Report of the Supervisory Board

Dear shareholders,

In the 2019 financial year, the Supervisory Board dutifully fulfilled the responsibilities entrusted to it by law, the company’s articles of association and rules of procedure, and the German Corporate Governance Code (GCGC). We continuously monitored the Executive Board’s management of business, provided advice on the further strategic development of HHLA and the HHLA Group as well as on important individual measures, and concluded that the management of the company and risk management strategy in place is lawful, proper, appropriate and cost-effective.

Working relationship between the Supervisory Board and the Executive Board

The Supervisory Board was involved in all decisions of major significance for the company. The Executive Board provided us with regular, prompt and comprehensive information on all major developments, especially the situation of HHLA and the Group, corporate planning, fundamental issues of company policy and strategy, investment plans and personnel. All measures for which the approval of the Supervisory Board or one of its committees was required by law, the articles of association or the Executive Board’s rules of procedure were submitted on time. After conducting their own examination and discussions with the Executive Board, the Supervisory Board or Supervisory Board committees approved all such measures. As Chairman of the Supervisory Board, I was also regularly in touch with the Executive Board between meetings and was informed about planning and strategy, the current business situation, significant transactions, the risk position, risk management and compliance.

The work of the Supervisory Board

The Supervisory Board held four routine meetings and three special meetings in the 2019 financial year.

At routine meetings, we regularly look at the current revenue, earnings and liquidity trend and the current business situation of the company and the individual segments, including the risk position, risk management and compliance. During the meetings, the Executive Board informed the Supervisory Board about the economic, financial and strategic position of the company and the Group, the company’s strategy, as well as significant developments and events. The other focal points of the meetings during the reporting period can be summarised as follows:

The financial statements meeting held on 22 March 2019 focused as scheduled on the auditing and approval of HHLA’s Annual Financial Statements, including the individual divisional financial statements for the A and S divisions, the Consolidated Financial Statements including the subgroup financial statements, the Combined Management Report of HHLA and the Group, the Supervisory Board report, the reports on transactions with related parties and on the relationship between the A and S divisions and the separate non-financial report, each for the 2018 financial year, as well as the agenda for the 2019 Annual General Meeting, including the Executive Board’s proposal on the appropriation of profit and the candidates proposed for the election of the auditor for the 2019 financial year. Representatives of the auditor were present at the meeting. They reported on the main results of their audit and were available to answer questions. As a follow-up to this meeting, the Supervisory Board also agreed on the proposed candidate for the election of a new shareholder representative at the Annual General Meeting on 18 June 2019 by way of a written circular.

In our second regular meeting on 7 June 2019, we addressed preparations for the Annual General Meeting and issues pertaining to the Executive Board and Supervisory Board.

In the two special meetings on 17 and 18 June 2019, we also primarily considered issues pertaining to the Executive Board and Supervisory Board, particularly the upcoming extension of Executive Board mandates and personnel changes following the appointment of Prof. Dr. Burkhard Schwenker to the Supervisory Board. We also discussed the upcoming changes due to the Act on the Implementation of the Second Shareholder Rights Directive and the new version of the GCGC.

In our regular meeting on 30 August 2019, we primarily focussed on current business developments as well as on various internal measures and projects in the Container segment and IT.

The focus of this year’s strategy meeting on 27 November 2019 was on IT, and IT security in particular, as well as on current and planned IT projects and initiatives.

In our final regular meeting on 13 December 2019, we routinely dealt with the budget for 2020, the medium-term planning for 2021 to 2024 for the Group and for the two subgroups, the findings of the risk and opportunity inventory and the declaration of compliance with the GCGC. We also discussed two smaller investment plans during this meeting.

As a general rule, regular meetings are attended by all of members of the Supervisory Board and – provided Executive Board matters or internal Supervisory Board topics are not discussed – the members of the Executive Board as well. The average attendance at the meetings of the Supervisory Board and its committees in the reporting period was approximately 89 %. Please see the end of this report for the individual participation ratios.

No conflicts of interest regarding members of the Executive Board or the Supervisory Board arose in the reporting period. The Supervisory Board does not include any former members of the company’s Executive Board.

Committee work

The Supervisory Board has set up a total of six committees: the Finance Committee, the Audit Committee, the Real Estate Committee, the Personnel Committee, the Nomination Committee and the Arbitration Committee. Following any committee work, the chairs report to the Supervisory Board about the committees’ activities. With the exception of the Nomination Committee, all of the committees include an equal number of shareholder and employee representatives. Corporate governance

The Finance Committee held four meetings during the 2019 financial year. At each meeting, the committee deals with the Group’s financial performance and its general financial and earnings position. In addition, as in the December meeting, it is concerned with the preliminary review of the budget for the coming year and relevant medium-term planning. In addition, the Finance Committee is responsible for the preliminary review of major financing, investment and participation plans. One area of focus during the reporting period was on the effects of the first-time application of the new leasing standard, IFRS 16.

The Audit Committee held five meetings in the reporting period. Its work regularly focuses on monitoring accounting and overseeing the accounting process and the audit. This includes monitoring the effectiveness of the audit, the internal control system, the risk management system, the internal audit system and compliance, along with the compliance management system. The committee oversees the selection of the auditor and the auditor’s qualifications, efficiency and independent status, and the admissibility of any additional services provided by the auditor (known as non-audit services). To do this, the Audit Committee has adopted a catalogue of basic approved non-audit services by type and scope. Other key issues at the various meetings held during the reporting period included a detailed discussion and examination of the Annual Financial Statements, the Consolidated Financial Statements and the Combined Management Report for the 2018 financial year (March meeting). This was followed by an in-depth consideration of the six-monthly financial report for 2019 and its review (August meeting). Other areas of focus were the interim reports for the first and third quarters, the organisation and audit remit of Internal Audit, the determination of key issues for the audit of the Annual Report and Consolidated Financial Statements for the 2019 financial year, the findings of the 2019 risk and opportunity inventory, the plans for the 2020 audit and the preparation of the declaration of compliance with the GCGC. In addition to the representatives of the Executive Board, HHLA’s Compliance Officer also regularly attends the meetings of the Audit Committee, where he speaks about his role and keeps the committee abreast of current developments. Other participants, such as representatives of the auditor or Internal Audit, attend meetings as necessary. The Chairman of the Audit Committee is also regularly in touch with the auditor and the Chief Financial Officer between meetings.

The Real Estate Committee held two meetings in the reporting period. It focused on the general development of business and the discussion and audit of HHLA’s Annual Financial Statements including the separate financial statements of the S division, the Consolidated Financial Statements and the Combined Management Report for the 2018 financial year (March meeting). The committee also dealt with the budget for the 2020 financial year and medium-term planning for 2021 to 2024 (December meeting). In each case, its deliberations related to the Real Estate subgroup (S division).

The Personnel Committee held six meetings in the reporting period. In addition to preparation for the upcoming staffing decisions – notably, the extension of Mr. Hansen’s mandate – the Personnel Committee focussed on the topic of Executive Board remuneration with regard to the Act on the Implementation of the Second Shareholder Rights Directive and the new version of the GCGC.

The Nomination Committee met once during the 2019 financial year in order to prepare for the election of a successor to Mr. Westhagemann on the Supervisory Board at the Annual General Meeting on 18 June 2019.

As in previous years, there was no cause for the Arbitration Committee to meet during the reporting period.

Corporate governance

The declaration of compliance with the GCGC in accordance with Section 161 of the German Stock Corporation Act (AktG) was prepared together with the Executive Board at the Audit Committee meeting on 11 November 2019 and adopted by the Supervisory Board at its meeting on 13 December 2019. The current declaration of compliance and further information about corporate governance can be found in the declaration on corporate governance in the Management Report. The current declaration and the declarations relating to previous years can also be viewed on HHLA’s website at www.hhla.de/corporategovernance. Corporate governance 

Training and further education

HHLA supports the members of the Supervisory Board upon their appointment and in terms of training and further education. When taking up a post, the candidate is generally trained in the work of the Supervisory Board, its tasks and the rights and obligations of its members. If required, further introductions or training sessions are provided to cover HHLA’s business activities or other relevant topics. During the course of its work, the Supervisory Board is kept informed of relevant topics such as new legal requirements or accounting standards. During the reporting period, this primarily affected the new tasks under the Act on the Implementation of the Second Shareholder Rights Directive, the new version of the GCGC and the effects of accounting standard IFRS 16.

Audit of financial statements

In line with the Audit Committee’s recommendation and the Supervisory Board’s nomination, the Annual General Meeting on 18 June 2019 elected PricewaterhouseCoopers GmbH Wirtschaftsprufungsgesellschaft, Hamburg (PwC), to conduct the audit of the Annual and consolidated financial statements for the 2019 financial year and to conduct the review of the Condensed Financial Statements and the interim management report of the Group for the first half of the 2019 financial year. In line with the legal requirements and the recommendations of the GCGC – especially those relating to the auditor’s independence – the Audit Committee then assigned the audit and defined its focus areas.

The auditor carried out an audit of HHLA’s annual financial statements for the 2019 financial year as provided by the Executive Board, including the divisional financial statements for the A division (Port Logistics subgroup) and the S division (Real Estate subgroup) presented as part of the notes, in line with the provisions of the German Commercial Code (HGB), the consolidated financial statements for the 2019 financial year including the subgroup financial statements for the A and S divisions in accordance with the International Financial Reporting Standards (IFRS) that apply in the European Union and the additional requirements of German commercial law pursuant to Section 315e HGB, and the combined management report for HHLA and the Group for the 2019 financial year. The auditor issued an unqualified opinion with respect to each of the foregoing.

The auditor also audited the report prepared by the Executive Board of HHLA on company transactions with related parties for the 2019 financial year in line with Section 312 AktG, delivered a written report on the audit findings and, having no objections to make, gave the report the following unqualified opinion:

“On the basis of our audit and in our professional opinion we confirm that (1) the factual statements in the report are correct, (2) the consideration paid by the company for the transactions mentioned in the report was not inappropriately high, and (3) the measures detailed in the report give us no grounds to reach a substantially different opinion to that of the Executive Board.”

The auditor also audited the report prepared by the Executive Board in line with Article 4 (5) of the articles of association applied analogously to Section 312 AktG on the relationship between the A and the S divisions for the 2019 financial year, delivered a written report on the audit findings and, having no objections to make, gave the report the following unqualified opinion:

“On the basis of our audit and in our professional opinion we confirm that (1) the factual statements in the report are correct, (2) the consideration paid by the company for the transactions mentioned in the report was not inappropriately high.”

Finally, the auditor reviewed the combined separate non-financial report in line with Section 289b et seqq. and Section 315b et seq. HGB to achieve a limited degree of certainty, reported the review findings and issued an unqualified opinion.

Each of the above-mentioned financial statements and reports along with the corresponding audit reports was distributed to all members of the Supervisory Board as soon as it had been produced and checked. The documents were subsequently discussed in detail at the meetings of the Audit and Real Estate Committees on 20 March 2020 and at the Supervisory Board’s financial statements meeting held on 23 March 2020. Representatives of the auditor took part in the meetings, where they reported on the scope, focal points and key findings of the audit and were available to answer questions. They paid particular attention to the key audit matters described in the certificate along with the audit procedures used and the conclusions regarding the accounting-related internal control and risk management system. Finally, they also reported on the nature and extent of the other services provided by the auditor.

As part of the preliminary review, the Audit and Real Estate Committees closely examined the course of the audit, the auditor’s reports and the findings. Once they had completed their examination, they recommended that the Supervisory Board as a whole approve the financial statements and reports. Following a detailed plenary examination of the auditor’s reports and findings and the findings of the committees’ preliminary review, and based on our own review, we approved the findings of the audit. Following our review, we had no objections to make to the Annual Financial Statements including the divisional financial statements, the Consolidated Financial Statements including the subgroup financial statements, and the Combined Management Report for the 2019 financial year. Accordingly, we approved the Annual Financial Statements, the Consolidated Financial Statements and the Combined Management Report at our meeting on 23 March 2020. HHLA’s Annual Financial Statements for the 2019 financial year have therefore been adopted. Following our review, we also had no objections to make to the Executive Board’s statements on related parties and on the relationship between the A and S divisions. Finally, following our review, we had no objections to make to the combined separate non-financial report for the 2019 financial year.

The Executive Board’s proposal for appropriation of the distributable profit was analysed in detail and discussed with the Executive Board at the meetings of the Audit Committee – for the A division – and the Real Estate Committee – for the S division – on 20 March 2020 and at the Supervisory Board’s meeting on 23 March 2020. Following our own review, which paid particularly close attention to earning trends, financial planning, the shareholders’ interests and with a view to protecting liquidity, we endorsed the Executive Board’s proposal for appropriation of the distributable profit. Together with the Executive Board, we will propose to the Annual General Meeting that a dividend of € 0.70 per dividend- entitled class A share and € 2.10 per dividend-entitled class S share be distributed from distributable profit for the 2019 financial year.

Personnel changes

On the Executive Board, Mr. Torben Seebold took up his position as a member of the Executive Board in the role of Labour Director on 1 April 2019 as the successor to Mr. Heinz Brandt. During the reporting period, we also extended Mr. Jens Hansen’s term of office by five years. Mr. Michael Westhagemann stepped down from the Supervisory Board with effect as of 6 February 2019 as a result of his appointment as Senator for Economic Affairs. In line with the Nomination Committee’s recommendation and the candidate proposed by the Supervisory Board, the Annual General Meeting on 18 June 2019 appointed Prof. Dr. Burkhard Schwenker, Chairman of the Advisory Council of Roland Berger GmbH, as Mr. Westhagemann’s successor for the remainder of his mandate on the Supervisory Board. In addition to the requirements of the German Stock Corporation Act, the GCGC and the Supervisory Board’s rules of procedure, the Nomination Committee and Supervisory Board recommendations each took into account the specifications of the profile of requirements issued by the Supervisory Board.

In the course of the personnel changes, Prof. Dr. Schwenker was also appointed the successor to Mr. Westhagemann on the Finance, Audit and Real Estate Committees. Corporate governance

Finally, on behalf of the Supervisory Board, I would like to take this opportunity to thank the members of the Executive Board and our employees for their hard work in the 2019 financial year, and our shareholders and business partners for the trust they have placed in us.

Hamburg, 23 March 2020

The Supervisory Board

Prof. Dr. Rüdiger Grube
Chairman of the Supervisory Board