HOCHTIEF: Building value on sound foundations

Annual Financial Statements ofHOCHTIEF Aktiengesellschaft, as of December 31, 2003

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Annual Financial Statements of HOCHTIEF Aktiengesellschaft, as of December 31, 2003

Balance Sheet ..................................................................4

Statement of Earnings ......................................................5

Movements in Fixed Assets ..............................................6

Notes to the Financial Statements ....................................8

Proposal by Executive Board for Use of

Net Profit ........................................................................18

Report of Independent Auditors ......................................19

Subsidiaries, Associates and

Other Significant Participating Interests ..........................20

Boards ............................................................................22

The 2003 Annual Financial Statements and Management

Report of HOCHTIEF Aktiengesellschaft are published in

the German Federal Bulletin (”Bundesanzeiger”) and are

submitted to the commercial registry of the Essen District

Court under registered number HRB 279. The Management

Report has been compiled jointly for HOCHTIEF Aktienge-

sellschaft and the HOCHTIEF Group; the combined Man-

agement Report starts on page 75 of our Annual Report.

The combined list of the Group’s and HOCHTIEF Aktien-

gesellschaft’s subsidiaries, associates and other participat-

ing interests, pursuant to Sections 285 (11) and 313 (2)

1-4 of the German Commercial Code (HGB) is deposited

at the commercial registry of the Essen District Court.

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Balance Sheet of HOCHTIEF Aktiengesellschaft

(EUR thousand) See note Dec. 31, 2003 Dec. 31, 2002

Assets

Fixed assets (1)

Property, plant and equipment 175,580 183,648

Financial assets 1,513,425 1,351,177

1,689,005 1,534,825

Current assets

Inventories

Construction work in progress 114,319 182,519

Less: Progress payments received 56,360 57,959 118,809 63,710

Other inventories (2) 136 149

58,095 63,859

Trade receivables andother receibvables (3) 496,398 634,094

Marketable securities (4) 343,211 193,307

Cash and cash equivalents (5) 314,828 90,502

1,212,532 981,762

Prepaid expenses (6) 3,330 2,573

2,904,867 2,519,160

Liabilities and Shareholders’ Equity

Shareholders’ equity (7)

Subscribed capital 179,200 179,200

Reserves 1,104,499 1,019,270

Unappropriated net profit 45,500 38,500

1,329,199 1,236,970

Special account withreserve characteristics (8) – 275

Provisions (9) 523,254 560,975

Liabilities (10) 1,052,414 720,940

2,904,867 2,519,160

5

Statement of Earnings of HOCHTIEF Aktiengesellschaft

(EUR thousand) See note 2003 2002

Sales (12) 159,356 119,037

Change in the level ofconstruction work in progress (68,200) 36,063

Other operating income (13) 184,427 380,686

Materials (14) (44,743) (172,820)

Personnel costs (15) (61,479) (67,788)

Depreciation and amortization (16) (6,190) (16,781)

Other operating expenses (17) (121,290) (193,636)

Income from financial assets (net) (18) 137,220 263,893

Interest (expense)/income (net) (19) (13,958) (1,691)

Depreciation and write-downs on financialassets and marketable securities (20) (57,971) (288,852)

Profit from ordinary activities 107,172 58,111

Income taxes (21) 19,736 (3,385)

Net profit before changes in reserves 126,908 54,726

Net profit brought forward 3,821 3,478

Changes in revenue reserves (7) (85,229) (19,704)

Unappropriated net profit 45,500 38,500

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Movements in Fixed Assets

Cost of acquisition or production

Jan. 1, 2003 Additions(EUR thousand)

Property, plant and equipment

Land, similar rights and buildings,including buildings on land owned by third parties 308,211 2,081

Technical equipment and machinery, transportation equipment 3,420 106

Other equipment, office equipment and small equipment 9,181 1,449

Prepayments and assets under construction 1,336 –

322,148 3,636

Financial assets

Shares in affiliated companies 835,532 191,374

Long-term loans to affiliated companies 24,759 –

Other participating interests 121,903 –

Long-term loans to companies in which the company has participating interests 39,198 –

Long-term securities investments 658,802 2,609

Other long-term loans 1,705 –

1,681,899 193,983

Total Fixed Assets 2,004,047 197,619

*Includes a EUR 49,000,000 asset write-up.

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Cost of acquisition or production Depreciation, Of which: Book value Book value

cumulative depreciation

Disposals Reclassifications in 2003 at Dec. 31, 2003 at Dec. 31, 2002

15,325 24 123,837 5,079 171,154 179,445

224 – 648 252 2,654 2,826

2,515 – 6,471 859 1,644 1,225

– (24) 1,184 – 128 152

18,064 – 132,140 6,190 175,580 183,648

3,071 – 72,632 33,307 951,203 796,208

201 – – – 24,558 24,759

5 – 118,215 23,520 3,683 27,208

3,572 – – – 35,626 39,198

16,684 – 148,037* 334 496,690 462,099

40 – – – 1,665 1,705

23,573 – 338,884 57,161 1,513,425 1,351,177

41,637 – 471,024 63,351 1,689,005 1,534,825

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Notes to the Financial Statementsof HOCHTIEF Aktiengesellschaft

General principles

These Annual Financial Statements have been prepared in

accordance with the German Commercial Code (HGB) and

Stock Corporations Act (AktG). For the sake of clarity of

presentation, a number of items in both the Balance Sheet

and the Statement of Earnings have been aggregated. Such

aggregated items are sub-classified into their constituents

and commented on in these Notes. The Statement of Earn-

ings classifies expenses by their nature, using what is also

known as the “type of expenditure format”. The financial

statements are denominated in euros, and all sums of money

in these Notes are cited to the nearest thousand euros,

unless specifically stated otherwise.

The Executive Board and Supervisory Board have issued

a declaration of compliance with the German Corporate

Governance Code pursuant to AktG Sec. 161, and this is

available for shareholders to view at all times in the Annual

Report and on the HOCHTIEF website.

Accounting and valuation principles

Property, plant and equipment are stated at cost of pur-

chase or production (at the amount required to be capital-

ized under tax law), less scheduled depreciation and write-

downs by impairment. Borrowing costs are not recognized

as part of purchase or production cost for property, plant

and equipment. Depreciation on property, plant and equip-

ment is made to the full extent permissible under tax law.

Property, plant and equipment are depreciated using the

declining balance method as far as tax law permits, switch-

ing to the straight-line method once this yields higher depre-

ciation amounts. Providing tax law permits, depreciation

on additions to movable assets during the first and second

half of the year is calculated using full or half-year rates

respectively. Low-value assets are fully written down in the

year of acquisition. As in the prior year, in light of legislative

changes contained in the Reduction of Tax Benefits Act

(StVergAbG), no new allocations have been made in 2003

to the special account with reserve characteristics permit-

ted by Sec. 6b of the German Income Tax Act (EStG).

Financial assets are generally reported at cost of acquisition.

Certain shares in affiliated companies and participating

interests are posted at fair value if this is lower. Long-term

securities investments are stated at the lower of acquisition

cost or their current stock market price or fair value. Non-

interest-bearing loans and low-interest loans to third-party

entities are reported at their present value.

Inventories are stated at cost of purchase or production (at

the legally required capitalized amount). Cost of production

of construction work in progress includes direct costs of

material and production. Progress payments received from

clients are deducted from inventories up to the amount of

the cost of production for each project. Advance payments

which exceed these amounts are reported as liabilities.

The valuation of receivables and other current assets

includes appropriate provision for specific doubtful accounts.

They have also had a lump sum charged against them to

cover general credit risks and allow for their failure to yield

interest.

Marketable securities are reported at the lower of cost or

market/fair value.

If the cost of purchase or production of any assets is higher

than their fair value on the balance sheet date, their value

is written down accordingly.

Provisions for pensions, long-service bonuses, and semi-

retirement programs for older employees are determined

using actuarial tables. The discount factor applied is 3.5

percent.

Other provisions are allocated in an appropriate amount to

cater for all recognizable risks; the amount provided reflects

the anticipated future charge.

Liabilities are invariably reported as the amount due.

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Currency translation

Assets and liabilities in foreign currency are reported in the

financial statements at the central rate or the daily rate

applicable at the time of initial entry into the accounts.

Losses due to changes in exchange rates are recognized

as expense.

Explanatory Notes to the Balance Sheet

1. Fixed assets

The aggregated fixed assets categories reported in the

balance sheet are sub-classified, with details of changes in

each item relative to the prior year, in the statement of Move-

ments in Fixed Assets on page 6 and 7.

The EUR 191,374,000 increase in stakes in affiliated com-

panies essentially comprises payments into the capital

reserve at Deutsche Bau- und Siedlungs-Gesellschaft

mbH, Essen (EUR 158,200,000) and HOCHTIEF Americas

GmbH, Essen (EUR 32,771,000).

In the course of restructuring the HOCHTIEF Group’s Devel-

opment division, Deutsche Bau- und Siedlungs-Gesellschaft

mbH transferred ownership of certain of its real estate

assets to newly founded project companies in the prior

year, at those assets’ fair values.

In the process of establishing a new holding structure,

implemented in the previous year, the equity stake in

HOCHTIEF USA INC., Wilmington, Delaware, was trans-

ferred to HOCHTIEF Americas GmbH, Essen, while the

stake in HOCHTIEF Australia Limited, Sydney, was trans-

ferred to HOCHTIEF Asia Pacific GmbH, Essen. The trans-

fer of these equity holdings took place at their carrying

amounts.

A list of the main subsidiaries, associates and other partici-

pating interests of the HOCHTIEF Group is provided on

pages 20-21. The complete list of HOCHTIEF Aktienge-

sellschaft’s equity interests has been deposited at the

Essen commercial registry.

Long-term securities investments to the value of EUR

4,417,000 consist of mutual fund units linked to a deferred

compensation plan to provide a supplementary pension for

employees. The fund units attributed to the employees

have been pledged to their benefit.

2. Other inventories

(In Tsd. EUR) 2003 2002

Raw materials andsupplies, spare parts 43 56

Advance payments 93 93

136 149

3. Trade receivables and other receivables

Receivables from affiliated companies are largely connected

with intra-Group financial management.

Other receivables include entitlements from real property

sales, short-term loans, interest receivables from securities

and fixed-term deposit investments, reinsurance and pen-

sion liability insurance entitlements, tax refund entitlements,

prepayments on wages, salaries and travel expenses, dam-

age claims, other non-trade receivables and other assets.

4. Marketable securities

Besides own shares, our securities are predominantly fixed-

interest investments. As of the balance sheet date, this

item also included 6,947,930 (2002: 6,951,780) of our

own common shares, with a carrying amount of EUR

159,802,000 (2002: EUR 90,373,000).

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(EUR thousand) 2003 Of which: with 2002 Of which: with

residual term residual term

above 1 year above 1 year

Trade receivables 11,332 139 33,324 –

Receivables fromconstruction joint ventures 1,705 – 2,041 –

Receivables fromaffiliated companies 421,164 – 540,355 1,919

Receivables from companiesin which the company has participating interests 1,470 – 166 –

Other receivables 60,727 20,588 58,208 10,150

496,398 20,727 634,094 12,069

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5. Cash and cash equivalents

This consists mostly of euro bank balances.

6. Prepaid expenses

The expenses involved are rents, insurance premiums

and taxes applicable to later accounting periods.

7. Shareholders’ equity

HOCHTIEF Aktiengesellschaft’s nominal capital of EUR

179,200,000 is divided into 70,000,000 no-par-value

shares.

The capital reserve contains the premiums received when

the Company issues new stock.

Conditional capital has been authorized with a nominal value

of up to EUR 3,584,000.00, to issue up to 1,400,000 new

no-par-value shares to members of the Executive Board,

and such managerial employees of HOCHTIEF Aktienge-

sellschaft and of certain of its affiliates as are selected for

participation by the Executive Board. The Supervisory Board

and/or Executive Board have been empowered to grant

the specified group of managers options to purchase up to

1,400,000 no-par-value shares, in execution of the 1999

and 2000 Long Term Incentive Plans (LTIP’s).

812,170 shares were repurchased under the authorization

granted at the General Shareholders’ Meeting of June 21,

1999 to provide for stock options awarded under the 1999

and 2000 LTIP’s.

Following the exercise of 3,850 stock options, we sold a

corresponding number of shares in March 2003 to the

holders of the option rights, at prices of EUR 11.68 per

share. These shares constitute EUR 9,856 of the nominal

capital stock (0.006 percent of the total).

In resolutions of the General Shareholders’ Meeting on

June 21, 1999 and June 28, 2000, the Company was

authorized to repurchase its own stock, in order to be able

to offer stock for the purposes of acquiring companies or

equity interests therein and for the purpose of entering into

mergers, or in order to retire stock. Together with the

(EUR thousand) Amount Dividends Net profit Transfers to Amount

on Jan. 1, distributed for the year revenue on Dec. 31,

2003 reserves 2003

Subscribed capital 179,200 – – – 179,200

Capital reserve 400,806 – – – 400,806

Revenue reservesStatutory reserve 1,492 – – – 1,492

Reserve for own stock 90,373 – – 69,429 159,802

Other revenue reserves 526,599 – – 15,800 542,399

Total reserves 1,019,270 – – 85,229 1,104,499

Unappropriated net profit 38,500 (34,679) 126,908 (85,229) 45,500

1,236,970 (34,679) 126,908 – 1,329,199

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stock already acquired under the terms of the authoriza-

tion in force from June 21, 1999 through June 27, 2000,

the total stock authorized for repurchase is restricted to a

maximum of ten percent of the overall capital stock (i.e., to

7,000,000 no-par-value shares). 6,139,224 shares were

repurchased for the purposes stated above. A further 386

were repurchased in order to offer them for sale to per-

sons employed by the Company or one of its affiliates.

These shares made up the holdings of own stock, as

defined in Section 160 (1) 2 of the Stock Corporations Act

(AktG), at December 31, 2003. They constitute EUR

17,787,000 of the nominal capital stock, or 9.93 percent

of the total. The shares were repurchased in 1999, 2000,

and 2001.

The purchase options granted under the 1999 and 2000

Long Term Incentive Plans, pursuant to Sec.192 (2) 3 of

the German Stock Corporations Act (AktG), up to the last

balance sheet date are:

Of the total stock options granted pursuant to AktG Sec. 192

(2) 3, the number issued to members of the Executive Board

was 129,000, and the remainder were granted to selected

managerial employees of the Company and its affiliates.

In accordance with a Supervisory Board resolution, the

Long Term Incentive Plan 2003 (LTIP 2003) introduced

stock appreciation rights (SARs) in 2003 for members of

the Executive Board and upper managerial employees of

HOCHTIEF Aktiengesellschaft and its domestic and foreign

affiliates.

The SARs have a two-year lock-up period and a three-

year term.

The 1,010,900 SARs created under the first issue in 2003

still existed in their full amount as of the balance sheet

date. The conditions for exercising them are that the

HOCHTIEF stock price must rise at least ten percent by

the exercise date (absolute performance) and must do bet-

ter than the CDAX Construction Price Index for ten con-

secutive days in the same period (relative performance).

The relative target is waived if HOCHTIEF’s stock gains 20

percent or more.

Options originally Options in force Options lapsed Options Options in force

granted on Dec. 31, 2002 in 2003 exercised on Dec. 31, 2003

1999 LTIP 336,600 272,270 268,420 3,850 –

2000 LTIP 537,520 462,800 7,050 – 455,750

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Provided the targets are met, SARs can be exercised any

day after expiration of the lock-up period save a short peri-

od before business data is published. How many can be

exercised depends on how far HOCHTIEF’s stock has

risen from the price laid down when the SARs were

issued, with a 10, 15 or 20 percent price gain respectively

permitting the exercise of 25 percent, 60 percent or all

SARs. When SARs are exercised, the issuing enterprise

pays out the difference between the current stock price

and the issue price. The payout is capped at 100 percent

of issue price.

The LTIP exercise conditions stipulate that the amount due

on exercise of the SARs can be paid out in HOCHTIEF

stock. In the case of holders not employed by HOCHTIEF

Aktiengesellschaft, expenses incurred on SARs being exer-

cised are borne by the affiliate concerned.

A transfer of EUR 69,429,000 supplemented reserves for

own stock to EUR 159,802,000 in FY 2003 in line with the

increased carrying amount of the stock (2002 saw with-

drawals of EUR 20,296,000). An amount of EUR 15,800,000

was transferred to other revenue reserves from net profit

before changes in reserves (2002: EUR 40,000,000).

8. Special account with reserve characteristics

The EUR 275,000 special reserves accumulated in earlier

years pursuant to Sec. 52 (16) of the German Income Tax

Act (EStG) were released in full in the year under review.

The impact of changes in this item was to increase the net

profit of HOCHTIEF Aktiengesellschaft by EUR 275,000.

9. Provisions

Provisions for pensions are created for obligations arising

from entitlements to future pension benefits and ongoing

payments to current and former employees and their sur-

vivors. Ongoing pension payments during the reporting

year were EUR 22,439,000 (2002: EUR 22,854,000).

Other provisions cover items such as risks in real estate

and equity holdings, costs of order processing and follow-

up costs on contracts already invoiced, anticipated losses

related to pending transactions not considered elsewhere,

costs of preparing the financial statements, contribution to

a mutual pension fund, outstanding employee vacation time,

restructuring costs, costs of semi-retirement programs for

older employees, payments for damages, and other uncer-

tain liabilities.

(EUR thousand) 2003 2002

Provisions forpensions 309,056 319,340

Provisions fortaxes 29,879 51,031

Otherprovisions 184,319 190,604

523,254 560,975

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10. Liabilities

EUR 105,100,000 has been deposited in a time deposit at

a Luxembourg bank to secure a bank loan.

Amounts due to affiliated companies are largely connected

with intra-Group financial management.

Other liabilities include tax liabilities, payroll liabilities, social

insurance liabilities, other non-trade payables and other

obligations.

11. Contingencies, commitments and other financial

obligations

Guarantees and sureties have been provided primarily as

security for bank loans, contract performance, warranty

obligations, and progress and advance payments. As of the

balance sheet date, we had provided guarantees primarily

for participating interests and construction joint ventures.

We are also jointly and severally liable for all construction

joint ventures in which we participate.

(EUR thousand) 2003 2002

Liabilities fromguarantees, suretiesand letters ofsupport 669,867 1,082,793

Of which: foraffiliatedcompanies 470,567 816,257

(EUR thousand) 2003 Of which: with 2002 Of which: with

residual term residual term

of up to 1 year of up to 1 year

Amounts due to banks 227,595 105,320 60,362 7,382

Advance payments received 3,372 3,372 11,342 11,342

Trade payables 6,085 6,085 14,074 14,074

Amounts due to construction joint ventures 759,403 759,403 590,734 590,734

Amounts due to companies in which thecompany has participating interests 1,056 1,056 1,012 1,012

Other liabilities 54,903 53,044 43,416 43,416

Of which: from taxes [34,282] [34,282] [26,055] [26,055]

Of which: from socialinsurance contributions [769] [769] [845] [845]

1,052,414 928,280 720,940 667,960

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HOCHTIEF Aktiengesellschaft furnished US insurance com-

panies with an unlimited bonding guarantee for the Turner

group in 2003. Bonding is a statutory form of security used

in the US to guarantee performance of public projects. It is

also used with other selected customers. The current total

bonding amount is USD 2,222 million. No recourse has ever

been made to these guarantees, which were previously

limited to USD 295 million.

Marketable securities with a nominal value of EUR 10,938,000

(2002: EUR 84,551,000) have been pledged as surety bonds

for the proper execution of construction work as per con-

tract and for progress and advance payments received.

In order to offset currency and interest rate fluctuations, we

enter into forward foreign exchange transactions and use

other derivative financial instruments in our international

transactions and financing arrangements. We have estab-

lished guidelines that are binding for all Group companies

to clearly regulate the use of these transactions, set up

separate controlling measures, and specify responsibilities.

Derivatives must be tied to underlying transactions. They

may only be used to hedge risks. The counterparties in

hedging transactions are invariably banks with a first-rate

credit standing.

Underlying transactions are valued as a unit with their cor-

responding hedging transactions when the two types are

objectively and intentionally complementary in both use and

function, to the extent that gains and losses from the under-

lying and the hedging transaction are highly likely to cancel

each other out.

The nominal amount of EUR 233,390,000 (2002: EUR

55,001,000) relates to exchange rate hedging transac-

tions. The nominal amount allows inferences to be drawn

as to the overall use made of derivatives, but does not

reflect the level of risk attendant upon their use. The net

market value was EUR -2,640,000 (2002: EUR -2,009,000)

as of December 31, 2003.

Explanatory Notes to the Statement of Earnings

12. Sales

Following the reorganization of HOCHTIEF Aktiengesell-

schaft as a strategic management holding company in

2001, which involved spinning off construction operations

into the legally autonomous HOCHTIEF Construction AG,

the sales posted now essentially comprise income from

processing older contracts in Germany, which fall within

the Construction division’s sphere of responsibility, togeth-

er with income from carrying out holding-company func-

tions. The international share of sales was EUR 78,299,000

(2002: EUR 1,653,000)

13. Other operating income

This category primarily includes income from the disposal

of fixed assets, corporate headquarters charges, sales of

securities, reversal of provisions, insurance payments received

for damages, foreign exchange gains and write-ups on finan-

cial assets and marketable securities. The high prior-year

figure was caused by the sale of our interest in Monachia

Grundstücks-Aktiengesellschaft, Munich (EUR 111,350,000)

and the transfer of certain real estate assets at fair value to

newly founded project companies (EUR 59,525,000).

EUR 69,479,000 of the write-ups relate to own stock and

EUR 49,000,000 to special-purpose funds. In the course

of establishing HOCHTIEF’s new holding structure, the

value of the equity interest in HOCHTIEF Australia Ltd. of

Sydney, Australia, was written up by EUR 66,801,000 in

2002 to match the value assessed for tax purposes. Income

from releasing the special account with reserve character-

istics totaled EUR 275,000 (2002: EUR 69,437,000).

16

14. Materials

15. Personnel costs

16. Depreciation and amortization

The depreciation and amortization applies entirely to fixed

assets, and is charged to the extent permitted by tax law.

There were no writedowns by impairments in 2003.

17. Other operating expenses

Other operating expenses primarily include changes in

provisions for risks in real estate and equity holdings and

for anticipated losses from pending transactions, costs

involved in order processing, insurance premiums, costs of

semi-retirement programs for older employees, write-downs

of receivables, costs of materials for administrative purposes,

rentals and lease rentals, travel and other business ex-

penses, foreign exchange losses, costs of preparing the

financial statements, and other social benefits payable that

are not reported elsewhere. The high prior-year figure was

due to recognition of provisions for risks in real estate and

project development.

The “other taxes” subitem reported here comes to EUR

717,000 (2002: EUR 1,614,000).

18. Income from financial assets (net)

(EUR thousand) 2003 2002

Raw materials,supplies and pur-chased goods 4,394 4,790

Purchasedservices 40,349 168,030

44,743 172,820

(EUR thousand) 2003 2002

Wages andsalaries 41,288 43,683

Social insuranceand support 4,853 5,118

Pensions 15,338 18,987

61,479 67,788

Employees

(average for the year) 2003 2002

Waged/industrialemployees 11 15

Salaried/officeemployees 390 419

Total 401 434

(EUR thousand) 2003 2002

Income from profit/ loss transferagreements 96,630 228,509

Income from partici-pating interests 34,910 97,093

Of which:from affiliatedcompanies [34,211] [91,065]

Expenses fromtransfer of losses (1,674) (71,412)

Income from othersecurities and long-term loans 7,354 9,703

Of which:from affiliatedcompanies [1,461] [1,782]

137,220 263,893

17

The high prior-year figures for income from profit/loss trans-

fer agreements largely came from Deutsche Bau- und Sied-

lungs-Gesellschaft mbH, Essen, which transferred part of

its real estate portfolio at fair value to a newly established

project company.

The high prior-year figures for expenses from the transfer

of losses mostly derived from HOCHTIEF Construction AG,

Essen.

19. Interest (expense)/income (net)

20. Depreciation and write-downs on financial assets

and marketable securities

This item consists of adjustments to valuations of partici-

pating interests in affiliated companies and other partici-

pating interests, and in the prior year a writedown of own

stock and other securities holdings to end-of-period mar-

ket price.

EUR 23,520,000 (2002: EUR 58,857,000) of the total charge

is a writedown on the participating interest in Ballast Nedam

N.V., Nieuwegein, Netherlands. EUR 193,357,000 of the

prior-year figure was a write-down on special-purpose

investment funds.

21. Income taxes

Income taxes include German trade income taxes, foreign

taxes on profits, tax refunds relating to earlier periods and

reversals of provisions for taxes. Other taxes are disclosed

under other operating expenses.

22. Total compensation for Supervisory Board and

Executive Board

Total compensation for the Executive Board in FY 2003 was

EUR 3,099,000 (2002: EUR 2,493,000). The total divides

into EUR 1,707,000 (2002: EUR 1,639,000) in fixed com-

pensation plus a performance-related component of EUR

1,392,000 (2002: EUR 854,000) for all the members com-

bined. The 2003 Long Term Incentive Plan adopted by the

Supervisory Board Human Resources Committee adds stock

appreciation rights (SARs)—a pay component combining a

long-term incentive effect with an element of risk. If perform-

ance thresholds in the 2003 Long Term Incentive Plan are

attained by the end of a two-year performance period, the

members of the Executive Board have a financial claim

against the company based on their SARs. Once stipulated,

the performance thresholds cannot be changed. The total

value of SARs is limited to approximately EUR 1.7 million

for the Executive Board as a whole so that the figures remain

appropriate even in the event of extraordinary or unforeseen

developments.

(EUR thousand) 2003 2002

Other interest andsimilar income 34,011 34,882

Of which: fromaffiliatedcompanies [21,895] [25,339]

Interest and similar expenses (47,969) (36,573)

Of which: toaffiliatedcompanies [(33,241)] [(26,230)]

(13,958) (1,691)

18

Compensation for the Supervisory Board came to EUR

836,000 (2002: EUR 417,000). Pension payments to for-

mer members of the Executive Board or their survivors

were EUR 1,800,000 (2002: EUR 1,614,000).

A total of EUR 18,670,000 (2002: EUR 19,099,000) has

been provided to cover future pension obligations to for-

mer members of the Executive Board or their survivors.

HOCHTIEF Aktiengesellschaft

The Executive Board

Essen, February 2004

Proposal by Executive Board for Use of Net Profit

We propose that the unappropriated net profit of EUR

45,500,000.00 available for distribution be used to pay a

dividend of EUR 0.65 per no-par-value share on the capital

stock of EUR 179,200,000.00, subdivided into 70,000,000

no-par-value shares.

The dividend amount that would otherwise have been

payable on own stock held by the Company on the date

of the General Shareholders’ Meeting—this stock is barred

from receiving a dividend by Section 71b of the Stock Cor-

porations Act (AktG)—will be carried forward to the new

fiscal year.

19

Independent Auditor’s Report

We have audited the Annual Financial Statements, together

with the bookkeeping system, and the combined Manage-

ment Report of HOCHTIEF Aktiengesellschaft and the

HOCHTIEF Group for the business year from January 1 to

December 31, 2003. The maintenance of the books and

records and the preparation of the Annual Financial State-

ments and 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 combined Management

Report based on our audit.

We conducted our audit of the Annual Financial Statements

in accordance with Sec. 317 of the German Commercial

Code (HGB) and 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 environ-

ment of the Company and evaluations of possible mis-

statements are taken into account in the determination of

audit procedures. The effectiveness of the accounting-

related internal control system and the evidence support-

ing the disclosures in the books and records, the Annual

Financial Statements and the combined 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 man-

agement, 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, the Annual Financial Statements of HOCHTIEF

Aktiengesellschaft give a true and fair view of the net assets,

financial position and results of operations of the Compa-

ny in accordance with principles of proper accounting. On

the whole the combined Management Report provides a

suitable understanding of the Company's position and suit-

ably presents the risks of future development.

Essen, February 18, 2004

PwC Westdeutschland

Aktiengesellschaft

Wirtschaftsprüfungsgesellschaft

Schwarzhof Kunst

Wirtschaftsprüfer Wirtschaftsprüfer

(German Public (German Public

Auditor) Auditor)

20

Subsidiaries, Associates and Other SignificantParticipating Interests of the HOCHTIEFGroup at December 31, 2003

Percentage Shareholders’ equity Profit/(loss)of stock held Local currency EUR thousand for the year

in % (thousand) (EUR thousand)

I. Affiliated companies included in the Consolidated Financial Statements

Airport Division

HOCHTIEF AirPort GmbH, Essen 100 135,000 – *

Airport Partners GmbH, Düsseldorf 60** 146,063 3,580

HAP Hamburg Airport Partners GmbH & Co. KG, Hamburg 80** 396,090 14,243

Sydney Airport Intervest GmbH & Co. KG, Essen 100** 132,605 17,395

Construction Division

Deutsche Bau- und Siedlungs-Gesellschaft mbH, Essen 100 175,690 – *

DEBAUSIE Immobilien GmbH & Co. KG, Essen 100** 79,655 355

HOCHTIEF Projektentwicklung GmbH, Essen 100 7,670 – *

HOCHTIEF Facility Management GmbH, Essen 100 1,093 – *

Construction Services Americas Division

HOCHTIEF Americas GmbH, Essen 100 542,524 – *

The Turner Corporation, Dallas, Texas, USA 100** USD 405,186 320,814 30,005

HOCHTIEF CANADA Inc., Toronto, Canada 100 CAD 53,181 32,759 (2,668)

HOCHTIEF do Brasil S.A., Sa~o Paulo/Brazil 91.50 BRL 2,620 719 (3,415)

Construction Services Asia Pacific Division

HOCHTIEF Asia Pacific GmbH, Essen 100 705,025 – *

Leighton Holdings Limited, Sydney, Australia 50.07** AUD 852,456 507,356 105,734

Construction Services Europe Division

HOCHTIEF Construction AG, Essen 100 203,662 – *

STREIF Baulogistik GmbH, Essen 100** 31,659 – *

Dipl. Ing. Hugo Durst GmbH, Vienna, Austria 100** 6,741 269

HOCHTIEF (UK) CONSTRUCTION Ltd.,Swindon, UK 100** GBP 1,292 1,833 724

HOCHTIEF Polska Sp. z o.o., Warsaw, Poland 99** PLN 71,297 15,164 (1,373)

HOCHTIEF VSB a.s., Prague, Czech Republic 94.66 CZK 627,713 19,365 4,360

***

***

21

Percentage Shareholders’ equity Profit/(loss)of stock held Local currency EUR thousand for the year

(thousand) (EURthousand)

Corporate Headquarters

VERBAU Gesellschaft zur Vermittlung vonBauversicherungen mbH, Essen 100 779 – *

Contractors’ Casualty & Surety ReinsuranceCompany S.A., Steinfort, Luxembourg 100** USD 3,500 2,771 –

Builders’ Credit Reinsurance Company S.A.,Steinfort, Luxembourg 100** USD 3,000 2,375 –

II. Associated companies consolidatedat equity

Airport Division

Flughafen Düsseldorf GmbH, Düsseldorf 50** 113,090 52,520

Athens International Airport S.A., Athens, Greece 39.94** 304,622 14,261

Flughafen Hamburg GmbH, Hamburg 49** 63,760 – *

Construction Services Americas Division

AECON Group Inc., Toronto, Canada 48.39** CAD 131,554 81,036 145

KITCHELL CORPORATION, Phoenix, Arizona, USA 31.18** USD 75,686 59,926 8,375

Construction Services Asia Pacific Division

Concor Limited, Johannesburg, South Africa 49.99 ZAR 181,235 21,763 2,488

Corporate Headquarters

Ballast Nedam N. V., Nieuwegein, Netherlands 48 56,000 (143,000)

P. T. Ballast Indonesia Construction, Jakarta, Indonesia 47.44 USD 6,472 5,124 1,060

* Profit/loss transfer agreement ** Indirect participating interest *** Consolidated result for group

22

Boards

Supervisory Board

Dr. jur. Dietmar Kuhnt

Essen, Chairman,

Former Chairman of the Executive Board of RWE AG, Essena) Allianz Versicherungs-AG

Dresdner Bank AGHapag-Lloyd AGmg technologies agRWE AG TUI AG

Gerhard Peters *

Butzbach, Deputy Chairman, Administrative Officera) HOCHTIEF Construction AG

Alois Binder *

Wyhl, Construction Plant Operator

Detlev Bremkamp

Munich, Member of the Executive Board of Allianz AG, Municha) Allianz Global Risks Rückversicherungs AG (Chairman)

Asea Brown Boveri AGb) ACIF

AGF RAS Holding B.V. (Chairman)Allianz Financial & Insurance Services GmbHAllianz General Insurance Company S.A.Allianz Life Insurance Company S.A.Allianz Risk TransferAllianz, Compania de Seguros y Reaseg. S.A. (Chairman)Assurances Générales de FranceElmonda Assistance (Chairman)Lloyd AdriaticoRAS International II B.V.RAS International N.V.RINV (NewCo) (Chairman)Royal Nederland VerzekeringsgroepZwolsche Algemeene N.V.

Günter Haardt *

Frankfurt am Main, Executive Manager, Vermögensverwal-

tungs- und Treuhandgesellschaft mbH der Industriegewerk-

schaft Bauen-Agrar-Umwelt (the asset management and trust

company of the Construction, Agricultural and Environmental

Employees’ Union), Frankfurt am Maina) HOCHTIEF Construction AGb) apm alpha print medien AG

Ulrich Hartmann

Düsseldorf, Chairman of the Executive Board of E.ON AG,

Düsseldorfa) Deutsche Bank AG

Deutsche Lufthansa AGE.ON Energie AG (Chairman)IKB Deutsche Industriebank AG (Chairman)Münchener Rückversicherungs-Gesellschaft AG (Chairman)

b) ARCELORHenkel KGaA

Josef Hess *

Vilshofen, Warehousekeeper and Works Council Chairman

(in Munich)

Dipl.-Ing. Gerhard Hilke *

Rödermark-Urberach, Management Chairman,

Southwest Division of HOCHTIEF Construction AG

Dr. rer. pol. h. c. Martin Kohlhaussen

Frankfurt am Main, Chairman of the Supervisory Board of

Commerzbank AG, Frankfurt am Maina) Bayer AG

Commerzbank AG (Chairman)Heraeus Holding GmbHInfineon Technologies AGSchering AGThyssenKrupp AG

b) Verlagsgruppe Georg von Holtzbrinck GmbH

Udo Paech *

Berlin, Technical Employee

Dr. jur. Dr.-Ing. E. h. Heinrich v. Pierer

Munich, Chairman of the Executive Board of Siemens AG,

Berlin & Municha) Bayer AG

Münchener Rückversicherungs-Gesellschaft AGVolkswagen AG

b) Siemens AG Österreich (Austria)

Prof. Dr. Jürgen Strube

Ludwigshafen, Chairman of the Executive Board of

BASF AG, Ludwigshafen

– until June 4, 2003; offices listed as of June 4, 2003 –a) Allianz Lebensversicherungs-AG

BASF Aktiengesellschaft (Chairman)Bayerische Motoren Werke AktiengesellschaftBertelsmann AGCommerzbank AGHapag-Lloyd AGLinde AG

Dr. phil. Klaus Sturany

Dortmund, Member of the Executive Board of RWE AG,

Essena) Commerzbank AG

Hannover Rückversicherungs-AGHeidelberger Druckmaschinen AGRAG AG RWE Dea AGRWE Power AGRWE Solutions AG

b) Innogy Holdings plc.RWE Trading GmbHThames Water plc.

* Supervisory Boardmember representingemployees

a) Membership in othersupervisory boards pre-scribed by law

b) Membership in compa-rable domestic andinternational corporategoverning bodies

Fritz Voelkner *

Duisburg, Assistant Foreman

Dr.-Ing. E. h. Heinrich Weiss

Hilchenbach-Dahlbruch,

Chairman of the Executive Board of SMS AG, Düsseldorfa) Commerzbank AG

Deutsche Bahn AGFerrostaal AGJ.M. Voith AGSMS Demag AG (Chairman)

b) Concast Holding AG (President)Concast AG (President)Thyssen-Bornemisza Group

Klaus Wiesehügel *

Frankfurt am Main,

National Chairman of the Construction, Agricultural and Envi-

ronmental Employees’ Union, Frankfurt am Maina) Zusatzversorgungskasse des Baugewerbes VVaG, Wiesbaden (Chairman)

Jan Zilius

Essen, Member of the Executive Board of RWE AG, Essen

– from June 4, 2003 –a) Heidelberger Druckmaschinen AG

RWE Energy AGRWE Systems AG (Chairman)RWE Umwelt AG (Chairman)

Supervisory Board Committees

Mediation Committee pursuant to Sec. 27(3) of the

Codetermination Act (MitbestG)

Dr. jur. Dietmar Kuhnt (Chairman)

Josef Hess

Dr. rer. pol. h.c. Martin Kohlhaussen

Gerhard Peters

Human Resources Committee

Dr. jur. Dietmar Kuhnt (Chairman)

Dr. rer. pol. h.c. Martin Kohlhaussen

Gerhard Peters

Audit Committee

Dr. rer. pol. h.c. Martin Kohlhaussen (Chairman)

Gerhard Hilke

Gerhard Peters

Dr. phil. Klaus Sturany

Dr.-Ing. E.h. Heinrich Weiss

Executive Board

Dr.-Ing. Dr.-Ing. E. h. Hans-Peter Keitel

Essen, Chairmana) HOCHTIEF Construction AG (Chairman)

IVECO MAGIRUS AG National-Bank AGViterra AG

b) Ballast Nedam N.V. Leighton Holdings LimitedThe Turner Corporation

Hans-Wolfgang Koch

Meerbuscha) Flughafen Düsseldorf GmbH (Chairman)

HOCHTIEF Construction AGIV-AG Immobilien AktiengesellschaftSchefenacker Vision Systems International AG

b) AECON Group Inc.The Turner CorporationTurner Construction – International LLC

Dr.-Ing. Herbert Lütkestratkötter

Bad Vilbel

– ab 1. Dezember 2003 –a) ThyssenKrupp Elevator AG

Dr. rer. pol. Peter Noé

Essenb) Leighton Asia Limited

Leighton Holdings Limited

Dr. rer. pol. Hans-Georg Vater

Ratingena) HOCHTIEF Construction AG

SAB Spar- und Anlageberatung AGb) Athens International Airport S.A.

Representative Directors

Albrecht Ehlers

Dortmund

Henning Mähl

Essen

Hartmut Paulsen

Düsseldorf

* Supervisory Boardmember representingemployees

a) Membership in othersupervisory boards pre-scribed by law

b) Membership in compa-rable domestic andinternational corporategoverning bodies

23