Annual Report 2017

G e t t i n g cars o f f t h e street

EMISSION-FREE. – reducing bus emissions to zero.

FREEDOM TO TRAVEL. – our U-Bahn network is growing.

FREEDOM FOR ALL. – we embrace diversity.

FREEDOM OF CHOICE, – switchh offers greater mobility than ever before.

BARRIER-FREE. – our major lift programme.

FREE SURFING. – WiFi on the go for everybody. 02 2017 ANNUAL REPORT ANNUAL HOCHBAHN

IMAGINE ...

… diesel buses disappearing from Hamburg’s streets.

… roads served by quieter electric vehicles that protect the climate.

… surfing the internet on the move with free high-speed WiFi.

… no longer needing your own car.

… taking a switchh car from your own front door instead.

… getting from Bramfeld to Jungfernstieg on the U-Bahn in just 22 minutes.

… only needing seven minutes to get from Jungfernstieg to Elbbrücken.

… all of this being more than just an idea. 03 IN BRIEF HOCHBAHN

IT’S NOT HARD TO IMAGE BECAUSE: We are HOCHBAHN.

We make it happen. 04 2017 ANNUAL REPORT ANNUAL HOCHBAHN BA HN 05 IN FIGURES YEAR FINANCIAL 2017 THE

IN FIGURES. 5,083 * employees (up from 4,996 the previous year) 525.1 million in sales (up from €508.6 million) BA 20 92.9 % cost coverage ratio (up from 91.6%) 2,111 million passenger kilometres (up from 2,062 million) 455.8 All figures, data and facts are available online in our manage- million passengers ment report and annual financial statements for 2017 at (up from 446.6 million) hochbahn.de/company report or directly via HNthe QR code.17*incl. Management Board and trainees 06

A message from Supervisory Board Chairman MODEL CITYFOR THE FUTURE OF MOBILITY.

Let us develop our city together. 07 FROM SUPERVISORY BOARD CHAIRMAN A MESSAGE

reach two million by 2035. In 2017 alone, the number of HOCHBAHN passengers rose by 9 (!) million to 455 million – Dear readers, a new record! In 2017, HOCHBAHN again Hamburg is develop- Creating smart, sustain- provided resounding proof MODEL ing the sustainable mobility of able transport solutions is that it has mastered its role as tomorrow like no other city in HOCHBAHN’s aim and ambi- a strong and innovative mobil- Germany. This was emphat- tion. The route of the new U5 ity provider for Hamburg – with ically confirmed in the past East is confirmed, the new increasing economic stability. year when we were chosen to Elbbrücken U4 station will Over the past year, the com- host the ITS World Congress become operational in Decem- pany succeeded in achiev- 2021. “COS it’s Hamburg – ber, and the upgrade from die- ing a cost coverage ratio of City of Solutions” is the motto sel to emission-free electric 92.9 percent, an impressive for the Congress, which will buses is progressing well, as is figure in both national and tackle the theme of intelligent the optimum integration of car, international terms. CITY transport systems and ser- bike and ridesharing as part of The aforementioned pro- vices. In addition to playing a our future switchh offering. jects and the boost provided key role as a driver of impor- HOCHBAHN has also suc- by the ITS World Congress is tant innovations, HOCHBAHN ceeded in bringing HEAT to transforming Hamburg into is also running the ITS project Hamburg – the first German a model city for the future of office. research project to test fully mobility in Europe. I would like to use some autonomous vehicles on pub- Let us develop our city illustrative figures to show lic streets. As project leader, together. Cos it’s Hamburg – why it is so important for us HOCHBAHN is responsible for the most beautiful city in the to think about the next gen- coordinating the entire ven- world. eration of mobility in this city ture – a unique achievement in a smart and efficient way: for a local transport company Hamburg is currently growing in Germany. by around 20,000 residents a year. According to recent studies, our population could FRANK HORCH Senator for the Economy, Transport and Innovation, Free and Hanseatic City of Hamburg

Chairman of the Supervisory IN 2017 ALONE, THE NUMBER Board of Hamburger OF HOCHBAHN PASSENGERS Hochbahn AG ROSE BY 9 (!) MILLION TO 455 MILLION – A NEW RECORD!

Senator Frank Horch at the topping-out ceremony of HOCHBAHN’s Gleisdreieck bus depot in autumn 2017. 08 2017 ANNUAL REPORT ANNUAL HOCHBAHN

UN Global Compact SUSTAINABLE FUTURE

With 25 percent of the CO2 footprint in Hamburg attributable to mobility activities, our task is clear.

Hamburg is one of These Sustainable Develop- the best cities in the world to ment Goals (SDG) encompass live in for a reason. Our aim everything from equal oppor- is to keep it that way while tunity to responsible con- continuing to improve quality sumption, energy efficiency to of life. How can we do that? economic growth, climate pro- By creating the mobility of tection measures to innova- tomorrow today, ensuring tion, and fit perfectly with our that it is fit for the future and understanding of sustaina- in harmony with people and ble development. We see our- the environment. By joining selves as an organiser of sus- the UN Global Compact in tainable mobility for our city. December 2017, we have set Climb aboard and learn more ourselves a specific frame- … work. The ten principles and objectives of the UN Global Compact are now an integral part of our HOC HBAHN#2030 strategy. #2030

HENRIK FALK CLAUDIA GÜSKEN HELMUT KÖNIG JENS-GÜNTER LANG Management Board Chairman Management Board member Management Board member Management Board member Chief Executive Officer Human Ressources Director Chief Financial Officer Chief Technology Officer Hamburger Hochbahn AG Chief Operating Officer FOCUS. OUR and well-being good health and infrastructure industry, innovation equality gender following issues: supporting. is work our objectives the of which you shows logos the of Each Compact. Global UN the of goals five the on To focus we this, do development. Hamburg’s ing FOCUSclean energy affordable and

We a t On

he following pages, you will learn how we are driv are we how learn will you pages, following he re also committed to the committed also re tion andproduction responsible consump- education quality action climate economic growth decent work and

and communities sustainable cities

- GOALS HERE. ITS C UN GLOBAL THE ABOUT MORELEARN CAN YOU

MAT AND OMPACT

UN GLOBAL COMPACT GLOBAL UN 09 SUSTAINABLE FUTURE SUSTAINABLE HOCHBAHN 10 ANNUAL REPORT 2017 2 3. 2 3. 2. 2. 2. 2. 1. 1. 1. 3. 3. 2. 2.3.3 REPORT MANAGEMENT 1. 1. .1 1 3 2 . 1 4 3.2 3.2 3.1 3 2 2

Re Re OPPORTUNITIES AND RISKS REP HO Ne Fi Re Ne Co Se RE Re Ob Th FUN nancial position nancial e company’s business model business e company’s ctor-specific environment ctor-specific port on risks and opportunities and risks on port developments expected on port operations of sults development and search t assets, financial position and results of operations of results and position financial t assets, t assets t urse of business of urse jectives and strategies and jectives PORT ON ECONOMIC POSITION CHBAHN employees CHBAHN

ORT ON EXPECTED DEVELOPMENTS, 2 017 DAMENTAL INFORMATION ABOUT THE COMPANY

22 14 22 20 20 28 18 15 13 12 14 11 17 17 11 11 FUNDAMENTAL INFORMATION ABOUT THE COMPANY THE ABOUT INFORMATION FUNDAMENTAL REPORT MANAGEMENT

1. Fundamental information about the company

1.1 The company’s business model Hamburger Hochbahn AG (HOCHBAHN) is one of the leading local public transport companies in Germany. Approximately 1.2 million passengers use the public transport provided by HOCHBAHN and its subsidiaries on four U-Bahn lines, 110 bus lines and several ferry services every day. HOCHBAHN thus provides ap proximately half of all public transport services within the Hamburg Public Transport Association (Hamburger Verkehrs verbund – HVV). With over 5,000 employees, the company is one of Hamburg’s largest employers. On 24 November 2009, the Free and Hanseatic City of Hamburg officially entrusted HOCHBAHN with public service obligations regarding the operation of regular bus and U-Bahn services in Hamburg. These contracts stipulate that HOCHBAHN is officially entrusted with the operation of regular bus services until 2019 and regular U-Bahn services until 2032. Together with its many subsidiaries and investees, including those providing rolling stock maintenance, security and cleaning services, HOCHBAHN is an integral part of mobility in Hamburg.

Hamburger Hochbahn AG is a company organised and managed according to private sector principles which is wholly-owned by the Free and Hanseatic City of Hamburg via HGV Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement mbH (HGV). The company is organised into four divisions:

Management Board Chairman Henrik Falk Claudia Güsken Helmut König Jens-Günter Lang

Division Division Division Division Corporate Management Personnel and Operations Finance Technical Henrik Falk Claudia Güsken Helmut König Jens-Günter Lang

The Corporate Management division is led by the Chief Executive Officer. This division comprises Sy stem Development and Bid Planning, Marketing, Corporate Communications, Sales and Transport, as well as several staff units (Public affairs and strategy, Public Participation, Organisation, Auditing, Business Develop- ment). U-Bahn and Bus Services together with Personnel and Occupational Safety, Environmental and Fire Protection make up the Personnel and Operations division. The Finance division comprises Finance and Controlling, Purchasing, Information Management, Legal and Real Estate. The Technical division consists of Project Construction / Ra ilway Installations, Infrastructure, Bus Technology and Rail Rolling Stock as well as construction of the new U5 U-Bahn line. 12 2017 ANNUAL REPORT ANNUAL HOCHBAHN Ms Claudia Güsken, Human Resources Director and Chief Operating Officer, joined HOCHBAHN on 1 September 2017. Until that date, Chief Executive Officer Henrik Falk had assumed responsibility for the Personnel department, Chief Financial Officer Helmut König had taken over Bus Services, and Chief Technology Officer Jens-Günter Lang had assumed responsibility for U-Bahn Services, Occupational Safety, Environmental and Fire Protection – all on an interim basis.

HOCHBAHN is dependent upon the legal framework within which it functions and, in particular, political decisions concerning local public transport in the Free and Hanseatic City of Hamburg. In recent years, the po sitive development of the company was primarily driven by the above-average increase in passenger nu mbers compared to Germany as a whole. HOCHBAHN is geared towards further growth.

One important milestone in the expansion of the U-Bahn network during 2017 was establishing the route of the eastern section of the new U5 U-Bahn line currently being planned. Plans to extend the U4 U-Bahn line to Horner Geest and building work on the new Oldenfelde station (U1) and the extension of the U4 line out to the bridges across the Elbe continued according to schedule. In the bus business, the first calls for tender began for the serial production of 60 battery-powered electric buses that will be acquired in stages between now and the end of the decade. Other important projects included the continued testing of innovative new propulsion systems in bus operations (particularly on “innovation line” 109), the commissioning of additional new-generation DT5 U-Bahn rolling stock and its use in regular service and ongoing work to provide barrier-free access to U-Bahn stations.

HOCHBAHN remains firmly on course to make digitalisation a cornerstone of its company strategy. The core objective of this strategy is to take advantage of the opportunities offered by digitalisation and, together with the City of Hamburg and its other mobility partners, create a simple, personal, flexible and sustainable mobility offering for the future.

Ahead of the entry into force of the EU General Data Protection Regulation (GDPR) on 25 May 2018, the company’s data protection officer kept members of the Management Board up to date with the progress of implementation.

1.2 Objectives and strategies The mobility sector is at the start of a period of profound transformation. This shift is driven by several factors that are expected to include strong traffic growth until 2030, new social, economic and technological trends, the realignment of many companies’ business models as a result of digitalisation, changes in customer expectations, demographic developments and the entry of new market participants from areas outside local public transport. With significant help from digitalisation, new players are already surging into the mobility market and changing it. In addition to renowned automobile manufacturers and car sharing providers, companies from the digital economy are also entering the market, including platform providers in particular. This is resulting in new business models that could fundamentally alter the mobility market, especially with regard to splitting the transport volume across different types of transportation (modal split), and thus place pressure on traditional local public transport. How HOCHBAHN reacts to, integrates and enters into partnerships with the provider of these new business models will be key for the future of the company.

The HOCHBAHN#2030 company strategy is HOCHBAHN’s response to the worldwide megatrend of digitalisation, which is triggering many changes in the mobility sector and creating major opportunities for the company. HOCHBAHN’s long-term vision is “intelligent mobility for a future worth living in”. HOCHBAHN’s mission “to provide sustainable mobility for the Hamburg SmartCity” is a declaration of its identity and commitment to 13 FUNDAMENTAL INFORMATION ABOUT THE COMPANY THE ABOUT INFORMATION FUNDAMENTAL REPORT MANAGEMENT

creating value for its customers, employees and the City of Hamburg and taking responsibility for people, the environment and society. For HOCHBAHN, sustainability means being fit for the future. HOCHBAHN reinforces this concept by supporting the UN Global Compact. The ten principles and objectives of the UN Global Co mpact are an integral part of HOCHBAHN#2030 and form the basis for our activities.

In recent years, the opportunities that digitalisation offers to intelligently interconnect processes mean that customer-focused solutions have become increasingly important and everyday work and daily life are becoming ever easier to organise. The same is true of the mobility sector, which needs sustainable solutions that combine as many mobility options as possible and make optimal use of new digital opportunities. This way, customers can consistently navigate their way from A to B simply and precisely by using their smartphones.

As HOCHBAHN already forms the backbone of mobility in Hamburg with around 700,000 subscribers and is a impartial partner of the city with a stake in its infrastructure and connectivity, the company is ideally placed to organise sustainable mobility in Hamburg. The expansion of HOCHBAHN’s core business to include the pooling and coordination of additional mobility services has helped to lift our customer figures, broadening our previous objective from “increase passenger figures” to “increase customer figures”.

HOCHBAHN’s strategic initiatives give the company crucial leverage to fulfil its mission as an organiser of sustainable mobility for the Hamburg SmartCity. Every initiative combines important, strategically-relevant schemes, projects and programmes to ensure HOCHBAHN is well positioned for the digital future of mobility in Hamburg. These initiatives allow the company to continue implementing its corporate strategy, increase customer numbers, tap into new customer groups, business areas and sources of income, and enhance the efficiency and sustainability of its core U-Bahn and bus business.

1.3 Research and development In Hamburg and other German cities, the pressure to further reduce harmful emissions, particularly nitrogen oxide, has increased to such an extent that bans on diesel cars are now likely in a number of cities. In February 2018, the Federal Administrative Court paved the way for this development. Against this backdrop, a National Diesel Summit headed by the Chancellor in November 2017 resulted in the launch of a €1 billion emergency programme entitled “Clean Air 2017 to 2020”. As part of the application process for grants to upgrade fleets of public transportation vehicles to electromobility, in January 2018 HOCHBAHN applied for a grant for the 60 e-buses it plans to procure by 2020 and the associated charging infrastructure. During an additional call for grant applications to digitalise transport (funding volume of €500 million), the company submitted an additional proposal for a subsidy for a new digital passenger information system in March.

As upgrading the bus fleet to local emission-free drive systems is very important for HOCHBAHN, this issue is also the focus of HOCHBAHN’s commitment to research and development. The concept for upgrading the bus fleet is being technically refined using the results of tests on “innovation line” 109 and by working closely with bus manufacturers, universities such as Helmut Schmidt University (HSU) and scientific institutions such as the Fraunhofer Institute for Transportation and Infrastructure Systems to exchange expertise. The focus now is on electric buses with powerful batteries that are supplied with energy at bus depots. The ove rall project to upgrade to alternative drive systems is currently focusing on preparations for the first preliminary vehicles, which are expected to enter service by the end of 2018. The first local emission-free buses to roll off the production line are scheduled to commence operations at the start of 2019. HOCHBAHN is working on the development of standards for electric bus systems as part of a joint initiative with several German transport companies.

Upgrading the entire bus fleet to electric drive systems requires thorough analysis that also includes the systematic expansion of charging infrastructure. The necessary concepts are being implemented for the first time in Germany at HOCHBAHN’s Gleisdreieck bus depot and VHH’s (Verkehrsbetriebe Hamburg-Holstein GmbH) Bergedorf depot. These concepts take into account the findings of the metastudy on the demands placed on the electricity grid conducted in 2017 in conjunction with Stromnetz Hamburg and HSU. In addition, HSU will continue provide research support for these new ventures to ensure that technology remains up-to-date and that implementation is sustainable, as well as enabling the concepts to be rolled out at other HOCHBAHN 14 2017 ANNUAL REPORT ANNUAL HOCHBAHN depots and other transport companies. As the grid connections at individual bus depots will not be able to provide enough energy to charge all buses simultaneously in future, a load and charge management sy stem is being developed that is expected to become operational by the end of 2018. This prevents the grid connection from becoming overloaded while ensuring that buses can be charged with the maximum power available. Due to the high degree of innovation involved in the concepts being developed in Hamburg, im plementation at the two depots and the accompanying scientific research conducted by HSU is receiving around €9 million in funding as part of the Federal Government’s mobility and fuel strategy.

Automated buses are one option for providing transport services at specific times or in certain areas with low demand when required as part of a transport company’s offering. However, plenty of research is still required in order to assess technical, operational and strategic issues such as suitable future fields of application and economically viable business models. With this in mind, HOCHBAHN has engaged the Institute for Climate Protection, Energy and Mobility (IKEM) from Berlin and the Institute of Transportation Systems at Deutsche Zentrum für Luft- und Raumfahrt e.V. (German Aerospace Center) in Braunschweig to scientifically analyse these issues as part of its project on autonomous minibuses in the HafenCity (HEAT, Hamburg Electric Autonomous Transportation). The autonomous minibuses are expected to be in regular operation by the end of 2020, in time for the ITS World Congress 2021 in Hamburg. The ITS World Congress deals with intelligent transport systems and services, and HOCHBAHN also expects the initial findings of the accompanying scientific research to be presented at this event.

2. Report on economic position

2.1 Sector-specific environment Local public transport as a growth sector The number of passengers using local public transport in Germany increased again in 2017. Local pu blic transport passenger numbers rose by 1.4% to 10.32 billion people year-on-year. This growth in passenger numbers is attributable to considerable increases in rail-based local transport (+3.5%) and tram transport (+2.0%). Passenger numbers in the bus segment fell by 0.2% year-on-year. Fare income grew by 3.3% to €12.78 billion, while transport performance rose by 1.7% to 94.81 billion passenger kilometres *.

Provisional statistics Local public transport passenger numbers according to statistics provided by the Association of German Trans- port Companies (Verbands Deutscher Verkehrsunternehmen – VDV) and changes from the previous year:

2017 1 2016 2015 Total public transport passenger numbers according to VDV statistics (million) (Total passengers, net) 10,320 10,180 10,004 Change from previous year (%) 1.4 1.8 0.5

1 The figures for 2017 represent preliminary data based on projections from the first three quarters

* Ch arts of the annual press conference of the Association of German Transport Companies (VDV) and the Internet: https://www.vdv.de/presse.aspx?id=21a74b88-1484-4af8-9e31-3e2ff8cc34a8&mode=detail 15 FUNDAMENTAL INFORMATION THE ABOUT COMPANY REPORT MANAGEMENT

2.2 Course of business The estimated increase in demand of 1.4% across Germany in 2017 was slightly below the previous year’s rise of 1.8%. Extrapolations suggest that demand in the HVV transport region grew by 1.2%* in 2017. After above- average performance in the previous year, growth for 2017 slightly lagged that of the VDV. The continuing boom in tourist trips, buoyant employment figures and robust consumer spending were the main reasons for this growth. Calendar effects such as the additional Reformation Day public holiday meant that there were three fewer business days and one fewer Saturday in 2017 than in the previous year. This had a slight dampening effect on passenger numbers.

Based on preliminary figures, more than 455 million people (including those changing means of transport) used |

HOCHBAHN’s services in 2017, equivalent to a year-on-year increase of 2.1%*. The renovation of U-Bahn and RE PORT ON ECONOMIC POSITION bus stations and work on the bus optimisation programme continued as planned to a similar extent as in the previous year. Although longer-term construction work was carried out on more heavily-used sections of track around the Berliner Tor – Wandsbeck – Gartenstadt U-Bahn stations, this work was of a significantly shorter duration than in 2016, thus offsetting the effect of the rainy summer and the decline in the number of refugees. Positive effects included the opening of the Elbe Philharmonic Hall and the continuing influx of visitors on the U3 U-Bahn line and corresponding bus lines. Lower passenger figures at the time of the G20 summit had only a limited effect on demand trends due to the relatively short duration of the event.

In 2017, HVV’s transport income rose by an estimated 2.4%** compared to the previous year. This rise exceeded the +1.4% average increase in fares in January 2017 and thus reflected the rise in passenger numbers. The further increase in the number of students in Hamburg to more than 101,000 had a positive impact, while school traffic stabilised. By contrast, trainee traffic experienced a decline. While cash sales of single tickets for shorter routes fell slightly once again, demand for day and group tickets rose sharply, with full-time and corporate client subscriptions also reporting significant growth. This demonstrates the success of our targeted marketing initiatives. Based on existing data and above-average demand development within the transport network, HOCHBAHN estimates income growth of at least 2.4%** in 2017.

HOCHBAHN transport performance

Number of passengers carried (in thousand) 2017 1 2016 2 2015 U-Bahn 242,453 235,391 228,944 Bus 213,297 211,186 208,589 Total of both divisions (U-Bahn + bus) 455,750 446,577 437,533 Total number company-wide 3 387,388 379,590 371,903 Passenger kilometres (in thousand) U-Bahn 1,447,443 1,405,284 1,366,796 Bus 663,580 657,010 648,931 Total number company-wide 2,111,023 2,062,294 2,015,727

1 Provisional figures 2 Updated figures 3 In the line entitled “Total number company-wide”, passengers changing from bus to underground and vice versa are only included once.

* Provisional figures ** VDV press information, HVV statement of account and information 16 2017 ANNUAL REPORT ANNUAL HOCHBAHN HOCHBAHN operating performance

U-Bahn 2017 2016 2015 Kilometres per unit in service 2 (in thousand) 88,678 87,843 86,760 Kilometres per space1, 2 (in million) 8,529 8,465 8,401 Total track length 2 (km) 104.4 104.4 104.4 Number of lines 4 4 4 Number of stations 2 91 91 91 Average travel speed (km / h) 33.3 3 33.3 33.3

1 Allowance made for standing space of 0.25 m2 each 2 Including Verkehrsgesellschaft Norderstedt mbH 3 Most popular line, U1: 35.1 km / h

HOCHBAHN operating performance

Bus 2017 2016 2015 Kilometres per unit in service (in thousand) 50,476 50,298 49,315 Kilometres per space 1 (in million) 3,950 3,920 3,843 Total track length 2 (km) 921.6 924.6 924.6 Number of lines2 110 111 111 Number of stations 1,329 1,327 1,327 Average travel speed (km / h) 18.8 18.6 18.8

1 Allowance made for standing space of 0.25 m2 each 2 Regular services as per Section 42 of the German Public Transport Act (Personenbeförderungsgesetz – PBefG), Line 380 (Arena Shuttle) not included

HOCHBAHN rolling stock

U-Bahn 2017 2016 2015 Type Years built Carriages Units Carriages Units Carriages Units DT11 1958 – 59 6 3 6 3 6 3 DT2 1962 – 66 2 1 2 1 30 15 DT3 1968 – 71 180 60 207 69 207 69 DT4 2 1988 – 2005 504 126 504 126 504 126 DT5 2012 – 2017 237 79 171 57 126 42 Number 929 269 890 256 873 255 Total rolling stock held 2 Spaces 3 85,695 82,712 80,920 Total ready for operation 848 241 839 238 861 250

1 One DT1 unit, with two carriages, is the Hanseat saloon carriage 2 Including 2 units (8 carriages) from Verkehrsgesellschaft Norderstedt mbH 3 Allowance made for standing space of 0.25 m2 each 17 REPORT ON ECONOMIC POSITION REPORT MANAGEMENT

HOCHBAHN rolling stock

Bus 2017 2016 2015 City and express buses 1, 2 507 484 460 Articulated buses 1, 2 289 272 270 Double articulated buses 1, 2 14 25 26 Diesel hybrid articulated buses 1 15 15 20 Fuel cell battery articulated buses 1 2 2 2 Fuel cell / hybrid / plug-in buses 1 22 22 19

All buses Number 2 849 820 797 Spaces 2, 3 68,810 67,133 65,781

1 Low-floor buses 2 Excluding approx. 150 units of subsidiaries / leased units 3 Allowance made for standing space of 0.25 m2 each

2.3 Net assets, financial position and results of operations 2.3.1 Results of operations In 2017, HOCHBAHN’s transport income rose by €9.8 million year-on-year to €440.4 million. This increase was partly due to the positive rise in demand and partly to the increase in HVV fares effective 1 January 2017. In the final calculation of the distribution of HVV income for 2016, HOCHBAHN’s proportional share was set at 48.6%. This rate is also applied to the current reporting period. Revenue from property leasing totalled €21.6 million, thus exceeding the prior-year figure of €20.8 million by €0.8 million.

Own work capitalised in the 2017 financial year amounted to €20.4 million, up €3.4 million year-on-year. Income from subsidy payments for 2017 was markedly higher than the previous year at €16.1 million (2015: €9.7 million). This was primarily due to higher subsidies for planning services associated with expansion of the U-Bahn network.

Gross revenue improved significantly during the 2017 financial year, increasing by €31.6 million to €572.5 million.

In cost of materials, diesel costs increased by €1.6 million to €17.8 million, due among other things to more kilometres being driven by the HOCHBAHN buses and the increase of €0.07 per litre in the average price of diesel.

In personnel expenses, additional expenses were incurred compared to the previous year due to collective wage increases and the higher number of employees. In addition, expenses resulting from the adjustment of various personnel provisions to their settlement amount as at 31 December 2017 were higher than in the previous year. Overall, personnel expenses rose by €13.5 million year-on-year to €253.1 million.

The €14.0 million decrease in other operating expenses in 2017 was mainly due to non-recurring expenses included in the previous year from the recognition of a provision totalling €16.0 million to cover the future financing needs of agilis Eisenbahngesellschaft mbH & Co. KG (agilis E).

Write-downs of long-term financial assets in the 2017 financial year amounted to €3.6 million (2016: €0.9 million). The budgets for Jasper Rund- und Gesellschaftsfahrten GmbH (Jasper) and Süderelbe Bus GmbH show declining results, taking into account an adjustment of personnel costs to the collective wage level of HOCHBAHN. These equity investments were therefore written down. 18 2017 ANNUAL REPORT ANNUAL HOCHBAHN Operating profitability increased mainly due to the decrease in other operating expenses. EBITDA (earnings before loss absorption, net interest income, taxes, depreciation and amortisation) rose by €14.0 million year-on- year to €54.7 million.

As a result of the considerable €31.6 million rise in gross revenue and the strong increase in the operating result in the 2017 financial year, the net loss before loss absorption for the 2017 financial year was reduced by €6.0 million year-on-year to €44.9 million (–11.8%).

In 2017, HOCHBAHN’s cost coverage ratio rose by 1.3 percentage points to 92.9%, a significant increase over the prior-year figure (91.6%). This again represents one of the highest levels achieved in Germany and internationally.

Net loss for the financial year (€ million) 2017 2016 2015 Net loss for the financial year 44.9 50.9 60.2

Cost coverage ratio (%) 2017 2016 2015 Cost coverage ratio 92.9 91.6 89.6

2.3.2 Financial position The condensed cash flow statement below shows the source and use of financing resources during the 2017 financial year and is presented in line with DRS 21. The subsidy payments agreed by HOCHBAHN are included in cash flow from investing activities on a net basis.

Cash funds as at 1.1.2017 €5.0 million Cash flows from operating activities +€27.6 million Cash flows from investing activities –€201.3 million Cash flows from financing activities + €176.2 million Cash funds as at 31.12.2017 €7.5 million

The cash funds as at 31 December 2017 consist of liquid funds.

In order to finance investments totalling €243.0 million before subsidies and make scheduled repayments on old loans amounting to €46.4 million, HOCHBAHN took out four long-term loans with a total volume of €150.0 million as part of its financing activities in 2017.

Loan liabilities at the end of the financial year were €650.1 million, Representing a year-on-year increase of €103.6 million or 19.0%.

Durable capital goods that cannot be covered by internal financing are generally financed by long-term bank loans. HOCHBAHN had committed credit lines at German banks with a total volume of €20.0 million. These credit lines can be used freely as part of the company’s ordinary business activities and were partially drawn down in the amount of €4.1 million.

Short-term financing needs are funded from the cash pool of the HGV Group. HOCHBAHN expects HGV to continue providing it with sufficient access to finance in future.

HOCHBAHN was able to meet its payment obligations at all times during 2017. 19 REPORT ON ECONOMIC POSITION REPORT MANAGEMENT

Capital expenditures In the 2017 financial year, HOCHBAHN incurred gross capital expenditures (before deduction of subsidies) totalling €243.0 million. Comprising 70.9% of total capital expenditures during the reporting year, the co mpany’s investing activities once again focused on U-Bahn operations, including infrastructure, with a total of €172.2 million. Of this amount, €77.6 million was attributable to the procurement of DT5 units, €23.0 million to measures for new U-Bahn construction (construction of a loop line and siding complex, extension of the U4 to the bridges over the Elbe, connection structure between Elbbrücken station and S-Bahn), €16.1 million to conversion of U-Bahn stations to enable barrier-free access, €12.9 million to above-ground construction, €5.7 million to construction of the new Billstedt U-Bahn workshop, €4.7 million to construction of the new Barmbek interlocking, and €3.5 million to the procurement of lorries. Further investments in the U-Bahn system involved the modernisation and maintenance of existing rolling stock and facilities.

A total of €57.1 million was invested in the bus system, including €42.4 million for the purchase of new buses, €11.3 million for the construction of the new Gleisdreieck bus depot, €1.4 million for WiFi installations in buses, and €0.5 million for video equipment in buses.

Investments in common facilities totalled €4.1 million, including premises of the former Jasper depot (€1.3 million), ticket machines (€0.3 million), the full electronic ticketing service (€0.2 million), the switchh project (€0.2 million), and automatic passenger counting equipment (€0.1 million).

Investments in financial assets related to additions to the capital reserves of HOCHBAHN Beteiligungs- gesellschaft mbH & Co. KG, Hamburg, totalling €9.6 million.

The following table shows a summary over several years:

Capital expenditures 2017 2017 2016 2015 € million % share € million € million U-Bahn division New rolling stock and facilities – DT5 77.6 31.9 114.1 107.6 – Construction of new U4 U-Bahn line 23.0 9.5 25.9 32.0

Existing rolling stock and facilities – Tracks, trackside equipment, safety installations, construction projects and rolling stock 71.6 29.5 47.9 42.9 U-Bahn subtotal 172.2 70.9 187.9 182.5

Bus division Rolling stock, fixtures and fittings, facilities and installations at bus depots 57.1 23.5 27.3 29.6 Shared facilities 4.1 1.6 3.1 2.0 Long-term financial assets 1 9.6 4.0 6.9 10.8 Total capital expenditures 243.0 100.0 225.2 224.9

1 without changes in the value of the securities portfolio 20 2017 ANNUAL REPORT ANNUAL HOCHBAHN 2.3.3 Net assets As at 31 December 2017, HOCHBAHN’s total assets increased by €118.3 million or 11.4% year-on-year to €1,156.6 million. This rise is primarily due to the increase in tangible fixed assets on the assets side of the balance sheet largely caused by the procurement of new DT5 generation U-Bahn rolling stock. At the same time, liabilities to banks on the liabilities side of the balance sheet increased as a result of taking out new loans to finance investments in these tangible fixed assets.

As at the balance sheet date, equity remained unchanged at €142.4 million. As a result of the increase in total assets, HOCHBAHN’s equity ratio declined year-on-year by 1.4 percentage points to 12.3%.

Assets 2017 2017 2016 € million % share € million Tangible and intangible fixed assets 915.7 79.2 799.2 Long-term financial assets 153.4 13.3 147.2 Inventories 19.8 1.7 19.8 Trade receivables 14.6 1.3 11.4 Cash 7.5 0.6 5.0 Other current assets and prepaid expenses 45.6 3.9 55.7 Total assets 1,156.6 100.0 1,038.3

Equity and liabilities 2017 2017 2016 € million % share € million Equity 142.4 12.3 142.4 Pension provisions 70.9 6.1 65.8 Liabilities to banks 652.4 56.4 548.1 Other provisions 148.5 12.9 161.4 Trade payables 33.9 2.9 39.3 Other liabilities and deferred income 108.5 9.4 81.3 Total equity and liabilities 1,156.6 100.0 1,038.3

2.4 HOCHBAHN employees As at 31 December 2017, the number of people employed by HOCHBAHN increased by 87 employees year-on-year.

31.12.2017 31.12.2016 31.12.2015 Full-time employees 4,536 4,442 4,418 Part-time employees 421 408 391 Management Board members 4 4 4 Trainees 122 142 164 Total employees 5,083 4,996 4,977

Collective wage agreement The collective wage agreement was terminated by the ver.di trade union with effect from 30 April 2018. As a result, the union and management will enter into collective negotiations in May 2018. 21 REPORT ON ECONOMIC POSITION REPORT MANAGEMENT

Work-study programmes / vocational training HOCHBAHN introduced a new dialogue marketing specialist apprenticeship on a part-time basis with two positions starting in the new 2017 training year. The company is expanding its part-time training of fering further in 2018. In addition to four part-time commercial apprenticeships specialising in dialogue marketing, a technical / industrial apprenticeship specialising in device and systems electronics is being introduced in Hamburg for the first time on a part-time basis.

The company also expanded its range of technical work-study courses in 2017. Since the 2017 / 2018 winter semester, HOCHBAHN has been training its first student in a work-study programme specialising in mechatronics in partnership with Hamburg University of Applied Sciences (HAW). In autumn 2018, the range of work-study programmes will be expanded to include an additional position specialising in civil engineering at Hochschule 21 in Buxtehude. The company will also train up to two computer scientists in 2018 in partnership with the Nor dakademie in Elmshorn.

Integration of refugees HOCHBAHN launched a training course for 16 refugees in conjunction with DEKRA and the Jobcenter in 2017. In addition to German language lessons, the first part of the course also included driver training. Ten participants have successfully completed the programme since the bus driver training and subsequent internship were launched in May 2017. These ten participants became employees of HOCHBAHN’s bus service with effect from 1 February 2018. A new training course with approximately 15 refugees is planned for 2018.

Diversity On 12 December 2016, the HOCHBAHN Supervisory Board agreed target percentage of at least 37.5% for women on the Supervisory Board and at least 25% on the Management Board. At the Supervisory Board meeting on 2 March 2017, it was retrospectively determined that these quotas should apply until 31 December 2020. As at 31 December 2017, the company met its Supervisory Board target with 37.5% female Supervisory Board members. The proportion of women on the Management Board also met the target at 25%.

In the Supervisory Board meeting on 2 March 2017, the Management Board informed the Supervisory Board of the gender quota it set for the first and second management levels below the Management Board. The ta rget is at least 28% for the first level of management, including managing directors of subsidiaries, and at least 19% for the second level of management. Both targets apply until 31 December 2020. As at 31 December 2017, the actual percentage was 25% for the first level of management and 18% for the second level of management. While neither figure is currently being achieved, HOCHBAHN is stepping up its efforts to meet the targets.

Basic principles of the remuneration system for Management Board members The remuneration structure determined by the Supervisory Board is governed by the director’s contracts of individual Management Board members. The remuneration is divided into non-performance-related and performance-related components.

The non-performance-related components primarily consists of the base salary. Other benefits are also included in non-performance-related components. They include the taxable monetary value of non-cash benefits such as the private use of company cars as well as reduced-price travel for the spouses and children.

The variable portion of remuneration is paid on a performance-related basis, and its components are determined by the Supervisory Board. Variable performance-related remuneration agreements are concluded with Management Board members each year. 22 2017 ANNUAL REPORT ANNUAL HOCHBAHN 3. Report on expected developments, opportunities and risks

3.1 Report on expected developments U4 line extension The extension of the U4 U-Bahn line is necessary in light of the ongoing development of the eastern part of HafenCity. As part of this project, the existing U4 track is being extended by approximately 1.3 kilometres. This track extension includes a turning loop and sidings in the immediate vicinity of the existing HafenCity Universität station as well as an additional station at Elbbrücken (the bridges over the Elbe), where passengers can change to the rapid transit (S-Bahn) network. The total budget for this programme is €178.2 million, which will be fully financed by a grant from the Free and Hanseatic City of Hamburg and funds made available by the Federal Government under the Local Authority Public Transport Finance Law (Gemeindeverkehrsfinanzierungs- gesetz – GVFG).

The turning loop and sidings became operational in October 2017. Structural and track works on the tunnel and trough section were completed by September 2017. This was followed by the laying of trackside cables and the installation of train control systems in the track area. Construction of the steel structure for the station roof was completed in summer 2017, with the majority of the glass panes installed by the end of October 2017. The space is being extended and technical building equipment installed inside the station during 2018. The connecting structure between the Elbbrücken U-Bahn and S-Bahn stations is scheduled to be lifted in two parts over Versmannstraße and the Deutsche Bahn long-distance tracks in May 2018. Services on this section of the U4 U-Bahn line are due to begin as planned in December 2018. As a result of more favourable contract place- ments and because foundation risks did not materialise, the project is approximately €20 million under budget.

Barrier-free upgrading of U-Bahn stations Providing people with limited mobility with access to local public transport is of particular concern for the Se nate of the Free and Hanseatic City of Hamburg and HOCHBAHN. The main elements in enabling barrier-free access are the integration of lift facilities, raising the level of platforms and equipping the stations with orientation aids for visually-impaired persons. The entire programme for upgrading U-Bahn stations to enable barrier-free access in the Hamburg metropolitan area is fully funded by grants from the Free and Hanseatic City of Hamburg. Stations in Schleswig-Holstein are funded by contributions from the State of Schleswig-Holstein, the administrative district of Stormarn and the municipal authorities concerned.

In the first stage of the accelerated upgrade programme, a total of 21 stations have already been upgraded to allow barrier-free access by the end of 2016.

A feasibility study was first commissioned in December 2013 in the following stages for the additional st ations (including four in Schleswig-Holstein), with construction scheduled to begin from 2016 onwards. This study identified the preferred option in each case, costs and a schedule for implementation. The findings for all stations were available by the end of 2017. Barrier-free access was created at a total of five stations in the second stage of the programme during the 2017 reporting year. This includes the U1 stations at Ahrensburg Ost, Ahrensburg West and Schmalenbeck in Schleswig-Holstein as well as Buchenkamp and Buckhorn. Works at Merkenstraße (U2) station were completed in January 2018, while upgrading work has begun at six further stations (Langen- horn Nord, Hoheluftbrücke, Habichtsstraße, Uhlandstraße, Lübecker Straße (U3), Meiendorfer Weg). Work on all of these stations is expected to be completed in 2018. The construction started at the Joachim-Mähl-Straße and Hagendeel stations in 2016 continued in 2017. This work is also likely to be completed in 2018 due to the complexity of both of these stations. 23 REPORT ON EXPECTED DEVELOPMENTS, OPPORTUNITIES AND RISKS AND OPPORTUNITIES DEVELOPMENTS, EXPECTED ON REPORT REPORT MANAGEMENT

Subsidies have also been granted for construction at six additional stations (Alter Teichweg, Lohmühlenstraße, Lübecker Straße (U1), Ritterstraße, Straßburger Straße, Wandsbeker Chaussee), with building work set to begin in summer 2018. These modifications are expected to be completed in 2019.

Subsidies for the design and approval planning of five stations (Mönckebergstraße, Rathaus, Landungsbrücken, Fuhlsbüttel Nord, Klein Borstel) to be converted in 2019 and 2020 have also been granted. The development of conceptual designs for these stations began in summer 2017. The grant for the design and approval planning of three stations (Jungfernstieg (U1), Messberg and Steinstraße) to be converted in 2021 was issued in April 2017. The grant application for construction at the Mönckebergstraße, Rathaus, Jungfernstieg (U1), Messberg and Steinstraße stations is expected to be submitted in autumn 2018. A grant application for the Landungsbrücken, Klein Borstel und Fuhlsbüttel Nord stations is expected to be submitted in the second quarter of 2018.

Barrier-free access upgrade work at the remaining five stations is scheduled to take place steadily over the next decade.

U-Bahn network expansion Hamburg is aiming to develop its local public transport network primarily by expanding the existing rapid tr ansit and regional rail network. To support these efforts, HOCHBAHN has been entrusted with the planning and implementation of construction work related to the U-Bahn. A concept study concluded at the end of 2014 produced the following network expansion measures:

• Construction of a U1 station at Oldenfelde • Expansion of the U4 line to Horner Geest • Construction of a new U5 line from Bramfeld to Osdorfer Born (in different sections)

The planning approval decision for construction of the new Oldenfelde station on the eastern branch of the U1 U-Bahn line between the Farmsen and Berne stations was received in August 2017. A grant totalling €19.5 million was issued by the Free and Hanseatic City of Hamburg in March 2017 to finance this construction work.

Implementation planning and the first EU-wide tendering process were carried out by the end of 2017. Contracts for the shell construction, earthworks and bracing work were awarded in December 2017.

The building site was fitted out in January 2018, with the first phase of construction getting underway in February 2018. Two service interruptions are planned on the U1 line in 2018. The first interruption took place during the spring break in March, and the second interruption is scheduled for the autumn holidays starting on 29 September 2018. The station is expected to open at the end of 2019.

In 2017, the project to extend the U4 line to Horner Geest involved the preparation of design documentation. This process was completed by the end of the year as planned. In spring 2017, the “coordination document” prepared based on this design documentation was sent to representatives of public interests for comment. Comments received from these public bodies were incorporated into the design. The company expects to submit the planning documentation by the end of May 2018. This will be immediately followed by implementation planning and the preparation of tendering documents. An additional application for a grant totalling €4.8 million has been submitted for this purpose, and this application was approved in November 2017. 24 2017 ANNUAL REPORT ANNUAL HOCHBAHN Planning for the construction of the new U5 U-Bahn line continued during the 2017 reporting year, with several milestones reached along the way.

Preliminary planning for the U5 East (Bramfeld – City Nord) planning segment was completed in 2017. Based on economic considerations and due to its positive overall impact on the U5 line, preliminary plans for an alternative route with a station in the Fuhlsbüttler Straße / Nordheimstraße area were drafted. The preliminary plans for the preferred option were finalised with this line layout following the steering committee’s decision on the final route in December 2017. Design plans are being created immediately thereafter to ensure that the planning documents can be submitted at the start of 2019. Construction is still scheduled to start at the end of 2021.

The feasibility study for the U5 Central (City Nord – Innenstadt – Siemersplatz / Stellingen) planning segment was largely completed by the end of 2017. The contract for preliminary planning is scheduled to be awarded in summer 2018 and completion is planned for mid-2020. A grant application for €28.8 million for this project has been submitted to the Free and Hanseatic City of Hamburg; a decision is expected in the second quarter of 2018.

A concept study for the Hamburg West (Stellingen and / or Diebsteich – Lurup – Osdorfer Born) planning segment was concluded at the end of 2016 with a preferred option for both the S-Bahn and U-Bahn. Once a general planner has been selected, a feasibility study is likely to be drafted in cooperation with Hamburg S-Bahn by the second quarter of 2019. The Free and Hanseatic City of Hamburg has approved a €3.2 million grant for the feasibility study.

The scheduling and financing of projects to expand the U-Bahn network are currently proceeding as planned.

Bus optimisation The Senate of the Free and Hanseatic City of Hamburg is aiming to develop one of Europe’s most modern bus transport systems in the city by the end of the decade. Together with project sponsor Hamburg Department for Economic Affairs, Transport and Innovation (Behörde für Wirtschaft, Verkehr und Innovation – BWVI) and the Hamburg State Agency for Roads, Bridges and Waterways (Landesbetrieb Straßen, Brücken und Gewässer – LSBG), HOCHBAHN is heavily involved in this project as a user of the infrastructure. The bus optimisation programme includes all activities along the routes and at the stops being implemented in the short and medium term. The objective is to achieve enhanced service capability (capacity) on MetroBus lines already operating at the limits of their capacity, while at the same time increasing the speed and reliability of bus services. Further steps towards establishing a system of modern bus services will include offering improved services, ensuring widespread barrier-free mobility and using new propulsion technologies in the vehicles.

With passenger demand increasing sharply on MetroBus line 5 since work was completed there in 2014, services on this line were increased from two to three buses every ten minutes in autumn 2016. Together with MetroBus line 4, buses now travel on the section with the highest demand between Eimsbüttel district office and Rathausmarkt every two minutes during peak periods. This high frequency of services was only made possible by the optimisation measures carried out and has now become well established. 25 REPORT ON EXPECTED DEVELOPMENTS, OPPORTUNITIES AND RISKS AND OPPORTUNITIES DEVELOPMENTS, EXPECTED ON REPORT REPORT MANAGEMENT

In 2017, numerous priority systems were put into operation or optimised along MetroBus lines 6, 7, 20 and 25. Additional work was also completed on MetroBus lines 6, 20 and 25, including the refurbishment of the Kapstadtring, Hebbelstraße, Beethovenstraße and U Mundsburg stops. However, some individual measures had to be postponed until 2018 contrary to planning due to the implementation of transport infrastructure improve- ment measures by the City of Hamburg.

Procedures enabling residents to participate in plans at Borgweg (line 6) and on Max-Brauer-Allee (lines 20, 25) were successfully concluded in 2017.

The focus in 2018 is on MetroBus lines 6, 20 and 25 in 2018. Refurbishment plans for Borgweg are currently being finalised, with implementation scheduled for 2019. These measures are expected to complete work on line 6. Several larger construction programmes are scheduled to begin on MetroBus lines 20 and 25 in 2018, including at Alsenplatz, in Überseering and on Hebebrandstraße. The work here consists of both bus stop upgrades and priority measures for traffic light systems where the entire streetscape (including pavements and cycle paths) is often redeveloped and reorganised at the same time. The participation process launched at Eppendorfer Marktplatz in 2017 is still underway and is likely to be completed in the first half of 2018. Work on lines 20 and 25 is expected to conclude in 2019 or 2020.

In addition, the planning process for Expansion Target B of the bus optimisation programme is scheduled to begin in 2018. As part of Expansion Target B, universal priority measures at traffic lights are expected to be implemented and bus stop infrastructure upgraded on MetroBus lines 4, 14, 23 and 26 starting in 2019.

Direct awarding of contracts for bus services On 19 August 2014, the Senate Commission for Public Organisations agreed to invite HOCHBAHN and Verkehrsbetriebe Hamburg-Holstein GmbH (VHH) to create the preconditions required to directly award contracts for bus services. Under this proposal, transport companies are encouraged to develop initiatives such as inter-company optimisation of the route network and bus cycles and benchmarking instruments involving other suitable transport operators. HOCHBAHN conducted extensive studies regarding inter-company network optimisation together with VHH and with the support of Signon (formerly HamburgConsult). The results have been phased in gradually since the 2016 / 2017 timetable change, with the final stage scheduled to be implemented with the 2018 / 2019 timetable change.

Two transport companies from Berlin (BVG) and Hanover (üstra) have been identified as suitable benchmarking partners. Under the direction of PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (PwC), HOCHBAHN developed benchmark instruments with the two transport companies and contrasted comparison data for selected functional areas from the years 2012 and 2014. Another comparison is scheduled for 2018.

After the BWVI announced plans for the planned direct awarding of contracts for transport services for the VHH in the EU Official Journal in late 2015, the contract was directly awarded to the VHH by a Senate decision at the end of 2016.

Advance information has not yet been published for HOCHBAHN as not all the statutory conditions have yet been fulfilled. According to the existing legal framework, contracts may only be directly awarded when the company is not committed outside of its home market either directly or through its shareholdings. This means that HOCHBAHN must find a solution for BeNEX GmbH (BeNEX) within the scope of the EU directive before the contract can be directly awarded. HOCHBAHN has been entrusted by the Free and Hanseatic City of Hamburg to provide bus services until the end of 2019. 26 2017 ANNUAL REPORT ANNUAL HOCHBAHN switchh project The switchh project was launched for a two-year pilot phase on 31 May 2013. switchh enables HOCHBAHN to link local public transport with supplementary mobility services such as car sharing on an online mobility platform and at so-called switchh points. The aim of switchh is to persuade people that they do not need their own car by intelligently networking all publicly available mobility options, to ultimately help improve not only traffic conditions, but also living quality and environmental conditions in Hamburg.

The two-year pilot phase was replaced by a so-called transition phase after a participation procedure aimed at recruiting new cooperation partners was completed in summer 2015. As well as car2go and StadtRAD Hamburg, DriveNow and cambio are also car-sharing partners of switchh. The new range of switchh services was introduced to the market on 1 October 2016. One key feature of this offering is that it is open to all HVV users, thus ensuring that the service is not limited only to HVV subscribers. Furthermore, new customers receive unique introductory offers with all cooperation partners and 20 free minutes per month with car2go and DriveNow. This expansion of the partner network gives customers access to a more diverse selection of vehicles, enabling them to become even less reliant on their own cars.

Hamburg is on track to become a model city for environmentally-friendly and intelligent transport concepts. Local public transport is being expanded and connected with supplementary offerings such as car, bike and scooter sharing, taxis and innovative shuttle services. This, combined with quiet, low-emission drive systems, should make the city more peaceful and improve its air quality as well as making multimodal and intermodal mobility more straightforward, natural and attractive.

These plans are based on a digital infrastructure or platform that networks all publicly available mobility offerings and makes them easy and comfortable for Hamburg residents to access at all times. In an age of increasing digitalisation, the population at large should have reliable and sustainable digital access to urban mobility, whether by train, bus, taxi or sharing services. As the largest transport company in the HVV region, HOCHBAHN has taken on this challenge.

In light of this, HOCHBAHN in August 2017 established a partnership with Upstream next level mobility GmbH (Upstream), a subsidiary of Wiener Linien GmbH & Co KG. HOCHBAHN and Upstream are united by the common goal of creating an independent, communal digital infrastructure for urban mobility and developing it together. The plan is to base Hamburg’s infrastructure on the comprehensive transfer of technology and expertise from Upstream to HOCHBAHN (including all necessary rights for its independent operation and development by HOCHBAHN). This will create the environment required to make best possible use of existing and subsequent innovation and research potential to deliver a comprehensive urban mobility service based on common technology and the reciprocal transfer of expertise and thus keep up with a mobility market un dergoing dynamic change. The implementation process was begun in early October 2017 with the aim of launching a new platform for a comprehensive mobility service in Hamburg in autumn 2018. 27 REPORT ON EXPECTED DEVELOPMENTS, OPPORTUNITIES AND RISKS AND OPPORTUNITIES DEVELOPMENTS, EXPECTED ON REPORT REPORT MANAGEMENT

At the same time, switchh points represent another exciting development. In addition to opening two further sites at Barmbek station and the Hallerstraße U-Bahn station, construction of the fifteenth switchh point began at the Schlump U-Bahn station in 2017 and was completed in February 2018. The first switchh point located in a densely populated area (Ottensen / Bei der Reitbahn) away from a municipal railway station was opened in mid-November 2017 as part of the “Firstmover” project. The number of decentralised switchh points in densely populated areas is expected to increase significantly in 2018. In 2017, the fundamental conditions were put in place for comprehensively equipping switchh points with charging infrastructure in 2018, providing the basis for electrifying the relevant part of the vehicle fleet operated by car2go and DriveNow by the end of 2019.

E-Bus system The City of Hamburg gave HOCHBAHN and all other Hamburg transport companies the political remit of acquiring only locally emission-free buses from 2020 onwards. HOCHBAHN is therefore urged to take all necessary steps to fulfil this mandate.

In July 2017, HOCHBAHN became the first major transport company in Germany to issue a call for tender for 60 emission-free buses, with procurement planned for 2018 to 2020. The tender calls for purely battery- powered buses with a guaranteed range of 150 km (30 vehicles in 2018 / 2019) and 200 km (30 vehicles in 2020). The results of the tendering process are expected in spring 2018.

In addition to vehicles, the infrastructure also needs to be equipped for a fleet comprising only electric- powered buses. Initial measures such as constructing charging facilities for e-buses, creating specialist roles in the workshop and providing staff with the necessary qualifications have already been implemented at the Hummelsbüttel depot. Construction of the new Gleisdreieck depot has fulfilled another important prerequisite for acquiring, servicing and supplying locally emission-free buses. Completion of this project is expected by the end of 2018, and the depot is scheduled to begin operating in spring 2019. The existing infrastructure at all other depots will then be gradually upgraded to the new bus technology. The existing capacity available at Hummelsbüttel will be expanded during this decade, with the remaining depots then following gradually.

The development and enhancement of the digital infrastructure will also be an important component of smooth and efficient passenger operations. As part of these efforts, the existing depot management system (DMS) will be converted into an e-DMS that enables the bus control centre to manage the depots and coordinate the electrified fleet. In addition, a load and charge management system is being developed to coordinate and optimise the electricity supply and charging processes. The systems are scheduled to be integrated into HOCHBAHN’s digital infrastructure by the time the Gleisdreieck depot begins operating in 2019.

The aforementioned changes will also affect the staff required for the bus system, including drivers as well as operations and workshop employees. Existing employees need to be trained accordingly and new recruitment conditions defined for new staff.

An interdisciplinary project management system capable of cross-departmental project organisation was installed at HOCHBAHN to enable the company to fulfil the mandate given to it by the City in a targeted manner. 28 2017 ANNUAL REPORT ANNUAL HOCHBAHN Expected future development of earnings at HOCHBAHN HOCHBAHN reported a net loss for the 2017 financial year of €44.9 million and a corresponding cost coverage ratio of 92.9%. Although a net loss of €52.0 million was originally expected, this was reduced to €45.1 million in the updated forecasts. This was primarily due to higher-than-expected HVV pool income and a weaker rise in diesel prices compared to the original estimates. The actual net loss deviated from the predicted net loss by only €0.2 million.

A net loss of €59.5 million is projected for 2018. The net loss is estimated to rise compared to 2017, primarily as a result of rising capital costs mainly driven by vehicle procurement in the bus and U-Bahn divisions. Staff costs are also forecast to increase due to greater staffing requirements caused by improved performance and planned collectively-agreed wage increases. As revenue growth can only partially offset these additional costs, earnings will not reach 2017 levels.

3.2 Report on risks and opportunities Risk and opportunity management The procedure for the identification, assessment, management and communication of risks and opportunities that arise from the company’s business activities is regulated by HOCHBAHN’s risk and opportunity management (ROM) system.

To enable focused risk and opportunity management, the key principles are defined by Group management and implemented throughout the Group. These principles are set out in the ROM Manual and regularly reviewed to determine whether they are still relevant and appropriate to the current situation. The Management and Supervisory Boards are regularly informed about the results of ROM inventories.

The goal of risk management is to recognise essential and existence-threatening risks at an early stage and to control them effectively.

The ROM Manual defines risks and opportunities as follows: “Potential future trends or events that might result in a departure from forecasts or goals that is negative (risk) or positive (opportunity) for the entity.”

Risks thus include the occurrence of an economic loss or disadvantage as well as the resulting negative deviation from the approved budget. Conversely, opportunities can lead to an economic gain or advantage and thus to a positive deviation from the approved budget.

The same instruments and processes are largely used for the treatment of risks and opportunities as part of the ROM inventory process. The risks recorded in the overall report are categorised and classified according to their probability of occurrence. However, differentiated rules and regulations apply depending on whether the occurrence of an event is expected in the short or the medium term. 29 REPORT ON EXPECTED DEVELOPMENTS, OPPORTUNITIES AND RISKS AND OPPORTUNITIES DEVELOPMENTS, EXPECTED ON REPORT REPORT MANAGEMENT

Risks The main risks for HOCHBAHN are listed below. The overall risk position of the company is also explained and assessed:

Restrictions on public grants and subsidies Agreements between the federal and state governments ensure the long-term preservation of the German Regionalisation Act (Regionalisierungsgesetz) and the GVFG federal programme. In accordance with these agreements, regionalisation funds with an initial volume of €8.2 billion (as of 2016) are being increased by 1.8% annually between 2017 and 2031 and distributed between the states. The GVFG federal programme will continue indefinitely beyond 2019. However, this results in the adoption of a “freezing clause” (Versteinerungs klausel) that means the GVFG can only be amended from 1 January 2025 onwards. The average amount has therefore been set at the current level of €333 million until the end of 2024. This “freezing” also prevents changes to the content of the GVFG federal programme.

The federal and state governments agreed to bring the current regulations governing funds awarded in accordance with the German Disentanglement Act (Entflechtungsgesetz) to an end in 2019. After this time, the federal government will only make general payments from VAT revenue. The previous tying of funds to the purpose of financing infrastructure measures to improve traffic conditions will lapse. Instead, the states are now obligated to create the appropriate conditions and ensure planning security for the expansion and renovation of transport infrastructure.

Subsidies from the state funds of the Free and Hanseatic City of Hamburg remain subject to significant fluctua- tions and will be largely determined by barrier-free access to U-Bahn stations in future.

Declining subsidies could also mean that essential measures to maintain the operational capabilities of the U-Bahn infrastructure will have to be financed entirely by HOCHBAHN. Higher debt and the resulting increase in debt servicing would have a negative impact on results in the medium term.

Cost structure adjustments – bus services The target set by the Senate of the Free and Hanseatic City of Hamburg of acquiring only locally emission-free buses from the year 2020 is already increasing the proportion of vehicles with alternative drive systems in the current phase. The servicing and repair of these buses requires is more costly than that of vehicles with conventional drive systems. Maintaining costs at a competitive level is a fundamental prerequisite for the direct awarding of bus services planned by the Free and Hanseatic City of Hamburg from 2020 onwards. 30 2017 ANNUAL REPORT ANNUAL HOCHBAHN Insufficient increase in HVV fare Insufficient consideration of actual increases in expenses by the transport authorities when adjusting the fare structure in the HVV transport region could cause HOCHBAHN’s deficit to rise. These cost increases can only be offset with internal savings to a small extent. Based on consultation between transport companies in the region and the transport authorities, any fare updates are geared towards increases in selected expense items.

Recoverability of the investment in BeNEX All activities associated with HOCHBAHN’s investment in BeNEX are conducted in rail-based local transport outside Hamburg. This investment is regularly tested for impairment during preparation of the annual financial statements. Cancelled dividends require corrections and can trigger the need to recognise valuation allowances. There is nothing in current planning to indicate a reduction in or loss of investment income.

The different opinions of BeNEX shareholders regarding the financing responsibility at the agilis E investee have led to a judicial review of this matter. In the first instance, the court ruled against HOCHBAHN in 2016. HOCHBAHN has lodged an appeal against this ruling. In light of this new situation, further adjustments to the current value of the investment cannot be ruled out.

Calls for tender for bus services HOCHBAHN provides bus services based on the fact that it has been entrusted with this task until the end of 2019. After that, there is the general risk that services will be awarded based on competition. HOCHBAHN is aiming to be directly awarded the contract for these services by the Free and Hanseatic City of Hamburg. To create the required preconditions, internal investigations have been carried out in various working groups with the aim of unlocking further potential for optimisation and finding a EU-compliant solution for the comp any’s investment in BeNEX.

Personnel risks Demographic change and a shrinking labour market require a shift in thinking within human resources marketing and increased recruitment efforts. This includes measures addressing specific target groups that are aimed at further increasing employer attractiveness, encouraging young talent and developing human resources development programmes. Enhanced applicant outreach efforts and references to professional career op portunities across all HOCHBAHN divisions were well received during the year under review.

Increased absence rates are causing personnel costs to rise. The rising average age of HOCHBAHN em ployees, a rise in the statutory retirement age and the abolishment of early retirement options may lead to a further increase in absence rates. This development is being counteracted with a company-wide programme of health management. 31 REPORT ON EXPECTED DEVELOPMENTS, OPPORTUNITIES AND RISKS AND OPPORTUNITIES DEVELOPMENTS, EXPECTED ON REPORT REPORT MANAGEMENT

Equity base Significant investments in U-Bahn infrastructure and new services on the one hand and declining subsidies on the other are increasing HOCHBAHN’s debt and reducing its equity ratio in the medium term. As a result of these developments, the company expects its debt servicing to increase. The effects of this development are manageable in the short term. Options for improving the equity ratio are discussed with the shareholder.

Autonomous driving and new mobility services Significant opportunities and risks could arise from the potential offered by autonomous driving and new mo bility services in the medium term.

The technological progress expected in vehicle automation and connectivity between vehicles and infrastructure will open up the possibility of autonomous driving. This development could trigger a rise in demand for autonomous vehicles from private households, which in turn could in turn cause individual transport to make up a greater share of the modal split. In addition to this potential development, autonomous driving is also giving rise to new business models that could play a role in local public transport.

The offerings of new mobility service providers represent competition for the local public transport business model, as they are a response to the growing demand for individualised mobility offerings. As yet, there are no reliable findings as to whether these new mobility services will prompt fewer people to own their own vehicles and thus lead to greater reliance on these services and local public transport.

Summary of risk position In 2017, two regular risk and opportunity management (ROM) inventories were conducted within the HOC HBAHN Group. In the year-end inventory, HOCHBAHN identified 81 risks. Of these, 24 were associated with counterparty risk, 11 with market risk, 18 were attributable to general conditions, 23 were connected with technology and organisation and five related to the Group. Risks allocated to the Group category are those that may arise from HOCHBAHN’s relationship with its equity investments.

HOCHBAHN’s medium-term overall risk position is mainly determined by uncertainties surrounding the develop ment of federal and state governments’ subsidy programmes as well as various technical and organisational risks. The company’s risk position has improved slightly year-on-year due to the elimination of risks.

The risks identified do not threaten the existence of the company either individually or as a whole. From today’s perspective, there are also no discernible going-concern risks in the medium term, either.

The risks represent a snapshot of the current position and are an excerpt from the inventory conducted on 31 December 2017. 32 2017 ANNUAL REPORT ANNUAL HOCHBAHN Opportunities The main opportunities for HOCHBAHN are listed below:

Strategic opportunities Collecting, processing, analysing and disseminating information digitally represents the key future cha llenge for many companies. Digitalisation primarily offers HOCHBAHN the opportunity to win new customers and retain existing ones with attractive services. Digital solutions in the areas of passenger information, as well as smart data use and the development of innovative services can help the company to identify customer wishes and requirements more precisely and offer tailored services. Access to HOCHBAHN transport se rvices will also be facilitated in future by the use of electronic media to unlock additional user potential.

In the longer term, fully automated cars will revolutionise both individual motorised travel and local pu blic transport. Autonomous driving is likely to intensify the shift in mobility culture and lead to the spread of sharing models. Against this backdrop, HOCHBAHN has the opportunity to penetrate new lines of business and thus further develop its strategic mission to become the “driver of sustainable mobility in the Hamburg SmartCity”.

The threat of legal action concerning non-compliance with air pollution targets also places greater pr essure on the City of Hamburg to reduce emission from the transport sector that is harmful to the environment and climate. HOCHBAHN’s transport services are already making a significant contribution to en vironmental and climate protection in Hamburg. When passengers switch from their own cars to buses, trains and car sharing programmes, this not only benefits the environment and climate but also improves the quality of life of Ha mburg residents by freeing up space.

Furthermore, HOCHBAHN is also working proactively to implement the Free and Hanseatic City of Hamburg’s political commitment to acquire only locally emission-free buses from 2020 onwards. The German local public transport sector is breaking new ground thanks to the joint procurement initiative launched by HOCHBAHN and the VHH with transport companies in Berlin, Munich, Stuttgart, Cologne, Düsseldorf and Darmstadt. Amid increasing awareness of the problem of sustainability within the transport sector, HOCHBAHN has an opportunity to reinforce its position as a “problem-solver” and thus equip itself well for the distribution of ever scarcer public resources. 33 REPORT ON EXPECTED DEVELOPMENTS, OPPORTUNITIES AND RISKS AND OPPORTUNITIES DEVELOPMENTS, EXPECTED ON REPORT REPORT MANAGEMENT

Market opportunities The generally positive market development in Hamburg caused by the steadily increasing population creates the ideal environment for expanding HOCHBAHN’s transport services.

The Senate’s aim to promote new residential construction in Hamburg is also driven by expected future population growth and offers HOCHBAHN an opportunity to attract new passengers and customers by connecting these new residential and commercial quarters to the local public transport network. The extension of the U4 U-Bahn line to the bridges across the Elbe and the planned construction of the U5 line will enable future highly populated districts with high demand potential to benefit from shorter travel times to the city centre.

The growing metropolis is also placing increasing strain on the city’s limited road network. The resulting impact of traffic jams and parking space shortages has a negative impact on the appeal of individual motorised travel. HOCHBAHN’s attractive offering gives it the opportunity to benefit from the continually growing demand for local public transport services and associated mobility services.

Hamburg, 29 March 2018

Hamburger Hochbahn Aktiengesellschaft The Management Board

Henrik Falk Claudia Güsken Helmut König Jens-Günter Lang 34 2017 ANNUAL RPEORT ANNUAL HOCHBAHN ANNUAL FINANCIAL STATEMENTS

INCOME STATEMENT 35

BALANCE SHEET 36

STATEMENT OF CHANGES IN FIXED ASSETS 38

NOTES TO THE ANNUAL FINANCIAL STATEMENTS 40 Notes to the balance sheet 42 Notes to the income statement 44 Other disclosures 46 Shareholdings of Hamburger Hochbahn Aktiengesellschaft as at 31 December 2017 52 2 017 35 INCOME STATEMENT ANNUAL FINANCIAL STATEMENTS

Income statement of HAMBURGER HOCHBAHN AKTIENGESELLSCHAFT for the period from 1 January to 31 December 2017

(€) Note 2017 2016 1. Sales (7) 525,081,751.84 508,570,686.31 2. Other own work capitalised 20,357,171.03 16,947,560.58 3. Other operating income (8) 27,082,768.46 15,391,612.52 4. Gross revenue 572,521,691.33 540,909,859.41 5. Cost of materials a) Cost of consumables and supplies, and of purchased merchandise -57,804,246.18 -51,115,301.93 b) Cost of purchased services -173,860,977.59 -163,323,543.76 -231,665,223.77 -214,438,845.69

6. Personnel expenses (9) a) Wages and salaries -207,511,828.81 -196,112,838.51 b) Social security, post-employment and other employee benefit costs -45,634,658.97 -43,525,277.90 -253,146,487.78 -239,638,116.41

7. Amortisation and write-downs of intangible fixed assets and depreciation and write-downs of tangible fixed assets (10) -75,067,861.85 -67,227,582.56 8. Other operating expenses (11) -44,741,789.89 -58,778,998.90 9. Investment income (12) 8,555,189.23 12,158,974.05 10. Net interest income (13) -20,947,558.37 -23,498,017.01 11. Earnings after taxes -44,492,041.10 -50,512,727.11 12. Other taxes -401,052.69 -388,670.71 13. Income from loss absorption 44,893,093.79 50,901,397.82

14. Net income / loss for the financial year 0.00 0.00 36 2017 ANNUAL RPEORT ANNUAL HOCHBAHN Balance sheet of HAMBURGER HOCHBAHN AKTIENGESELLSCHAFT as at 31 December 2017

ASSETS (€) Note 31.12.2017 31.12.2016 A. Fixed assets (1) I. Intangible fixed assets 1. Purchased concessions, industrial and similar rights and assets 1,687,502.00 870.078,00 2. Prepayments 692,019.31 464.253,24 2,379,521.31 1.334.331,24 II. Tangible fixed assets 1. Land, land rights and buildings, including buildings on third-party land 109,099,503.43 108,887,400.35 2. Technical equipment and machinery 678,759,833.23 549,009,671.23 3. Other equipment, operating and office equipment 19,122,564.70 12,702,658.98 4. Prepayments and assets under construction 106,333,739.39 127,212,352.60 913,315,640.75 797,812,083.16 III. Long-term financial assets 1. Shares in affiliated companies 135,130,473.00 129,094,473.00 2. Loans to affiliated companies 1,057,260.21 1,237,525.49 3. Long-term equity investments 155,990.25 401,990.25 4. Long-term securities 9,301,873.53 8,691,147.54 5. Other loans 7,803,000.00 7,803,000.00 153,448,596.99 147,228,136.28 1,069,143,759.05 946,374,550.68 B. Current assets I. Inventories 1. Consumables and supplies 19,789,295.69 19,850,538.68 2. Merchandise 5,914.36 5,914.36 19,795,210.05 19,856,453.04 II. Receivables and other assets (2) 1. Trade receivables 14,564,950.67 11,408,694.00 2. Receivables from affiliated companies 9,231,572.83 9,669,176.22 3. Receivables from other long-term investees and investors 1,987,611.45 1,830,558.78 4. Receivables from the Free and Hanseatic City of Hamburg 32,030,010.70 39,734,034.53 5. Other assets 2,150,675.33 3,933,179.82 59,964,820.98 66,575,643.35 III. Cash in hand, bank balances 7,502,250.49 4,979,187.62 87,262,281.52 91,411,284.01 C. Prepaid expenses 175,309.98 545,558.12

1,156,581,350.55 1,038,331,392.81 37 BALANCE SHEET ANNUAL FINANCIAL STATEMENTS

EQUITY AND LIABILITIES (€) Note 31.12.2017 31.12.2016 A. Equity (3+4) I. Subscribed capital 88,938,200.00 88,938,200.00 II. Capital reserves 48,050,144.94 48,050,144.94 III. Revenue reserves 1. Statutory reserve 4,124,005.57 4,124,005.57 2. Other revenue reserves 1,321,876.04 1,321,876.04 5,445,881.61 5,445,881.61 142,434,226.55 142,434,226.55 B. Provisions (5) 1. Provisions for pensions and similar obligations 70,895,368.00 65,772,333.00 2. Other provisions 148,450,511.84 161,403,980.92 219,345,879.84 227,176,313.92 C. Liabilities (6) 1. Liabilities to banks 652,363,773.69 548,110,731.52 2. Trade payables 33,902,252.50 39,264,511.96 3. Liabilities to affiliated companies 73,161,330.11 45,267,653.19 4. Liabilities to other long-term investees and investors 627.00 1,211,853.89 5. Other liabilities 34,870,490.91 34,139,144.80 794,298,474.21 667,993,895.36 D. Deferred income 502,769.95 726,956.98

1,156,581,350.55 1,038,331,392.81 38 2017 ANNUAL RPEORT ANNUAL HOCHBAHN Statement of changes in fixed assets of HAMBURGER HOCHBAHN AKTIENGESELLSCHAFT for 2017

Cost Depreciation, amortisation and write-downs Carrying amounts

(€ thsd.) Balance on Reclassi Balance on Balance on Reclassi Balance on Balance on Previous 01.01.17 Additions Disposals fications 31.12.17 01.01.17 Additions Disposals fications 31.12.17 31.12.17 year I. Intangible fixed assets 1. Purchased concessions, industrial and similar rights and assets 34,048 1,079 1,169 406 34,364 33,178 668 1,170 0 32,676 1,688 870 2. Prepayments 464 289 0 -61 692 0 0 0 0 0 692 464 Intangible fixed assets 34,512 1,368 1,169 345 35,056 33,178 668 1,170 0 32,676 2,380 1,334

II. Tangible fixed assets 1. a) Land, land rights, including office, operating and other buildings 82,430 1,530 3 10 83,967 29,884 2,041 3 0 31,922 52,045 52,546 1. b) Buildings on third-party land ba) Rail infrastructure, installations and buildings 180,883 1,700 203 3,706 186,086 147,914 2,585 203 0 150,296 35,790 32,969 bb) Other buildings 82,820 290 3 121 83,228 59,448 2,518 3 0 61,963 21,265 23,372 346,133 3,520 209 3,837 353,281 237,246 7,144 209 0 244,181 109,100 108,887

2. Technical equipment and machinery a) Tracks, trackside equipment and safety installations 414,040 11,366 5,566 5,625 425,465 290,859 12,160 5,548 0 297,471 127,994 123,181 b) Rolling stock for passenger and goods transport 814,909 127,846 33,907 40,579 949,427 417,206 44,440 33,691 0 427,955 521,472 397,703 c) Machines and machinery not classified under a) or b) 83,510 3,222 1,466 1,815 87,081 55,384 3,869 1,466 0 57,787 29,294 28,126 1,312,459 142,434 40,939 48,019 1,461,973 763,449 60,469 40,703 0 783,212 678,760 549,010

3. Other equipment, operating and office equipment (incl. low-value assets) 98,826 6,981 2,749 5,635 108,693 86,123 6,183 2,735 0 89,571 19,122 12,703 4. Prepayments and assets under construction 127,212 37,562 604 -57,836 106,334 0 604 604 0 0 106,334 127,212 Tangible assets 1,884,630 190,497 44,501 -345 2,030,281 1,086,818 74,400 44,251 0 1,116,964 913,316 797,812

III. Long-term financial assets 1. Shares in affiliated companies 145,094 9,642 0 0 154,736 16,000 3,606 0 0 19,606 135,130 129,094 2. Loans to affiliated companies 1,238 36 217 0 1,057 0 0 0 0 0 1,057 1,238 3. Long-term equity investments 3,459 0 3,303 0 156 3,057 0 3,057 0 0 156 402 4. Long-term securities 8,691 611 0 0 9,302 0 0 0 0 0 9,302 8,691 5. Other loans 7,803 0 0 0 7,803 0 0 0 0 0 7,803 7,803 Long-term financial assets 166,285 10,289 3,520 0 173,054 19,057 3,606 3,057 0 19,606 153,448 147,228 2,085,427 202,154 49,190 0 2,238,391 1,139,053 78,672 48,478 0 1,169,246 1,069,144 946,374 39 STATEMENT OF CHANGES IN FIXED ASSETS FIXED IN CHANGES OF STATEMENT ANNUAL FINANCIAL STATEMENTS

Statement of changes in fixed assets of HAMBURGER HOCHBAHN AKTIENGESELLSCHAFT for 2017

Cost Depreciation, amortisation and write-downs Carrying amounts

III. Long-term financial assets 1. Shares in affiliated companies 145,094 9,642 0 0 154,736 16,000 3,606 0 0 19,606 135,130 129,094 2. Loans to affiliated companies 1,238 36 217 0 1,057 0 0 0 0 0 1,057 1,238 3. Long-term equity investments 3,459 0 3,303 0 156 3,057 0 3,057 0 0 156 402 4. Long-term securities 8,691 611 0 0 9,302 0 0 0 0 0 9,302 8,691 5. Other loans 7,803 0 0 0 7,803 0 0 0 0 0 7,803 7,803 Long-term financial assets 166,285 10,289 3,520 0 173,054 19,057 3,606 3,057 0 19,606 153,448 147,228 2,085,427 202,154 49,190 0 2,238,391 1,139,053 78,672 48,478 0 1,169,246 1,069,144 946,374 40 2017 ANNUAL RPEORT ANNUAL HOCHBAHN Notes to the annual financial statements for the 2017 financial year of HAMBURGER HOCHBAHN AKTIENGESELLSCHAFT Hamburg Local Court, No. HRB 3072

General disclosures The 2017 annual financial statements of Hamburger Hochbahn Aktiengesellschaft (HOCHBAHN) were pr epared in accordance with the requirements of the German Commercial Code (Handelsgesetzbuch – HGB). The provisions of the German Stock Corporation Act (Aktiengesetz – AktG) were also observed.

The company’s financial year is the calendar year.

To improve the clarity of presentation, items are combined in the balance sheet and income statement but disclosed separately in the notes. We provided explanatory notes to the balance sheet and income statement, also for the sake of clarity. In accordance with Section 265 (5) HGB, we further subclassified the items in HOCHBAHN’s statement of changes in fixed assets. For the classification, HOCHBAHN observes the Regula- tion governing the Classification of the Annual Financial Statements of Transport Companies (Verordnung über die Gliederung des Jahresabschlusses von Verkehrsunternehmen). We prepared the income statement using the total cost (nature of expense) format.

In contrast to the previous year, receivables from HVV GmbH (€7,978 thousand) are no longer shown under other assets but under trade receivables. The prior-year figure (€1,940 thousand) was not adjusted.

Hamburger Hochbahn Aktiengesellschaft is not required to prepare consolidated financial statements and a group management report in accordance with Section 291 HGB. The exempting consolidated financial statements and group management report are prepared and published by our parent company, HGV Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement mbH, Hamburg.

Accounting policies Assets and liabilities have been measured using the same methods as in the previous year.

Intangible and tangible fixed assets are measured at cost and reduced by government grants as well as depreciation, amortisation and write-downs.

In addition to directly attributable costs, proportionate overheads are included in the production cost of internally generated assets. Cost items included in the overheads that cannot be capitalised have been eliminated through the recognition of a percentage discount.

Depreciation and amortisation are calculated over the expected useful life of the asset based on our own experience and standard rates for public transport operators. With the exception of U-Bahn rolling stock and buses, calculations for assets purchased or produced after 30 June 1997 have generally been based on the depreciation table for “passenger and goods transport (by road and rail)” issued by the Federal Finance Ministry from 1 July 1997 in conjunction with the depreciation table for “general-purpose capital goods” valid from 1 January 2001, taking the economic useful lives of the assets in question into account. The plug-in and battery-powered buses being operated in a test phase are depreciated over a shorter useful life of five years because these vehicles are prototypes.

Straight-line depreciation or amortisation is applied to all assets purchased after 1 January 2008. Assets purchased before 1 January 2008 are depreciated using the declining balance method, with the exception of intangible assets, buildings, TV surveillance equipment, DT4 U-Bahn units and buses 41 NOTES TO THE ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL THE TO NOTES ANNUAL FINANCIAL STATEMENTS

The viaducts pertaining to the buildings, station buildings and rail infrastructure are on publicly owned land belonging to the Free and Hanseatic City of Hamburg.

Movable items of finite-lived fixed assets with an acquisition cost of up to €150 that can be used independently are deducted in full as operating expenses.

Movable items of finite-lived fixed assets costing between €150 and €1,000 that can be used independently have been pooled and depreciated or amortised over a period of five years using the straight-line method, reducing profit.

Shares in affiliated companies, long-term equity investments, long-term securities and other loans have been recognised at cost. Where there were identifiable impairments, the assets were measured at fair value.

Non-interest-bearing and low-interest loans were discounted in line with their terms.

Consumables and supplies are measured at the weighted average cost. Internally generated inventories were measured at production cost including overhead surcharges on wages and materials. Appropriate write-downs were charged for identifiable impairments.

Receivables and other assets are carried at their principal amount. Risks are taken into account through appropriate valuation allowances. Liquid funds are shown at their nominal amount.

Payments made before the balance sheet date are carried as prepaid expenses where these represent expenditure for a specific period after the balance sheet date.

Based on actuarial opinions, pension obligations are recognised using the projected unit credit method (PUC) applying Professor Klaus Heubeck’s 2005 G mortality tables. The company did not make use of the simplifica- tion option provided in Section 253 (2) Sentence 2 and (3) HGB but rather used the discount rate in line with the average duration of the liabilities, which corresponds to an average remaining maturity of 12 years. The interest rate as at 31 December 2017 was 3.48% p.a. (previous year: 3.83% p.a.). The future salary trend (including career advancement) was calculated at 2.75% p.a. (previous year: 2.75% p.a.). The anticipated pension trend of 2.50% p.a. (previous year: 2.50% p.a.) was taken into account.

Other provisions include all identifiable risks and uncertain obligations and are recognised at the settlement amount dictated by prudent business judgement. Some of the provisions have been determined on the basis of actuarial opinions. For provisions with a remaining term of more than one year, a salary trend (including career advancement) of 2.75% p.a. (previous year: 2.75%) was taken into account when calculating the settlement amount. For the other price and cost increases, increases of 1.50% p. a. (previous year: 1.50% p.a.) were taken into account. Furthermore, these provisions were discounted in accordance with Section 253 (2) Se ntence 1 HGB at the average market interest rates corresponding to their remaining maturity set by the Deutsche Bundesbank at between 1.43% p. a. (previous year: 1.59% p. a.) and 2.80% p. a. (previous year: 3.24% p. a.). Other provisions also include provisions in accordance with Section 249 (2) HGB (old version). The company made use of the option provided in Article 67 (3) Sentence 1 of the Introductory Act to the German Commercial Code (Einführungsgesetz zum Handelsgesetzbuch – EGHGB) to maintain these provisions.

Liabilities are carried at their settlement amount.

Payments received before the balance sheet date are carried as deferred income where these represent income relating to a specific period after the balance sheet date. 42 2017 ANNUAL RPEORT ANNUAL HOCHBAHN Notes to the balance sheet

(1) Fixed assets

The breakdown of fixed assets is shown in the statement of changes in fixed assets (annex to the notes).

(2) Receivables and other assets

in € thsd. 2017 2016 1. Trade receivables 14,565 11,409 2. Receivables from affiliated companies 9,231 9,669 of which trade receivables / liabilities (-101) (-45) of which other receivables (9,332) (9,714) 3. Receivables from other long-term investees and investors 1,988 1,831 of which trade receivables (1,367) (1,831) of which from other assets (621) (0) 4. Receivables from the Free and Hanseatic City of Hamburg 32,030 39,734 of which trade receivables (22,358) (29,327) of which from other assets (9,672) (10,407) 5. Other assets 2,151 3,933 Total 59,965 66,576

All receivables are fully due within one year.

(3) Subscribed capital

HOCHBAHN’s subscribed capital amounted to €88,938,200.00 on 31 December 2017 and is broken down as follows:

Type of shares Notional par No. of shares value (units) No. of votes € thsd. Bearer shares Class A no-par value shares 720,172 720,172 37,449

Registered shares Class B no-par value registered shares 219,616 219,616 11,420 Class C no-par value registered shares 768,898 768,898 39,982 Class B no-par value preferred shares 1,664 1,664 87 990,178 51,489 1,710,350 1,710,350 88,938

All of HOCHBAHN’s shares are held by HGV Hamburger Gesellschaft für Vermögens- und Beteiligungsmanage- ment mbH, Hamburg. The Free and Hanseatic City of Hamburg holds 100% of the shares in HGV Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement mbH, Hamburg. 43 NOTES TO THE ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL THE TO NOTES ANNUAL FINANCIAL STATEMENTS

The discounting of the provisions for pensions at the average market interest rate for the past ten years compared with a discounting at the average market interest rate for the past seven years gives rise to a difference of €5,260 thousand at the balance sheet date. In principle, this is subject to a dividend payout restriction in accordance with Section 253 (6) Sentence 2 HGB but not to a transfer restriction.

(4) Statement of changes in equity in € thsd. Subscribed Capital Revenue capital reserves reserves Equity Balance at 1.1.2017 / Balance at 31.12.2017 88,938 48,050 5,446 142,434

The statutory reserve is €4,124 thousand, the other revenue reserves are €1,322 thousand.

(5) Provisions in € thsd. 2017 2016 Provisions for pensions and similar obligations 70,895 65,772 Other provisions 148,451 161,404 219,346 227,176

Provisions for pensions and similar obligations of HOCHBAHN include obligations for the provision of free pensioners’ tickets and reduced-price tickets for the spouses of beneficiaries entitled to them that arose after 1 January 1987. There is a deficit of €25,996 thousand for current pensions and similar obligations and of €9,202 thousand for future pensions to beneficiaries and eligible beneficiaries who acquired these entitlements prior to 1 January 1987.

Apart from provisions to ensure competitiveness in the amount of €84,270 thousand, other provisions include obligations for remuneration back-payments to employees, future anniversary bonuses, outstanding holiday entitlements, surpluses on long-term working hours accounts, contributions to the employers’ liability insurance association, obligations for third-party insurance with Haftpflichtgemeinschaft Deutscher Nahverkehrs- und Versorgungsunternehmen (HDN), deferred maintenance payments in accordance with Section 249 (1) No. 1 HGB, financing and transaction risks, provisions recognised to comply with official regulations, litigation risks, outstanding invoices, as well as provisions in accordance with Section 249 (2) HGB (old version) which have been retained pursuant to Article 67 (3) EGHGB. 44 2017 ANNUAL RPEORT ANNUAL HOCHBAHN (6) Liabilities

in € thsd. of which with a remaining maturity of more than Total up to 1 year 1 to 5 years 5 years 1. Liabilities to banks 652,364 58,285 256,723 337,356 Previous year 548,111 47,244 223,790 277,077 2. Trade payables 33,902 33,902 0 0 Previous year 39,264 39,264 0 0 3. Liabilities to affiliated companies 73,161 73,161 0 0 Previous year 45,268 45,268 0 0 of which trade receivables (-3,370) (-3,370) (0) (0) Previous year (3,931) (3,931) (0) (0) of which other liabilities (76,531) (76,531) (0) (0) Previous year (41,337) (41,337) (0) (0) 4. Liabilities to other long-term investees and investors 1 1 0 0 Previous year 1,212 1,212 0 0 of which trade receivables (1) (1) (0) (0) Previous year (1,212) (1,212) (0) (0) 5. Other liabilities 34,870 34,870 0 0 Previous year 34,139 34,139 0 0 of which taxes (3,330) (3,330) (0) (0) Previous year (3,111) (3,111) (0) (0) of which related to social security (1,281) (1,281) (0) (0) Previous year (1,263) (1,263) (0) (0) Total 794,298 200,219 256,723 337,356 Previous year 667,994 167,127 223,790 277,077

Notes to the income statement

(7) Sales

in € thsd. 2017 2016 Ticket sales 1 440,443 430,650 Rental and leasing agreements 46,529 43,101 Other 38,110 34,820 525,082 508,571 of which relating to prior periods 2 4,837 9,728

1 Sales principally comprise income generated from membership of HVV as well as compensation pursuant to Section 45a of the Passenger Transport Act (PBefG) (school transport) and Section 148 of Volume IX of the Code of Social Law (SGB IX) (transport of severely disabled persons). The definitive allocation of HVV income for 2017 is not yet available. Income generated from membership of HVV has therefore been calculated using a qualified estimate based on preliminary figures of HVV GmbH. Income from the transport of severely disabled persons (Section 148 SGB IX) is determined in principle using provisional calculations based on the previous year’s parameters.

2 Sales relating to prior periods mainly comprise adjustments to the estimate of income generated from membership of HVV (€3,721 thousand; previous year: €9,110 thousand). Sales were generated exclusively in Germany. 45 NOTES TO THE ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL THE TO NOTES ANNUAL FINANCIAL STATEMENTS

(8) Other operating income in € thsd. 2017 2016 Other operating income 27,083 15,392 of which relating to prior periods (mainly income from the reversal of provisions as well as compensation for damage and cost refunds for previous years) 5,573 4,099

Other operating income includes extraordinary compensation payments in the amount of €3,599 thousand.

(9) Personnel expenses in € thsd. 2017 2016 Wages and salaries 207,512 196,113 Social security, post-employment and other employee benefit costs 45,634 43,525 253,146 239,638 of which in respect of post-employment benefits 5,475 6,309 of which relating to prior periods 1,318 237

(10) Amortisation and write-downs of intangible fixed assets, and depreciation and write-downs of tangible fixed assets

Depreciation, amortisation and write-downs of €75,068 thousand (previous year: €67,228 thousand) were recognised in the financial year. This figure includes write-downs in accordance with Section 253 (3) Sentence 5 HGB in the amount of €4,073 thousand (previous year: €1,220 thousand).

(11) Other operating expenses

Other operating expenses amount to €44,742 thousand (previous year: €58,779 thousand) and include prior-period expenses of €565 thousand. These mainly comprise expenses for land rents in the amount of €242 thousand and the deductible for liability damages in the amount of €216 thousand. 46 2017 ANNUAL RPEORT ANNUAL HOCHBAHN (12) Investment income

in € thsd. 2017 2016 Income from profit transfer agreements 6,113 7,553 Income from long-term equity investments 6,963 5,498 of which from affiliated companies (6,341) (5,381) Write-downs of long-term financial assets -3,606 -892 Expenses for loss absorption -915 0 of which from affiliated companies (-915) (0) 8,555 12,159

(13) Net interest income

in € thsd. 2017 2016 Income from long-term loans 901 1,754 of which from affiliated companies (896) (1,734) Other interest and similar income 302 395 of which from affiliated companies (65) (70) of which from the unwinding of discounted receivables (235) (318) Interest and similar expenses -22,151 -25,647 of which to affiliated companies (-20) (-121) from the unwinding of discounts (-4,598) (-5,248) -20,948 -23,498

Other disclosures

(14) Auditor’s fee

The fee for services provided by the auditors of the annual financial statements was recognised as expense in the financial year as follows:

Breakdown of auditors’ fees in € thsd. 2017 Audit services 104 Other assurance services 5 Other services 19 Tax advisory services 0 128

The audit services include fees of €25 thousand for the audit of the annual financial statements in the previous year. 47 NOTES TO THE ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL THE TO NOTES ANNUAL FINANCIAL STATEMENTS

(15) Off-balance-sheet transactions

Cross-border lease agreements General, nature and purpose There is a finance lease for U-Bahn rolling stock which was agreed to obtain present value benefits. The finance lease gives rise to a liability to foreign lessors of €29,631 thousand, for which recourse claims in the same amount exist against a domestic bank. These liabilities are secured by assignment using the U-Bahn rolling stock itself as collateral. There are also obligations under a cross-border leasing transaction for ferries. Purchase payments were made in NZD for these by HOCHBAHN to ATG/HADAG AG. These are set off against receivables from ATG/HADAG AG in the same amount in respect of rental payments in NZD on a pro rata basis, congruent with the individual instalments.

Benefits, risks and financial effects HOCHBAHN generated present value benefits from the cross-border leasing transactions. These amounted to €464 thousand as at 31 December 2017, but were not yet reflected in income at this date. There are no significant future risks for HOCHBAHN.

Interest and currency swap transactions Two loans denominated in NZD (€70,733 thousand) with a variable interest rate were signed. Any currency and interest rate exposures arising in connection with this were hedged with appropriate interest and currency swaps matching the respective amounts and maturities. Swaps are inseparable from the underlying transaction. The fair value of the swaps at the balance sheet date totalled -€1,666 thousand. The hedges recognised in accordance with Section 254 HGB are micro hedges. The contractual partners for the loan agreements and swap contracts are identical. Since all factors to be applied for measuring the hedged item and the hedging item are identical, this does not give rise to risks for HOCHBAHN according to the critical terms match method.

(16) Contingent liabilities

Liabilities from guarantees €4,117 thousand.

Liabilities from guarantees arise in connection with contractual obligations entered into by indirect HOCHBAHN investees when the investee has commitments towards its contractual partners under transport and service agreements. It is highly unlikely that such guarantees will be called. In addition, there are further unlimited performance guarantees in favour of subsidiaries. As the parent company, HOCHBAHN monitors the compliance of the investees with their contractual obligations.

(17) Other financial obligations

Other financial obligations amount to €411,825 thousand. This figure includes €17,296 thousand to affiliated companies and €4 thousand to associates. 48 2017 ANNUAL RPEORT ANNUAL HOCHBAHN (18) Disclosures on employees

The figures show the average numbers of staff for the year.

2017 2016 Personnel and operations 3,224 3,144 Technical workers 911 880 Corporate management and finance 465 450 Investees, inactive employment contracts, etc. 340 366 4,940 4,840 Trainees 120 139

(19) Total remuneration of the Supervisory Board and the Management Board

The members of the Supervisory Board did not receive any remuneration in financial year 2017, only meeting attendance fees.

Total remuneration of the Management Board amounted to €1,065 thousand and is broken down as follows:

in € thsd. Mr Mr Mr Ms Ms Falk König Lang Güsken Riedel Non-performance-related remuneration components 260 194 188 58 31 Fringe benefits (remuneration in kind, direct insurance) 15 15 9 9 1 Performance-related remuneration components 100 65 56 0 64 Total 375 274 253 67 96

In addition, there are provisions for pension obligations to active members of the Management Board in the amount of €1,293 thousand and provisions for pension obligations to retired members of the Management Board and their surviving dependants totalling €5,504 thousand. Remuneration of €660 thousand was paid to former members of the Management Board and their surviving dependants in financial year 2017. 49 NOTES TO THE ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL THE TO NOTES ANNUAL FINANCIAL STATEMENTS

(20) Governing bodies of the company

Members of the Supervisory Board

Frank Horch, Hamburg Chairman Senator, Department of Economic Affairs, Transport and Innovation

Max Leininger*, Hamburg Deputy Chairman Union secretary of the ver.di trade union

Martin Huber, Hamburg Department Supervisor, Department of Economic Affairs, Transport and Innovation

Dr Sibylle Roggencamp, Hamburg Senate Director, Department of Finance

Wolfgang Michael Pollmann, Hamburg State Secretary, Department of the Environment and Energy

Andreas Rieckhof, Hamburg State Secretary, Department of Economic Affairs, Transport and Innovation

Dr Rainer Klemmt-Nissen, Hamburg Managing Director, HGV Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement mbH

Martina Plag, Hamburg Managing Director, Hachenberg und Richter Unternehmensberatung GmbH

Claudia Plath, Hamburg Managing Director Finance, ECE Projektmanagement G.m.b.H. & Co. KG

Anne-Louise Quiring*, Hamburg Union secretary of the ver.di trade union

Klaus Ceglecki*, Hamburg Bus driver, member of HOCHBAHN’s Works Council

Karin Fritsche*, Hamburg (until 20 July 2017) Head of division, TEREG Gebäudedienste GmbH

* Employee representative 50 2017 ANNUAL RPEORT ANNUAL HOCHBAHN Angelika Jank*, Hamburg (from 20 July 2017) Cleaner, TEREG Gebäudedienste GmbH

Ingomar Spieß*, Hamburg Head of division, HOCHBAHN’s data protection officer

Heinrich Hanebuth*, Hamburg Bus driver, member of HOCHBAHN’s Works Council

Norbert Klang*, Hamburg Public relations manager, member of HOCHBAHN’s Works Council

Marlies Schneider-Polich*, Hamburg U-Bahn driver, member of HOCHBAHN’s Works Council

Members of the Management Board

Henrik Falk Chairman Chief Executive Officer

Helmut König Chief Financial Officer

Jens-Günter Lang Chief Technology Officer

Claudia Güsken (from 1 September 2017) Human Resources Director and Chief Operating Officer

Retired members of the Management Board

Ulrike Riedel (until 28 February 2017) Human Resources Director and Chief Operating Officer

* Employee representative 51 NOTES TO THE ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL THE TO NOTES ANNUAL FINANCIAL STATEMENTS

(21) Name and registered office of the parent company

HGV Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement mbH, Hamburg (HGV), is HOCHBAHN’s sole shareholder; the sole shareholder of HGV is the Free and Hanseatic City of Hamburg. HGV is the parent company that prepares the consolidated financial statements for the largest group of companies. In addition, the Free and Hanseatic City of Hamburg prepares consolidated financial statements.

HOCHBAHN has entered into a control and profit transfer agreement with HGV.

HGV’s financial statements are published in the electronic Federal Gazette (Bundesanzeiger), while the consolidated financial statements of the Free and Hanseatic City of Hamburg (FHH) are published on FHH’s website.

Hamburg, 29 March 2018

Hamburger Hochbahn Aktiengesellschaft The Management Board

Henrik Falk Claudia Güsken Helmut König Jens-Günter Lang 52 2017 ANNUAL RPEORT ANNUAL HOCHBAHN Shareholdings of HAMBURGER HOCHBAHN AKTIENGESELLSCHAFT as at 31 December 2017 1

Name and registered office Control of the entity Equity 2017 and profit Equity investment profit / loss transfer (€ thsd.) (Name) % (€ thsd.) agreement FFG Fahrzeugwerkstätten Falkenried GmbH, Hamburg 4,100 HOCHBAHN 100.0 0 yes HADAG Seetouristik und Fährdienst AG, Hamburg 4,096 HOCHBAHN 100.0 0 yes 2 ATG Alster-Touristik GmbH, Hamburg 3,472 HOCHBAHN 100.0 0 yes HHW Hamburger Hochbahn- Wache GmbH, Hamburg 26 HOCHBAHN 100.0 0 yes HSF Hamburger Schnellbahn- Fahrzeug-Gesellschaft mbH, Hamburg 775 HOCHBAHN 100.0 0 yes SBG Süderelbe Bus GmbH, Hamburg 2,000 HOCHBAHN 100.0 0 yes Friedrich Jasper Rund- und Gesellschaftsfahrten GmbH, Hamburg 4,163 HOCHBAHN 100.0 0 yes Zentral-Omnibus-Bahnhof „ZOB“ Hamburg GmbH, Hamburg 4 1,095 HOCHBAHN 69.2 180 — HOCHBAHN Grundstücks- verwaltungsgesellschaft mbH & Co. KG, Hamburg 39,572 HOCHBAHN 100.0 3,160 — HOCHBAHN-Verwaltungs- gesellschaft mbH, Hamburg 132 HOCHBAHN 100.0 4 — HOCHBAHN Beteiligungsgesellschaft mbH & Co. KG, Hamburg 55,983 HOCHBAHN 100.0 -11,614 — HSG Hanseatische HOCHBAHN Siedlungsgesellschaft mbH, Beteiligungs- Hamburg 8,545 gesellschaft 100.0 0 yes 3 TEREG HOCHBAHN Gebäudedienste GmbH, Beteiligungs- Hamburg 1,731 gesellschaft 56.0 0 yes 3

1 Unless insignificant. 2 A profit transfer agreement is in place with HGV Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement mbH. 3 A profit transfer agreement is in place with HOCHBAHN. 4 Disclosure of prior-year figures 53 NOTES TO THE ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL THE TO NOTES ANNUAL FINANCIAL STATEMENTS

Name and registered office Control of the entity Equity 2017 and profit Equity investment profit / loss transfer (€ thsd.) (Name) % (€ thsd.) agreement BeNEX GmbH, Hamburg 4 69,223 HOCHBAHN 51.0 6,195 — agilis Eisenbahngesellschaft HOCHBAHN 51.0 mbH & Co. KG, Regensburg 5 N / A BeNEX 49.0 N / A — agilis Verkehrsgesellschaft mbH & Co. KG, Regensburg 5 N / A BeNEX 100.0 N / A — 1. BeNEX Fahrzeuggesellschaft mbH & Co. KG, Parchim 5 N / A BeNEX 100.0 N / A — 2. BeNEX Fahrzeuggesellschaft mbH, Grünwald 5 N / A BeNEX 100.0 N / A yes 6 3. BeNEX Fahrzeuggesellschaft mbH & Co. KG, Grünwald 5 N / A BeNEX 100.0 N / A — 4. BeNEX Fahrzeuggesellschaft mbH & Co. KG, Grünwald 5 N / A BeNEX 100.0 N / A — 5. BeNEX Fahrzeuggesellschaft mbH & Co. KG, Grünwald 5 N / A BeNEX 100.0 N / A — cantus Verkehrsgesellschaft mbH, Kassel 4 7,040 BeNEX 50.0 2,086 — HNB Hamburger Nahverkehrs- Beteiligungsgesellschaft mbH, Hamburg 5 N / A BeNEX 100.0 N / A — Stadtverkehr Lübeck GmbH, Lübeck 4 31,141 HNB 49.9 0 yes 7 NBE nordbahn Eisenbahngesellschaft mbH & Co. KG, Kaltenkirchen 4 710 BeNEX 50.0 308 — ODEG Ostdeutsche Eisenbahn GmbH, Parchim 4 6,176 BeNEX 50.0 5,676 — ODIG Ostdeutsche Instandhaltungsgesellschaft mbH, Eberswalde 4 250 ODEG 100.0 0 yes

4 Disclosure of prior-year figures 5 No details are given of the equity and net profit / loss for the year since the company is not required to publish its annual financial statements. 6 A profit transfer agreement is in place with BeNEX GmbH. 7 A profit transfer agreement is in place with Stadtwerke Lübeck Holding GmbH. 54 2017 ANNUAL RPEORT ANNUAL HOCHBAHN Auditors’ report

We issued the following auditors’ report on the annual financial statements for the financial year ended 31 December 2017 attached hereto as appendices 1 to 3 and on the management report on the 2017 financial year (appendix 4):

“We have audited the annual financial statements – comprising the balance sheet, the income statement and the notes to the financial statements – together with the bookkeeping system and the management report of Hamburger Hochbahn Aktiengesellschaft, Hamburg, for the financial year from 1 January to 31 December 2017. The maintenance of the books and records and the preparation of the annual financial statements and the management report in accordance with German commercial law are the responsibility of the company’s management. Our responsibility is to express an opinion on the annual financial statements, together with the bookkeeping system, and the management report based on our audit.

We conducted our audit of the annual financial statements in accordance with Section 317 of the German Commercial Code (Handelsgesetzbuch – HGB) and the German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW). 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 annual financial statements in accordance with principles of proper accounting and in the management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the company and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the internal control system relating to the accounting system and the evidence supporting the disclosures in the books and records, the annual financial statements and the management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the annual financial statements and management report. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion based on the findings of our audit, the annual financial statements comply with the legal requirements and give a true and fair view of the net assets, financial position and results of operations of the Company in accordance with the principles of proper accounting. The management report is consistent with the annual financial statements, complies with legal requirements and on the whole provides a suitable understanding of the Sparkasse’s position and suitably presents the opportunities and risks of future development.”

Hamburg, 29 March 2018

Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft

Hartmut Schmidt Jens Engel Auditor Auditor 55 UIO’ REPORT AUDITOR’S

Report of the Supervisory Board |

R PR O TE UEVSR BOARD SUPERVISORY THE OF EPORT

The Supervisory Board was regularly briefed on the position of the company and on important management issues during financial year 2017 by means of verbal and written reports from the Management Board. The Supervisory Board formed a Finance Committee, a Transport Committee, an Identification Committee as well as the Arbitration Committee required by law. During financial year 2017 the Supervisory Board held four meetings, the Finance Committee two meetings, the Transport Committee two meetings and the Identification Committee four meetings.

The annual financial statements and the management report of Hamburger Hochbahn AG for the year ended 31 December 2017 and the company’s accounting records were audited by Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft, Hamburg, the auditors elected at the last Annual General Meeting. The audit did not give rise to any objections and an unqualified auditor’s report was issued.

The audit reports were submitted to the members of the Supervisory Board. In addition, the financial statement auditors reported on the main findings of their audit at the financial statements meeting held by the Finance Committee.

The Supervisory Board examined the annual financial statements and the management report of Hamburger Hochbahn AG and, in agreement with the auditors, raised no objections. It approved and thus adopted the annual financial statements presented by the Management Board.

The Supervisory Board would like to thank Karin Fritsche, who left the Supervisory Board on 20 July 2017, for her many years of dedicated and constructive service. Ms Angelika Jank has been a member of the Supervisory Board since then, replacing the departed member.

The Supervisory Board would like to extend its thanks to the members of the Management Board and all company employees for their work in 2017.

Hamburg, 25 June 2018

The Supervisory Board

Frank Horch Chairman 56 2017 ANNUAL RPEORT ANNUAL HOCHBAHN Declaration of compliance with the Hamburg Corporate Governance Code (Code)

In the period from 1 January 2017 to 31 December 2017,

Hamburger Hochbahn AG (HOCHBAHN)

complied with the regulations of the Hamburg Corporate Governance Code, which is the responsibility of the Management Board and the Supervisory Board (Items 3 – 7 of the Code and their sub-sections). The company deviated from the following item of the Code:

• It em 5.1.5 of the Code: “Minutes of Supervisory Board resolutions (meetings, resolutions adopted by circular vote, etc.) shall be available to all members of the Supervisory Board no later than six weeks after the date of the resolution.”

In one case, the transmission of the minutes of a circular vote was delayed by a few days.

In the period from 1 January 2017 to 31 December 2017, the HOCHBAHN subsidiaries

ATG Alster-Touristik GmbH (ATG) FFG Fahrzeugwerkstätten Falkenried GmbH (FFG) HADAG Seetouristik und Fährdienst AG (HADAG) BeNEX GmbH (BeNEX) TEREG Gebäudedienste GmbH (TEREG)

complied with the regulations of the Hamburg Corporate Governance Code, which is the responsibility of their respective Management and Supervisory Boards, with the following exceptions (Items 3 – 7 of the Code and their sub-sections). The companies departed from the Code in the following items:

• Item 4.2.1 Sentence 1 and Sentence 3 of the Code: “The Management Board shall be comprised of at least two persons, who represent the company jointly. By-laws shall govern the cooperation between the members of the Management Board and the allocation of duties among individual Management Board members.”

At the HOCHBAHN subsidiaries ATG, FFG and HADAG there is only one managing director in each case. Due to the small size of these companies, the appointment of only one managing director to ATG, FFG and HADAG is deemed appropriate. In view of this situation, there are no by-laws governing the cooperation between members of the Management Board. 57 DECLARATION OF COMPLIANCE DECLARATION

• Item 4.2.2 of the Code: “In principle, members of the Management Board shall be chosen from the best candidates in a selection process (through advertising or with the assistance of personnel management consultants).”

On account of HOCHBAHN’s shareholder status, up to now members of the Management Boards of the subsidiaries ATG, FFG and HADAG have always been delegated. In general, a selection process is expected to be conducted for future appointments.

• Item 4.2.6 Sentence 1 and Sentence 2 of the Code: “Remuneration to members of the Management Board shall be disclosed on an individual basis – broken down into its non-performance-related, performance-related and long-term incentive components – in the notes to the annual financial statements or in the management report. In the case of companies which are not required to publish annual financial statements because they are part of a group, the disclosure of the remuneration shall appear in the declaration of compliance with the Code.”

The total amount of remuneration to members of the Management Board for the subsidiary BeNEX is shown as requested by the shareholder INPP. In the case of the subsidiary TEREG, consent has not yet been given by the minority shareholder Vattenfall for publication of the remuneration to the members of the Management Board.

Th e subsidiaries FFG, ATG and HADAG are not subject to the obligation to disclose this information. As required by the Code, the remuneration of the management is published here:

Non-performance- Fringe benefits Performance- related (remuneration related remuneration in kind, direct remuneration in € thsd. components insurance) components Total FFG Olaf Lilla 141 37 43 221 ATG Gabriele Müller-Remer 47 4 12 63 HADAG Gabriele Müller-Remer 94 6 25 125

In addition, a provision for pension obligations to Ms Müller-Remer has been recognised in the amount of around €304 thousand (proportionately). 58 2017 ANNUAL REPORT ANNUAL HOCHBAHN • Item 5.3.1 of the Code:: “D epending on the specifics of the enterprise and the number of its members, the Supervisory Board shall form committees with sufficient expertise. These serve to increase the efficiency of the Supervisory Board’s work and its handling of complex issues. The respective committee chairmen shall report regularly to the Supervisory Board on the work of these committees or send the minutes of committee meetings to all Supervisory Board members without delay.”

The Supervisory Boards of ATG, FFG, HADAG and TEREG have not formed any committees since it was not deemed necessary to do so due to the small size of the companies and the small number of Supervisory Board members in each case.

• Item 5.3.2 of the Code: “T he Supervisory Board of larger companies (companies which would be classified as large corporations in accordance with Section 267 (3) HGB) shall form an Audit Committee or instruct their Finance Committee to monitor the company’s financial reporting process, the effectiveness of the internal control system, internal risk management system and internal audit system, and the audit of the financial statements, here in particular the independence of the auditor and the additional services provided by the auditor. At least one member of the Audit Committee/Finance Committee shall have special knowledge and experience in the application of accounting principles and internal control processes. The chairperson of the Audit Committee/Finance Committee shall not be a former member of the Management Board of the company and not be the Supervisory Board Chairman in office.”

The Supervisory Boards of FFG and TEREG have not formed an Audit Committee, nor have they instructed their Finance Committee as described above, since it was not deemed necessary to do so due to the small size of the companies and the small number of Supervisory Board members in each case. 59 DECLARATION OF COMPLIANCE DECLARATION

• Item 6.2 of the Code: “A ny information which the company discloses shall also be available on the company’s website. This includes the company agreement underlying HW GmbH (memorandum of association), the management report, the annual financial statements and the notes, and the declaration of compliance with the Code.”

In formation on the companies is published on the transparency portal set up in October 2014 in accordance with the Hamburg Transparency Act (HmbTG), in particular in the report on equity holdings of the Free and Hanseatic City of Hamburg (FHH) which can be accessed there.

Hamburg, 28 March 2018 Hamburg, 19 March 2018

H. Falk F. Horch Management Board, Chairman Supervisory Board, Chairman

C. Güsken

H. König

J.-G. Lang 60 2017 ANNUAL RPEORT ANNUAL HOCHBAHN Overview of subsidiaries and investees

agilis Eisenbahngesellschaft mbH & Co. KG (www.agilis.de) Shareholders: Hamburger Hochbahn AG 51%, BeNEX GmbH 49% I Business purpose: operation of rail-based local transport services in Bavaria: Electrified regional rail network in and around Regensburg including the Donautalbahn I Number of railcars: 26 I Number of employees: 182

ATG Alster-Touristik GmbH (www.alstertouristik.de) Shareholders: Hamburger Hochbahn AG 100% I Business purpose: Tourist boat cruises, mainly on the Alster Lake and its canal I Number of ships: 18 I Number of employees: 48

BeNEX GmbH (www.benex.de) Shareholders: Hamburger Hochbahn AG 51%, INPP Public lnfrastructure Germany GmbH & Co. KG 49% I Business purpose: Management of a group of companies providing all types of road / rail transport services outside the boundaries of the Free and Hanseatic City of Hamburg, as well as the purchase, maintenance and sale of shareholdings of this kind for the area of business detailed above including all associated financing, brokerage, consultancy and other services (to the extent that these do not require legal approval or official permission under the German Banking Act (KWG) I Number of employees: 26 (annual average)

FFG Fahrzeugwerkstätten Falkenried GmbH (www.ffg-hamburg.de) Shareholders: Hamburger Hochbahn AG 100% I Business purpose: Maintenance of all types of commercial vehicles, especially buses; technical and commercial fleet management for HOCHBAHN’s bus fleet; maintenance of various underground stops; construction and retrofitting of special vehicles I Number of employees: 285

Friedr. Jasper Rund- und Gesellschaftsfahrten GmbH (www.jasper.de) Shareholders: Hamburger Hochbahn AG 100% I Business purpose: Regular bus services and private coach tours, regular bus services on behalf of HOCHBAHN, special “insider tours” of Hamburg I Number of city buses: 68 own (including 10 diesel hybrid buses) and 23 leased; Number of over- land coaches: 4; Number of articulated buses: 6 leased and 20 provided I Number of employees: on average 386 (excluding 5 trainees)

HADAG Seetouristik und Fährdienst AG (www.hadag.de) Shareholders: Hamburger Hochbahn AG 100% I Business purpose: Passenger transport services by ferry in the Port of Hamburg and on the Elbe I Number of ferries: 25 I Number of employees: 93

HHW Hamburger Hochbahn-Wache GmbH Shareholders: Hamburger Hochbahn AG 100% I Business purpose: ensuring the security of passengers and employees, protection of rolling stock, facilities and installations. Performance of ticket inspections, collection of fare surcharges I Number of delegated employees: 405 61 OVERVIEW OFOVERVIEW AND SUBSIDIARIES INVESTEES FURTHER INFORMATION

HSF Hamburger Schnellbahn-Fahrzeug-Gesellschaft mbH Shareholders: 100% Hamburger Hochbahn AG, Hamburg I Business purpose: The purpose of the company is the procurement and financing of rail rolling stock and its leasing to rail transport operators, in particular for use in the rapid transit network in the Greater Hamburg Area, as well as the construction, financing and leasing to rail and rapid transit system operators of rolling stock maintenance depots and storage sidings I Number of employees: the company has no employees of its own

HSG Hanseatische Siedlungs-Gesellschaft mbH Shareholders: Hambuger Hochbahn AG via HOCHBAHN-Beteiligungsgesellschaft mbH & Co. KG 100% I Business purpose: Letting of company-owned apartments to employees of the HOCHBAHN Group I Number of apartments: 2,041 I Number of employees: 46

HVW Hamburger Verkehrsmittel-Werbung GmbH Shareholders: Hamburger Hochbahn AG 24.9%, DSM Deutsche Städte-Medien GmbH 75.1% I Busi- ness purpose: Set-up, management and letting of advertising space at stations, marketing and design of advertising on board buses and trains I Number of employees: 1 hySOLUTIONS GmbH (www.hysolutions-hamburg.de) Shareholders: Hamburger Hochbahn AG 56%, Vattenfall Europe 12.5%, Stromnetz Hamburg 12.5%, DNV GL SE 6%, VHH Verkehrsbetriebe Hamburg-Holstein 5%, Handelskammer Hamburg 4%, Handwerkskammer Hamburg 4% I Business purpose: Promotion, support and implementation of hydrogen and fuel cell technology as well as innovative electrical drive and supply systems in Hamburg I Number of employees: 10

SBG Süderelbe Bus GmbH Shareholders: Hamburger Hochbahn AG 100% I Business purpose: Regular bus services on behalf of HOCHBAHN, number of city buses: 36 own (including 7 diesel hybrid buses) and 15 leased; I Number of employees: on average 139 (excluding 2 trainees)

TEREG Gebäudedienste GmbH (www.tereg.de) Shareholders: Hamburger Hochbahn AG über die HOCHBAHN-Beteiligungsgesellschaft mbH & Co. KG 56%, Vattenfall Europe 44% I Business purpose: Provision of cleaning and related services for sites, buildings, transport facilities and rolling stock, public establishments and industrial plants and facilities, repair of damage to buildings and sites, building management and provision of security and services in the transport sector I Number of employees: 1,697

Zentral-Omnibus-Bahnhof „ZOB“ Hamburg GmbH (www.zob-hamburg.de) Shareholders: Hamburger Hochbahn AG 69.2%, Autokraft 11.7%, VHH 11.5%, Jasper 2.9%, six further minority stakes 4.6% I Business purpose: Operation of Hamburg’s Central Bus Station (ZOB), letting of units for retail and catering outlets I Number of employees: The company does not have staff of its own but staff seconded by HOCHBAHN and 1 employee from VHH 62 2017 ANNUAL REPORT ANNUAL HOCHBAHN HOCHBAHN AT A GLANCE

2017 2016 2015 Financial information (€ million) Sales 525.1 508.6 435.4 Net loss for the financial year before loss absorption by HGV 44.9 50.9 60.2 Cost coverage ratio (%) 92.9 91.6 89.6 Fixed assets 1,069.1 946.4 832.2 Balance sheet total 1,156.6 1,038.3 915.4 Gross capital expenditures 243.0 225.2 224.9

Employees 1 5,083 4,996 4,977

Bus Passengers (million) 2, 3 213.3 211.2 208.6 Passenger kilometres (million) 2, 3 663.6 657.0 648.9 Investments (€ million) 57.1 27.3 29.6 Number of busses 849 820 797 Buses including subsidiaries 990 974 953 Number of lines 110 111 111 Number of stations 1,329 1,327 1,327

2, 4, 5, 6 spec. CO2 emissions (in g per person-km) 80.29 80.19 78.38 spec. nitrogen oxides (NOx) emissions (in g per person-km) 2, 4, 7 0.18787 0.27395 0.30393

spec. particulate matter (PM2,5 ) emissions (in g per person-km) 2, 4, 7 0.00066 0.00134 0.00157 spec. diesel consumption (in l per person-km) 2, 4, 5 0.03291 0.03286 0.03212 U-Bahn Passengers (million) 2, 3 242.5 235.4 228.9 Passenger kilometres (million) 2, 3 1,447.4 1,405.3 1,366.8 Investments (€ million) 172.2 187.9 182.5 Number of carriages 929 890 873 Number of lines 4 4 4 Number of stations 91 91 91

2, 4, 6 spec. CO2 emissions (in g per person-km) 39.90 42.72 43.92 spec. energy consumption (in kWh per person-km) 2, 4 0.07485 0.08014 0.0824

1 At 31 December 2017, including Management Board and trainees 2 2017: preliminary figures 3 2016: updated figures 4 Related to the vehicle drive without considering the upstream chain 5 In addition to the traffic situation, reasons for increasing CO2 emissions from diesel consumption include the use of air conditioning and filter systems (due to higher emission control requirements), which require a higher exhaust gas pressure and/or more powerful engines. 6 Emission factors for calculating the reduction of CO2 emissions as part of the Hamburg Climate Plan. Provided by: Department of the Environment and Energy, Coordination Center for Climate Protection. Current as of: October 2017. 7 Emission factors according to the German Federal Environment Agency (2018), TREMOD transport emission model 5.72 Imprint

Published by Hamburger Hochbahn AG Steinstraße 20, 20095 Hamburg Germany Phone: +49 (0)40 / 32 88-0 Fax: +49 (0)40 / 32 64 06 E-mail: [email protected] hochbahn.de

Edited by Marketing division Public affairs and strategy unit Finance and Controlling division

Photography Dirk Uhlenbrock Getty Images

Concept and design Silvester Group, silvestergroup.com Jutta Gathmann, Marlene Schlund, Nils Christopher Kemter Hamburger Hochbahn AG Steinstraße 20, 20095 Hamburg hochbahn.de