEF Americas, HOCHTIEF Asia Pacific, HOCHTIEF Europe and HOCHTIEF Concessions divisions. The former HOCHTIEF Europe, Real Estate, and Services divisions have been combined to form the new HOCHTIEF Europe division. Since the beginning of 2011, the strategic management holding company has concentrated mainly on Group management and control. We have transferred the procurement, legal, human resources, communications, occupational health and safety, and environmental protection services provided for the operational units from the holding company to the new HOCHTIEF Europe division. In 2011, the simplified Group structure already began to lower costs and significantly increase coopera tion across the Group, and also made for wide-ranging exchange of experience between corporate units across all continents. Our aim is to build long-term partnerships with our clients and work together with them in a relationship of trust. This is why we are keen to set HOCHTIEF apart from the competition through high quality, innovativeness, and flexibility. Most of our projects are unique assignments for which we deliver custom solutions. Sustainability is embedded in our Group strategy. 38 Annual Report 2011

39 Group structure planned for 2012 Corporate Headquarters (strategic management holding company) Divisions Group Management Report Group Situation HOCHTIEF Americas HOCHTIEF Asia Pacific HOCHTIEF Europe HOCHTIEF Insurance Broking and Risk Management Solutions This HOCHTIEF subsidiary under the direct ownership of the holding company ensures that the necessary insurance cover is in place throughout all phases of our projects across the Group. This goes for infrastructure projects, real estate, and facilities before, during, and after construction. The company also offers its services to third parties, primarily those involved in a project. On request, we also insure this target group against risks such as fire and interruptions to business after construction work has finished, just as we do for clients, owners, and end users. New Group structure planned for 2012 In 2012, we wish to adapt our structure again in light of the planned sale of HOCHTIEF AirPort. HOCHTIEF Concessions AG, including its operational unit HOCHTIEF AirPort GmbH*, will be continued until the airport unit is sold. In the first quarter of 2012, the public-private partnership activities of HOCHTIEF PPP Solutions GmbH were allocated through a share transfer to HOCHTIEF Solutions AG, which spearheads the HOCHTIEF Europe division. We will thus streamline our structures again and achieve the clear regional setup we are aiming for. We are confident that the restructuring will enable us to leverage further synergies. *For further information, please see page 116. Reinsurance services round out HOCHTIEF Insurance Broking and Risk Management Solutions portfolio. Provided through Builders Credit Reinsurance Company S.A. in Luxembourg, a subsidiary rated A- (Excellent) by A.M. Best Rating, this primarily includes reinsurance for construction work, subcontractor default, and liability risks, which is used notably by our HOCHTIEF Americas division. The cost-effective offering tailored to the project in question not only enables HOCHTIEF to reduce its own insurance expenditures. By insuring third parties risks, we also tap additional sales and earnings potential. Annual Report

40 L E I G H T O N HOCHTIEF around the world: A selection of the many companies in our divisions shows HOCHTIEF s global HOCHTIEF Americas HOCHTIEF Asia Pacific Group Management Report Group Situation Turner (USA, Canada) Flatiron (USA, Canada) E.E. Cruz (USA) Clark Builders (Canada, from January 1, 2012) Leighton Holdings (Australia) Leighton Contractors (Aus tralia, New Zealand) Thiess (Australia, India, Indonesia) John Holland Group (Australia) Leighton Properties ( Australia) Leighton Asia (Cambodia, Hong Kong, India, Indonesia, Laos, Macau, Malaysia, Mongolia, Philippines, Singapore, Taiwan, Thailand, Vietnam) Habtoor Leighton Group (HLG) (Qatar, United Arab Emirates) Leighton Middle East and Africa (Botswana, United Arab Emirates) FLATIRON FLATIRON 40 Annual Report 2011

41 L E I G H T O N L E I G H T O N L E I G H T O N L E I G H T O N L E I G H T O N L E I G H T O N L E I G H T O N L E I G H T O N Business Activities and Group Structure presence with the Group structure from 2011 HOCHTIEF Europe HOCHTIEF Concessions HOCHTIEF Solutions (Abu Dhabi, Austria, Bahrain, Bulgaria, Chile, Czech Republic, Denmark, Germany, Greece, Hungary, India, Ireland, Luxembourg, Peru, Poland, Qatar, Romania, Russia, South Africa, Sweden, Switzerland, UK) HOCHTIEF Procurement Asia (Hong Kong) HOCHTIEF ViCon (Germany, Qatar) Streif Baulogistik (Austria, Germany, Poland, Qatar, Russia) HOCHTIEF Property Management (Germany) aurelis Real Estate (Germany) HOCHTIEF Energy Management (Germany) HOCHTIEF Concessions (Germany) HOCHTIEF AirPort (Germany) HOCHTIEF AirPort Capital (Germany) Airport Partners (Germany) Sydney Airport Intervest (Germany) FHK Flughafen Hamburg Konsortial- und Service-Gesellschaft (Germany) HAP Hamburg Airport Partners (Germany) HAP Hamburg Airport Partners Holding Verwaltungsgesellschaft (Germany) HOCHTIEF AirPort Retail (Albania) HOCHTIEF PPP Solutions (Canada, Chile, Germany, Greece, Ireland, UK, USA) HOCHTIEF PPP Schools Capital (UK) HOCHTIEF Concessions India (India) Group Management Report Group Situation The companies featured here by way of example illustrate HOCHTIEF s national and international lineup. Some activities are carried out through branches, offices or separate companies. For more on the corporate divisions, turn to fold-out pages 3 and 4 and the segment reporting on pages Alongside HOCHTIEF Aktiengesellschaft, the consolidated financial statements take in 456 fully consolidated companies and 242 equity-accounted companies. This organizational presentation goes together with legal information given in the list of subsidiaries, associates and other companies on pages 208 to 209. For the address and contact information of our subsidiaries and associates as well as their branches and offices, please see our website Leighton Holdings Annual Report

42 Markets and Operating Environment Group Management Report Group Situation All details provided in this section are based on the market data and forecasts available at the editorial deadline on February 28, Overall real economic growth (in percent) in re gions served by HOCHTIEF E Asia excl. Japan Australia Austria China Czech Republic Germany Hungary India Indonesia Poland Russia UK United Arab Emirates USA Source: International Monetary Fund (as of: Jan. 24, 2012) Global economic environment and trends The economic upturn weakened in the course of fiscal Two factors above all had a strong impact on the global economic trend. Firstly, economic growth in the industrialized nations was very slow from the beginning of the year onward. Secondly, the uncertainty surrounding public budgets and on the financial markets increased sharply as of the middle of the year. This affected the global economic situation, making it impossible to match the strong growth seen in The industrialized nations expanded by 1.6 percent in Various oneoff events also caused the global economy to slow during the reporting period. These included the earthquake and tsunami in Japan as well as the uncertainty surrounding oil supplies as a result of internal political crises in the Middle East and North Africa. In 2012, the experts at the International Monetary Fund (IMF) expect economic growth of 1.2 percent. The markets are reacting very critically and sensitively both to the high levels of debt in a number of countries and to measures to bring down debt levels. Particularly in Europe, market worries have spread to the banks that hold large portfolios of sovereign bonds and are in considerable need of recapitalization. In turn, this uncertainty is leading to tighter lending and an economic slowdown. Emerging and developing markets have not yet been affected by this trend and continue to record sustained high rates of growth. At 6.2 percent in 2011 and an anticipated 5.4 percent in 2012, these are far higher than in the advanced economies. Overall, the global economy grew by 3.8 percent in In 2012, the IMF expects global economic growth of 3.3 percent. In this scenario, the positive trend will vary considerably from region to region. Significant impetus will come from emerging and developing economies, while the industrialized nations will grow at a slower pace. Economic growth in the USA also weakened in 2011 and now stands at 1.8 percent. In 2012, the IMF experts anticipate growth of 1.8 percent. In the USA too, there is a certain amount of anxiety over the extent to which the economic recovery will continue and how the stability of public budgets can be ensured in the medium term. The Canadian economy is proving to be more robust than that in the USA. It grew by 2.3 percent in 2011 and is expected to expand by 1.7 percent in In Europe, the trend varies from country to country. Economic output has almost returned to pre-crisis levels in countries such as Germany, Poland, Switzerland, and Turkey, which are benefiting in particular from the upturn in manufacturing. Meanwhile, other countries including Greece, Ireland, and Portugal are recording growth rates well below pre-crisis levels due to the financial crisis. The European economy as a whole expanded by 1.6 percent in In 2012, it is expected to fall by 0.1 percent. In Russia, gross domestic product (GDP) rose by 4.1 percent in The substantial improvement in the economic climate was due primarily to higher commodity prices as a result of returning demand. For 2012, the IMF forecasts growth of 3.3 percent. 42 Annual Report 2011

43 The emerging Asian nations and their economies remain on an upward trajectory, chalking up growth of 7.9 percent in 2011 and expected to expand by 7.3 percent in This is due in particular to China and India. Extensive fiscal policy measures enabled China to achieve strong growth in demand. GDP rose by 9.2 percent in Although the economy has weakened, it continues to perform very well. Growth of 8.2 percent is forecast for India s economy is also maintaining a high level of growth. GDP was up by 7.4 percent in 2011 and is expected to rise by seven percent in Unlike in China, this growth is being driven primarily by the private sector. The oil-exporting countries in the Middle East also managed to increase their economic growth year on year. They benefited especially from the high oil price. The GDP of these countries rose by 4.9 percent in Oil prices are expected to fall in 2012, however. The experts at the IMF anticipate an economic slowdown and therefore lower growth of 3.9 percent. Markets served by HOCHTIEF Development Property development The general economic trend will continue to have a strong impact on the European real estate markets. In contrast to the previous year, both the rental and the investment markets are on a positive track. Colliers Research expects the rental market to lose momentum slightly in 2012, but to nevertheless remain at a high level. Despite rising demand, the experts also expect investment market volumes in 2012 to be similar to those in 2011 due to restrictive lending and supply bottlenecks. Real estate rental market According to the experts at BNP Paribas, the amount of floor space changing hands in the seven strongholds of the German real estate market, namely Berlin, Düsseldorf, Frankfurt, Hamburg, Cologne, Munich, and Stuttgart, increased sharply compared with 2010: by 18.4 percent to 3.45 million square meters. Prime rents held steady in the course of the reporting period and ended the fourth quarter of 2011 up on the prior-year figure. Benefiting from this were our real estate developers, who are active notably in the high-quality property segment. In 2012, however, slower economic growth is set to impact on the office markets, pushing down turnover. There is currently no sign of a slump, though. In Central and Eastern European (CEE) markets, market performance varies considerably, as the general economic trend also differs from country to country. Real estate investment market According to BNP Paribas, the German investment market grew significantly in the course of 2011, recording an increase of 20 percent compared with In this scenario, the volume of commercial property transactions amounted to a total of EUR 23.5 billion at the end of the reporting period. For 2012, the industry experts predict a similar market volume, as national and international investors will continue to focus on the German real estate market due to its robustness. Group Management Report Group Situation Annual Report

44 Group Management Report Group Situation *See glossary on page 211. **European Wind Energy Association According to the experts at Jones Lang LaSalle, transaction volumes in Central and Eastern European markets were on a strong upward trajectory in the first three quarters of 2011 and by the end of November 2011 had risen by almost 50 percent year on year to EUR 8.7 billion. This trend was driven primarily by the markets in Russia, Poland, and the Czech Republic. High-quality core real estate* is in high demand and short supply. Due to the CEE markets heavy reliance on Western European banks and the current debate surrounding the stability of the euro zone, their performance in 2012 is difficult to predict. As in 2011, Poland will play an extremely positive and therefore stable role here. The Australian residential construction market declined slightly by two percent in The experts from BIS Shrapnel expect this to improve again over the next few years. One of the main drivers is the net immigration in Australia. This is likely to increase further in the coming years. Market conditions will remain strained due to the small number of new buildings started. This is reflected in particular in the low vacancy rates and rising rents. Infrastructure development Roads Since 2005, more than EUR 225 billion has been invested worldwide in public-private partnership (PPP) infrastructure projects in the transportation sector. Around 60 percent of these projects were in Europe. A total of eight high-volume PPP road projects have been awarded in Germany since 1999, four of them to HOCHTIEF Concessions. Further projects representing around EUR 3 billion worth of construction work in total are expected by In Europe, the PPP market in the Netherlands is growing at a particularly fast rate. The country s high-volume PPP road projects amount to some EUR 4 billion in the period to The potential for PPP road construction projects also remains high in the North American market. As a proportion of GDP, the USA has so far invested barely half as much in infrastructure projects as Europe. An increasing number of PPP projects will be carried out in the coming years in order to renovate and extend roads built decades ago and thus not fall behind on infrastructure development. Due to high levels of both private and public-sector investments in 2009, the road building sector in Australia declined in 2010 and However, the experts from BIS Shrapnel expect it to grow sharply again in 2012, as there is a lot of reconstruction work pending, especially after the flood disaster in Queensland. Social infrastructure In Germany, a total of 173 building construction projects worth around EUR 5 billion in all have been carried out on a public-private partnership basis since In the reporting period, 16 projects worth EUR 650 million were completed. There is still considerable interest in further projects and over 120 are currently at the tender and preparation stage. Driven by PPP support programs, social facilities also continue to be expanded in the UK. In the period to 2015, the UK government will provide EUR 2.3 billion to support up to 300 PPP school projects. In addition, a EUR 1.5 billion program for refurbishing existing and building new schools by 2018 was initiated in Scotland. In the USA and Canada, PPP projects play an ever more important role. Supported by an infrastructure program worth around EUR 12 billion, for example, Canada made further progress in renewing large parts of its social infrastructure in the reporting period. This trend is expected to continue in the coming years. The social infrastructure segment in Australia fell sharply in the reporting year, primarily due to the decrease in state investment in education. For 2012, the experts from BIS Shrapnel expect a return to substantial growth due to a number of major hospital projects. New markets and business segments 2011 saw a continuation of the positive trend in the renewable energy sector. According to EWEA**, the German offshore wind energy market added 108 megawatts of newly installed capacity in Further offshore wind farms will come onto the grid in the years 44 Annual Report 2011

45 Markets and Operating Environment Offshore wind power in Europe (in megawatts) 13,000 10,000 Expansion targets to 2020 Installed offshore wind capacity June 2011 Source: EU (Renewable Action Plans), EWEA, WAB Group Management Report Group Situation 6,000 5,178 3,000 2,400 1,339 2, UK Germany France Netherlands Spain Ireland Denmark Finland Belgium Estonia Poland Greece Sweden Others ahead. The German federal government s aim is to install wind turbines with a capacity of at least 10,000 megawatts in the North and Baltic Seas by The Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety expects the federal government s offshore targets to generate total sales of EUR 100 billion in the offshore wind energy sector and the maritime industry. The expansion of port capacity alone has so far triggered investments amounting to approximately half a billion euros. According to EWEA, wind turbines with an output of around 3,300 megawatts have now been installed in Europe. In addition to Germany, several other European countries have also issued targets for offshore wind power. Turbines generating up to 44 gigawatts in all are therefore set to be installed within Europe by HOCHTIEF is well prepared for the transformation of energy generation. We offer appropriate solutions and will participate in the expansion and modification of the energy infrastructure in Germany and Europe. Building The eminent Euroconstruct Group* analyzes trends in the European construction industry on an annual basis. After four years of negative growth, the construction market in Europe as a whole is stabilizing. The experts at Euroconstruct anticipate a further slight decline of 0.3 percent in 2012, but the market is then expected to grow by 1.8 percent in After contracting sharply in 2009 (by 12.5 percent) and 2010 (by 2.3 percent), residential construction in the nineteen member countries studied is likely to have grown *See glossary on page 211. Annual Report

46 Group Management Report Group Situation Percentage growth in the regional markets served by HOCHTIEF Region Non-residential construction Civil engineering Overall market Non-residential construction Australia Austria Canada Czech Republic Civil engineering Overall market The economic trend over the last four years had a profound impact on construction activity in Europe. As a result of economic stimulus programs, civil engineering was not as severely affected by the economic crisis as the two other market segments in the construction industry. Nevertheless, it declined by 3.3 percent year on year (2010: contraction of 4.4 percent), as budgets remained tight in a number of countries. A further decline of 2.1 percent is expected in Starting in 2013, Euroconstruct forecasts a return to a positive trend in civil engineering, with the market expanding by 0.4 percent. Sources: BIS Shrapnel, Construction Sector Council, Euroconstruct, IHS Global Insight, McGraw-Hill Construction Eastern Europe Germany Hungary India Poland Russia UK USA Western Europe by 1.4 percent in As the residential construction market will continue to stabilize in 2012, the forecast is then for further growth of 1.3 percent. Alongside residential construction, building construction (excluding residential construction) and civil engineering in particular are also key markets for HOCHTIEF in the construction industry. Still impacted by the effects of the economic crisis, building construction (excluding residential construction) declined by a further 1.4 percent in As in the previous year, construction volumes therefore fell; the high growth rates seen before the economic crisis have yet to be matched. Negative growth (minus 1.4 percent) is also forecast for This market segment will then stabilize in The experts at Euroconstruct expect further slight improvements in the market in 2013, with construction volumes rising by 2.1 percent. Building construction (excluding residential construction) is very much dependent on the general economic trend. As long as this trend in Europe remains uncertain, this segment of the construction industry will continue to deliver low growth rates. The US construction industry stabilized in 2010 as a result of the economic stimulus programs put in place. However, the ongoing financial and economic crisis had an increasingly noticeable impact again in According to the experts at McGraw-Hill Construction, market uncertainty has increased and is showing through in high unemployment, restrictive lending, and low government budgets. Until there is a significant improvement in the economic situation, the construction industry will likewise fail to turn sharply up. As a result of this uncertainty, the US construction market as a whole declined by 4.4 percent in It is not set to stabilize until Building construction (excluding residential construction) is expected to expand by a marginal 1.7 percent. The residential construction market, which has been hard hit by the mortgage crisis in recent years, is set to grow by 12 percent in Civil engineering, on the other hand, will contract again in The general economic trend in Canada is proving to be more robust than in the USA. This is also reflected in Canada s construction industry. According to the experts at the Construction Sector Council, the construction market as a whole grew by 1.7 percent in In the coming years, it is expected to grow by more than two percent on average. The key drivers are residential construction and building construction (excluding residential construction). Building construction (excluding residential construction) expanded by 5.8 percent in In 2012 and 2013, the Construction Sector Council anticipates growth of 2.4 percent and 5.0 percent respectively. Following its recent acquisition of Clark Builders, HOCHTIEF is well positioned notably in building construction (excluding residential construction). 46 Annual Report 2011

47 Markets and Operating Environment The Gulf region remains a highly attractive market for construction projects and therefore for a company like HOCHTIEF, which is active there through the companies in the Leighton business portfolio and HOCHTIEF Solutions, providing construction and facility management services. The region s infrastructure sector in particular is likely to continue performing well due to government investment. The 2022 FIFA World Cup in Qatar requires further infrastructure spending in the region. According to estimates from Business Monitor International, between EUR 60 and 80 billion are being invested in preparation for the soccer tournament. Especially transportation infrastructure and commercial projects are receiving support. Qatar s victory in the bid to host the event will therefore lead to a sharp upturn. Following some project cancellations in the Gulf region in recent years, the market once again stabilized significantly. Industry experts are much more confident about the coming years. For all that, it should be noted that the Gulf region has attracted a number of companies and competition has therefore increased considerably. In addition, the region is dependent on the global economic trend and the oil price. A stable global economic trend and a stable oil price are supportive of government spending in the construction sector. Political stability in the Gulf region is another key factor determining the economic trend there. The same applies for the Arab Spring and the dramatic changes it has brought about, which have impacted on Middle Eastern countries. investments are expected to be made in large towns and cities, in shopping malls, office complexes, and residential developments, for example. The construction sector in Hong Kong is very attractive, particularly in light of the government s stable budget and the resulting strong appetite for investment, primari ly in public infrastructure projects. According to the experts at IHS Global Insight, the market will continue to perform well. More specifically, the infrastructure segment will record the highest growth rates. Both the Australian economy and the Australian construction market weathered the economic crisis much better than expected. According to market watchers at BIS Shrapnel, the strong recovery in the construction market in 2010 (plus 14 percent) was above all due to the Australian government s various economic stimulus programs. In the reporting period, the Australian market contracted (minus 4 percent). According to BIS Shrapnel, this was a result of the decline in government programs, which supported the education segment in particular. The long-term trend will resume in 2012, however, with the result that the Australian construction sector as a whole will continue to expand (plus 8 percent) is therefore expected to see strong rates of growth in the building construction (plus 16.9 percent) and civil engineering (plus 8.2 percent) segments. Group Management Report Group Situation The construction market in Asia is one of the world s largest growth markets. The Indian construction sector has returned to expansion, benefiting primarily from the Indian government s heavy infrastructure spending. The market researchers at IHS Global Insight expect growth of over eight percent for the reporting period. In 2012, the Indian construction market is likely to grow by almost nine percent. According to the experts at Germany Trade & Invest (GTAI), Indonesia s construction sector boasts strong momentum. The resource-rich country intends to invest heavily in expanding public infrastructure. Sectors such as transportation, energy, communications, and the environment are also a focus. In addition, further Operation Facility management A study by market research institute Lünendonk estimates that Germany s external market for facility services was worth EUR 57 billion in the reporting period. The focus of this study is on infrastructural and technical facility management. If commercial facility management and the facility management services provided internally are also included, the market volume in Germany rises to over EUR 100 billion, according to industry experts. The industry will continue to expand in the coming years, as demographic change and sustained pressure for optimization will result in a long-term willingness in German industry to outsource facility management services. Demand remains high for integrated Annual Report

48 Group Management Report Group Situation *See glossary on page 211. facility management (FM), where FM activities are incorporated into the client s complex production processes. There is a stronger focus here on sustainability and the efficient use of energy resources. With its portfolio of services including the bluefm quality seal, for example HOCHTIEF Solutions is well positioned to cater to this. According to the Lünendonk study, Germany s FM sector is set to undergo further consolidation, notably due to increased market concentration among the top ten providers, of which HOCHTIEF Solutions has been one for some years now. The sector is also becoming increasingly international: There is more demand for transnational services and international providers are increasingly active in the German FM market. HOCHTIEF Solutions provides FM services in Eastern Europe and the high-growth Middle East, for instance, where the FM market is mostly still in its infancy and therefore offers considerable growth potential. Energy management The energy management sector, which includes energy performance and energy supply contracting, continues to offer considerable opportunities for growth. Climate protection in particular is a major source of potential, in areas such as expanding renewable energies, increasing energy efficiency, and conserving energy. According to the Federal Ministry for the Environment, Nature Conservation, and Nuclear Safety, more than 30 percent of Germany s total carbon emissions are caused by cooling, heating, and operating properties. There is high demand especially for energy contracting models that enable cuts in energy consumption and costs. HOCHTIEF Solutions has successfully established itself in the market, with the Energy Management business unit giving it the expertise it requires. Various industry associations put the value of the German market for contracting services as a whole at some EUR 20 billion. So far, only a small percentage of this market has been tapped. The estimates therefore predict annual growth rates of between 10 and 15 percent. In a position paper published in April 2011, the German Environmental Management Association (B.A.U.M.) stated that there is the potential to save a total of 93.6 billion kilowatt-hours of energy nationwide by Trade and industry, commerce, serv ices, and public facilities account for more than 75 percent of this potential energy saving. B.A.U.M. put the investment necessary to achieve the savings it mentions at around EUR 42 billion, a large proportion of which could be recouped through cost savings. Contract mining* Increased demand for commodities, notably from China and India, had an extremely positive effect on commodity prices in This trend is set to continue in 2012 and will impact on the volume of production in the mining sector. Forecasts such as those from BIS Shrapnel predict sharp increases in iron ore and coal production in both Australia and Asian countries. A high level of investment is therefore expected over the next five years. In 2011, new investment in the mining sector grew by 11.1 percent. In 2012, the experts at BIS Shrapnel anticipate a further rise of 21 percent. Production volumes across mining as a whole will also increase. Our Australian subsidiary Leighton is set to benefit from this forecast growth. HOCHTIEF subsidiary Leighton is the world s largest contract miner. In Australia and Asia, we produce mainly iron ore and coal. 48 Annual Report 2011

49 Legal and Economic Factors Tax increases and recessionary environment in Greece In Greece, the measures adopted by the government back in 2010 continue to impact on the airports segment. The increase in corporation tax implemented in 2010 was reversed in 2011, including with retroactive effect to The tax rate in the reporting period was therefore 20 percent. However, the temporary special tax continued to take its toll on earnings at our airport holding Athens International Airport in 2011 and is expected to be levied again in also saw the introduction of the country s first property tax, which is likewise having a negative impact on earnings at Athens Airport. The new law governing this tax was adopted through The massive economic problems in Greece, which led to another drop in passenger numbers at Athens Airport in 2011, and the uncertainty surrounding future developments in Greece have also impacted on negotiations regarding the sale of the airport activities and, like the turmoil on the financial markets, been a factor in the transaction s delay. Surface Transportation Bill, USA In the United States, the volume of federal funding for infrastructure is defined in the multi-year Surface Transportation Bill, an investment program that provides the federal portion of financing of infrastructure projects over a six-year period. For instance, a majority of projects carried out by our US subsidiary Flatiron typically have some portion of funding provided by this bill. There have been and will continue to be discussions of a New Surface Transportation Bill to replace the current one but when this will take place is unknown. The current extension of the bill expires March 2012 and a subsequent extension is expected, currently it is assumed 2012 funding levels will be similar to those in No further relevant legal or economic factors affecting HOCHTIEF business came to our attention. Group Management Report Group Situation The decline in traffic and takings resulting from the debt crisis in Greece, the large number of toll dodgers, the ongoing credit block by the financing banks, and also the substantial delay in construction progress are the main reasons why the two Greek toll road projects Maliakos-Kleidi (HOCHTIEF stake: 35 percent) and Elefsina-Patras-Tsakona (HOCHTIEF stake: 17 percent) are well behind expectations. At present, both project companies and their shareholders are engaged in restructuring negotiations with the Greek government and the financing banks in order to agree a viable solution concept for continuing both projects.* *For further information, please see the Segment Reporting on page 117 and the Notes on page 199. Annual Report

50 Orders and Work Done in 2011 Work done and order backlog at a high level Group Management Report Group Situation *See glossary on page 212. **Calculation of percentage based on EUR millions. New orders down on prior-year Work done reaches a new all-time high Order backlog impacted by exchange rate effects Forward order book of more than 22 months HOCHTIEF s orders and work done in the past fiscal year were affected by economic uncertainty in the markets. Despite this, HOCHTIEF achieved the secondhighest level of new orders in its corporate history. New orders thus fell short on the prior-year record. Nonetheless, very strong new orders were recorded in the last quarter. Work done* increased as a result of some large-scale projects being worked through. The order backlog remains high, paving the way for continuous growth in work done going forward. New orders down on prior year At an absolute total of EUR billion, the Group s new orders were 14.4 percent** down on the prior-year figure. Adjusted for exchange rate effects, new orders amounted to EUR million, a decline of 16.2 percent. HOCHTIEF s new orders in Germany were down EUR 0.24 billion, or 9.4 percent, year on year. Internationally, new orders fell by 14.8 percent (adjusted for exchange rate effects: 16.8 percent), an absolute decline of EUR 4.02 billion. New orders received outside Germany accounted for 91 percent of total order intake in the reporting period. The HOCHTIEF Asia Pacific division won a number of significant contract mining orders and large-scale infrastructure projects in As not as many orders of this magnitude were secured in the reporting period, new orders were significantly lower year on year, amounting to an absolute total of EUR billion (adjusted for exchange rate effects: EUR billion). This represents a decline of 22 percent (adjusted for exchange rate effects: 27.1 percent). The HOCHTIEF Americas division increased new orders despite the uncertain environment in the American construction market and negative exchange rate effects. Turner and Flatiron once again secured some significant projects in the United States in the past fiscal year. As a result, new orders were 0.7 percent (adjusted for exchange rate effects: 6.7 percent) up on the prior-year figure at EUR 7.04 billion. The HOCHTIEF Europe division fell EUR 0.26 billion below the prior-year figure, a decline of 7.2 percent. An increase in international projects (7.7 percent) was not enough to offset the decline in Germany (13.7 percent). The division secured some significant infrastructure projects, especially on the international front, including in Scotland, England, and Sweden. For the detailed five-year summary, please see pages 213 and 214. New orders EUR billion Work done EUR billion Order backlog EUR billion HOCHTIEF s order statistics are based on the definition by the Central Federation of the German Construction Industry. For further information, please see www. bauindustrie.de (in German only) Annual Report 2011

51 In the third quarter of 2011, the city of Braunschweig awarded the HOCHTIEF Concessions division the contract to design, finance, build/refurbish, and operate nine schools and three child daycare centers. New orders were therefore EUR 0.11 billion up on the previous year, an increase of 73 percent. The vast majority of the HOCHTIEF Concessions division s holdings are not fully consolidated. These statistics therefore exclude some significant new orders due to equity-method consolidation. Work done at a record high thanks to solid order backlog Group work done amounted to EUR billion at year-end, the highest figure in the company s history. Year on year, it grew by 11 percent. Adjusted for exchange rate effects primarily against the US dollar and the Australian dollar it was still 8.5 percent higher. The increase was primarily the result of HOCHTIEF achieving particularly high productivity levels on large projects, which it could consequently work its way through at a rapid pace. This notably related to multiyear contract mining contracts and large infrastructure projects at HOCHTIEF Asia Pacific. The division s work done was up EUR 2.82 billion in absolute terms, or 22.1 percent (adjusted for exchange rate effects: 14 percent). Due to the healthy trend in orders over the last two years, work done by the HOCHTIEF Americas division dropped only slightly below the prior-year figure to EUR 6.71 billion. Adjusted for negative exchange rate effects against the US dollar, work done in the reporting period was 4.8 percent up on the previous year. In international markets, the Group recorded work done of EUR billion, surpassing the prior-year figure by 10.9 percent. As a result of the traditionally large international share of Group work done (over 92 percent), HOCHTIEF holds top positions in the annual Top 225 International Contractors ranking by industry publication Engineering News-Record and Deloitte s European Powers of Construction 2010 league table. New orders in fiscal 2011 amounted to around EUR 0.4 billion less than Group work done during the same period and therefore had only a minor impact on the order backlog. Order backlog up on record prior-year figure due to exchange rate effects The order backlog reached a new all-time high of EUR billion. The EUR 1.18 billion (2.5 percent) increase was due to positive exchange rate effects against the Australian dollar and the US dollar. Adjusted for exchange rate effects, however, the Group s order backlog is only slightly down (0.3 percent) on the prior-year figure, amounting to EUR billion in absolute terms. In Germany, the order backlog grew by EUR 0.32 billion (8.7 percent) year on year due to project wins at HOCHTIEF Concessions and HOCHTIEF Europe. Based on current work done, the Group has a forward order book guaranteeing capacity utilization for more than 22 months. New orders by region Asia/Pacific/Africa 58.4 % Americas 27.7 % Germany 9.0 % Eastern Europe 1.6 % Rest of Europe 3.3 % 100 % = EUR billion Work done by region Asia/Pacific/Africa 62.0 % Americas 26.2 % Germany 7.8 % Eastern Europe 2.2 % Rest of Europe 1.8 % 100 % = EUR billion Order backlog by region Group Management Report Group Situation In Germany, Group work done amounted to EUR 2.02 billion (2010: EUR 1.8 billion), an increase of 11.8 percent. This was due to projects carried out by the HOCHTIEF Europe division, which thus strengthened its position in Germany significantly in the past fiscal year. Asia/Pacific/Africa 69.0 % Americas 18.5 % Germany 8.3 % Eastern Europe 1.0 % Rest of Europe 3.2 % 100 % = EUR billion Annual Report

52 The challenge: Well-equipped schools that make learning and teaching fun A case in point: Every day, 1,200 students attend the Rodenkirchen comprehensive all-day school in Cologne where HOCHTIEF financed and built the new school complex as part of a public-private partnership (PPP) contract. The school combines ambitious architecture with environmentally friendly energy supply. Solar and geothermal systems have brought huge reductions in both carbon emissions and running costs. HOCHTIEF will also be responsible for operating the school until 2034, including all caretaker/janitorial services as well as food services in the cafeteria and snack kiosk. This is one learning environment that deserves top marks. Our solution: Schools for cities and districts that really make the grade 52 Annual Report 2011

53 Strategy Our product and service portfolio Four strategic initiatives adopted Securing sustained growth Lean Group structure implemented HOCHTIEF is one of the world s leading construction service providers. We develop, build, and operate infrastructure projects, real estate, and facilities. Our services put us on the map in all major regional markets. According to the latest ranking from Engineering News-Record magazine, HOCHTIEF is the world s most international provider. We are guided by our vision: HOCHTIEF is building the future. Along with our partners, we expand horizons, link people and organizations, create new ways to think and act, and continually enhance the values entrusted to our care. Our strategy is geared to the long term and primarily targets earnings growth for the Group. Decisive factors in HOCHTIEF s success include our corporate culture and close intra-group teamwork. We foster international exchange of expertise, employees, and managerial staff at all levels. Our risk management system and sustainable business principles are likewise integral parts of the Group strategy. Develop This module includes the development of infrastructure projects on a public-private partnership basis and of energy infrastructure projects and real estate. The services range from design to finance and marketing with all capabilities available separately or in a packaged solution. Our finance service aids HOCHTIEF subsidiaries and associates in transactions the world over. Build This module comprises our mainstream construction business together with construction management in HOCHTIEF s building construction, civil engineering, and infrastructure segments. Alongside construction and construction management, HOCHTIEF also procures materials, systems, and services, and provides site facilities. Operate This module embraces all activities relating to the operation of infrastructure projects, real estate, and facilities together with the management of business processes, including asset, property, facility, and energy management. The module also includes the concessions and operation business featuring our public-private partnership projects such as roads and social infrastructure, and contract mining with its focus on operation. Group Management Report Group Situation Four strategic initiatives We concentrate our efforts on four strategic initiatives to maximize value: Expansion into high-growth areas Optimization of financial fire power and risk management Differentiation through unique solutions HOCHTIEF: Best place to work Two further initiatives have become so integral to our everyday corporate life that we no longer list them as Group objectives. These are, firstly, life-cycle concept activities targeting the entire real estate and infrastructure project life cycle and, secondly, increasing service business. Operate Develop Build When clients use all modules in our product and service portfolio in a single project, we generate maximum value and our clients benefit from the synergies. Annual Report

54 Group Management Report Group Situation **See glossary on page 212. *For further information please see page 65. Strategic initiative 1: Expansion into high-growth areas HOCHTIEF operates a clear growth strategy. We see major potential in creating sustainable energy infrastructure, shaping major cities, and building state-of-the-art transportation infrastructure. Although HOCHTIEF already earns some 90 percent of sales outside Germany, we continue to enter new markets where we can develop projects that generate value. Creating sustainable energy infrastructure Growing ranks of governments champion the use of renewable energy and not just since the nuclear disaster in Japan. Securing the attainment of climate change targets has top priority for the United Nations and the European Union. The German government likewise promotes power generation from renewable energy sources. This drives huge demand for infrastructure: Experts expect billions to be spent in the years ahead on installations that generate power from renewable energy. Transporting this electricity from where it is generated places like the North Sea and the Baltic will take several thousand kilometers of new surface and underground power lines in Germany alone. Finally, renewables-generated energy has to be stored. One of the best ways of doing this is with modern pumped storage power stations. The capital investment needed for this transformation of energy supplies promises large returns and growth rates for our industry. HOCHTIEF can take a major slice of the spend. This is an opportunity to contribute our technical expertise and longstanding experience in complex infrastructure projects, with services ranging from development and finance through to construction and operation. One of the fastest-growing markets is wind energy.* HOCHTIEF was an early mover here and today is one of the most experienced providers of offshore construction and logistics services. We have a hand in building many German offshore wind farms and the specialty equipment to match, including HOCHTIEF s Thor and Odin jack-up platforms will see the launch of the Innovation, a crane jack-up vessel that is already chartered out for offshore wind farm projects for several years ahead. HOCHTIEF plans to extend its portfolio in the offshore sector in the future to include wind farm servicing and maintenance. Experts at HOCHTIEF Solutions are already developing a special service ship for the purpose, scheduled for deployment from A further growth focus is the development of offshore wind farms themselves. HOCHTIEF plans to design large-scale projects of this kind, finance them with partners, and sell them on to end investors, preferably before construction begins. HOCHTIEF Offshore Development Solutions GmbH has been launched for this purpose in cooperation with a finance partner in The plans are already generating strong interest in the market. Many players want to invest in wind farms, but the sort of design and development expertise HOCHTIEF can offer is in short supply. Under this business model, HOCHTIEF will operate as a trader developer**, with rapid asset turnover and a low commitment of capital. For the temporary storage of renewables-generated energy, we offer the construction of pumped storage power stations a market segment where HOCHTIEF already has decades of experience. We are also working on innovative ideas for power storage, such as storage spheres on the sea floor. HOCHTIEF boasts further expertise in the construction of power lines, thousands of kilometers of which will be needed in the coming years. One option for densely populated regions takes the shape of underground power tunnels a capability where we can apply our recognized know-how from tunneling and power station construction. We additionally plan to offer the construction of above-ground transmission lines. This market will be served from 2012 by HOCHTIEF COBRA Grid Solutions GmbH, which we launched at the beginning 54 Annual Report 2011

55 Strategy of 2012 jointly with COBRA, an ACS subsidiary specialized in high-voltage networks. We also plan to enter the renewable energy market in North America. Shaping major cities Another of our identified growth areas comprises major conurbations. Demographic change and new technologies have altered what people expect and need from the places where they live and work. The result is a diverse range of opportunities for HOCHTIEF. We have extensive capabilities to serve this market. HOCHTIEF creates cutting-edge urban buildings that combine cosmopolitan living with attractive housing. More and more often, we develop entire neighborhoods and urban districts, taking care in the process to maintain a healthy balance of rental, owner-occupied, and care accommodation in direct proximity to stores, offices, and leisure amenities. Examples include the Quartier 21 and WaterHouses projects in Hamburg, the Europaviertel development in Frankfurt and le flair, an urban district development in Düsseldorf. All construction projects made outstanding progress in 2011 and are attracting strong interest from investors and users. Many of our developments have earned seals of quality such as certification from the German Sustainable Building Council. The high standard of our development projects pays: In le flair, to cite just one example, 92 percent of the initial 260-plus apartments are already sold and the first occupants moved in at the end of Another challenge of modern cities is the development and construction of state-of-the-art office and commercial properties. Buildings made to sustainable standards are a notable success story in this regard. For many years, HOCHTIEF has been among the pioneers and leaders in this field. Our subsidiary Turner is the number one green builder in the USA and completed its 200th LEED*-certified building in Today s cities also need affordable, contemporary social infrastructure. We contribute significantly here with our public-private partnership activities. HOCHTIEF currently operates over 90 schools and training centers as well as 20 public administration and public safety facilities in Germany, the UK, Ireland, and Canada. In the USA, Turner is among the leading construction companies in the education segment. Building state-of-the-art transportation infrastructure Meeting modern society s globally rising mobility needs calls for smart, efficient transportation planning and infrastructure to match. This includes roads, bridges, and tunnels alongside ports, rail lines, and airports. In the Asia-Pacific region, our subsidiary Leighton is one of the leading providers of transportation infrastructure projects and won numerous large-scale contracts in Among these is the 36-kilometer Southern Sydney Freight Line under construction by Leighton Contractors. We also serve the transportation infrastructure segment in the USA, where our US subsidiary Flatiron has secured contracts such as the upgrading of Route 5 in California. HOCHTIEF s capabilities for transportation projects do not end with construction, however. We also design, develop, and operate increasing numbers of infrastructure projects. Clients benefit from our integrated approach. Our aim is to take account of operation and maintenance needs right from the planning stage and so cut operating costs. One example is the A8 German expressway project awarded as a public-private partnership in *See glossary on page 212. Group Management Report Group Situation Annual Report

56 Group Management Report Group Situation To minimize tailbacks and disruptions, HOCHTIEF works continuously to refine the traffic management systems used in PPP projects. The A4 highway near Eisenach in eastern Germany, for example, features an innovative monitoring system for immediate localization of vehicle breakdowns, stray animals, or dropped loads. Developing regional growth markets The political and economic situation on world markets is in constant flux. HOCHTIEF and its Group companies therefore continuously screen prospects and opportunities in markets new and old. Where we spot potential for sustained growth, we expand by acquiring existing operators or launching new companies. Through our American subsidiary Turner, we broadened our activities in Canada by taking a majority stake in Clark Builders in the year under review. Clark is one of the foremost builders in western and northern Canada. The two companies will jointly develop growth potential in the Canadian construction market. Our subsidiary Leighton also plans to step up its activities in Southeast Asia. The countries of the Middle East likewise present promising openings for new business. We have already built a very good reputation and established networks in Qatar with construction work and services for various large-scale projects. Most of all, we expect major growth impetus from the World Cup soccer championship to be staged in the Emirate in HOCHTIEF Solutions has made Qatar a key hub for further initiatives in the Arabian Peninsula and is weighing projects in Saudi Arabia and Abu Dhabi. Africa presents attractive new opportunities in contract mining for Leighton. Our subsidiary entered the African market in the year under review with a mining project in Botswana. Strategic initiative 2: Optimization of financial fire power and risk management HOCHTIEF makes efficient use of capital. We plan to further enhance our financial fire power and make our portfolio less capital intensive, giving us greater scope to enter attractive segments and more flexibility for our activities. Our subsidiary Leighton sold interests in its HWE Mining iron ore business in Australia on attractive terms in the year under review. We also continue to pursue the sale of the airport business as a strategic objective. Additionally, as has long been announced, we plan divestments of individual projects and project portfolios at our successful subsidiary aurelis Real Estate. We similarly aim to increase asset turnover in publicprivate partnership contracts and real estate development, selling market-ready projects at an earlier stage than in the past. In the case of PPP contracts in the social infrastructure segment, such as schools and town halls, this is done in close consultation with the publicsector parties to the contracts and with users. As the public sector parties often value support from experienced HOCHTIEF employees over the entire project lifetime, we can continue operating such properties after any sale. Our company s financial strategy remains value-driven and conservative. This has given us a firm footing especially through the financial and economic crisis of the last few years. We attach importance to a strong equity base and uphold clear profitability targets in capital investment, based on our RONA approach. Compliance with these requirements is watched over by our risk management system. Necessary changes are implemented quickly and systematically as at our subsidiary Leighton, where a Chief Risk Officer position was established in the year under review. 56 Annual Report 2011

57 Strategy HOCHTIEF retains its top credit standing. We refinanced our existing EUR 2 billion syndicated guarantee and credit facility on favorable terms in December The Group negotiated a EUR 2 billion five-year syndicated credit facility with an international banking syndicate. The early refinancing of the credit facilities due to terminate at the end of 2012 generated strong interest on the international banking market, with banks offering a total of EUR 2.3 billion, well above the amount needed for refinancing. Despite the difficult market environment, we also succeeded in 2011 in issuing a EUR million promissory note loan.* These borrowings enabled us to strengthen our long-term financing capacity and our ongoing operating development. Strategic initiative 3: Differentiation through unique solutions HOCHTIEF stands apart from its competitors thanks to the considerable technical expertise and experience of its workforce and is highly sought after in many regions of the world as a contractor for complex projects. We are among the world market leaders in virtual construction, where design as well as building and operating workflows are simulated by computer long before construction begins. The method reduces the time needed for construction, enabling clients to make an earlier sale. It also cuts costs by allowing more parts to be prefabricated, and it enhances overall quality. Turner alone has undertaken some 400 projects worth over EUR 25.5 billion using the new building information modeling technology. HOCHTIEF ViCon provides virtual design services worldwide. The company is currently coordinating the use of 3D technologies in the development of Lusail City in Qatar, one of the biggest urban planning projects in the world. In the offshore wind power segment, we have developed a new foundation drilling method that generates significantly lower noise emissions when anchoring large foundations for wind turbines to the sea floor.** Strategic initiative 4: HOCHTIEF: Best place to work With over 75,000 employees around the world, HOCHTIEF has a highly capable workforce that grew by some 6.8 percent in 2011 compared with the previous year. The expertise and dedication of our workforce are vital to our business success. HOCHTIEF prides itself on being the best place to work, not least because skilled employees are internationally in increasingly short supply. We promote individual further training, work-life balance, and the highest standards of occupational safety.*** Streamlined Group structure We adopted a significantly leaner Group structure during the last two years, reducing the Group to four divisions as of January 1, In fiscal 2012, this will go down to just three. As of the reporting year, we also combine our solutions for development, design, construction, and operation under the roof of HOCHTIEF Solutions AG in the reorganized HOCHTIEF Europe division. The public-private partnership activities were likewise integrated into this division in the first quarter of This gives us a regional structure for the future focusing on the local markets of America, Asia, and Europe. We also streamlined the holding company as part of the same changes. **Please see page 65. *See Notes to the Consolidated Financial Statements on page 186. ***For further information, please see page 60. Group Management Report Group Situation Annual Report

58 Sustainability Group Management Report Group Situation Sustainability and corporate responsibility drive HOCHTIEF s strategy Focus on six sustainability objectives Sustainability provides HOCHTIEF with excellent growth opportunities Our strategy of providing services for every phase of infrastructure, real estate, and facility projects lays the groundwork for our integrated approach. To date, 24 of the buildings constructed by HOCHTIEF in Germany have gained German Sustainable Building Council (DGNB) precertification or certification. These include *By sustainability at HOCHTIEF we mean the interplay between business, environmental and social responsibility. Clear commitment to sustainability* As a growth-oriented company, HOCHTIEF embraces its responsibility to society and the environment. Sus- the new headquarters for specialty chemicals group Lanxess in Cologne and the PortAL 10 commercial property in Münster. tainability and corporate responsibility (CR) thus have a long tradition as an integral part of our corporate strat- HOCHTIEF subsidiary Turner has been number one for **For further information please see page 53. egy. Sustainability drives our values, vision**, and guiding principles, both throughout the Group and in our several years now in the fast-developing green building segment in the USA, where 492 Turner projects to date projects around the world. In the year under review, the have achieved, or have been registered for, the coveted first CR Group directive was adopted to more firmly LEED certification. In 2011, Turner secured the contract to anchor the sustainability strategy in every part of the build a 20-hectare operation center for the Sacramento Group and even better guarantee its implementation. Municipal Utility District. The campus will generate precisely as much energy as it uses, making it the nation s The capital market acknowledges our commitment to largest net zero energy project. The aim is to obtain LEED sustainability. In September 2011, our company was in- Platinum certification for the project. Number of certified green buildings constructed by HOCHTIEF cluded in the Dow Jones Sustainability Indexes for the sixth year in succession. We are currently the only German construction services provider to be listed in the Europe Index. While we were unable to regain our listing in the World Index in the reporting year, our sights HOCHTIEF intends to promote sustainable construction the world over. In 2011 we also developed ecologically exemplary properties in countries where this field is not yet firmly established, including Poland, the Czech Re are firmly set on this goal in Our membership in the Ethibel Sustainability Index Excellence Europe was confirmed in 2011 again, HOCHTIEF is the only Ger- public, and the Philippines. For instance, Turner is constructing a 362-meter-high business center in the Vietnamese capital of Hanoi, the first in the country to receive man company in the construction industry on the list. LEED certification. EU (DGNB, LEED, BREEAM) Australia (GreenStar) USA (LEED) (For details, please see glossary on pages 211 and 212) As a member of the European Network of Construction Companies for Research and Development (ENCORD), HOCHTIEF signed the Sustainable Development Charter Investors and building occupants alike value the advantages of sustainably designed properties. Their ancillary costs are generally lower, they consume less energy, in June The objective of the Charter is to more have a positive effect on the indoor climate, and feature effectively integrate sustainability principles in the in- elements such as plantings that create a sense of well- dustry and promote sustainability by way of joint initia- being. On the whole, green building features in office ***For further information please see page 63. tives, notably in research and development.*** properties produce potential additional value of more than ten percent over typical local rents, according to a Sustainability/CR focus areas study by Technical University Munich commissioned by Sustainability at HOCHTIEF is concentrated in six areas HOCHTIEF and published in the year under review. with clearly defined objectives. In addition to green building, HOCHTIEF is also system- 1. Sustainable products and services atically expanding its range of sustainability services. As a dedicated pioneer in green building, HOCHTIEF These include efficient energy management along with ranks among the world s leading companies in this field. diagnoses and revitalization of existing buildings as well 58 Annual Report 2011

59 as sustainable facility management. To this end, we launched the bluefm * quality seal in the year under review. In these projects, clients commission our facility managers to develop customized sustainability concepts for managing buildings and facilities. ment and now rank among the top partners to utility companies for the construction, assembly, and maintenance of offshore wind turbines. In the future, we also aim to invest in and operate such facilities.*** January 2011 saw the beginning of construction of the *For further information please see page 66. ***For further information please see page 65. Group Management Report Group Situation Our objective: We aim to lead the global market for geothermal power plant in the Bavarian community of sustainable projects in the construction and construction- Dürrnhaar. HOCHTIEF has been developing the plant related services segments. We therefore constantly add as part of Süddeutsche Geothermie-Projekte GmbH & to our range of services spanning the infrastructure proj- Co. KG since As general contractor, HOCHTIEF ect, real estate, and facility life cycle. Energy Management is now in charge of designing and building the power plant and will operate it for ten years. 2. Active climate protection After its completion in 2012, the plant will have a capacity As a construction services provider, HOCHTIEF uses of approximately 5.5 megawatts and produce around up energy and resources. At the same time, buildings 46,000 megawatt-hours of electricity. Financing was also account for some 40 percent of the world s energy con- secured for the second power plant in Kirchstockach in sumption. Our goal is therefore to cut carbon emissions and energy use in our own company, in our work for clients, and in carrying out projects. HOCHTIEF plays Within the company, HOCHTIEF also attaches high pri- an active part in protecting the climate through various ority to climate protection. In the 2011 fiscal year, we services: The buildings we construct in line with sustain- cut the annual number of kilometers traveled for busi- ability principles stand out for their low energy use. Our ness by more than 15 percent as compared with the energy management specialists develop smart solutions 2008 baseline figure, among other things through the for energy-efficient property and facility operation. We increased use of web and video conferencing. More- also invest in stepping up the use of renewable energies. over, all business travel on the Deutsche Bahn was Our Group implements numerous energy conservation made climate-neutral, with a total of 475 metric tons of and efficiency measures in-house. And our active climate CO 2 equivalents offset by supporting a wind energy protection policies have also been recognized outside project in India. In September 2011, our US subsidiary the company: HOCHTIEF has once again been listed in Flatiron received Platinum-level Green Fleet certification the German Carbon Disclosure Leadership Index**. from the Association of Equipment Management Pro- **See glossary on page 211. fessionals for its eco-friendly equipment fleet. During the reporting year, HOCHTIEF Solutions Energy Management business unit saved its clients in excess of 115,000 metric tons of carbon emissions. Our efficiency meas ures for example, to improve the energy efficiency of systems for Heideblume dairy, a long- Our objective: We aim to save carbon emissions together with our clients. 3. Resource protection Carbon savings by HOCHTIEF Energy Management for clients (tco 2-e) 105, ,000 95,000 86,500 standing client who extended our contract for another Resource protection is of particular importance to 15 years won dual acclaim in 2011: the 3rd German HOCHTIEF. Our projects require a huge amount of ma- Refrigeration Award from the Federal Environment Min- terials; they use and largely seal off areas of land, and istry and the first place Energy Efficiency Award 2011 from the German Energy Agency. produce considerable amounts of waste. Actively protecting the environment is therefore a key component of HOCHTIEF s worldwide activities. As early as 2003, We are continually stepping up our activities in the grow- we spelled out our occupational safety and environ- ing offshore wind energy market. In fiscal year 2011, we mental protection policy in a directive in force through- again invested substantially in special-purpose equip- out the Group. This directive was revised in the year Annual Report

60 Group Management Report Group Situation Share of corporate units certified to ISO (in percent) Accident rate: Accidents per million hours worked *For further information please see page 71. under review. More than 70 percent of HOCHTIEF s corporate units have now been certified according to the ISO environmental management standard. In 2011, 14 additional German facility management units and our Group company Leighton Offshore were certified. We achieve good construction waste recycling rates in our projects in Germany and abroad, far exceeding national averages on this score. In Germany, our recycling rate in 2011 was 98 percent. In the USA, we recycled 88 percent of the construction waste. These successes are achieved with the help of employees, who share our awareness of environmental issues and act upon it in their everyday work. This is why we also continually train our team in this area. The primary goal is to determine what the consequences of our activities will be early on and then minimize them as much as possible. Large-scale infrastructure projects involving road, tunnel, or bridge construction are particularly challenging, sometimes requiring substantial intrusion into the environment as well as affecting the people living in the vicinity. For this reason, we develop comprehensive environmental plans and take appropriate measures before construction work even begins to reduce to a minimum or eliminate interference with flora and fauna and disturbances to the local population. For instance, in expanding the West Gate Freeway in Australia, a project completed in the year under review, our Group company Thiess applied a comprehensive set of environmental standards. These included using construction materials such as steel, concrete, and plastic containing a large percentage of recycled materials, and reusing a good 8,700 cubic meters of excavation materials on site, saving around 10,000 trips by truck. The company was able to reduce carbon emissions from the entire project by 34 percent. Our objective: We aim to conserve natural resources and optimize the use of resources. 4. Attractive working environment HOCHTIEF has more than 75,000 employees and works with over 60,000 partners around the world. Our goal is to create optimum working conditions for them and offer the highest standards of occupational safety along with above-average health protection. Our cross-divisional competence center for occupational safety, health, and environmental protection (OSHEP) ensures that these issues are prioritized highly throughout the Group. In fiscal year 2011, we succeeded in reducing the accident rate across the Group to 1.55 accidents per million hours worked (2010: 1.79). Our Group offers employees professional and personal educational and training opportunities along with attractive career options. Work-life balance is becoming more and more important in this regard. Our companies and corporate units have implemented various initiatives and programs to make it easier for employees to combine a career and private life.* The diversity of our employees is a key success factor for our company. After all, various talents, experiences, and working styles all have a positive effect on project work. Diversity and providing equal opportunity are accordingly significant aspects of our corporate culture and are fostered through various measures. Our Australian subsidiary Leighton, for example, has formulated clear goals in its human resources policy. By 2016, the company aims for women to make up 40 percent of its executive and senior management staff. The figure at Leighton Holdings was 22 percent as of the 2011 year-end. The first woman was appointed to the Leighton Board as of January 1, February 2011 saw the first woman to take office as chief financial officer at Turner. In Germany the share of women in executive positions is 9 percent (2010: 9.2 percent). The proportion of women in the Group workforce as a whole is 15.8 percent (2010: 15.8 percent). Our objective: We aim to further consolidate our position as a sought-after and responsible employer in the industry. 60 Annual Report 2011

61 Sustainability 5. Corporate citizenship HOCHTIEF carries out projects and therefore sees itself as a local partner in all four corners of the globe. As such, we practice good corporate citizenship by hiring as many local people as possible to fill on-site jobs and by employing subcontractors from the region. Against this backdrop, we are active in training local subcontractors. Our US subsidiary Turner offers companies run by ethnic minorities and women a unique training opportunity at the Turner School of Construction Management: free courses on various construction-related topics such as estimating, procurement, logistics, financing, and workplace safety. More than 33,000 companies have participated in this development program since its inception in In 2011, Turner awarded contracts to these firms worth over EUR 857 million. We are committed to providing aid in the wake of natural disasters. Following the catastrophic floods in Queensland around the 2010/2011 new year, Leighton provided manpower and machines in Australia as well as some EUR 1.5 million in financial relief. As a corporate citizen, we see it as our responsibility to constructively promote modern professional training and further development for young people. Thus one of the focal points for our sponsorship activities is to educate and foster young professionals. In the year under review, we again supported a wide variety of initiatives and institutions, providing both the Group s expertise and funding, for instance, to Bridges to Prosperity through our subsidiary Flatiron.* Our objective: We aim to get involved in the community wherever our company is at work. 6. Compliance HOCHTIEF is a global company and as such operates in locations with different values, political systems, and legal frameworks. This is why we attach great importance to compliance** with all company and third-party regulations. In May 2011, the new Group directive on compliance was introduced, defining our compliance goals and the responsibilities of our compliance system in a document binding for the entire Group. The key guidelines for conduct are laid down in HOCHTIEF s Code of Conduct, which is updated regularly and is now available in seven languages. We pay close attention to ensuring that all of the Group s employees comply with internal rules and applicable law and respond with full rigor to any violations. We annually determine our corruption risk based on the Corruption Perception Index (CPI) published by Transparency International. For years now, we have performed around 90 percent of our construction work in countries with a low or very low corruption risk. We continue to educate our employees on compliance issues and provide them with guidance for their everyday work with a wealth of communications initiatives and training sessions such as the course on compliance in practice introduced in fiscal In 2011, we also developed the Code of Conduct for HOCHTIEF Subcontractors and Suppliers into an updated, uniform, binding standard of conduct for all of our contractual partners. These rules include acknowledging social responsibility to their own organizations, to clients, suppliers and other business partners as well as to the environment and society. Our objective: We aim to set standards in business ethics and do our utmost to apply those standards. Transparent stakeholder information HOCHTIEF has been publishing sustainability reports since 2005, most recently in the year under review. These reports comply with the Guidelines of the Global Reporting Initiative (GRI) as well as the principles of the UN Global Compact. Their content has been audited by an international auditing firm since The next report will be published in 2013 and annually thereafter. Additional current information about sustainability at HOCHTIEF is available at sustainability. Construction output in countries with low or very low corruption risk Total donations and sponsorship (EUR million) CPI 6 8 (low corruption risk) CPI > 8 (very low corruption risk) EU Australia USA *Further information is available on the Internet at **For further information please see page 22. Group Management Report Group Situation Annual Report

62 The challenge: Making offshore wind power safer for the marine environment A case in point: Together with a partner, HOCHTIEF has developed a special drilling method for the foundation piles of offshore wind turbines. In offshore foundation drilling, turbine foundations are not rammed the conventional way but are drilled into the sea floor. The new method is far quieter, significantly reducing noise exposure for marine fauna. The innovative solution gives HOCHTIEF a competitive edge in the growing offshore wind power market and contributes in a small way to conserving the habitat of the harbor porpoise native to the German North Sea. Our solution: An innovative drilling method that creates new opportunities and helps protect marine fauna 62 Annual Report 2011

63 Research and Development Innovation a feature of almost all projects Innovative power as competitive hallmark Innovative ideas set new technological benchmarks Custom solutions for unique projects tunneling job for HOCHTIEF by some EUR 500,000. All told, the top ten ideas from 2010 delivered savings or efficiency gains of about EUR 2 million. New software introduced in 2011 aids the entry, evaluation, and implementation of submitted ideas. The suggestion rate has also been added as indicator to the balanced score- For further information on R&D and innovation projects, please see our Sustainability Report and www. hochtief.com/sustainability. Group Management Report Group Situation Most of the projects developed, designed, financed, card for management of our business activities. This built, and operated by HOCHTIEF for national and in- reflects the key role played by innovative spirit as a suc- Number of R&D projects ternational clients are complex and one of a kind. They incorporate research and development (R&D) in many cess factor for HOCHTIEF different forms. In this way, we create measurable added Innovation management on three levels value for clients and set ourselves apart from competi- Innovation is managed on three levels at HOCHTIEF. The tors as a global construction services provider. first level, central innovation management, focuses on Innovation management as a key success factor cross-cutting issues with lasting benefit for operating activities throughout the Group. Integrated innovation HOCHTIEF has long ranked among construction industry innovators with a compelling track record of meeting clients needs with tailored solutions. Our structured, Group-wide, cross-divisional innovation management system contributes toward further extending and rein- management is coordinated by HOCHTIEF Corporate Development. The same unit is also in charge of picking out promising innovations and supporting their implementation. Ongoing monitoring and control keeps the process highly efficient from the outset. Our Inno- Number of R&D projects completed forcing our market position. We deploy innovation to vation Committee decides in each case whether we go pinpoint and develop new growth segments. At the same ahead with a project. The Committee has members time, our teams constantly work to make internal work- from operational units and the corporate centers flows and processes more efficient. Innovation management plays a key part in implementing our strategic initiatives (see page 57). Employees excel with innovative ideas and suggestions HOCHTIEF spent some EUR 5.2 million on Group-wide, first-level R&D projects in the past fiscal year. Sixty-five employees worked on a total of 46 projects. We launched 29 new projects in 2011 and brought 11 to completion. Number of R&D projects started Our German workforce once again made intensive use The second level of the HOCHTIEF innovation man- of the virtual Ideas Room on the HOCHTIEF corporate intranet in the year under review. Employees have been agement system comprises divisional innovation. These projects are developed, financed, and imple able to post ideas and suggestions for improvement in mented by the divisions and companies themselves. the Ideas Room since Some 248 new ideas were Investment volume of R&D added in At our third annual ideas management conference in April, we awarded prizes for the top ten The third level relates to project-specific innovation. R&D work of this kind is carried out in the contract bid- projects (EUR million) ideas from First prize went to a proposal for a ding and execution stage. The resulting expenses are manipulator for fitting and removing the disc cutters on accounted for as part of project costs and so are not tunnel boring machines. Working on the tunnel for a registered at Group level. subway line in Hamburg, the inventor came up with a device that significantly reduced the time needed to swap TBM disc cutters. This cuts the cost of a typical The statistics in the charts relate to first-level innovation projects. Annual Report

64 Group Management Report Group Situation Innovation projects in 2011 The selection of projects presented in the following showcase the above-average innovative capacity of the HOCHTIEF Group. Technology and process improvements benefit each and every contract we undertake. Level 1: Central innovation management Carbon-neutral construction In an innovation project launched in 2011, carbon emissions from construction and operation of a building are offset using certified climate protection projects. HOCHTIEF has developed a new service product specifically for this purpose: We first identify and agree on potential carbon reduction measures throughout the life cycle of a building project. What emissions then remain are offset by purchasing credits for certified climate protection projects. This makes it possible for construction of a building to qualify as carbon-neutral. Carbonneutral status for building operation is achieved in the same manner. Both of these quality accolades are to be awarded in close cooperation with an independent assessment body that can confirm the high quality of the climate protection projects. A first pilot project is currently underway. This supplements our portfolio of sustainable building construction and operation capabilities together with the matching certification options. Demand for the product has been demonstrated by HOCHTIEF s own market research. Research on senior-friendly housing As demographic change progresses, countless cities and communities face the challenge of making the buildings they are responsible for senior-friendly with limited financial resources. So far, however, most initiatives in this field have taken only a piecemeal approach. Many such building, conversion, and modernization projects are also poorly coordinated with the necessary services. This is the subject of a study by HOCHTIEF in cooperation with the Technical University of Darmstadt. The research analyzes various approaches, pinpoints new ideas in senior housing, and investigates and ranks them in terms of feasibility, practicability, and affordability. The aim is to provide communities with a choice of options for senior-friendly development. The study augments HOCHTIEF s expertise in senior housing, giving the company a knowledge lead in this highly promising growth market. Enhanced safety for bridges and tunnels The SKRIBT project on safety regarding critical roadbridges and tunnels initiated in 2008 by the German Federal Ministry of Education and Research (BMBF) came to an end in the year under review. The aim of this project was to develop and evaluate effective means of protecting such structures and their users in the event of severe accidents, natural disasters, and terrorist attacks. HOCHTIEF was among the ten consortium partners comprising federal agencies, research institutes, universities, and the private sector. Under the leadership of the Federal Highway Research Institute, the consortium developed 140 potential safety measures and intensively screened 45 of them for effectiveness and economic viability. A follow-on project with the same consortium, SKRIBT Plus, was launched in early The focus of the new project is on channeling the knowledge gained into developing practical methods and products for bridge and tunnel safety. The outcomes have already benefited projects that we have in progress today. Upgrading bridges while in use Most bridges on Germany s expressways are in urgent need of repair and modernization. In recognition of this, projects to develop adaptive, smart bridges receive funding under a program to promote innovation in roadbuilding by the German Federal Ministry of Transport, Building and Urban Development (BMVBS). Working in partnership with a scientific institute, HOCHTIEF has contributed an idea for adaptive tube-in-tube bridges. A combination of load-bearing mechanisms makes it possible to quickly upgrade bridges without having to close them to traffic. A bridge may be increased in capacity, for example, or retrofitted with traffic control systems and noise barriers. The acquired knowledge can also be used by our US subsidiary Flatiron, which specializes in infrastructure projects. Efficient road infrastructure management In the design and construction of road infrastructure projects, the parties involved collect a wide range of 64 Annual Report 2011

65 Spotlight on offshore wind power With a range of innovative equipment and techniques, HOCHTIEF has established itself as a leading player in the dynamically growing offshore wind power sector. The order backlog grew from just under EUR 20 million in 2009 to a good EUR 465 million at the end of We notably continued work in the year under review on our crane jack-up vessel, the Innovation, construction of which is going to plan. The vessel is due to be launched in mid-2012 ready for immediate deployment on contracts already in hand. We also expect more orders to follow in Although project work generally has been postponed due to the global financial crisis, we continue to view offshore wind power as an attractive business for HOCHTIEF and anticipate work done in this segment in the triple digit millions of euros over the years ahead. Besides erecting and maintaining offshore wind turbines, HOCHTIEF is now gearing up to enter a further segment of this booming market. Together with an investor, we plan to acquire concessions for German offshore wind farms, jointly develop them, and sell them on to end investors. This represents only a small part of the investment we carry out to strengthen and continuously expand our position in the offshore wind power business. In the HOCHTIEF Europe division, we spent more in this sector during 2011 than in any other. Special-purpose vessels with extraordinary potential HOCHTIEF builds and operates special-purpose offshore jack-up vessels in cooperation with GeoSea, Belgium. The Innovation currently being built will be the world s most powerful crane jack-up vessel for the erection of offshore wind power installations. The vessel s development and construction cost some EUR 200 million. The Innovation is 142 meters long and can operate in depths of up to 50 meters. A payload of 8,000 metric tons and a 1,500-metric-ton crane capacity mean the vessel can perform all types of offshore foundation work. This allows us to apply the latest foundation technologies, with significantly shorter assembly and maintenance times. HOCHTIEF developed the design for the Innovation and, working jointly with GeoSea in HGO Infra Sea Solutions, will also operate the vessel and charter it out with its own crew. With demand for such special equipment already exceeding supply, the company plans to build further jack-up vessels of the same kind. Alongside the Innovation, HOCHTIEF is currently working on a maintenance vessel for commissioning, servicing, and maintaining wind turbines. Due for completion in 2013, this will mark a further addition to our range of products and services spanning the entire life cycle of offshore wind farms. Innovative foundation drilling method Offshore wind power projects call for the use of highly specialized techniques to seat the supporting piles for turbines in the sea floor. Not least among the challenges is the need to significantly reduce noise from foundation work to protect fauna and flora. Marine mammals particularly are affected by the noise produced. HOCHTIEF s answer, developed together with a partner, is the offshore foundation drilling technique. Instead of ramming, this approach uses quieter vertical drilling to insert piles into the sea floor. Yet another innovative technique, engineered in cooperation with a second partner, is known as Gravitas. This involves floating concrete foundations that are fabricated on land and lowered to the sea floor. Where the sea floor geology is favorable, the method has the benefit of being more costeffective than conventional steel piles. Innovation, our crane jack-up vessel, is all set to be launched in mid The vessel is already booked out for five years. HOCHTIEF masterminds innovative solutions to support the growing trend toward renewable energy. Group Management Report Group Situation data in their software systems, covering areas such as project timing, quantities, costs, resources, and materials. Distributed, incompatible data storage frequently makes it difficult to put all this information to use in the design, construction, and operation of an entire project. Since 2011, HOCHTIEF has been working on a 3D-based information system that brings together all relevant data and presents the information in consolidated form. The innovative initiative comprises two subprojects: In the first, our subsidiaries Flatiron and HOCHTIEF ViCon are focusing on making the extensive data from the bidding stage readily accessible in Annual Report

66 Group Management Report Group Situation An end to crumbling concrete: Leighton Contractors protects concrete by spraying on an eco-friendly film (left). Campus building with suspended floors: An innovative solution was used in place of a conventional frame structure in this building for John Jay College in New York so that it could be built over a rail line. the construction phase. The second subproject relates to collecting data for the efficient operation and maintenance of infrastructure. This part of the development project, which receives funding from the German Federal Highway Research Institute, is carried out by HOCHTIEF ViCon, HOCHTIEF Consult, and HOCHTIEF PPP Solutions. Our company benefits from the pooling and linking of data as well as from process improvements. Technical risk evaluation for built structures RiMaPORT, an innovation project launched in 2011, targets total cost of ownership by aiming to minimize risk as well as optimize maintenance and upgrading across a portfolio of built structures. As part of the project, HOCHTIEF Concessions and HOCHTIEF Solutions are jointly devising an approach for objectively and systematically evaluating a heterogeneous portfolio of engineering structures such as a portfolio of roadbuilding projects with tunnels and bridges. The resulting models help improve the maintenance and modernization of structures in the portfolio both technically and economically, enabling HOCHTIEF to further set itself apart from competitors as a designer and operator of this kind of complex portfolio. Innovation focus on growth areas for HOCHTIEF Solutions We pinpointed numerous innovation projects in the course of restructuring our Europe division. Pooling capabilities under the roof of HOCHTIEF Solutions AG generated further potential. We initially brought together a total of 93 thematic areas, which we then analyzed, evaluated, and prioritized. This left ten thematic areas for which we drew up comprehensive business and project plans. Examples include development and operation of small hydropower and pumped storage power stations, ultra-high voltage grids, and power tunnels. Further thematic areas comprise the one-stop design, construction, upgrading, and operation of data centers, complaints management, and systems engineering. Implementation of the projects began in late 2011 under the framework of our cross-cutting innovation management system. The projects are slated to deliver a significant contribution to earnings by Level 2: Innovation by the divisions Advances in sustainable building operation As a construction services provider with a rigorous sustainability focus, we also made further additions to our portfolio of sustainability-related facility management services in Under our newly developed bluefm quality label, HOCHTIEF experts offer clients an integrated approach to reducing carbon emissions from the operation of buildings and other properties by 66 Annual Report 2011

67 Research and Development up to 20 percent in the next five years. To meet this voluntary commitment at the assets we manage, intensive bluefm training courses began for HOCHTIEF facility management employees during the year under review. Significantly improved construction processes Like all HOCHTIEF companies, our US subsidiary Turner operates a continuous improvement process to the benefit of the company and clients alike. America s number one general builder has secured major savings by implementing lean construction processes in its projects. Studies show that some 70 percent of construction site activity does not directly create value. Turner s aim is to significantly reduce this percentage with lean construction. The approach implemented to achieve this begins with a special, highly reliable scheduling method involving all subcontractors. Use of building information modeling (BIM) makes it possible to identify and avoid conflicts among technical building service trades before construction commences. The detailed schedule and BIM provide the basis for using significantly more prefabricated components in the construction phase, reducing costs and saving additional time. Turner is already successfully applying lean construction in a number of projects including healthcare, office, and commercial buildings. Sustainable treatment for concrete Using the new Secure 33 curing compound, our Australian subsidiary Leighton Contractors reduces the danger of concrete used in road construction developing fissures, leading to high costs of repair. The environmentally friendly wax-based compound developed jointly with a partner is sprayed onto freshly laid concrete, where it quickly hardens even in widely varying ambient conditions to form a permanent film. Leighton Contractors has also developed a colored variant that stores heat to harden concrete in cold surroundings. Projects on which Secure 33 has been successfully deployed include the Tarcutta Bypass in New South Wales. The compound is also projected for use at other HOCHTIEF companies. Level 3: Project-specific innovation Exceptional bridge building project Our subsidiary Flatiron secured the contract to construct two bridges for the Utah Department of Transportation (UDOT). The project broke new ground in the USA and will utilize an Accelerated Bridge Construction method developed by UDOT. Flatiron is constructing two new bridges along Interstate 80 on temporary supports directly alongside existing structures and then quickly sliding them into their final position and lowering each onto their permanent foundations, all to a meticulous schedule. Flatiron prevailed over rivals for the design-build contract not just on cost, but also on construction time and technical innovation. Unusual building design At the end of 2011, Turner completed an extension to the John Jay College of Criminal Justice in New York in which it deployed an innovative solution. The challenge: A rail line under the complex prevented the building from being erected with a conventional structural system. The solution: The top nine floors are hung from steel outrigger trusses supported by the building s structural core comprising the stairwell. The lower five floors of the building are supported by a conventional steel frame. Wide-ranging international cooperation HOCHTIEF has built up a high-caliber R&D cooperation network including national and international universities, scientists, and industry associations. As a member of the European Construction Technology Platform, our company makes an active contribution toward maintaining the high technical standards of the European construction industry. We are also a member of ENCORD*, the European forum for industry-led research, development, and innovation in the construction sector. Benefits from our membership include best practice exchange on issues such as lean construction, virtual construction, and work safety. *European Network of Construction Companies for Research and Development. Group Management Report Group Situation For the R&D outlook, please turn to Looking Ahead: Outlook and Opportunities on page 134. Annual Report

68 The challenge: Energy supply for everyday needs A case in point: When building pipelines for gas and oil, such as for Pipeline Replacement Project 2 off the coast of Mumbai, Leighton Offshore lays hundreds of pipelines underwater. The specialists at our Australian subsidiary offer a comprehensive portfolio of services for offshore energy infrastructure. That includes planning, procurement, construction, and installation as well as commissioning and maintenance of pipelines, landing stages, warehouse and storage stations, and other facilities. To accomplish all this, Leighton Offshore maintains a large fleet of special-purpose equipment, including the 100-meter-long Stealth pipelay barge. That helps ensure that your household has what it needs to keep running. Our solution: Modern energy infrastructure that really makes connections 68 Annual Report 2011

69 Employees Recruiting successful despite lack of specialist staff New training initiative in Germany Staff development further improved Workplace made safer Human resources strategy the key to success A critical factor for ensuring HOCHTIEF s sustained business success is the above-average performance as well as high levels of motivation and qualifications of our employees. That is why it is important for us to spark interest in our company among talented individuals. From day one, HOCHTIEF offers development opportunities on an ongoing basis to employees who meet our standards, tailoring these efforts to each individual s abilities and potential. This applies to trainees as well as specialist and managerial staff alike. We offer opportunities for a lively exchange of experience through national and international contacts within the Group. Ongoing high demand for specialist staff Year on year, the total number of job openings advertised in Germany grew substantially in Increased staff requirements, the shorter schooling period, and the elimination of obligatory military service led to an increase in applications from 23,000 to more than 26,000. Nevertheless, the number of applications per job opening fell by almost 20 percent. HOCHTIEF primarily sought employees for Facility Management as well as staff for various commercial departments. We also required additional specialists of whom there are only few for our offshore business. Our subsidiary Flatiron primarily sought estimators and project engineers. Through targeted staff development measures, we filled many of the positions internally. Employee numbers up again The number of employees at the HOCHTIEF Group rose to a total of 75,449 in the reporting year, up around 6.8 percent over the 2010 figure. This increase is attributable to our positive business performance outside of Germany. For instance, our Australian subsidiary Leighton s workforce grew by 12.6 percent. In Germany, the restructuring of some companies led to personnel cutbacks of around 4.5 percent. This chiefly affected the HOCHTIEF Europe division. The workforce reductions were handled in a socially responsible manner and in close cooperation with employee representatives. Excellent recruiting process HOCHTIEF was thoroughly prepared for the increased number of applications, notably due to application processing on our Online Job Market. We also select trainees online, a practice that has now become firmly established. Young job seekers at more and more locations are taking the vocational aptitude test online from home. This saves us time and money. Our US subsidiaries Flatiron and Turner use online systems almost exclusively to manage job applications. Applicants interested in working abroad are placed in our database, allowing us to contact them quickly when needed. As a responsible corporate citizen, it is important to us to include persons with severe disabilities in our candidate pool and to further increase the current percentage of employees with severe disabilities at HOCHTIEF in Germany. Currently, this figure stands at 4.27 percent (2010: 4.16 percent). Through our ties to selected chairs at technical and business faculties, we succeeded in making contact with particularly talented potential employees at an early stage once again in the reporting year. These activities contributed to more than 3,200 graduates and students applying for jobs at HOCHTIEF in Germany during the year under review. By taking part in numerous university events in 2011, our US subsidiary Turner succeeded in recruiting a number of staff, including more than 300 new employees and 250 interns. Through its Early Talent Management program, Flatiron also maintains close relationships with top colleges and universities in the USA and Canada. Excellent image as employer For years now, our Group has been held in particularly high regard around the world as an employer. Several awards garnered in 2011 are evidence of this. For example, the German real estate publication Immobilien Zeitung selected HOCHTIEF as the top employer in the industry for the third time in a row. In addition, Turner is considered one of the employers of choice among students and was named an Ideal Employer by Universum Communications. Further information on our employees as well as occupational safety and health at HOCHTIEF is available on the Internet at under Career and Sustainability. Group Management Report Group Situation Annual Report

70 Number of employees at HOCHTIEF Group Management Report Group Situation Average for the year N Total N International employees N Employees in Germany 64,527 53, ,178 55,043 11,004 11,135 10,821 10, ,657 59,836 75,449 65, Employee retention programs producing desired results The aim of our human resources management efforts is to ensure as early as possible that suitable employees remain enthusiastic about working for HOCHTIEF for the long term. In Germany, we invite interns to informational events and seminars to maintain contact with them even well after their internships have ended. In 2011, around 45 young people participated in such programs. We remain in close contact with students who completed an internship with HOCHTIEF abroad so that we can recruit them for our company if needed. The Employees Recruit Employees initiative has continued to prove successful. The quality of job applications submitted improved once again. Our US subsidiaries run similar programs. Turner, for example, stays in contact with former employees through its Alumni Circle program to provide them with an avenue for returning to the company. This is also true for interns who have proven themselves particularly well. Flatiron offers internships to young engineers and cooperates with selected colleges and universities. Our Australian subsidiary Leighton currently offers nearly 1,200 people initial training. New training initiative launched HOCHTIEF had a total of 402 trainees in around 30 different professions in Germany at the end of fiscal 2011, 101 of whom began their training at HOCHTIEF in the year under review. In 2011, we hired almost 70 percent of the trainees following their traineeship. Our training initiative launched in 2011 aims to further substantially improve the quality of training and the training quota by implementing uniform structures and standards. Among the steps taken by HOCHTIEF was naming training coordinators. Their job is to manage all of the training processes in a region, segment or branch, and they play an important role in shaping their content. Staff development at the forefront We work continuously to improve the professional and personal qualifications of our employees and offer them attractive professional prospects. In fiscal 2011, HOCHTIEF Academy, where we pool our continuing education measures in Germany, held 186 multi-day and 87 one-day training sessions. For the first time, the academy conducted events in Greece and Qatar. As in prior years, our employees again had the opportunity in 2011 to attend a part-time degree program to receive an officially recognized degree from HOCHTIEF Academy. The degrees offered include a Bachelor of Engineering Construction Site Management and a Bachelor of Facility Management. The first Facility Management class finished in 2011 with 13 graduates. At the close of 2011, a total of 72 employees were attending HOCHTIEF Academy, with 28 graduates completing this training successfully in At Turner in the United States, the training program covered topics including leadership, diversity, and project management. In addition, Turner University offers special seminars on subjects such as BIM (Building Information Modeling), green building and lean construction. Employees can participate in online training or attend classroom sessions. Flatiron Construction University offers specialty training programs for various target groups: from day-long operational excellence events through engineering forums to multi-day leadership development seminars for selected high-potential employees. In 2011, Flatiron employees had a choice of 200 courses, which included instructor-led training and online courses. Training for managerial staff fine-tuned The professional and personal caliber of management is among the key building blocks of HOCHTIEF s ongoing success. This is why we continually review our existing training options for managerial staff. In the year under review, for example, HOCHTIEF designed a worldwide development program for top management. The goal is to prepare top managerial staff from all of the Group s divisions for global markets and help them build personal networks through shared events on various topics such as strategy and international financing. 70 Annual Report 2011

71 Employees Uniform standards for performance-based remuneration system The compensation system was revised in 2011 to link performance-based compensation to the partially new set of key performance indicators. At the same time, we simplified the system and increased transparency. We set up a uniform basic structure for all units of the company in Germany. HOCHTIEF s aim is to encourage employees to act in a forward-looking and risk-conscious manner. The annual Occupational Safety Day is a tool geared to raising awareness of dangers and how to avoid them. In 2011, the motto was Safety first Protect yourself and your colleagues. Unsafe actions and near-accidents were the focus of this event. In parallel, the systematic collection of data on near-accidents was made more professional. Group Management Report Group Situation Sustainable company pension plan HOCHTIEF supports employees in securing their standards of living in retirement. Most of the Group s companies offer employees a pension plan that is part employer- and part employee-financed. Most companies in Germany also pay a performance-based component in addition to the yearly pension component under certain circumstances. The amount depends on the relevant net profit before changes in reserves. Measures promote work-life balance Being able to combine family and career is an increasingly important factor when it comes to selecting an employer as well as a source of motivation. We aim to put the appropriate conditions in place to foster this. In Germany, HOCHTIEF offers periodic or permanent teleworking options and joined forces with the Group Works Council in 2011 to rewrite and simplify the conditions for this type of work arrangement. In the United States, Flatiron arranged employee assistance programs that include counseling, parenting services, childcare, eldercare and legal services. In 2011, we again supported the German school in Doha, Qatar, financially and through personal involvement after having contributed substantially to its founding in A total of 113 students and 58 kindergarteners attended the school in in In 2011, we succeeded in further increasing the number of standardized occupational safety processes and the share of external certifications. In Europe alone, almost 200 audits were conducted in the operational units, and the OSHEP Center itself was audited. The share of occupational safety certifications Group-wide was 74.5 percent. Throughout our activities in the reporting year, the OSHEP Center kept in close contact with the Group s international units to promote our occupational safety culture and implement common strategies. Our Australian subsidiary Leighton and our US subsidiaries Turner and Flatiron again received several awards in 2011 for their exemplary occupational safety standards and accident-free projects.* Thanks to employees and employee representatives HOCHTIEF s excellent reputation and the quality of our services far above the average are down to our employees motivation, commitment, qualifications, and loyalty. The company s management therefore wishes to express its sincere thanks to all our staff for their hard work. Thank you also to our employee representatives. *For further information, please see page 102. Further improvement in occupational safety and health Traditionally, the HOCHTIEF Group gives high priority to occupational safety and health. In 2011, our cross-divisional competence center for occupational safety, health, and environmental protection (OSHEP) worked with the Corporate Responsibility function to rewrite the relevant Group Directive to include climate protection issues. Main points of the Executive Board and Supervisory Board compensation system The main points of the compensation system as well as details of payments received by individual members of the Executive Board and Supervisory Board from Group companies for fiscal year 2011 are summarized in the compensation report.** This report is to be considered part of the combined Company and Group Management Report. For the outlook on employees, please turn to Looking Ahead: Outlook and Opportunities on page 134. **For further information, please see page 23. Annual Report

72 Procurement Group Management Report Group Situation Further information on the subject of procurement is available on the Internet at *Indirect materials: Products from product categories including occupational safety, office materials and furniture, energy, vehicles, travel, telecommunications, tools. Procurement volume comes to EUR billion Sustainability in the supply chain strengthened Global direct purchasing successful In fiscal year 2011, we purchased supplies and services worth a total EUR billion, the equivalent of 66.9 percent of Group sales. Success in procurement as a global network During the fiscal year, procurement systematically advanced. An international purchasing network led by the Procurement Steering Committee and the Procurement Board successfully implemented the measures identified in Cooperation between the companies was also stepped up. For a number of divisions, we signed international master agreements with improved terms and conditions, especially for supplies and services from core business. This reduced procurement costs by ten to 20 percent for numerous projects, such as in residential construction at HOCHTIEF Solutions and civil engineering at Flatiron. Based on our network, we have set up more international procurement teams and pooled demand over a number of product categories, thereby achieving better terms and conditions. In the newly structured HOCHTIEF Solutions AG, the procurement organization was restructured for all the company s market segments and countries, and key procurement processes were made more effective and efficient. Close cooperation with suppliers and partner companies rounds out our purchasing network. We involve them in projects at an early stage, which in 2011 allowed us in many cases to effect technical streamlining (value engineering). Professional supplier management still a central pillar of procurement Selecting the right partners is a key component of HOCHTIEF s business success. Over the last few years, we have systematically improved our supplier management. This includes initial prequalification, constant assessment of our business partners, and measures to further develop subcontractors and thus to improve performance. In 2011, we enhanced further aspects of supplier management. For instance, we reissued our economic, ecological, and social requirements in a special set of rules, the HOCHTIEF Code of Conduct for Business Partners. Together with our Group-wide procurement directive, it describes our ethical principles for procurement and formulates the most important values, responsibilities, and standards of conduct for all persons and groups involved in the procurement process. We also attach great importance to the sustainable conduct of our suppliers. Hence we have implemented systematic monitoring and training of our partner companies. When auditing potential new partners in Southern and Eastern Europe for upcoming HOCHTIEF Solutions projects, for example, sustainability aspects such as security, environmental protection, social action, and anti-corruption played a more pivotal role. Over 20 companies were reviewed in on-site audits lasting several days, with regard to aspects such as their technical capabilities as well as compliance with required quality standards, their economic performance, and their corporate responsibility. We regularly engage in dialog with our strategic partners, for instance, with regard to systematic evaluation of projects, and coordinate our demands for sustainable action with them. In this way, we ensure extensive, continuous integration in all phases of supplier management. Successful processes in the purchasing of indirect materials* transferred to other units For a number of years, we have been consolidating the purchasing of indirect materials through master agreements with strategic partners and, in 2011, we achieved successes comparable with prior years. We can purchase sustainable products, such as highly protective work clothing, energy-saving electrical and IT goods, as well as products manufactured specifically with a 72 Annual Report 2011

73 view to conserving resources and protecting the environment, on good, stable terms. The unchanged high proportion of indirect material purchased under master agreements of 90 percent at HOCHTIEF Solutions, for example, and around 75 percent at our US subsidiaries makes us all the more determined to continue pushing the concept within the Group. An improved software solution also enabled us to increase internal customer satisfaction in the reporting year. The overall process, from demand and ordering through to billing, will now be represented in its entirety and thus accelerated further. During the year under review, further product groups that are key to our core business as direct materials were added. Items from construction chemistry and building materials are now ordered through the catalog, supplied, and integrated in the billing process through the system. More product categories will follow, thus achieving a procurement volume in the upper doubledigit million range. The procurement specialists from Turner Logistics support their clients all over the world. A US technology group awarded the company a contract with a total volume of EUR million to supply the equipment for technical building systems for 12 projects at international sites. This growing third-party business of Turner Logistics with international clients is attributable to its extensive expertise in technical matters and global logistics, as well as its longstanding partnership with reputable manufacturers. Turner Logistics boosted its activities in the regions of Germany, Eastern Europe, Canada, and Mexico. In the future, the company also aims to increasingly support its clients around the globe with services for the planning and procurement of equipment for technical building systems. In fiscal year 2011, our trading company on the European market, HOCHTIEF Global Trade, further expanded its business with construction materials, technical components, and the fit-out of buildings on major projects such as hotels and shopping malls thanks to its expertise in the international market environment. Group Management Report Group Situation Global sourcing on the rise HOCHTIEF has a presence in North and South America, Asia, and Europe with the Turner Logistics, HOCHTIEF Global Trade, and HOCHTIEF Procurement Asia trading companies and purchases supplies and equipment worldwide directly from manufacturers. In order to enhance efficiency even further going forward, we will merge the latter two entities into one trading company in 2012, under the name of HOCHTIEF Trade Solutions. Thanks to Turner Construction s strong position in the construction of data centers, Turner Logistics also received more orders in the United States in 2011 to plan and procure equipment for such data centers. The procurement volume for a project in Toronto, for example, was EUR million, for a project in California EUR 8.57 million. HOCHTIEF Procurement Asia, based in Hong Kong and China, substantially expanded its third-party business in fiscal year 2011 and strengthened its position in the region. The company has direct contact with Chinese manufacturers, carries out quality control on site, and has seasoned experts at every link in the supply chain. Procurement Asia generated more than 80 percent of its sales with projects in Eastern Europe, South America, the Middle East, Australia, and New Zealand. For instance, under our HOCHMEISTER brand launched in 2009, we positioned tile products on the building materials markets in Australia and New Zealand in the reporting year. In Italy, a reputable bathroom fittings chain procures HOCHMEISTER shower cubicles. Our trading companies work together successfully within the HOCHTIEF network: For the renovation of the Cathay Pacific Lounge at San Francisco Airport, for example, HOCHTIEF Procurement Asia purchased high-quality natural stone on behalf of Turner Logistics. Our HOCHMEISTER proprietary brand: A mark of highquality interior building products such as wall and floor coverings, sanitary appliances and equipment, lighting and hotel furniture. For further information, please see For the outlook on procurement, please turn to Looking Ahead: Outlook and Opportunities on page 134. Annual Report

74 Measuring Return on Capital: Return on Net Assets Group Management Report Group Situation For further information on our use of RONA as a measure of return on capital, please see our website, Value created brought down by Leighton results RONA model continues to provide Group-wide transparency at all levels RONA projected to resume positive trend in 2012 erated. Net assets can be calculated starting from the assets side or the liabilities side of the balance sheet. For divisional management purposes, net assets are determined starting from the assets side by taking total assets and deducting non-interest-bearing liabilities. *See glossary on page 211. **For a detailed calculation of cost of capital, please see Financial control system creates Group-wide transparency Sustained value growth for the Group as a whole is central to HOCHTIEF. The return on net assets (RONA) performance metric makes value growth measurable. It is integrated into all Group company planning and reporting systems to ensure transparency. It also provides the basis for assessing the profitability of investment decisions. Value-based performance measures are used alongside indicators focusing on earnings and cash flow* as key components of our management system. Return on net assets (RONA) The two main control parameters relating to return on capital are RONA and value created. If RONA exceeds weighted average cost of capital (WACC), value created is positive and the Group is creating value. Expressed in absolute terms, value created is RONA, minus WACC, times average net assets. RONA is return as a percentage of net assets and indicates how well HOCHTIEF s assets are performing as an investment. Return is defined for this purpose as operating earnings (EBITA, shown in the Operational Statement of Earnings) plus interest income from the Group s financial assets. The net assets figure reflects the total capital commitment from which returns are to be gen- The assets-side calculation of net assets is useful in monitoring operating activities as it specifically highlights accounting parameters that operational managers can influence, such as trade receivables, liquidity, and trade payables. For the HOCHTIEF Group s external reporting purposes, net assets are determined from figures on the liabilities side of the balance sheet. Net assets are obtained in a simple and easy-to-follow calculation by adding interestbearing liabilities items on the published balance sheet (shareholders equity, pension provisions, and financial liabilities). Since RONA is calculated on a pre-tax basis, deferred taxes are eliminated from the net assets figure to remove tax effects. Cost of capital** Cost of capital is calculated on a weighted average basis. Individual calculation parameters were reviewed in the year under review. Positive effects from a reduction in the risk-free interest rate that would have led to lower weighted average cost of capital were neutralized with an increase in beta. After adjustments to various parameters, the Group s pre-tax weighted average cost of capital came to ten percent and so showed no change compared with the prior year. The cost of capital was adjusted individually for each of the divisions. A wide range of elements are taken into account here, including divisional financing structure and risk profile in the form of beta. A division s risk profile is largely determined by competition risk and sectoral risk, capital ex- 74 Annual Report 2011

75 HOCHTIEF Group: Weighted average cost of capital (WACC) 2011 Risk-free interest rate 4.5 % Market risk premium 4.5 % Beta 1.2 x Post-tax cost of equity capital 9.9 % Pre-tax cost of debt capital 5.75 % Tax-deductibility of interest (tax shield) % Post-tax cost of debt capital 3.9 % Equity capital share 50 % HOCHTIEF Group: Return on net assets (RONA) (EUR million) (restated)* Operating earnings (EBITA)** Interest income Return ,014.4 Shareholders equity (including minority interests) 4, , Pension provisions Financial liabilities 3, ,222.7 *For further information on the restated figures, please see page 201 onwards. **See page 79 for the derivation of operating earnings (EBITA). Group Management Report Group Situation Debt capital share 50 % Post-tax WACC 6.9 % Effective rate of tax on income 31.5 % Deferred tax assets Deferred tax liabilities Pre-tax WACC 10.0 % Net assets at December 31 7, ,408.9 Average net assets 7, ,733.2 penditure in conjunction with capital formation, divisional diversification, fixed costs as a percentage of Return on net assets (RONA) Value created (absolute) (627.6) total costs, and customer and supplier dependency. Divisional value created and returns HOCHTIEF Group performance So that the performance and competitiveness of The HOCHTIEF Group generated a 1.8 percent return HOCHTIEF s divisions can be better measured and on net assets in fiscal 2011 (versus 15.1 percent in 2010). compared, they are managed with reference to divi- The negative impact on earnings at Leighton and nec- sion-specific costs of capital. The use of a separate essary risk provisioning for our toll road projects in the cost of capital for each division is made necessary by HOCHTIEF Concessions division were the main rea- the divisions differing business models and regional sons that we were unable to attain our target of equal- focus. Cost of capital was determined from scratch for ing cost of capital. the newly established HOCHTIEF Europe division. HOCHTIEF generated a return of EUR million, The HOCHTIEF Americas division increased value significantly less than the prior year (EUR 1,014.4 mil- created from EUR 58.7 million in the prior year to EUR lion). Average net assets rose from EUR 6.7 billion to 74.3 million in the year under review. The division s re- EUR 7.7 billion year on year. This represents an increase turn is higher than in the prior year. Alongside improve- of some 13.7 percent, largely reflecting the change in ments in the operating business, the increase in the net current assets at our subsidiary Leighton in the return reflects the profit on the sale of the remaining Asia-Pacific region. stake in HOCHTIEF do Brasil. HOCHTIEF Group value created was minus EUR RONA in the HOCHTIEF Asia Pacific division was million (2010: plus EUR million) the first minus 3.4 percent (2010: plus 22.5 percent) in fiscal time the figure has been negative since adopting the 2011, resulting in a significantly lower figure for value RONA metric in created. The main causes of the steep drop were the negative contributions to earnings from the large-scale Airport Link and Victorian Desalination Plant projects and the impairment charge at the Habtoor Leighton Group. Net assets increased mainly due to changes in Annual Report

76 Group Management Report Group Situation *Value created restated for new structure Divisions Return 2011 (EUR million) Net assets 2011 (EUR million) RONA 2011 (%) WACC 2011 (%) Value created 2011 (EUR million) Value created 2010 (EUR million) HOCHTIEF Americas HOCHTIEF Asia Pacific (131.5) 3, (586.0) HOCHTIEF Concessions , (66.0) 33.7 HOCHTIEF Europe* , (38.2) Group , (627.6) current assets headings such as inventories, receivables, and cash and cash equivalents at Leighton. HOCHTIEF Concessions generated RONA of 5.5 percent (2010: 12.7 percent), resulting in a substantially negative figure for value created. The causes were necessary risk provisioning for our road projects in Greece and Chile. The Greek projects were particularly hard hit by the economic crisis in Greece. With regard to the Vespucio Norte Express toll road, provisions had to be increased for the residual value guarantee on the sales of stakes in 2007/2008. The airports business contributed positively to RONA thanks to the healthy operating performance of the airport holdings. Outlook HOCHTIEF generated a 1.8 percent return on net assets in 2011, well below the weighted average cost of capital. On the basis of our corporate strategy geared to sustained value growth, we are confident that we will once again generate a return on net assets in excess of the cost of capital going forward. For 2012, HOCHTIEF once again expects to generate a strong positive figure for value created, generated from operations in all divisions. Value created at HOCHTIEF Europe was positive, at EUR 3.5 million, compared with a negative figure of EUR 38.2 million in the prior year. The improvement in RONA to 10.4 percent (2010: 9 percent) was largely attained through the focus on lucrative markets, rigorous risk management, and organizational fine-tuning within the division. The return also includes the positive effect from the resale of 50 percent of our offshore business. 76 Annual Report 2011

77 Value Added Group net value added close to EUR 5 billion Impact of negative net income from participating interests at HOCHTIEF Asia Pacific Majority of value added distributed to employees Value added generated by HOCHTIEF in 2011 was on a par with the prior year. Net value added fell slightly to a total of EUR 4,982.5 million, down EUR 98.2 million year on year. This represents a decrease of 1.9 percent. Sources Net value added as a proportion of corporate performance decreased by 3.3 percentage points to 21.1 percent. This proportionate decrease in value added is entirely due to the sharp, 3.6 percentage point fall in net income from participating interests compared with the prior year. Negative developments in the large-scale Victorian Desalination Plant project and notably the impairment loss at the Habtoor Leighton Group in the HOCHTIEF Asia Pacific division are the main causes of the EUR million lower net income from participating interests. The negative impact from net income from participating interests was largely compensated by a EUR 2,845.7 million increase in corporate performance relative to the prior year combined with a further slight decrease in input costs as a proportion of this figure to 73.6 percent. The 13.7 percent rise in corporate performance wholly relates to HOCHTIEF Asia Pacific, which like the HOCHTIEF Americas and HOCHTIEF Europe divisions achieved a slight absolute gain in net value added on the prior year. Sources of value added EUR million % EUR million % Sales 23, , Changes in inventories (143.6) Other operating income Corporate performance 23, , Materials (15,572.2) 65.9 (13,764.0) 66.2 Other operating expenses (1,792.9) 7.6 (1,553.7) 7.5 Other investment expenses (29.1) 0.1 (15.7) 0.1 Input costs (17,394.2) 73.6 (15,333.4) 73.7 Investment and interest income Net income from participating interests (584.7) Gross value added 5, , Depreciation and amortization (782.9) 3.3 (678.5) 3.3 Net value added 4, , Distribution of value added EUR million % EUR million % Employees 4, , Lenders Minority shareholders (7.6) HOCHTIEF shareholders Public authorities HOCHTIEF (160.3) Net value added 4, , The percentage distributed to lenders shows a moderate rise compared with the prior year. The share distributed to minority shareholders and the tax expense significantly decreased, primarily as a result of the collapse in earnings at the HOCHTIEF Asia Pacific division in the first half of the year. Group Management Report Group Situation Distribution The lion s share of value added in 2011 was distributed to employees, who accounted for EUR 4,860.3 million or 97.5 percent of the total. The increase relates to the HOCHTIEF Asia Pacific division, where the portion distributed to employees exceeded net value added. Annual Report

78 The challenge: Produce shining examples of industry A case in point: In Western Australia s Pilbara region, our Group company Thiess is undertaking the preparatory work for a new iron ore mine. The Leighton subsidiary s contract is for the entire mine establishment works including the haul roads and stockpile pads. As one of the world s leading contract mining companies, Leighton handles coal, iron ore, copper, and other resources in Australia and Asia. Our range of mine operator services includes setting up mines and their infrastructure following exploration, and managing the entire mining operation. The resources extracted by Leighton are used all over the world also to the delight of many a car aficionado. Our solution: Cutting-edge mining operations that supply the world with raw materials 78 Annual Report 2011

79 Financial Review Further growth in business volume Earnings impacted by nonrecurring items Sound starting basis for fiscal 2012 Earnings HOCHTIEF faced exceptional challenges in 2011 due to the difficult macroeconomic environment and problems with large infrastructure projects in Australia. Earnings were impacted by major nonrecurring factors. These notably affected the HOCHTIEF Asia Pacific division through our subsidiary Leighton Holdings and the HOCHTIEF Concessions division on account of toll road projects in Greece and Chile. Earnings were also brought down by the expense incurred as former members of the Executive Board exercised their special rights of termination following the change of control. Nonetheless, the Group substantially boosted business volume. Operational Statement of Earnings (EUR million) (restated)* Profit from operating activities Net income from participating interests (584.8) Non-operating earnings (+) 20.3 (+) 9.5 Operating earnings (EBITA) Net investment and interest income (168.7) (181.4) Non-operating earnings (20.3) (9.5) Profit before taxes (127.0) Income taxes (40.9) (210.3) Profit after taxes (167.9) Of which: Consolidated net profit (160.3) Of which: Minority interest (7.6) *For details of the restatements, please see page 201. Group Management Report Financial Review Bearing out HOCHTIEF s strong position in key international markets, sales grew to EUR billion, an increase of 15.5 percent on the prior year (EUR billion). Through its subsidiary Leighton Holdings, the HOCHTIEF Group showed strong presence in the growth markets of Australia and Asia as well as in the Gulf region. The Leighton Group boasts an extensive capability portfolio with prime focus on the contract mining business in the continuously growing primary resources market and on infrastructure activities. Reflecting Leighton Holding s outstanding position in the market and the large order backlog, the HOCHTIEF Asia Pacific division generated sales of EUR billion, 31.8 percent higher than the prior year (EUR billion). Alongside growth in the operating business, the sales figure also includes EUR million in positive exchange rate effects resulting from the stable trend in the Australian dollar over the course of the year. The HOCHTIEF Americas division brings together our activities on the North American continent and delivers a wide range of services in building construction, civil engineering, and infrastructure construction through our subsidiaries Turner, Flatiron, and E.E. Cruz. Our units specialize in lucrative segments with forward growth potential. The strong operating performance was countered, however, by the trend in the US dollar exchange rate. Translation into euros, the Group currency, produced EUR 371 million in nega tive exchange rate effects for the fiscal year. For this reason, sales in the HOCHTIEF Americas division, at EUR 6.18 billion, are 3.4 percent down on the comparative prior-year figure (EUR 6.4 billion). On a US dollar basis, sales rose by 2.4 percent. The HOCHTIEF Europe division underwent organizational restructuring effective as of the beginning of The operational units of the previously separate HOCHTIEF Europe, HOCHTIEF Real Estate, and HOCHTIEF Services divisions were brought together under a single roof, enabling us to even better exploit synergies and pool our existing expertise to the benefit of clients. Sales came to EUR 3.32 billion, up 2.8 percent on the prior-year sales of EUR 3.23 billion. A major share of this increase came from the real estate Solutions business line, which generated significantly Annual Report

80 Group Management Report Financial Review higher sales by successfully marketing developments and from numerous building starts. International activities also contributed substantially to sales in the HOCHTIEF Europe division as a result of work for the giant Barwa Commercial Avenue project in Qatar. HOCHTIEF forged ahead with the process of internationalization in the past fiscal year and stepped up collaboration between operational units across all continents. The proportion of sales generated on international markets consequently remained at a very high level in 2011, at 91.2 percent (2010: 91.9 percent). Strong divisional operating performance unable to compensate for losses due to nonrecurring items The HOCHTIEF Group s earnings performance in 2011 was shaped by very varied patterns of development in the individual divisions. Strong operating earnings performance at HOCHTIEF Americas, HOCHTIEF Europe, and the airports business contrasted with severe impacts on earnings at HOCHTIEF Asia Pacific from two major infrastructure projects and associate Habtoor Leighton Group. Earnings were also hit by risk provisioning that became necessary for our toll road projects in Greece and Chile as well as expenses incurred for departing members of the Executive Board. Against this backdrop, operating earnings (EBITA) for the Group as a whole, at EUR 62 million, were far below the comparative figure of EUR million attained in the prior year. The HOCHTIEF Americas division generated very strong earnings. HOCHTIEF Americas lifted operating earnings by 10.4 percent from EUR million in the prior year to EUR million in the reporting period. The key to success consisted as before of high-quality orders coupled with broad diversification of activities in the American building construction and civil engineering market. In building construction, Turner concentrated on the high-growth segments of education, healthcare, sports, and commercial buildings as well as on green building, a segment in which it retained the US market leadership in In civil engineering, HOCHTIEF notched up further successes with subsidiaries Flatiron and E.E. Cruz and had a hand in a number of major infrastructure projects. HOCHTIEF Americas also made a profit on the sale of the remaining stake in HOCHTIEF do Brasil. In the HOCHTIEF Asia Pacific division, strong operating performance in the core business was negatively impacted by problems on two large infrastructure projects and in the Habtoor Leighton Group. Due to cost and schedule overruns, the two major projects concerned Airport Link in Brisbane and Victorian Desalination Plant near Melbourne will be completed at a substantial loss. Earnings performance at the Habtoor Leighton Group was also adversely affected by the persistently difficult market environment in Dubai and impairment charges on receivables from legacy contracts. In addition to meeting the operating loss, Leighton Holdings took a charge of EUR million for the impairment loss on its investment in the Habtoor Leighton Group. On the upside, Leighton Holdings took in an exceptional profit of EUR 191 million on the sale of three mine projects to miners BHP Billiton and the sale of a five percent stake in Burton Coal Mine. The unsatisfactory overall performance in fiscal 2011 resulted in an operating loss in the HOCHTIEF Asia Pacific division of EUR million (2010 operating earnings: profit of EUR million). Operating earnings in the HOCHTIEF Concessions division were comfortably in the black at EUR 41.6 million but well short of the EUR million 80 Annual Report 2011

81 Financial Review recorded in the prior year. The airports and public-private partnerships businesses performed very differently from each other. In the airports segment, the strong overall operating performance at our airport holdings, with a further overall rise in passenger numbers, was supplemented by a reversal of provisions for Budapest Airport and Düsseldorf Airport. Other posi tive earnings factors included a cut in Greek dividend taxation affecting dividends from Athens Airport and the payment of a success fee by investors for above -average value growth in the airport portfolio over the past five years. Conversely, operating earnings in the public-private partnerships segment were significantly affected by risk provisioning for the Greek toll road projects. The Greek debt crisis took a sharp turn for the worse as 2011 progressed. This prompted HOCHTIEF to subject the valua tion of its investment in the Maliakos-Kleidi and Elefsina-Patras-Tsakona toll road projects to thorough review. Accounting provisions of just under EUR 60 million were recognized to cover the identified financial risks. We also added a further EUR 29.4 million to the risk provisioning for the residu al value guarantee given to the purchaser of the stake in the Vespucio Norte Express toll expressway in Chile. Success fees for transportation and social infrastructure PPP contracts were not enough to offset this negative impact. The HOCHTIEF Europe division improved operating earnings by a significant 34.6 percent, from EUR million in the prior year to EUR million in The main factor here was a marked improvement in project earnings, which showed the positive effects of action taken to restructure our building construction business in Germany and the focus on high-margin projects. International activities likewise developed successfully and provided a large contribution to earnings. The division also generated exceptional income on the resale of a 50 percent stake in the Beluga HOCHTIEF Offshore joint venture. Alongside the results from the divisions, Group operating earnings additionally include the earnings of the Corporate Headquarters unit. These were negatively affected by about EUR 35 million in expenses from the exercise of special rights of termination by former members of the Executive Board. HOCHTIEF s net income from participating interests dropped a long way from a positive EUR million in the prior year to a negative EUR million in the reporting period. This was largely due to the losses on the Victorian Desalination Plant project and from associate Habtoor Leighton Group. As a result, net income from participating interests in the HOCHTIEF Asia Pacific division, at minus EUR million, fell far short of the prior-year figure (plus EUR 40.7 million). A significantly better contribution to net income from participating interests was generated by the HOCHTIEF Americas division. Our US subsidiaries Turner and Flatiron improved net income from their business portfolio by 49.9 percent to EUR 64.6 million, compared with EUR 43.1 million in the prior year. Net income from participating interests in the HOCHTIEF Concessions division was likewise positive at EUR million, EUR 13.6 million up on the prior year (EUR million). The airports business put in a very healthy performance with a substantially higher net income from participating interests of EUR million, EUR 30.2 million up on the prior year (EUR million). Alongside a further improvement in operating earnings, contributing factors here included a reduction of the tax burden at Athens Airport and reversal of a provision for capital expenditure commitments at Budapest Airport. In light of the specific plans to sell and the status of the sale negotiations, non-current assets belonging to the airport holdings were reclassified as of September 30, 2011 in accordance with IFRS 5 as non-current assets held for sale. This had the consequence that the affected equitymethod investments in the airport business ceased to be accounted for using the equity method from the date of the reclassification, and net income for the airports business only includes profit or loss from those investments for the first nine months of the fiscal year. The prior-year comparative figures, in contrast, include the profit and loss on the equity-method investments for Group Management Report Financial Review Annual Report

82 Group Management Report Financial Review *The full Consolidated Statement of Cash Flows appears on page 146, in the Financial Statements and Notes section. the full fiscal year from January to December In the PPP business, accounting for losses from the Greek toll roads had a negative impact, and net income from participating interests was down on the prior year as a result. In the HOCHTIEF Europe division, net income from participating interests was well into positive figures, at EUR 30.3 million. This was EUR 6.8 million lower than in the prior year, however, due to lower income from joint ventures and other participating interests. Borrowing and investment markets were highly volatile and overshadowed by uncertainty in 2011 because of the financial crisis. In this difficult environment for business finance, HOCHTIEF secured the Group s longterm funding on good terms. This included refinancing, ahead of schedule, the syndicated credit facility due to expire at the end of 2012 with a EUR 2 billion facility running for five years to December HOCHTIEF also successfully placed a EUR million promissory note loan issue at interest rates well below those of past years. In our holdings of marketable securities, we applied active portfolio management, in part with the disposal of securities held in special-purpose investment funds. All told, transactions on the financial markets resulted in net investment and interest income of minus EUR million in the reporting period, compared with minus EUR million in the prior year. Within this net total, net interest income improved by EUR 5.3 million to minus EUR million. Turnaround in operating earnings achieved in second half-year After the large hit to earnings at the HOCHTIEF Asia Pacific division in the first half of 2011, the turnaround was achieved operationally in the remainder of the year. Profit before taxes, however, at a loss of EUR 127 million, was well down on the prior-year profit of EUR million. The project losses incurred at Leighton Holdings resulted in the recognition of deferred tax assets at the HOCHTIEF Asia Pacific division. Deferred tax consequently shows an income item of EUR 20.9 million. This was countered by current tax expense of EUR 61.8 million. The net result was a tax expense for the reporting period of EUR 40.9 million. In the prior year, strong earnings figures and the ensuing large figure for current tax resulted in a tax expense of EUR million. Profit after taxes dropped steeply from the prior-year figure (EUR million) to a loss of EUR million. The consolidated net loss attributable to HOCHTIEF shareholders is EUR million, compared with a consolidated net profit of EUR 288 million in the prior year. The amount allocated to minority interest out of profit after taxes for fiscal 2011 is a loss of EUR 7.6 million (2010: profit of EUR million). The loss allocated to minority interest is much lower relative to the consolidated net loss attributable to HOCHTIEF shareholders because notable positive contributions to earnings were generated in parts of the Group in which there are significant minority shareholdings. Alongside the airports business, this also includes parts of the business portfolio in HOCHTIEF Europe and HOCHTIEF Americas. Statement of Cash Flows for the HOCHTIEF Group (Summary)* (EUR million) Net cash provided by operating activities 1, ,036.0 Net cash used for investment activities (1,277.0) (970.9) Net cash provided by/(used in) financing activities (21.2) Net cash increase/(decrease) in cash and cash equivalents (272.4) Cash and cash equivalents at year-end 2, ,451.1 Of which: Included in assets held for sale [15.9] [-] Of which: Cash and cash equivalents as per Consolidated Balance Sheet [2,264.8] [2,451.1] 82 Annual Report 2011

83 Financial Review Cash flow Consolidated statement of cash flows Net cash provided by operating activities was strongly positive, at EUR 1.03 billion. The operating business thus brought in a cash inflow of a similar high level to the prior year (EUR 1.04 billion). The severe impact on profit after taxes from Leighton Holdings and the public-private partnership business is not fully reflected in net cash provided by operating activities because a large share of the losses resulted from factors that have not yet had a cash impact. Inventory reductions at the HOCHTIEF Europe division also led to an improvement in net cash provided by operating activities. Additions to receivables from the operating business, on the other hand, added to the amount of cash tied up in working capital at HOCHTIEF Americas. Capital expenditure reached a new dimension in fiscal 2011, at EUR 2.02 billion. This exceeded the already high prior-year figure of EUR 1.13 billion by a further EUR million. We placed the focus of our capital spending policy on replacement and modernization of plant and equipment in the mining segment and of construction plant to undertake complex projects in the infrastructure business. The HOCHTIEF Group committed a total of EUR 1.51 billion for expenditure on intangible assets and property, plant and equipment, compared with EUR million in the prior year. The majority of this capital expenditure EUR 1.39 billion (2010: EUR 837 million) was accounted for by Leighton Holdings. Capital investment in financial assets increased to EUR million in the past year, more than doubling the prior-year figure. This spending was concentrated on the airports business in the HOCHTIEF Concessions division as well as on strategic additions to the business portfolio in the HOCHTIEF Asia Pacific and HOCHTIEF Americas divisions. In the HOCHTIEF Concessions division, the airports business was further augmented with investment in increasing the stake in Budapest Airport. Leighton Holdings also invested EUR million in its business portfolio. Capital expenditure to supplement the business portfolio in the HOCHTIEF Americas division mainly related to stakes in joint ventures at Flatiron. The large cash outflow from capital expenditure in the year under review was countered by EUR million in proceeds from disposals of property, plant and equipment and out of divestitures from the business portfolio. A large fraction of this cash inflow EUR million was generated from the successful sale of parts of the Australian iron ore business and other property, plant and equipment and of disposals of business stakes at Leighton Holdings. In the prior year, the cash inflow from sale transactions of this kind across the HOCHTIEF Group came to EUR million and mainly related to amounts from the sale of the Luxembourg reinsurer Contractors and the partial sale of Leighton Holding s activities in India. Changes in securities holdings and financial receivables include a substantial cash inflow due to disposals of securities. Loans granted had a contrary effect. The net outcome is a EUR 146 million cash inflow from changes in securities holdings and financial receivables. In the prior year, additions to our securities portfolio resulted in a cash outflow of EUR million. Consolidation changes involving subsidiaries added EUR 13.6 million to cash in the fiscal year. In the prior year, such changes produced a large cash outflow of EUR million. Most of this related to the deconsolidation of Contractors and the partial sale of Leighton Holding s activities in India. In total, net cash used in investing activities in the reporting period came to EUR 1.28 billion, compared with EUR million in the prior year. Against the backdrop of the economic crisis and growing sovereign debt in the USA and a number of European countries, the financial markets in 2011 were subject to increasing uncertainty. This also significantly compounded the challenges faced in business finance. HOCHTIEF responded early to these developments and pursues a long-term, sustainable funding strategy. The focus of activities in fiscal 2011 was on securing sufficient liquidity for our operating business and further improving the terms and structure of our funding. After generating a net cash inflow from financing activities of EUR 417 million in the prior year from new borrowings and making partial use of authorizations to issue new Group Management Report Financial Review Annual Report

84 Group Management Report Financial Review *See glossary on page 212. **For further information, please see page 188. shares, 2011 brought a cash outflow recorded as net cash used in financing activities of EUR 21.2 million. New borrowing and debt service practically canceled each other out, at EUR 1.24 billion each. The main items of new borrowing related to drawings on the syndicated credit facility by HOCHTIEF Aktiengesellschaft and the use of outside sources of funding by Flatiron. In addition, a capital raising at Leighton Holdings in early 2011 generated a significant inflow of cash that is included in the EUR million total figure for payments into equity by minority shareholders (2010: EUR 68.7 million). In the prior year, the share issue by HOCHTIEF Aktiengesellschaft was included with a cash inflow of just under EUR 400 million. Payments of dividends to HOCHTIEF s and minority shareholders reduced cash and cash equivalents by EUR million. EUR 312 million in cash was used for this purpose in the prior year. Cash and cash equivalents stood at EUR 2.26 billion on the Consolidated Balance Sheet as of December 31, 2011, a reduction of EUR million compared with December 31, 2010 (EUR 2.45 billion). The effect of exchange rate changes included in the total came to EUR 52.1 million. Transfers of cash from the pension fund (CTA) additionally boosted cash and cash equivalents by EUR 50 million. In the opposite direction, the reclassification of EUR 15.9 million cash and cash equivalents relating to the airports business as noncurrent assets held for sale reduced cash and cash equivalents in the Consolidated Balance Sheet. Free cash flow net cash provided by operating activities (EUR 1.03 billion) minus net cash used in investing activities (EUR 1.28 billion) came to a negative figure of EUR million in fiscal 2011 (2010: positive free cash flow of EUR 65.1 million). Group funding secured for the long term successful placement of new syndicated credit and guarantee facility* promissory note loan refinanced We successfully refinanced our existing syndicated credit and guarantee facilities in December 2011, thereby securing the Group s strategic funding in terms of credit and guarantee facilities for the long term. The new syndicated facility for a total of EUR 2 billion and running to the end of 2016 consists of a guarantee facility tranche totaling EUR 1.5 billion and a credit facility tranche for EUR 500 million that can be drawn on a revolving basis. Drawings on the guarantee facility come to EUR 1.12 billion at the reporting date. Drawings on the credit facility tranche are made flexibly as needed and total EUR 400 million at the reporting date. The terms may be regarded as attractive compared with current market conditions. In November of the year under review, we also successfully placed a further promissory note loan issue in a difficult market environment to refinance a 2009 promissory note loan ahead of schedule and on significantly more favorable terms. The new five-year promissory note loan for EUR million represents a further benchmark transaction for HOCHTIEF that provides the Group with secure funding for the loan duration.** The terms are well below the level obtained in previous years. Placement of the issue has also further extended the maturity profile of our debt portfolio. In a particularly encouraging development, non-german investors took up some 40 percent of the issue. This reflects the sustained excellent credit standing of the HOCHTIEF Group on national and international capital markets alike. The loan agreements correspond to those of previous promissory note loan issues. We ensure as before that all lenders have equal terms. With the latest promissory note loan issue, we have now placed a total of EUR 756 million in long-term funding in this attractive finance segment in Germany and internationally. 84 Annual Report 2011

85 Financial Review The Group also has bilateral, short-term credit facilities to furnish operational units with sufficient cash resources to finance day-to-day business. These facilities have to be renewed annually and run to a total in excess of EUR 312 million. Over 80 percent of the facilities have written bank confirmation for up to a year. The terms are in keeping with the high credit standing of the HOCHTIEF Group. Drawings on these short-term credit facilities were zero as of the reporting date. The syndicated guarantee facility is supplemented with bilateral guarantee facilities, which place roughly an additional EUR 900 million at the Group s disposal as of the year-end This represents an increase of some 57 percent or EUR 327 million compared with the prior year. Here, too, the terms accord with the ongoing good credit standing of the HOCHTIEF Group. The various borrowing instruments taken together secure long-term, broadly diversified funding for the Group, on borrowing terms and conditions that continue to be acceptable and attractive to HOCHTIEF. None of the borrowing instruments taken out by HOCHTIEF is secured and all are pari-passu, with all lenders having equal seniority. The syndicated and bilateral facilities are supplemented with project-related borrowing as needed. Such borrowings are each negotiated and agreed on the basis of a specific project, can be put to flexible use and are repaid out of the proceeds when the project is sold. If at all, loans are secured against project assets themselves and, in almost all cases, any recourse to the HOCHTIEF Group is expressly precluded. A case in point is the successful refinancing of aurelis. At the end of the fiscal year, this HOCHTIEF company secured follow-on funding for EUR 700 million on attractive market terms until September 2015, replacing the existing loan a year ahead of the regular schedule. As in the prior year, there are loans in place on a local basis for the HOCHTIEF Americas and HOCHTIEF Asia Pacific divisions. The US bonding facility is very important in this regard. This covers a total of approximately EUR 5 billion (USD 6.5 billion) and as before represents the cornerstone of our funding for the US business. Both Turner and Flatiron make use of the facility. The bonding facility was restructured in the year under review, adding new surety companies and increasing the total to some EUR 5 billion. A facility of this large size is necessary in the US market, where construction projects often have to be bonded with 100 percent of the contract value, in contrast to other jurisdictions where ten percent performance guarantees are generally required. Flatiron additionally has bilateral arrangements with banks in the form of both credit and guarantee facilities. These are primarily used in Canadian activities, where bank guarantees are frequently required rather than surety bonds. The local surety bonding facility is the subject of a Group guarantee from HOCHTIEF Aktiengesellschaft. Leighton Holdings enjoys an undiminished strong standing in the Australian capital market. Its borrowing activities are carried out on a bilateral or syndicated basis. As before, no security or underwriting is provided by HOCHTIEF Aktiengesellschaft or any other Group company. Group Management Report Financial Review Annual Report

86 Group Management Report Financial Review Consolidated Balance Sheet (EUR billion) Assets Liabilities Intangible assets, property, plant and equipment, and investment properties Financial assets Other non-current assets and deferred taxes Inventories, trade receivables and other current assets Marketable securities, cash and cash equivalents Assets held for sale Non-current assets Current assets Non-current liabilities Current liabilities Shareholders equity Provisions Other non-current liabilities and deferred taxes Provisions Other current liabilities With the exception of the promissory note loan issues currently in place as well as the short-term credit and guarantee facilities, which have to be renewed annually, refinancing the syndicated facilities ahead of schedule at the end of 2011 means that we have no borrowing arrangements falling due in As in the year under review, we will additionally continue to keep a close watch on the financial and capital markets and take advantage of any opportunities to maintain and further diversify the Group s secure longterm financing. Balance sheet HOCHTIEF sustains growth trend HOCHTIEF continued to operate on the basis of a strong and rock-solid balance sheet in fiscal Despite the difficult macroeconomic environment and problems with individual projects, we succeeded in sustaining our growth trend The documentation for the syndicated facilities and the promissory note loan issues features identical changeof-control conditions as in the prior year. Change of control takes effect when a 30 percent shareholding in HOCHTIEF Aktiengesellschaft is exceeded (ACS Group companies excepted). Creditors have a right to terminate their loan commitments for cause if a 60-day negotiation period from the date of change of control expires without agreement. Comprehensive ring-fencing clauses for transactions with ACS have also been retained or built into new credit facilities as applicable. The HOCHTIEF Group had total assets of EUR 15.8 billion as of the December 31, 2011 balance sheet date, 5.4 percent up on the prior year. HOCHTIEF launched a process to sell the airports business in As of September 30, 2011, the transaction had reached a very advanced stage with potential buyers, and the relevant assets and liabilities were reclassified in accordance with IFRS 5. The negotiations nonetheless became delayed due to the deteriorating macroeconomic envi ron ment toward the year-end and were unable to be finalized in We have continued to pursue the planned sale past the year-end reporting date, however, with the aim of unlocking the value in our airports portfolio. The assets and the liabilities to external creditors relating to the airports business have thus been reclassified to separate current items on the assets and the liabilities and shareholders equity sides 86 Annual Report 2011

87 Financial Review of the balance sheet as of December 31, This notably affected the amounts reported as of the yearend for financial assets and non-current financial receivables. The balance sheet for the end of fiscal 2011 showed non-current assets of EUR 5.22 billion. This represented a EUR million reduction on the figure as of the end of fiscal 2010 (EUR 5.87 billion). The large difference is primarily accounted for by a decrease of EUR 1.4 billion on reclassification of assets relating to the airports business as non-current assets held for sale. Intangible assets, at EUR million, were above their prior-year level (EUR million). This increase mainly related to licenses acquired in connection with the implementation of purchased application software and to the inclusion of Devine Ltd. as a fully consolidated subsidiary at Leighton Holdings. Concessions and similar rights consequently reached EUR million at the year-end (2010: EUR 90.1 million). Intangible assets include EUR million (2010: EUR million) in goodwill recognized on initial consolidation of fully consolidated subsidiaries. The Group s property, plant and equipment rose by EUR million to EUR 2.24 billion. The additions relative to the figure as of December 31, 2010 (EUR 1.81 billion) mostly reflect the high level of capital expenditure at Leighton Holdings. As in the prior year, investment properties primarily related to real estate held in the HOCHTIEF Europe division and at EUR 21.7 million showed little change (2010: EUR 24 million). Non-current financial assets came to EUR 1.1 billion, significantly down on the prior year-end (EUR 2.51 billion). The main factor here was the reclassification of assets relating to the airports business as non-current assets held for sale. Also significant in the decrease in non-current financial assets were losses at the Habtoor Leighton Group together with the impairment loss on the carrying amount of the investment in that group. Non-current financial receivables, at EUR million, were up EUR million on the prior year (EUR million). An increase in this item due to loans from Leighton Holdings to the Habtoor Leighton Group was largely offset by the reclassification of financial receivables relating to the airports business as non-current assets held for sale. Other receivables and other assets rose by EUR 82.7 million to a total of EUR million. A decrease from the transfer of cash and cash equivalents from the pension fund was more than made up for here by an increase in sundry other assets. Deferred tax assets went up as a result of the project losses incurred at Leighton Holdings by EUR 14.1 million to EUR million. HOCHTIEF saw current assets grow by EUR 1.46 billion to EUR billion in 2011, compared with EUR 9.12 billion at the end of The year-end figure for 2011 includes EUR 1.46 billion in non-current assets held for sale relating to the airports business. Trade receivables from the operating business gained substantially with the expansion of business activities within our divisions to total EUR 4.68 billion at the end of fiscal 2011, up EUR million on the end of the prior year (EUR 3.98 billion). Inventories rose only marginally over the course of the year, by EUR 18.4 million to EUR 1.29 billion. Additions to inventories due to the inclusion of real estate developer Devine Ltd. as a fully consolidated subsidiary for the first time at Leighton Holdings were countered by reductions on disposals of real estate development projects in the Real Estate Solutions business line at the HOCHTIEF Europe division. We rigorously streamlined our securities portfolio in the past fiscal year and further improved our Group funding structure in the process. A substantial amount of the cash generated by sales of fixed-interest securities, fund units, and shares was used to repay outstanding loans as well as for capital expenditure. As a result, marketable Group Management Report Financial Review Annual Report

88 Group Management Report Financial Review securities decreased by EUR million to EUR million. HOCHTIEF had EUR 2.26 billion in cash and cash equivalents at the December 31, 2011 balance sheet date. This was EUR million down on the end of fiscal 2010 (EUR 2.45 billion). As well as for funding the ongoing operating business, cash was notably used for capital expenditure on property, plant and equipment and financial assets. HOCHTIEF Group shareholders equity came to EUR 4.11 billion at the end of fiscal 2011, EUR million down on the figure as of December 31, 2010 (EUR 4.27 billion). A substantial part of the decrease was accounted for by EUR million in dividends for HOCHTIEF s and minority shareholders. Other factors with a negative impact on shareholders equity were profit after taxes (a EUR million loss), actuarial gains and losses (EUR 43.6 million), as well as currency translation differences and changes in fair value of financial instruments (EUR 9.4 million). In the opposite direction, Group shareholders equity was significantly added to by other changes not recognized in the Statement of Earnings (EUR million). EUR million of this amount represented the minority interest in the capital raising at Leighton Holdings. The equity ratio (shareholders equity to total assets) stood at 26 percent as of the December 31, 2011 balance sheet date (December 31, 2010: 28.5 percent). Non-current liabilities fell in the course of fiscal 2011 by EUR million to EUR 3.2 billion at the end of the year. The decrease notably related to maturity-based reclassifications to current financial liabilities. Non-current liabilities were reduced by EUR million to EUR 2.3 billion at the fiscal year-end. The non-current provisions item showed an increase of EUR 97 million in fiscal 2011, from EUR million on December 31, 2010 to EUR million as of December 31, Within this figure, provisions for pensions and similar obligations rose by EUR 72.2 million to EUR million. Other non-current provisions chiefly consist of personnel and insurance-related obligations together with risk provisioning for toll road projects, and showed a net increase of EUR 24.7 million to EUR million. Other liabilities held level with the prior year, at EUR million, and mainly consist of liabilities relating to derivatives. The HOCHTIEF Group recorded a substantial, EUR 1.14 billion increase in current liabilities, which came to EUR 8.49 billion at the end of fiscal 2011, compared with EUR 7.35 billion as of December 31, The driving factors here consisted of our activities to optimize and secure the Group s finances as well as the related short-term borrowings combined with reclassifications of loan liabilities previously reported under the non-current heading. Current financial liabilities rose as a result by EUR million to EUR 1.49 billion. Trade payables swelled with ongoing growth in the operating business by EUR million to a year-end figure of EUR 5.63 billion. Current other provisions remained broadly unchanged at EUR million. Other liabilities stood at EUR million, slightly up on the level as of December 31, 2010 (EUR million). 88 Annual Report 2011

89 Financial Review Summary assessment of the business situation by the Chairman of the Executive Board The HOCHTIEF Group was impacted by various nonrecurring factors during the year under review, but was operationally highly successful in its markets the world over and positioned itself in high-growth markets. The order backlog surpassed the 2010 record and is enough to keep our company operating at capacity for nearly two years. The HOCHTIEF Americas division had a successful year. Our subsidiary Leighton had to deal with substantial losses on two major projects Airport Link, Brisbane, and Victorian Desalination Plant near Melbourne and negative impacts on earnings from associate Habtoor Leighton Group. The HOCHTIEF Concessions division s Chilean and Greek toll road projects also affected the consolidated results. Additionally, financial market turbulence and uncertainty regarding Europe s forward economic development negatively influenced negotiations for the sale of the airports business and resulted in the transaction being delayed. Our projection for fiscal 2012 is for profit before taxes and consolidated net profit from the operating business to be slightly below the current all-time record set in As a global construction services provider with divisions serving the European, American, and Asian markets, HOCHTIEF is ideally poised to accomplish this. With our established business models and our focus on three strategic growth areas creating sustainable energy infrastructure, shaping major cities, and building state-of-the-art transportation infrastructure we target growth, also through times of crisis, and exploit these outstanding opportunities. To meet the challenges, we boast a comprehensive capability portfolio, technical expertise, and decades of experience. Our expectations for fiscal 2012 are subject to risk, however, to the extent that uncertainties can arise concerning the onward development of the global economy and the financial markets. Report on relations with affiliated companies in accordance with Section 312 of the German Stock Corporations Act (AktG) As there is no control agreement with our major shareholder ACS Actividades de Construcción y Servicios S. A., the Executive Board of HOCHTIEF Aktiengesellschaft is required to prepare a report on relations with affiliated companies in accordance with Section 312 of the German Stock Corporations Act (AktG). This report concludes with the following statement from the Executive Board: There were no reportable transactions at HOCHTIEF Aktiengesellschaft in relation to the controlling company or its affiliates in the reporting period June 1 to December 31, No actions were undertaken or refrained from at the instruction or in the interest of the controlling company or its affiliates. Group Management Report Financial Review Annual Report

90 The challenge: A shopping experience that has something for everyone A case in point: In the desert state of Qatar we are building Barwa Commercial Avenue (BCA), scheduled for completion by mid This shopping boulevard 8.5 kilometers long and 65 meters wide is located on the outskirts of the country s capital, Doha. It is a contract of remarkable size for HOCHTIEF Solutions: With a total volume of EUR 1.4 billion, it set a new record as the largest single contract in the company s history. With floor space of nearly 900,000 square meters that s about the size of 110 soccer fields BCA will feature a mix of 600 stores and restaurants plus 1,300 offices and apartments. In short, a whole world of choice that leaves nothing to be desired. Our solution: Shopping centers that open up new dimensions 90 Annual Report 2011

91 HOCHTIEF Aktiengesellschaft (Holding Company): Financial Review HOCHTIEF Aktiengesellschaft Statement of Earnings (Summary) (EUR million) Sales Changes in the balance of construction work in progress (19.6) (2.1) Other operating income Materials (14.3) (130.7) Personnel costs (36.4) (80.6) Depreciation and amortization (11.5) (9.8) Other operating expenses (141.8) (153.5) Net income from financial assets Net interest income (84.3) (66.0) Writedowns on financial assets and marketable securities (0.2) (1.4) Profit from ordinary activities Extraordinary income Extraordinary expenses 0.0 (0.7) Income taxes. (2.4) Net profit before changes in reserves Net profit brought forward Changes in revenue reserves 0.0 (77.3) Unappropriated net profit HOCHTIEF Aktiengesellschaft Balance Sheet (Summary) HOCHTIEF Aktiengesellschaft heads the HOCHTIEF Group s divisions as a strategic management holding company. Its profits are therefore mostly determined by net income from participating interests as well as by revenues and expenditure relating to its function as a holding company. The HOCHTIEF Aktiengesellschaft annual financial statements are prepared in accordance with the German Commercial Code (HGB) and Stock Corporations Act (AktG) and have been given an unqualified auditors report by auditors Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft. There are no recognition and measurement changes relative to the prior year. The 2011 Annual Financial Statements and Management Report of HOCHTIEF Aktiengesellschaft are published in the electronic Bundesanzeiger (Federal Official Gazette). Earnings The transfer of service activities and their workforces from HOCHTIEF Aktiengesellschaft to HOCHTIEF Solutions AG affects numerous items in the Statement of Earnings, resulting in a significant decrease in some such items and limited comparability with the previous year. Group Management Report Financial Review (EUR million) Fixed assets Dec. 31, 2011 Dec. 31, 2010 Intangible assets and property, plant and equipment Financial assets 2, , , ,171.1 Current assets Inventories, receivables and other assets, and prepaid expenses 1, ,087.2 Cash and cash equivalents, and marketable securities , ,678.5 Excess of plan assets over obligations Total assets 3, ,928.1 Shareholders equity 1, ,939.7 Provisions Liabilities 1, ,835.1 Total liabilities 3, ,928.1 Annual Report

92 Group Management Report Financial Review HOCHTIEF Aktiengesellschaft s reported sales (EUR 69.8 million) comprise revenue from performing the functions of a holding company. Sales also include revenue from construction projects where contract performance and processing was left with HOCHTIEF Aktiengesellschaft for organizational reasons in the context of the transfer of construction operations to HOCHTIEF Solutions AG. Such projects resulted in significantly higher sales in the prior year, primarily relating to the Russia operating location. Those projects have been finally invoiced and future projects are the responsibility of a local subsidiary. The prior-year sales figure was consequently substantially larger, at EUR million. The materials item was similarly affected and decreased from EUR million in the prior year to EUR 14.3 million in the reporting period. Personnel costs came to EUR 36.4 million, compared with EUR 80.6 million in the prior year. Other operating expenses were also increased by the expense incurred as former members of the Executive Board exercised their special rights of termination following the change of control. In other respects, profit in the HOCHTIEF Aktiengesellschaft separate financial statements mostly consists of net income from participating interests. Due to lower income from profit/loss transfer agreements and significantly larger expense from transfer of losses, income from financial assets (net), at EUR million, was substantially lower than in the prior year (EUR million). Balance sheet In keeping with its function as a holding company, HOCHTIEF Aktiengesellschaft s balance sheet is dominated by financial assets and receivables from affiliated companies. These represent 93.6 percent of total assets, compared with 78.6 percent in Marketable securities (EUR million) and cash and cash equivalents (EUR million) were also significantly higher in the prior year. The decreases in marketable securities by EUR million to EUR 46 million and in cash and cash equivalents by EUR million to EUR 44.1 million are largely due to the measures adopted in the fiscal year to optimize the structure of the Company s finances. HOCHTIEF Aktiengesellschaft s subscribed capital is divided into 76,999,999 no-par-value shares and has a nominal value of EUR million. Deducting the amount accounted for by treasury stock, subscribed capital stands at EUR million. There is virtually no change in the capital reserve at EUR million and in revenue reserves at EUR million. Shareholders equity came to the equivalent of 47.6 percent of total assets (2010: 49.4 percent). Liabilities amount to EUR 1.86 billion (2010: EUR 1.84 billion) and include promissory note loans issued in past years totaling EUR million. The coupon on each of the promissory note loan issues is in line with market conditions at the time of issue and is either equal to six-month EURIBOR plus an appropriate margin or is made up of a combination of fixed and variable rates. Liabilities include a EUR 102 million portion of a EUR million five-year promissory note loan issue placed in the market on November 25, The loan was placed with national and international banks and a EUR 18.6 million portion with an affiliated company. The coupon is based on six-month EURIBOR plus an appropriate margin. Liabilities also contain EUR 400 million (2010: EUR 477 million) in drawings on a EUR 500 million syndicated revolving credit facility. Amounts due to affiliated companies are largely connected with intra-group financial management and come to EUR 647 million (2010: EUR million). HOCHTIEF Aktiengesellschaft s net profit before changes in reserves for 2011 was EUR 46,000. Including profit carried forward from the previous year (EUR 6,870,000), unappropriated net profit comes to EUR 6,916, Annual Report 2011

93 HOCHTIEF Aktiengesellschaft (Holding Company): Financial Review Executive Board proposal for the use of net profit The Executive Board proposes resolution on the use of net profit as follows: The unappropriated net profit of HOCHTIEF Aktiengesellschaft for fiscal 2011 in the amount of EUR 6,915, will be carried forward. Disclosures pursuant to Sections 289 (2) 5, 289 (4), 315 (2) 4, and 315 (4) of the German Commercial Code HOCHTIEF Aktiengesellschaft s subscribed capital of EUR 197,119, is divided into 76,999,999 no-parvalue bearer shares. Each share accounts for EUR 2.56 of capital stock. The capital reserve comprises premium on shares issued by HOCHTIEF Aktiengesellschaft. Pursuant to Section 4 (5) of the Articles of Association, the Executive Board is authorized subject to Supervisory Board approval to increase the capital stock by issuing new no-par-value bearer shares for cash or noncash consideration in one or more issues up to a total of EUR 35,840,000 by or before May 10, 2015 (Authorized Capital I). Similarly, there is an authorization to increase capital by up to EUR 23,296,000 by or before May 11, 2016 under Section 4 (6) of the Articles of Association (Authorized Capital II). Detailed provisions are contained in the stated section of the Articles. Pursuant to Section 4 (4) of the Articles of Association, the Company s capital stock has been conditionally increased by up to EUR 49,280,000 divided into up to 19,250,000 no-par-value bearer shares (conditional capital). Detailed provisions are contained in the stated section of the Articles. Group Management Report Financial Review The Executive Board is unaware of any restrictions on voting rights or on transfers of securities. There are no shares with special control rights. The Executive Board is not aware of any employee shares where the control rights are not exercised directly by the employees. The appointment and replacement of Executive Board members is governed by Sections 84 and 85 of the German Stock Corporations Act (AktG) and Section 31 of the Codetermination Act (MitbestG) read in conjunction with Sections 9 (2) and 7 (1) of the Company s Articles of Association. Statutory rules on the amendment of the Articles of Association are contained in Section 179 et seq. and Section 133 AktG. In instances where the Act requires a majority of the capital stock represented at the time of the resolution in addition to a majority of votes cast, Section 23 (3) of the Articles of Association provides that a simple majority will suffice unless there is a mandatory requirement stipulating a different majority. Under Section 15 of the Articles of Association, the Supervisory Board is authorized to make amendments that only affect the wording of the Articles of Association. Authorization to repurchase shares: The Company is authorized by resolution of the General Shareholders Meeting of May 12, 2011 to repurchase its own shares in accordance with Section 71 (1) 8 of the German Stock Corporations Act (AktG). The authorization expires on November 11, It is limited to ten percent of the capital stock at the time of the General Shareholders Meeting resolution or at the time of exercising the authorization, whichever figure is smaller, with the quantity of shares able to be acquired by the use of call options limited to a maximum of five percent of the capital stock at the time of the resolution. The authorization can be exercised directly by the Company or by a company in its control or majority ownership or by third parties engaged by the Company or engaged by a company in its control or majority ownership and allows the share repurchase to be executed in one or more installments covering the entire amount or any fraction. The repurchase may be effected through the stock exchange or by public offer to all shareholders, or by public invitation to all shareholders to tender shares for sale, or by issuing shareholders with rights to sell shares, or by the use of call options. The conditions governing the repurchase are set forth in detail in the resolution. Annual Report

94 Group Management Report Financial Review By resolution of the General Shareholders Meeting of May 12, 2011, the Executive Board is authorized, subject to Supervisory Board approval, in the event of a sale of repurchased shares effected by way of an offer to all shareholders, to issue subscription rights to the shares to holders of any warrant-linked and/or convertible bonds issued by the Company or by any subordinate Group company. The Executive Board is also authorized, subject to Supervisory Board approval, to sell repurchased shares other than through the stock exchange and other than by way of an offer to all shareholders provided that the shares are sold for cash at a price not substantially below the current stock market price for Company shares of the same class at the time of sale. The shares may also, on condition that they be held for at least two years after transfer, be transferred to members of the Executive Board of the Company and to members of the executive boards and general management of companies under its control within the meaning of Section 17 of the German Stock Corporations Act (AktG), and to employees of the Company or of a company under its control within the meaning of Section 17 AktG. Such transfers are only permitted for the purpose of settling the transferees variable compensation entitlements in place of cash settlement. Further conditions of transfer are detailed in the resolution. Where shares are issued to members of the Executive Board of the Company, the decision to issue the shares is taken solely by the Supervisory Board. The HOCHTIEF Aktiengesellschaft Executive Board is also authorized, subject to Supervisory Board approval and the conditions set out in the following, to offer and transfer repurchased shares to third parties other than through the stock exchange and other than by way of an offer to all shareholders. Such transactions may take place in the course of acquisitions of business enterprises in whole or part and in the course of mergers. They are also permitted for the purpose of obtaining a listing for the Company s shares on foreign stock exchanges where it is not yet listed. The shares may also be offered for purchase by employees or former employees of the Company or its affiliates. Holders of bonds which the Company or a Group company subordinate to it issues or has issued under the authorization granted at the General Shareholders Meeting of May 12, 2011 (agenda item 8) may also be issued with the shares upon exercising the warrant and/or conversion rights and/or obligations attached to the bonds. Shareholders statutory subscription rights to such shares are barred pursuant to Sections 71 (1) 8 and 186 (3) and (4) of the German Stock Corporations Act (AktG) to the extent that the shares are used in exercise of the authorization set out above. The Executive Board is also authorized, subject to Supervisory Board approval, to retire repurchased shares without a further resolution of the General Shareholders Meeting being required for the share retirement itself or its execution. The conditions governing awards of subscription rights and the sale, transfer, and retirement of treasury stock are set forth in detail in the General Shareholders Meeting resolution. 94 Annual Report 2011

95 HOCHTIEF Aktiengesellschaft (Holding Company): Financial Review HOCHTIEF Aktiengesellschaft successfully arranged the refinancing of its previous syndicated guarantee and credit facilities with an international banking syndicate on December 13, The new syndicated facility for a total of EUR 2 billion runs to December 2016, consists of a EUR 1.5 billion guarantee facility tranche and a EUR 500 million credit facility tranche, and contains identical change-of-control provisions to the previous syndicated facilities. Lenders may each withdraw from their credit exposure subject to satisfaction of an agreed condition precedent if negotiations with the borrower to continue the facility have failed, such negotiations having given consideration to the credit standing of the company taking control, the risk of any change in corporate strategy, and the risk of the lenders being restricted in any way in provision of the facilities. The condition precedent is satisfied if a party, or group of parties acting in concert, secures control of the borrower within the meaning of Section 29 (2) of the German Securities Acquisition and Takeover Act (WpÜG). Lenders may give notice of termination of their credit exposure within 70 days of it becoming known to HOCHTIEF Aktiengesellschaft that the condition precedent has been satisfied, subject to a minimum of ten days to consider the options available. As before, the outlined change-of-control provisions do not apply for shareholder ACS (ACS Actividades de Construcción y Servicios, S.A.) and its affiliates; in agreement with lenders, the comprehensive ring-fencing clauses for dealings and transactions with ACS have also been retained. The ring-fencing includes an undertaking by HOCHTIEF Aktiengesellschaft not to enter into any contractual agreement with ACS that would weaken HOCHTIEF s credit standing; this would include any control agreement. Lenders have a special right of termination for the event that any such contracts are nevertheless entered into. HOCHTIEF Aktiengesellschaft signed two promissory note loan agreements (Schuldscheindarlehen) for initially EUR 50 million and EUR 200 million with a German bank on July 4, It also signed four promissory note loan agreements with a German bank for an initial total of EUR 300 million and with differing durations on May 25, It additionally signed two five-year promissory note loan agreements, one for initially EUR million and one for initially EUR 59.5 million, with two German banks on May 26, A further EUR million promissory note loan was arranged in November This replaced part of the 2009 promissory note loan ahead of schedule. HOCHTIEF Aktiengesellschaft also arranged a EUR 175 million global credit facility with a German bank on December 30, 2011/January 2, All of these agreements contain a substantively identical provision under which, in the event of a change in control, HOCHTIEF Aktiengesellschaft must repay the loan early if it and the lender do not reach agreement on the loan s continuation within 60 days of announcement of the change of control and the lender demands early repayment within ten days of the 60-day period expiring. In this context, a change of control is defined as a party, or group of parties acting in concert within the meaning of Section 30 (2) of the German Securities Acquisition and Takeover Act (WpÜG), securing control of HOCHTIEF Aktiengesellschaft within the meaning of Section 29 (2) WpÜG. The foregoing change-of-control provisions for the foregoing loans do not apply for shareholder ACS and its affiliates, in exchange for which comprehensive ring-fencing clauses have likewise been agreed with lenders in respect of these loans with regard to dealings and transactions with ACS. Group Management Report Financial Review Annual Report

96 Group Management Report Financial Review On August 23/29, 2011, HOCHTIEF Aktiengesellschaft extended the term of a EUR 55 million global credit facility with a German bank. The facility has an amended change-of-control provision under which the bank can terminate the credit facility without notice in the event of a change of control. The amendment excludes shareholder ACS and its affiliates from application of the change-of-control provision. In this context, a change of control is defined as a party, or group of parties acting in concert within the meaning of Section 30 (2) of the German Securities Acquisition and Takeover Act (WpÜG), securing control of HOCHTIEF Aktien gesellschaft within the meaning of Section 29 (2) WpÜG, subject to application of the attribution rules in Section 30 WpÜG. On September 30, 2011, HOCHTIEF Aktiengesellschaft signed an agreement amending a general counter indemnity arranged with seven US surety companies to secure a USD 6.5 billion bonding line provided by the surety companies. The amended general counter indemnity contains a change-of-control provision giving the surety companies the right, if an agreed condition precedent is satisfied, to require HOCHTIEF Aktiengesellschaft to submit up to USD 500 million in cash by way of security; under the agreed terms, this sum is reduced by the amount of any bank guarantees already provided as security for the bonding facility. The condition precedent is normally satisfied if a party, or group of parties acting in concert within the meaning of Section 30 (2) of the German Securities Acquisition and Takeover Act (WpÜG) (with the exception of shareholder ACS and its affiliates), acquires in total 30 percent or more of all shares in HOCHTIEF Aktiengesellschaft or if shareholder ACS and its affiliates acquire in total 75 percent or more of all shares in HOCHTIEF Aktiengesellschaft. The security payment must then be made within 30 bank working days of notification that it is required. Through subsidiaries, HOCHTIEF Aktiengesellschaft indirectly holds an ownership interest as general partner, trading as HOCHTIEF AirPort Capital Verwaltungs GmbH & Co. KG in HOCHTIEF AirPort Capital GmbH & Co. KGaA, a limited partnership with share capital. This ownership interest is governed by a shareholders agreement under which the limited-liability shareholders are entitled in specific contingencies to purchase all ownership interests in the general partner. The first such contingency arises, dependent upon who the purchaser is, in the event that a company acquires the majority of the shares or voting rights in or otherwise secures control of HOCHTIEF Aktiengesellschaft or serves as a trustee for such voting rights or control mechanisms. The second contingency arises in the event that a third party acquires more than half of the shares or voting rights in or otherwise secures control of HOCHTIEF Aktiengesellschaft and, within nine months of the acquisition becoming known, more than half of the key personnel or at least three individuals among the key personnel leave HOCHTIEF AirPort GmbH. HOCHTIEF PPP Solutions GmbH has sold stakes in two Chilean toll road project companies. Under the contract of sale, the seller is obliged in certain circumstances to provide the buyer with a guaranteed present value greater than the purchase price. HOCHTIEF Aktiengesellschaft has furnished a guarantee for the seller s obligations. A change of control at HOCHTIEF Aktiengesellschaft is consequently one of the circumstances that trigger the guaranteed present value obligation. The contract defines a change of control as when a party, or group of parties acting in concert, secures control of HOCHTIEF Aktiengesellschaft within the meaning of Section 29 (2) of the German Securities Acquisition and Takeover Act (WpÜG). 96 Annual Report 2011

97 HOCHTIEF Aktiengesellschaft (Holding Company): Financial Review The terms of the D&O insurance* taken out by HOCHTIEF Aktiengesellschaft provide for a limitation of insurance cover if HOCHTIEF Aktiengesellschaft is absorbed by another company by merger, takeover, or similar action or if another company other than ACS or another third party gains control of HOCHTIEF Aktiengesellschaft. In such event, unless otherwise agreed, the insurance solely covers claims relating to breaches of obligations toward third parties that took place before the change took legal effect. Insurance cover terminates in the foregoing instances on expiration of the insurance period. Above and beyond the mandatory disclosures under Sections 289 (4) 8 and 315 (4) 8 of the German Commercial Code, other Group companies are party to further agreements that are conditional upon a change of control. The following is an abridged and non-exhaustive presentation: A change of control at HOCHTIEF AirPort GmbH would have various legal consequences. In particular, such a change of control may trigger sale or purchase obligations relating to ownership interests held by HOCHTIEF AirPort GmbH. In the PPP segment, project contracts frequently accord the client substantial rights that make it difficult to effect a change of ownership structure in the project company. As of the balance sheet date, there are no longer any agreements with members of the Executive Board or employees providing for compensation in the event of a takeover offer. Regarding presentation of the salient points of the Executive Board compensation system pursuant to Sections 289 (2) 5 and 315 (2) 4 of the German Commercial Code, we refer to the information provided in the Compensation Report section of the Corporate Governance Report.** *See glossary on page 211. **For further information, please see pages Group Management Report Financial Review Annual Report

98 Group Management Report Financial Review Explanatory report by the Executive Board of HOCHTIEF Aktiengesellschaft pursuant to Section 176 (1) of the German Stock Corporations Act (AktG) on the disclosures pursuant to Sections 289 (4), 289 (5), 315 (4), and 315 (2) 5 of the German Commercial Code (HGB) The Executive Board provides the following explanatory notes on disclosures provided in the combined Group and HOCHTIEF Aktiengesellschaft Management Report and required under Sections 289 (4), 289 (5), 315 (4), and 315 (2) 5 of the German Commercial Code: Our disclosures for HOCHTIEF Aktiengesellschaft relate to the situation in fiscal The disclosures consist of information on the Company s subscribed capital, statutory rules, and rules contained in the Company s Articles of Association about the appointment and replacement of Executive Board members as well as about amendment of the Articles of Association, powers of the Company s Executive Board including in particular any powers in relation to the issuing or buying back of shares, and any significant agreements to which the Company is a party that are conditional upon a change of control of the Company following a takeover bid. The structure of the Company s subscribed capital and rights attaching to no-par-value bearer shares in the Company are determined among other things by the Company s Articles of Association. Restrictions on voting rights attaching to those shares may result from the provisions of the German Stock Corporations Act. For example, there are circumstances in which shareholders are prohibited from voting (Section 136 of the Act). The Company also has no voting rights with regard to treasury stock (Section 71b of the Act). No agreements are known to us that may result in restrictions on voting rights or on the transfer of securities. The information in accordance with Section 289 (4) 3 and Section 315 (4) 3 of the German Commercial Code on direct or indirect shareholdings exceeding ten percent of voting rights is included in the Notes to the Consolidated Financial Statements. The information provided on appointment and replacement of Executive Board members conforms to the substance of the German Stock Corporations Act and the Company s Articles of Association, as does the information on amendment of the Articles of Association. The Executive Board s powers in relation to the issuing or buying back of shares are based in their entirety on authorizations granted by resolution of the General Shareholders Meeting. The information provided on these powers conforms to the authorizations granted by resolution of the General Shareholders Meeting. Significant agreements to which the Company is a party that are conditional upon a change of control of the Company following a takeover bid, and the effects of such agreements, are accurately described. If lenders were to exercise their right of termination under these agreements according to the conditions stated, the corresponding borrowing needs of HOCHTIEF Aktiengesellschaft and the HOCHTIEF Group would have to be met by other means. By way of an additional disclosure for informational purposes, in supplement to the mandatory disclosures under the stated sections of the German Commercial Code, other Group companies are party to further agreements that are conditional upon a change of control. The following is an abridged and non-exhaustive presentation: A change of control at HOCHTIEF AirPort GmbH would have various legal consequences. In particular, such a change of control may trigger sale or purchase obligations relating to ownership interests held by HOCHTIEF AirPort GmbH. In the PPP segment, project contracts frequently accord the client substantial rights that make it difficult to effect a change of ownership structure in the project company. 98 Annual Report 2011

99 HOCHTIEF Aktiengesellschaft (Holding Company): Financial Review The remaining disclosures required under Sections 289 (4) and 315 (4) of the German Commercial Code relate to circumstances that do not apply to HOCHTIEF Aktiengesellschaft. We do not therefore cover these points in detail in the combined Group and HOCHTIEF Aktiengesellschaft Management Report. There are no limitations on voting rights, no restrictions on the exercise of voting rights attached to employee shares, no agreements between the Company and members of the Executive Board or the Company s employees providing for compensation in the event of a takeover bid, and no securities carrying special rights with regard to control of the Company. The main features of the internal control and risk management system in relation to the financial reporting process described in the Management Report are accurately presented and conform with the Executive Board s knowledge. Group Management Report Financial Review Essen, February 2012 Dr. Frank Stieler Peter Sassenfeld Pedro López Jiménez Annual Report

100 The challenge: Create a great working environment A case in point: maxcologne, a prestigious office complex on the banks of the Rhine in Cologne. HOCHTIEF revitalized the original 1970s structure to high standards, creating a cutting-edge structure with a completely fresh identity. Sustainability played a key role in this project. maxcologne uses energy very efficiently, with features such as heating and cooling for the offices regulated using groundwater. What s more, the complex features ecological building materials, and the windows are fitted with individually adjustable sun screens. The German Sustainable Building Council has already awarded this HOCHTIEF property gold precertification. And an efficient, gold-standard office environment is sure to bring about the best in everyone who works there. Our solution: Green buildings that benefit people and the environment alike 100 Annual Report 2011

101 Segment Reporting Segments chalk up successes in strategic growth areas HOCHTIEF focuses on three strategic growth areas: creating sustainable energy infrastructure, shaping major cities, and building state-of-the-art transportation infrastructure. These offer all Group divisions attractive business opportunities and development potential. In the reporting period, HOCHTIEF s operational units won and successfully carried out numerous projects in these growth areas in the markets of Europe, America, and Asia. In Europe, HOCHTIEF Solutions has established itself as a competent partner to the energy sector. We are involved in numerous offshore wind projects and in 2011 continued to invest heavily in our own specialpurpose equipment. In the future, HOCHTIEF will also become involved in the development of offshore wind farms and move into power line construction. In the Asia-Pacific region, our subsidiary Leighton has long been one of the biggest providers in the construction of energy infrastructure and, in the reporting period, won a number of attractive contracts for example, to build oil and gas pipelines as well as power lines. We are also pursuing plans to enter the US renewable energy market. Shaping major cities likewise offers HOCHTIEF a raft of business opportunities. In the period under review, HOCHTIEF Solutions was once again awarded numerous contracts to develop and build residential properties, office real estate, and nursing care facilities that are both modern and fit for the future. At the same time, further urban district development projects were won or successfully continued. In the USA, our subsidiary Turner has for some years been one of the leading providers in the green building segment. In the reporting period, the company completed the 200th project to have achieved sustainability certification. Turner also chalked up project successes in the healthcare and educational property segments. In Australia, the Leighton Group was awarded two major contracts for the construction of hospitals. In Germany and the UK in 2011, HOCHTIEF PPP Solutions was commissioned to develop, build, and subsequently operate further schools and child daycare facilities on the basis of public-private partnership contracts. Worldwide, our companies and units build roads, bridges, tunnels, ports, railroads, and airports, putting in place the infrastructure necessary for our society s growing mobility requirements. In Scotland, for example, HOCHTIEF Solutions is the leader of a joint venture constructing a two-kilometer cable-stayed bridge over the Firth of Forth. In fiscal 2011, the Leighton Group won major infrastructure projects in places such as Australia, Hong Kong, and Oman. Our subsidiary Flatiron was awarded numerous attractive contracts in North America, including for the demolition and replacement of two bridges in the Canadian province of Alberta. In a further example in Germany in 2011, HOCHTIEF PPP Solutions received the contract to extend a section of the A8 expressway on a publicprivate partnership basis. Internal collaboration generates further growth potential for HOCHTIEF Knowledge transfer within our Group as well as national and international collaboration between our companies open up additional growth potential for HOCHTIEF and create added value for its clients. In the newly structured HOCHTIEF Europe division, the reporting period saw us bring together the close collaboration in the areas of development, design, construction, and operation under the roof of HOCHTIEF Solutions AG, combining our services to the benefit of those who entrust us with orders. In fiscal 2011, our companies once again cooperated successfully on numerous projects. Our units reap rewards by working together notably on public-private partnership projects. Turner and Flatiron have likewise joined forces on several projects in the USA, such as that at San Diego Airport. In Edmonton, Canada, Flatiron and HOCHTIEF Solutions are cooperating on the construction of the urban railroad tunnel. Our companies handled cooperation projects worth a total of EUR 2.5 billion in the reporting period. Group Management Report Segment Reporting Annual Report

102 HOCHTIEF Americas Division Group Management Report Segment Reporting **For further information, please see com. ***See glossary on page 212. *For further information, please see Companies retain top positions in US construction market Turner still market leader in the green building segment Very large order backlog Acquisition of majority stake in Clark Builders strengthens Canadian portfolio The HOCHTIEF Americas division combines the activities of our operational units in the USA and Canada. With its companies Turner, Flatiron, and E.E. Cruz, HOCHTIEF operates in the building construction, civil engineering, and infrastructure segments. The HOCHTIEF Americas division had a successful 2011 fiscal year. All subsidiaries developed in line with expectations and secured attractive new contracts despite the persistently difficult environment and uncertainties in the American construction market (minus 4.4 percent in 2011). The Canadian markets, by contrast, showed a positive trend. In fiscal year 2011, HOCHTIEF expanded its portfolio in North America: Through its US subsidiary Turner, the Group purchased a majority interest in the Canadian construction company Clark Builders* with effect from January 1, The purchase price amounted to EUR million (CAD 68 million) plus performance-based payments over the next five years. The company specializes in the construction of institutional and commercial buildings as well as educational and sports facilities, in western and northern Canada. Clark Builders acts as a general contractor and also offers design/build and construction management services. Clark Builders is excellently positioned in Canada and is expanding. This purchase strengthens HOCHTIEF s building construction business in North America, with the aim of accelerating its growth through close cooperation between Turner and Clark Builders. HOCHTIEF withdrew from the Brazilian market altogether in the fiscal year. In the fourth quarter, the Group sold its minority interest of 19 percent in HOCHTIEF do Brasil to the Zech Group, which already acquired the majority stake in November Turner** In the annual ranking of the Top 400 Contractors published by the trade journal Engineering News-Record, Turner was once again named as the leading general builder in the United States and as the number one builder in the market segments healthcare and education properties, hotels and convention centers, and correctional facilities. Engineering News-Record New York named Turner 2011 Contractor of the Year in New York, New Jersey and Connecticut. For the fourth year in a row, Turner was also recognized as a leader in the green building segment. The reporting year saw the 200th Turner project to receive LEED*** Certification from the US Green Building Council: The Yale University Health Center in New Haven, Connecticut, achieved LEED Gold certification. The health center was built using sustainable materials, like bamboo, water-saving, low-pressure sanitary fittings, and energy-saving lighting technology, which help the building to achieve a positive sustainability rating. Turner has placed an emphasis on sustainable construction since 2004 and work done in this market segment reached around EUR 3.2 billion in To date, more than 240 projects have been certified in accordance with the LEED standard, and another 252 Turner projects are registered. In order to meet the demand for sustainably-constructed properties, our US subsidiary employs more than 1,200 accredited LEED Professionals more than any other construction company in the world. Turner also received the Construction Safety and Excellence Award recognition from the Associated General Contractors of America for its high occupational safety standards: The HOCHTIEF subsidiary was the first-place finisher in the category Over Four Million Man- Hours worked. 102 Annual Report 2011

103 Project highlights Education/science segment In the education/science segment, our subsidiary Turner maintained its number one position in the US market and again acquired attractive new projects in the reporting year: In October 2011, for example, construction work began on the new site of the Whitney Museum of American Art in New York. At more than 17,000 square meters, the new building will be twice as big as the old one. In addition to the largest columnfree gallery in the city, the new museum will include a conservation lab, art-handling spaces, a restaurant with a museum shop, special event spaces, and an auditorium. The contract is worth around EUR 148 million. Healthcare segment Turner also continued to secure work in the healthcare segment. In Cincinnati, Ohio, Turner is building a hospital with a heart center, cancer center, family birth center, women s center, and a comprehensive orthopedics program. The contract value for the 250-bed Mercy Westside Hospital amounts to approximately EUR 100 million. In Austin, Texas, the company is building the Veterans Administration Outpatient Clinic. The multispecialty clinic will include cardiology, neurology, and oncology. The contract is worth EUR 56 million. Together with a partner, Turner is building Temecula Hospital in southern California for the operator Universal Health Services. The five-story acute care hospital has 140 beds, including 20 intensive care beds, and six state-of-the-art operating rooms. The contract is worth around EUR 37 million. Commercial and industrial property segment In the commercial property segment, Turner secured the contract to build a 39-story office building located in Midtown Manhattan, New York, for Boston Properties. The building is scheduled to be completed in the spring of 2014 and will seek LEED certification. Turner is expanding the Miami Intermodal Center transportation hub, located next to Miami International Airport. The contract to build the East Concourse & Ground Transportation Center is worth almost EUR 58 million. The project includes platforms, surface parking and a bus drop-off area. The almost 10,000-square-meter complex is built around the existing tracks. Convention center segment During the reporting year, Turner was awarded the contract to build the Cleveland Medical Mart and Convention Center. The contract is worth approximately EUR 225 million. Pharmaceutical segment New orders in this segment include the new group headquarters for pharmaceuticals manufacturer Vertex in Boston, Massachusetts, which Turner is building in Fan Pier in Boston Harbor. The complex comprises two 18-story buildings with laboratories and offices, plus retail and restaurant space as well as underground parking. The Vertex headquarters will seek LEED Gold certification from the US Green Building Council. Public building segment Along with a partner, Turner is building a more than 20-hectare facility for the Sacramento Municipal Utility District in California. The East Campus Operations Center is being designed and built for sustainability as a zero net-energy project the biggest in the country. In order to achieve this target, the property and its facilities will themselves generate the energy they consume using photovoltaic and thermal solar panels as well as techniques for low energy heating, cooling, and lighting. Slated for completion in 2013, the project includes a six-story office building and fleet vehicle fueling, storage, and maintenance facilities. The facility is aiming for LEED Platinum certification. In the correctional facility segment, the company is expanding and renovating the Montgomery County Judicial Center in Rockville, Maryland. The annex of the judicial center will have ten courtrooms as well as administrative spaces. This EUR 60 million-plus project will also be sustainable, including a green roof, photovoltaic panels as well as harnessing such features as environmentally friendly materials. Group Management Report Segment Reporting Annual Report

104 Group Management Report Segment Reporting *For further information, please see At Richmond City Jail in Virginia, Turner is also constructing a building with administrative support facilities and 1,500 beds under a contract worth over EUR 60 million. Flatiron* HOCHTIEF is very well positioned on the North American civil engineering market through our United States subsidiary Flatiron. The company is one of the leading providers of transportation and infrastructure projects in North America. Flatiron received a number of awards in the reporting year for its outstanding technical prowess and high occupational safety standards. Trade journal Engineering News-Record California named Flatiron 2011 Contractor of the Year in California and ranked the company as one of the leading civil engineering firms for highways and bridges, among other things. The Associated General Contractors of America recognized Flatiron for excellent occupational safety: The company took second place nationally in the category Over One Million Man- Hours. With the support of tunnel specialists from HOCHTIEF Solutions AG, Flatiron won a tunnel construction project in Edmonton, Canada during the fiscal year: The company is building two urban railroad tunnels of 418 and 452 meters in length in the city center. The contract is worth more than EUR 22 million and marks Flatiron s entry into machine-driven tunnel construction. The project is also a good example of the international transfer of know-how within our Group. Flatiron once again secured a large number of attractive orders in the reporting period: Roads segment The California Department of Transportation has commissioned Flatiron to construct two highways. In Carmenita, the company will reconstruct Route 5 in a project worth some EUR 66 million. In Santa Barbara, Flatiron is constructing the Route 101 Santa Maria Connector. In addition to replacing existing structures, Flatiron is also responsible for building additional lanes and a bike path. The EUR 21.5 million project is scheduled for completion by the end of In Canada, Flatiron s new orders include the construction of new bridge approaches for the Donald Bridges on the Trans Canada Highway 1 in British Columbia, with a contract value of over EUR 28 million. The Northwest Anthony Henday Drive in Edmonton, Canada, which was constructed by Flatiron, opened in November This 21-kilometer highway section includes 29 bridges and nine intersections. Bridges segment In California, Flatiron is building the Riverside Drive Viaduct over the Los Angeles River. This bridge construction contract is worth EUR 27 million. In Canada, Flatiron is responsible for the demolition and rebuilding of two bridges. The Alberta Ministry of Transportation commissioned the HOCHTIEF subsidiary to reconstruct the Drayton Valley Bridge over the North Saskatchewan River as well as 8.5 kilometers of Highway 22 to the east of the bridge. Construction work began in August The project, which is worth more than EUR 36 million, is slated for completion in Also in Alberta, Flatiron is replacing the superstructure of the Steinhauer Bridge over the Athabasca River in Fort McMurray. The contract is worth EUR 36 million. Energy infrastructure segment In 2011, Flatiron, as part of a joint venture, was awarded a contract for the design, materials procurement, and construction of a 250-kilometer transmission line in the Canadian province of British Columbia. The company holds a large portion of the EUR 542 million total project cost. Work is scheduled for completion in January Water segment In a joint venture that also includes Dragados, an ACS Group company, Flatiron is replacing the Calaveras Dam in Sunol, California, with a 64-meter-high earth and rock fill dam designed to withstand earthquakes. The project, which should be completed by the end of 2015, has a total volume of almost EUR 182 million, with Flatiron accounting for approximately EUR 54.6 million. 104 Annual Report 2011

105 HOCHTIEF Americas Division HOCHTIEF Americas division E.E. Cruz* With its subsidiary E.E. Cruz, acquired in 2010, HOCHTIEF is strengthening its position on the heavy construction market of the New York metropolitan area. In the reporting year, the company, together with a partner, was awarded the contract to replace and widen the Queens approach of the Bronx-Whitestone Bridge in New York City. The total value of this contract is almost EUR 76 million, 50 percent of which will go to E.E. Cruz. The project is scheduled for completion in January The HOCHTIEF Americas division s key figures New orders rose slightly in the Americas division in 2011 despite negative exchange rate effects resulting from a substantial year-on-year fall in the US dollar (the annual average exchange rate was down 6.0 percent). Adjusting for exchange rates, new orders grew by 6.7 percent in a difficult market environment. Work done also increased on an exchange rate adjusted basis by 4.8 percent on the prior year. In line with this growth, divisional and external sales likewise showed an exchange rate adjusted gain on the prior year. The order backlog attained the very high level of EUR 8.92 billion in the year under review, only just below the all-time record. The rise resulted from a EUR 505 million improvement in operating activities and a EUR million positive exchange rate effect. The order backlog is equivalent to 16 months in forward orders. (EUR million) (restated)** New orders 7, ,987.6 Work done 6, ,793.6 Order backlog 8, ,136.4 Divisional sales 6, ,396.4 External sales 6, ,396.4 Operating earnings (EBITA) Profit before taxes Capital expenditure RONA*** (%) Net assets (December 31) Employees (average over the year) 7,280 7,334 Capital expenditure, at EUR 55.2 million, was down on the prior-year figure, which was very high due to the acquisition of E.E. Cruz. The purchase of the majority stake in Clark Builders will not show through in capital expenditure until 2012, as HOCHTIEF will fully consolidate the company for the first time from January 1, The average number of employees in the Americas division over the year decreased marginally by 54 (a reduction of 0.7 percent). Outlook After further contraction in the US construction market during 2011, the experts at McGraw-Hill Construction forecast that the market will level out in The US building construction market is expected to begin growing again, although the trend in civil engineering is once again projected to be negative. Moderate growth is forecast for the Canadian market. In light of the large order backlog, the strong position of our subsidiaries, and the additions to the portfolio through recent acquisitions, and assuming a stable US dollar exchange rate, we expect another strong profit before taxes in fiscal Given the weaker infrastructure market anticipated this year, the division expects profit before taxes in 2012 to be slightly below the 2011 level. **For further information on the restated figures, please see page 201 onwards. *For further information, please see ***For further information, please see page 75. Group Management Report Segment Reporting The Americas division generated gratifyingly strong earnings in fiscal Operating earnings grew by EUR 14.1 million (exchange rate adjusted: EUR 22.7 million) and profit before taxes by EUR 15.9 million (exchange rate adjusted: EUR 25 million). The earnings growth is down to several factors: Alongside improvements in the operating business, earnings were also boosted by the profit on the sale of the remaining stake in HOCHTIEF do Brasil. Annual Report

106 HOCHTIEF Asia Pacific Division Group Management Report Segment Reporting *For further information, please see Solidly back in profit in second half of 2011 after earnings downgrade in first six months Recycling capital and unlocking value with sale of part of Australian iron ore business Through its majority interest in the Leighton Group*, HOCHTIEF has a leading position in the Australian, Asian and Middle Eastern contracting markets. Leighton is the world s largest contract miner and its diversified operations span construction, contract mining, operations and maintenance, and development services in the infrastructure, resources and property markets. Fiscal 2011 was impacted by a steep drop in profits in the spring. This was attributable to problems on the Airport Link and Victorian Desalination Plant infrastructure projects located in Brisbane and Melbourne respectively. The Airport Link project was affected by the oncein-a-century rainfall in Queensland and ensuing floods as well as delays to official approvals. In addition, an impairment loss was recognized on the carrying amount of BrisConnections, the consortium developing the Airport Link toll road, because the original traffic projections are not expected to be attained. The Victorian Desalination Plant was severely affected by weather and complex logistics in a very constrained space. Both projects underwent a thorough review and were given support from additional and new project managers and experts. In parallel, the risk management system at the Leighton Group was reviewed and improved. Leighton can thus ensure its reporting and accounting systems remain able to provide timely and appropriate information to mitigate risk. outstanding receivables also resulted in impairment charges being recognized in Strategic changes and investments Leighton made two sales in the reporting period in order to recycle tied-up capital and unlock value. In September, Leighton sold parts of its Australian iron ore business at a substantial profit. It transferred three projects undertaken by its subsidiary HWE Mining in the Pilbara region to the client, BHP Billiton, the world s largest commo d- ities group. The operations transferred from HWE Mining account for about 80 percent of BHP Billiton s iron ore production in Western Australia. The sale at a price of EUR 512 million generated a post-tax profit of some EUR 120 million for Leighton. Back in June of the year under review, Leighton subsidiary Thiess sold its five percent interest in the Burton coal mine in Queensland, Australia to the client, Peabody Energy, the world s largest private-sector coal group. In the 1990s, Thiess had made an investment in the mine s development. As operations had since been running successfully, this strategic investment was no longer required. Thiess continues to operate as a mining contractor at the Burton coal mine. Also in the second quarter of 2011, Leighton increased its stake in Australian residential property developer Devine Limited from to percent, as a result of which the company is now a fully consolidated subsidiary. Leighton is thus continuing to expand its activities in selected attractive segments of Australia s residential construction market. The shortfall from these projects was cushioned by strong operating earnings, especially in contract mining and in infrastructure construction elsewhere, and by the sale of part of the Australian iron ore contract mining business. The mining business also recovered from the impacts of the once-in-a-century floods as the year progressed. Market conditions for the Habtoor Leighton Group remain challenging. After refocusing on markets outside the United Arab Emirates, new orders there were also below budget. Existing risks associated with Successful operations in growth markets Leighton entered Africa s growing contract mining market in 2011 and will carry out work for 66 months in a joint venture at the Debswana diamond mine in Jwaneng, Botswana. Leighton s responsibilities include mine scheduling, drilling and blasting, and waste removal. The project s clients are the Government of Botswana and De Beers. Jwaneng is one of the richest diamond mines in the world. The project is worth around EUR million, with Leighton s share amounting to some 60 percent. 106 Annual Report 2011

107 The Habtoor Leighton Group is diversifying in the Middle East, winning its first project in Oman in The company is part of a joint venture that will expand a 75-kilometer section of the Bidbid-Sur highway south of the capital of Muscat into a four-lane carriageway. The project also includes the construction of nine interchanges and 50 kilometers of service roads. The work on the EUR 220 million contract has already begun and is scheduled to be completed by The Habtoor Leighton Group holds a 50 percent stake. Like Qatar, Oman is one of the Gulf region s strong states. Its government has announced that it intends to invest almost EUR 15 billion to expand national infrastructure over the next five years. Through the Habtoor Leighton Group, HOCHTIEF has been present and already very well positioned in Oman for several years. The oil and gas business also continues to be a key growth market for Leighton, not just in the Gulf region, but throughout Asia and in the company s largest market, Australia. This was supported at the year-end with the acquisition of a business now named Leighton Engineering, a new subsidiary that will support the Leighton Group with engineering services in all activities in the offshore oil and gas business. The new company started with a workforce of about 100 and operates out of Kuala Lumpur, Malaysia. It has already secured its first service contract to provide Leighton companies with commercial and engineering support in the construction of two offshore platforms. Project highlights in Australia Infrastructure Infrastructure remains Leighton s largest market and numerous new infrastructure contracts were awarded in the year under review. For instance, a joint venture including the subsidiary John Holland was appointed to deliver the Perth City Link rail project in Western Australia for EUR million. John Holland is the leading provider of rail services in Australia. In addition, Leighton Contractors is to construct a 36-kilometer dedicated freight line in southern Sydney under a contract worth EUR million. In Victoria, Leighton Contractors and Thiess were separately awarded two packages of work in the expansion of the regional rail network. Working in a joint venture, Leighton Contractors is to construct 25 kilometers of rail line, two stations, and numerous bridges for EUR 385 million. In another joint venture, Thiess will construct 7.5 kilometers of track along with bridges and link roads. The contract for a total of EUR 637 million also includes the construction of operating control systems. In New South Wales, Thiess will participate in an alliance to deliver transmission cable projects for Ausgrid, Australia s largest energy network operator. Thiess will receive just over EUR million in total from the five-year contract. Thiess also won a significant alliance contract in the energy infrastructure sector in the year under review, expanding Sydney s underground electricity supply system. To this end, it will build a 3.2-kilometer power tunnel. Thiess will also supply and install all the tunnel s technical and electrical installations. The project is worth EUR 107 million and is scheduled to be completed in Contract mining and resources The Leighton Group is the world s largest contract miner and, in the commodity sector, Leighton secured numerous attractive projects in the Australian state of Queensland in the reporting period. Thiess secured extensions to mines of around EUR 1.8 billion including a EUR million contract extension at the Burton coal mine, where it will mine more than 2.5 million metric tons of the commodity a year. The Leighton subsidiary has been responsible for contract mining at the open-pit mines since During this time, Thiess has handled a total contract volume of around EUR 1.5 billion and mined almost 50 million metric tons of coal there. The client is Peabody Energy Coal. In addition, Thiess will carry out a range of works worth EUR million on a project in Queensland to develop coal seam gas, including installing compressor stations, pipelines, and water storage ponds. The works are scheduled to be completed in March Oil and gas is a growth market where Leighton companies are well positioned to deliver further work in the future. Also in Queensland, Leighton subsidiary John Holland is constructing loading facilities and berths at the Curtis Island liquid natural gas plant in a contract worth EUR 107 million. Leighton Contractors will expand the Broadmeadow coal mine in Queensland for around EUR million. The company will also be responsible for gold mining Group Management Report Segment Reporting Annual Report

108 at two mines. At the Telfer open-pit mine in Western Australia, Leighton Contractors is to carry out contract mining for 27 months on a project worth EUR million. At the Cosmo Deeps underground gold mine in the Northern Territory, the company was awarded a three-year, EUR 83.5 million contract. In New South Wales, Thiess was awarded a contract extension for the Wilpinjong coal mine worth almost EUR million. The company also secured the contract to carry out Phase One development works on a new iron ore mine in Western Australia s Pilbara region for around EUR 72 million. The 18-month contract is for complete initial pioneering and mine establishment works, including haul roads and stockpile pads. In the high-growth offshore oil and gas business, both John Holland and Thiess secured further contracts for the Wheatstone gas project off the coast of Western Australia. John Holland is to build numerous refinery buildings for EUR 185 million and secured a separate EUR 282 million contract to design and construct a 3,800-bed accommodation village for the project. For the same offshore project, Thiess will construct a tunneled crossing under the ocean to link two gas reserves with the refinery. The contract is worth EUR 43 million. Building construction The Leighton companies also chalked up a number of large-scale building construction contracts in the year under review, particularly in the specialist healthcare sector which is an area of core competency. A consortium, including Leighton Contractors, will design and build the new Royal Adelaide Hospital in Southern Australia in a project worth a total of EUR 1.35 billion, with Leighton s share amounting to around EUR million. John Holland was appointed managing contractor to build the New Children s Hospital in Perth worth a total of EUR 887 million. John Holland s share, subject to progression to the second construction stage, amounts to approximately EUR 592 million. Services The Australian government awarded a contract to a joint venture including Thiess Services to expand the Australian broadband telecommunications network for EUR 282 million over the next two years. The contract features an option for a further two-year extension. Together with a joint venture partner, Thiess will also take on facility management for telecommunications provider Telstra for the next five years. The contract requires specialist telecommunications expertise and is worth EUR 259 million, with the Leighton subsidiary s share amounting to EUR 130 million. Group Management Report Segment Reporting Project highlights in Asia Infrastructure In the Asian infrastructure sector, the Leighton Group chalked up numerous major new contracts, including what is truly a project of the century; the high-speed rail line linking the city of Hong Kong to the Chinese mainland. The EUR million contract, of which Leighton Asia has a 50 percent share, will involve the construction of the terminus station for the Guangzhou- Shenzhen-Hong Kong Express Rail Link. This highspeed train line, much of it below ground, will serve as Hong Kong s international gateway to China from 2015 and carry up to 100,000 passengers a day following its completion. The work is being carried out as part of a joint venture with a partner. Back in 2010, Leighton Asia secured two sub-contracts on this project totaling EUR million. These were now joined by the third contract for the construction of a station in the center of West Kowloon with 15 platforms, customs facilities, departure lounges, duty free shops, and footbridges. The Express Rail Link is one of Hong Kong s most important future projects. In Hong Kong, Leighton Asia together with John Holland was also awarded large-scale contracts for the construction of a stretch of the South Island Line train line totaling a good EUR 408 million. In addition, the companies jointly won the EUR 97 million contract to expand the urban railroad in Singapore. Contract mining In Indonesia, where the Leighton Group has a strong market position, the subsidiary Thiess was awarded a three-year extension to the contract to operate two mines in the East Kalimantan region. This work is worth around EUR 368 million. PT Thiess Contractors Indonesia has been responsible for the Teguh Sinar Abadi and Firman Ketaun Perkasa coal mines of commodity group PT Bayan Resources near the Indonesian city of Melak for several years. The Leighton subsidiary will 108 Annual Report 2011

109 HOCHTIEF Asia Pacific Division develop the mine and extract around five million metric tons of the commodity a year. Project highlights in the Gulf region In Abu Dhabi, the Habtoor Leighton Group is part of a joint venture undertaking construction of the Al Mafraq Hospital under a contract worth EUR 428 million. The specialist hospital complex is scheduled to be completed in 2014, when it will have 745 beds, various operating theaters, laboratories, and auditoriums. The project is the Habtoor Leighton Group s second major contract in Abu Dhabi s healthcare sector in just twelve months. Back in April 2010, it was awarded the contract to construct the Arzanah Medical Complex. The Habtoor Leighton Group is also building the new headquarters of the Abu Dhabi Islamic Bank for EUR 76.8 million and infrastructure at the Qusahwira oil field under a contract worth EUR 95.1 million. In the Qatari capital of Doha, the Habtoor Leighton Group will undertake the construction of Phase 1 of the North Gate Mall and Office Buildings for EUR million. Following its completion in March 2014, the shopping and office complex will comprise two parking levels, a three-story mall, and six five-level office buildings. The HOCHTIEF Asia Pacific division s key figures New orders ran to EUR billion in fiscal 2011, some EUR 4.16 billion down (exchange rate adjusted: EUR 5.14 billion down) on the prior year. This is mainly an effect of the exceptionally strong prior-year figure, which was bolstered by large order volumes in infrastructure construction and contract mining. HOCHTIEF Asia Pacific division (EUR million) (restated)* New orders 14, ,938.6 Work done 15, ,702.8 Order backlog 33, ,126.9 Divisional sales 13, ,339.5 External sales 13, ,339.2 Operating earnings (EBITA) (168.2) Profit before taxes (285.4) Capital expenditure 1, RONA** (%) Net assets (December 31) 4, ,343.5 Employees (average over the year) 52,220 46,376 Operating earnings and profit before taxes were heavily impacted by losses on two infrastructure projects Airport Link in Brisbane and Victorian Desalination Plant near Melbourne. Both projects are now on an even keel and will be completed in the second half of Earnings were also depressed by writedowns of outstanding receivables at the Habtoor Leighton Group and a further impairment loss on the carrying amount of the investment in the Habtoor Leighton Group. A positive factor was the book gain on the sale to the client of three iron ore projects in Western Australia. Capital expenditure increased by a substantial EUR million to EUR 1.67 billion. Alongside exchange rate effects of around EUR 110 million, the main factor here comprised new major contract mining projects both in Australia and Asia, which needed corresponding quantities of large plant. *For further information on the restated figures, please see page 201 onwards. **For further information, please see page 76. Group Management Report Segment Reporting Work done increased in the period under review by 22.1 percent to EUR billion and external sales by 31.8 percent to EUR billion. The rates of increase were still substantial after adjusting for exchange rate changes, at 14 percent and 23.1 percent respectively. This reflects the division working its way through the very large order backlog from the prior year. The division followed up the prior-year s record order backlog with a further increase of roughly EUR 300 million to EUR billion in 2011, although about EUR 1 billion of this was accounted for by positive exchange rate effects. The order backlog is equivalent to just under 26 months in forward orders. The average number of employees grew as a result of project activities by 12.6 percent to 52,220. Outlook Fiscal 2011 proved unsatisfactory for the Asia Pacific division. However, the initiated reorganization measures, including the overhaul of the risk management system, already gained traction in the second half of These will be systematically continued and finetuned in Based on the sustained positive performance of the core business, the ongoing favorable economic environment in Australia as well as Asia, and the implemented restructuring, we expect earnings in the Asia Pacific division to return to the level reached in Annual Report

110 The challenge: Keep travel safe, reliable, and comfortable A case in point: In Krefeld, Germany, Siemens Rail Systems builds regional and high-speed multiple-unit trains for railways all over the world. And HOCHTIEF performs a wide spectrum of industrial services needed to keep the plant running. Our facility managers are responsible for making sure all the technical equipment required in production is always in perfect working order. That includes complex manufacturing robots and rail car transporters, for example. The HOCHTIEF experts ensure that our client Siemens can focus on its core business and that passengers can relax and enjoy their trip, knowing they ll get where they re going safe and sound. Our solution: Services for industry to keep production processes running smoothly 110 Annual Report 2011

111 HOCHTIEF Europe Division New Europe division pools services and reduces costs Success in all strategic growth segments International business expands further the Baltic states. Based on our experience in the Gulf region, we additionally aim to do business in Saudi Arabia and Bahrain as well as in the United Arab Emirates and Kuwait. For further information, please see The new HOCHTIEF Europe division has been home to the companies of the former HOCHTIEF Europe, HOCHTIEF Real Estate, and HOCHTIEF Services divisions since January The division s main company, HOCHTIEF Solutions AG, develops, builds, and operates properties, facilities, and infrastructure projects in Europe and in selected high-growth regions around the world. New structure promotes cooperation The newly structured HOCHTIEF Europe division allows us to reap synergies and cut costs. It enables us to combine our development, design, construction, and operation services to benefit our clients, as demonstrated by the growing number of joint projects undertaken within the Europe division. Strategic areas of focus and markets In recent years, we have successfully shaped our German building construction activities to meet market requirements, generating a stable work done figure of EUR 500 million with strong profits in the building segment. In 2011, our infrastructure activities focused on segments including offshore wind energy. HOCHTIEF Solutions is involved in several German offshore projects and has emerged as a strong partner to the energy industry.* Further potential for energy infrastructure work is possible in areas including local pumped storage power plants, where we can apply the build-and-operate experience we have gained from complex projects of this kind. In the future, we will additionally offer electrical power line installation services. Experts anticipate substantial investments in this area. We further expanded our international business in In Poland, the Czech Republic, Romania, and Slovakia, our country-level subsidiaries were successful in the infrastructure sector as well as the office, commercial, and residential real estate market segments. We also intend to establish a company in Latvia that will operate across HOCHTIEF Solutions is one of the leading developers of high-quality real estate.** The focus in 2011 continued to be on office, retail, and residential properties in top-notch locations near urban centers. We see potential in urban district developments and nursing care facilities due to the demographic shift. In the residential real estate segment, we look forward to growth opportunities in the attractive markets of Germany, Luxembourg, Austria, and Eastern Europe. In the energy and facility management segment, energy efficiency was a business driver in building operations during the reporting year, generating a large number of new contracts. We believe that the trend toward cloud computing is the source of substantial growth potential in data center construction and operation. We assist our clients through all phases of these projects, from design and financing through construction and operation to energy supply. Project highlights In fiscal 2011, HOCHTIEF Solutions AG s companies and units were again able to win numerous attractive new orders and successfully complete projects around the globe. Offshore wind farms segment HOCHTIEF Solutions is involved in building the EnBW Baltic 2 offshore wind farm with 80 turbines located north of the island of Rügen. Our share of the project is valued at around EUR 191 million. Construction work will begin in After completion, the wind farm will deliver approximately 1,200 gigawatt-hours of electricity annually. In 2012, work will also start on the Global Tech I North Sea wind farm slated to deliver 1,400 gigawatts of electricity. The Innovation, a jack-up vessel we developed in-house, will be employed for the first time in installing the project s 80 turbines. The contract amounts to roughly EUR 175 million. **According to a ranking by BulwienGesa, HOCHTIEF was one of the most active real estate developers in Germany and the top German residential housing developer of projects under construction and in the planning phase in *For further information, please see page 65. Group Management Report Segment Reporting Annual Report

112 Group Management Report Segment Reporting *For further information, please see page 118. Our business also extends beyond German waters: In 2011, we were awarded a contract in the UK to install the 100-meter met mast for the Hornsea offshore wind farm in the North Sea. Billions will be invested in the project from 2014 onward. As a preferred construction partner of the lead company in the consortium, HOCHTIEF anticipates receiving a share of these investments. Hydro construction segment Construction work was completed in 2011 on a flood barrier to protect the greater St. Petersburg area from the effects of a storm surge. The centerpiece of the project, generating around EUR 149 million for HOCHTIEF, is a 730-meter traffic tunnel under the barrage. Transportation infrastructure segment In October of the year under review, we celebrated completion of the breakthrough for the Gotthard Tunnel along with our partners and set the record for the world s longest railway tunnel. The 57-kilometer tunnel is scheduled to open in As a member of a consortium, we were awarded the contract in 2011 to expand a 41-kilometer stretch of the A8 expressway between Ulm and Augsburg in a publicprivate partnership project*. The expressway will be extended from four to six lanes while in use. Work began in June The contract is worth approximately EUR 177 million. Another project in progress is the Norra Länken bypass north of Stockholm where we are working with a Swedish joint venture partner on two construction projects to be completed by Here, we are building two doublelane 1.2-kilometer tunnels and an approximately onekilometer-long road section including ramps and turnoffs. The project will generate some EUR 63 million for HOCHTIEF. We are also building a traffic tunnel in downtown Stockholm comprising three 700-meter tubes. The work will not require road closure and is slated for completion by The project worth around EUR 93 million for HOCHTIEF also includes construction of a new bridge. As the leader of a joint venture also including ACS subsidiary Dragados, HOCHTIEF Solutions will build a bridge and the related traffic connections over the Firth of Forth near Edinburgh. The contract amounts to some EUR 894 million, with about EUR 250 million accruing to HOCHTIEF. Construction started in May 2011 and will be wrapped up in At the heart of the project is a two-kilometer-long cable-stayed bridge and the necessary connecting structures. Nearly seven kilometers of road infrastructure will be built without disrupting traffic. Renovation of Salzburg main station is proceeding according to schedule. As general contractor, HOCHTIEF is performing the required demolition and construction work while railway services are in full operation. The contract is worth approximately EUR 56 million. In April 2011, we were awarded the contract to build the Thames Tunnel in London as part of a joint venture. The project includes construction of two three-kilometer tunnel tubes and portal structures. Worth some EUR 218 million in total, this complex job is expected to be finished in May HOCHTIEF s share comes in at roughly EUR 109 million. Social infrastructure segment In April 2011, HOCHTIEF secured another public-private partnership (PPP) contract in Salford, UK. HOCHTIEF Facility Management (UK) will operate two schools with nearly 3,500 students for 25 years. This includes all utility, waste removal, and cleaning services as well as security. In another HOCHTIEF PPP project in conjunction with the city of Braunschweig, HOCHTIEF Solutions will perform the construction and refurbishment work on nine schools, three daycare centers, and two sports halls. The work will begin in April 2012 and is expected to be completed in fall In addition, our facility managers will operate the properties for 25 years. They are responsible for repairing, maintaining, and cleaning the buildings and grounds. Work has been further delayed on the public part of the Elbe Philharmonic Hall complex. The reasons as before are unresolved technical issues, delays in plan availability and decision making, and client-side planning changes. In December 2011, for example, nearly five years after starting construction, HOCHTIEF received new plans for the 10th to 17th floors including modifications resulting from a new fire safety plan. A substantial part of the new plans are unexecutable. We have put in a large number of comments and reservations. Revising the plans to make them feasible is the task of the city client, ReGe Hamburg. In a second example at the beginning of February 2012, HOCHTIEF was handed over a thousand plan documents, in some cases containing substantial changes to the work specifications. We are currently examining the effects. It is already clear that additional 112 Annual Report 2011

113 HOCHTIEF Europe Division work must be carried out and further costs will be incurred. The architects have not yet declared the plans complete and final. HOCHTIEF has been forced to stop work on various parts of the project until the points under dispute are resolved. Affected areas include the concert hall roof and technical systems, foyers, and backstage area. Construction work on the hotel, restaurants, and apartments that likewise form part of the complex is only affected by delays at roof level and is on schedule in other respects. HOCHTIEF is in overall charge of planning in these sections. We expect that the structural problems will be resolved as soon as possible. With this end in mind, we are in dialog with the City of Hamburg and among other things are prepared to take on greater responsibility for planning in order to achieve clarity at last regarding all construction details. Office and commercial buildings segment We successfully sold and rented out numerous projects in 2011 in further pursuit of our strategy of increasing asset turnover in real estate development and unlocking value earlier. For instance, we sold the La Cour office building in Düsseldorf to a large insurance company even before laying of the foundation stone. The project with floor space of around 15,000 square meters is being built with sustainability in mind, aiming for silver certification from the German Sustainable Building Council (DGNB). HOCHTIEF s real estate developers are also putting up the first office building in the Le Quartier Central urban district development on a site in Düsseldorf acquired by our Group company aurelis Real Estate. Around 90 percent of the total 13,400-square-meter rental area was leased before construction began. The Caleido development in Stuttgart will be built by mid The majority of the new construction with a total of approximately 14,000 square meters of commercial space and 15 residential units was rented out before construction work started. In 2011, the Caleido complex was the first mixed-use property to receive DGNB silver pre-certification. In fall 2011, HOCHTIEF Solutions began handling technical and infrastructure facility management for Germanischer Lloyd s new corporate headquarters in Hamburg. The contract runs until the end of In the future, Stuttgart Stock Exchange will cut its energy costs by a six-figure sum annually thanks to measures implemented by HOCHTIEF Energy Management, while simultaneously lowering carbon emissions by around 500 metric tons per year. In addition, this client has been relying on our facility management services since Shopping center segment Work continued successfully on Qatar s 8.5-kilometerlong Barwa Commercial Avenue in the reporting year. The large-scale project with a contract value totaling EUR 1.4 billion will be finished on schedule in Residential segment By the end of 2012, the residential real estate developers at HOCHTIEF Solutions will complete four top-quality multi-family homes and three city villas in a desirable residential neighborhood in Darmstadt. The 40 condominiums in the Rosarium residential complex were sold even before the foundation work began. We are building the WaterHouses in Hamburg featuring four triplexes and a nine-story WaterTower for the Internationale Bauausstellung construction exhibition to be held in All 34 residential units were sold before construction began in June The project has already received gold pre-certification from DGNB for its sustainable design. Our subsidiary HOCHTIEF Polska started constructing the 260-meter Cosmopolitan Twarda 2/4 skyscraper in Warsaw in October The project comprises 250 apartments and a five-story office building with retail and catering units. Urban district development segment By 2013, HOCHTIEF s real estate developers are building the Katharinenquartier, a new residential and commercial urban district in Hamburg that will measure over 22,000 square meters with some 130 rental apartments and office and retail space. The project was sold before construction started. In Düsseldorf, we are continuing to build the le flair urban district along with a joint venture partner. By 2015, we will construct over 900 residential units there and implement a multi-generational living concept for young fami- Group Management Report Segment Reporting Annual Report

114 lies as well as older and single people. The first phases were finished in 2011 and most of them sold. pressed air center. A new combined heat and power station and refrigeration plant will also be built. Group Management Report Segment Reporting **Further information is available on the Internet at *See glossary on page 212. Care segment In close cooperation with nursing care services provider BeneVit, HOCHTIEF Solutions is building nursing care facilities according to a community living concept. In December 2011, we held the topping-out ceremony in Burladingen for our eleventh joint project. To date, twelve projects have been sold to the investor, life insurance company Swiss Life, and of these, eight are currently in operation. Refurbishment and upgrading segment In November 2011, the Sevens shopping center in Düsseldorf opened for business again after extensive alterations. Our construction specialists and property and facility managers worked together closely on this project as well. From June 2011 to March 2013, we are refurbishing a building complex for Ruhr University s school of engineering in Bochum. The property with an area of about 46,500 square meters was built in 1965 and will be fully renovated in line with ecological standards. Building site logistics segment The new A-West concourse at Frankfurt Airport will be completed in Our subsidiary Streif Baulogistik is responsible for site installation and logistics, and supplying energy to the large-scale construction site. In Düsseldorf, we started building an office and commercial complex in 2011 according to LEED* Platinum sustainability certification standards. Streif is handling aspects of the project, including disposal of construction site waste in accordance with LEED criteria. Industrial plant segment Our facility managers have further extended their cooperation with Mercedes-Benz. As of August 2011, we assumed responsibility for technical facility management of two new climatic wind tunnels in Sindelfingen for an initial three years. This primarily includes technical building services as well as maintenance of the test bench technology. Pharma manufacturer Nordmark will reduce annual energy costs by a substantial six-digit amount over the next ten years. In order to achieve the savings, HOCHTIEF Energy Management s specialists are taking various measures including the refurbishment of the boiler room at a Nordmark facility and construction of a new com- In October of the year under review, our energy management professionals entered a new business segment: We are producing top natural gas-quality biomethane in Saxony that will be fed directly into the pan-european Gas Infrastructure Europe (GIE). The contract for operating a state-of-the-art biogas plant was awarded to us by a regional biomethane company. The ten-year contract stipulates that HOCHTIEF will produce 53.5 gigawatt-hours of biomethane per year in the new plant. This is equivalent to the annual consumption of 2,300 single-family homes. aurelis Real Estate** HOCHTIEF Group company aurelis Real Estate owns approximately 17 million square meters of real estate close to urban centers across Germany and leases land and buildings for commercial purposes. All other properties are developed jointly with municipalities until development rights have been secured and the construction-ready land can be sold. Business was good again in The development and sales segment saw assets with a total value of approximately EUR 250 million sold in around 500 transactions. In the leasing segment, aurelis generated income of EUR 82.6 million in total. New tenancies and contract renewals amounted to annual net rent of EUR 19.9 million as of the end of The average tenancy increased to 66 months. The strategy is to further enhance the quality of the existing portfolio, for instance, through revitalization projects, and to boost the value of the land and buildings, as well as to create conditions allowing for rent increases. After signing long-term lease agreements, aurelis builds on its own land and adds the projects to its existing portfolio. aurelis again proved its expertise in active asset management in a wide variety of projects in 2011: A solar park with an area of roughly 34,000 square meters and a total capacity of 1.7 megawatt-hours of electricity was commissioned near Dresden. In Braunschweig, aurelis is refurbishing the historical hall of a former railway repair workshop with heritage status. In addition, a new logistics center was built for a drug store chain in Karlsruhe. The lease agreement was signed for 15 years initially. Similar successes were the hallmark of the property business in For example, a site measuring around 40,000 square meters was sold for the new Europa- 114 Annual Report 2011

115 HOCHTIEF Europe Division viertel development in Frankfurt. A real estate developer acquired a good 47,000 square meters of land for a new commercial development on the grounds of the former rail freight yard in Cologne s Mülheim district. aurelis Real Estate s successful business strategy inspires financial market confidence: At the end of 2011, the HOCHTIEF company was able to arrange longterm refinancing of its more than EUR 700 million line of credit expiring in The credit line will run until September The HOCHTIEF Europe division s key figures New orders in the Europe division were down EUR million (7.2 percent) in the year under review compared with the prior year. A 7.7 percent or EUR 83.2 million increase to EUR 1.16 billion on the international side of the business was not enough to make up for the EUR million (13.7 percent) decrease to EUR 2.14 billion in Germany. The overall trend in new orders was less than satisfactory, as major national and international projects were either not undertaken or put off until the next year. Work done fell short of the prior-year figure by EUR million (4.9 percent) to total EUR 3.44 billion in the year under review. Work done increased in Germany by EUR million or 12.3 percent to EUR 2 billion. Internationally however, work done decreased by EUR million or 21.5 percent to EUR 1.44 billion. The order backlog, at EUR 5.89 billion (down 1.8 percent), showed a slight decrease on the prior year. The order backlog is equivalent to upward of 20 months in forward orders. Both divisional sales and external sales were above the comparative prior-year figures, with gains of 2.0 percent and 2.8 percent respectively. Most of this was generated in the Real Estate Solutions business line, where sales went up compared with the prior year by EUR 409 million (46 percent) to EUR 1.3 billion. Operating earnings increased relative to the prior year by EUR 39.1 million (34.5 percent) to EUR million. The marked rise in earnings reflected our focus on high-margin markets, rigorous risk management, and organizational improvements within the division. Taking into account net investment and interest income together with negative non-operating earnings in connection with ongoing organizational development, profit HOCHTIEF Europe division (EUR million) (restated)* New orders 3, ,559.5 Work done 3, ,612.7 Order backlog 5, ,994.5 Divisional sales 3, ,280.1 External sales 3, ,229.4 Operating earnings (EBITA) Profit before taxes Capital expenditure RONA** (%) Net assets (December 31) 1, ,737.7 Employees (average over the year) 15,418 16,035 before taxes grew in the year under review by EUR 10.6 million (12.8 percent) to EUR 93.1 million. The Europe division s successful international orientation is underscored by a 73.5 percent international share in profit before taxes. The year-on-year increase in capital expenditure chiefly relates to project-specific expenditure on property, plant and equipment and expansion of the construction logistics equipment fleet, in contrast with a reduction in capital spending on financial assets mostly as a corollary to the prior year s investment in a joint venture for the expansion of our offshore business. The 3.8 percent fall in the average number of employees primarily reflects project-related changes in South America and the Gulf region, development of the business in Eastern Europe, and the realignment in German building construction as well as in facility management. Outlook At the beginning of 2012, the public-private partnership activities, previously managed as part of the HOCHTIEF Concessions division, were integrated as a separate business line within the HOCHTIEF Europe division spearheaded by HOCHTIEF Solutions AG. The existing social infrastructure and roads activities will be supplemented with energy as an added focus of activity in the PPP business. This allows us to even better capitalize on our available expertise with streamlined resources in the development, construction, and operation of infrastructure projects, real estate, and facilities. For fiscal 2012, we expect an increase in profit before taxes on the prior year. *For further information on the restated figures, please see page 201 onwards. **For further information, please see page 76. Group Management Report Segment Reporting Annual Report

116 HOCHTIEF Concessions Division Group Management Report Segment Reporting *For further information, please see Positive growth in passenger numbers at airports HOCHTIEF Concessions responsible for 111 schools with more than 84,000 students Operating earnings and profit before taxes affected by risk provisioning for road projects The HOCHTIEF Concessions division pools our activities in the areas of concessions and operation projects under the leadership of HOCHTIEF Concessions AG*, operating in the airports, roads, and social infrastructure facilities segments. HOCHTIEF Concessions AG, the parent company of HOCHTIEF AirPort and HOCHTIEF PPP Solutions, numbered among the world s major industrial infrastructure investors at the end of fiscal year As of December 31, 2011, its portfolio comprised six airport holdings, eight roads including two tunnels, 111 schools, 18 police facilities, one community center, a barracks, and two geothermal projects. Airports segment HOCHTIEF AirPort optimizes and manages both its own airport holdings and those held by HOCHTIEF AirPort Capital, and provides services such as consulting to its own and third-party airports. At the end of 2011, the portfolio included six airport holdings Athens, Budapest, Düsseldorf, Hamburg, Sydney, and Tirana. The airports handled 94.7 million passengers in total in the year under review, thus recording growth of 2.2 percent, despite the decline in passenger numbers at Athens International Airport due to the Greek economic crisis. The sale of our airports segment was delayed as a result of the macroeconomic situation and financial market developments and could not be completed in 2011 as originally planned. We aim as before to sell our airport activities and obtain the best price possible. Until the activities are sold, we continue to profit from the positive business trend at our airports. Airports Athens International Airport HOCHTIEF AirPort stake: 26.7% / HOCHTIEF AirPort Capital stake: 13.3% Athens International Airport saw passenger numbers fall by 6.3 percent to 14.4 million in the reporting year due to the massive economic problems facing the country. By cutting costs, the airport company nevertheless managed to keep its profit margins stable. The reversal in 2011 of the increase in corporate income tax, including retroactively for 2010, also had a positive effect. Selection of Athens International Airport as European Airport of the Year 2011 is evidence that its attractiveness remains undiminished. The Institute of Transport Management recognized the airport in May 2011 notably for its excellent customer service and role as an economic engine for the region. Moreover, international airlines commended Athens International Airport for outstanding airline marketing, naming it the secondplace winner in the Europe category in the 2011 Routes Airport Marketing Award. Budapest Airport HOCHTIEF AirPort stake: 49.66% During the year under review, Budapest Airport saw 8.9 million passengers, a record number. Combined with increased efficiency, this also led to improved operating earnings. The second purchase price installment for shares in the airport due on June 30, 2011 was paid in accordance with the agreement signed when the airport was purchased in In early June 2011, the Hungarian government announced that it would divest its 25 percent stake in the airport. The share was proportionally taken over by the airport s private shareholders. Since then, the airport has been completely privatized, with HOCHTIEF Concessions holding a percent interest. The new SkyCourt terminal building opened in March Connecting the existing terminals 2A and 2B, this glassed-in structure makes the airport much more attractive thanks to a varied selection of retail shops and food outlets. 116 Annual Report 2011

117 Düsseldorf International HOCHTIEF AirPort stake: 20% / HOCHTIEF AirPort Capital stake: 10% Düsseldorf International Airport continued its successful run in 2011 and ended the reporting year by setting a new passenger record: The airport was used by 20.3 million passengers, around 7.1 percent more than in the prior year. This achievement is also positively reflected in the airport s earnings. Düsseldorf Airport received first prize in the Airport Staff Service Excellence Europe category of the SkyTrax World Airport Awards. A survey was conducted among 11.3 million passengers regarding the quality of various aspects of service provided by airport employees such as conduct, friendliness, and foreign language skills. Tirana International Airport HOCHTIEF AirPort stake: 47% Our airport holding in the Albanian capital was successful again in 2011 thanks to above-average passenger growth. The number of passengers climbed to 1.8 million, up 18.2 percent against the already excellent 2010 figure. This had a positive effect on earnings. Consulting HOCHTIEF AirPort is now an internationally recognized independent consulting firm, offering services including traffic forecasts, operating concepts as well as master and business plans. In its consulting projects, the HOCHTIEF Concessions subsidiary draws on experience managing its own airport holdings. Hamburg Airport HOCHTIEF AirPort stake: 34.8% / HOCHTIEF AirPort Capital stake: 14.2% Hamburg Airport was successful again in 2011 thanks to substantial growth. The airport counted 13.6 million passengers, up 4.6 percent compared with the prior year. Earnings exceeded expectations. As a company that practices sustainability, the airport further stepped up its renewable energy activities in Since May, a photovoltaic system on the airport s grounds has been providing electricity amounting to around 32,000 kilowatt-hours per year, thus lowering the airport s annual carbon emissions by up to 12 metric tons. Sydney Airport HOCHTIEF AirPort stake: 5.61% / HOCHTIEF AirPort Capital stake: 6.50% The passenger volume at Sydney Airport increased by 0.2 percent to 35.6 million, developing not quite as positively as most of the other HOCHTIEF Concessions airport holdings. The reasons included the severe natural disasters in the Pacific region as well as the temporary disruptions in the flight operations of Qantas and Tiger Airways. Despite the limited growth in air travel, sales and EBITDA rose. HOCHTIEF AirPort provided consulting services to airports including Koltsovo Airport in The largest regional airport in Russia aims to develop into a logistics hub with the very best service and modern infrastructure. In a feasibility study conducted in 2009/2010, HOCHTIEF AirPort had already reported the overall potential that the airport could open up. The plan includes a new freight terminal and a cargo city. The project begun in 2011 calls for turning the conceptual plan for the freight terminal into a concrete design. Roads segment In April 2011, the bid submitted by a consortium in which HOCHTIEF PPP Solutions holds a 50 percent stake was accepted for the public-private partnership (PPP) project to expand the A8 expressway between Ulm and Augsburg. As of December 31, 2011, HOCHTIEF Concessions was thus building and operating a total of eight roads, including two tunnels, with a total length of more than 800 kilometers. The A4 highway and Herren Tunnel projects in Germany, the San Cristóbal tunnel and Vespucio Norte Express highway in Chile, and the A5 highway in Austria are all in operation. The A8 expressway in Germany is being expanded considerably and in part rebuilt without any road closures. Group Management Report Segment Reporting Annual Report

118 Group Management Report Segment Reporting In the past few years, progress on both road projects in Greece Elefsina-Patras-Tsakona and Maliakos-Kleidi has been delayed by slow progress in expropriation and approval proceedings as well as numerous archeological finds. In the year under review, it was also heavily impacted by the difficult economic situation in the country, which forced the project companies to discontinue some of the construction work. The Greek government and the private operator consortia are negotiating a viable long-term solution for both toll road projects. We have recognized impairment losses and made risk provisioning of just under EUR 60 million to take account of the uncertainty regarding the projects continuation. Project highlights A stretch of the A8 expressway between Ulm and Augsburg is currently being planned, financed, and upgraded by HOCHTIEF PPP Solutions together with a partner. The HOCHTIEF Concessions subsidiary holds a 50 percent stake in the concession company, and HOCHTIEF Solutions holds a 50 percent interest in the construction joint venture commissioned for the project. Work began in June In October 2011, the concession company began operating the 58-kilometer stretch between the Ulm-Elchingen and Augsburg-West interchanges. The project with a capital outlay of around EUR 410 million will run for 30 years. The tolls generated by two projects, the Vespucio Norte Express toll road and San Cristóbal toll tunnel in Santiago de Chile, grew year on year by 6.5 and 16.7 percent, respectively, in The damage caused to the northern beltway in Santiago de Chile by the severe earthquake in February 2010 has for the most part been repaired. One of the most important connecting routes is therefore again well equipped to handle the traffic flows in Chile s capital. Social infrastructure segment Public-private partnerships are an attractive alternative to conventional methods of implementing urgently needed infrastructure in building construction, too, especially in times when public coffers are mostly empty. Project highlights A consortium including our subsidiary HOCHTIEF PPP Solutions (UK) was awarded a contract by Halton Borough Council in the UK to design, finance, build, and operate two schools. The total project value is roughly EUR 181 million with capital outlay of about EUR 63 million. Construction began in June 2011 and will take around 22 months. After completion, HOCHTIEF Facility Management will operate the schools for 25 years. The city of Braunschweig also chose to award a PPP contract covering nine schools and three daycare centers to HOCHTIEF PPP Solutions. The company will design, finance, refurbish, and then operate the facilities. The project comprises investment spending of approximately EUR 80 million and will run for 25 years, including the construction phase. The total value of the contract is in the region of EUR 279 million. HOCHTIEF Solutions is responsible for all construction work, slated for completion in fall In fiscal 2011, work was completed on two further British schools: Walkden High School and Irlam & Cadishead High School in Salford. The two educational facilities have room for more than 2,500 students. The community center in Wigan, UK, was also finished at the end of HOCHTIEF Facility Management (UK) operates both schools and the community center. In fall 2011, HOCHTIEF PPP Solutions (UK) secured another contract to work with a consortium partner in the future to design, finance, build, and subsequently operate four schools in Salford. The PPP contract worth around EUR 320 million runs for 25 years. Construction has started and will be wrapped up in 22 months. Infrastructure ventures segment HOCHTIEF Concessions is developing two power plants in Bavaria as a 50 percent joint venture partner of Süddeutsche Geothermie-Projekte GmbH (SGG). Project financing for the power plant in Dürrnhaar was obtained by SGG at the end of 2010, the first time ever for this type of plant in Germany. Construction began in January 2011 and is on schedule. After its completion in 2012, the plant will have a capacity totaling approximately 5.5 megawatts of electricity. In September 2011, project financing was also arranged for the second power plant in Kirchstockach. The capital outlay amounts to approximately EUR 62 million. As general contractor, HOCHTIEF Energy Management is responsible for designing, building, and maintaining both power plants. 118 Annual Report 2011

119 HOCHTIEF Concessions Division The HOCHTIEF Concessions division s key figures A major new contract for nine schools and three child daycare centers for the city of Braunschweig pushed new orders up well past the prior-year level to EUR million. The order backlog swelled accordingly to EUR million. Work done, divisional sales, and external sales were nonetheless below the prior-year figures due to the sale of three school projects and two city hall projects at the end of HOCHTIEF Concessions division (EUR million) New orders Work done Order backlog Divisional sales External sales Operating earnings (EBITA) Profit before taxes Capital expenditure RONA* (%) Net assets (December 31) 1, ,330.4 Employees (average over the year) *For further information, please see page 76. The operating earnings of EUR 41.6 million and profit before taxes of EUR 3.6 million were both significantly down on the prior year. The main factor here consisted of risk provisioning necessitated for our toll road projects in Greece and Chile. The ongoing unsettled economic climate in Greece and associated delays to the restructuring of our two toll road projects, Maliakos-Kleidi and Elefsina-Patras- Tsakona, are significantly affecting growth in traffic volumes and takings as well as project progress, with impairment charges and risk provisioning following as a result. At the same time partly in view of the concerted EU support we retain our expectation that the restructuring of our projects will be successful. In Chile, lower outcomes on benchmark transactions necessitated a EUR 29.4 million increase to provisions for the residual value guarantee on the stake in the Chilean Vespucio Norte Express toll expressway sold in 2007/2008. A positive impact on earnings came in the roads and social infrastructure segments from success fees on the award of the A8 expressway and Braunschweig schools/daycare center projects in Germany as well as of the four Salford schools and the Halton Borough school project in the UK. The sale of the four geothermal exploration permits in the geothermal energy/infrastructure ventures segment also returned a positive contribution to earnings. The profit in the airports business mostly reflects the strong overall operating performance of our airport holdings, with 2.2 percent growth in passenger numbers compared with the previous year, combined with airport cost improvements. HOCHTIEF AirPort Capital earned a success fee from the investors for aboveaverage value growth in the airport portfolio in the past five years. The airports business also profited from reversals of provisions for Budapest Airport and Düsseldorf Airport and a cut in Greek dividend income tax relating to Athens Airport. Capital expenditure totaled EUR million, well up on the prior year. The main element in this was payment of the second purchase price installment for Budapest Airport in accordance with the agreement struck on the airport s acquisition in The Hungarian government also parted with its 25 percent shareholding, which was taken up by the private owners in proportion to their respective stakes. Outlook HOCHTIEF retains the strategic objective of selling its subsidiary HOCHTIEF AirPort. The airports business will therefore continue to be accounted for in accordance with IFRS 5 as assets held for sale. We anticipate another positive performance from our airports overall in fiscal The remaining HOCHTIEF Concessions activities roads, social infrastructure, and infrastructure ventures are integrated into HOCHTIEF Solutions AG from the beginning of Fully in line with our One roof all solutions philosophy, this brings together our processes and capabilities for infrastructure projects, real estate, and facilities in the HOCHTIEF Europe division and enables us to unlock further efficiency and cross-selling potential. Group Management Report Segment Reporting Annual Report

120 The challenge: Bringing home joy in later life A case in point: The nursing home in Albstadt-Onstmettingen, southern Germany, is one of ten residences for senior citizens that HOCHTIEF developed and built in collaboration with BeneVit as partner and operator. Based on a community living concept, the home comprises six independent residential units with a total of 74 single and double rooms which the seniors can decorate with their own furniture if they choose. Residents can also lend a hand with the housework according to their abilities. Additional support and care are provided by professionals. This concept creates living space where people in need of care can continue to make their own decisions and take responsibility for themselves and where the younger generation will love coming to visit. Our solution: Housing for the elderly that respects individual desires and fosters a sense of community 120 Annual Report 2011

121 Risk Report Group-wide early warning system used to manage risk Continuous refinement of risk management as strategic success factor Group finances secure for long term No risks relating to the company s ability to continue as a going concern Group risk management Risk management encompasses all organizational processes for the identification and minimization or elimination of risks. A risk is defined as any contingency with a potential negative impact on the attainment of qualitative or quantitative business goals. Special focus is placed here on earnings and liquidity. Risk management is an integral component of the HOCHTIEF management system. It enables the active management of identified risks to ensure the Group s continuing ability to operate as a going concern, maintain jobs, and secure HOCHTIEF s onward development. Risk awareness is continuously promoted throughout the workforce by means of organizational processes at all levels that are fine-tuned on an ongoing basis. Risks are communicated adequately, fully, and openly. HOCHTIEF Group early warning system The Group risk directive stipulates how risks are dealt with, describes the structure and procedures, and lays down the Group-wide framework for risk management. To supplement this Group directive, the divisions and Group companies have produced their own organizational instructions for the identification, assessment, and management of risks, developed with their specific circumstances in mind. In addition, the Group audit function checks and assesses compliance with the requirements and the effectiveness of the installed systems and processes. The findings are used to optimize the early detection and management of risk. Risk inventories and forecasts are compiled three times a year in a standardized process. The resulting information is aggregated to Group level.* This approach brings in managers at all levels of the corporate hierarchy. The risk report contains information on the potential impact of a risk, its probability of occurrence, risk category, possible time-scale, and any measures that have already been taken to avert it. Above and beyond this quantitative risk assessment, HOCHTIEF considers it particularly important that the risks are discussed openly by management. This key need is addressed by the Risk Management Steering Committee, which is made up of representatives from all divisions and corporate departments. The Steering Committee looks at reported risks from the perspective of both the divisions and the holding company, weighing and adopting counter measures in the process. Information on the risk situation is compiled by Corporate Controlling, subsequently appraised by the Steering Committee, and reported to the Executive Board. The risk position is also discussed at scheduled intervals at the meetings of the Supervisory Board s Audit Committee. New, material risks arising at short notice are reported to risk managers separately from the standardized process. Within the HOCHTIEF risk early warning system, careful appraisal of capital spending, investments, and contracts plays a key role in risk avoidance. All divisions and Group companies accordingly have individual approval processes tailored to their business model and applying strict appraisal criteria. In addition to the risks, the planning and forecast reports submitted to the Executive Board also outline the opportunities HOCHTIEF faces. There is no offsetting of risks and opportunities. Internal control and risk management system in relation to the financial reporting process Reliable financial reporting is vitally important not only for management, but also for banks and investors. Risks associated with the Group financial reporting process are dealt with in the HOCHTIEF Group in a variety of ways. For instance, IFRS accounting guidelines are prepared each year based on the IFRS rules applicable at the time to ensure uniform financial reporting and measurement throughout the Group. A set of German Commercial Code (HGB) accounting guidelines is also updated annually for German Group companies. *Please see chart on page 122. Group Management Report Risk Report, Forecast and Post-balance-sheet Events Annual Report

122 Formal risk management procedure 4. Holding company Executive Board discusses and assesses risk situation 3. Risk Management Steering Committee evaluates the risks in the provisional Group risk situation analysis 2. Corporate Controlling categorizes risks and prepares the provisional Group risk situation analysis Actions Group risk position Overall Group risk is determined by adding the expected individual risk exposures and expressing them as a fraction of forecast or budgeted earnings. Expected risk exposures are also aggregated at Group level by division and risk category. The Risk Management Steering Committee assesses interrelations between individual risks and takes them into account in risk quantification. The risk position is compared on an ongoing basis for transparency about changes in the risk structure. Group Management Report Risk Report, Forecast and Post-balance-sheet Events 1. Divisions/Corporate Departments identify and explain their respective risks Accounting for financial instruments and deferred taxes is carried out in close cooperation with Corporate Finance and the Tax corporate department. The measurement of derivative financial instruments has additionally been supported since 2009 by a proven treasury management system widely used in the industrial and banking sectors. The IT system for preparation of the consolidated financial statements has numerous plausibility testing features and is central in ensuring the correct performance of capital, liability, expense, and income consolidation. Any remaining inconsistencies are investigated and eliminated by Corporate Headquarters. Access is controlled using an authorization system that ensures the employees responsible can only access data of relevance to them. The consolidation system underwent an audit by the internal audit function, which also audits internal control, management, and monitoring systems throughout the Group in all business units, notably taking into account uniform application of the applicable IFRS and HGB guidelines. Despite the unexpectedly large impact on earnings from our Australian subsidiary Leighton in fiscal 2011, our financing and liquidity position remains sound. From today s perspective, there are no risks that might cast doubt over the Group s ability to continue as a going concern. The closer monitoring of liquidity risks established during the financial crisis proved effective and has been retained. HOCHTIEF is able to compensate for any identified liquidity risks through existing holdings of cash resources. In light of this analysis, there is no identifiable risk to HOCHTIEF s future financial position and results of operation that might raise doubt about the entity s ability to continue as a going concern. The overall risk identified at HOCHTIEF primarily relates to the risk categories covered in the following. Project and contract risk Most project and contract risks arise in the mainstream construction activities of HOCHTIEF Americas, HOCHTIEF Asia Pacific, and HOCHTIEF Europe. HOCHTIEF Solutions AG and HOCHTIEF Concessions are also exposed to risk in their real estate development activities and PPP projects respectively. Acquisitions of ownership interests, real estate investments, development projects, PPP projects, and outsourcing projects are carefully scrutinized in a structured process. Projects above a certain volume or risk level must also undergo this approval process. 122 Annual Report 2011

123 Risk Report Ausführungs- Execution Audit audit Liquiditäts- Liquidity Management management Evaluation länderspezifischer specific Risiken of country- risks Sorgfältige Careful Auswahl selection der of Partner partners Bonitätsprüfung Credit check Value creation Wertschöpfung Entwicklung Develop Build Konzessionen und Bau Betrieb Operate Dienst - leistungen Risk management Risikomanagement Abnahme- Acceptance Audit audit Investitionsausschuss Investment Committee Project risk management HOCHTIEF attaches importance to operating practical, effective mechanisms. For HOCHTIEF s real estate development projects, for example, pre-lease or pre-sales rates commensurate with the type of project must be attained before the green light is given for construction to start and, in certain cases, before the site is purchased. Our Australian subsidiary Leighton also stipulates a wide range of project-specific requirements for processing and approving bids. All projects and their risk structure are analyzed by special committees, which decide whether a project is approved, conditionally approved, or declined. The flood disaster reported on last year only occasioned non-material direct losses at Leighton subsidiaries. Lost sales due to interruptions to coal mining operations were made good in the year under review. The early warning system was revised at Leighton in the past year in response to the unexpected and substantial losses on two major projects the Victorian Desalination Plant and Airport Link. Besides newly appointing a Chief Risk Officer, Leighton initiated improvements to its existing systems that will significantly enhance risk minimization and management. Contract Review Committee Contract review Bid audit The decision-making bodies of our US subsidiaries Turner and Flatiron, which include a Contract Review Committee, base their decisions on similar criteria taking into consideration market-specific conditions. Similarly in the HOCHTIEF Europe division, all prospective acquisitions and bids undergo a risk classification procedure. All bids are assessed by a Contract Review Committee made up of competent specialists. Risk auditors watch over projects from bid preparation through contract award to handover to the client. In addition, the internal auditing function regularly analyzes domestic and international projects for technical, commercial, and legal risk. The restructuring measures we adopted in the building construction business in the last few years are on target. Margins on new contracts are better and risk is fairly distributed among the contract parties. Projects are not approved until there are binding offers from subcontractors for key trades and materials. Escalator clauses reduce the risk of price increases. This approach supports HOCHTIEF in its aim to further reduce risk in the mainstream construction business through partnershipbased contracting models. Despite these measures, cost risk cannot be entirely eliminated now or in the future, particularly in large-scale projects spread over several years. Although HOCHTIEF generates a high volume of sales with individual trading partners, it is not dependent on any one client or supplier. Default risk is reduced through customer credit checks and by obtaining guarantees for amounts owed. HOCHTIEF s procurement management ensures that only capable operating partners are selected. By maintaining a constant watch over the market and close contact with suppliers and institutions, we ensure that we can quickly spot changes on the procurement market and respond accordingly. Earnings from a project for example, a tunnel construction contract can be adversely affected during the execution phase by factors such as unexpected geological conditions differing from those in the bid Group Management Report Risk Report, Forecast and Post-balance-sheet Events Annual Report

124 Group Management Report Risk Report, Forecast and Post-balance-sheet Events *For further information, please see pages 23 and 61. invitation. The commercial viability of such contracts often depends on the extent to which claims for supplementary work can be billed on to project owners. Contracts usually specify which risks lie with the client. Risks arise for HOCHTIEF if the value of change orders cannot be recouped. Moreover, the project execution phase also poses the risk of ambitious completion dates not being able to be met. The Elbe Philharmonic Hall project has needed reassessment on numerous occasions in the course of its construction as a result of changes to plans. The changes in the course of construction have led to corresponding delays. The claims situation on this building contract once again had to be reviewed in the past year. HOCHTIEF has come to the conclusion also after consulting with outside assessors and experts that we are not at fault for the delays and cost overruns. In court evidence-taking proceedings at the beginning of 2012, for example, it was established that fissures in an escalator tube were attributable to architects design errors. We consequently do not expect any penalties. We are in intensive negotiations with the City of Hamburg to resolve the problems. The threat of warranty risks is reduced through systematic project management and by securing subcontractor guarantees. We continue to support clients after handing over completed projects and in many cases enter into service contracts to maintain the integrity of buildings and facilities. Risk arising from legal disputes and third-party claims Our company aims to avoid court cases wherever possible. Despite this, HOCHTIEF is party to various lawsuits and arbitrations both in Germany and abroad. The outcome of legal disputes is difficult to predict. We consider the provisions recognized for ongoing cases to be adequate. Combating economic crime and corruption is a top priority for HOCHTIEF. Our compliance* program ensures that the organizational precautions are in place to secure compliance with the rules by the company, its decisionmaking bodies, and workforce. This minimizes risk to the company due to corruption-related crime. The HOCHTIEF Code of Conduct and various Group directives and circulars lay down the conduct expected from employees. HOCHTIEF also expects compliance with certain standards of conduct from suppliers and other contracting parties in order to avoid corruption risk. Employees are provided with comprehensive information on compliance topics, both on the intranet and through web-based e-learning programs with which employees are required to take training. There is also regular classroom-based training. All members of the workforce are called upon to play an active part in implementing the compliance program within their area of responsibility. The compliance program is reviewed on a regular basis and adapted where necessary. Risk arising from equity holdings The acquisition and disposal of equity holdings entails risk and uncertainty. The disposals assumed in our forecasts may differ significantly from our expectations as a result of various factors. In particular, these include changes in the general economic climate, financial market trends, and the competitive environment. In the Asia Pacific division, impairment losses have been recognized for existing risks from outstanding receivables at associate Habtoor Leighton Group. A further impairment loss was also recognized on the carrying amount of the investment in the Habtoor Leighton Group. In connection with the sale of interests in subsidiary HOCHTIEF do Brasil, we continue to be exposed to earnings risk on certain ongoing projects. Provisions have been recognized for the event that the risk materializes. In the case of companies in which we hold a minority interest primarily our airport holdings and shares in concessions businesses there is no legal basis for enforcing direct access to the investee s risk management system. These companies nonetheless comply with HOCHTIEF s request for such access and operate an effective risk management system. All relevant information held by the equity holding control function is reported and entered in the central IT system. 124 Annual Report 2011

125 Risk Report Under the consortium agreement for the Budapest Airport consortium company, fellow members alongside HOCHTIEF AirPort GmbH are entitled in certain circumstances to exercise a put option and hence to offer their investment in the consortium for sale to HOCHTIEF AirPort GmbH at a set price. Circumstances triggering this contingency include a change of control at the level of HOCHTIEF Aktiengesellschaft. One fellow member is of the opinion that the additional purchase of shares in HOCHTIEF Aktiengesellschaft by ACS Actividades de Construcción y Servicios, S.A. in spring 2011 brought about such a change of control, despite the fact that ACS so far holds fewer than 50 percent of HOCHTIEF shares. HOCHTIEF, on the other hand, is of the opinion that there is no change of control for the purposes of the consortium agreement until more than 50 percent of HOCHTIEF shares are acquired. The fellow member has nonetheless declared that it is exercising the put option and has simultaneously filed for arbitration regarding whether its exercise of the put option is valid. Other risks of the airport business include unexpected events such as volcanic eruptions and sand storms that obstruct aviation. These entail the risk of a decline in sales. Lack of growth due to a downturn in the global economy can likewise impact negatively on the earnings performance of HOCHTIEF s airport holdings. Business difficulties experienced by airlines can lead to them defaulting on amounts owed to the airport holdings. Concessions generally have a very long contract term and pose specific risks, among other things due to the need to estimate future business growth as well as to cost operation and maintenance expenditure. On concessions projects in the infrastructure segment, HOCHTIEF either guarantees a particular level of availability or assumes the risk relating to future utilization levels. If utilization levels turn out to be lower than estimated, this can have a negative impact on the value of a concession. The performance of our Greek toll road projects in the past fiscal year was thus affected by the recessionary overall situation in Greece. Falling traffic volumes and large numbers of toll dodgers have significantly reduced takings. To reach a sustainable solution for the long term, we are actively managing this risk by negotiating with the Greek government. Risk provisioning was recognized for the projects in We cannot preclude the eventuality that impairment losses may have to be recognized for our subsidiaries and associated companies in isolated cases in the future. Market risk* The slowing economic recovery and greater uncertainty on financial markets since mid-2011 added to market risk for HOCHTIEF. Persistently reduced demand in some markets and weakened government finances continue to be a source of risk across the board. Excluding residential construction, the mainstream construction market in Europe further contracted in the past fiscal year. To reduce risk, we trimmed capacity in areas such as German building construction, largely insulating ourselves from short-run market trends. Our business nonetheless needs a strong and sustained global upturn. Although the US construction market went on shrinking, HOCHTIEF Americas once again won numerous attractive new contracts in Turner retained its position as the leading general builder in the USA and was named number one in construction segments including healthcare and education properties, hotels and convention centers, and correctional facilities. The company traditionally has very little involvement in the residential construction market that was so hard hit by the subprime crisis. A large percentage of projects are undertaken for governmental and quasi-governmental clients. Our US subsidiary Flatiron secured major infrastructure projects in the American civil engineering market. These include a dam construction project in a joint venture with Dragados, a company in the ACS Group. Flatiron sustained its position as one of the leading infrastructure and civil engineering providers in North America. *For detailed information on our sales markets, please see pages Group Management Report Risk Report, Forecast and Post-balance-sheet Events Annual Report

126 Group Management Report Risk Report, Forecast and Post-balance-sheet Events Through our subsidiary Leighton, the HOCHTIEF Asia Pacific division has a presence in the Australian market and various Asian markets, including the Gulf region and India. While the Dubai property market has settled down at a low level, the prospects remain promising for construction projects in Abu Dhabi, Qatar, Saudi Arabia, and Kuwait. Possible risks relating to receivables due from clients in Dubai were taken into account when measuring the receivables. The division primarily focuses on high-growth markets. Demand for raw materials remains strong and is supported by sustained demand from China and India. In the past fiscal year, the division was able to secure or extend contract mining contracts in Australia, Indonesia, and for the first time in Africa. The division also won contracts for healthcare buildings and infrastructure projects in Asia and Australia. Given the large order backlog and undiminished demand, we expect that the division will once again perform strongly moving forward. HOCHTIEF Concessions benefited overall from a rise in passenger numbers and sales in its airports business. The performance of the non-aviation business is dependent on fluctuating passenger numbers. The sale of our airports business is affected by the macroeconomic situation. The sale may once again be postponed as a result. In the roads business, our Greek toll road projects are impacted by the country s economic situation and lower than projected traffic volumes. Our road projects in Chile are likewise susceptible to any decrease in traffic volumes. We have reassessed the risks for toll road projects in both countries. The European construction market contracted for the fourth year in a row in 2011, most of all in building construction (excluding residential construction) and civil engineering. For the HOCHTIEF Europe division, a market trend of this kind means that large-scale contracts are put off until a future date. The division nonetheless secured some major infrastructure projects both in Germany and internationally during the year under review. The market is increasingly aware of the added value of green building. As a green building provider, HOCHTIEF Europe is profiting from increased demand for certified buildings. The division also aims to secure future earnings potential by opening up new lines of business such as the development of offshore wind parks. The trend on the real estate market in 2011 was positive compared with the prior year. Both the investment and the rental market grew substantially. Turnover of office space was in line with this trend. Office markets are expected to cool in 2012, however, as a result of the slower economic growth. The real estate developers at HOCHTIEF Solutions continue to focus on high-quality, sustainable projects in prominent locations. The division monitored the market closely and responded to changes in demand from institutional investors. For instance, it increased the number of development projects with a residential component while continuing to operate a restrictive acquisition policy. A high pre-lease rate also minimizes the risk. Rising demand for integrated facility management is addressed by a sector that faces further consolidation. HOCHTIEF Solutions is geared to market needs as one of the top ten providers of sustainable, effective facility management (FM) services. Increased demand for energy efficiency improvements is met by the Group s energy management service portfolio. We can also serve international demand for FM services in Eastern Europe and the rapidly growing Middle East market. The potential in international markets can be used to minimize market risks. HOCHTIEF once again generated a large order backlog in fiscal 2011 that guarantees the company s performance in terms of work done for almost two years. If the global economy remains unstable, HOCHTIEF s future earnings performance may be negatively impacted by a lack of new orders. Regulatory risk Changes in the legal framework at national or European level entail risks that may negatively impact our earnings. Our earnings situation can be affected, for example, by changes in tax legislation. 126 Annual Report 2011

127 Risk Report In legal systems with tendering regulations that mostly prohibit two companies from the same group from bidding (e.g. Canada and the USA), there is a risk that HOCHTIEF Group companies may not be permitted to take part in invitations to tender, as another company of the ACS Group is already participating or intends to participate. For the business activities of the HOCHTIEF companies Turner and Flatiron in North America, public-sector contracts are especially important. This market is expected to be a key growth driver for the HOCHTIEF Group over the coming years. In order to serve this market, the contractor is required to provide a wide range of collateral. In the USA, such collateral is extended by surety companies on the basis of the HOCHTIEF Group s credit standing. In terms of the size of the commitment, HOCHTIEF s bonding capacity is among the largest bonding facilities in the USA. On the basis of HOCHTIEF s credit standing, a new surety program was established in the past year with a larger facility. Financial risk* Coordinating financial requirements within the Group and safeguarding its financial independence is a central task in the financial management process. HOCHTIEF achieves this goal with sound Group financing secured for the years ahead and by limiting financial risk. Financial activities in the HOCHTIEF Group are conducted on the basis of a Group-wide financial framework directive. Alongside the Group s general risk directive there is a financial risk directive that is supplemented by further individual, function-specific operating directives. In addition, responsibilities within the Group are strictly separated between trading activities on the one hand and control and settlement activities on the other. All trading transactions are compulsorily subject to dual control at minimum. Compliance with all directives and requirements is checked and if necessary fine-tuned by the internal audit function at least once a year. Having refinanced key credit facilities ahead of schedule in 2011, the Group possesses long-term, broadly diversified funding to furnish operational units with sufficient cash resources.** In December 2011, for example, we successfully refinanced our previous credit and guarantee facilities for EUR 2 billion through to the end of A promissory note loan issue dating from 2009 was replaced ahead of time with a new five-year promissory note loan for EUR million***. This further extended the maturity profile of our debt portfolio. HOCHTIEF consequently has sufficient credit facilities with a five-year term, significantly reducing any financing risk. Financial covenants**** on these facilities, which trigger lenders right to call in loans if violated, are monitored continually and currently rated as non-critical. The Group also has bilateral, short-term credit facilities to finance day-to-day business and prevent liquidity shortfalls. The cash position is continuously monitored and our cash planning is supplemented with stress tests. Most HOCHTIEF subsidiaries largely operate in a single currency region and therefore do not face any material currency risk. Leighton s subsidiaries, which operate in Asia on a US dollar basis, are an exception. Transaction risks on transfers of profits from international subsidiaries to HOCHTIEF Aktiengesellschaft are promptly hedged by entering into appropriate forward foreign exchange contracts. We minimize the risk of interest rate changes by locking in interest rates for the longest available terms. Any variable-rate borrowing that may be necessary is hedged in each instance by targeted use of interest rate derivatives with matching maturities. Project finance is hedged as needed according to term and volume. Derivative financial instruments such as interest-rate swaps and currency options are never used for specu- **For further information, please see page 84. ***For further information, please see page 186. ****See glossary on page 211. *For detailed information on financial risk management, please see pages Group Management Report Risk Report, Forecast and Post-balance-sheet Events Annual Report

128 Group Management Report Risk Report, Forecast and Post-balance-sheet Events *For further information, please see pages 95 and 96. **For further information, please see page 95. ***For further information, please see page 95. **** For further information, please see page 181. lative purposes. They are used solely to hedge potential risks from existing transactions. Risk can arise at HOCHTIEF from investments in stocks and funds. We minimize this risk through constant market monitoring and analysis to enable timely investment management. The Group s main financing agreements continue to include change-of-control clauses which, however, do not apply in the case of ACS Group companies. The existing, comprehensive ring-fencing clauses for transactions with ACS have been either retained unmodified or built into new credit facilities, as applicable. The ringfencing includes an undertaking by HOCHTIEF to lending banks not to enter into any agreement with ACS that would weaken HOCHTIEF s credit standing.* Subject to certain conditions, a change of control** may necessitate refinancing or additional financing within the HOCHTIEF Group. Certain financing agreements concluded by HOCHTIEF and project agreements entered into by subsidiaries contain change-of-control provisions that, subject to certain conditions, grant the other parties to those agreements certain rights, including rights of termination, put and call options, or a right to cash collateral.*** Personnel risk HOCHTIEF has long been among the most highly regarded employers internationally, particularly for engineers. This is reflected in several awards gained in Immobilien Zeitung, a German real estate publication, voted HOCHTIEF the top employer in the industry for the third time in succession. Turner was acclaimed Ideal Employer Universum Communications, marking it as one of the most popular employers among students. The aim of our human resources strategy is to continuously improve our employees qualifications and motivation and retain them long-term. Regular employee interviews leverage the potential for improvement within the company. The findings of these interviews are acted upon and a tailored development plan is offered in order to prevent the risks associated with employee deficits or dissatisfaction. Succession planning is an integral part of HOCHTIEF s human resources strategy. With a view to grooming selected potential high-flyers, the human resources development function offers special training options for various stages of career development. We systematically prepare employees to take on expert or managerial roles. We retain managerial employees over the long term by providing variable compensation components that act as a long-term incentive. The changes on the HOCHTIEF Executive Board in the year under review had no effect on the company s ability to act. HOCHTIEF has an above-average number of managerial staff who have been with the company for many years. Staff turnover in upper management during the reporting year was only three percent. Employee and workplace safety has always been a key consideration at HOCHTIEF. Occupational safety, health and environmental protection are coordinated centrally by the OSHEP Center. The aim is to further reduce accident and health risks for employees, subcontractors, and third parties. Risk arising from pension obligations No material risks are currently apparent with regard to HOCHTIEF s company pensions. The switch from defined benefit pension plans to defined contribution arrangements, where the costs to the company are predictable, was made several years ago. Pension obligations in Germany are largely covered by HOCHTIEF Pension Trust e. V. and pension liability insurance, and are backed by sound assets.**** All new pension commitments at 128 Annual Report 2011

129 Risk Report Leighton, Turner, and Flatiron follow the defined contribution model. If, however, the capital markets were to follow a sustained downward trend, it would not be possible to rule out the necessity of top-up contributions to meet pension commitments. Risk associated with information security HOCHTIEF counters IT risks by working together with competent service providers. IT service categories are clearly set out in service certificates forming part of our service contracts. Compliance with availability and data security service levels is ensured by stipulating measurable targets. Business-critical systems have an agreed 99.8 percent availability level. The deployment of modern hardware and software combined with digital and physical access control protect data from unauthorized access. Key data is kept in certified, redundant, geographically separate data centers. Regular external penetration tests verify the ability of our firewall systems to withstand attacks from the Internet. Confidential data and files are protected by using encryption systems covering areas such as data storage and . Risk management audit The auditors examined the early warning system and its integration into planning and reporting processes when auditing the annual financial statements. The Executive Board was shown to have taken appropriate measures to set up a system for the early detection of risk as stipulated by Section 91 (2) of the German Stock Corporations Act (AktG). The early warning system is capable of identifying at an early stage any development that might cast doubt over the Group s ability to continue as a going concern. Executive Board s overall assessment of risks The overall risk situation of the HOCHTIEF Group has deteriorated slightly in fiscal 2011 compared with the prior year. The assessment of the overall risk is reached by consolidated analysis of all material individual risks. From today s perspective, there are no risks that might cast doubt over the HOCHTIEF Group s ability to continue as a going concern. The IT security directives are continuously refined in consultation with experts and verified by audits in Germany and internationally. A special security level applies for employees in sensitive areas. In cooperation with the Group s Data Security Officer, our service providers ensure that personal data are only processed in accordance with the requirements of the German Federal Data Protection Act. Group Management Report Risk Report, Forecast and Post-balance-sheet Events HOCHTIEF has not yet had any notable IT incident. We consider the risk to remain low for the future. Opportunities By virtue of our strong strategic lineup, we consider HOCHTIEF s key markets and business segments to hold numerous growth prospects that will provide the Group with excellent opportunities in the future.* *For detailed information, please see report on opportunities on pages Annual Report

130 The challenge: Safe, state-of-the-art roads to take the stress out of driving A case in point: Together with a partner, HOCHTIEF financed and built the Hörselberge bypass, a roughly 25-kilometer section of the A4 highway near Eisenach, Germany, in a public-private partnership (PPP) contract. After just two years far ahead of schedule the stretch was opened to traffic. We will also operate this section until 2037, including monitoring the condition of the road and landscape maintenance. On top of that, the concession company performs road repairs as well as winter snow and ice control. This lowers the risk of traffic jams and inconvenient delays and puts the fun back in driving. Our solution: Public-private partnerships that keep transportation infrastructure in the best possible condition for years 130 Annual Report 2011

131 Looking Ahead: Outlook and Opportunities Group guidance confirmed for 2012 Planning certainty delivered by large order backlog over 22 months worth of forward orders Focus on high-growth segments Looking ahead Economic environment for 2012 The global economic upturn kept up in the year under review, but at a slacker pace. Year-on-year growth was down, at 3.8 percent in 2011 compared with five percent in The world economy will continue growing in The International Monetary Fund (IMF) expects global economic growth of 3.3 percent. The size of the increase will vary from region to region. Growth will be stronger in emerging and developing economies than in industrialized nations. Looking to the euro zone, the IMF expects economic growth to weaken in 2012, but projections for the European construction market mean we are confident for the way ahead. The construction market trend is bottoming out after four years of negative growth rates. Euroconstruct forecasters anticipate only a slight further contraction, of 0.3 percent in Growth of 1.8 percent is projected for The IMF forecasts about 1.8 percent growth for the US economy in After shrinking by 4.4 percent across the board in 2011, the US construction market is expected to level off in 2012 with growth of 0.5 percent anticipated. The prospects for Australia are judged to be significantly more positive. IMF experts estimate economic growth at 3.3 percent. After a negative trend in the year under review, the Australian construction market is projected to return a strong eight percent growth figure in For the Middle East, we expect to see a stable market trend, most of all in Qatar, Abu Dhabi, and Saudi Arabia. The markets in Asia and the emerging economies, first and foremost China, India, Indonesia, and Hong Kong, are likely to sustain their growth in Our strong presence in American and Asia-Pacific markets means that HOCHTIEF s projected earnings are impacted by exchange rate trends. Our budgeting for 2012 is based on a slight appreciation of the euro relative to the US dollar. For the Australian dollar, we assume a moderate devaluation relative to the euro. We will be able to put HOCHTIEF s projected development for the current fiscal year in more concrete terms in the quarterly reports. Our planning is based on the assumption that the financial and euro crisis will not further worsen in severity, there will not be a recession in the world economy and the situation in the political crisis regions of the Middle East and North Africa will not further deteriorate. Stable trend in new orders, order backlog, and sales Group new orders were EUR billion in 2011 (2010: EUR billion), once more showing a strong positive trend despite the less dynamic growth in the second half-year. It was not possible to match the prior-year level because of the exceptionally high comparative figure for 2010, which was boosted by very large new orders in the infrastructure and contract mining businesses. The EUR billion order backlog marks yet another all-time high and is equivalent to a forward order book stretching more than 22 months into the future. Sales were once again very healthy in the year under review, gaining 15.5 percent on the prior-year figure to EUR billion (2010: EUR billion). In 2012, new orders will normalize somewhat below the prior-year level, subject to exchange rate trends. For the order backlog, we currently expect the figure to normalize in the current 2012 fiscal year at a level beneath the 2011 record. The same applies for sales. Group Management Report Risk Report, Forecast and Post-balance-sheet Events Annual Report

132 Group Management Report Risk Report, Forecast and Post-balance-sheet Events Positive trend in the operating business Strong earnings performance in fiscal 2011 at HOCHTIEF Americas, HOCHTIEF Europe, and in the airports business contrasted with large impacts on earnings at HOCHTIEF Asia Pacific from two large infrastructure projects as well as from associate Habtoor Leighton Group. Earnings were also reduced by risk provisioning that became necessary for our toll road projects in Greece and Chile and by expenditure for departing Executive Board members. As a result, profit before taxes a loss of EUR million was a long way below the prior-year profit of EUR million. The EUR million consolidated net loss attributable to HOCHTIEF shareholders likewise represented a big shortfall on the prior year (2010: consolidated net profit of EUR 288 million). HOCHTIEF has dealt with the impacts on earnings in the consolidated financial statements and has laid down a sound starting basis for The HOCHTIEF divisions recorded good operating successes in the last few months of The HOCHTIEF Americas and HOCHTIEF Europe divisions ended fiscal 2011 with an improvement on profit before taxes compared with The exceptional items just mentioned had a negative impact on HOCHTIEF Asia Pacific. However, HOCHTIEF s Australian subsidiary Leighton has announced an increase in underlying profit after tax in the second half of 2011 to approximately AUD 270 million, versus guidance of around EUR 250 million. For fiscal 2012, Leighton confirmed on February 13, 2012 that this positive trend will be sustained, with the prospect of growth in operating profit. This projection means we are confident for After regaining a significantly improved trend in operating earnings toward the end of 2011, HOCHTIEF expects to be back in profit in fiscal Despite the unsettled macroeconomic environment, for 2012 we are confident we can generate from our operating business both profit before taxes and consolidated net profit slightly below the record levels set in For 2013, we expect to attain a further improvement in earnings. Planned new Group structure We combined the former HOCHTIEF Europe, HOCHTIEF Real Estate, and HOCHTIEF Services divisions in the new HOCHTIEF Europe division effective January 1, Our activities are now structured in four divisions: HOCHTIEF Americas, HOCHTIEF Asia Pacific, HOCHTIEF Concessions, and HOCHTIEF Europe. Since the start of 2011, the strategic management holding company has concentrated on Group management and control. The streamlined Group structure has cut costs and fosters cooperation throughout the Group. A notable effect has been to step up knowledge transfer among corporate units across all continents. The planned disposal of the airports business will make for an even leaner structure. Until then, HOCHTIEF Concessions AG will be retained, together with its operational unit HOCHTIEF AirPort GmbH. In the first quarter of 2012, ownership of HOCHTIEF PPP Solutions GmbH was transferred with its publicprivate partnership activities to HOCHTIEF Solutions AG, which spearheads the HOCHTIEF Europe division. Portfolio adjustments to maximize value Our planning is geared to enhancing the success and value of HOCHTIEF. We aim to further increase the Group s financial fire power and make our portfolio less capitalintensive, giving us extra scope to enter attractive segments as well as greater flexibility for our activities. Leighton sold parts of its Australian iron ore business at a substantial profit in the year under review. The company sold several projects under its subsidiary HWE Mining for the equivalent of EUR 512 million to resources group BHP Billiton. Leighton generated an after-tax profit of approximately EUR 120 million on the transaction. The macroeconomic situation in 2011 caused delays to the sale of the airports business. We aim as before to dispose of our airport stakes and to generate maximum value in the process. Additionally, we plan to sell all or 132 Annual Report 2011

133 Looking Ahead: Outlook and Opportunities part of the aurelis Real Estate portfolio. A former Deutsche Bahn subsidiary, aurelis Real Estate has done very well since HOCHTIEF took a 50 percent stake back in We also intend to increase asset turnover in public-private partnership projects and real estate developments, and to sell on market-ready projects at an earlier juncture. Dividend HOCHTIEF has a longstanding dividend policy geared to earnings and liquidity. In light of the good prospects for fiscal 2012, we aim to stay the course with our dividend policy and continue to let shareholders participate adequately in the success of our business. Successful refinancing of borrowing facilities HOCHTIEF retains its top credit standing and has always operated a conservative financial strategy. This has ensured us a secure position at all times, including through the financial and euro crisis. We successfully refinanced our previous credit and guarantee facilities in the amount of EUR 2 billion in December The Group agreed a five-year syndicated facility with an international banking syndicate, comprising EUR 1.5 billion for guarantees and EUR 0.5 billion for cash drawings. This gives HOCHTIEF the flexibility to draw and surrender bank guarantees up to the agreed limit on good market terms. The refinancing of the credit facilities ahead of schedule the previous facilities were set to run out at the end of 2012 met with a strong response on the international banking market. At over EUR 2.3 billion, demand was well in excess of the refinancing amount needed. We also successfully placed a promissory note loan in a difficult market environment. The EUR 100 million initial offering generated strong interest and was substantially oversubscribed. We were able to increase the size of the loan to EUR million. In issuing the loan, the Group strengthened its long-term financing capacity and onward operating development. In December 2011, HOCHTIEF subsidiary aurelis successfully refinanced a credit facility due to expire in The company reached agreement with pbb Deutsche Pfandbriefbank, the syndicate leader, to prolong the facility ahead of schedule to September The approximately EUR 700 million facility is provided on good market terms. aurelis had further improved its debt profile in the preceding two years with successful real estate sales that enabled it to slice a good EUR 200 million off non-recourse borrowings that originally ran to over EUR 900 million. By refinancing the various borrowings ahead of schedule, the HOCHTIEF Group has furnished itself with sufficient leeway and security, including for its long-term growth plans. The borrowings are placed with major international banks. Investing in sustained growth Our capital spending is geared to enhancing and continuously extending HOCHTIEF s leading international competitive position. Capital expenditure attained a new dimension in fiscal 2011 with a total figure of EUR 2.02 billion (2010: EUR 1.13 billion). This investment spending was primarily focused on replacement and modernization of plant and equipment in contract mining and of construction plant to undertake complex projects in the infrastructure business. Alongside this main focus, expenditure was concentrated in the airports activities within the HOCHTIEF Concessions division as well as on strategic additions to the business portfolio in the HOCHTIEF Asia Pacific and HOCHTIEF Americas divisions. We expect that capital expenditure in the current, 2012 fiscal year will be below the prioryear level. A large share of the total will once more be at Leighton, which incurs capital expenditure in the highly profitable, capital-intensive contract mining segment. Further capital spending is planned for growth segments such as offshore wind power. Group Management Report Risk Report, Forecast and Post-balance-sheet Events Annual Report

134 Group Management Report Risk Report, Forecast and Post-balance-sheet Events *For futher information, please see pages 53, 101 and 121. Innovation as a key success factor We want to build long-term partnerships with our customers and work with them on a basis of trust. We therefore endeavor to set HOCHTIEF apart from the competition through top quality standards, innovative solutions, and flexibility. Our Group has long been one of the innovators of the construction industry and wins over clients with a constant flow of new, tailored developments. Most HOCHTIEF projects are unique assignments and shaped by custom solutions. We build extensive research and development into them. HOCHTIEF will continue to systematically forge ahead with its innovation management in Sustainability will remain a key focus. We will also drive forward the development of new market segments. We will continue to step up ideas management, with which we harness the potential of employee ideas. Ongoing optimization of procurement During the fiscal year, procurement systematically advanced. Our international purchasing network implemented the potential for improvement identified in Cooperation between the companies was also stepped up. For a number of divisions, we signed international master agreements with improved terms and conditions, especially for supplies and services from core business. In 2012, our procurement volume is expected to once again attain between 65 and 70 percent of Group sales. We plan to further boost procurement efficiency, continue with the systematic standardization of procurement processes going forward, and exploit economies of scale. Human resources strategy to foster loyalty among employees The commercial success of our company is crucially driven by the performance, qualifications, and motivation of our employees. HOCHTIEF s long-term projects call for a focused human resources strategy to foster long-range loyalty to HOCHTIEF in suitable employees and to provide individual support for especially qualified and talented staff. To this end, we will continue to implement and regularly add to our successful measures as well as our comprehensive range of training and ongoing education programs. It is our aim to further establish HOCHTIEF nationally and internationally as an attractive employer and to offer our employees interesting development prospects. We attach great importance to employee satisfaction. In view of this, a number of employee surveys will be conducted again in Opportunities* In the markets and growth segments most relevant to HOCHTIEF, we anticipate numerous opportunities for expanding our business. Thanks to our successful strategic positioning, we are among the top competitors. Our broad international reach enables us to maximize regional market opportunities. Furthermore, the fact that we have focused intensively on fast-growing and promising business areas over the last few years and operate in attractive regions is also paying off. Prospects from fast-growing business areas HOCHTIEF is outstandingly well poised to meet the challenges posed by periods of economic weakness and leverage existing opportunities thanks to its longterm strategy and high degree of internationalization. We are represented with our services on all major regional growth markets. According to the latest ranking by the Engineering News-Record trade journal, HOCHTIEF is the most international construction services provider in the world an assessment that underlines the success of our strategy. HOCHTIEF focuses on three strategic growth areas: creating sustainable energy infrastructure, shaping major cities, and building state-of-the-art transportation infrastructure. These offer all Group divisions attractive business opportunities and development potential. In the reporting period, HOCHTIEF s operational units won and successfully carried out numerous projects in these growth areas in the markets of Europe, America, and Asia. 134 Annual Report 2011

135 Looking Ahead: Outlook and Opportunities In Europe, HOCHTIEF Solutions has made a name for itself as an expert partner to the energy sector. We are involved in numerous offshore wind projects and in 2011 continued to invest heavily in our own special purpose equipment. In the future, HOCHTIEF will also become involved in the development of offshore wind farms as well as in network expansion. We are a competent provider for the construction of power lines, thousands of kilometers of which will be needed in the future. This could mean underground power tunnels for densely populated regions work for which we can draw on our recognized expertise in tunnel and power plant construction. But we will also offer the construction of overhead lines. For this purpose, we established HOCHTIEF COBRA Grid Solutions GmbH at the start of 2012 together with the ACS subsidiary COBRA, which specializes in high voltage grids. We also see potential in the energy infrastructure segment, for instance, in local pumped storage power plants, where we can harness our experience in building and operating such complex projects. In the Asia-Pacific region, our subsidiary Leighton has long been one of the biggest providers in the construction of energy infrastructure; in the reporting period, Leighton won a number of attractive contracts for example, to build oil and gas pipelines as well as power lines. We also operate successfully in onshore wind energy projects. Leighton has set itself the goal of becoming a leading provider in the construction of wind power plants in Australia. In the state of Victoria, our subsidiary is involved in the construction of the Mac arthur Wind Farm, the largest project of its kind in the southern hemisphere. In addition, we are pursuing plans to enter the US market for regenerative energies. Shaping major cities likewise offers HOCHTIEF a raft of business opportunities. In the USA, our subsidiary Turner has for some years been one of the leading providers in the green building segment. In the reporting period, the company completed the 200th project to have achieved sustainability certification. Turner also chalked up project successes in the healthcare and educational property segments. In Australia, the Leighton Group received two major contracts for the construction of hospitals. In the period under review, HOCHTIEF Solutions was once again awarded numerous contracts to develop and build residential properties, office real estate, and nursing care facilities that are both modern and fit for the future. At the same time, further urban district development projects were won or successfully continued. In 2011, HOCHTIEF PPP Solutions was commissioned to develop, build, and subsequently operate further schools and child daycare facilities in Germany and the UK on the basis of public-private partnership contracts. Worldwide, our companies and units build roads, bridges, tunnels, ports, railroads, and airports, putting in place the infrastructure necessary for our society s growing mobility requirements. In fiscal 2011, the Leighton Group won major infrastructure projects in places such as Australia, Hong Kong, and Oman. Our subsidiary Flatiron was awarded numerous attractive contracts in North America. In Scotland, HOCHTIEF Solutions is leading a joint venture to build a cable-stayed bridge over the Firth of Forth. In Germany, HOCHTIEF PPP Solutions received the contract in 2011 to expand a section of the A8 expressway on a public-private partnership basis. Thanks to our many years experience in Europe, HOCHTIEF PPP Solutions is a key partner for successfully tapping into the growing PPP market segment. We will also step up activities in the market for major infrastructure projects in North America in close cooperation with our subsidiary Flatiron. Prospects in key HOCHTIEF markets Our Group has a presence in all the world s major regional construction markets, which include large swathes of Europe, the Americas, Australia, the Asia- Pacific region, and the Gulf region. The latest market forecasts for the European construction market make us confident of being able to acquire many new contracts. HOCHTIEF is mainly focusing on Group Management Report Risk Report, Forecast and Post-balance-sheet Events Annual Report

136 Group Management Report Risk Report, Forecast and Post-balance-sheet Events building construction, civil and structural engineering in high-growth countries in Western and Eastern Europe. We will continue to embrace our rigorously selective policy when pursuing new business. We expect additional business in our European units due to closer collaboration with the Group companies brought together under the new HOCHTIEF Solutions AG and through collaborations with other Group subsidiaries. HOCHTIEF Solutions will also continue to exploit market opportunities outside of Europe, for example, in the Gulf region or South America. We anticipate that the US construction industry will stabilize in Turner leads the market as the number one general builder. Flatiron is among the foremost providers in the civil engineering segment and carries out projects in the USA and Canada. Industry experts expect the non-residential building construction segment to experience moderate growth in We anticipate a decline in 2012 for the US civil engineering market in which Flatiron and E.E. Cruz operate. The forecasts for the Canadian construction market are much more positive. We expanded our business in Canada in the reporting year through our US subsidiary Turner, by means of the majority share in Clark Builders. The company is one of the leading building construction providers in western and northern Canada. We acquired this share with the intention of profiting more from growth in the Canadian building construction market. Flatiron has been successfully involved in Canada for years and won lucrative contracts there in the reporting year. PPP projects continue to play an ever greater role in the USA and Canada. We expect this trend to go on for the next few years and that we will be able to expand our activities in the fast-growing public-private partnership market segment for infrastructure projects. The Asia-Pacific region is still one of the most promising growth markets. It holds many opportunities for our subsidiary Leighton. The construction market in Asia is one of the biggest growth markets in the world. Prospects are especially promising in India, Indonesia, and Hong Kong. The Indian construction industry is on a growth track, benefiting primarily from massive infrastructure investments from the Indian government. Indonesia is planning huge investments in public infrastructure. Other industries such as transportation, energy, communications, and the environmental sector are being targeted as well. Further investments in major cities are also anticipated, for example, in shopping malls, office complexes, and residential developments. The construction sector in Hong Kong is also attractive, due in particular to the government s stable budget and the resulting high degree of willingness to invest notably in public infrastructure projects. The Australian economy and the Australian construction market have emerged from the economic crisis in much better shape than expected. The building construction and civil engineering segments are expected to grow substantially in In Australia, there is still demand in the infrastructure sector. We also anticipate substantial investments in the water and energy management segment. And there are excellent opportunities for growth in the oil and gas business in Australia and Asia. For this reason, we acquired a company at the end of 2011 which now operates under the name Leighton Engineering and provides engineering services to support all the Leighton Group s activities in the market for offshore oil and gas reserves. The company, which already operates with around 100 employees, is headquartered in Kuala Lumpur, Malaysia, and has already won its first service contract to provide commercial and technical support to Leighton companies on the construction of two offshore platforms. In light of rising demand for raw materials, especially from China, substantial increases in coal and iron ore production are expected in contract mining business in Australia and Asia. This trend will also continue in 2012 and impact on mining production volumes. Leighton is the 136 Annual Report 2011

137 Looking Ahead: Outlook and Opportunities world s largest contract miner and will profit from this forecast increase. In Australia and Asia, we primarily mine iron ore and coal. Africa also offers attractive new areas of activity in contract mining business for Leighton. Our subsidiary successfully entered the market in the reporting year with a mining project in Botswana. Countries in the Middle East similarly provide opportunities for new business. While the property market in Dubai is stabilizing at a low level, the prospects for construction projects in Abu Dhabi, Qatar, Saudi Arabia, Kuwait, and Oman still look very promising. We have already made a very good name for ourselves and built up networks in Qatar, providing construction work and services on a number of major projects. In particular, we expect major growth impetus to come from the soccer World Cup, which is to be held in this Emirate in HOCHTIEF Solutions has made Qatar a platform for further initiatives on the Arabian Peninsula and is looking at projects in Saudi Arabia and Abu Dhabi. The Habtoor Leighton Group won its first project in Oman in Our strategic positioning in the region is strengthen ed not least by numerous subsidiaries and ongoing projects, as well as by Qatar Holding becoming a new major shareholder of HOCHTIEF in December Growth potential through internal partnerships Knowledge transfer within our Group as well as national and international collaboration between our companies open up additional growth potential for HOCHTIEF and create added value for its clients. In the newly structured HOCHTIEF Europe division, the reporting period saw us bring together the close collaboration in the areas of development, design, construction, and operation under the roof of HOCHTIEF Solutions AG, combining our services to the benefit of those who entrust us with orders. In fiscal 2011, our companies once again cooperated successfully on numerous projects. Our units reap rewards by working together notably on public-private partnership projects. Turner and Flatiron have likewise joined forces on several projects in the USA. Flatiron and HOCHTIEF Solutions are cooperating on a tunnel project in Edmonton, Canada. Sustainability sharpens competitive edge As a growth-oriented company, HOCHTIEF steps up to its responsibilities to society and the environment. Thus sustainability and corporate responsibility have long been integral to our corporate strategy. HOCHTIEF is a committed pioneer of sustainable green building and is one of the world s leading providers in this segment. Furthermore, we are systematically expanding our range of sustainable services, including efficient energy management, the diagnosis and revitalization of existing buildings, and sustainable building operation. Our commitment to sustainability was once again rewarded in 2011 for the sixth time in a row with a listing in the Dow Jones Sustainability Indexes. Driven by our aim to become the global market leader for sustainable construction and construction-related projects, we are continuously expanding our services for infrastructure projects, real estate, and facilities. We see a wide range of opportunities here to broaden our business. Forward-looking statements This Annual Report contains statements related to the future performance of the HOCHTIEF Group and its companies as well as to economic and political developments. These statements represent estimates we made on the basis of a thorough review of all information available to us at the time of going to print. If the underlying assumptions prove false or additional risks arise, actual results may differ materially from those currently expected. Thus we are unable to guarantee the statements made here. Group Management Report Risk Report, Forecast and Post-balance-sheet Events Annual Report

138 The challenge: The best possible medical care for a lifetime A case in point: The Virtua Voorhees replacement hospital in New Jersey, built by Turner. For this high-tech facility, our US subsidiary successfully applied Building Information Modeling. BIM technology generates 3D computer models of all phases of construction. That streamlines planning and coordination processes while saving time and money. As the market leader in the USA, Turner has completed well over 600 major projects in the healthcare sector in the past ten years alone. Alongside providing construction services, HOCHTIEF operates health and nursing facilities worldwide and procures special equipment for them so all patients, even the very smallest, receive the care they need. Our solution: Modern healthcare properties that make room for efficiency and quality 138 Annual Report 2011

139 Forward-looking Statements This Annual Report contains forward-looking statements. These statements reflect the current views, expectations, and assumptions of the Executive Board of HOCHTIEF Aktiengesellschaft and are based on information currently available to the Executive Board of HOCHTIEF Aktiengesellschaft. Such statements involve risks and uncertainties and do not guarantee future results (such as profit before tax or consolidated net profit) or developments (such as with regard to possible future divestments, general business activities or business strategy). Actual results (such as profit before tax or consolidated net profit), dividends and other developments (such as with regard to possible future divestments, general business activities or business strategy) relating to HOCHTIEF Aktiengesellschaft and the HOCHTIEF Group may therefore differ materially from the expectations and assumptions described in such statements due to, among other things, changes in the general economic, sectoral, and competitive environment, capital market developments, currency exchange rate fluctuations, changes in international and national laws and regulations, in particular with respect to tax laws and regulations, the conduct of other shareholders, and other factors. Any information provided on dividends is additionally subject to the recognition of a corresponding unappropriated net profit in the published separate financial statements of HOCHTIEF Aktiengesellschaft for the fiscal year concerned and the adoption by the competent decision-making bodies of HOCHTIEF Aktiengesellschaft of appropriate resolutions taking into account the prevailing situation of the Company. Aside from statutory publication obligations, HOCHTIEF Aktiengesellschaft does not assume any obligations to update any forward-looking statements. Post-balance-sheet events Airline Malév ceases operations Hungarian airline Malév ceased operations on February 3, Within days, some services had been taken over by other airlines, including Lufthansa and British Airways. The commercial implications of Malév going out of business are currently being assessed. Investigation of possible breach of Code of Ethics Leighton announced on February 13, 2012 that it had voluntarily reported to the Australian Federal Police (AFP) a possible breach of its Code of Ethics that, if substantiated, may contravene Australian laws. The possible breach related to a project undertaken in Iraq by subsidiary Leighton Offshore Pte. Limited. The AFP is conducting an investigation to determine whether there has been any wrongful or unlawful conduct. Leighton has pledged to cooperate fully with the AFP. On February 28, 2012, the Supervisory Board appointed Mr. Pedro López Jiménez a deputy for an Executive Board member for the period until March 2, 2012 in accordance with Section 105 (2) of the German Stock Corporations Act (AktG). Mr. Pedro López Jiménez did not take part in the adoption of this resolution. There were no other material events to report between the close of fiscal 2011 and the editorial deadline for this annual report. Declaration on corporate governance The Declaration on Corporate Governance is available online at Group Management Report Risk Report, Forecast and Post-balance-sheet Events Annual Report

140 The challenge: Safe, forward-thinking transportation routes to boost mobility Our solution: Cutting-edge transportation infrastructure projects that bring people together

141 The result: More free time to spend on what s really important The growing demand worldwide for cutting-edge transportation infrastructure presents vast opportunities for HOCHTIEF. Our road, bridge, and tunnel construction projects help manage traffic flow efficiently and sustainably. We deliver services for all phases of such projects, from development through design and building to operation. Our solutions enhance safety for road users, greatly reduce the likelihood of traffic jams, and facilitate increased mobility. A case in point: Lake Champlain Bridge (New York/Vermont). The new, almost 700-meter-long bridge built by our subsidiary Flatiron replaces the old route that was 160 kilometers longer or a one-hour ferry trip. Notes to the Consolidated Financial Statements

142 HOCHTIEF Group Consolidated Financial Statements as of December 31, 2011 Consolidated statement of earnings Notes to the consolidated financial statements Consolidated statement of comprehensive income Accounting policies Consolidated balance sheet Explanatory notes to the consolidated statement of earnings Consolidated statement of cash flows Explanatory notes to the consolidated balance sheet Consolidated statement of changes in equity Other disclosures Responsibility statement Independent auditors report Financial Statements and Notes 142 Annual Report 2011

143 Consolidated Statement of Earnings (EUR thousand) Note Sales (1) 23,282,237 20,159,286 Changes in inventories (143,629) 154,350 Other operating income (2) 499, ,756 Materials (3) (15,572,201) (13,763,981) Personnel costs (4) (4,863,639) (4,080,859) Depreciation and amortization (5) (782,914) (678,543) Other operating expenses (6) (1,792,880) (1,553,665) Profit from operating activities 626, ,344 Share of profits and losses of equity-method associates and jointly controlled entities (7) (649,894) 189,820 Net income from other participating interests (7) 65,171 32,885 Investment and interest income (8) 108,680 81,564 Investment and interest expenses (8) (277,392) (263,041) Profit before taxes (126,958) 756,572 Income taxes (9) (40,932) (210,294) Profit after taxes (167,890) 546,278 Of which: Consolidated net profit/(loss) [(160,287)] [288,030] Of which: Minority interest (10) [(7,603)] [258,248] Earnings per share (EUR) Diluted and undiluted earnings per share (EUR) (32) (2.18) 4.31 Financial Statements and Notes Annual Report

144 Consolidated Statement of Comprehensive Income (EUR thousand) Profit after taxes (167,890) 546,278 Currency translation differences 27, ,534 Changes in fair value of financial instruments Primary 11,388 1,279 Derivative 48,820 (5,268) Share of profits and losses of equity-method associates and jointly controlled entities recognized directly in equity (97,494) (14,550) Actuarial gains and losses (43,632) (42,040) Other comprehensive income (after taxes) (52,996) 297,955 Total comprehensive income after taxes (220,886) 844,233 Of which: HOCHTIEF Group [(238,688)] [476,282] Of which: Minority interest [17,802] [367,951] Financial Statements and Notes 144 Annual Report 2011

145 Consolidated Balance Sheet (EUR thousand) Note Dec. 31, 2011 Dec. 31, 2010 Assets Non-current assets Intangible assets (11) 693, ,879 Property, plant and equipment (12) 2,235,136 1,807,472 Investment properties (13) 21,727 24,010 Equity-method investments (14) 1,033,203 2,005,642 Other financial assets (15) 64, ,088 Financial receivables (16) 632, ,757 Other receivables and other assets (17) 258, ,072 Deferred tax assets (18) 274, ,555 5,213,839 5,868,475 Current assets Inventories (19) 1,286,753 1,268,333 Financial receivables (16) 149, ,339 Trade receivables (20) 4,681,313 3,984,763 Other receivables and other assets (17) 226, ,420 Current income tax assets (21) 124,194 99,058 Marketable securities (22) 392, ,640 Cash and cash equivalents (23) 2,264,821 2,451,057 Assets held for sale* 1,455,831 10,582,226 9,117,610 15,796,065 14,986,085 Liabilities and Shareholders Equity Shareholders equity (24) Attributable to the Group Subscribed capital 197, ,120 Capital reserve 783, ,142 Revenue reserves 1,712,794 1,854,824 Deduction for treasury stock [90,060] [90,411] Accumulated other comprehensive income (101,994) (23,593) Unappropriated net profit 6, ,000 2,598,388 2,965,493 Minority interest 1,511,976 1,298,679 4,110,364 4,264,172 Non-current liabilities Provisions for pensions and similar obligations (26) 188, ,566 Other provisions (27) 451, ,850 Financial liabilities (28) 2,301,549 2,576,954 Other liabilities (29) 178, ,359 Deferred tax liabilities (18) 78,734 66,005 3,199,348 3,372,734 Current liabilities Other provisions (27) 956, ,553 Financial liabilities (28) 1,492, ,766 Trade payables (30) 5,630,217 5,363,733 Other liabilities (29) 379, ,263 Current income tax liabilities (31) 8,270 16,864 Liabilities associated with assets held for sale* 19,271 8,486,353 7,349,179 15,796,065 14,986,085 *For further information, please see page 152. Financial Statements and Notes Annual Report

146 Consolidated Statement of Cash Flows (EUR thousand) Note Profit after taxes (167,890) 546,278 Depreciation, amortization, impairments, and impairment reversals 978, ,492 Changes in provisions (57,893) 104,447 Changes in deferred taxes (20,834) (2,074) Gains/(losses) from disposals of non-current assets and marketable securities (64,870) (29,873) Other non-cash income and expenses (primarily equity accounting) and deconsolidations 469,772 (311,149) Changes in working capital (net current assets) (138,157) (39,751) Changes in other balance sheet items 27,491 3,613 Net cash provided by operating activities 1,025,818 1,035,983 Intangible assets, property, plant and equipment, and investment properties Purchases (1,506,035) (924,087) Proceeds from asset disposals 117, ,092 Acquisitions and participating interests Purchases (517,286) (203,623) Proceeds from asset disposals/divestments 469, ,713 Changes in cash and cash equivalents due to consolidation changes 13,559 (301,567) Changes in securities holdings and financial receivables 145,957 (243,412) Net cash used in investing activities (1,277,014) (970,884) Payments received from sale of treasury stock Proceeds from new share issue 399,798 Payments into equity by minority shareholders 271,109 68,700 Dividends to HOCHTIEF s and minority shareholders (290,517) (311,999) Proceeds from new borrowing 1,237, ,552 Service of debt (1,240,085) (610,590) Net cash provided by/(used in) financing activities (21,211) 416,961 Net cash increase/(decrease) in cash and cash equivalents (272,407) 482,060 Effect of exchange rate changes 52, ,353 Transfer from HOCHTIEF pension fund 50,000 Overall change in cash and cash equivalents (170,337) 681,413 Cash and cash equivalents at the start of the year 2,451,057 1,769,644 Cash and cash equivalents at year-end 2,280,720 2,451,057 Of which: Included in assets held for sale [15,899] [ ] Of which: Cash and cash equivalents as per Consolidated Balance Sheet [2,264,821] [2,451,057] Financial Statements and Notes 146 Annual Report 2011

147 Consolidated Statement of Changes in Equity Note 24 Subscribed capital of HOCHTIEF Aktiengesellschaft Revenue reserves* Accumulated other comprehensive income Currency translation differences Changes in fair value of financial instruments Actuarial gains and losses Capital reserve of HOCHTIEF Aktiengesellschaft Unappropriated net profit Attributable to the Group Attributable to minority interest Total (EUR thousand) Balance as of Jan. 1, , ,806 1,690,892 (74,195) (66,902) (70,748) 105,000 2,164,053 1,100,076 3,264,129 Dividends paid (99,816) (99,816) (212,183) (311,999) Profit after taxes 288, , , ,278 Currency translation differences and changes in fair value of financial instruments** 234,976 (4,687) 230, , ,995 Changes in actuarial gains and losses (42,037) (42,037) (3) (42,040) Total comprehensive income 234,976 (4,687) (42,037) 288, , , ,233 Transfer to revenue reserves 139,214 (139,214) New share issue 17, , , ,798 Other changes not recognized in the Statement of Earnings ,718 25,176 42,835 68,011 Balance as of Dec. 31, 2010/ Jan. 1, , ,142 1,854, ,781 (71,589) (112,785) 154,000 2,965,493 1,298,679 4,264,172 Dividends paid (147,130) (147,130) (143,387) (290,517) Profit after taxes (160,287) (160,287) (7,603) (167,890) Currency translation differences and changes in fair value of financial instruments** 13,269 (48,011) (34,742) 25,378 (9,364) Changes in actuarial gains and losses - - (43,659) (43,659) 27 (43,632) Total comprehensive income 13,269 (48,011) (43,659) (160,287) (238,688) 17,802 (220,886) Transfer to revenue reserves (160,333) 160,333 Other changes not recognized in the Statement of Earnings ,303 18, ,882** 357,595 Balance as of Dec. 31, , ,552 1,712, ,050 (119,600) (156,444) 6,916 2,598,388 1,511,976 4,110,364 * As of December 31, 2011, treasury stock with a purchase cost of EUR 90,060,000 (2010: 90,411,000) was accounted for as a deduction from revenue reserves. ** Includes EUR 255,947,000 for the minority interest in the capital raising at Leighton Holdings. Financial Statements and Notes Annual Report

148 Responsibility Statement To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the Group management report, which is combined with the management report of HOCHTIEF Aktiengesellschaft, includes a fair review of the development and performance of the business and the position of the Group, together with a description of the material opportunities and risks associated with the expected development of the Group. Essen, February 28, 2012 HOCHTIEF Aktiengesellschaft The Executive Board Dr. Frank Stieler Peter Sassenfeld Pedro López Jiménez Financial Statements and Notes 148 Annual Report 2011

149 Independent Auditors Report We have audited the consolidated financial statements comprising Group income statement, consolidated statement of comprehensive income, Group balance sheet, statement of cash flows, statement of changes in equity, and notes to the consolidated financial statements, prepared by HOCHTIEF Aktiengesellschaft, Essen/Germany, as well as the report on the position of the Company and the Group for the financial year from January 1, to December 31, The preparation of the consolidated financial statements and the report on the position of the Company and the Group in accordance with International Financial Reporting Standards (IFRS), as applicable in the EU, and the regulations under German commercial law as complementarily applicable under 315a (1) German Commercial Code (HGB) is the responsibility of the Company s Executive Board. Our responsibility is to express an opinion on the consolidated financial statements and the report on the position of the Company and the Group based on our audit. Our audit has not led to any reservations. In our opinion, which is based on the results of our audit, the consolidated financial statements of HOCHTIEF Aktiengesellschaft, Essen/Germany, comply with the IFRS, as applicable in the EU, and the regulations under German commercial law as complementarily applicable under 315a (1) German Commercial Code (HGB) and convey a true and fair view of the Group s net assets, financial position and results of operations in accordance with these regulations. The report on the position of the Company and the Group is consistent with the consolidated financial statements, conveys, in the aggregate, a true and fair view of the Company s and Group s position and suitably presents the risks and opportunities of future development. We conducted our audit of the consolidated financial statements in accordance with 317 German Commercial Code (HGB) in compliance with German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with applicable accounting regulations and in the report on the position of the Company and the Group are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and evaluations of possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the report on the position of the Company and the Group are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of the companies included in consolidation, the determination of the companies to be included in consolidation, the accounting and consolidation principles used and significant estimates made by the Executive Board, as well as evaluating the overall presentation of the consolidated financial statements and the report on the position of the Company and the Group. We believe that our audit provides a reasonable basis for our opinion. Düsseldorf, February 28, 2012 Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft (Dr. Reichmann) (Bedenbecker) Wirtschaftsprüfer Wirtschaftsprüfer (German Public Auditor) (German Public Auditor) Financial Statements and Notes Annual Report

150 Notes to the Consolidated Financial Statements Accounting principles General information The Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and with supplementary provisions of German commercial law applicable under Section 315a (1) of the German Commercial Code (HGB). The same accounting policies applied in the prior year. Alongside the Consolidated Statement of Earnings, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, and the Consolidated Statement of Cash Flows, the Consolidated Financial Statements also include a Consolidated Statement of Changes in Equity. Segment reporting is provided in these Notes. Basis of consolidation The Consolidated Financial Statements include HOCHTIEF Aktiengesellschaft and all significant domestic and foreign subsidiaries in which it directly or indirectly holds the majority of voting rights. This generally goes hand in hand with a majority shareholding. In the case of two subsidiaries included in the Consolidated Financial Statements, HOCHTIEF Aktiengesellschaft is not the majority shareholder but holds the majority of voting rights by virtue of a pooling agreement. Five companies are consolidated by virtue of de facto control. Significant associates and jointly controlled entities are accounted for using the equity method. Companies in which HOCHTIEF Aktien gesellschaft holds a majority of voting rights but over which it exercises joint control by contractual arrangement with other owners are likewise accounted for using the equity method. Financial Statements and Notes For purposes of clarity, a number of items are combined in the Statement of Earnings and in the Balance Sheet. These items are broken down into their constituents and commented on elsewhere in these Notes. The Statement of Earnings is presented using the nature of expense method of analysis. The Consolidated Financial Statements are presented in euros, and all monetary amounts in the text of these Notes are rounded to the nearest thousand euros unless specifically stated otherwise. As an independent listed group, HOCHTIEF Aktiengesellschaft, Essen, Germany, publishes its own consolidated financial statements, which are also included in the consolidated financial statements of ACS Actividades de Construcción y Servicios, S.A., Madrid, Spain (ACS). The Consolidated Financial Statements relate to the 2011 fiscal year, comprising the reporting period from January 1 to December 31, The Executive Board of HOCHTIEF Aktiengesellschaft released the financial statements for publication on February 28, They will be approved at the Supervisory Board meeting on February 28, Holdings in subsidiaries or associated companies or jointly controlled entities deemed to be of minor overall significance from a Group perspective are not consolidated and are accounted for in accordance with IAS 39. The list of subsidiaries, associates, and other equity interests held by the HOCHTIEF Group (pursuant to Section 313 (2) 1-4 of the German Commercial Code) is published in the electronic Bundesanzeiger (Federal Official Gazette). The main consolidated subsidiaries and equity-method investments and other participating interests are listed on pages 208 and 209. A number of the subsidiaries included in the Consolidated Financial Statements make partial use of the exempting provisions in either Section 264 (3) or Section 264b of the German Commercial Code. A list of the companies that make use of these exemptions is included on page Annual Report 2011

151 The Consolidated Financial Statements as of December 31, 2011 include HOCHTIEF Aktiengesellschaft and a total of 66 German and 390 foreign consolidated companies. The number of consolidated companies showed a net decrease of one over the previous year. Ten German and 52 foreign companies were consolidated for the first time in Most of these are in the HOCHTIEF Asia Pacific division (41) or the HOCHTIEF Americas division (six). The majority are project companies. As in the prior year, the Consolidated Financial Statements include a total of five special-purpose securities investment funds. Five domestic and 58 foreign companies have been removed from the consolidated group. Most of the companies removed from the consolidated group were in the HOCHTIEF Asia Pacific division (39) and the HOCHTIEF Americas division (15). An entity is generally added to or removed from the consolidated group at the time the equity stake in the entity is acquired or disposed of. Sixty affiliated companies of minor overall significance to the Group s financial position and results of operations were not consolidated in the year under review. Their combined sales represented less than one percent of consolidated sales. Nineteen domestic and 223 foreign associates were accounted for using the equity method. This number showed a net increase of 14, with 48 companies added and 34 removed from the category. Most of the companies added are project companies in the HOCHTIEF Asia Pacific division (35) and the HOCHTIEF Americas division (eight). Most of the companies removed from the consolidated group were in the HOCHTIEF Asia Pacific division (33). Due to their minor overall significance, a further 32 companies were not accounted for using the equity method. A total of EUR 2,670,000 (2010: EUR 41,941,000) was expended in 2011 under asset deals and for purchases of companies consolidated for the first time; the expenditure was made in cash. Acquisitions notably the acquisition of control in Devine Limited in the HOCHTIEF Asia Pacific division in 2011 affected earnings and the balance sheet as follows: (EUR thousand) Non-current assets 246,595 44,778 Current assets excluding cash and cash equivalents 246,484 21,426 Cash and cash equivalents 13,559 5,027 Assets 506,638 71,231 Provisions 4,499 9,824 Other liabilities 251,541 19,696 Liabilities 256,040 29,520 Sales 160,104 24,359 Profit before taxes 19,625 2,640 Consolidation policies The financial statements of domestic and international companies included in these Consolidated Financial Statements are prepared in accordance with uniform Group accounting principles. Subsidiaries with a different reporting date generally prepare interim financial statements as of the Group reporting date. This so far notably applied to Leighton Holdings, which has changed its reporting date from June 30 to December 31. All business combinations (acquisitions) are accounted for using the purchase method. Business combinations are measured at the acquisition date by allocating the consideration given to the acquired subsidiary s net assets measured at fair value. Transaction costs arising in connection with such acquisitions are recognized directly as expense. All assets, liabilities, and contingent liabilities of an acquired subsidiary that satisfy the recognition criteria are measured at full fair value regardless of any minority interest. Intangible assets are recognized separately from goodwill if they are separable from the accounting entity or arise from contractual or other legal rights. Any goodwill then left is recognized as an asset. Goodwill is not amortized, but is tested instead for impairment in accordance with IAS 36 on an annual basis and whenever there are indications that it may be impaired. Negative goodwill arising on initial measurement is recognized immediately in income. On divestment, a pro rata share of the divesting division s goodwill is taken into account when measuring disposal proceeds. Financial Statements and Notes Annual Report

152 Goodwill decreased by EUR 6,727,000 in the year under review, from EUR 492,750,000 to EUR 486,023,000. Income, expenses, receivables, and liabilities between consolidated companies are eliminated. Unrealized intercompany profits and losses are eliminated unless they are of minor significance. Any impairment losses recognized for consolidated companies in their separate financial statements are reversed. The same policies apply for equity-method investments. These include the Group s associates and jointly controlled entities. Any goodwill increases the carrying amount of an investment. Like other goodwill, goodwill on equity-method investments is not amortized. Reductions in carrying amount due to impairment are reported in the share of profits and losses of equity-method associates and jointly controlled entities. The financial statements of all equity-method investments are prepared in accordance with uniform Group accounting and valuation principles. Non-current assets held for sale (disposal group) HOCHTIEF Aktiengesellschaft s interests in airports at Düsseldorf, Hamburg, Athens, Budapest, Tirana, and Sydney are held in HOCHTIEF AirPort GmbH, which is part of the HOCHTIEF Concessions division. In view of the intention to sell, the airports business is reported in accordance with IFRS 5 as noncurrent assets held for sale (comprising a disposal group) from September 30, Under IFRS 5, disposal groups are measured at the lower of carrying amount and fair value less costs to sell. The assets and liabilities classified as held for sale are presented separately in the Balance Sheet. The table below shows the major classes of assets and liabilities held for sale. Additionally, a cumulative amount of EUR 21,125,000 is recognized in other comprehensive income. Dec. 31, (EUR thousand) 2011 Intangible assets and property, plant and equipment 6,111 Financial assets 1,101,853 Other assets 347,867 Total assets 1,455,831 Liabilities 19,271 There are also intra-group liabilities to HOCHTIEF Group companies totaling EUR 959,920,000. Currency translation For currency translation purposes, the following exchange rates have been used for the main Group companies outside the euro area: Annual average Daily average at reporting date (All rates in EUR) US dollar (USD) Australian dollar (AUD) British pound (GBP) Polish zloty (PLN) Qatari riyal (QAR) Czech koruna (CZK) Russian rubles (RUB) Chilean pesos (CLP) Financial Statements and Notes In their separate financial statements, Group companies disclose transactions denominated in foreign currency using the average exchange rate on the day of recording the transaction. Exchange gains or losses up to the reporting date on the measurement of foreign currency-denominated monetary assets or liabilities are included in other operating income or other operating expenses at the average exchange rate on the reporting date. Currency translation differences relating to a net investment in a foreign company are accounted for in accumulated other comprehensive income until the company is sold. This includes foreign currency receivables from fully consolidated Group companies for which settlement is neither planned nor 152 Annual Report 2011

153 Notes to the Consolidated Financial Statements likely to occur in the foreseeable future and which therefore resemble equity. Financial statements of foreign companies are translated by applying the functional currency approach. As all companies outside the euro area operate autonomously in their own national currencies, their balance sheet items are translated into euros using the average exchange rate prevailing on the reporting date in accordance with official requirements. The same method is used to translate the annual valuation of the shareholders equity of equity-method foreign associates. Differences from the previous year s translated valuation are recognized in other comprehensive income and are reversed to income or expense on sale of the equity interest. Goodwill of commercially independent foreign Group entities is translated at the exchange rate prevailing on the reporting date. Income and expense items are translated into euros using the annual average exchange rate. Accounting policies Intangible assets are reported at amortized cost. All intangible assets have a finite useful life with the exception of company names recognized as assets on initial consolidation and of goodwill. Intangible assets include concessions and other licenses with useful lives of up to 30 years. These are amortized according to the pattern of consumption of economic benefits. They also include future earnings from additions to the order backlog arising from business acquisitions; these are amortized over the period in which the corresponding work is billed. Intangible assets further encompass software for commercial and engineering applications, which is amortized on a straight-line basis over three to five years, and entitlements to various financing arrangements with banks amortized over between 27 and 84 months in accordance with the term of the arrangement. Estimated useful lives and depreciation methods are reviewed annually. Company names and goodwill are not amortized. They are tested instead for impairment in accordance with IAS 36 on an annual basis and whenever there are indications that they may be impaired. The Turner, Flatiron, E.E. Cruz, and Devine names were recognized as intangible assets with an indefinite useful life as they do not have a product life cycle and are not subject to technical, technological, or commercial depletion or any other restriction. Capitalized development costs in the HOCHTIEF Group are reported in intangible assets as licenses and amortized on a straight-line basis over three to five years. Property, plant and equipment is stated at depreciated cost. Only amounts directly attributable to an item of property, plant or equipment are included in its cost. Borrowing costs are included in cost in the case of qualifying assets. Property, plant and equipment is normally depreciated on a straight-line basis except in the contract mining business, where depreciation is mostly recognized on an activity basis. Items of property, plant, machinery and equipment typically encountered in the HOCHTIEF Group are depreciated on a straight-line basis over the following uniform useful lives: No. of years Buildings and investment properties Technical equipment and machinery; transportation equipment 3 10 Other equipment and office equipment 3 8 Estimated useful lives and depreciation methods are reviewed annually. Items of property, plant and equipment on finance leases are recognized at fair value or the present value of the minimum lease payments, whichever is lower, and are depreciated on a straight-line basis over their estimated useful life or over a shorter contract term if applicable. Investment properties are stated at amortized cost. Transaction costs are included on initial measurement. The fair values of investment properties are disclosed in the Notes. These are assessed using internationally accepted valuation methods, such as taking comparable properties as a guide to current market prices or by applying the discounted cash flow method. Like property, plant and equipment, investment properties are normally depreciated using the straight-line method. Financial Statements and Notes Annual Report

154 Impairment losses are recognized for intangible assets (including goodwill), property, plant and equipment, or investment properties if their recoverable amount (net selling price or value in use, whichever is higher) falls below their carrying amount. Impairment testing may require assets and in some cases liabilities to be grouped into cash-generating units. For goodwill, impairment testing is performed on cash-generating units corresponding to the HOCHTIEF divisions that feature in segmental reporting. For any asset that is part of an independent cash-generating unit, impairment is determined with reference to the recoverable amount of the unit. If the recoverable amount of a cash-generating unit falls below its carrying amount, the resulting impairment loss is allocated first to any goodwill belonging to the unit and then to the unit s other assets, normally pro rata on the basis of the carrying amount of each asset. Except in the case of goodwill, impairment charges are reversed (up to a maximum of amortized cost) when the impairment ceases to exist. Equity-method investments are stated at cost, comprising the acquired equity interest in an associate or jointly controlled entity plus any goodwill. The carrying amount is increased or decreased annually to recognize the Group s share of after-tax profits or losses, any dividends, and other changes in equity. The full carrying amount is tested for impairment in accordance with IAS 36 whenever there are indications that it may be impaired. If the recoverable amount of an equity-method investment is less than its carrying amount, an impairment loss is recognized for the difference. Any subsequent reversal of an impairment loss is recognized in profit or loss. Jointly controlled entities are a type of joint venture. Joint ventures are contractual arrangements under which two or more parties undertake an economic activity which is subject to joint control. In addition to jointly controlled entities accounted for using the equity method, joint ventures also include jointly controlled operations and construction joint ventures. The latter are accounted for as follows in accordance with IAS 31: As a party to a jointly controlled operation or construction joint venture, HOCHTIEF recognizes the assets it controls, the liabilities it enters into, and the expenses it incurs, and reports its share of earnings from the activity under sales. Assets and liabilities remaining in jointly controlled operations and construction joint ventures (e.g. due to contracts awarded to subcontractors) lead to a share of earnings that is accounted for using a method equivalent to the equity method and included in receivables from or liabilities to construction joint ventures. All other financial assets, comprising interests in non-consolidated subsidiaries, other participating interests, and noncurrent securities, are classed as held for sale and are measured at fair value where a fair value can be reliably estimated. In the case of publicly listed financial assets, fair value is determined as the market price. If there is no active market, fair value is calculated using the most recent market transactions or a valuation method such as the discounted cash flow method. In cases where fair value cannot be measured reliably, financial assets are reported at cost (less any impairments). Initial measurement is performed as of the settlement date. Unrealized gains or losses are accounted for, after adjusting for deferred taxation, in other comprehensive income and are reversed to income or expense on disposal of the asset. If there is objective evidence of impairment, the carrying amount of a financial asset is reduced and the impairment loss recognized as an expense. Such evidence includes a significant or prolonged decline in fair value below cost. Receivables and other assets are measured at amortized cost using the effective interest rate method (accounting for factors such as premiums and discounts). An impairment loss is recognized if there is any objective material evidence that a financial asset may be impaired. Objective evidence for impairment includes, for example, downgrading of a debtor s credit rating and related interruptions in payment or potential insolvency. Impairment losses are recognized according to actual credit risk. Receivables comprise financial receivables, trade receivables, and other receivables. Sales are shown net of VAT and other taxes and expected reductions such as trade discounts and rebates. Sales of goods are recognized when: The significant risks and rewards of ownership of the goods have been transferred to the buyer The HOCHTIEF Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold Financial Statements and Notes 154 Annual Report 2011

155 Notes to the Consolidated Financial Statements The amount of revenue and the costs incurred or to be incurred in respect of the transaction can be measured reliably It is probable that the economic benefits associated with the transaction will flow to the HOCHTIEF Group. Revenue from transactions involving the rendering of services is recognized by reference to the stage of completion. Revenue under construction contracts is recognized as described below. Long-term loans are stated at amortized cost. Loans yielding interest at normal market rates are reported at face value, and non-interest-bearing and low-interest-bearing loans are discounted to present value. Discounting is always done using a risk-adjusted discount rate. Construction contracts are reported using the percentage of completion* (POC) method. Cumulative work done to date, including the Group s share of net profit, is reported under sales on a pro rata basis according to the percentage completed. The percentage of completion is measured by reference to the stage of completion; that is, as the ratio of performance delivered up to the end of the reporting period to total contract performance. Construction contracts are reported in trade receivables and trade payables, as Gross amount due from/to customers for/from contract work (POC). If cumulative work done to date (contract costs plus contract net profit) of contracts in progress exceeds progress payments received, the difference is recognized as an asset and included in amounts due from customers for contract work. If the net amount after deduction of progress payments received is negative, the difference is recognized as a liability and included in amounts due to customers from contract work. Anticipated losses on specific contracts are accounted for on the basis of the identifiable risks. Construction contracts handled by construction joint ventures are also accounted for using the POC method. Trade receivables from construction joint ventures include pro rata entitlements to contract net profit. Anticipated losses are immediately recognized in full in contract net profit. Contract income on construction contracts undertaken by the Group independently or in construction joint ventures is recognized in accordance with IAS 11 as the income stipulated in the contract plus any claims and variation orders. Construction contract receivables are realized as part of the HOCHTIEF Group s operating cycle. In accordance with IAS 1, they are therefore included in current assets even though they are not expected to be realized within twelve months of the balance sheet date. The POC method is used primarily in the mainstream construction business, construction management, and contract mining. Deferred taxes arising from temporary differences between the IFRS accounts and tax base of individual Group companies or as a result of consolidation are recognized as separate assets and liabilities. Deferred tax assets are also recognized for tax refund entitlements resulting from the anticipated use of existing tax loss carryforwards in subsequent fiscal years provided it is sufficiently certain that they will be realized. Deferred tax assets and liabilities are offset within each company or group. Deferred taxes are measured on the basis of tax rates applying or expected to apply in each country when they are realized. For domestic operations, as in the prior year, a tax rate of 31.5 percent is assumed taking account of corporate income tax plus the German solidarity surcharge and the average rate of municipal trade tax faced by Group companies. For all other purposes, deferred taxes are measured on the basis of the tax regulations in force or enacted at the reporting date. Inventories are initially stated at cost of purchase or production. Production cost includes costs directly related to the units of production plus an appropriate allocation of materials and production overhead, including production-related depreciation charges. Borrowing costs for inventories that are qualifying assets are capitalized as part of cost. Most materials and supplies are measured on a FIFO or moving-average basis. Inventories are written down to net realizable value if their recoverable amount is less than their carrying amount at the reporting date. If the recoverable amount of inventories subsequently increases, the resulting gain must be recognized. This is done by reducing materials expense. *See glossary on page 212. Financial Statements and Notes Annual Report

156 All marketable securities are classed as held for sale and measured at fair value. They mainly comprise securities held in special-purpose funds and fixed-income securities with a residual term of more than three months at the time of acquisition and where there is no intention to hold the securities to maturity. Initial measurement is performed as of the settlement date and includes any transaction costs directly attributable to the acquisition of the securities. Unrealized gains or losses are reported in other comprehensive income and are reversed to income or expense on disposal. If there is objective evidence of impairment, the carrying amount of a financial asset is reduced and the impairment loss recognized as an expense. Such evidence includes a significant or prolonged decline in fair value below cost. Cash and cash equivalents consist of petty cash, cash balances at banks, and marketable securities with maturities of no more than three months at the time of acquisition. Non-current assets held for sale and associated liabilities are measured in accordance with IFRS 5 and reported as current assets. To be classed as assets held for sale, assets must be available for immediate sale and their sale must be highly probable. Assets held for sale can be individual non-current assets, groups of assets held for sale (disposal groups), or discontinued operations. Liabilities that are disposed of with assets in a single transaction are part of a disposal group or discontinued operation and are likewise reported separately under current liabilities as liabilities associated with assets held for sale. Non-current assets held for sale cease to be depreciated or amortized, and are measured at their carrying amount or at fair value less costs to sell, whichever is lower. Gains or losses arising on the measurement of discontinued operations at fair value less costs to sell, profits or losses of discontinued operations, and gains or losses on their disposal are reported under results of discontinued operations. Gains or losses arising on the measurement of individual assets held for sale or of disposal groups are reported under results from continued operations until their ultimate disposal. Share-based payment transactions are measured in accordance with IFRS 2. Stock option plans are accounted for Groupwide as cash-settled share-based payment transactions. Provisions for obligations under the Long-term Incentive Plans, the Top Executive Retention Plans, and the Retention Stock Award Plans are recognized in the amount of the expected expense that is or was spread over the stipulated waiting period. The fair value of stock options is measured using generally accepted financial models, the value of the plans being determined with the Black/Scholes option pricing model. The specific problem of valuing the plans in question is solved using binomial tree methods. The computations are performed by an outside appraiser. Provisions for pensions and similar obligations are recognized for current and future benefit payments to active and former employees and their surviving dependants. The obligations primarily relate to pension benefits, partly for basic pensions and partly for optional supplementary pensions. The individual benefit obligations vary from one country to another and are determined for the most part by length of service and pay scales. The Turner Group s obligations to meet healthcare costs for retired staff are likewise included in pension provisions due to their pension-like nature. Provisions for pensions and similar obligations are computed by the projected unit credit method. This determines the present value of future entitlements, taking into account current and future benefits already known at the reporting date plus anticipated future increases in salaries and pensions and, for the Turner Group, in healthcare costs. The computation is based on actuarial appraisals using biometric accounting principles. Plan assets as defined in IAS 19 are shown separately as deductions from pension obligations. Plan assets comprise assets transferred to pension funds to meet pension obligations, shares in investment funds purchased under deferred compensation arrangements, and qualifying insurance policies in the form of pension liability insurance. If the fair value of plan assets is greater than the present value of employee benefits, the difference is reported subject to the limit in IAS 19 under other non-current assets. Financial Statements and Notes 156 Annual Report 2011

157 Notes to the Consolidated Financial Statements Pursuant to the option in IAS 19, actuarial gains and losses are recognized directly in equity in the period during which they arise. The current service cost is reported under personnel costs. The interest element of the increase in pension obligations, diminished by anticipated returns on plan assets, is reported in net investment and interest income. Past service costs are recognized immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are recognized in income by amortization on a straight-line basis over the vesting period. Tax provisions comprise current tax obligations. Income tax provisions are offset against tax refund entitlements if they relate to the same tax jurisdiction and are congruent in nature and reporting period. Other provisions account for all identifiable obligations as of the reporting date that result from past business transactions or events but are uncertain in their amount and/or settlement date. Provisions are stated at the estimated settlement amount, i.e. after making allowance for price and cost increases, and are not offset against any rights to reimbursement. For obligations with a settlement probability exceeding 50 percent, the amount set aside is calculated on the basis of the most likely settlement outcome. A provision can only be recognized on the basis of a legal or constructive obligation toward third parties. Long-term provisions with a term of more than one year are stated at the present value of the estimated settlement amount as of the reporting date and are reported under noncurrent liabilities. Liabilities are reported at amortized cost using the effective interest rate method (accounting for factors such as premiums and discounts). Finance lease liabilities are initially recognized at fair value at the inception of the lease or the present value of the minimum lease payments, whichever is lower. Derivative financial instruments are measured at fair value regardless of their purpose and reported under other receivables and other assets or other liabilities. Initial measurement is as of the settlement date. All derivative financial instruments are measured on the basis of current market rates as of the balance sheet date. The recognition of changes in fair value depends on the purpose for which a derivative is held. Derivatives are only ever used in the HOCHTIEF Group for hedging purposes. Hedges are structured for maximum effectiveness. A cash flow hedge is a hedge of the exposure to variability in cash flows from a hedged item, as with the hedging of variable rate loans to counter variations in payment amounts due to interest rate changes. Unrealized gains and losses are initially recognized in equity, taking account of deferred taxes. The portion of the changes in value initially recognized in equity is reclassified to income or expense as soon as the hedged item is recognized in income or expense. If a hedged planned transaction subsequently results in recognition of a financial asset or a financial liability, gains or losses recognized in equity in the meantime are reclassified to income or expense in the period when the financial asset or financial liability affects income. If a hedged planned transaction subsequently results in recognition of a non-financial asset or liability, gains or losses recognized in equity in the meantime are taken out of equity and subtracted from or added to the initial cost of the asset or liability. In the cases described, only the portion of changes in value that are determined to be effective for hedging purposes are recognized in equity. The ineffective portion is recognized directly as income or expense. In the HOCHTIEF Group, only cash flow hedges are currently recognized. Derivatives are also used for economic hedging purposes where no hedge accounting is applied. In such cases, changes in fair value are recognized in income or expense. Financial Statements and Notes Annual Report

158 Contingencies, commitments, and other obligations are possible or current obligations, based on past transactions, that are unlikely to lead to an outflow of resources. They are disclosed separately and are not included in the Balance Sheet unless assumed in the course of a business combination. The amounts stated for contingent liabilities reflect the extent of the liabilities as of the reporting date. Judgments made by management in applying the accounting policies primarily relate to the following issues: Leases must be assessed to determine whether the substantial risks and rewards of beneficial ownership transfer to the lessee. Securities may be grouped in different categories. Actuarial gains and losses can be accounted for in various ways when determining provisions for pensions and similar obligations. Assets earmarked for sale must be assessed to confirm that they are available for immediate sale and their sale is highly probable. If the result of this assessment is positive, they and any liabilities to be disposed of in the same transaction must be reported and accounted for as assets held for sale and liabilities associated with assets held for sale. It is necessary to determine whether construction revenue is accounted for under IAS 11 or IAS 18. All estimates and assumptions are based on current circumstances and appraisals. Forward-looking estimates and assumptions made as of the balance sheet date with a view to future business performance take account of circumstances prevailing on preparation of the Consolidated Financial Statements and future trends considered realistic for the global and industry environment. Actual amounts can vary from the estimated amounts due to changes in the operating environment that are at variance with the assumptions and lie beyond management control. If such changes occur, the assumptions and if necessary the carrying amounts of affected assets and liabilities are revised accordingly. New accounting pronouncements Adoption by the International Accounting Standards Board (IASB) and IFRS Interpretations Committee (IFRS IC) of new and revised IFRS and IFRIC pronouncements has resulted in changes to accounting policies in those instances where the pronouncements have been adopted by the EU and have been applied in the reporting period January 1 to December 31, 2011 either because their application is mandatory for that period or because HOCHTIEF elected early application. Changes in IFRS and IFRIC affecting the HOCHTIEF Group are as follows: Financial Statements and Notes The decision made by the HOCHTIEF Group for general application in each instance is set out under Accounting Policies in these Notes. Preparation of the IFRS Consolidated Financial Statements requires Group management to make estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses, and disclosures of contingencies, commitments, and other obligations. The main estimates and assumptions relate to the following: Assessing projects on a percentage of completion basis, in particular with regard to accounting for change orders, the timing of profit recognition, and the amount of profit recognized. Estimating the economic life of intangible assets, property, plant and equipment, and of investment properties. Accounting for provisions. Testing goodwill and other assets for impairment. Testing deferred tax assets for impairment. Amendments to IAS 24 Related Party Disclosures: In November 2009, the IASB issued a revised version of IAS 24, primarily to make the standard clearer and more readily comprehensible so as to ensure its uniform interpretation and application. The new IAS 24 notably includes a revised definition of the term related party. The new standard also provides a partial exemption for entities controlled, jointly controlled, or significantly influenced by the state. It also adds executory contracts to the types of transactions requiring disclosure. The amendments were endorsed by the EU in July From the perspective of the HOCHTIEF Group, the amendments do not result in any material change in the individuals and entities considered as related parties. 158 Annual Report 2011

159 Notes to the Consolidated Financial Statements The IASB has also published an omnibus standard as part of its annual improvements process. This involved small, non-urgent but necessary changes to six standards and one interpretation. The amendments were endorsed by the EU in February They have no material impact on the presentation of HOCHTIEF s financial position and financial performance but result in minor changes to disclosures in accordance with IFRS 7 in the Notes. The following standards and interpretations effective from fiscal 2011 have no effect on the HOCHTIEF Consolidated Financial Statements: Amendments to IAS 32 Financial Instruments: Presentation Amendments to IFRS 1 Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments. Other new accounting pronouncements issued by the IASB and IFRS IC take the form of standards and interpretations that affect the HOCHTIEF Consolidated Financial Statements but do not have to be applied for the 2011 fiscal year and in some cases have not yet been endorsed by the EU. Amendments to IFRS 7 Financial Instruments: Disclosures: The IASB published amendments to IFRS 7 on October 7, The amendments relate to disclosure requirements for transfers of financial assets (for example, factoring). Where transferred assets are not derecognized in their entirety, disclosures are required on the resulting liability. Where transferred assets are derecognized in their entirety, disclosures are required on the transferor s remaining rights and obligations. These include, for example, any exposure to loss from continuing involvement and any repurchase agreements. The changes are endorsed for application in the EU for annual periods beginning on or after June 30, Comparative prior-year information is not required. It is not currently expected that the amendments will materially affect the HOCHTIEF Consolidated Financial Statements. IFRS 9 Financial Instruments: The IASB issued IFRS 9 on November 12, This represents the first phase of a threephase project to replace IAS 39 and relates to the classification and measurement of financial instruments. As the remaining phases are completed, new requirements will be incorporated into IFRS 9 and the corresponding parts of IAS 39 withdrawn. Under the new standard, there will be only two measurement categories for financial instruments: At fair value through profit or loss Amortized cost. For an investment in an equity instrument not held for trading, the entity may make an irrevocable election at the time of initial recognition to present subsequent changes in the fair value of the investment, including proceeds on disposal, in other comprehensive income. The sole exception from this rule relates to dividends received from such investments, which are recognized in profit or loss. On October 28, 2010, in the second phase of the complete overhaul of IAS 39, the IASB added requirements on accounting for financial liabilities and on derecognition to IFRS 9. With regard to financial liabilities, the two existing categories amortized cost and at fair value through profit or loss are retained. The only change relates to the fair value option, where changes in the fair value of a financial liability are no longer always to be recognized in profit or loss. Changes in the fair value of a liability due to changes in the entity s own credit risk are presented in other comprehensive income. All other changes in fair value are recognized as before in profit or loss. The special accounting treatment does not apply for financial liabilities for which measurement at fair value through profit or loss is not optional, such as derivatives outside of hedging. The derecognition model in IFRS 9 is carried over from IAS 39 as it currently stands. Financial Statements and Notes Annual Report

160 Financial Statements and Notes The standard is applied retrospectively for all financial instruments at the date of initial application. The date of initial application is the first fiscal year beginning on or after January 1, EU endorsement is still pending. The new standard will result in a reclassification of financial assets at HOCHTIEF. The new rules on financial liabilities will probably have no effect on HOCHTIEF. IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities, in conjunction with Amendments to IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures: On May 12, 2011, the IASB published three new and two amended standards on accounting for business combinations. IFRS 10 replaces the previous control approach in IAS 27 and SIC-12 with a uniform approach applicable to all business combinations. The rules for separate financial statements remain in IAS 27. The new control approach has three elements: Power over the investee Variable returns Ability to use the power over the investee to affect the amount of the variable returns. IFRS 11 replaces IAS 31 and abolishes proportionate consolidation. The core principle of IFRS 11 is the rule that a party to a joint arrangement classifies the arrangement either as a joint operation or a joint venture by assessing its rights and obligations arising from the arrangement. With a joint operation, each party accounts for the assets, liabilities, revenues, and expenses relating to its interest in the joint operation, together with its share of such items held or incurred jointly, in accordance with the applicable IFRSs. With a joint venture, each party accounts for its investment in the joint venture using the equity method in accordance with the amended IAS 28. IFRS 12 brings together the revised disclosures under IFRS 10, IFRS 11, IAS 27, IAS 28, and IAS 31 in a separate standard. The amended standards apply for annual periods beginning on or after January 1, Earlier application is solely permitted for all standards in combination. EU endorsement is still pending. The potential implications for the HOCHTIEF Group are currently being assessed. IFRS 13 Fair Value Measurement: The IASB published IFRS 13 on May 12, The new standard sets out in a single IFRS a framework for measuring fair value where other IFRS require fair value measurements or disclosures. The IFRS establishes a three-level fair value hierarchy for all purposes. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions (i.e., the exit price). The standard also requires additional disclosures in the notes on items measured at fair value. IFRS 13 applies for annual periods beginning on or after January 1, The amendments apply prospectively. Earlier application is permitted. EU endorsement is still pending. The potential implications for the HOCHTIEF Group are currently being assessed. Amendments to IAS 1 Presentation of Financial Statements: The IASB published Presentation of items of Other Comprehensive Income (OCI): Amendments to IAS 1 on June 16, The amendments require items of OCI to be classified into items that may be reclassified (recycled) subsequently to profit or loss and items that will not be reclassified. If items of OCI are presented before tax, the requirement also applies for tax. The amendments apply for annual periods beginning on or after July 1, Earlier application is permitted. EU endorsement is still pending. For HOCHTIEF, the amendments result in a modified classification of OCI items in the Statement of Comprehensive Income. Amendments to IAS 19 Employee Benefits: The amendments published on June 16, 2011 bring to completion the IASB s project to improve the accounting for pensions and other post-employment benefits. The amendments relate to the elimination of an option to defer recognition of actuarial gains and losses (the corridor method), measurement of changes in the net defined benefit liability/asset, and the recognition of plan amendments and curtailments, and require additional disclosures on characteristics and risks of defined benefit plans. Also changed in IAS 19 is the treatment for termination benefits, specifically the point in time when an entity would recognize a liability for termination benefits. The revised IAS 19 applies for annual periods beginning on or after January 1, Earlier application is permitted. EU endorsement is still pending. The potential implications for the HOCHTIEF Group are currently being assessed. 160 Annual Report 2011

161 Notes to the Consolidated Financial Statements Amendments to IAS 32 Financial Instruments: Presentation and IFRS 7 Financial Instruments: Disclosures: On December 16, 2011, the IASB published a clarification of a number of details relating to the offsetting of financial assets and financial liabilities and related supplementary disclosures. In issuing the clarification, the IASB does not intend to change the current offsetting principle under IAS 32. By way of mandatory supplementary disclosures, the gross and net amounts set off must be presented in a tabular format along with amounts subject to an enforceable master netting arrangement, including amounts that do not meet some or all of the offsetting criteria. The amendments apply retrospectively for annual periods beginning on or after January 1, 2013 (supplementary disclosures) and 2014 (clarifications). EU endorsement is still pending. For HOCHTIEF, the amendments will probably result in additional disclosures in the Notes. IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine: The IASB published IFRIC 20 on October 21, The interpretation clarifies when production stripping should lead to recognition of an asset and how that asset should be measured initially in subsequent periods. The interpretation applies for annual periods beginning on or after January 1, Earlier application is permitted. EU endorsement is still pending. The potential implications for the HOCHTIEF Group are currently being assessed, but the interpretation is not expected to materially affect the HOCHTIEF Consolidated Financial Statements. The following standards and interpretations not yet applicable in 2011 are not expected to have a material effect on the HOCHTIEF Consolidated Financial Statements in future periods: Amendments to IFRS 1 Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters Amendments to IAS 12 Income Taxes Deferred Tax: Recovery of Underlying Assets. Explanatory Notes to the Consolidated Statement of Earnings 1. Sales The EUR 23,282,237,000 (2010: EUR 20,159,286,000) sales figure comprises, firstly, contract sales recognized under the percentage of completion (POC) method in general construction, construction management, and contract mining, plus products and services provided to construction joint ventures, the Group s share of profits from construction joint ventures, and other related services. Secondly, the sales figure includes revenues from services such as construction planning, logistics, asset management, facility management, property management, energy management, and insurance and concessions business. Sales recognized under the percentage of completion method came to EUR 20,620,967,000 (2010: EUR 17,483,708,000). Sales figures provide only an incomplete view of work done* during the fiscal year. For additional information, work done by the Group is presented below, including the Group s share of work done in construction joint ventures. The breakdown by division is as follows: (EUR thousand) HOCHTIEF Americas 6,714,485 6,793,569 HOCHTIEF Asia Pacific 15,515,716 12,702,794 HOCHTIEF Concessions 66, ,065 HOCHTIEF Europe 3,436,147 3,612,749 Corporate Headquarters/ Consolidation 57,334 12,733 25,789,898 23,233, Other operating income *See glossary on page 212. (EUR thousand) Proceeds from divestitures 180, ,181 Income from reversal of provisions 114,931 69,517 Income from the disposal of intangible assets, property, plant and equipment, and investment properties 27,751 25,851 Foreign exchange gains 23,419 37,222 Income from impairment reversals 3,261 25,138 Sundry other operating income 149,618 98, , ,756 Financial Statements and Notes Annual Report

162 Proceeds from divestitures in 2011 are mainly accounted for by the HOCHTIEF Asia Pacific division and mostly relate to Henry Walker Eltin. In the prior year, the item included EUR 117,410,000 from remeasuring remaining investments at fair value. Income from impairment reversals includes EUR 3,162,000 (2010: EUR 25,036,000) for reversals of impairments on receivables. Sundry other operating income includes lease and rental income, income from insurance claims, and income from changes in the fair value of derivatives. The figure for the year under review also includes EUR 75,179,000 for a bargain purchase gain in the HOCHTIEF Asia Pacific division. 5. Depreciation and amortization (EUR thousand) Intangible assets 38,638 11,894 Property, plant and equipment 743, ,698 Investment properties , ,543 There were no impairment charges on intangible assets in the fiscal year (2010: impairment charges of EUR 250,000). Impairment charges of EUR 12,000 were recognized on property, plant and equipment (2010: EUR 2,417,000) and impairment charges of EUR 166,000 on investment properties (2010: EUR ). 6. Other operating expenses Financial Statements and Notes 3. Materials (EUR thousand) Raw materials, supplies, and purchased goods 4,334,136 3,500,477 Purchased services 11,238,065 10,263,504 15,572,201 13,763, Personnel costs (EUR thousand) Wages and salaries 4,357,859 3,661,770 Social insurance, pensions, and support 505, ,089 4,863,639 4,080,859 Expenditure on pensions totaled EUR 298,045,000 (2010: EUR 219,550,000). This mostly consists of new entitlements accrued during the year under defined benefit pension plans and payments into defined contribution pension schemes. Payments to state pension insurance funds are included in social insurance. Employees (average for the year) Waged/industrial employees 39,236 37,925 Salaried/office employees 36,213 32,732 75,449 70,657 An average of 395 (2010: 465) were employed for the purposes of their occupational training. (EUR thousand) Rentals and lease rentals 427, ,557 Technical and business consulting 250, ,995 Insurance expenses 231, ,740 Travel expenses 114, ,976 Expenses from derivative financial instruments 83,880 2,882 Restructuring and adjustment costs/severance benefits 78,465 41,689 Court costs, attorneys and notaries fees 56,889 54,449 External organization and programming 56,290 60,517 Office supplies 51,195 44,550 Currency losses 42,242 21,874 Commission 32,764 37,235 Marketing 23,044 17,250 Mail and funds transfer expenses 17,689 16,919 Impairment losses and losses on disposal of current assets (except inventories) 14,040 21,604 Legal costs 10,508 13,527 Sundry other operating expenses 301, ,901 1,792,880 1,553,665 The insurance expenses mainly relate to project risk management in the Turner Group. Insurance payments by Turner and other project stakeholders such as suppliers and clients are combined to minimize project execution risks to Turner and its clients. The insurance expenses are counterbalanced by insurance revenue reported in sales. 162 Annual Report 2011

163 Notes to the Consolidated Financial Statements The expenses from derivative financial instruments mainly relate to the measurement of equity verification guarantees given by the Group and a reclassification in connection with hedging a future acquisition in the HOCHTIEF Asia Pacific division. Sundry other operating expenses mostly comprise order processing, costs of materials for administrative purposes, costs of preparing the annual financial statements, losses incurred on disposal of property, plant and equipment, and other expenses not reported elsewhere. Also included under this heading are sundry taxes amounting to EUR 33,020,000 (2010: EUR 24,565,000). Including personnel and material expenses, a total of EUR 5,191,000 was spent on Group-wide research and development projects by the central innovation management function in 2011 (2010: EUR 4,886,000). 7. Net income from participating interests Net income from participating interests includes all income and expenses relating to equity-method investments and participating interests. Net income from participating interests is made up as follows: (EUR thousand) Share of profits and losses of equity-method associates and jointly controlled entities (649,894) 189,820 Of which: Impairment [193,159] [70,259] Net income from non-consolidated subsidiaries (1,757) (2,394) Of which: Impairment [(1,040)] [(2,394)] Net income from other participating interests 33,708 22,186 Of which: Impairment [(1,174)] [(13,399)] Income from the disposal of participating interests 34,673 1,344 Expenses on disposal of participating interests (116) Income from long-term loans to participating interests 16,190 11,749 Impairment of long-term loans to participating interests (17,527) Other income from participating interests 65,171 32,885 (584,723) 222,705 The share of profits and losses of equity-method associates and jointly controlled entities consists of minus EUR 268,471,000 (2010: minus EUR 43,524,000) relating to associates and minus EUR 381,423,000 (2010: EUR 233,344,000) relating to jointly controlled entities. A negative share of profits and losses totaling minus EUR 820,428,000 (2010: positive share of profits and losses totaling EUR 53,023,000) relates to the HOCHTIEF Asia Pacific division and is mainly accounted for by the Victorian Desalination Plant joint venture project. This is countered by a EUR 85,867,000 (2010: EUR 61,784,000) share of profits and losses from the HOCHTIEF Concessions division. The share of profits and losses of equity-method associates and jointly controlled entities includes EUR 193,159,000 in impairments (2010: EUR 70,259,000). These relate to associates in the HOCHTIEF Asia Pacific division, primarily the Habtoor Leighton Group. Financial Statements and Notes Annual Report

164 Net income from other participating interests includes EUR 34,740,000 (2010: EUR 33,142,000) in distributed profits of Southern Cross Airports Corporation Holdings Ltd. from the ownership interest in Sydney Airport, which is reported as part of assets held for sale. EUR 1,174,000 (2010: EUR 13,398,000) of the impairment losses accounted for in net income from other participating interests relates to participating interests of Leighton Holdings. Participating interests measured at cost less impairments and disposed of in the fiscal year had a carrying amount of EUR 545,000 (2010: EUR 129,000). Disposals realized a gain on sale of EUR 10,291,000 in 2011 (2010: EUR 15,000). As of the balance sheet date, there are no other plans to sell participating interests measured at cost. 8. Net investment and interest income (EUR thousand) Interest and similar income 75,593 66,893 Other investment income 33,087 14,671 Investment and interest income 108,680 81,564 Interest and similar expenses (249,247) (245,847) Interest component of increase in non-current provisions 990 (1,429) Of which: For pension obligations [3,445] [2,582] Other investment expenses (29,135) (15,765) Investment and interest expenses (277,392) (263,041) (168,712) (181,477) Interest and similar income consists of interest on cash investments, interest-bearing securities, and other long-term loans, plus profit shares and dividends from current and non-current securities. Interest and similar expenses represent all interest incurred. Net interest income the balance of interest and similar income and expenses is negative, at minus EUR 173,654,000 (2010: negative EUR 178,954,000). Interest income of EUR 70,058,000 was recorded in the 2011 fiscal year for financial instruments not carried at fair value through profit or loss (2010: EUR 59,959,000). Interest expenses of EUR 249,247,000 were recorded for financial instruments not carried at fair value through profit or loss (2010: EUR 245,847,000). The interest component of increases in pension obligations an amount of EUR 3,445,000 (2010: EUR 2,582,000) consists of EUR 42,217,000 (2010: EUR 43,937,000) in annual interest on the net present value of long-term pension obligations rolled over into the new fiscal year, offset against EUR 45,662,000 (2010: EUR 46,519,000) for the expected return on plan assets. Interest and investment income and expenses not included in interest and similar income and expenses or in the interest component of increases in long-term provisions are reported as other investment income and expenses. These mostly comprise income and expenses relating to sales of securities and to derivatives, and expenses relating to impairment losses on securities. Financial Statements and Notes 164 Annual Report 2011

165 Notes to the Consolidated Financial Statements 9. Income taxes (EUR thousand) Current income taxes 61, ,368 Deferred taxes (20,834) (2,074) 40, ,294 Current income taxes include EUR 355,000 net tax income (2010: EUR 302,000 net tax expense) relating to prior periods. Tax expense is derived from the theoretical tax expense. The theoretical tax rate applied to pretax profit is 31.5 percent, as in the prior year. (EUR thousand) Profit before taxes (126,958) 756,572 Theoretical tax charge/income, at 31.5 percent (39,992) 238,320 Difference between the above and foreign tax rates (465) (21,815) Tax effects on: Tax-exempt income (44,934) (84,078) Non-tax-allowable expenditure 60,328 41,762 Equity accounting of associates and jointly controlled entities, including impairment of associates and jointly controlled entities 110,815 1,220 Unrecognized deferred tax assets for tax loss carryforwards 61,732 45,357 Other (106,552) (10,472) Effective tax charges 40, ,294 Effective rate of tax (percent) The tax effects on equity accounting mainly relate to the HOCHTIEF Asia Pacific division. The Other item mainly includes the reversal of a provision at Leighton Holdings. The provision was recognized because there was a risk of Leighton Holdings having to pay back tax relief obtained in connection with research and development expenditure to the tax authorities. This risk ceased to apply in the reporting period. For reasons of accounting prudence, as in 2010, deferred tax assets were not recognized for tax losses incurred in Germany in Minority interest The negative EUR 7,603,000 (2010: positive EUR 258,248,000) minority interest in consolidated net profit represents the balance of profits totaling EUR 80,491,000 (2010: EUR 260,975,000) and losses totaling EUR 88,094,000 (2010: EUR 2,727,000). The profits mainly comprise EUR 34,157,000 (2010: EUR 33,717,000) for minority shareholders in airport companies and EUR 26,650,000 (2010: EUR 30,504,000) for minority shareholders in HOCHTIEF Solutions Middle East Qatar. The losses mainly consist of EUR 85,187,000 (2010: profits of EUR 167,480,000) for minority shareholders in the Leighton Group. Financial Statements and Notes Annual Report

166 Explanatory Notes to the Consolidated Balance Sheet 11. Intangible assets The table below shows the composition of and changes in intangible assets on the balance sheet for 2011 and the previous year. (EUR thousand) Concessions, industrial property and similar rights and assets, and licenses in such rights and assets Goodwill arising on consolidation Total Cost of acquisition or production Jan. 1, , , ,408 Additions or disposals due to consolidation changes 17,615 (20,324) (2,709) Additions 30,574 30,574 Disposals (44,061) (44,061) Reclassifications 117,120 (5,897) 111,223 Currency adjustments 8,791 13,597 22,388 Dec. 31, , , ,823 Cumulative amortization Jan. 1, ,529 84,529 Additions or disposals due to consolidation changes Amortization 38,638 38,638 Disposals (36,270) (36,270) Reclassifications 1,977 1,977 Currency adjustments 1,900 1,900 Impairment reversals Dec. 31, ,573 91,573 Carrying amounts as of Dec. 31, , , ,250 Cost of acquisition or production Jan. 1, , , ,843 Additions or disposals due to consolidation changes 2,568 12,481 15,049 Additions 22,152 22,152 Disposals (1,483) (1,483) Reclassifications Currency adjustments 7,541 49,216 56,757 Dec. 31, , , ,408 Financial Statements and Notes Cumulative amortization Jan. 1, ,142 71,142 Additions or disposals due to consolidation changes (6) (6) Amortization 11,894 11,894 Disposals (1,447) (1,447) Reclassifications Currency adjustments 2,928 2,928 Impairment reversals Dec. 31, ,529 84,529 Carrying amounts as of Dec. 31, , , , Annual Report 2011

167 Notes to the Consolidated Financial Statements Intangible assets include EUR 1,901,000 (2010: EUR 2,590,000) in capitalized development costs. No impairment losses were recorded on intangible assets in the reporting year (2010: impairment losses of EUR 250,000). Intangible assets include EUR 25,341,000 (2010: EUR 24,538,000) for the value of the Turner name, which was recognized as an asset in the HOCHTIEF Americas division on initial consolidation of the Turner Group. The Flatiron name is also capitalized in the HOCHTIEF Americas division at EUR 2,860,000 (2010: EUR 2,769,000) and the E.E. Cruz name at EUR 2,628,000 (2010: EUR 2,545,000). The change compared with the prior year is due to currency adjustment. Initial consolidation of Devine Limited in the HOCHTIEF Asia Pacific division in 2011 resulted in recognition of a further company name as an asset with a carrying amount of EUR 18,864,000. The company names are not subject to systematic amortization, but are tested for impairment annually and if there is any indication of impairment. Impairment testing is performed in accordance with IAS 36 as described below for goodwill. As in the prior year, no impairment was identified in the year under review. Intangible assets also include EUR 16,505,000 (2010: EUR 18,007,000) for a concession on an expressway project in Santiago de Chile. This concession is attached to a commitment to construct a toll road and is amortized using the unit of production method (that is, based on utilization levels) over its expected 27-year duration from the date it came into operation in At the end of the concession in 2033, the expressway is to be returned to the Chilean state. The decrease in value compared with the prior year is mainly due to exchange rate adjustments. Goodwill recognized for consolidated companies on initial consolidation is allocated to cash-generating units at segment level for the purposes of impairment testing as described in the following. The cash-generating units correspond to the divisions used in segment reporting. Annual impairment testing of goodwill at segment (division) level is performed at HOCHTIEF in the fourth quarter of each year. In impairment testing, the recoverable amount of a division is compared with its carrying amount. The recoverable amount for the HOCHTIEF Americas, HOCHTIEF Concessions, and HOCHTIEF Europe cash-generating units is separately measured for each unit as value in use. Value in use is the present value of future cash flows expected to arise from a cash-generating unit. It is determined from an internal Group perspective using the discounted cash flow method. This is carried out on the basis of cash flow budgets derived from the three-year budget for the detailed planning horizon as approved by the Executive Board and current at the time of impairment testing. The forecasts incorporate past experience and expected future market developments. Cash flows are assumed to remain constant in subsequent years. Weighted average cost of capital (WACC) is used for cost of capital data. Value in use is first measured on an after-tax basis by discounting the cash flows with an after-tax WACC determined separately for each cash-generating unit. The pre-tax discount rate is then found by iteration for the purposes of the Notes disclosures. The discount rates used for cash-generating units in impairment testing are between 10.9 and 11.6 percent before tax (2010: between 8.9 and 11.5 percent). The recoverable amount for the HOCHTIEF Asia Pacific cashgenerating unit is measured as fair value based on Leighton s stock market valuation. As in the prior year, comparison of the recoverable amounts of the divisions with their carrying amounts has not revealed any impairment of goodwill. Changes in goodwill by division in 2011 were as follows: (EUR thousand) Jan. 1, 2011 Currency adjustments Consolidation changes Impairment losses Dec. 31, 2011 HOCHTIEF Americas 237,808 7, ,583 HOCHTIEF Asia Pacific 196,456 5,822 (19,819) 182,459 HOCHTIEF Concessions 5,897 5,897 HOCHTIEF Europe 52,589 (505) 52, ,750 13,597 (20,324) 486,023* *The EUR 5,897,000 difference relative to the amount shown on the Consolidated Balance Sheet relates to the reclassification of the airports business as assets held for sale. Financial Statements and Notes Annual Report

168 12. Property, plant and equipment (EUR thousand) Land, similar rights and buildings, including buildings on land owned by third parties Technical equipment and machinery, transportation equipment Other equip ment and office equipment Prepayments and assets under construction Cost of acquisition or production Jan. 1, ,675 3,431, ,377 2,628 4,015,964 Additions or disposals due to consolidation changes (20,671) (253,224) (909) (274,804) Additions 24,493 1,403,614 40,892 5,419 1,474,418 Disposals (20,504) (472,340) (62,867) (446) (556,157) Reclassifications 8 (114,652) 57 (3,453) (118,040) Currency adjustments 5, ,836 1, ,697 Dec. 31, ,753 4,127, ,511 4,296 4,682,078 Total Cumulative depreciation Jan. 1, ,784 1,915, ,810 2,208,492 Additions or disposals due to consolidation changes (3,512) (98,941) (814) (103,267) Depreciation 14, ,076 25, ,567 Disposals (6,780) (430,339) (30,812) (467,931) Reclassifications (2,092) (308) (2,400) Currency adjustments 2,639 64,033 1,908 68,580 Impairment reversals (30) (69) (99) Dec. 31, ,189 2,152, ,148 2,446,942 Carrying amounts as of Dec. 31, ,564 1,974,913 95,363 4,296 2,235,136 Cost of acquisition or production Jan. 1, ,079 2,544, ,642 4,652 3,082,624 Additions or disposals due to consolidation changes (2,956) (9,718) (160) (448) (13,282) Additions 36, ,289 34,014 1, ,881 Disposals (19,309) (398,134) (44,848) (820) (463,111) Reclassifications 4,678 (3,539) (2,493) (1,354) Currency adjustments 36, ,918 12, ,206 Dec. 31, ,675 3,431, ,377 2,628 4,015,964 Financial Statements and Notes Cumulative depreciation Jan. 1, ,649 1,316, ,571 1,590,297 Additions or disposals due to consolidation changes (1,129) (2,068) (177) (3,374) Depreciation 15, ,893 29, ,698 Disposals (10,773) (266,647) (31,681) (309,101) Reclassifications 3,309 (3,327) (18) Currency adjustments 13, ,412 6, ,092 Impairment reversals (78) (24) (102) Dec. 31, ,784 1,915, ,810 2,208,492 Carrying amounts as of Dec. 31, ,891 1,515, ,567 2,628 1,807, Annual Report 2011

169 Notes to the Consolidated Financial Statements Property, plant and equipment includes lease-financed assets worth EUR 410,571,000 (2010: EUR 222,170,000); these mainly comprise technical equipment and machinery at Leighton Holdings. Impairment losses of EUR 12,000 (2010: EUR 2,417,000) were recorded on property, plant and equipment in the reporting year. Property, plant and equipment is subject to restrictions in the amount of EUR 58,000 (2010: EUR ). 13. Investment properties (EUR thousand) Cost of acquisition or production Jan. 1, ,716 Additions or disposals due to consolidation changes Additions 1,043 Disposals (8,420) Reclassifications Currency adjustments Dec. 31, ,339 Cumulative amortization Jan. 1, ,706 Additions or disposals due to consolidation changes Amortization 709 Disposals (5,803) Reclassifications Currency adjustments Impairment reversals Dec. 31, ,612 Carrying amounts as of Dec. 31, ,727 Cost of acquisition or production Jan. 1, ,028 Additions or disposals due to consolidation changes (6,868) Additions 54 Disposals (19,753) Reclassifications Currency adjustments 255 Dec. 31, ,716 Cumulative amortization Jan. 1, ,789 Additions or disposals due to consolidation changes (1,426) Amortization 951 Disposals (11,679) Reclassifications Currency adjustments 71 Impairment reversals Dec. 31, ,706 Carrying amounts as of Dec. 31, ,010 Financial Statements and Notes Annual Report

170 Impairment losses of EUR 166,000 (2010: EUR ) were recorded on investment properties. The fair values of investment properties came to EUR 34,064,000 as of December 31, 2011 (2010: EUR 38,989,000). These are assessed using internationally accepted valuation methods, such as taking comparable properties as a guide to current market prices or by applying the discounted cash flow method. EUR 9,958,000 (2010: EUR 14,547,000) of this total is accounted for by fair value adjustments following independent external appraisals. Rental income from investment properties in the reporting year totaled EUR 1,258,000 (2010: EUR 1,475,000). Direct operating expenses totaling EUR 2,721,000 (2010: EUR 2,524,000) consisted of EUR 866,000 (2010: EUR 953,000) in expenses for rented and EUR 1,855,000 (2010: EUR 1,571,000) in expenses for unrented investment properties. As in the prior year, investment properties are not subject to any restrictions. 14. Equity-method investments (EUR thousand) Dec. 31, 2011 Dec. 31, 2010 Equity-method associates 477,579 1,391,474 Equity-method jointly controlled entities 555, ,168 1,033,203 2,005,642 The decrease in equity-method investments mainly reflects the reclassification of airport holdings as assets held for sale. This relates to the investments in the airports at Athens, Budapest, and Hamburg (associates) and at Düsseldorf and Tirana (jointly controlled entities). Associates The following tables show the Group s share of main items of the balance sheets and statements of earnings of the equitymethod associates: Dec. 31, 2011 Dec. 31, 2010 (EUR thousand) [of which: IFRS 5] Consolidated Balance Sheet Assets 4,186,103 [2,312,083] 1,874,020 4,346,149 Liabiities (3,106,132) [(1,709,691)] (1,396,441) (2,954,675) Net assets 1,079,971 [602,392] 477,579 1,391,474 (EUR thousand) Sales 1,287,976 1,406,149 Profit (268,471) (43,524) Financial Statements and Notes The fair value of equity-method associates for which there are published prices was EUR 162,189,000 as of December 31, 2011 (2010: EUR 239,192,000). The profit from equity-accounted associates includes EUR 193,159,000 in impairment charges (2010: EUR 70,259,000) relating to associates in the HOCHTIEF Asia Pacific division, notably the Habtoor Leighton Group. Investments in associates are not subject to any restrictions in the year under review (2010: EUR 643,648,000 subject to restrictions). 170 Annual Report 2011

171 Notes to the Consolidated Financial Statements The main associates in the HOCHTIEF Group are: Name Domicile Activities Shareholding (%) HOCHTIEF Asia Pacific Al Habtoor Engineering Enterprises Co. L.L.C. (Habtoor Leighton Group) Dubai, United Arab Emirates Construction 45 Macmahon Holdings Limited Perth, Australia Construction / mining 19 Sedgman Limited Brisbane, Australia Construction 32 HOCHTIEF Concessions Inversiones de Infrastructura S.A. Santiago de Chile, Chile Development 45 Sociedad Concesionaria Autopista Vespucio Norte Express S.A. Santiago de Chile, Chile Development 18 Sociedad Concesionaria Túnel San Cristobal S.A. Santiago de Chile, Chile Development 50 Athens International Airport S.A.* Athens, Greece Airport 27 Budapest Airport Zrt.* Budapest, Hungary Airport 50 Flughafen Hamburg GmbH* Hamburg Airport 49 *Included in assets held for sale Jointly controlled entities The Group s share of the items of the balance sheets and statements of earnings of the equity-method jointly controlled entities are presented below: Dec. 31, 2011 Dec. 31, 2010 (EUR thousand) [of which: IFRS 5] Consolidated Balance Sheet Non-current assets 2,553,401 [455,089] 2,098,312 2,095,377 Current assets 1,168,123 [53,543] 1,114,580 1,603,269 Non-current liabilities (2,069,926) [(348,468)] (1,721,458) (2,080,894) Current liabilities (995,503) [(59,693)] (935,810) (1,003,584) Net assets 656,095 [100,471] 555, ,168 (EUR thousand) Income 2,342,170 2,809,431 Expenses (2,723,593) (2,576,087) Profit (381,423) 233,344 As in the prior year, profit from equity-method jointly controlled entities does not contain any impairment losses. Shares in jointly controlled entities are pledged in the amount of EUR 1,442,000 (2010: EUR 1,010,000). Financial Statements and Notes Annual Report

172 The main jointly controlled entities in the HOCHTIEF Group are: Name Domicile Activities Shareholding (%) HOCHTIEF Americas Kiewit / Flatiron (Port Mann Bridge) Richmond, Canada Construction 28 HOCHTIEF Asia Pacific City West Property Sydney, Australia Development 50 Hassall Street Trust Sydney, Australia Development 50 Leighton Welspun Contractors Mumbai, India Construction 65 New Royal Adelaide Hospital Adelaide, Australia Construction 50 Thiess Degremont Wonthaggi, Australia Construction 65 *Included in assets held for sale HOCHTIEF Concessions Aegean Motorway Concession Company S.A. Larissa, Greece Development 35 Bonaventura Straßenerrichtungs-GmbH Vienna, Austria Development 44 Herrentunnel Lübeck GmbH & Co. KG Lübeck Development 50 Olympia Odos Concession Company S.A. Athens, Greece Development 17 Süddeutsche Geothermie-Projekte GmbH & Co. KG Haar near Munich Development 50 Via Solutions Thüringen GmbH & Co. KG Eisenach Development 50 Flughafen Düsseldorf GmbH* Düsseldorf Airport 50 Tirana International Airport SHPK* Tirana, Albania Airport 47 HOCHTIEF Europe aurelis Real Estate GmbH & Co. KG Eschborn Development 50 HGO InfraSea Solutions GmbH & Co. KG Bremen Construction /development Other financial assets (EUR thousand) Dec. 31, 2011 Dec. 31, 2010 Non-consolidated subsidiaries 7,142 7,233 Other participating interests 57, ,377 Non-current securities ,478 64, ,088 An amount of EUR 1,040,000 was recognized in impairment losses on non-consolidated subsidiaries in the year under review (2010: EUR 2,394,000) and EUR 1,174,000 on other participating interests (2010: EUR 13,399,000). The investment in Sydney Airport included as EUR 398,914,000 in other participating interests in the prior year has been reclassified as assets held for sale. As in the prior year, the non-current securities are not subject to any restrictions. They are classified as available for sale and are measured at fair value. Financial Statements and Notes 16. Financial receivables Dec. 31, 2011 Dec. 31, 2010 Noncurrencurrent Current Non- Current (EUR thousand) Long-term loans to non-consolidated subsidiaries and to participating interests 582,243 32, ,123 29,832 Financial receivables from non-consolidated subsidiaries 4,712 32, ,111 Financial receivables from participating interests 10,313 63,240 27,119 75,146 Interest accruals 13,728 9,311 Other financial receivables 34,795 8,475 23, , , , , Annual Report 2011

173 Notes to the Consolidated Financial Statements Long-term loans to non-consolidated subsidiaries and to participating interests include EUR 380,993,000 (2010: EUR 86,785,000) for a loan to the Habtoor Leighton Group and EUR 142,010,000 (2010: EUR 174,389,000) for loans in connection with the acquisition of aurelis Real Estate in EUR 143,944,000 in loans in connection with the purchase in shares in Budapest Airport included in the prior year have been reclassified as assets held for sale. Receivables from equity-accounted companies total EUR 647,829,000 (2010: EUR 554,917,000). Other financial receivables include EUR 3,177,000 (2010: EUR 3,779,000) in finance lease receivables. These were made up as follows: Finance lease receivables Dec. 31, 2011 Dec. 31, 2010 Minimum Minimum lease lease (EUR thousand) payments Discount Present value payments Discount Present value Due in up to 1 year Due in 1 5 years 2, ,131 3, ,514 Due after 5 years Other receivables and other assets (EUR thousand) Dec. 31, 2011 Dec. 31, 2010 Current Noncurrent Noncurrent Current Prepaid expenses 3, ,972 2,418 68,238 Derivative receivables 18,310 14,353 57,071 10,743 Entitlements from sales of participating interests 27,103 79,626 Pension fund credit balances 16,055 67,535 Entitlements from real estate sales 7,641 3,170 Tax receivables (excluding income taxes) 7,624 6,348 Shares in companies not recognized in non-current assets 159 5,955 Claims for damages and claims under guarantee 26 6,196 Sundry other assets 221,299 53,647 49,048 52, , , , ,420 Prepaid expenses consist of insurance premiums, rents applicable to later accounting periods, and prepayments for maintenance and services. They also include commission paid by HOCHTIEF insurance companies for insurance arranged by direct insurers. Such commission is reversed to expense over the lifetime of the policy. Sundry other assets in the HOCHTIEF Asia Pacific division are subject to restrictions in the amount of EUR 171,786,000 (2010: EUR ). Financial Statements and Notes Annual Report

174 18. Deferred taxes Deferred tax assets and liabilities break down as follows: Dec. 31, 2011 Dec. 31, 2010 (EUR thousand) Deferred tax assets Deferred tax liabilities Deferred tax assets Deferred tax liabilities Non-current assets 120, , , ,915 Current assets 18, ,937 8, ,786 Non-current liabilities Pension provisions 92,262 20,221 90,525 18,161 Other provisions 57,439 60,286 61,453 49,540 Sundry non-current liabilities 42,157 38,575 Current liabilities Other provisions 108,473 1, ,095 2,077 Sundry current liabilities 34,753 49,476 73,745 4, , , , ,920 Losses carried forward 70,594 22,618 Gross amount 544, , , ,920 Offsetting item 270, , , ,915 Reported amount 274,697 78, ,555 66,005 Financial Statements and Notes Deferred tax assets and deferred tax liabilities are offset within each company or group. The EUR 544,730,000 (2010: EUR 513,470,000) gross amount of deferred tax assets includes the following tax refund entitlements arising from the expected future use of tax loss carryforwards: (EUR thousand) Dec. 31, 2011 Dec. 31, 2010 Corporate income tax 65,608 17,632 German municipal trade tax 4,986 4,986 70,594 22,618 There is adequate assurance that the tax loss carryforwards will be realized. For reasons of accounting prudence, as in 2010, deferred tax assets were not recognized for tax losses incurred in Germany in Tax loss carryforwards for which no deferred tax assets have been recognized amount to EUR 833,521,000 (2010: EUR 992,952,000) in respect of corporate income tax and EUR 1,044,718,000 (2010: EUR 1,236,705,000) in respect of German municipal trade tax. Under Section 8c of the German Corporation Tax Act (KstG), 27.6 percent of tax loss carryforwards relating to corporation tax and municipal trade tax ceased to be deductible in the year under review as a result of the acquisition of shares by ACS and of acquisitions of shares since No deferred tax assets were recognized in past years in respect of the forefeited tax loss carryforwards. Deferred tax assets are recognized for tax-deductible temporary differences if it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. Deferred tax liabilities totaling a gross amount of EUR 348,767,000 (2010: EUR 318,920,000) are entirely due to taxable temporary differences, mostly from adjustments to ensure uniform Groupwide compliance with IFRS valuation principles. EUR 4,575,000 was credited to equity (2010: EUR 24,961,000) for deferred tax relating to exchange differences from translation of foreign entity financial statements. EUR 25,364,000 was charged (2010: EUR 598,000 credited) to equity for deferred tax on amounts recognized in equity for changes in the fair value of derivative and non-derivative financial instruments. EUR 24,072,000 was credited to equity (2010: EUR 20,022,000) for deferred taxes relating to actuarial gains and losses. As of the balance sheet date, deferred taxes from the measurement of financial instruments credited to equity amounted to EUR 13,396,000 (2010: EUR 38,760,000), while EUR 96,858,000 (2010: EUR 72,786,000) was credited to equity in connection with actuarial gains and losses. 19. Inventories (EUR thousand) Dec. 31, 2011 Dec. 31, 2010 Raw materials and supplies, spare parts 192, ,605 Work in progress 1,084,944 1,096,160 Finished goods 5, Prepayments 3,470 13,031 1,286,753 1,268,333 Borrowing costs of EUR 10,467,000 were capitalized under work in progress in accordance with IAS 23 in 2011 (2010: EUR 8,576,000). The borrowing costs were determined on the basis of interest rates of between 1.2 and 12.1 percent (2010: 1.2 and 8.1 percent). Work in progress also includes properties under development that are subject to restrictions in the amount of EUR 581,030,000 (2010: EUR 436,282,000). 174 Annual Report 2011

175 Notes to the Consolidated Financial Statements 20. Trade receivables (EUR thousand) Trade receivables Dec. 31, 2011 Dec. 31, 2010 Gross amount due from customers for contract work (POC) 4,878,254 3,916,444 Less: progress payments received (2,630,732) (2,135,152) 2,247,522 1,781,292 From construction joint ventures 183, ,061 Other 2,192,942 1,970,071 4,624,060 3,954,424 From non-consolidated subsidiaries 16,915 9,142 From participating interests 40,338 21,197 4,681,313 3,984,763 The figure of EUR 2,247,522,000 (2010: EUR 1,781,292,000), representing the gross amount due from customers for construction work (POC) less progress payments received, relates to construction contracts where incurred contract costs (including shares of contract net profit) exceed progress payments received from customers. The combined total of POC contract costs (including net profit shares) reported under trade receivables and trade payables is EUR 5,374,957,000 (2010: EUR 4,383,209,000). The combined total of progress payments received and offset against the gross amounts due to and from customers for contract work (POC) is EUR 3,530,132,000 (2010: EUR 3,147,753,000). Various fully consolidated companies in the HOCHTIEF Group have been granted service concession or similar arrangements. These arrangements are mostly accounted for as financial assets and reported as part of gross amount due from customers for contract work (POC). The service concession arrangements, which are in the social infrastructure/public buildings segment, are agreements to build and modernize, operate, and maintain schools and public buildings. Construction work and improvements are on schedule and generating the projected positive returns. The HOCHTIEF Group companies concerned are required accordingly to perform their obligations under the service concession arrangements and are granted the rights necessary to do so in each case. At the end of the period of a service concession arrangement, the infrastructure to which the arrangement relates is returned to the public-sector client. The assets associated with a service concession arrangement generally remain public property for the entire duration of the arrangement. The sole termination option provided for in the service concession arrangements relates to termination for cause; some arrangements have renewal options. Trade receivables include EUR 332,333,000 (2010: EUR 358,881,000) in contractual retention amounts. Trade receivables also include properties under development that are subject to restrictions in the amount of EUR 273,968,000 (2010: EUR 128,804,000). Receivables from equity-accounted companies total EUR 9,667,000 (2010: EUR 18,475,000). 21. Current income tax assets The EUR 124,194,000 (2010: EUR 99,058,000) in current income tax assets comprises amounts receivable from domestic and foreign revenue authorities. 22. Marketable securities The marketable securities totaling EUR 392,831,000 (2010: EUR 937,640,000) mainly consist of securities held in specialpurpose investment funds and fixed-income securities with maturities at the time of acquisition of more than three months where there is no intention to hold the securities to maturity. The decrease mainly reflects disposals of securities in the year under review to streamline the structure of the Group s finances. All marketable securities are classified as available for sale and are carried at fair value. The carrying amount was decreased due to fair value adjustments in 2011 by EUR 10,848,000 (2010: carrying amount decreased by EUR 24,304,000). Marketable securities are pledged in the amount of EUR 22,683,000 (2010: EUR 23,004,000) as security for employee benefit entitlements under semiretirement programs. Marketable securities are subject to restrictions in the amount of EUR 232,078,000 (2010: EUR ). Outside of externally managed investments, direct investment activities are exclusively restricted to the purchase of bonds from top-class issuers* with broad diversification to ensure that concentration risks relative to specific issuers are strictly avoided. 23. Cash and cash equivalents Cash and cash equivalents total EUR 2,264,821,000 (2010: EUR 2,451,057,000) and comprise petty cash, cash at banks, and marketable securities with maturities at the time of acquisition of no more than three months. Cash and cash equivalents to the value of EUR 85,212,000 are subject to restrictions (2010: EUR 7,464,000). *See glossary on page 212. Financial Statements and Notes Annual Report

176 Financial Statements and Notes 24. Shareholders equity The Consolidated Statement of Changes in Equity is shown on page 147. HOCHTIEF Aktiengesellschaft s subscribed capital is divided into 76,999,999 no-par-value shares, having been increased by the issue of 6,999,999 shares in December 2010, and has a total value of EUR 197,120,000. Each share accounts for EUR 2.56 of capital stock. The capital reserve comprises premium on shares issued by HOCHTIEF Aktiengesellschaft. The Executive Board is unaware of any restrictions on voting rights or transfers of securities. There are no shares with special control rights. The Executive Board is not aware of any employee shares where the control rights are not exercised directly by the employees. Statutory rules on the appointment and replacement of Executive Board members are contained in Sections 84 and 85 and statutory rules on the amendment of the Articles of Association in Sections 179 and 133 of the German Stock Corporations Act (AktG). Under Section 7 (1) of the Company s Articles of Association, the Executive Board comprises at least three individuals. Section 23 (1) of the Articles of Association provides that resolutions of the General Shareholders Meeting require a simple majority of votes cast unless there is a statutory requirement stipulating a different majority. In instances where the Act requires a majority of the capital stock represented at the time of the resolution in addition to a majority of votes cast, Section 23 (3) of the Articles of Association provides that a simple majority will suffice unless there is a mandatory requirement stipulating a different majority. Pursuant to Section 4 (5) of the Articles of Association, the Executive Board is authorized subject to Supervisory Board approval to increase the capital stock by issuing new no-parvalue bearer shares for cash or non-cash consideration in one or more issues up to a total of EUR 35,840,000 by or before May 10, 2015 (Authorized Capital I). Similarly, there is an authorization to increase capital by up to EUR 23,296,000 by or before May 11, 2016 under Section 4 (6) of the Articles of Association (Authorized Capital II). Detailed provisions are contained in the stated section of the Articles. Pursuant to Section 4 (4) of the Articles of Association, the Company s capital stock has been conditionally increased by up to EUR 49,280,000 divided into up to 19,250,000 no-parvalue bearer shares (conditional capital). Detailed provisions are contained in the stated section of the Articles. Authorization to repurchase shares: The Company is authorized by resolution of the General Shareholders Meeting of May 12, 2011 to repurchase its own shares in accordance with Section 71 (1) 8 of the German Stock Corporations Act (AktG). The authorization expires on November 11, It is limited to ten percent of the capital stock at the time of the General Shareholders Meeting resolution or at the time of exercising the authorization, whichever figure is smaller, with the quantity of shares able to be acquired by the use of call options limited to a maximum of five percent of the capital stock at the time of the resolution. The authorization can be exercised directly by the Company or by a company in its control or majority ownership or by third parties engaged by the Company or engaged by a company in its control or majority ownership and allows the share repurchase to be executed in one or more installments covering the entire amount or any fraction. The repurchase may be effected through the stock exchange or by public offer to all shareholders, or by public invitation to all shareholders to tender shares for sale, or by issuing shareholders with rights to sell shares, or by the use of call options. The conditions governing the repurchase are set forth in detail in the resolution. By resolution of the General Shareholders Meeting of May 12, 2011, the Executive Board is authorized, subject to Supervisory Board approval, in the event of a sale of repurchased shares effected by way of an offer to all shareholders, to issue subscription rights to the shares to holders of any warrant-linked and/or convertible bonds issued by the Company or by any subordinate Group company. The Executive Board is also authorized, subject to Supervisory Board approval, to sell repurchased shares other than through the stock exchange and other than by way of an offer to all shareholders provided that the shares are sold for cash at a price not substantially below the current stock market price for Company shares of the same class at the time of sale. The HOCHTIEF Aktiengesellschaft Executive Board is authorized, subject to Supervisory Board approval and the conditions set out in the following, to offer and transfer to third parties repurchased shares other than through the stock exchange and other than by way of an offer to all shareholders. Such transactions may take place in the course of acquisitions of business enterprises in whole or part and in the course of mergers. They are also permitted for the purpose of obtaining a listing for the Company s shares on foreign stock exchanges where it is not yet listed. The shares may also be offered for purchase by employees or former employees of the Company or its affiliates. Holders of bonds which the Company or a Group company subordinate to it issues or has issued under the authorization granted at the General Shareholders Meeting of May 12, 2011 (agenda item 8) may also be issued with 176 Annual Report 2011

177 Notes to the Consolidated Financial Statements the shares upon exercising the warrant and/or conversion rights and/or obligations attached to the bonds. The shares may also, on condition that they be held for at least two years after transfer, be transferred to members of the Executive Board of the Company and to members of the executive boards and general management of companies under its control within the meaning of Section 17 of the German Stock Corporations Act (AktG), and to employees of the Company or of a company under its control within the meaning of Section 17 AktG. Such transfers are only permitted for the purpose of settling the transferees variable compensation entitlements in place of cash settlement. Further conditions of transfer are detailed in the resolution. Where shares are issued to members of the Executive Board of the Company, the decision to issue the shares is taken by the Supervisory Board alone. shares were purchased over the course of fiscal 2008 for the purposes provided for in the resolution of the General Shareholders Meeting of May 8, The holdings of treasury stock represent EUR 8,759,642 (4.44 percent) of the Company s capital stock. In July 2011, 13,340 shares of treasury stock were sold to persons in the employment of the Company or an affiliate for a price of EUR per share. These shares represent EUR 34,150 (0.02 percent) of the Company s capital stock. Unappropriated net profit is identical for HOCHTIEF Aktiengesellschaft and the HOCHTIEF Group. EUR 147,130,000 (2010: EUR 99,816,000) in dividends were paid out in Shareholders statutory subscription rights to such shares are barred pursuant to Sections 71 (1) 8 and 186 (3) and (4) of the German Stock Corporations Act (AktG) to the extent that the shares are used in exercise of the authorizations set out above. The minority interest in the shareholders equity of consolidated companies totaled EUR 1,511,976,000 (2010: EUR 1,298,679,000); this mainly related to the Leighton Group and the airport companies. The Executive Board is also authorized, subject to Supervisory Board approval, to retire repurchased shares without a further resolution of the General Shareholders Meeting being required for the share retirement itself or its execution. The conditions governing awards of subscription rights and the sale, transfer, and retirement of treasury stock are set forth in detail in the General Shareholders Meeting resolution. As of December 31, 2011, HOCHTIEF Aktiengesellschaft held a total of 3,421,735 shares of treasury stock as defined in Section 160 (1) 2 of the German Stock Corporations Act (AktG). These Accumulated other comprehensive income is part of revenue reserves. It includes amounts recognized in equity for changes in the fair value of primary and derivative financial instruments and exchange differences from translation of foreign entity financial statements. Accumulated other comprehensive income also includes the Group s share of changes recognized directly in the other comprehensive income of equity-method associates and jointly controlled entities, plus actuarial gains and losses from defined benefit pension plans. The changes in other comprehensive income are presented on a year-on-year basis in the following table:the tax effects relating to changes Changes in other comprehensive income (EUR thousand) Dec. 31, 2011 Dec. 31, 2010 Currency translation differences Changes in other comprehensive income for the period 27, ,812 Amounts reclassified to profit or loss 12,722 27, ,534 Changes in fair value of financial instruments primary Changes in other comprehensive income for the period 22,170 1,179 Amounts reclassified to profit or loss (10,782) ,388 1,279 Changes in fair value of financial instruments derivative Changes in other comprehensive income for the period (16,928) (5,923) Amounts reclassified to profit or loss 65, ,820 (5,268) Share of profits and losses of equity-method associates and jointly controlled entities recognized directly in equity (97,494) (14,550) Actuarial gains and losses (43,632) (42,040) Financial Statements and Notes Other comprehensive income after taxes (52,996) 297,955 Annual Report

178 The tax effects relating to changes in other comprehensive income are distributed as follows: Dec. 31, 2011 Dec. 31, 2010 (EUR thousand) Before taxes Taxes After taxes Before taxes Taxes After taxes Currency translation differences 27,922 27, , ,534 Changes in fair value of financial instruments primary 11,884 (496) 11,388 5,654 (4,375) 1,279 Changes in fair value of financial instruments derivative 73,688 (24,868) 48,820 (10,241) 4,973 (5,268) Share of profits and losses of equity-method associates and jointly controlled entities recognized directly in equity (97,494) (97,494) (14,550) (14,550) Actuarial gains and losses (67,704) 24,072 (43,632) (62,062) 20,022 (42,040) Other comprehensive income (51,704) (1,292) (52,996) 277,335 20, ,955 Financial Statements and Notes 25. Share-based payment The following Group-wide share-based payment systems were in force for managerial staff of HOCHTIEF Aktiengesellschaft and its affiliates in 2011: Top Executive Retention Plan 2004 The Top Executive Retention Plan 2004 (TERP 2004) was launched by resolution of the Supervisory Board in 2004 in connection with the sale of RWE Aktiengesellschaft s stake in HOCHTIEF Aktiengesellschaft and is open to Executive Board members and selected managerial employees. The TERP complemented existing measures in helping to forge long-term ties with HOCHTIEF and retain expertise within the Company. The plan is based on stock appreciation rights (SARs). The plan was fully settled in The SARs issued have accrued in three tranches, with waiting periods of between two and four years. The exercise period was between six and eight years, depending on the tranche. The SARs could only be exercised if the average (arithmetic mean) closing price of HOCHTIEF stock over the ten stock market trading days preceding the exercise date increased by a greater percentage relative to the issue price than the average closing level of the MDAX index increased over the same ten trading days relative to the index base (relative performance threshold) and the stock market closing price of HOCHTIEF stock on the last stock market trading day before the exercise date was at least 25 percent higher than the issue price (absolute performance threshold). The relative performance threshold was waived if after the end of the waiting period the average stock market price of HOCHTIEF stock over the ten consecutive stock market trading days immediately preceding the exercise date was at least 30 percent higher than the issue price. Provided that the targets were met, SARs under the plan could be exercised at any time after the waiting period except during a short period before any business results were published. The number of SARs that could be exercised depended on the size of the gain relative to the issue price in the average price of HOCHTIEF stock over ten consecutive stock market trading days during the exercise period for the respective tranche of SARs, with a minimum 25, 30, or 35 percent price gain permitting 25 percent, 60 percent, or all SARs to be exercised. When SARs were exercised, the issuing entity paid out the difference between the current stock price and the issue price. During the exercise period, this amount was limited to a specific fraction of the maximum possible difference (capped), the fraction increasing according to the exercise date and thus with the passage of time. From the fourth or third exercise year, as applicable, the difference was capped at 100 percent of the issue price. 178 Annual Report 2011

179 Notes to the Consolidated Financial Statements Long-term Incentive Plan 2007 The Long-term Incentive Plan 2007 (LTIP 2007) was launched by resolution of the Supervisory Board in 2007 and is open to Executive Board members and upper managerial employees of HOCHTIEF Aktiengesellschaft and its affiliates. Alongside grants of stock appreciation rights (SARs), LTIP 2007 also provides for grants of stock awards. The SARs can only be exercised if, for at least ten consecutive stock market trading days before the exercise date, the tenday average (arithmetic mean) stock market closing price of HOCHTIEF stock is higher relative to the issue price compared with the ten-day average closing level of the MDAX index relative to the index base (relative performance threshold) and, additionally, return on net assets (RONA) in the most recently approved set of consolidated financial statements is at least ten percent (absolute performance threshold). The relative performance threshold is waived if the average stock market price of HOCHTIEF stock exceeds the issue price by at least ten percent on ten consecutive stock market trading days after the end of the waiting period. Provided that the targets are met, the SARs can be exercised at any time after a two-year waiting period except during a short period before any business results are published. When SARs are exercised, the issuing entity pays out the difference between the current stock price and the issue price. The difference is capped at 50 percent of the issue price. The LTIP conditions for stock awards stipulate that for each stock award exercised within a two-year exercise period following a three-year waiting period, entitled individuals receive at HOCHTIEF Aktiengesellschaft s discretion either a HOCHTIEF share or a compensatory amount equal to the closing price of HOCHTIEF stock on the last stock market trading day before the exercise date. The gain on each stock award is limited to 150 percent of the stock market closing price on the day before the issue date. Long-term Incentive Plan 2008 The Long-term Incentive Plan intended for issue in 2008 was already launched as the Long-term Incentive Plan 2008 (LTIP 2008) by resolution of the Supervisory Board in November 2007 and is open to Executive Board members and upper managerial employees of HOCHTIEF Aktiengesellschaft and its affiliates. The conditions do not differ from those of LTIP The term of the plan has been extended compared with earlier plans to ensure that the exercise system is not changed despite the earlier issue. Retention Stock Awards 2008 In May 2008, the Supervisory Board adopted a resolution to launch for members of the Executive Board, on the basis of LTIP 2008 (stock awards), a Retention Stock Award plan (RSA 2008) consisting of three tranches and running for seven years, and granted a first tranche of awards under the plan. The conditions for the first tranche of RSA 2008 differ from LTIP 2008 (stock awards) solely with regard to the cap, which is set at EUR 160 per stock award. The second tranche was granted in March The conditions for the second tranche differ from LTIP 2008 (stock awards) solely in the timeframe being one year later and with regard to the cap, which is set for the second tranche at EUR per stock award. The third tranche was granted in March The conditions for the third tranche differ from LTIP 2008 (stock awards) solely in the timeframe being two years later and with regard to the cap, which is set for the third tranche at EUR per stock award. The first tranche was exercised in full by the members of the Executive Board in Top Executive Retention Plan 2008 The Executive Board also resolved in June 2008 to launch a Top Executive Retention Plan 2008 (TERP 2008) for selected managerial employees. This plan is likewise based on stock awards and consists of three tranches. The first tranche was granted in July 2008, the second in July 2009, and the third in July The total term of the plan is ten years. The waiting period after the granting of each tranche is three years. The exercise period is between five and seven years, depending on the tranche. The conditions stipulate that, after the waiting period, entitled individuals receive for each stock award either a HOCHTIEF share or, at HOCHTIEF Aktiengesellschaft s discretion, a compensatory cash amount equal to the closing price of HOCHTIEF stock on the last stock market trading day before the exercise date. The gain is capped for each year of the exercise period. The cap rises annually up to a maximum gain at the end of the term. The maximum gain is set to EUR 160 per stock award for the first tranche, EUR for the second tranche, and EUR for the third tranche. Financial Statements and Notes Annual Report

180 Long-term Incentive Plan 2009 The Long-term Incentive Plan 2009 (LTIP 2009) was launched by resolution of the Supervisory Board in 2009 and is open to Executive Board members and upper managerial employees of HOCHTIEF Aktiengesellschaft and its affiliates. The conditions do not differ in any material respect from those of LTIP The maximum gain is set to EUR per stock award. Long-term Incentive Plan 2011 The Long-term Incentive Plan 2011 (LTIP 2011) was launched by resolution of the Supervisory Board in 2011 and is open to Executive Board members and upper managerial employees of HOCHTIEF Aktiengesellschaft and its affiliates. The conditions do not differ in any material respect from those of LTIP The maximum gain is set to EUR per stock award. Long-term Incentive Plan 2010 The Long-term Incentive Plan 2010 (LTIP 2010) was launched by resolution of the Supervisory Board in 2010 and is open to Executive Board members and upper managerial employees of HOCHTIEF Aktiengesellschaft and its affiliates. Except for the longer waiting period (four instead of two years) for the SARs, the conditions do not differ in any material respect from those of LTIP The maximum gain is set to EUR per stock award. Other information The conditions of all plans stipulate that on the exercise of SARs or stock awards and the fulfillment of all other requisite criteria HOCHTIEF Aktiengesellschaft normally has the option of delivering HOCHTIEF shares instead of paying out the gain in cash. Where the entitled individuals are not employees of HOCHTIEF Aktiengesellschaft, the expense incurred on exercise of SARs or stock awards is met by the affiliated company concerned. The quantities of SARs and stock awards granted, expired, and exercised under the plans are as follows: Originally granted Outstanding at Dec. 31, 2010 Granted in 2011 Expired in 2011 Exercised in 2011 Outstanding at Dec. 31, 2011 TERP ,853,901 8,967 8,967 LTIP 2007 SARs 430, , ,650 61,550 LTIP 2007 stock awards 110,650 33,450 23,050 10,400 LTIP 2008 SARs 304, ,745 19,725 29, ,570 LTIP 2008 stock awards 101,985 92, ,240 18,820 TERP 2008/Tranche 1 130, ,300 48,300 73,000 TERP 2008/Tranche 2 359, , ,300 TERP 2008/Tranche 3 174, ,100 6, ,900 RSA 2008/Tranche 1 122, , ,012 RSA 2008/Tranche 2 347, , ,478 RSA 2008/Tranche 3 146, ,884 LTIP 2009 SARs 414, , ,200 2,900 LTIP 2009 stock awards 273, ,200 7,000 27, ,600 LTIP 2010 SARs 353, ,900 21,250 46, ,650 LTIP 2010 stock awards 166, ,900 9,200 23, ,400 LTIP 2011 SARs 275,250 21, ,250 LTIP 2011 stock awards 124,850 11, ,850 Financial Statements and Notes Provisions recognized for the stated share-based payment arrangements totaled EUR 37,208,000 as of the balance sheet date (2010: EUR 56,157,000). Further provisions totaling EUR 2,250,000 are reported in the fiscal year as part of liabilities associated with assets held for sale. The total expense recognized for the stated arrangements in 2011 was EUR 14,327,000 (2010: EUR 31,524,000). The intrinsic value of SARs exercisable at the end of the reporting period was EUR 1,512,000 (2010: EUR 3,311,000). An additional factor consisted of EUR 15,699,000 in expense incurred as former members of the Executive Board exercised their special rights of termination following the change of control. 180 Annual Report 2011

181 Notes to the Consolidated Financial Statements 26. Provisions for pensions and similar obligations The Group s retirement benefits include both defined contribution and defined benefit plans. Under defined contribution plans, the Company pays into a state or private pension fund voluntarily or in accordance with statutory or contractual stipulations and has no obligation to pay further contributions. Under defined benefit plans, the Company s obligation is to provide agreed benefits to current and former employees. Defined benefit plans can be funded externally or through pension provisions. Defined benefit plans are mostly in use at HOCHTIEF Aktiengesellschaft, its domestic subsidiaries, and the Turner Group (benefits agreed up to December 31, 2003). Since January 1, 2000, pension arrangements in the domestic HOCHTIEF Group have consisted of a company-funded basic pension in the form of a modular defined contribution plan and a supplementary pension linked to company performance. These benefits are classed as defined benefit liabilities under IAS 19. The size of the basic pension component depends on employee income and age (resulting in an annuity conversion factor) and a general pension contribution reviewed by HOCHTIEF every three years. The size of the supplementary pension component depends on growth in IFRS-basis profit after taxes. The basic pension can be supplemented in this way by up to 20 percent. The pension arrangements in force until December 31, 1999 featured benefit groups based on collective agreements. These benefits were integrated into the new system of retirement benefits as an initial pension component. Benefits comprise an old-age pension, an invalidity pension, and a surviving dependants pension. Turner changed over from defined benefit to defined contribution plans with effect from January 1, Depending on length of service and salary level, between three percent and six percent of an employee s salary is paid into an external fund. In addition, Turner employees have an option to pay up to five percent of their salaries into an investment fund as part of a 401 (k) plan. Turner steps up the deferred compensation by up to 100 percent depending on length of service. Employees can join the plan after three years service. Tax relief is granted on payments into the fund; the investment risk is borne by employees. Leighton and Flatiron likewise have defined contribution plans and pay between four and ten percent of salary (before deductions) into an external fund. HOCHTIEF Aktiengesellschaft s pension finances were restructured with the creation of a contractual trust arrangement (CTA) as of December 31, This arrangement was extended to all major domestic Group companies in 2005 to The transferred assets are administered in trust by HOCHTIEF Pension Trust e. V. and serve exclusively to fund pension obligations. The transferred cash is invested on the capital market in accordance with investment principles set out in the trust agreement. The defined benefit plans discontinued by the Turner Group effective December 31, 2003 are likewise covered by an external fund. The size of pension provisions is determined on an actuarial basis. This necessarily involves estimates. Specifically, the actuarial assumptions used are as follows: (Percent) Domestic Foreign Domestic Foreign Discount factor* Salary increases Pension increases Health cost increases Anticipated return on plan assets* * weighted average Salary and pension increases ceased to be taken into account in foreign operations (the Turner Group) in 2004 due to the changeover in pension arrangements. Biometric mortality assumptions are based on published country-specific statistics and experience. Domestically, they are determined using the Prof. Dr. Klaus Heubeck 2005 G tables. Turner uses the RP-2000 Mortality Table for employees. Assumptions regarding the anticipated return on plan assets are based in Germany and internationally on the intended portfolio structure and future returns on individual asset classes. Projections are based on long-term historical averages. For the main domestic pension plans, the anticipated return on plan assets was additionally derived using asset-liability studies. Financial Statements and Notes Annual Report

182 Changes in the present value of defined benefit obligations and of the market value of plan assets are as follows: Changes in the present value of defined benefit obligations Domestic Internationational Total Domestic Interna- Total (EUR thousand) Defined benefit obligations at start of year 669, , , , , ,714 Current service cost 9,946 1,318 11,264 9,592 1,227 10,819 Past service cost 3,729 (1,651) 2, Interest expense 30,513 11,704 42,217 31,151 12,786 43,937 Actuarial gains/(losses) 1,175 12,426 13,601 36,629 18,807 55,436 Benefits paid from Company assets (445) (1,372) (1,817) (394) (2,501) (2,895) Benefits paid from fund assets (34,725) (17,168) (51,893) (33,580) (12,036) (45,616) Employee contributions 2,695 2,695 3,307 3,307 Effect of transfers (860) (860) (9) (9) Consolidation changes (154) (371) (525) 3,364 3,364 Currency adjustments 8,532 8,532 16,448 16,448 Defined benefit obligations at end of year 681, , , , , ,935 Reclassification as liabilities associated with assets held for sale (2,181) (2,181) Defined benefit obligations at end of year after reclassification 679, , , , , ,935 Financial Statements and Notes Changes in the market value of plan assets Domestic Internationational Total Domestic Interna- Total (EUR thousand) Plan assets at start of year 673, , , , , ,994 Anticipated returns on plan assets 31,105 14,557 45,662 32,310 14,209 46,519 Difference between anticipated and actual returns (37,862) (16,458) (54,320) (14,341) 7,715 (6,626) Withdrawal of plan assets due to overfunding of pension obligations (50,000) (50,000) Employer contributions 4,538 4,538 1,127 1,127 Employee contributions 2,695 2,695 3,307 3,307 Benefits paid (34,725) (17,168) (51,893) (33,580) (12,036) (45,616) Consolidation changes (53) (53) Currency adjustments 4,815 4,815 13,311 13,311 Plan assets at end of year 589, , , , , ,904 Reclassification as liabilities associated with assets held for sale (2,062) (2,062) Plan assets at end of year after reclassification 587, , , , , , Annual Report 2011

183 Notes to the Consolidated Financial Statements Investing plan assets to cover future pension obligations generated actual losses of EUR 8,658,000 in 2011 (2010: returns of EUR 39,893,000). Defined benefit obligations are covered by plan assets as follows: Coverage of defined benefit obligations by plan assets Dec. 31, 2011 Dec. 31, 2010 Defined benefit Plan assets Defined benefit Plan assets (EUR thousand) obligations obligations Uncovered by plan assets 53,840 50,669 Partially covered by plan assets 840, , , ,602 Incompletely covered by plan assets 894, , , ,602 Fully covered by plan assets 47,022 63, , ,302 Total 941, , , ,904 The pension provisions are determined as follows: Reconciliation of pension obligations to provisions for pensions and similar obligations (EUR thousand) Dec. 31, 2011 Dec. 31, 2010 Defined benefit obligations 941, ,935 Less plan assets 768, ,904 Funding status 172,760 49,031 Adjustments arising from the limit in IAS Assets from overfunded pension plans 16,055 67,535 Provision for pensions and similar obligations 188, ,566 The fair value of plan assets is divided among asset classes as follows: Composition of plan assets Dec. 31, 2011 Dec. 31, 2010 (EUR thousand) Market value % Market value % Stock 166, , Fixed-interest securities 456, , Real estate 26, , Insurance policies 62, , Commodities 35, , Cash 20, , Total 768, , As of December 31, 2011, anticipated pension payments for future years are as follows: (EUR thousand) Due in ,554 Due in ,808 Due in ,284 Due in ,108 Due in ,935 Due in 2017 to ,457 Financial Statements and Notes Annual Report

184 Experience adjustments the effects of differences between the previous actuarial assumptions and what has actually occurred are as follows: Differences between actuarial assumptions and actual developments (EUR thousand) Defined benefit obligation at end of year 941, , , , ,927 Effects of differences in fiscal year (816) 2,145 1,641 1,030 (3,904) Effects as percent age of defined benefit obligations Plan assets at end of year 768, , , , ,827 Effects of differences in fiscal year (54,320) (6,626) 102,355 (137,670) (6,855) Effects as percent age of plan assets Funding status at end of year 172,760 49,031 (23,280) 30,563 (88,900) Pension expense under defined benefit plans is made up as follows: (EUR thousand) Do mestic International Total Do mestic International Current service cost 9,946 1,318 11,264 9,592 1,227 10,819 Past service cost 3,729 (1,651) 2, Total personnel expense 13,675 (333) 13,342 10,022 1,227 11,249 Interest expense for accrued benefit obligations 30,513 11,704 42,217 31,151 12,786 43,937 Anticipated return on plan assets (31,105) (14,557) (45,662) (32,310) (14,209) (46,519) Total interest expense (net investment and interest income) (592) (2,853) (3,445) (1,159) (1,423) (2,582) Total pension expense 13,083 (3,186) 9,897 8,863 (196) 8,667 Total Financial Statements and Notes EUR 283,932,000 was paid into defined contribution plans in 2011 (2010: EUR 207,255,000), mostly in the Leighton Group (EUR 254,225,000; 2010: EUR 178,575,000) and the Turner Group (EUR 24,847,000; 2010: EUR 23,698,000). An additional EUR 89,719,000 was paid into state pension schemes in 2011 (2010: EUR 88,722,000). Costs of defined contribution plans are reported as part of personnel expenses. The Turner Group s obligations to meet healthcare costs for retired staff are included in pension provisions due to their pension-like nature. The defined benefit obligation as of December 31, 2011 came to EUR 40,105,000 (2010: EUR 36,816,000). Healthcare costs accounted for EUR 1,279,000 (2010: EUR 1,192,000) of the current service cost and EUR 1,882,000 (2010: EUR 1,844,000) of the interest expense. The effects of a one percentage point change in the assumed healthcare cost trend rate are as follows: (EUR thousand) Increase Decrease Effect on the sum of current service cost and interest expense 15 (15) Effect on defined benefit obligation 362 (328) The Consolidated Statement of Comprehensive Income includes EUR 67,704,000 in actuarial losses recognized in 2011 before deferred taxes and after consolidation changes (2010: EUR 62,062,000). Before deferred taxes, the cumulative amount of actuarial losses is EUR 253,296,000 (2010: EUR 185,592,000). 184 Annual Report 2011

185 Notes to the Consolidated Financial Statements 27. Other provisions Dec. 31, 2011 Dec. 31, 2010 Noncurrencurrent Current Total Non- Current Total (EUR thousand) Provisions for taxes 63,336 63,336 44,323 44,323 Personnel-related provisions 259, , , , , ,157 Provisions for insurance claims 114,806 44, , ,120 42, ,655 Warranty obligations 61,591 61,591 80,006 80,006 Restructuring costs 5,052 54,777 59,829 3,183 38,371 41,554 Litigation risks 23,510 23,510 30,304 30,304 Sundry other provisions 72, , ,779 24, , ,404 Other provisions 451, ,143 1,344, , ,230 1,342, , ,479 1,408, , ,553 1,386,403 The personnel-related provisions mainly consist of provisions for stock option schemes, long-service awards, leave entitlements, and early retirement arrangements. The size of provisions for insurance claims is computed annually by an actuary. Items covered by sundry other provisions include contract administration, contract costs incurred subsequent to invoicing, investment risk, preparation of annual financial statements, payments for damages, and other uncertain liabilities. Statement of provisions Balance at Jan. 1, 2011 Allocations to provisions Reversal of provisions Consolidation changes, currency adjustments, reclassifications, and Use of provisions Balance at Dec. 31, 2011 (EUR thousand) transfer Provisions for taxes 44,323 23,973 (1,125) 6,315 (10,150) 63,336 Personnel-related provisions 652, ,294 (22,410) (9,927) (168,038) 646,076 Provisions for insurance claims 152,655 3,947 5,087 (2,776) 158,913 Sundry other provisions 537, ,004 (92,521) 68,241 (197,283) 539,709 Other provisions 1,342, ,245 (114,931) 63,401 (368,097) 1,344,698 1,386, ,218 (116,056) 69,716 (378,247) 1,408, Financial liabilities Dec. 31, 2011 Dec. 31, 2010 (EUR thousand) Non-current Current Non-current Current Bonds or notes issued 722,632 46, , ,010 Amounts due to banks 1,228, ,767 1,701, ,983 Financial liabilities to non-consolidated subsidiaries 2,463 2,390 Financial liabilities to participating interests 458, ,929 Lease liabilities 333, , ,577 48,736 Sundry other financial liabilities 17,080 5,247 12,465 25,718 2,301,549 1,492,837 2,576, ,766 Financial Statements and Notes Annual Report

186 Financial Statements and Notes The bonds or notes issued relate to Leighton Holdings. A USD 350,000,000 US dollar bond issued in fiscal 2010 has a carrying amount of EUR 273,997,000 (2010: EUR 265,177,000). The bond is repayable in three installments in 2015, 2017, and The installments each carry a different rate of interest ranging from 4.51 to 5.78 percent. The item also includes EUR 220,074,000 (2010: EUR 213,156,000) for a further bond issued by Leighton Holdings in fiscal This has a face value of AUD 280,000,000, is for five years, and has a 9.5 percent fixed coupon. In 2008, Leighton Holdings issued a USD 280,000,000 US dollar private placement repayable in three installments in 2013, 2015, and The installments each carry a different rate of interest ranging from 6.91 to 7.66 percent. The carrying amount of the US dollar private placement at December 31, 2011 is EUR 219,235,000 (2010: EUR 211,907,000). A USD 110,000,000 US dollar debt issue by Leighton Holdings in Indonesia in 2006 was fully repaid in the fiscal year as planned. Finally, bonds or notes issued contain EUR 55,747,000 (2010: EUR 18,270,000) for a total of AUD 70,900,000 under three further Leighton Holdings notes issues with a fixed or variable coupon. Amounts due to banks include a EUR 102,000,000 portion of a EUR 120,600,000 five-year promissory note loan issue placed in the market on November 25, The loan was placed with national and international banks and a EUR 18,600,000 portion with an affiliated company. The coupon is based on six-month EURIBOR plus an appropriate margin. There is also a EUR 240,000,000 promissory note loan issue put out by HOCHTIEF in the previous year and consisting of two tranches, for EUR 59,500,000 and EUR 180,500,000 respectively. This loan has an initial term of five years and a coupon equal to sixmonth EURIBOR plus an appropriate margin. The four promissory note loans taken out in 2009 for a total of EUR 300,000,000 with terms of three and five years split halfway with part-fixed, part-variable interest were partially repaid by HOCHTIEF ahead of schedule in 2011 in the amount of EUR 140,500,000. Amounts due to banks also include EUR 236,000,000 for two further promissory note loans issued in 2008, comprising one for a nominal amount of EUR 197,000,000 and an initial term of five years and one for a nominal amount of EUR 39,000,000 and an initial term of seven years. The coupon on both is equal to six-month EURIBOR plus an appropriate margin. The EUR 600,000,000 syndicated revolving credit facility taken out with an international banking syndicate in 2005 and originally due to run until November 22, 2012 was refinanced ahead of schedule in December 2011 with a combined guarantee and credit facility for a total of EUR 2 billion. An international banking syndicate provided HOCHTIEF on market terms with a five-year credit facility comprising a EUR 1.5 billion guarantee tranche and a EUR 500,000,000 cash tranche. Drawings on the cash tranche stand at EUR 400,000,000 at the balance sheet date (2010: EUR 477,000,000). EUR 464,590,000 (2010: EUR 284,220,000) of amounts due to banks concerns borrowings by Leighton Holdings, mostly to finance acquisitions mainly the Habtoor Leighton Group plus project companies. Amounts due to banks at the balance sheet date comprise EUR 1,275,452,000 (2010: EUR 521,531,000) subject to variable rates of interest and EUR 805,957,000 (2010: EUR 1,488,124,000) subject to fixed rates of interest. The average interest rate on the variable-interest portion stood at 3.06 percent (2010: 2.24 percent). The average interest rate on the fixed-interest portion was 5.61 percent (2010: 5.23 percent). The average term was one-and-a-half years (2010: two years). Trade payables due to companies accounted for using the equity method were EUR 458,030,000 (2010: EUR 10,861,000). This mainly related to obligations to make payments into capital in connection with the Victorian Desalination Plant project in the HOCHTIEF Asia Pacific division. The EUR 460,454,000 (2010: EUR 221,313,000) in lease liabilities mainly relates to plant and equipment under finance leases at Leighton Holdings. 186 Annual Report 2011

187 Notes to the Consolidated Financial Statements The minimum lease payments for liabilities under finance leases break down as follows: Finance leases Dec. 31, 2011 Dec. 31, 2010 (EUR thousand) Nominal value Discount Present value Nominal value Discount Present value Due in up to 1 year 139,919 12, ,259 53,944 5,208 48,736 Due in 1 5 years 342,191 21, , ,194 6, ,577 Due after 5 years 13, ,713 Sundry other financial liabilities mostly contain short-term loans and other debt. 29. Other liabilities Dec. 31, 2011 Dec. 31, 2010 (EUR thousand) Non-current Current Non-current Current Liabilities under derivative financial instruments 141,427 54, ,170 47,568 Liabilities to employees 190, ,025 Deferred income 36,770 26,193 42,552 29,637 Tax liabilities (excluding income taxes) 39,482 46,131 Social insurance liabilities 6,534 9,550 Sundry other liabilities , , , , , ,263 EUR 111,845,000 of the liabilities under derivative financial instruments relates to an obligation in the Leighton Group to pay into an infrastructure project company (2010: EUR 92,266,000) and EUR 35,388,000 (2010: EUR 56,935,000) relates to interest-rate swaps held by HOCHTIEF Aktiengesellschaft. In connection with the sale in 2007 and 2008 of a total of percent of the indirectly held interests in the Vespucio Norte Express (VNE) project in Chile, HOCHTIEF PPP Solutions GmbH gave the investors equity verification guarantees ending on December 31, The equity verification guarantees had a fair value of EUR 30,700,000 as of the balance sheet date (2010: EUR 1,300,000). This item was reclassified in the fiscal year as current liabilities under derivative financial instruments. Deferred income mainly comprises insurance premiums received in advance for subsequent years (these are reversed to income over the life of the policies) and rental payments. Sundry other liabilities comprise other non-trade payables. 30. Trade payables (EUR thousand) Trade payables Dec. 31, 2011 Dec. 31, 2010 Gross amount due to customers from construction work (POC) (496,703) (466,765) Progress payments received 899,400 1,012, , ,836 To construction joint ventures 112,036 81,926 Other 5,095,821 4,727,671 5,610,554 5,355,433 Advance payments received 11,749 6,005 From non-consolidated subsidiaries 2,474 1,260 From participating interests 5,440 1,035 5,630,217 5,363,733 The EUR 402,697,000 (2010: EUR 545,836,000) gross amount due to customers from construction work (POC) represents such amounts where the progress payments received from customers exceed the incurred contract costs including a pro-rata allocation of contract net profit. Financial Statements and Notes Trade payables due to companies accounted for using the equity method were EUR 199,000 (2010: EUR 213,000). Annual Report

188 31. Current income tax liabilities The EUR 8,270,000 (2010: EUR 16,864,000) in current income tax liabilities comprises amounts payable to domestic and foreign revenue authorities. Other disclosures 32. Undiluted and diluted earnings per share Undiluted earnings per share are calculated by dividing the consolidated net profit or loss attributable to the Company s stock by the average number of shares in circulation. This indicator can become diluted as a result of potential shares (mainly stock options and convertible bonds). HOCHTIEF s share-based payment arrangements do not have a dilutive effect on earnings. Consequently, diluted and undiluted earnings per share are identical Consolidated net profit/(loss) (EUR thousand) (160,287) 288,030 Number of shares in circulation in thousands (weighted average) 73,572 66,846 Earnings per share (EUR) (2.18) 4.31 Dividend per share (EUR) 2.00 Proposed dividend per share (EUR) 33. Reporting on financial instruments Financial instruments include financial assets and liabilities as well as contractual claims and obligations relating to exchanges and transfers of financial assets. Financial instruments can be derivative or non-derivative. Non-derivative financial assets mostly comprise cash and cash equivalents, marketable securities, receivables, and other financial assets. Marketable securities are carried at fair value. The fair values of available-for-sale financial assets are established with reference to market prices or determined using accepted valuation methods. Non-derivative financial liabilities are mostly current liabilities measured at amortized cost. Holdings of non-derivative and derivative financial instruments are carried on the Balance Sheet; the maximum risk of loss or default is equal to total financial assets. Any such risk identified in respect of financial assets is accounted for with an impairment loss. Risk management All financial activities in the HOCHTIEF Group are conducted on the basis of a Group-wide financial framework directive. This is fleshed out by individual, function-specific operating directives on issues such as currency and collateral management. These lay down principles for dealing with the various classes of financial risk. Trading, control, and settlement activities are divided within Corporate Finance between front, middle, and back offices. This ensures effective operational risk management in that monitoring and settlement of front office external trading activities are performed by a separate and independent back office. All external trading actions are also subject to at least dual control. Internal authorizations to give instructions are strictly limited in number and monetary amount, and are reassessed at least once a year and adjusted as necessary. Management of liquidity risk HOCHTIEF uses predominantly centralized liquidity structures in particular cash pooling to pool liquidity at Group level, among other things to avoid liquidity bottlenecks at the level of individual entities. The central liquidity position is calculated at regular monthly intervals and budgeted in a bottom-up process over a rolling 18-month period. Liquidity budgets are supplemented with monthly stress testing. Liquidity budgets are used by HOCHTIEF in active management of the securities portfolio and loans portfolio. Issuance of a new EUR 120,600,000 promissory note loan in November 2011 enabled the Group once again to spread borrowing over a larger range of lenders and further extend the maturity profile of the debt portfolio. Alongside national and international banks, part of the loan placement consisted of a EUR 18,600,000 investment by a subsidiary. Financial Statements and Notes *See glossary on page 211. According to their fair value, derivative financial instruments are reported either in other receivables and other assets or in other liabilities. Derivatives are used in the HOCHTIEF Group for hedging existing transactions and in asset management*. 188 Annual Report 2011

189 Notes to the Consolidated Financial Statements The tables below show maximum payments. The tables show the worst-case scenario for HOCHTIEF, i.e. the earliest possible contractual payment date in each case. Creditors rights of termination are taken into account. Foreign currency items are translated using the closing rate as of the balance sheet date. Interest payments on variable rate items are translated uniformly using the last interest rate fixed prior to the balance sheet date. Both primary and derivative financial instruments (for example, forward exchange contracts and interest rate swaps) are taken into account. Credit facilities granted but not yet drawn in their full amount are also included, as are financial guarantees given by the Group. The maximum payments shown in the following tables (worst case scenario) are offset by contractually fixed receipts in the same periods that are not shown here (for example, from trade receivables). These will cover most of the cash outflows shown. Maximum payments as of December 31, 2011 (EUR thousand) after 2015 Total Primary financial liabilities 6,887, , , ,455 9,483,559 Derivative financial instruments 54,791 18, , ,218 Loan commitments and financial guarantees 56,060 56,060 6,998, ,638 1,115, ,870 9,735,837 Maximum payments as of December 31, 2010 (EUR thousand) after 2014 Total Primary financial liabilities 5,662,891 1,194, , ,006 8,547,761 Derivative financial instruments 47,568 29,416 18,272 95, ,738 Loan commitments and financial guarantees 313,955 18, ,955 6,024,414 1,241, , ,488 9,070,454 In addition, Group liquidity is adequately secured with cash in hand and on deposit, marketable securities holdings, and undrawn revolving credit facilities. The following table shows the main liquidity instruments: (EUR thousand) Dec. 31, 2011 Dec. 31, 2010 Cash in hand and on deposit 1,701,975 1,727,000 Marketable securities 615,704 1,631,229 Undrawn revolving credit facilities 1,742,234 2,093,210 4,059,913 5,451,439 The revolving credit facilities include a EUR 500 million credit facility tranche under the syndicated guarantee and credit facility extended during the fiscal year to December 13, The credit facility was 80 percent drawn as of December 31, There is also EUR 312 million in short-term, bilateral, revolving money market facilities, which as in the prior year were undrawn. Part of the undrawn revolving credit facilities is tied in each case to specific projects. Some of the facilities are subject to creditors rights of termination under financial covenants, which are continuously monitored as part of corporate planning. In light of the successful refinancing ahead of schedule in December 2011 and the broad international syndication in each instance, there is no refinancing risk with regard to longterm guarantee and credit facilities. As a further precautionary measure, there is appropriate scope for raising additional capital under resolutions adopted at the 2011 General Shareholders Meeting. HOCHTIEF also has sufficient revolving guarantee facilities, which play an important role for the Group. The guarantee facilities have a total size of EUR billion (2010: EUR billion) and, as in the prior year, are 72 percent drawn. Management of currency risk HOCHTIEF is exposed to currency risk (in the form of transaction risk) from receivables, liabilities, cash and cash equivalents, securities, and pending transactions in currencies other than the functional currency of the Group company concerned in each case. Currency derivatives, mainly forward exchange contracts, are used to hedge against fluctuations in these payments or items caused by exchange rates. HOCHTIEF normally hedges all currency risk. Financial Statements and Notes Annual Report

190 Hedges for Group companies with the exception of hedges in the Leighton Group are mainly administered via HOCHTIEF Aktiengesellschaft. Binding guidelines clarify their use and separate controls and responsibilities for all Group companies. Currency derivatives are normally only used to hedge risk. Any form of speculation is ruled out under a binding, Group-wide risk directive. The counterparties for derivatives entered into externally are banks with a top credit rating. The following table shows the fair values of currency derivatives: (EUR thousand) Assets Forward exchange contracts/ currency swaps Dec. 31, 2011 Dec. 31, 2010 for hedging purposes (cash flow hedges) 7,603 3,149 for hedging purposes (but not hedge accounted) 8,306 2,247 15,909 5,396 Liabilities and sharehold ers equity Forward exchange contracts/ currency swaps for hedging purposes (cash flow hedges) 10,199 24,620 for hedging purposes (but not hedge accounted) 937 1,044 11,136 25,664 Where hedge accounting is used, unrealized gains and losses on hedges are initially recognized in other comprehensive income, taking into account deferred tax. Gains and losses are not realized until a hedged item affects income. Derivatives are measured on the basis of current market rates as of the balance sheet date. When interpreting positive or negative fair value changes relating to derivatives, it is important to remember that they balance hedged items whose values move in the opposite direction. A net EUR 18,875,000 was credited to equity in fiscal 2011 (2010: EUR 10,570,000 charged to equity) for market value changes on the above derivatives in cash flow hedges. Where hedge accounting is not applied, all unrealized gains and losses on the hedged item are recognized immediately in profit or loss; in 2011 this related to a net gain of EUR 6,166,000 (2010: EUR 4,536,000). The following sensitivity analyses demonstrate the impact on HOCHTIEF Group equity and profit that would result from a ten percent fluctuation in relevant foreign currencies relative to each Group company s functional currency. The analysis is based on holdings as of the balance sheet date. The maximum residual term of currency derivatives in cash flow hedges as of December 31, 2011 is 59 months (2010: 19 months). As of December 31, 2011, the maximum residual term of currency derivatives for which hedge accounting is not applied is 11 months (2010: 23 months). Financial Statements and Notes 190 Annual Report 2011

191 Notes to the Consolidated Financial Statements Dec. 31, 2011 Dec. 31, 2010 Exchange rate Exchange rate (EUR thousand) Ten percent increase Ten percent decrease Ten percent increase Ten percent decrease Change in equity due to market value fluctuations of currency derivatives used for hedging (cash flow hedges) Functional currency Foreign currency EUR CHF 4,178 (4,214) EUR PLN (2,071) 1,639 1,536 (1,536) EUR USD 2,180 (2,011) AUD EUR (216) ,856 (10,856) AUD JPY 54 (54) 1,145 (1,145) AUD THB 5,738 (5,738) AUD USD (301) ,317 (15,317) Change in profit or loss due to unhedged currency exposures in primary financial instruments and to market value fluctuations in derivative financial instruments (not hedge accounted) Functional currency Foreign currency EUR CAD 1,125 (1,125) EUR PLN (38) (98) 1,759 (1,759) EUR USD (3,540) 3,611 (7,815) 7,815 AUD HKD 1,927 (1,927) 1,163 (1,163) AUD USD 11,067 (11,049) 11,896 (11,896) CZK EUR (4,940) 4,943 (2,345) 2,345 QAR EUR 1,900 (1,900) (2,769) 2,769 USD GBP 521 (526) 382 (382) USD JPY 1,371 (1,371) 519 (519) Management of interest rate risk HOCHTIEF is exposed to interest rate risk through financial items primarily consisting of interest-bearing marketable securities on the assets side and financial liabilities on the liabilities side of the Balance Sheet. Two approaches are used to minimize this risk. Firstly, the Company uses natural hedging, meaning that it eliminates contrary interest rate risk from primary financial instruments on the asset and liabilities side. The second method is to use interest rate derivatives. These generally take the form of interest rate swaps used in accordance with the Group financing strategy to manage cash flow risk from changes in interest rates for variable-rate financial items. (EUR thousand) Assets Interest rate swaps Dec. 31, 2011 Dec. 31, 2010 for hedging purposes (cash flow hedges) for hedging purposes (but not cash flow hedge accounted) Interest rate futures not for hedging purposes (for asset management structuring) ,591 As with currency derivatives, hedges for Group companies with the exception of hedges in the Leighton Group are mainly administered via HOCHTIEF Aktiengesellschaft. There are also parallel regulations and guidelines, and derivatives are used solely for hedging (i.e. not speculatively) as a matter of principle. The counterparties for derivatives entered into externally are banks with a top credit rating. The following table shows the fair values of interest rate derivatives: Liabilities and sharehold ers equity Interest rate swaps for hedging purposes (cash flow hedges) 31,921 63,664 for hedging purposes (but not cash flow hedge accounted) 8,013 1,455 Interest rate futures not for hedging purposes (for asset management structuring) ,173 65,193 Financial Statements and Notes Annual Report

192 The maximum residual term of interest rate swaps both in cash flow hedges and otherwise as of December 31, 2011 is 59 months (2010: 54 months). The interest rate futures have a maximum residual term of three months (2010: eight months). was no hedge ineffectiveness (2010: EUR 495,000 charged to profit or loss). A net EUR 6,497,000 was charged to profit or loss (2010: EUR 1,368,000) for market value changes on the remaining interest rate derivatives. EUR 30,376,000 was credited to equity in fiscal 2011 (2010: EUR 4,853,000) for market value changes on interest rate derivatives in cash flow hedges. This included EUR 13,643,000 reclassified as a charge to profit or loss (2010: EUR ). There The following sensitivity analyses demonstrate the impact that a one percent fluctuation in the respective market interest rate would have had on equity and on profit or loss. The analysis is based on holdings as of the balance sheet date. (EUR thousand) Dec. 31, 2011 Dec. 31, 2010 Market interest rate Market interest rate One percent increase One percent decrease One percent increase One percent decrease Change in equity due to market value fluctuations of interest rate derivatives used for hedging (cash flow hedges) and of fixed-interest securities meas ured at fair value through equity 5,506 (5,472) 16,196 (16,742) Change in profit or loss due to unhedged variable rate interest rate exposures on primary financial instruments and to market value fluctuations in derivative financial instruments (not hedge accounted) (13,171) 12,935 (6,503) 6,489 Financial Statements and Notes Management of other price risk Other price risk results at HOCHTIEF through investing in current and non-current non-interest-bearing securities, chiefly shares and funds, that are classified as available for sale and therefore measured at fair value through equity. Other price risk stems from participating interests that are classified as available for sale to the extent that they are measured at fair value. Such items are shown in the following table. Participating interests measured at amortized cost because their fair value cannot be reliably measured are not included. (EUR thousand) Dec. 31, 2011 Dec. 31, 2010 Price risk exposure on noncurrent assets 50, ,610 Price risk exposure on current assets 46, ,682 HOCHTIEF actively manages price risk. Continuous monitoring and analysis of the markets make it possible to marshal investments at short notice. This allows the Company to detect negative developments on the capital market at an early stage and take appropriate action. Derivatives are only used to control price risk in exceptional instances. To hedge our share-based compensation plans, stock-based derivatives were entered into with a maximum residual term of 64 months as of December 31, 2011 (2010: 76 months). They are not subject to hedge accounting, but are deployed as a natural hedge. Gains and losses in the fair value of these derivatives are contained in personnel costs. Two index-based options have additionally been purchased with a maximum residual term of 38 months (2010: 50 months). The following table shows the fair values of equity options, stock forward contracts, index-based options, and two written options (see page 187): 192 Annual Report 2011

193 Notes to the Consolidated Financial Statements (EUR thousand) Assets Dec. 31, 2011 Dec. 31, 2010 Equity options and stock forward contracts for hedging purposes (but not hedge accounted) 13,046 55,483 Index-based options, not for hedging purposes 3,258 5,344 16,304 60,827 Liabilities and sharehold ers equity Forward purchase contracts for hedging purposes (cash flow hedges) 111,845 92,266 Equity options and stock forward contracts for hedging purposes (but not hedge accounted) 2,364 6,315 Options written, not for hedging purposes 30,700 1, ,909 99,881 EUR 19,579,000 was charged to equity in fiscal 2011 (2010: EUR 9,621,000 credited to equity) for market value changes on the above derivatives in cash flow hedges. This includes a charge of EUR 52,105,000 (2010: EUR ) for a reclassification of unrealized losses to profit or loss in the HOCHTIEF Asia Pacific division in connection with hedging future acquisitions. A net EUR 51,099,000 was charged to profit or loss (2010: EUR 27,959,000 credited to profit or loss) for market value changes on equity options, stock forward contracts, and indexbased options not in hedges and on the written options. The following sensitivity analyses demonstrate the impact that a ten percent fluctuation in the market value of primary and derivative financial instruments would have had on equity and on profit or loss. The analysis is based on holdings as of the balance sheet date. (EUR thousand) Dec. 31, 2011 Dec. 31, 2010 Market value Market value Ten percent increase Ten percent decrease Ten percent increase Ten percent decrease Change in equity due to market value fluctuations of derivatives used for hedging (cash flow hedges) 4,535 (4,535) 5,999 (5,999) Change in profit or loss due to market value fluctuations of derivatives to which hedge accounting is not applied 14,611 (15,625) 11,137 (11,469) Change in equity due to changes in market price of unimpaired securities 4,643 (4,643) 20,479 (20,479) Change in equity due to changes in value of unimpaired participating interests measured at fair value 44,767 (44,767) 44,858 (44,858) Change in equity due to increases in the market price of impaired securities 3,168 Change in equity due to increases in the value of impaired participating interests measured at fair value Change in profit or loss due to reductions in the market price of impaired securities (3,168) Change in profit or loss due to decreases in the value of impaired participating interests measured at fair value (124) (55) Financial Statements and Notes Annual Report

194 Management of credit risk The HOCHTIEF Group is exposed to credit risk from operations and from certain financing activities. HOCHTIEF performs risk management for operations by continuously monitoring trade receivables at divisional level. If a specific credit risk is detected, it is countered by recognizing an individual impairment. The HOCHTIEF Group has given third parties financial guarantees in respect of companies accounted for using the equity method. Financial guarantees are only given in respect of companies with top credit standing, restricting to a minimum the probability of the guarantees being drawn upon. Loan commitments are only given to companies accounted for using the equity method. The maximum credit risk exposure of financial assets is equivalent to their carrying amounts in the Balance Sheet. The actual credit risk exposure is lower, however, due to collateral given in favor of the HOCHTIEF Group. The maximum risk exposure on financial guarantees given by HOCHTIEF is the maximum amount to be paid by HOCHTIEF. The maximum credit risk for loan commitments is the amount of the commitment. The maximum credit risk from financial guarantees and loan commitments amounted to EUR 56,060,000 as of December 31, 2011 (2010: EUR 331,955,000). The probability of the financial guarantees and loan commitments being drawn upon is very small as of the reporting date. HOCHTIEF accepts collateral to secure contract performance by subcontractors, subcontractors warranty obligations, and claims to remuneration. Such collateral includes guarantees relating to warranty obligations, contract performance, advance payments, and receivables. Acceptance of collateral is governed by a HOCHTIEF directive. Among other things, this covers the contractual drafting, implementation, and management of all agreements. The detailed rules vary according to factors such as the country jurisdiction and applicable case law. In the case of credit risk, HOCHTIEF examines the credit rating of the party providing the collateral for all guarantees accepted. HOCHTIEF uses external specialists (for example, rating agencies) to assess credit ratings where possible. The fair values of accepted collateral are not disclosed as they often cannot be measured reliably. The following table shows unimpaired financial assets that are past due: Dec. 31, 2011 Dec. 31, 2010 (EUR thousand) Up to 30 days 31 to 60 days 61 to 90 days Over 90 days Up to 30 days 31 to 60 days 61 to 90 days Over 90 days Trade receivables 137,191 28,206 8,611 66,432 95,781 24,418 15,975 92,657 Current financial receivables , Other current receivables and other current financial assets ,801 28,799 9,183 71,610 96,299 24,418 15,975 92,698 Financial Statements and Notes The age structure of financial assets that are past due is shaped by industry-specific factors. Receipt of payment depends on acceptance (inspection) and invoice checking, which can often take a relatively long time, especially for large-scale projects. Most of the unimpaired financial assets that are past due are from public-sector clients and industrial companies with top credit ratings. 194 Annual Report 2011

195 Notes to the Consolidated Financial Statements Individually impaired financial assets are shown below: Dec. 31, 2011 Dec. 31, 2010 Gross carrying Impairment Net carrying amount Gross carrying Impairment Net carrying amount (EUR thousand) amount amount Trade receivables 147,577 84,039 63,538 99,643 73,949 25,694 Financial receivables Non-current 20,962 19,867 1,095 Current 8,062 8, ,674 5,674 Other current receivables and other current financial assets 1, , ,732 64, ,149 80,455 25,694 The impairments in trade receivables mostly consist of impaired contracting-related claims as is typical for the industry. The following table shows changes in impairments on financial assets in the 2011 fiscal year and in the prior year: Reconciliation of changes in impairments Dec. 31, (EUR thousand) Jan. 1, 2010 Changes* 2010/ Jan. 1, 2011 Changes* Dec. 31, 2011 Trade receivables 73, ,949 10,090 84,039 Financial receivables Non-current 1 (1) 19,867 19,867 Current 6,123 (449) 5,674 2,330 8,004 Other current receivables and other current financial assets 1,197 (365) 832 (10) ,146 (691) 80,455 32, ,732 *Changes result from allocations, reversals, utilizations, curreny adjustments and consolidation changes. With regard to financial assets that are neither past due nor impaired, there are currently no indications of any need to recognize impairments for reasons relating to credit ratings. Capital risk management The HOCHTIEF Group manages capital with the aim of ensuring that all Group companies can continue to operate as a going concern. The Group keeps the cost of capital as low as possible by optimizing the balance between equity and debt as the need arises. These measures serve to maximize shareholder earnings. The Group s capital structure consists of the Balance Sheet items comprising net debt (current and non-current liabilities less cash and cash equivalents) and shareholders equity. The Risk Management Steering Committee assesses and examines the Group s capital structure at regular intervals, taking into account the risk-adjusted cost of capital. The overall capital risk management strategy did not change in fiscal 2011 compared with the prior year. Additional information on financial instruments The table overleaf shows carrying amounts and fair values for each class of financial instrument and carrying amounts for each IAS 39 category as of December 31, 2011 and December 31, Financial Statements and Notes Annual Report

196 2011 Carrying amount by category Not belonging to any category Financial assets Financial liabilities Available for sale Held for trading Loans and receivables Held for trading At amortized cost Hedge accounting and finance leases Not covered by IFRS 7 Total carrying amounts Dec. 31, Total fair value Dec. 31, 2011 (EUR thousand) 2011 Assets Other financial assets At fair value 50,259 50,259 50,259 At amortized cost 14,719 14,719 N/A 64,978 64,978 50,259 Financial receivables Non-current 629,668 2, , ,063 Current 149, , ,958 Trade receivables 2,433,791 2,247,522 4,681,313 4,681,313 Other receivables and other financial assets Non-current At fair value 12,946 5,364 18,310 18,310 At amortized cost 185, , ,247 Not covered by IFRS 7 55,228 55,228 55,228 12, ,247 5,364 55, , ,785 Current At fair value 11,991 2,362 14,353 14,353 At amortized cost 75,437 75,437 75,437 Not covered by IFRS 7 136, , ,735 11,991 75,437 2, , , ,525 Securities 392, , ,831 Cash and cash equivalents 2,264,821 2,264,821 2,264,821 Liabilities and shareholders equity Financial liabilities Non-current 1,968, ,195 2,301,549 2,368,072 Current 1,365, ,259 1,492,837 1,492,837 Trade payables 5,215, ,446 5,630,217 5,630,217 Other liabilities Non-current At fair value 8, , , ,427 At amortized cost Not covered by IFRS 7 37,268 37,268 37,268 8, ,017 37, , ,695 Current At fair value 33,842 20,949 54,791 54,791 At amortized cost 60,715 60,715 60,715 Not covered by IFRS 7 263, , ,773 33,842 60,715 20, , , ,279 Financial Statements and Notes 196 Annual Report 2011

197 Notes to the Consolidated Financial Statements 2010 Carrying amount by category Not belonging to any category Financial assets Financial liabilities (EUR thousand) Assets Other financial assets Available for sale Held for trading Loans and receivables Held for trading At amortized cost Hedge accounting and finance leases Not covered by IFRS 7 Total carrying amounts Dec. 31, 2010 Total fair value Dec. 31, 2010 At fair value 491, , ,610 At amortized cost 13,478 13,478 N/A Financial receivables 505, , ,610 Non-current 503,730 3, , ,757 Current 143, , ,339 Trade receivables 2,203,471 1,781,292 3,984,763 3,984,763 Other receivables and other financial assets Non-current At fair value 55,517 1,554 57,071 57,071 At amortized cost 16,775 16,775 16,775 Not covered by IFRS 7 102, , ,226 55,517 16,775 1, , , ,072 Current At fair value 7,657 3,086 10,743 10,743 At amortized cost 135, , ,721 Not covered by IFRS 7 85,956 85,956 85,956 7, ,721 3,086 85, , ,420 Securities 937, , ,640 Cash and cash equivalents 2,451,057 2,451,057 2,451,057 Liabilities and shareholders equity Financial liabilities Non-current 2,404, ,577 2,576,954 2,582,273 Current 597,030 48, , ,766 Trade payables 4,811, ,840 5,363,733 5,363,733 Other liabilities Non-current At fair value 8, , , ,170 At amortized cost Not covered by IFRS 7 43,189 43,189 43,189 8, ,698 43, , ,359 Current At fair value 1,716 45,852 47,568 47,568 At amortized cost 63,937 63,937 63,937 Not covered by IFRS 7 251, , ,758 1,716 63,937 45, , , ,263 Financial Statements and Notes Annual Report

198 Because current financial instruments have short residual terms and are measured at market value, their carrying amounts correspond to market value as of the balance sheet date. Non-current securities in the available-for-sale category are measured at fair value through equity, and as such their carrying amounts also correspond to fair value. Shares in non-consolidated subsidiaries and other participating interests are measured at fair value if fair value can be reliably determined. Otherwise, such items are measured at cost in the available-for-sale category. The Group measures fair values of financial instruments using the following fair value hierarchy levels reflecting the observability of inputs used in making the measurements: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities; e.g. quoted securities. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); e.g. interest rate swaps and forward foreign exchange contracts. Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs); e.g. investments measured at fair value determined by business valuation. Disclosures relating to the fair value hierarchy for financial instruments measured at fair value *For further explanatory notes, please see page 172. Dec. 31, 2011 Dec. 31, 2010 (EUR thousand) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Other financial assets 1,504 48,755* 2,024 42, ,368 Other receivables and other assets Non-current 18,310 57,071 Current 14,354 10,743 Marketable securities 311,903 80, ,955 19,685 Liabilities Other liabilities Non-current 141, ,870 1,300 Current 24,091 30,700 47,568 Reconciliation of beginning to ending balances for Level 3 measurements of financial instrument fair values (EUR thousand) Balance as of Jan. 1, 2010 Cash changes for the period Currency adjustments Gains/(losses) recognized in profit or loss Reclassifications Balance as of Dec. 31, 2011 Other financial assets 447,368 (1,205) 1,506 (398,914)* 48,755 Other liabilities Non-current 1,300 (1,300) Current (29,400) 1,300 30,700 Financial Statements and Notes (EUR thousand) Balance as of Jan. 1, 2010 Cash changes for the period Currency adjustments Gains/(losses) recognized in profit or loss Reclassifications Balance as of Dec. 31, 2010 Other financial assets 438,885 (234) 8, ,368 Other liabilities Non-current 16,000 14,700 1, Annual Report 2011

199 Notes to the Consolidated Financial Statements The EUR 29,400,000 in losses (2010: EUR 14,700,000 in gains) recognized in profit or loss are included in other operating expenses (2010: other operating income). Financial assets with a carrying amount of EUR 511,759,000 (2010: EUR 30,468,000) are provided as collateral for recognized financial liabilities and unrecognized contingent liabilities as of December 31, The following table shows the net profit from financial instruments by IAS 39 category: Net profit from financial instruments (EUR thousand) Available for sale 87,055 41,021 Held for trading (28,358) 14,370 Loans and receivables 22,275 72,344 Liabilities at amortized cost (249,248) (245,848) (168,276) (118,113) The calculation of net profit from financial instruments includes interest income and expenses, impairments and impairment reversals, income and expenses from currency translation, dividend income, gains and losses on disposal, and other changes in the fair value of financial instruments recognized in income. Impairments of financial assets totaling EUR 36,743,000 (2010: EUR 43,173,000) were recognized in the 2011 fiscal year. EUR 1,174,000 (2010: EUR 13,398,000) of this figure relates to the carrying amounts of non-consolidated subsidiaries and other participating interests measured at fair value and EUR 1,040,000 (2010: EUR 2,395,000) to the carrying amounts of non-consolidated subsidiaries and other participating interests measured at cost where fair value cannot be reliably determined. Impairments of EUR 19,763,000 (2010: EUR ) were recorded on non-current financial receivables in the fiscal year. Impairments of EUR 2,537,000 (2010: EUR 458,000) were recognized for current financial receivables. Impairments of EUR 11,576,000 (2010: EUR 21,146,000) were recognized for trade receivables and EUR 546,000 (2010: EUR 5,776,000) for marketable securities. In fiscal 2011, impairments of EUR 107,000 were additionally recognized for other current receivables and other current financial assets (2010: EUR ). 34. Contingencies, commitments, and other financial obligations (EUR thousand) Dec. 31, 2011 Dec. 31, 2010 Obligations under guarantees and letters of comfort 10,483 58,398 These commitments and potential obligations primarily serve as security for bank loans, contract performance, warranty obligations, and advance payments. Most guarantees as of the reporting date related to participating interests and construction joint ventures. HOCHTIEF is also jointly and severally liable for all construction joint ventures in which it has an interest. The syndicated guarantee facility taken out by HOCHTIEF Aktiengesellschaft in 2007 was refinanced along with the Company s syndicated credit facility in December 2011 with a new combined guarantee and credit facility for EUR 2 billion from an international banking syndicate. The syndicated guarantee and credit facility has a EUR 1.5 billion tranche for guarantees, drawings on which amounted to EUR 1.12 billion (2010: EUR 1.21 billion) as of December 31, 2011 and a EUR 500,000,000 cash tranche, drawings on which came to EUR 400,000,000 (2010: EUR 477,000,000) as of December 31, The facility ensures the availability of guarantees for ordinary activities, mainly of the HOCHTIEF Concessions and HOCHTIEF Europe divisions. The new guarantee and credit facility runs for five years to December 13, In addition, the HOCHTIEF Group has available a further EUR 5.74 billion (2010: EUR 5.39 billion) in guarantee facilities provided by insurance companies and banks. HOCHTIEF Aktiengesellschaft has provided an unlimited bonding guarantee in favor of US insurance companies in respect of obligations of the Turner Group and the Flatiron Group. Bonding is a statutory form of security used in the US to guarantee performance of public projects. It is also used with other selected customers. The total bonding amount is USD 6,500 million (2010: USD 6,256 million). USD 4,417 million was utilized in the year under review (2010: USD 4,084 million). No recourse has ever been made to this guarantee provided by HOCHTIEF, and none is currently anticipated for the future. Financial Statements and Notes Annual Report

200 In connection with two toll road projects Maliakos-Kleidi and Elefsina-Patras-Tsakona HOCHTIEF PPP Solutions GmbH and HOCHTIEF Solutions AG have given guarantees, directly or as indemnities, totaling EUR 146,533,000 after provisions for payments into capital. The guarantees cover contract performance, an equity bridge loan that has been taken out, further injections of capital, advance payments, and warranty obligations. There is no risk of recourse to the guarantee in respect of obligations to cover capital injections in excess of the equity bridge loan or of additional contract performance guarantees in favor of the concessionaire. It is currently considered unlikely that the criteria for recourse to these guarantees in the amount of EUR 18,747,000 will be fulfilled. In the event that the ongoing negotiations for restructuring of the projects should fail, the guarantees could therefore be drawn upon in a maximum amount (in the worst-case scenario) of EUR 127,786,000 under the terms and conditions of the concessions, the equity bridge loan, and the construction contracts, including the refunding of advance payments received. As a viable restructuring is in the interest of all parties to the projects and also appears attainable on a current assessment based on the continuing negotiations with the Greek government, management currently does not expect the guarantees to be drawn upon. The obligations from operating leases mainly relate to technical equipment and machinery leased by the Leighton Group. Lease payments under operating leases were EUR 351,575,000 in 2011 (2010: EUR 347,661,000). Amounts due under long-term tenancies are EUR 199,508,000 (2010: EUR 294,875,000). The term for which such tenancies cannot be terminated is between two and ten years (2010: two and eleven years). The amounts due under tenancies are partly offset by anticipated rental income of EUR 133,724,000 (2010: EUR 141,258,000). Other financial obligations include EUR 76,303,000 (2010: EUR 74,305,000) in commitments under long-term contracts for the supply of goods and services. Legal disputes HOCHTIEF Group companies are involved in various legal disputes in the context of their operating activities. HOCHTIEF does not anticipate any material negative impact from such disputes on the Group s business and financial situation. Group order exposure from awarded capital expenditure projects is EUR 507,255,000 (2010: EUR 629,033,000) and mostly relates to mining activities at the Leighton Group. Cash call commitments on financial assets totaled EUR 190,793,000 (2010: EUR 204,226,000), mostly for PPP project companies in the HOCHTIEF Asia Pacific division. The term breakdown of minimum lease payments under operating leases is as follows: Financial Statements and Notes Operate Leasing Dec. 31, 2011 Dec. 31, 2010 Nominal Nominal (EUR thousand) value value Due within 1 year 314, ,637 Due in 1 5 years 698, ,002 Due after 5 years 147,594 69, Annual Report 2011

201 Notes to the Consolidated Financial Statements 35. Segment reporting The structure of HOCHTIEF reflects the operating focus of our business and the Group s presence in key international regions and markets. Segmental reporting in the HOCHTIEF Group is based on the Group s divisional operations. The breakdown mirrors the Group s internal reporting systems. The Group s reportable segments (divisions) are as follows*: HOCHTIEF Americas encompasses the construction activities of operational units in the USA and Canada The Corporate Headquarters/Consolidation unit comprises Corporate Headquarters, other activities not assigned to sepa rately listed divisions, including management of financial resources and insurance activities, plus consolidation effects. Insurance activities are managed from Corporate Headquarters under the responsibility of HOCHTIEF Insurance Broking and Risk Management Solutions GmbH together with a subsidiary in Luxembourg. The HOCHTIEF insurance companies provide various reinsurance offerings for contractors casualty and surety, contractor default, guarantee, liability, and occupational accident insurance. *Detailed information on the various operating segments is included in the Management Report on pages HOCHTIEF Asia Pacific pools the construction activities and contract mining in the Asia-Pacific region HOCHTIEF Concessions focuses on developing and undertaking concession and operation projects HOCHTIEF Europe brings together the core business in Europe as well as selected other regions and designs, develops, builds, operates, and manages real estate and infrastructure. Following the change in the Group s structure as of January 1, 2011, the HOCHTIEF Europe division includes the activities of the former HOCHTIEF Europe, HOCHTIEF Real Estate, and HOCHTIEF Services divisions. The prior-year figures represent the aggregate of these former divisions, with the sole exception that allowing for that portion of external sales of the three former divisions which due to the restructuring now constitutes internal sales of the HOCHTIEF Europe division results in a EUR 47,049,000 lower comparative figure for divisional sales in the prior year. Prior-year EBITDA and operating earnings/ebita are also reduced by EUR 16,808,000 through elimination of the (statistical) interest credited item. Financial Statements and Notes Annual Report

202 Divisions External sales Intersegment sales Sales by division (external plus intersegment) (EUR thousand) restated restated HOCHTIEF Americas 6,178,918 6,396, ,178,918 6,396,392 HOCHTIEF Asia Pacific 13,631,142 10,339, ,631,327 10,339,495 HOCHTIEF Concessions 63, ,095 2,765 1,970 66, ,065 HOCHTIEF Europe 3,321,121 3,229,397 24,677 50,680 3,345,798 3,280,077 Corporate Headquarters/ Consolidation 87,624 84,249 9,781 48,625 97, ,874 HOCHTIEF Group 23,282,237 20,159,286 37, ,617 23,319,645 20,260,903 Divisions Consolidated net profit/ (loss) Depreciation/ amortization Impairment losses (EUR thousand) HOCHTIEF Americas 87,983 71,402 20,166 24, ,390 HOCHTIEF Asia Pacific (154,807) 180, , , ,332 83,658 HOCHTIEF Concessions (39,923) 41, ,495 HOCHTIEF Europe 18,643 48,613 35,774 45,315 1,218 1,927 Corporate Headquarters/ Consolidation (72,183) (53,773) 9,401 6, HOCHTIEF Group (160,287) 288, , , ,562 88,720 *For further explanatory notes, please see page 170. Divisions Share of profits and losses of equity-method associates and jointly controlled entities Carrying amount of equitymethod investments Purchases of intangible assets, property, plant, equipment, and investment properties * (EUR thousand) HOCHTIEF Americas 54,193 43,059 99,244 78,260 29,375 38,244 HOCHTIEF Asia Pacific (820,428) 53, ,013 1,216,607 1,385, ,962 HOCHTIEF Concessions 85,867 61,784 14, , HOCHTIEF Europe 30,474 31, , ,393 65,141 47,016 Corporate Headquarters/ Consolidation 25,801 1,718 HOCHTIEF Group (649,894) 189,820 1,033,203 2,005,642 1,506, ,087 Financial Statements and Notes Regions External sales by customer location Property, plant and equipment Intangible assets (EUR thousand) Germany 2,055,220 1,641,680 92,289 92,055 73,756 80,079 Rest of Europe 780, ,782 37,684 43,347 1,832 4,639 Americas 6,307,830 6,891, , , , ,545 Asia 3,093,790 2,340, , , ,160 Australia 11,039,519 8,302,019 1,323,418 1,024, , ,456 Africa 5,678 6,639 HOCHTIEF Group 23,282,237 20,159,286 2,235,136 1,807, , , Annual Report 2011

203 Notes to the Consolidated Financial Statements Profit/(loss) from operating activities (segment result) EBITDA Operating earnings (EBITA) Profit before taxes restated restated ,762 91, , , , , , , , , ,239 1,251,197 (168,188) 653,072 (285,374) 512,671 (76,140) 9,079 42, ,082 41, ,183 3,623 84, ,698 66, , , , ,178 93,066 82,502 (111,984) (63,931) (102,585) (59,127) (111,983) (66,232) (80,722) (49,415) 626, , ,953 1,626,070 62, ,527 (126,958) 756,572 Impairment reversals Non-cash expenses Interest and similar income Interest and similar expenses ,112 96,032 4,310 5,594 16,404 15,171 66, ,028 36,723 14, , ,360 66,634 15,667 11,704 11,969 49,416 40, , ,025 32,669 36,513 62,124 51,660 77,096 91,220 (9,813) (2,142) (32,664) (16,765) , ,972 75,593 66, , ,847 Purchases of financial assets Total purchases Total assets (balance sheet total) Gross debt restated restated 25,792 61,330 55,167 99,574 2,672,780 2,646,346 2,403,488 2,411, , ,323 1,666, ,285 8,074,946 6,541,688 5,832,419 4,450, ,212 1, ,547 1,843 1,639,967 1,387,328 1,160, ,557 7,004 19,259 72,145 66,275 3,566,538 3,640,079 2,922,755 3,064, ,801 1,733 (158,166) 770,644 (633,015) (70,162) 517, ,623 2,023,321 1,127,710 15,796,065 14,986,085 11,685,701 10,721,913 Carrying amount of equitymethod investments Total assets (balance sheet total) Purchases , ,098 3,870,239 4,406,703 64,310 50,783 3, ,240 1,130,559 1,142, ,251 11, ,385 90,493 2,500,224 2,669,633 75, , , ,728 2,998,417 2,464, , , , ,083 5,296,626 4,303,007 1,136, ,824 1,033,203 2,005,642 15,796,065 14,986,085 2,023,321 1,127,710 Financial Statements and Notes Annual Report

204 Financial Statements and Notes Explanatory notes to the segmental data Intersegment sales represent revenue generated between divisions. They are transacted on an arm s length basis. External sales mainly comprise revenue recognized using the percentage-of-completion method in the mainstream construction business, construction management, and contract mining, in the amount of EUR 20,620,967,000 (2010: EUR 17,483,708,000). The sum of external sales and intersegment sales gives total sales revenue for each division. The share of profits and losses of equity-method associates and jointly controlled entities comprises income and expenses, including impairment losses relating to companies accounted for using the equity method. Depreciation and amortization relate to intangible assets with finite useful lives, property, plant and equipment, and investment properties. The impairment losses relate to intangible assets, property, plant and equipment, investment properties, and financial assets. Purchases comprise additions to intangible assets, property, plant and equipment, investment properties, equity-method investments (excluding equity-method adjustments), subsidiaries, and other participating interests. Total assets are equivalent to the divisions totals in the Consolidated Balance Sheet. Gross debt equals total assets minus consolidated shareholders equity. Operating earnings (EBITA) are derived from earnings from operating activities as follows: (EUR thousand) restated Earnings from operating activities 626, ,344 + Net income from participating interests (584,723) 222,705 Non-operating earnings (+) 20,286 (+) 9,478 Operating earnings (EBITA) 62, ,527 Interest credited, a purely statistical adjustment representing interest on the average financing balance, is no longer material following the changes in Group structure and therefore ceases to be used and separately presented in the reconciliation. This reduces operating earnings (EBITA) for 2010 by EUR 16,808,000 to EUR 947,527,000. The derivation of operating earnings from earnings from operating activities is based on the following considerations: Net income from participating interests contains all income and expense from equity stakes held for operational purposes and is thus an integral part of operating earnings. Income and expenses classified as exceptional items for business management purposes or resulting from exceptional transactions hinder analysis of ordinary operations and should be attributed to non-operating earnings. Consolidated earnings from operating activities were adjusted in the year under review by non-operating earnings of minus EUR 20,286,000 (2010: minus EUR 9,478,000). The non-operating earnings item consists in its entirety of restructuring expenses in the HOCHTIEF Europe division. 36. Notes to the Consolidated Statement of Cash Flows The Consolidated Statement of Cash Flows classifies cash flows into operating, investing, and financing activities. Exchange rate effects are eliminated and their influence on the cash position is disclosed separately. Changes in cash and cash equivalents due to acquisitions and disposals of consolidated companies are shown separately under cash used in or provided by investing activities. The EUR 13,559,000 increase in cash and cash equivalents (2010: EUR 301,567,000 decrease) due to consolidation changes comprised EUR 13,559,000 (2010: EUR 5,027,000) in cash and cash equivalents from acquisitions. Disposals did not include cash and cash equivalents in the fiscal year (2010: EUR 306,594,000 included in disposals). The EUR 2,280,720,000 (2010: EUR 2,451,057,000) year-end total for cash and cash equivalents shown on the cash flow statement matches the cash and cash equivalents item on the balance sheet after deducting the figure of EUR 15,899,000 (2010: EUR ) contained in assets held for sale. The total comprises EUR 2,798,000 (2010: EUR 2,685,000) in petty cash, EUR 1,784,389,000 (2010: EUR 1,731,779,000) in cash balances at banks, and EUR 477,634,000 (2010: EUR 716,593,000) in marketable securities with maturities of no more than three months at the time of acquisition. Cash and cash equivalents to the value of EUR 85,212,000 are subject to restrictions (2010: EUR 7,464,000). All non-cash income and expense and all income from asset disposals or arising on deconsolidation is eliminated in net cash provided by or used for operating activities. The net cash used in investing activities was not met in full from net cash provided by operating activities. Subtracting net cash used by financing activities gives the overall decrease in cash and cash equivalents in fiscal Annual Report 2011

205 Notes to the Consolidated Financial Statements Net cash provided by operating activities included: Interest income of minus EUR 70,514,000 (2010: plus EUR 65,985,000) Interest expenses of EUR 249,247,000 (2010: EUR 245,847,000). Income taxes amounting to EUR 53,218,000 (2010: EUR 243,969,000). After deducting the non-cash component of income from equityaccounted interests, net income received (as dividends) from such interests was EUR 194,068,000 (2010: EUR 192,958,000). Divestments relate to the deconsolidation of fully consolidated subsidiaries. This reduced non-current assets by EUR 205,843,000 (2010: EUR 40,909,000) and current assets by EUR 132,764,000 (2010: EUR 394,317,000). Non-current liabilities decreased by EUR 19,439,000 (2010: EUR 101,058,000) and current liabilities by EUR 142,790,000 (2010: EUR 143,698,000). As of the balance sheet date, EUR 337,295,000 (2010: EUR 203,788,000) of the EUR 356,998,000 (2010: EUR 283,414,000) sale proceeds were settled in the form of cash and cash equivalents. The dividend distribution to HOCHTIEF s shareholders in 2011 was EUR 147,130,000 (2010: EUR 99,816,000). Dividends paid to minority shareholders totaled EUR 143,387,000 (2010: EUR 212,183,000). The servicing expense for existing debt was EUR 1,240,085,000 (2010: EUR 610,590,000), compared with EUR 1,237,902,000 (2010: EUR 870,552,000) in new borrowing. Financial assets and financial liabilities are made up as follows: Financial assets are subject to certain restrictions on their use. Other than by financial liabilities, net financial assets are offset by advance payments from customers, cash call commitments on financial assets, and order exposure from awarded capital expenditure projects. Advance payments from customers came to EUR 402,697,000 (2010: EUR 545,836,000) and serve to fund contract costs. Cash call commitments on financial assets totaled EUR 190,793,000 (2010: EUR 204,226,000), mostly for PPP project companies in the HOCHTIEF Asia Pacific division. Group order exposure from awarded capital expenditure projects is EUR 507,255,000 (2010: 629,033,000) and mostly relates to the Leighton Group s mining activities. 37. Related party disclosures Significant related parties include ACS, the parent company of HOCHTIEF Aktiengesellschaft. No material transactions were entered into between HOCHTIEF Aktiengesellschaft or any Group company and ACS or its affiliates during the year under review. Further significant related parties comprise companies accounted for using the equity method that are material to the Group: Athens International Airport S.A., Flughafen Düsseldorf GmbH, Flughafen Hamburg GmbH, Budapest Airport Zrt., Sociedad Concesionaria Túnel San Cristobal S.A., Sociedad Concesionaria Autopista Vespucio Norte Express S.A., aurelis Real Estate GmbH & Co. KG, the Habtoor Leighton Group, and Leighton Welspun Contractors. Transactions with material related parties gave rise to amounts in the financial statements as follows: (EUR thousand) Loans 814, ,118 Receivables 96,219 74,476 Payables 12, Sales 14,522 16,010 Goods and services purchased 14, Other operating income Interest income 28,934 14,167 (EUR thousand) Dec. 31, 2011 Dec. 31, 2010 Cash and cash equivalents 2,264,821 2,451,057 Marketable securities 392, ,640 Non-current securities ,478 Total financial assets 2,657,912 3,431,175 Bonds or notes issued, and amounts due to banks 2,850,462 2,801,905 Lease liabilities 460, ,313 Financial liabilities 3,310,916 3,023,218 Net financial assets/ (net financial liabilities) (653,004) 407,957 The loans mostly relate to the Habtoor Leighton Group, Budapest Airport, and aurelis Real Estate. The loan to Budapest Airport is reported under assets held for sale. All transactions were conducted on an arm s length basis. No other material transactions were entered into between HOCHTIEF Aktiengesellschaft or any Group company and Executive or Supervisory Board members or persons or companies close to them during the 2011 fiscal year. There were no conflicts of interest involving Executive Board or Supervisory Board members. Financial Statements and Notes Annual Report

206 38. Total Executive Board and Supervisory Board compensation The Compensation Report on pages of this Annual Report outlines the principles applied when determining Executive Board compensation at HOCHTIEF Aktiengesellschaft and explains the amount and composition of that compensation. The principles applied and the amount of Supervisory Board compensation are also described. The Compensation Report is based on the recommendations of the German Corporate Governance Code. The Compensation Report also forms an integral part of the combined Management Report. On the basis of the above, compensation for the individual members of the Executive Board was as follows (excluding the effects of the special right of termination/termination agreement; see page 26): (EUR thousand) Fixed salary Cash compensation Noncash and other additional benefits Performancelinked compensation/ short-term incentive component (cashsettled)** Variable pay components combining a long-term incentive effect with an element of risk Performance-linked compensation/ long-term incentive component I (sharebased with two-year bar)**,*** LTIP 2011/long-term incentive component II Stock apprecia tion rights (SARs) Stock awards Qty. Value**** Qty. Value**** Pension benefits Transfers to pension provision Service cost Interest expense Total compensation including pension benefits Dr. Stieler , , ,547 Dr. Lütkestratkötter (until May 12, 2011) Dr. Lohr (until Oct. 18, 2011) Dr. Noé (until June 30, 2011) , , , , , , ,065 18, , , , , , , , , , , , , , ,061 Dr. Rohr , , ,817 Sassenfeld (since Nov. 1, 2011) Executive Board total , , , * ***** , , , ,200 1,516 1, , , ,905 68, ,800 1,432 1, ,015****** *Refund of expenses in connection with termination of previous executive board mandate. **100 percent target attainment was assumed for the individual bonus. A corresponding Supervisory Board resolution will be adopted by May ***Payment subject to the condition that the Supervisory Board exercises its right to settle alternatively in shares. ****Value at grant date as per actuarial appraisal. *****Under agreement to grant at least 100 percent for the first 12 months, Mr. Sassenfeld is entitled to an LTIP grant (long-term incentive component II) of EUR 58,000 in May ******Including the granting of the third tranche of the Retention Stock Award Plan (RSA 2008), total compensation including pension benefits exceptionally came to EUR 17,874,000 in Financial Statements and Notes The present value of pension benefits for former Executive Board members is EUR 59,967,000 (2010: EUR 53,163,000). This amount is fully covered by plan assets in the form of pension liability insurance entitlements and the HOCHTIEF Pension Trust e. V. (CTA). Pension payments to former members of the Executive Board and their surviving dependants were EUR 5,273,000 in 2011 (2010: EUR 3,699,000). EUR 52,909,000 (2010: EUR 37,767,000) in provisions have been recognized for pension obligations to former members of the Executive Board and their surviving dependants. Total compensation for the members of the Supervisory Board came to EUR 561,000 (2010: EUR 2,779,000). (EUR thousand) Present value of pension benefits Dr. Stieler , Dr. Lütkestratkötter , ,940 Dr. Lohr , ,934 Dr. Noé , ,628 Dr. Rohr , ,274 Sassenfeld Executive Board total , , Annual Report 2011

207 Notes to the Consolidated Financial Statements 39. Auditing fees Eurafrica Baugesellschaft mbh, Essen, Fees for services provided by auditors Deloitte & Touche were Europaviertel Baufeld 4d GmbH & Co. KG, Essen paid and recognized as expenses as follows: forum am Hirschgarten Nord GmbH & Co. KG (formerly: MK 3 Nord GmbH & Co. KG), Essen (EUR thousand) forum am Hirschgarten Süd GmbH & Co. KG (formerly: MK 3 Financial statement audits ,431 Süd GmbH & Co. KG), Essen Of which in Germany [1,776] [1,143] Other auditing and valuation services 1, Of which in Germany [127] [12] Tax consulting Of which in Germany [35] [ ] Other services for HOCHTIEF Aktiengesellschaft or subsidiaries Of which in Germany [0] [ ] 7,082 4,121 GVG mbh & Co. Objekt RPU Berlin 2 KG, Essen, HAP Hamburg Airport Partners GmbH & Co. KG, Hamburg, HOCHTIEF Ackerstraße GmbH & Co. KG, Berlin, HOCHTIEF AirPort GmbH, Essen, HOCHTIEF AirPort Capital Verwaltungs GmbH & Co. KG, Essen, HOCHTIEF Americas GmbH, Essen, HOCHTIEF Asia Pacific GmbH, Essen, HOCHTIEF Aurestis Beteiligungsgesellschaft mbh, Essen, HOCHTIEF Concessions AG, Essen, HOCHTIEF Construction Erste Vermögensverwaltungsgesell- The fees for services provided in Germany relate to services of schaft mbh, Essen, the appointed Group financial statement auditors Deloitte & HOCHTIEF Energy Management GmbH, Essen, Touche GmbH Wirtschaftsprüfungsgesellschaft and its affiliates HOCHTIEF Global One GmbH, Essen, within the meaning of Section 271 (2) of the German Commer- HOCHTIEF Global Trade GmbH, Essen, cial Code. The fees for financial statement audits mostly relate HOCHTIEF Insurance Broking and Risk Management Solu- to fees charged by Group auditors Deloitte & Touche for audit- tions GmbH, Essen, ing the HOCHTIEF Group consolidated financial statements, HOCHTIEF Offshore Crewing GmbH, Essen, the combined HOCHTIEF Group and HOCHTIEF Aktiengesell- HOCHTIEF ÖPP Projektgesellschaft mbh, Essen, schaft management report, and the financial statements of HOCHTIEF PPP Solutions GmbH, Essen, HOCHTIEF Aktiengesellschaft and its domestic and interna- HOCHTIEF PPP Schulpartner Braunschweig GmbH, Essen, tional subsidiaries. The increase in other auditing and valuation HOCHTIEF Projektentwicklung Am Europagarten GmbH & services mostly relates to services in connection with over- Co. KG, Essen, hauling the early warning system at Leighton in the year under HOCHTIEF Projektentwicklung GmbH, Essen, review. Tax consulting encompasses all services provided in HOCHTIEF Projektentwicklung Helfmann Park GmbH & Co. connection with tax matters, mostly for HOCHTIEF Aktien- KG, Essen, gesellschaft s international subsidiaries. The other services HOCHTIEF Property Management GmbH, Essen, mainly relate to projects in the HOCHTIEF Asia Pacific divi- HOCHTIEF Solutions AG, Essen, sion. HOCHTIEF Solutions Real Estate GmbH, Essen, HOCHTIEF ViCon GmbH, Essen, 40. Declaration pursuant to Section 161 of the German HTP Grundbesitz Blue Heaven GmbH, Essen, Stock Corporations Act HTP Immo GmbH, Essen, The declaration on corporate governance required by Section I.B.G. Immobilien- und Beteiligungsgesellschaft Thüringen- 161 of the German Stock Corporations Act (AktG) has been Sachsen mbh, Erfurt, made available for the general public to view at any time on the MK 1 Am Nordbahnhof Berlin GmbH & Co. KG, Essen, HOCHTIEF website.* 41. Events since the balance sheet date Events subsequent to the reporting period are outlined under Post-balance-sheet events on page Use of the exempting provisions in Section 264 (3) (and Section 264b) of the German Commercial Code The following domestic fully consolidated subsidiaries made partial use of the exempting provisions in the 2011 fiscal year: Moltendra Grundstücks- und Vermietungsgesellschaft mbh & Co. Objekt Mainoffice KG, Frankfurt am Main, Projektgesellschaft Börsentor Frankfurt GmbH & Co. KG, Essen, Projektgesellschaft Luxemburger Straße Essen GmbH & Co. KG, Essen, Projektgesellschaft Marco Polo Tower GmbH & Co. KG, Hamburg, Projektgesellschaft Quartier 21 mbh & Co. KG, Essen, SCE Chile Holding GmbH, Essen, Streif Baulogistik GmbH, Essen, *For further information on corporate governance at HOCHTIEF, please see corporategovernance. Financial Statements and Notes A.L.E.X.-Bau GmbH, Essen, Turner HOCHTIEF Construction Management GmbH, Essen. car.e Facility Management GmbH, Hamburg, Deutsche Baumanagement GmbH, Essen, Deutsche Bau- und Siedlungs-Gesellschaft mbh, Essen, Annual Report

208 43. Subsidiaries, associates, and other significant participating interests of the HOCHTIEF Group at December 31, 2011 The HOCHTIEF Annual Report 2011 including the auditor s report contains the complete list of subsidiaries, associates, and other significant participating interests and is published in the electronic Bundesanzeiger (Federal Official Gazette) as well as on our website. Percentage stock held Shareholders equity Local currency (thousand) EUR thousand Profit/(loss) for the year (EUR thousand) I. Affiliates included in the Consolidated Financial Statements HOCHTIEF Americas Division HOCHTIEF Americas GmbH, Essen ,236 1) The Turner Corporation, Dallas, USA 100 2) USD 550, ,793 47,906 3) Flatiron Construction Corp., Wilmington, USA 100 2) USD 216, ,546 31,686 3) E.E. Cruz and Company Inc., Holmdel, USA 100 2) USD 45,250 34,972 8,574 HOCHTIEF Asia Pacific Division HOCHTIEF Asia Pacific GmbH, Essen 100 1,392,288 1) Leighton Holdings Limited, Sydney, Australia ) AUD 2,784,907 2,188,881 3) (207,711) HOCHTIEF Concessions Division HOCHTIEF Concessions AG, Essen ,170 1) HOCHTIEF AirPort HOCHTIEF AirPort GmbH, Essen 100 2) 6) 135,000 1) Airport Partners GmbH, Düsseldorf 40 2) 6) 142,666 27,052 HAP Hamburg Airport Partners GmbH & Co. KG, Hamburg 71 2) 6) 395,190 25,406 Sydney Airport Intervest GmbH, Essen ) 6) 258,403 30,379 HOCHTIEF AirPort Capital Verwaltungs GmbH & Co. KG, Essen 100 2) 6) 1,205 12,944 HOCHTIEF PPP Solutions HOCHTIEF PPP Solutions GmbH, Essen 100 2) 32,352 1) HOCHTIEF PPP Solutions Chile Limitada, Santiago de Chile, Chile 100 2) CLP 40,206,803 62,888 2,546 HOCHTIEF PPP Solutions (UK) Limited, Swindon, UK 100 2) GBP 11,717 14, HOCHTIEF Europe Division HOCHTIEF Solutions AG, Essen ,665 1) Financial Statements and Notes Streif Baulogistik GmbH, Essen 100 2) 31,659 1) HOCHTIEF Hamburg GmbH, Hamburg 70 2) 11,597 2,597 HOCHTIEF (UK) Construction Ltd., Swindon, UK 100 2) GBP 8,295 9, HOCHTIEF CZ a.s., Prague, Czech Republic 100 2) CZK 980,422 38, HOCHTIEF Polska S.A., Warsaw, Poland 100 2) PLN 131,239 29,440 7,027 OOO HOCHTIEF, Moscow, Russia 100 2) RUB 320,696 7,677 1,944 HOCHTIEF Construction Qatar W.L.L., Doha, Qatar 49 2) QAR 372,721 79,147 51,721 Deutsche Bau- und Siedlungs-Gesellschaft mbh, Essen ,490 1) HOCHTIEF Projektentwicklung GmbH, Essen 100 7,670 1) HOCHTIEF Aurestis Beteiligungsgesellschaft mbh, Essen 100 2) 6,570 1) HOCHTIEF Energy Management GmbH, Essen 100 2) 17,018 1) 208 Annual Report 2011

209 Notes to the Consolidated Financial Statements Percentage stock held Shareholders equity Local currency (thousand) EUR thousand Profit/(loss) for the year (EUR thousand) Corporate Headquarters HOCHTIEF Insurance Broking and Risk Management Solutions GmbH, Essen ,779 1) Builders Credit Reinsurance Company S.A., Steinfort, Luxembourg 100 2) USD 258, ,449 21,527 II. Equity-method investments HOCHTIEF Concessions Division HOCHTIEF AirPort Budapest Airport Zrt., Budapest, Hungary ) 223,306 4) 4) (36,383) Flughafen Düsseldorf GmbH, Düsseldorf 50 2) 162,392 4) 55,015 4) Flughafen Hamburg GmbH, Hamburg 49 2) 63,760 4) 1) Athens International Airport S.A., Athens, Greece ) 436,624 4) 96,550 4) Tirana International Airport SHPK, Tirana, Albania 47 2) 30,614 4) 8,501 4) HOCHTIEF PPP Solutions Herrentunnel Lübeck GmbH & Co. KG, Lübeck 50 2) 4) (5,606) 4) (1,863) Sociedad Concesionaria Autopista Vespucio Norte Express S.A., Santiago de Chile, Chile ) CLP 62,470,415 4) 93,081 4) 4) (21,363) Sociedad Concesionaria Túnel San Cristobal S.A., Santiago de Chile, Chile 50 2) CLP 5,310,867 4) 7,913 4) 4) (3,030) HOCHTIEF Europe Division aurelis Real Estate GmbH & Co. KG, Eschborn 50 2) 180,895 4) 52,731 HGO InfraSea Solutions GmbH & Co. KG, Bremen 50 2) 22,567 4) 4) 3) 4) III. Other companies HOCHTIEF Concessions Division HOCHTIEF AirPort Southern Cross Airports Corporation Holdings Limited, Sydney, Australia ) 6) AUD 2,435,214 4) 1,914,029 4) 323,219 4) 1 Profit/loss transfer agreement 2 Indirect shareholding 3 Consolidated result for group 4 Fiscal 2010 figures 5 Consolidated in Turner/Flatiron 6 Reported in the Balance Sheet as part of assets held for sale Financial Statements and Notes Annual Report

210 Index Airports Auditors report Aurelis...56, 112 Balance sheet...86, 145, 166 Boards Building Information Modeling (BIM)...67, 136 Business activities Capital expenditure Cities...37, 55, 98, 99 Clark Builders... 3, 100 Combined management report Compensation report... 23, 206 Compliance declaration Contract mining... 48, 78, 104 Cooperation projects Corporate governance Currency translation Declaration on corporate governance Dividend...31, 93, 131 E.E. Cruz... 3, 103 Employees... 69, 132 Energy infrastructure... 6, 54, 65, 68, 99 Energy management... 30, 48, 59 Equity...88, 147 Executive Board... 16, 20 Facility management... 47, 66, 108 Financial calendar Financial instruments Financial review...79 ff. Financial statements Five year summary Flatiron... 3, 102, 141 Free float Glossary Green building... 55, 58, 98, 100, 135 Group Executive Committee Group structure...38 ff. Healthcare properties , 106, 107, 111, 118, 136 HOCHTIEF Americas ff. HOCHTIEF Asia Pacific ff. HOCHTIEF Concessions ff. HOCHTIEF Europe ff. Insurance services Investor relations Leighton... 3, 104 Long-term incentive plan... 24, 178 ff. Management report Markets...42 ff. Net income from participating interests...81, 163 Net investment and interest income... 82, 164 Notes to the Consolidated Financial Statements Orders and work done Ownership structure Post-balance-sheet events Procurement...72, 132 Project development...43, 111 ff. Provisions...88 f., 145, 151, 156 ff. Publication details and credits Public-private partnership (PPP)... 39, 44, 52, 55, 115 f., 128 Research and development... 63, 132 Return on net assets (RONA)...74 Risk report ff. Sales...77, 79 ff., 161 School projects...52, 116 Segment reporting... 99, 201 Statement of cash flows...82, 146 Statement of earnings...79, 93, 143 Stock Strategic growth areas...54 ff. Strategy Subsidiaries and associated companies... 40, 208 Supervisory Board...10, 18 Sustainability... 53, 135 Transportation 44, 55, 64, 99, 102, infrastructure f., 110, 115 f., 128, 141 Turner...3, 100, 136 Value added Value created f. Vision Wind energy...7, 44 f., 54, 65, 99, 109, 133 Further Information 210 Annual Report 2011

211 Glossary Asset management Asset management means all activities involved in managing buildings and properties. This includes rent accounting, tenant administration, utility billing and support, systems maintenance, energy management, coordinating repairs and refurbishing, as well as short-to-medium-run planning of all cash flows relating to the property. BREEAM BREEAM (Building Research Establishment Environmental Assessment Method) is a UK-developed, internationally used environmental assessment method for buildings. Based on a straightforward scoring system with eight categories (management, health and wellbeing, energy, transport, water, material and waste, land use and ecology, and pollution), BREEAM assigns assessed buildings an overall rating in one of four rating bands. Core real estate Core real estate consists of high-value properties built to very high standards, usually in prime locations and fully rented out for the foreseeable future to reliable clients of strong credit standing. DGNB (German Sustainable Building Council) The German Sustainable Building Council (DGNB) has awarded DGNB certification since January 2009 to projects that are environmentally compatible, economically efficient, and user-friendly. The certification system addresses all areas relevant to green building. The rating incorporates some 60 criteria covering environmental performance, economy, sociocultural and functional aspects, technology, processes, and location. Outstanding buildings are awarded gold, silver, or bronze certification. HOCHTIEF is a founding member of DGNB. Carbon Disclosure Leadership Index Germany s Carbon Disclosure Leadership Index lists the 30 companies that practice the greatest transparency with regard to climate change. It is published by the Carbon Disclosure Project (CDP), a global initiative launched by institutional investors with the goal of collating high-quality corporate climate change information and making it publicly available. Using a standardized questionnaire, the CDP annually surveys a wide range of companies including Germany s 200 largest on their climate change policies and carbon emissions. Directors and officers (D&O) insurance D&O insurance is consequential loss insurance taken out by a company for its decision-making boards. The insurance covers the boards personal liability risk from their work for the company under company-law liability obligations. Euroconstruct Group A cooperation of several European research and consulting institutes which publishes annual analyses of trends in the European construction industry. Cash flow One of the key figures used to assess a company s financial position. Represents the net inflow of funds from sales and other operating activities. Financial covenants Financial indicators which are negotiated with a loan and with which the borrower is required to comply. Contract mining In contract mining, a mine owner contracts out certain operations to a service provider. HOCHTIEF s Australian subsidiary Leighton extracts commodities such as ores and coal under long-term contract to mine owners. Its services also include mine development and renaturalization after mine closure. Further terms and explanations are provided in the Investor Relations section of the HOCHTIEF website, Here, you will find a detailed glossary. Annual Report Further Information

212 Green Star Green Star is a voluntary rating system developed by the Green Building Council of Australia that evaluates the environmental performance of buildings. The nine categories assess the environmental impact that is a direct consequence of a project s site selection, design, construction, and maintenance: Management, Indoor Environment Quality, Energy, Transport, Water, Materials, Land Use & Ecology, Emissions, and Innovation. Issuer An issuer of securities is a company in the case of shares and a company, public body, the state, or other institution in the case of bonds. LEED LEED (Leadership in Energy and Environmental Design) is the United States Green Building Council rating system for green building projects. LEED certification defines precise standards for green buildings. The LEED rating system is organized into six categories: Sustainable Sites, Water Efficiency, Energy & Atmosphere, Materials & Resources, Indoor Environmental Quality, and Innovation & Design Process. Long-term incentive plan (LTIP) A long-term incentive plan is an incentives system or pay component offered to selected managerial staff so that they participate in the company s long-term success, thus securing their loyalty to the company. Public-private partnership (PPP) Cooperation between the public sector and usually wellcapitalized private-sector firms. A characteristic feature of such cooperation is that the parties pursue common objectives and interests as regards the project itself even though they differ in terms of their broader functions. Syndicated guarantee facility A loan facility structured by an international banking syndicate in order to furnish financial guarantees by way of assurance for clients. Trader-developer A trader-developer taps new earnings potential in attractive markets by investing in and developing high-value assets and selling them on at a profit. The assets are devel oped for resale as quickly as possible rather than for inclusion in an existing portfolio (say for rental). The purchaser at the end of the line receives an asset that is significantly enhanced in value. Work done This reporting term covers all construction work complet ed by the company itself, together with its fully consolidated subsidiaries, and by joint ventures on a pro rata basis, plus all other sales generated by non-construction operations during the reporting period. Percentage of completion (POC) method Method of accounting for long-term contracts that computes the applicable costs and revenues generated by the project up to the reporting date. Revenues, expense, and earnings are thus reported in line with the progress of a project to date. This method supersedes the realization principle stipulated by the German Commercial Code, which does not allow profits from construction contracts to be recognized until the fiscal year in which a project is formally accepted by the client. Further Information 212 Annual Report 2011

213 Five Year Summary * 2009** New orders EUR million 23,509 25,284 22,473 29,627 25,368 Of total: domestic 3,192 2,549 1,919 2,524 2,286 international 20,317 22,735 20,554 27,103 23,082 Work done EUR million 18,773 21,620 20,566 23,234 25,790 Of total: domestic 2,410 2,820 2,284 1,804 2,017 international 16,363 18,800 18,282 21,430 23,773 Order baklog at year-end EUR million 29,894 30,961 35,374 47,486 48,668 Of total: domestic 3,904 3,603 2,996 3,726 4,048 international 25,990 27,358 32,378 43,760 44,620 Employees (average for year) Total Number 52,449 64,527 66,178 70,657 75,449 Of total: domestic 10,152 11,004 11,135 10,821 10,331 international 42,297 53,523 55,043 59,836 65,118 External sales EUR million 16,452 18,703 18,166 20,159 23,282 Increase/(decrease) on prior year % Materials EUR million 12,327 14,273 12,563 13,764 15,572 Materials ratio % Personnel costs EUR million 2,807 3,266 3,501 4,081 4,864 Payroll ratio % Depreciation and amortization EUR million Profit from operating activities EUR million Net income from participating interests EUR million ( 585) Net investment and interest income EUR million 24 ( 96) (155) ( 181) ( 168) Profit before taxes EUR million ( 127) Of which: Americas EUR million Asia Pacific EUR million (285) Concessions EUR million Europe EUR million ( 70) Pre-tax return on sales % Profit after taxes EUR million ( 168) Return on equity % Consolidated net profit/(loss) EUR million ( 160) EBITDA EUR million 852 1,045 1,265 1, Operating earnings (EBITA) EUR million Of which: Americas EUR million Asia Pacific EUR million ( 168) Concessions EUR million Europe EUR million (47) Earnings per share EUR ( 2.18) Dividend per share EUR * Dividends paid EUR million RONA % **** Free cash flow 1) EUR million ( 945) ( 635) ( 251) Our five year summary *Proposed dividend per share 1) Free cash flow: Net cash provided by operating activities and net cash used for investing activities Anual Report

214 Assets Intangible assets EUR million Property, plant and equipment EUR million 1,028 1,120 1,492 1,807 2,235 Investment properties EUR million Financial assets EUR million 2,018 2,099 2,251 2,511 1,098 Other non-current assets EUR million ,166 Non-current assets EUR million 4,258 4,410 5,106 5,868 5,214 As % of total assets Inventories EUR million ,116 1,268 1,287 Receivables and other assets EUR million 4,110 4,113 3,703 4,461 5,182 Marketable securities and cash and cash equivalents EUR million 2,169 2,597 2,577 3,389 2,657 Assets held for sale EUR million 1,456 Current assets EUR million 6,399 7,654 7,396 9,118 10,582 As % of total assets Total assets EUR million 10,657 12,064 12,502 14,986 15,796 Liabilities and Shareholders Equity Attributable to the Group EUR million 2,298 1,931 2,164 2,965 2,598 Minority interest EUR million ,100 1,299 1,512 Shareholders equity EUR million 3,001 2,826 3,264 4,264 4,110 As % of total assets As % of non-current assets Non-current provisions EUR million Non-current financial liabilities EUR million 1,324 1,678 2,048 2,577 2,302 Other non-current liabilities EUR million Non-current liabilities EUR million 1,831 2,426 2,753 3,373 3,199 As % of total assets Current provisions EUR million Current financial liabilities EUR million 643 1, ,493 Other current liabilities EUR million 4,427 4,849 4,783 5,744 6,037 Current liabilities EUR million 5,825 6,812 6,485 7,349 8,487 As % of total assets Total assets EUR million 10,657 12,064 12,502 14,986 15,796 Property, plant and equipment ratio 2) % Total capital expenditure, including acquisitions EUR million 1,774 1, ,128 2,023 Of total: Intangible assets EUR million Of total: Property, plant and equipment EUR million ,474 Of total: Investment properties EUR million 1 Of total: Financial assets EUR million 1, Capital expenditure ratio 3) % Depreciation and amortization ratio 4) % Receivables turnover 5) Total assets turnover 6) Net financial assets/(liabilities) EUR million 323 ( 212) ( 78) 408 ( 653) 2) Property, plant and equipment ratio: Property, plant and equipment as a percentage of total assets 3) Capital expenditure ratio: Capital expenditure on intangible assets, property, plant and equipment and investment properties as a percentage of cumulative cost of acquisition 4) Depreciation and amortization ratio: Depreciation and amortization as a percentage of intangible assets, property, plant and equipment and investment properties 5) Receivables turnover: Ratio of external sales to average trade receivables 6) Total assets turnover: Ratio of external sales to average total assets Annual Report

215 Publication Details and Credits Published by: HOCHTIEF Aktiengesellschaft Opernplatz 2, Essen, Germany Tel.: , Fax: Investor relations contact: HOCHTIEF Investor Relations Opernplatz 2, Essen, Germany Tel.: , Fax: Project management/editors-in-chief: HOCHTIEF Corporate Communications: Lisa Zindler-Roggow, Verena Blaschke Design, text, layout, and editing: HOCHTIEF Corporate Communications Protext, Cologne Struwe & Partner GmbH, Düsseldorf Financial Calendar May 3, 2012 General Shareholders Meeting a.m., Congress Center Essen, Entrance West, Norbertstrasse, Essen May 8, 2012 Quarterly Report at March 31, 2012 Conference Call with Analysts and Investors August 14, 2012 Half-Year Report at June 30, 2012 Conference Call with Analysts and Investors November 7, 2012 Interim Report at September 30, 2012 Conference Call with Analysts and Investors February 28, 2013 Business Results Press Conference Analysts and Investors Conference English adaptation: Burton, Münch & Partner, Düsseldorf Photographer: Christoph Schroll, HOCHTIEF, Essen May 7, 2013 General Shareholders Meeting a.m., Congress Center Essen, Entrance West, Norbertstrasse, Essen Other photo credits: Computer visualization: HOCHTIEF ViCon, Essen HOCHTIEF photo archive, Essen; Leighton Holdings, Sydney; Turner Construction, New York; Staatstheater Hannover/Thomas M. Jank; Solvin Zankl; Tillmann Franzen; plainpicture/erickson, Fancy Images, Photo Alto, Thomas Reutter; Getty Images/B. Blue, Arabian Eye, Martin & Alex, Maiwolf; Cultura Images/F1 online; Per Kasch/Severinwendeler; Mauritius/OJO Images Imaging work, typesetting and prepress: Creafix GmbH, Solingen This annual report is a translation of the original German version, which remains definitive. For the online version of this annual report, please see The editorial deadline for this annual report was February 28, 2012; the report was published on February 29, Printed by: Druckpartner, Essen This annual report is printed on eco-friendly Maxi Silk coated paper certified in accordance with the rules of the Forest Stewardship Council (FSC). Forward-looking statements This Annual Report contains forward-looking statements. These statements reflect the current views, expectations and assumptions of the Executive Board of HOCHTIEF Aktiengesellschaft and are based on information currently available to the Executive Board of HOCHTIEF Aktiengesellschaft. Such statements involve risks and uncertainties and do not guarantee future results (such as profit before tax or consolidated net profit) or developments (such as with regard to possible future divestments, general business activities or business strategy). Actual results (such as profit before tax or consolidated net profit), dividends and other developments (such as with regard to possible future divestments, general business activities or business strategy) relating to HOCHTIEF Aktiengesellschaft and the HOCHTIEF Group may therefore differ materially from the expectations and assumptions described in such statements due to, among other things, changes in the general economic, sectoral and competitive environment, capital market developments, currency exchange rate fluc tuations, changes in international and national laws and regulations, in particular with respect to tax laws and regulations, the conduct of other shareholders, and other factors. Any information provided on dividends is additionally subject to the recognition of a corresponding unappropriated net profit in the published separate financial statements of HOCHTIEF Aktiengesellschaft for the fiscal year concerned and the adoption by the competent decision-making bodies of HOCHTIEF Aktien gesellschaft of appropriate resolutions taking into account the prevailing situation of the Company. Aside from statutory publication obligations, HOCHTIEF Aktien gesellschaft does not assume any obligations to update any forward-looking statements. Annual Report

216 HOCHTIEF Aktiengesellschaft Opernplatz 2, Essen If your cell phone supports QR codes, scan the code to view further information on the HOCHTIEF Annual Report 2011 on our website.