Annual Report 2010 AF Group Annual Report Company

Highlights 2010 2010 AF Group annual report

Record profit The AF Group ended its 2010 anniversary year with the highest annual net profit in the history of the

AF Group annual report 2010 AF Group annual report company. Profit before tax for 2010 was NOK 372 million, corresponding to a profit margin of 6.4 per cent. While the outlook for the five business areas varies, overall the AF Group is well positioned for the future from both an organisational and financial standpoint.

Financially sound position At the end of 2010 AF had NOK 580 million in net interest-bearing receivables and an equity ratio of 32.1 per cent. Thanks to the sale of parts of the Environ- mental Base at Vats and profits from operations AF is financially strong and well equipped to meet opportunities and challenges in the time to come.

High activity and good performance in Civil Engineering AF’s Civil Engineering business area reported its highest level of activity and earnings ever in 2010. Revenues in 2010 amounted to NOK 2,158 million and profit before tax was NOK 198 million, equivalent to a profit margin of 9.2 per cent. All the Civil Engineering units performed very well during the year.

Historically low level of injuries HSE has high priority at AF and is an integral part of management at all levels. In 2010, AF had a historically low level of injuries, with an LTI rate of 1.7 for the Norwegian part of the business. The LTI rate is defined as the number of lost time injuries per million man- hours, and AF includes all sub-contractors in the Annual report 2010 calculation. AF shareholders acquire Environmental Base at Vats In the autumn of 2010 AF sold parts of its Environ- mental Base at Vats, Europe’s most modern reception facility for decommissioned offshore installations. The buyers were the largest shareholders in the AF Group AF Gruppen ASA along with several smaller ones, including employees Innspurten 15 AF Group of AF. AF retains a 40 per cent ownership interest in P.O. Box 6272 Etterstad the environmental base. 0603 Oslo

Telephone +47 22 89 11 00 Fax +47 22 89 11 01 www.afgruppen.no Operational structure Addresses Contents

This is the AF Group 04 AF’s goals for profitable growth 08 History of the AF Group 10 From the CEO 12 Risk management 14 AF Gruppen ASA Aeron AS BA Gjenvinning AS Health, safety and the environment (HSE) 16 AF Gruppen Norge AS Nulandsvika 8 P.O. box 6271 Etterstad Environmental and social responsibility 18 AF Anlegg 4400 Flekkefjord 0603 Oslo AF Offshore & Civil Construction Tel. +47 38 32 78 00 Tel. +47 22 89 12 24 People in the AF Group 22 AF Byggfornyelse Fax +47 38 32 78 01 Fax +47 22 89 11 01 AF Bygg Oslo AF Anlegg AF Bygg Oslo AF Eiendom AF Decom AF Energi & AF Eiendom AF Bygg Göteborg AB Johan Rognerud AS Business areas Miljøteknikk AF Decom AS Theres Svenssons gata 9 Industriveien 28 Civil Engineering 26 AF Decom Offshore AS S - 417 55 Gothenburg 2050 Jessheim Building 32 AF Offshore & AF Bygg- AF Decom Mollier AF Entech AS Tel. +46 31 762 40 00 Tel. +47 63 92 79 00 Property 38 Civil Construction fornyelse Offshore Environment 42 AF Energi & Miljøteknikk AS Fax +46 31 762 40 01 Fax +47 63 92 79 09 Energy 48 AF Miljø AS Pålplintar AF Bygg Østfold Aeron Miljøbase Vats AS AF Bygg Syd AB Mollier AS i Sverige Shareholder Information 54 Stationgatan 37 Forusbeen 210 Corporate governance 55 Visiting address S - 302 45 Halmstad 4313 Sandnes The share 61 AF Bygg Sør Innspurten 15 Tel. +46 35 71 02 000 Tel. +47 51 96 26 00 Board of Directors’ report 64 0663 Oslo Fax +46 35 21 74 40 Fax +47 51 96 26 01

Postal address AF Bygg Sør Pålplintar AB Annual accounts AF Group 74 AF Bygg Statement of comprehensive income 75 Göteborg P.O. Box 6272 Etterstad Sjølystveien 15 Borrvägen 3 Balance sheet 76 0603 Oslo 4610 Kristiansand S S - 155 93 Nykvarn Statement of changes in equity 78 Tel. +47 22 89 11 00 Tel. +47 22 89 11 00 Tel. +46 85 50 65 050 Cash flow statement 79 Fax +47 22 89 11 01 Fax +47 22 89 11 01 Fax +46 85 50 67 210 Notes 80

http://www.afgruppen.no AF Bygg Østfold AF Group Polska Sp.z o. o. Annual accounts AF Gruppen ASA 127 Sarpsborgveien 11 D Ul. Mokotowska 55/7 Statement of comprehensive income 128 Civil Eng. Building Property 1640 Råde 00-542 Warsaw Balance sheet 129 Tel. +47 69 28 35 00 Poland Cash flow statement 130 Fax +47 69 28 35 01 Tel. +48 608 022 88 Notes 131 Civil Engineering carries out large complex construction Building performs traditional building operations Property comprises the development of residential Auditor’s Report 139 projects and niche projects in the following areas: with a solid local base. The business area enjoys a housing units and commercial buildings for own Glossary 141 ports, oil and energy and foundations. Customers strong market position in the central Eastern Norway account in Eastern Norway, where the company has AF Decom AB Definitions 142 include both public sector and municipal agencies region and in southern Sweden. AF is also one of access to its own contracting services. AF will gain August Barks gata 30 A Addresses 143 and large industrial companies. Norway’s largest building renovation contractors. better control over the value chain by collaboration S - 421 32 Västra Frölunda between property and contracting operations. Tel. +46 31 76 25 100

Design Cox design/cox.no Photo Werner Anderson, Jan Lillehamre (Cox) Translation Amesto Translations AS Print TS-trykk™

ER JØM KE IL T M

2 4 6 1 1 7 T RYKKSAK Key figures

YEAR 2010 2009 2008 2007 2006 Definitions and glossary TURNOVER (NOK MILLION) Financial ratios Operating and other revenue 5,828 5,401 5,916 5,538 5,358 1) EBITDA % Order backlog 6,193 6,033 4,912 5,862 5,177 (Operating profit+depreciation, EARNINGS (NOK MILLION) amortisation and impairment)/operating Earnings before interest taxes, depreciation and revenue amortisation (EBITDA) 463 417 417 311 266 2) EBIT % Depreciation, amortisation and impairment losses -97 -83 -88 -82 -74 Operating profit/operating revenue Earnings before interest and taxes (EBIT) 366 335 328 229 192 Earnings before taxes (EBT) 372 366 308 232 185 3) EBT % Net profit 277 270 219 175 134 Earnings before taxes/operating revenue PROFITABILITY (NOK MILLION) 1) 4) Return on equity EBITDA % 7.9 % 7.7 % 7.0 % 5.6 % 5.0 % Net profit/average shareholders’ equity EBIT % 2) 6.3 % 6.2 % 5.6 % 4.1 % 3.6 % EBT % 3) 6.4 % 6.8 % 5.2 % 4.2 % 3.5 % 5) Return On Average Capital Employed Return on equity 4) 37.6 % 33.1 % 33.5 % 31.6 % 27.8 % (ROaCE) Return on average capital employed (ROaCE) 5) 36.0 % 35.7 % 33.0 % 29.3 % 25.4 % (Earnings before taxes+interest expenses)/average capital employed Economic Value Added (EVA) 6) 181 183 154 107 79 BALANCE SHEET (NOK MILLION) 6) Economic Value Added (EVA) Total assets 3,013 3 059 3,194 2 553 2,155 (Return on capital employed*0.72- Equity 968 915 741 570 534 average capital costs after tax)*average Capital employed 7) 1,040 1,009 1,202 859 834 capital employed Average capital employed 1,047 1,075 1,024 843 922 7) Capital employed 8) Equity ratio 32.1 % 29.9 % 23.2 % 22.3 % 24.8 % Shareholders’ equity+interest-bearing Net interest-bearing receivables (debt) 9) 580 185 -297 -124 -206 liabilities Debt-to-equity ratio 10) -1.50 -0.25 0.29 0.18 0.28 THE SHARE (NOK) 8) Equity ratio Equity/total capital Share capital as at 31 December 3,555,897 3,524,797 3,467,472 3,442,472 3,442,472 Number of shares as at 31 December 71,117,940 70,495,940 69,349,440 68,849,440 68,849,440 9) Net interest-bearing receivables (debt) Earnings per share 11) 3.92 3.85 3.16 2.55 1.95 Interest-bearing receivables+liquid Diluted earnings per share 3.82 3.85 3.16 2.55 1.95 assets- interest-bearing liabilities Cash flow per share 12) 6.14 4.02 5.83 4.26 3.65 10) Debt-to-equity ratio Dividend per share 4.50 3.60* 1.40 1.20 1.00 Net interest-bearing liabilities/(share- PERSONNEL holders’ equity+net interest-bearing Number of salaried employees as at 31 December 972 977 963 857 736 liabilities) Number of employees paid by the hour as at 31 December 961 997 1,084 1,033 1,057 Total number of employees 1,933 1,974 2,047 1,890 1,793 11) Earnings per share Net profit/average number of shares * Includes extraordinary dividend of NOK 2.00 per share. outstanding

12) Cash flow per share (Earnings before taxes+depreciation- taxes paid)/average number of shares Environment Energy outstanding

Through state-of-the-art expertise Environment offers The world needs more energy. This will create more solutions that meet the environmental challenges business opportunities. Energy will drive the develop- faced by the Group's customers. The business area ment of smarter, more energy-efficient technical includes AF’s environmental services within onshore solutions for the building, industry, marine and and offshore demolition and recycling. Onshore demoli- offshore sectors. AF's solutions will be profitable tion is carried out in Norway, Sweden and Poland. for both the customer and the environment. Offshore demolition and recycling focuses on the market in the North Sea.

3 This is the AF Group

4 AF Group annual report 2010 AF Group 5 Energy more business supplies smarter, Energy The for the energy-efficient technical solutions sec- marine industry, and offshore building, profitability provide solutions will The tors. and benefit the environment. customers for extensive industryWith knowledge and cutting-edge expertise efficiency, in energy production and operation optimisa- energy tion, service con- Energy and maintenance, the implementation of reliable, tributes to The busi- clean and cost-effective solutions. Skien, in Oslo, has a presence ness area Flekkefjord Stavanger, Trondheim, Bergen, and Shanghai. as demolition in connection- with rehabilita AF is established in Norway, tion jobs. unit offshore The Poland. and Sweden dismantling and recy- preparatory, provides cling services installations. petroleum for AF has a state-of-the-art facility reception decommissioning of the environmental for Vats near Haugesund structures at offshore and has set up operations in England. - Property acquires, AF's Property operation identifies, and residential sells and executes develops, building projects in areas non-residential is engaged in contracting AF where opera- makes business area its own The tions. with partners. or cooperates investments Environment business area Activities in the Environment demolition and offshore include onshore AF is Scandi- clean-up. and environmental leading demolition contractor for navia’s as well plants and installations, buildings, and commercial buildings. AF is also one of buildings. and commercial efficien- of energy Norway’s providers largest has a strong AF buildings. solutions for cy position in Oslo and the central Eastern as the Gothenburg- Norway as well region, In in Sweden. 2010 AF estab Halmstad area lished building operations in Southern Norway starting that with the organisation theatre Kilden prestigious the out carrying is and concert hall project. -

Building types all performs area business Building The clients public and private for work building of work in residentialand carries out renovation AF is a turnkey supplier of civil engineering AF has 25 years, services For in Norway. built up the experience and expertise carry to required out everything small from and demanding con- large and simple to include both struction Customers projects. industrialpublic sector agencies and large has state- Civil Engineering companies. of-the-art expertise in the market of areas construction, underground oil and energy, infrastructure and harbours. Civil Engineering Civil ing value. AF stands for: “Addressing Future”. “Addressing AF stands for: value. ing AF has always been independent and proud and proud been independent AF has always and ability master strength to of its own Our entrepreneurial complex challenges. spirit an ability is distinguished by and will- seek and to think Alternatively to ingness of generat ways Future-oriented more better, Environment and Energy. Environment business areas: Civil Engineering, Building, Property, Property, Building, Engineering, Civil business areas: on the Oslo Stock Exchange (AFG) and consists of five of five and consists (AFG) Exchange Stock on the Oslo Sweden, Poland, the UK and China. The AF Group is listed listed is Group AF The China. and UK the Poland, Sweden, of NOK 5,828 million and had 1,933 employees in Norway, Norway, in employees 1,933 had and million 5,828 NOK of and industrial groups. In 2010 the Group posted a turnover turnover a posted Group the 2010 In groups. industrial and AF Gruppen ASA is one of Norway's is one ASA AF Gruppen contracting leading Vision Core values

Clearing up the past, building for the future. The AF Group is a values-driven company with a firmly anchored set The AF Group will be one of Europe’s leading of core principles: companies for environmental solutions through its state-of-the-art expertise in the • Reliability Environment and Energy focus areas. • Freedom to exercise entrepreneurship and discipline in relation to goals and Through the innovative use of materials and requirements efficient project execution the AF Group will • Thoroughness and hard work create solutions that are adapted to future • Persistence in achieving profitable use and provide high customer value. growth • Management through presence and involvement

Mission

AF's mission is to be an industrial group that delivers value by forming the future through contracting, energy and environmental services. The company has an uncompromising attitude towards safety and ethics.

6 AF Group annual report 2010 AF Group 7 - Paul-Terje Gundersen Paul-Terje Executive Vice President Responsible for the Building and Property business areas. Has broad managerial experience from AF, Ragnar and Evensen Kruse Smith. Akershus from engineering in Degree University College. Holdings:83,800 andshares 40,000 options AF in DecemberGruppen 2010. ASA 31 at as Moe Arild Executive Vice President Responsible for the Civil Engineer ing business Has held area. various Degreemanagerial in posts AF. at engineering from Oslo University College and degree business in economics from the University of shares Holdings: 278,620 Agder. and 90,000 options AF Gruppen in December 2010. ASA 31 at as Robert Haugen Executive Vice President Responsible for the Environment business Has held area. various Degreesmanagerial in posts AF. at economics business and engineering from Buskerud University College. and shares Holdings: 144,350 options AF Gruppen in 120,000 December 2010. ASA 31 at as - - -

Sverre Hærem Sverre Executive Vice President/CFO Previously VP Dyno at Finance ASA Fjord Seafood at and CFO ASA.MSc degree business in administration from BI Norwegian School of Man agement. Holdings: 86,000 shares options AF Gruppen in and 120,000 December 2010. ASA 31 at as Fjukstad Tore Executive Vice President business Energy the for Responsible Managerialarea. experience from several industrial groups. Degrees engineeringin and economics from Uni and Sør-Trøndelag Trondheim versity College. Has a Master in Energy Management from and IFP ESCP-EAP and Paris BI in Norwegian School of Management. Holdings: options and shares 120,000 76,500 AF Gruppenin ASA 31 at as December 2010. Pål Egil Rønn Egil Pål CEO Has held various managerial posts Chartered engineer with a PhD AF. at from the Norwegian University of Science and Technology (NTNU). Completed the Advanced Manage ment Programme INSEAD. at and shares Holdings: 172,075 140,000 options AF Gruppen in December 2010. ASA 31 at as Corporate Management Team Management Corporate AF’s goals for profitable growth

AF will create continuous value growth that makes the company attractive to investors. This provides flexibility for business operations and opportunities for developing our employees.

AF is to seek opportunities, and organise and conduct its business so that the value the company creates is recognised.

Profitability Financial strength

Objective Objective AF's goal is to have an operating margin and return AF’s financial strength target is to achieve a minimum equity on capital employed that is better than comparable ratio of 20 per cent and to have sufficient liquidity to cover companies. the company’s current needs at any given time.

AF's target is to have a return on capital employed that is higher than 20 per cent.

Results in 2010 Results in 2010 AF achieved an operating margin of 6.3 per cent in 2010. AF’s equity ratio was 32.1 per cent at the end of 2010, The company’s return on capital employed was 36 per cent. and the company had unutilised credit and loan facilities of NOK 900 million as at 31 December 2010.

8 AF Group annual report 2010 AF Group 9

Health, safety and safety Health, the environment AF achieved an LTI rate of 1.7 and a sickness rate absence rate an LTI AF achieved results the best safety is on a par with This of 3.7 per cent. in the contractor industry Objective perform objective is to all our operations without AF’s and sickness of zero absence rate rate with an LTI injuries, partners subject the are to of less than 3 per cent. AF’s and AF includes them in as AF itself, same requirements target. rate its LTI Results in 2010

Dividend For 2010, the Board of Directors proposes a dividend of proposes of Directors 2010, the Board For NOK 4.50 per share. In 2010, AF paid a dividend of NOK 1.60 per share for the In for AF paid a dividend of NOK 1.60 per share 2010, In addition, it paid an extraordinaryyear. 2009 financial dividend of NOK 2.00 per share. Results in 2010 The company assumes that future dividends will be stable dividends will be stable assumes that future company The and ideally rise in line with its earnings performance. Objective a competitive shareholders dividend policy give is to AF’s of a dividend. in the form return History of the AF Group 25 years

The AF Group is established Stock exchange listing and Establishes environmental AF Group was established in 1985 by Per merger with Ragnar Evensen business Aftreth and Leif Jørgen Moger, who worked After 10 years of carrying out large and AF saw potential in old industries that were together at Ingeniør F. Selmer on several complex construction projects, AF began to be phased out, and launched its environ- large construction projects. They wanted a to look at the building and property market. mental activities during the millennial year. company where there was freedom to cul- The will to grow had been there all along, In just two years, the acquisition of Graves- tivate an entrepreneurial spirit and incentives but the economic slowdown at the start of ervice and focus on large projects made AF for profitable growth. Their idea was to the 90s delayed the process. Not until 1997 the largest demolition player in Norway. focus on heavy construction projects any- did AF have the muscle to carry out acqui- The first major project was the Sola refinery where in Norway. Aftreth ran the large sitions. The merger with one of Oslo’s largest in which 64,000 tonnes of concrete and projects outside Oslo, while Moger was contracting companies, Ragnar Evensen, 22,000 tonnes of steel were removed. responsible for the major urban projects. roughly doubled AF’s turnover. AF was listed By Easter 1986, AF was involved in two on the Oslo Stock Exchange in the autumn Expands building operations major contracts, Dokkfløyvatn Dam as of 1997. The listing helped to professionalise in Østfold and Sweden well as the construction of the Lodalen the company further and also provided The acquisition of Brødrene Holstad in 2000 Train Formation Yard. greater financial flexibility. bolstered building operations in Østfold and Company turnover: NOK 118 million Group turnover: NOK 1,174 million the southern part of Akershus counties. Today, the business unit is called AF Bygg Østfold, and its building credits include Østfoldbadet Water Park and Halden Prison. The hunt for new markets led AF to the Swedish building market in 2001. In 2001 AF bought the majority share in JK Bygg Göteborg AB, which since 2007 has been wholly owned by AF and has changed its name to AF Bygg Göteborg. Reinforces underground construction and foundation skills The acquisition of Scandinavian Rock Group (SRG) in 2000 enabled AF to undertake even more complex underground construction jobs. Swedish Pålplintar, which offers piling, sheet piling, drilling and site preparation services, was purchased by AF in 2000. Group turnover: NOK 1,426 million 1985 1997 2000

10 AF Group annual report 2010 AF Group 11 - 2009 Opens Europe's most modern Opens Europe's base environmental When AF won contracts remove several to offshoreinstallations, it provided the basis for expanding the already existing environ mental base Vats. in invested AF has NOK 600 million the in Environmental Base at mostVats, which Europe's modern is and environmentally correct reception facility for decommissioned offshoreinstallations. The facility includes a new 182-metre-long paved deep with quay water membrane a underlay collects that run-offfor on-site AF sold 60 of per cent treatment. In 2010 the environmental base shareholdersto of AF Gruppen ASA. the same At time AF 15-year Decom Offshore a into entered lease with Miljøbase AS. Vats Group turnover: NOK 5,401 million

2006 Focus on maintenance of on maintenance Focus and systems HVAC offshore systems marine ventilation In the autumn of 2006 energy AF's business serviceestablished (Heating, a HVAC Venti lation and Air Conditioning) Bergen. in boosted AF itsIn October focus on 2007, energy-related offshore services by acquiring TheMollier. acquisition provided to access interesting customer contracts, skills key and a presence the in oil cities of Stavanger and Bergen. The Flekkefjord-basedcompany Aeron is a leading supplier of HVAC systems a leading is Aeron supplier of HVAC to the shipbuildingto industry. Founded in the operates company 60 in countries. 1979, wasAeron purchased by the AF Group in July 2008. Group turnover: NOK 5,358 million AF starts business energy Recognising a substantial that part of the world's energy takes consumption place in buildings, expanding in potential AF saw great its business. main With the acquisition of the & Miljøteknikk Energi and Holst & Brå of expertisecentres 2006, in AF could offer energy efficiency guaranteeand savings buildingsfor commercial and industry.

- - -

2005

cling offshore installations cling offshore lished environ 2005 in by the AF Group's mental operation. The base located is in Vindafjord Municipalityindustrialin an area where Norwegian Contractors previously built a number of North Sea installations Whenon site. the platform modules arrive smaller pieces Vats, theyat cut and are into or energy materials recoverysent to facilities. sorted is Waste different fractions into before landfills. sent to it is millionGroup turnover: NOK 4,175 Environmental base for recy base for Environmental The Environmental Base was Vats estab at In 2005, AF took itsIn 2005, environmental activities offshore. When tothe tankEkofisk was be removed, AF used its in-house developed piece" methodology"small pick the to tank clean with excavators the in North Sea, transporting the parts the environmental to base for recycling.for success a was Ekofisk and much as 98 as both the and client AF, ofper the platform cent was recycled. Since then, recycling of offshoreinstallations has been an important part of the company's installations business. around 550 In total, thein North Sea will be removedthe over next 30-40 years. AF goes offshore AF goes offshore since its inception in 1986. its inception since manage risk." These qualities have characterised AF ever ever AF characterised have qualities These risk." manage ness and capacity to think differently and an ability and an to and capacityness differently think to "Independence, a thirst for complex challenges, a willing - challenges, complex for a thirst "Independence, Addressing Future: Well-equipped for further growth For AF, 2010 was an anniversary year highlighted by the company's best ever results in terms of profits and HSE. Happy employees and a solid financial position provide a good foundation for continued profitable growth.

In 2010 the AF Group celebrated its 25th In 2010, AF focused in particular on devel- industry and in consumers' choice of products anniversary. We can look back on a history oping the role of the project manager and and services. Challenges associated with of profitable growth based on an entrepre- production managers. In total, over 200 climate change affect us all and place new neurial spirit and expertise to master employees completed management train- demands on how buildings and plants are complex challenges. ing courses offered by AF. The objective has designed, built, managed and demolished. been to make participants more confident In the short-term, this will require investments This has been a golden thread running in their role as manager, able to communi- in resources and skills enhancement, and through the company's history. Our core cate, exercise leadership and demonstrate can also create new profitable business is made up of a cohesive work community, the attitudes required of a manager in the opportunities. By focusing on Energy and with a corporate culture based on hard AF Group. The AF Group works on a project Environment as separate business areas, the work, thoroughness and solid values. basis. Each project is like a business within a AF Group has acquired expertise that benefits business. At the same time AF's core values the rest of the Group. Going forward, a dis- Profitability, safety and clear ethical guide- and culture are to underlie and serve as a tinct environmental profile will be a significant lines have been, and will continue to be, framework for the projects. One of our competitive advantage. Skills that will enable the pillars of our development. We will highest goals is to develop many of our us to create more value for society and continue to develop our ability to think new leaders within our own organisation, extract more value for AF can be found in Alternatively and be Future-minded so including from the ranks of skilled workers. the intersections between our business that we can live up to our slogan: segments. “Addressing Future”. Increasing order books show that we have employees who succeed in a tough market. The flow of information in society is steadily Going forward, we will also stress the Our HSE ambitions and results are a prereq- increasing and new views on what the world importance of developing a strong and uisite for deliveries to our customers and will be like in the future abound. On the healthy corporate culture based on our creating a good, healthy working environ- whole, the AF Group considers the market core values. Developing the knowledge ment. Pride, job satisfaction and dedication prospects for our business segments to be and expertise of our employees is the most are good starting points for giving the AF good. profitable investment we make. In AF, all Group a further boost. our employees must have the will to develop We will continue to invest in our employees their skills. Each year we therefore spend a We expect to see an even stronger environ- and focus on things that we can do some- significant amount on training employees. mental awareness both in business and thing about.

12 AF Group annual report 2010 From the CEO 13 CEO, AF Group Rønn, CEO, Egil Pål

We can look back on a history can growth of profitable We spirit and our based on our entrepreneurial challenges. ability complex master to employees' Active attitude to risk

To achieve its goals of profitability and growth, AF must assume risk in an increasing number of new projects. It is therefore essential that managers of AF have good tools for managing risk. The aim is not to eliminate, but to identify, manage and price risk correctly.

Since 2006, AF has had a strong focus on organisation from the projects to the a result of improved insight and decision risk management to improve profitability Corporate Management Team. Risk analysis making. AF has many examples of risk man- and ensure its competitiveness. An important is a uniform tool that provides managers at agement processes that have opened up goal for AF is to eliminate losses in projects. all levels with a better basis for making new opportunities and solutions for customers AF operates in an industry characterised by decisions. The same types of assessments and AF. The risk analyses are also used to large volumes, small margins and projects are made out in the projects, in the business look at whether AF can think creatively with an asymmetric risk profile. AF has units and at Group level. This provides good in terms of procurement, organisation of therefore historically had a number of loss- traceability of the risk. In practice, this means projects and in relation to how we solve making projects, often involving tens of that a significant risk factor that is identified special challenges. millions of kroner. These occurrences had in a project will be dealt with in the project to be stopped if the Group's goal of itself, by the business unit and by the Pricing of risk improved margins was to be reached. Corporate Management Team. This type of Based on history, the tool provides useful risk factor assessment ensures that effective information about the type of projects Risk management in AF measures are implemented at the right level in which the company has the greatest AF has developed a management system of the organisation. The risk analysis provides potential to turn a profit. This puts AF that is adapted to its business. Analysis valuable information about what the in a better position to prioritise tenders tools have been specially adapted and company is good at and vice versa. and to price them correctly. gradually implemented in all the Group's business areas. At the same time profes- Risks are opportunities and Risk assessment is carried out in the tender sional internal support functions have threats phase by quarterly reviews of the project been established to facilitate and drive Risk management largely involves identifying and project portfolio in the business unit. these processes forward. AF's focus on risk the risk of loss in projects. Equally important A complete risk assessment is carried out management is firmly anchored in the are efforts to identify new opportunities as for all projects over NOK 25 million.

14 AF Group annual report 2010 Risk analysis Quarterly risk Quarterly of tenders analysis in projects risk analysis

of portfolio AF Group

The tender team presents its proposed solution to an Risk identification. Top 10 Review of all projects in analysis group to obtain a list of the greatest opportu- the business unit's portfolio common understanding of nities and threats based on the Top 10 list the project and provide a basis for identifying risk

Quantification of risk. Quantification of risk. Risk Identification Prioritisation of projects brainstorming Ranking of factors with greatest risk with the greatest uncertainty

Defining measures and Analysis and quantification Defining measures and re- responsibilities of the of risk sponsibilities in the project business unit

Summary of risks Follow-up actions Follow-up actions

Projects over NOK 100 million are presented to the Corporate Management Team. A simplified risk analysis model was developed in 2010 for projects under NOK 25 million. Risk management yields results Improved risk management has resulted in a sharp reduction in the number of loss- making projects and improved margins in the projects. AF's EBIT margin has risen from 3.5 per cent in 2006 to 6.4 per cent in 2010. Proper pricing of risk is a key factor in competing for new projects and has helped bring about an increased backlog of orders that are properly priced in relation to risk.

15 Health, safety and the environment (HSE)

Health Environment

The sickness absence rate is an important AF wants to avoid environmental damage and to minimise adverse effects on the environment. indicator of successful management and This is being met by environmental protection work that is an integral part of AF’s HSE job satisfaction. AF will facilitate a working system. In addition, each AF business unit must follow the principles in ISO 14001, the environment that promotes good health internationally recognised standard for environmental management, by identifying and and prevents work-related illnesses. monitoring the most important environmental impact that their activities represent. Through the Environment and Energy business areas AF has also reduced the environmental Sickness absence goal impact of many customers. AF is therefore creating competitiveness and developing its Below 3 per cent. The goal represents a business in accordance with society's resource and environmental requirements. Read normal sickness rate, without work-related more about this on page 20. illness. External environment goals in own operations Means AF has introduced two new parameters to improve environmental work in its own AF’s sickness absence rate has been low operations: source separation rate and carbon footprint. compared with comparable businesses for a number of years. Through long-term and Means systematic efforts it is AF's ambition to elimi- The source separation rate indicates how much of the waste from own operations is sorted. nate all work-related illness. To achieve this, The purpose of sorting is to facilitate recycling. AF has sorted its waste for years, but will the work-related illnesses that affect sickness now measure and track the overall sorting rate per business unit and across the Group. absence are surveyed. The survey has shown that measures to combat musculoskeletal Carbon footprint is the measurement of AF's impact on the climate related to the amount

disorders will help to reduce sickness of greenhouse gas emissions in tonnes of CO2 equivalents. CO2 equivalent is a unit for absence further. comparing the effects of various greenhouse gases on the climate.

Result Measuring and monitoring these parameters will be a driving force in AF's environmental AF had a sickness absence rate of 3.7 per work. The parameters will also illustrate AF's environmental profile and business involvement cent in 2010, both for the Norwegian part in demolition and recycling, and its development of environmentally friendly energy solutions. of operations and across the Group. For the Norwegian operations, this corresponds to Result

a decrease of 0.3 percentage points, which Carbon footprint for 2010: 22,730 tonnes of CO2 equivalents equal to 3.9 tonnes per NOK is 8 per cent lower than in 2009. million of turnover. See Energy and climate account on page 21.

The total source separation rate for the Group will be measured from 2011. Measurements from the last half of 2010 indicate the following sorting rate: Building: 80 per cent, Rehabili- tation: 78 per cent and Demolition: 95 per cent.

Sick absence 6 % 5 % 4 % 3 % 2 % 1 % 2003 2004 2005 2006 2007 2008 2009 2010

16 AF Group annual report 2010 Health, safety and the environment (HSE) 1717

AF will facilitate a working environment environment a working AF will facilitate good health andthat promotes prevents illnesses. work-related

2010

2009

2008

2007

2006

2005

2004

2003 LTI rate LTI 7 6 5 4 3 2 1

from the past to handle future risks. future handle the past to from methods means continuously makingmeans continuously methods use of experience of injuries in company history. Good safety-related work work Good safety-related history. of injuries in company high priority to safety. In 2010 it recorded its lowest level level lowest its In recorded it 2010 priorityhigh safety. to Ever since it was established, the AF Group has given Result for rate with an LTI the years, injuryThe over trend a positive frequency has shown rate of 1.7. rate LTI the Norwegian 20 in the early today's 90s to operations of around Means policy that all planning and execution An important achieving this goal is AF’s instrument for a and acceptance that all injuriesmust be based on a fundamental understanding have Job achieving this is the Safe One of the key for tools be avoided. cause and can therefore injury for analysed and risk in which all tasks with the potential mitigation are Analysis, past experience in dealing from entails continually drawing This established. are measures It risks. adapt and optimise with future change, about continuously being able to is also and business. changes in the organisation to work methods with regard Safety goal = 0). rate all lost time injuries (LTI avoid goal is to overall The AF believes that it is important to take responsibility for safety throughout the entire that it is important the entire AF believes throughout safety take to for responsibility AF expectsproject phase. its partners that all the parties do the same and and suppliers to A substantial proportion of safe. are worksites in ensuring that shared an active role play be included in the Subcontractors must therefore sites. injuries take at our partners’ place reported. follow are addition, all subcontractorsIn must figures calculations when safety must acknowledge guidelines and the managers and verify this. AF’s Good safety work requires a good organisational culture and appropriate attitudes to safety. safety. attitudes to and appropriate culture a good organisational Good work requires safety support of AF's organisation. at all levels management is integrated these objectives safety To In and dealings with managers. should be clear in meetings addition, it is stressed This as their as well well-being their own for is responsible that each individual AF employee co-workers. Safety Environmental and social responsibility

A focus on safety and clear ethical guidelines have been standards in AF's development, just as they will continue to be in the future. Ethical guidelines AF has placed importance on building a value-based corporate culture ever since its establishment in 1985. AF will create a culture where orderly conduct is recognised and lived up to by all employees. AF's core values are the bedrock of its operations:

• Reliability • Freedom to exercise entrepreneurship and discipline in relation to goals and requirements • Thoroughness and hard work • Persistence in achieving profitable growth • Management through presence and involvement

AF expects all employees to identify with and live by these values. A Code of Conduct has also been prepared to make it easier to live by the core values. Suppliers and purchasing National and international purchasing of goods and services constitutes 65 per cent of AF's turnover. Purchasing from China and other A special Code of Conduct has been prepared that makes countries in Asia and Eastern Europe is increasing. AF's Code of Con- it easier for all employees to duct serves as the standard for the expectations and demands we comply with our core values. make of our suppliers and subcontractors. The purpose of this is to create a culture in which orderly conduct is recognised, In 2009, AF became an official member of the United Nations Global valued and lived up to by all Compact, which is based on ten fundamental principles for safe- employees. guarding human rights, working conditions, the environment and anti-corruption measures. AF encourages all suppliers and subcontractors to follow the same guidelines.

AF is engaged in activities that can affect the environment and continuously works to lessen its impact on its surroundings.

18 AF Group annual report 2010 Environmental and social responsibility 19 AF demolishes

from houseseverything from and oil platforms to and steel that ensures are other materials AF can docu- recycled. rate a recycling ment 98 per cent. of up to with this standard. A total of 18 (10) incidents involving an undesirable undesirable an involving incidents (10) 18 of total A standard. this with reported 2010, the in impact were external on the environment machinery from minor oil or diesel spills majority of which involved recurrence any prevent to and equipment. AF workssystematically the use avoid AF seeks to the externaland damage to environment. health to hazardous of products with substances/chemicals that are utilises the Building and Civil company The or the environment. risk assess- for industry’s system Engineering information substance further improve To products. ment and the evaluation of substitute two new AF introduced its work on the external environment, and carbon separation rate footprint. in 2010: Source parameters impact reduce the environmental about AF's effortsto Read more on page 16. of its operations in the HSE chapter The AF Group aims to carry aims to The AF Group its activities out in a manner that a level to and the environment its impact on resources reduces and the authorities clients. by within what is required well

AF is engaged in operations that can affect the external environment environment external the affect can that operations in engaged is AF and other discharges emissions, dust, vibrations, of noise, in the form means of pollution. Its on activities also entail encroachments may aims to AF Group The the landscape and nature. and changes to carry and out its activities that the impactin such way on resources within what is required well a level to is reduced the environment policy Corporate the authorities by and clients. and the associated or prevent to are the external environment for systems control systems control The impact. environmental undesirable any reduce the most identify and control that AF is able to ensure meant to are business All unit. business each of aspects environmental important with the principles that comply systems in control units in AF have partsISO 14001. Large certified of our operations are in accordance Environment an uncompromising attitude towards safety and ethics. safety towards attitude an uncompromising contracting, energy and environmental operations with operations environmental and energy contracting, AF’s mission is to create value through future-oriented through value create to is mission AF’s Environmentalism as a competitive advantage "Clearing up the past and building for the future" is the AF Group’s vision and forms the basis for our mission and strategic development. AF has made a conscious choice to look at the business opportunities for value creation in the Environment and Energy business areas.

Environment business area Energy business area Waste is a by-product of an increasingly prosperous society. Today, According to IEA forecasts, world energy demand will increase by waste is considered a resource and a secondary raw material that 45 per cent from now until 2030. Meeting the demand gap and si- is becoming increasingly important as primary virgin raw materials multaneously stopping the development of greenhouse gas emis- become more scarce. sions requires, among other things, huge investments in energy efficiency and great political will. Through its Environment business area AF has established a business concept in response to this situation by demolishing, removing, Within the Energy business area AF offers customers cost-effective sorting and recycling structures and buildings as well as decom- and environmentally friendly energy solutions in commercial build- missioned offshore installations. ings, offshore installations and within the shipbuilding industry. AF’s competitive advantage is the fact that the company can deliver AF's environmental business is a leader in Norway and one of complete solutions from A to Z. AF is currently a preferred partner Europe's largest players in demolition and environmental clean-up, in consumption reduction, production of renewable energy and both onshore and offshore. Its demolition and recycling facility, the monitoring of energy consumption in the public and private sectors. Environmental Base at Vats, is Europe's most modern environmental This expertise is also used internally, primarily toward the Property base for recycling oil installations. BA Gjenvinning specialises in and Building units, where environmentally-friendly solutions with receiving, processing and recycling asphalt and concrete from respect to energy use are emphasised. the building and construction industry. Result AF sorts waste to facilitate further recycling whether it is recircula- The Energy business area helped reduce energy consumption tion, conversion, energy recovery, or pure reuse. by a total of about 7 million Kwh in 2010, an amount equivalent

to cutting greenhouse gas emissions by 2,500 tonnes of CO2 Result equivalents. In 2010 the Environment business area sorted a total of 290,000 tonnes of waste, a rate of over 95 per cent.

AF has made a conscious choice to look at the business opportunities for value creation in the Environment and Energy business areas.

Source separation that pays When AF tore down the 11,000 square metres of office building, warehouses and production Where others see garbage, AF sees valuable facilities at Scanrope's site in Tønsberg, an resources. As much as 8,800 tonnes of emphasis was placed on giving the old buildings waste was sold or given away for reuse new uses. The result was that 8,800 tonnes of or recycling when AF Decom tore down demolition materials were recycled or reused, ScanRope's old buildings in Tønsberg. while 1,100 tonnes went to the materials and energy recovery depot. Only 300 tonnes of AF has been sorting and recycling materials waste went to a landfill. from demolition jobs for many years. Not only is it good for the environment - sorting also Result: The source separation rate for the Re-use in practice: Hundred-year-old beams from contributes to healthy margins and profitability Scanrope project was all of 97 per cent. Scanrope's warehouse were purchased by a local in the projects. enthusiast who will use them as decorative beams in his rec- room.

20 AF Group annual report 2010 Environmental and social responsibility 21 - 5.0 % 3.0 % 7.5 % 0.1 % 0.1 % 1.0 % 0.0 % 0.7 % 0.0 % 8.0 % 8.0 % 82.0 % 84.0 % 100.0 % Percentage (2 ) 2 - - - - 1.0 31.4 30.6 678.9 223.8 156.7 1,173.5 1,697.2 1,852.5 1,728.6 18,736.5 19,148.6 22,729.6 Emissions (tonnes CO Emissions (tonnes 1 ------19.3 295.0 131.5 798.5 615.7 17,057.5 68,136.6 17,352.6 87,054.2 69,701.6 Energy equiv. (MWh) equiv. Energy both significant cost reductions, and the ability to reduce their impactreduce reductions, and the abilityto cost both significant achieve AF customers

km km kWh kg l l kWh kg l l l on the environment. In commercial buildings and industries where AF carries efficiency buildings and industries out energy where In commercial on the environment. in the project. and savings costs for guarantees customers AF gives measures, - - 3,015 10,194 84,055 67,660 295,034 Consumption 8,113,317 4,657,394 7,406,153 17,057,518 2 emissions from operations emissions from 2 centre of expertise customers AF has a leading centre that provides

Total indirect emissions, other indirect emissions, Total CO Total Air travel – commuting Air travel Air travel – business Air travel District heating activity indirect emissions own Total Carbon dioxide CO Carbon dioxide Propane LPG Propane Fuel oil/paraffin Fuel Biodiesel (B30) Energy and greenhouse gas account and greenhouse Energy Category Electricity Total direct emissions Total E85 Diesel Petrol Equivalent to 3.9 tonnes per NOK million of turnover. 3.9 tonnes to Equivalent Energy equivalents are calculated for the organisation's core business (direct and indirect emissions from own activities) to show the annual energy intensity of the company's daily activities. intensity of the company's activities) the annual energy own show to and indirect emissions from business (direct core the organisation's for calculated equivalents are Energy 2) 1) with smarter energy-efficient solutions. technical and more People in AF

Thanks to our ambitious and results-oriented employees the AF Group has experienced rapid growth in recent decades. In AF, capable employees are given responsibility early on along with great opportunities for personal development.

22 AF Group annual report 2010 People in the AF Group 23 • Ability to be decisive and doers • Ability be decisive to • Being and motivators leaders • Analytical abilities used when management qualities are These and train our employees. evaluate recruit, we Observance of AF’s Code of Conduct Code Observance of AF’s values and core • Being business-oriented Corporate culture and culture Corporate management building a values-based to AF is committed and works in a targeted corporate culture and maintain the com- develop manner to standing as an attractive employer. pany's Developing good managers is important ensuring of our goals the achievement for Good management is and ambitions. sickness a low through reflected absence satisfaction. and high employee rate by results achieve to Managers at AF are setting a good example and building a conduct- which orderly in is recog culture our em- by up to and lived valued nised, been clear about AF has therefore ployees. what qualities it values in its managers: • AF focuses heavily on developing its own its own on developing heavily AF focuses been AF managers have Many managers. ranks. our own from recruited AF's core activityAF's core is project-oriented the company that means This industry. management and needs both technical expertise. In always AF new projects are starting, opportunities offering for responsibility, take to want who employees new tasks and aren't for a desire have learning curve. of a steep afraid

AF has a human resource policy gives that AF has a human resource opportunitiesemployees take to on exciting em- Ambitious and talented challenges. fast- look forward to can therefore ployees Because development. the paced career to develop is investment most profitable the knowledge and expertise of employees, High job satisfaction Employee The like their jobs. AF employees Satisfaction Survey conducted in December like their that AF employees 2009 shows than most others in the industry.jobs better employees satisfied and dedicated Proud, so that AF can foundation a good are its goal of becoming a leading achieve industrial group. AF is involved in everything demolitionAF is involved from building and con- large to of oil platforms struction In projects. addition, AF has built of expertise centre largest up Scandinavia’s consumption. Having optimal energy for range of servicesa broad means that the of expertise areas many has and company opportunitiescareer the Group. across

the challenge Employees who accept accept who Employees The company offers competitive pay with attractive bonus schemes and exciting career and development opportunities.

Recruitment and is a good place for individuals to realise important issues that are addressed in the AF works systematically to attract qualified their aspirations for personal development. Group. Close cooperation with the manage- people who can contribute to achieving ment at the project, business unit and group challenging goals. The company offers com- Ownership of own workplace levels is vital to remain focused on AF's core petitive pay with attractive bonus schemes AF's goal is that all employees should have values and employee well-being through and exciting career and development an opportunity to become shareholders in reduced sickness absence rates and fewer opportunities. Over the next few years, the company and benefit from the increase injuries. AF will recruit 600 new managers. in value arising from joint value creation and development. For many years AF’s employees Employee development AF follows a dual track of recruiting recent have been given an opportunity to purchase Developing the knowledge and expertise graduates and employees with relevant discounted shares. At the end of the option of our employees is the most profitable experience, while also providing apprentice programme in February 2011, many AF investment we make in AF. All employees places. In recent years, AF has presented employees became shareholders for the must have the willingness and ability to itself to a variety of colleges and universities, first time. Today, AF employees own about develop their skills. In 2010, more than 200 and in 2011 AF has high hopes that its 20 per cent of the company's shares, an employees took management training eye-catching recruitment campaign will amount corresponding to NOK 600 million. courses offered by AF. The company has increase interest in the company. its own AF Academy, which offers both Corporate democracy technical and management courses at The general message to potential employees AF has a well-functioning employee repre- different levels. is that AF is an Alternative-thinking and sentative structure and safety organisation, Future-minded corporation that is growing which enables employees to influence

24 AF Group annual report 2010 People in the AF Group 25 CEO President Vice Executice President Vice Executice Human Resources President Vice representative Head employee representative Head employee representative Employee employees are a good foundation so that AF so that a good foundation are employees and dedicated satisfied Proud,

Working Evironment Commitee Evironment Working Rønn Egil Pål Robert Haugen Gundersen Paul-Terje Frydenlund Bård Henrik Nilsson Arne Sveen Larsen Tommy

can achieve its goal of becoming a leading industrial group. its goal of becoming can achieve

n o i t uc trod in t n e m age n a m sis a b Top Level 1 Level Level 2 Level Skills Course Management Introduction Course Management Course, Management Management Course, Management AF Academy Civil Engineering 2010

The Civil Engineering business area Key figures comprises all of AF’s construction NOK million 2010 2009 2008 activities in Norway and Sweden. Revenue 2,158 1,768 2,044

The Civil Engineering business area Earnings before interest, taxes, depreciation consists of: and amortisation (EBITDA) 227 114 172 Earnings before interest and taxes (EBIT) 194 82 130 • AF Anlegg Earnings before taxes (EBT) 198 105 122 • AF Offshore & Civil Construction • Pålplintar i Sverige AB EBITDA % 10.5 % 6.5 % 8.4 % EBIT % 9.0 % 4.6 % 6.4 % EBT % 9.2 % 5.9 % 5.9 %

Capital employed 446 221 296 Return on capital employed 60.8 % 63.3 % 42.8 % Order backlog 1,899 2,175 888

26 AF Group annual report 2010 Civil Engineering

Number of employees Turnover in NOK million Earnings before taxes EBT % (EBT) NOK million

400 10

300 8 6 200 4 100 2 Civil Engineering 670 (35 %) Civil Engineering 2,158 (37 %) 0 % AF Group 1,933 AF Group 5,828 Civil Engineering 198 (53 %) Civil Engineering 9.2 % AF Group 372 AF Group 6.4 %

27 Civil Engineering – all-time record level of activity and earnings

AF is a turnkey provider of civil engineering services and has built up the experience and expertise required to carry out everything from small and simple to large and demanding construction projects. 2013 2013

Øyer-Tretten T-connection AF started the E6 project between In September 2009 AF commenced Øyer and Tretten in Oppland County a large project in Rogaland called in the spring of 2010. The work in- the T-connection. An 8,950-metre cludes construction of a 3,850-metre tunnel and 4,500 meters of open tunnel and upgrading of 10 kilometres road will link the three municipalities of the existing E6 highway. of Karmøy, Haugesund and Tysvær together when the project is Contract price: NOK 680 million completed. Completion: 2013 Client: Public Roads Administration Contract price: NOK 878 million Completion: 2013 Client: Public Roads Administration

28 AF Group annual report 2010 The Civil Engineering business area comprises all of AF’s construction

activities in Norway and Sweden. In Norway, AF is engaged in civil engineering Civil Engineering operations throughout the country. Located in the Stockholm area, the wholly-owned subsidiary Pålplintar carries out the Swedish operations.

The Civil Engineering business area carries out large complex construction projects and niche projects in the following areas: ports, oil and energy and foundations.

AF Anlegg carries out traditional construction projects throughout Norway. The unit is one of Norway's leading tunnel contractors and focuses on large complex projects. AF Offshore & Civil Construction carries out port construction, and sea, bridge and dam projects throughout Norway. Civil Construc- tion's core market also includes land facilities of the oil and gas industry. Its main activities have been linked to onshore facilities such as Kårstø, Kollsnes, Mongstad, Snøhvit and Ormen Lange.

Pålplintar i Sverige AB carries out foundation projects for industrial, residential and public buildings in Stockholm and Mälardalen.

In AF, capable employees are 2010 in brief In 2010 Civil Engineering reported revenues given responsibility early on along Civil Engineering reported its highest level of NOK 2,158 million (1,768) and earnings with great opportunities for personal of activity and earnings ever in 2010. All before tax of NOK 198 million (105). The development. business units met the Group's margin and business area realised a record high profit return on capital employed requirements. margin of 9.2 per cent (5.9 per cent). 2014

Kårstø In the last 15 years the AF Group has had a number of major construction Hagen/Statoil Photo: Øyvind Civil Engineering reported its projects for Statoil. The framework highest level of activity and agreement for Kårstø includes maintenance and modifications to earnings ever in 2010. buildings and infrastructure as well as excavation, grading and concrete work.

Contract price: NOK 350 million Completion: 2014 Client: Statoil

29 2010's healthy profits were created by good Market outlook Because investments in new onshore facilities project management. This is a result of long- An increased level of activity is expected for for the oil and gas industry are still some term work in the business units on risk infrastructure projects, including roads and time off, this will represent a challenging management, project management and railways. The forecast for the overall construc- market situation for AF. Further positioning development of specialised expertise. In tion market indicates a growth rate of about within the maintenance and modification 2010 the units paid additional attention to 5 per cent in 2011. While there is considerable market in the oil and gas industry, and the developing production managers to increase competition in the infrastructure market, development of renewable energy still pro- quality and productivity in their production. AF Anlegg is well positioned to take its vide the potential for growth. share of the growth. Since the end of the On 1 September 2010 AF Anlegg entered year, Civil Engineering has submitted a The Swedish market for foundation work into an agreement to acquire all of the number of new tenders and is in a good rose in the last half of 2010. The positive shares of the machinery contractor Johan position to win new contracts. trend is expected to continue in 2011. Rognerud AS. The company was acquired with accounting effect on 1 October. The The port market is expected to be stable in The Civil Engineering business area had an acquisition strengthens AF's position in 2011, but with the expansion of its market and order backlog of NOK 1,899 million (2,175) earth moving. geographical catchment area AF has ambi- as at 31 December. The order backlog is tions to increase its level of activity in 2011. expected to rise in 2011.

In 2010 the units paid additional attention to developing production managers to increase quality and productivity in their production.

AF has long experience and expertise in underground projects and has equipment that covers all main activities in underground work, i.e., driving and securing, injection, shotcreting and finishing work. Contracts

Largest contracts signed in 2010

Name of project Client Description Size (NOK million) Business unit E6 Øyer-Tretten Public Roads Administration E6, road and tunnel 680 AF Anlegg Rånåsfoss III Glomma Kraftproduksjon AS River power plant 100 AF Anlegg Sørenga pier Bjørvika Infrastruktur AS Harbour promenade 95 AF Offshore & Civil Construction Hysnes Norwegian Defence Sea works 50 AF Offshore & Civil Construction

30 AF Group annual report 2010 Civil Engineering

hydropower in Norway the from of hydropower development The

1970s until the mid-1980s formed the basis of AF. This is This of AF. the basis the mid-1980s formed 1970s until plant 4 power the construction of the Embretsfoss from River. in Drammen AF will seek to expand its range of services maintenance to expandAF will seek its range to related will be achieved Growth within oil gas. and and modifications In addition, AF continues or acquisitions. growth organic through projects, energy on positioning itself in renewable work to both and onshore. offshore particularly in wind power, the strengthen to continuously Civil Engineering is working will units The planning. career and training through organisation colleges and employees from graduates actively qualified recruit and project management. in operations with experience

trategy

An increased level of activity is expected including roads projects, for infrastructure and railways.

Civil Engineering operations will grow by seizing the opportunities by will grow Civil Engineering operations expanding the will be by realised Growth that exist in the market. and area identifying opportunities market geographic new for activities existing operations. close to of Johan AS puts Civil Engineering Rognerud in The acquisition infrastructure complex for large compete positiona better to position in marine market its strong Given in the future. contracts and port expanding its geographical AF will consider facilities include Sweden. to area market S Building 2010

The Building business area performs Key figures traditional building operations with NOK million 2010 2009 2008 a solid local base. Revenue 2,267 2,561 2,881

Building activities are divided into five Earnings before interest, taxes, depreciation business units: and amortisation (EBITDA) 50 223 144 Earnings before interest and taxes (EBIT) 46 218 140 • AF Bygg Oslo Earnings before taxes (EBT) 51 221 156 • AF Byggfornyelse • AF Bygg Østfold EBITDA % 2.2 % 8.7 % 5.0 % • AF Bygg Sør EBIT % 2.0 % 8.5 % 4.9 % • AF Bygg Göteborg AB EBT % 2.3 % 8.6 % 5.4 % Capital employed 385 306 182 Return on capital employed 14.2 % 163.5 % 82.3 % Order backlog 3,067 2,324 2,382

32 AF Group annual report 2010 Building

Number of employees Turnover in NOK million Earnings before taxes EBT % (EBT) NOK million

400 10

300 8 6 200 4 100 2 Building 617 (32 %) Building 2,267 (39 %) 0 % AF Group 1,933 AF Group 5,828 Building 51 (14 %) Building 2.3 % AF Group 372 AF Group 6.4 %

33 Building – good performance in Norway, challenging year in Sweden

AF is a major player in residential, commercial and public buildings. Our building services include both new construction and building renovation. 2011 2011

Kilden Nøkkeland School The AF Group is building Kilden, AF started building Nøkkeland the new theatre and concert hall in School in the autumn of 2009. The Kristiansand. The building consists lower secondary school will include of a foyer, four stages with more a multi-purpose hall, swimming than 2,200 seats, rehearsal rooms pool and artificial grass field, and and facilities for the administration. will be handed over to the client before school starts in 2011. Contract price: NOK 450 million Completion: 2011 Contract price: NOK 97 million Client: Kilden TKS Completion: 2011 Client: Moss Municipality

34 AF Group annual report 2010 Building 35 -

2010 in brief profits and turnover lower a posted Building business The with 2009. in 2010 compared of NOK 2,267 million reported revenues area of NOK 51 tax (2,561) and earnings before in 2010 operating margin The million (221). was 2.0 per cent (8.5 per cent), which is lower long-term operating margin than the Group's affect was strongly result The requirement. a which posted AF Bygg Göteborg, ed by tax of NOK 84 million in 2010. loss before the addition changes, organisational With project on focused initiatives and expertise of management and project implementation, the Swedish expected from are results better 2011. operation from AF Bygg Göteborg is AF’s largest operation operation largest is AF’s AF Bygg Göteborg In traditional buildingin Sweden. addition to is engaged in activities, the business unit building property and developing projects also business unit The account. own for carries out building activities in Halmstad its subsidiarythrough AF Bygg Syd.

Future growth will be realised by will be by realised growth Future being in the forefront of new trends of new trends being in the forefront and concepts, and increasing the proportion of international purchasing.

AF has broad experience across the value experience across AF has broad and engineering development chain from market Our core commercial is building. to projects and public residential buildings, a broad cover Our customers buildings. spectrum small companies with a from private and large to simple assignment - public clients with a longstanding relation the opportunities AF can increase ship. new designing the client for to available and solutions technical buildings through Norway’s of one also is AF materials. of choice contractors. building renovation largest new and for Building will actively search methods new techniques, production better a greater that provide and building processes growth of industrialisation. Future degree of being in the forefront by will be realised and increasing and concepts, new trends the proportion of international purchasing. 2013 school facility has 2013 2 Undervisningsbygg , quality, risk assessment AF emphasises leadership, quality, ontract price: NOK million 623 ompletion:

The Building business area performs traditional building operations with market in the central position a strong enjoys Building local base. a solid in Sweden. area and the Gothenburg-Halmstad NorwayEastern region and flexibility in all projects. This is essential for ensuring ensuring for essential is This projects. all in flexibility and and AF. for customers project a profitable In May 2010 AF startedIn May 2010 construction of the new vocational school in Oslo. The 40,000 m Risløkka Competence Centre C C Client: seven floors and will house more than 1,400 students and teachers when it ready is in 2013. Norwegian building activities are delivering strong results and good performances. AF Byggfornyelse posted strong profits in 2010. Throughout the year, AF Byggfornyelse won contracts for the renovation of three schools in Oslo for the Municipal Undertaking for Educational Buildings and Property (Undervisningsbygg). AF Bygg Oslo performed well in 2010. The unit has a steady intake of orders and entered 2011 with a very large order backlog. The market in Østfold was challenging throughout 2010. Market outlook The market situation gradually improved over the year, and is expected to continue into 2011. The residential construction market in the Oslo area is booming. While the market in Østfold County and Gothenburg is improv- ing, the competition for jobs is tough. At the AF Bygg Oslo performed well in 2010. The unit has end of the year, building operations had an a steady intake of orders and entered 2011 with a order backlog of NOK 3,067 million (2,324). very large order backlog. Contracts

Largest contracts signed in 2010

Name of project Client Description Size (NOK million) Business unit Kværnerbyen Field D OBOS Apartments and commercial space 381 AF Bygg Oslo Idun stage 1+2 Idun Industri Eiendom AS Apartments 295 AF Bygg Oslo Kjelsås School Undervisningsbygg Oslo KF School 188 AF Byggfornyelse Rolfsbukta stage 2 Fornebu Utvikling AS Apartments 130 AF Bygg Oslo Sagabakken School Fredrikstad Municipality School and multipurpose hall 95 AF Bygg Østfold

36 AF Group annual report 2010 Building 37

The residential construction market construction market The residential in the Oslo is booming. area To strengthen its competitiveness in Østfold a decision was made in Østfold a decision was its competitiveness strengthen To The merged Glomsrød. Øst and AF Bygg AF Bygg merge in 2010 to - of com chance a better will have Østfold, AF Bygg business unit, projects in its market. complex peting for large, its focus Building will increase on growth organic ensure To andrecruitment building up management capacity based on reducing on focus will Building addition, culture.In corporate AF's quality non-conformances. ofa the costs

trategy

theatre and concert the that the Kilden hall project theatre AF shown Through

Building aims to grow its turnover and profit. Growth will be Growth and profit. its turnover grow Building aims to in the existing home market, being a leading player by realised Norway in areas geographical new in operations establishing and organic through achieved be will establishments New Sweden. and or acquisitions. growth construction the by created position the on build to continue will AF and in Kristiansand, has decided to centre of the Kilden cultural based in Southern Norway. building company establish a local S company has the resources and expertise required to succeed in large in large succeed and expertise to required resources has the company on Southern Norway A focus be intensified. building projects. will now Property 2010

AF will gain better control over Key figures the value chain by increased NOK million 2010 2009 2008 collaboration between property Revenue 134 51 102 and contracting operations. Earnings before interest, taxes, depreciation and amortisation (EBITDA) 42 -10 -33 Earnings before interest and taxes (EBIT) 42 -10 -33 Earnings before taxes (EBT) 35 -15 -45

EBITDA % 31.2 % -19.1 % -32.5 % EBIT % 31.2 % -19.1 % -32.6 % EBT % 25.8 % -29.1 % -43.6 %

Capital employed 287 271 317 Return on capital employed 14.6 % -3.6 % -11.6 % Order backlog 3 - 9

38 AF Group annual report 2010 Property

Number of employees Turnover in NOK million Earnings before taxes EBT % (EBT) NOK million

400 30 350 25 300 250 20 200 15 150 10 100 50 5 Property 8 (0 %) Property 134 (2 %) 0 % AF Group 1,933 AF Group 5,828 Property 35 (9 %) Property 25.8 % AF Group 372 AF Group 6.4 %

39 Property – positive performance in 2010

AF will gain better control over the value chain by increased collaboration between property and contracting operations. Collaboration reduces the uncertainty in the implementation phase, contributing to more efficient development processes. In sum, this provides increased profitability for AF as a whole.

AF works closely with other players in the industry. Development projects are often organised by setting up joint development companies with partners to reduce project- specific risk and benefit from each other’s expertise. 2010 in brief Property posted healthy pre-tax earnings of NOK 35 million (-15) for 2010. Although its turnover of NOK 134 million (52) is significantly better than in 2009, revenues are still too low.

Building of the Rolvsrud Park Q and R houses and the Grefsenkollveien 16 project commenced in 2010. The projects sold a total 89 apartments in 2010. AF’s share of the apartments sold is 34. AF’s share of the unsold apartments in these projects is 10. AF identifies properties with development potential and gives them added value through a development process. 2012 2012

Rolvsrud Park, Building R Fossumhagen This is the final building phase of In Stovner in Oslo AF is building 128 the popular Rolvsrud complex in apartments in four buildings and Lørenskog. AF is building 27 apart- 2,000 m2 of commercial space. ments on five floors in the conclusion Fossumhagen will have a central of the Rolvsrud Park project, where location with all types of businesses, more than 500 apartments have been services and public transport in the built since ground was broken in 2001. immediate vicinity.

Completion: Q2 2012 Completion: Q2 2012 Client: Rolvsrud Utbygging Client: Stovner Utvikling KS AF's stake: 45 % AF's stake: 33 % Total turnover: NOK 108 million Total turnover: NOK 405 million (AF's share: NOK 48.6 million) (AF's share: NOK 135 million)

40 AF Group annual report 2010 Property 41 The brisk housing sales in 2010 are The brisk housing sales in 2010 are in 2011. The expected continue to at a healthy is growing economy expected are rates and interest pace level. at a low remain to

Property's strategy is to develop propertiesProperty's AF develop where is to in the same markets geographic strategy option into entering by risk is reduced development Project has building operations. having partners and by for land, agreements co-owners that are As of the projects. be project should of the units in a residential sold least 50 per at cent rule, a general before construction begins. in propertyAF has had the most success segment in within the residential development Propertythe Oslo its position Going forward, area. strengthen in commercial to will work position In addition, AF will seek a stronger in propertyproperty. in Østfold. development of the establishment of building activities in SouthernAs a consequence Norway property will also be in this region considered. development Strategy -

2012 Sandakerveienlient: 99 B KS Q3 2012 ompletion: Q3 pected to remain at a low level. AF Eiendom level. at a low remain pected to its turnover increase positioned to is well marketThe within in the housing segment. The propertycommercial hesitant. is more cent per 8 still is rate vacancy property office It in Oslo. will still take some time before new realise AF Eiendom will be able to projects. commercial The brisk housing sales in 2010 are expected briskThe sales in 2010 are housing is growing economy The continue in 2011. to ex are rates and interest pace at a healthy Market outlook Market The sale of the Fossumhagen, Lillohagen and Lillohagen the Fossumhagen, sale of The Blomsterstykket of 131 with a total projects, in 2010. was also initiated units, residential housing units had been sold 65 residential the the end of After the end of the year. by Utvikling Stovner AF Eiendom, through year, 33 per cent of the KS, of which AF owns commence construction decided to shares, project is expectedThe of Fossumhagen. in Q1 2013. be completed to - organ projects are Since these development these in the AF Group, as associates ised backlog. not included in the order projects are The Property business area comprises the development of residential housing of residential development the comprises Property area business The Norway in the Eastern account own for buildings commercial units and services. contracting its own to access has the company where region, C C % 33 AF's stake: NOK 960 turnover: million Total (AF's share:million) NOK 320 A total of 270 apartmentsA total of 270 in seven buildings with underground parking and a day-care centre will be going up in this popular fast-growing area of Oslo. AF building is Lillohagen, a residential housing project centrally located between Sandaker, and Storo Nydalen. Lillohagen Environment 2010

Through state-of-the-art expertise Key figures Environment offers solutions that meet NOK million 2010 2009 2008 the environmental challenges faced by Revenue 767 743 667 the Group's customers. Earnings before interest, taxes, depreciation The Environment business area consists of: and amortisation (EBITDA) 147 80 90 Earnings before interest and taxes (EBIT) 107 46 56 • AF Decom Offshore Earnings before taxes (EBT) 90 43 54 • AF Decom Offshore UK Ltd. • AF Decom EBITDA % 19.2 % 10.8 % 13.5 % • AF Decom AB EBIT % 14.0 % 6.2 % 8.4 % • AF Group Polska Sp.z.o.o. EBT % 11.7 % 5.8 % 8.1 % • Palmer Gotheim Skiferbrudd AS Capital employed 366 787 403 • BA Gjenvinning AS Return on capital employed 16.9 % 7.3 % 22.6 % • Miljøbase Vats AS (40 %) Order backlog 892 1,070 1,285 • Vici Ventus Technology AS (33 %) 42 AF Group annual report 2010 Environment

Number of employees Turnover in NOK million Earnings before taxes EBT % (EBT) NOK million

400 12 10 300 8 200 6 4 100 2 Environment 322 (17 %) Environment 767 (13 %) 0 % AF Group 1,933 AF Group 5,828 Environment 90 (24 %) Environment 11.7 % AF Group 372 AF Group 6.4 %

43 Environment – good performance, good results

On assignment from the Norwegian National Coastal Administration, AF is carrying out the removal of the Russian cruiser the “Murmansk”. In brief, AF's method involves preparing for the dry demolition and dismantling of the wreck where it lies. 2011 2011

The “Murmansk” LCC Roza Luksemburg AF is well under way with the removal AF Group Polska has been commis- of the Russian cruiser "Murmansk", sioned to demolish the old incandes- which lies outside Sørvær on the cent lamp factory in Warsaw. The coast of Finnmark. 2010 was spent building totals 27,500 m2 and is 44 building the breakwater and driving metres high. Due to high mercury sheet piling around the wreck. During contamination inside clean-up and 2011, a dry dock will be built and work removal of contaminated material on the actual demolition and removal will be carried out before mechanical of the wreck can begin. demolition commences.

Contract price: NOK 239 million Contract price: NOK 12 million Completion: December 2011 Completion: May 2011 Client: Norwegian National Coastal Client: LC Corp/Warszawa Administration Przyokopowa Sp.z.o.o

44 AF Group annual report 2010 Through state-of-the-art expertise Environment offers solutions that meet

the environmental challenges faced by the Group's customers. The business Environment area includes AF’s environmental services within onshore and offshore demolition and recycling. Onshore demolition is carried out in Norway, Sweden and Poland. Offshore demolition and recycling focuses on the market in the North Sea.

The Environment business area is a leader On 11 November AF sold 60 per cent of the in Scandinavia in the removal, demolition shares of Miljøbase Vats AS. In connection and environmental clean-up of buildings, with the sale, AF Decom Offshore AS entered industrial plants and offshore installations. into a 15-year agreement for the lease of Strict environmental regulations and de- the land. manding demolition work means that attention to environmental protection and On 26 October, the AF Group agreed to safety must permeate our work at all times. purchase the remaining 50 per cent stake The Environmental Base at Vats accepts and in BA Gjenvinning AS from Franzefoss Pukk processes materials from demolition activities AS, and now owns 100 per cent of the in the North Sea, and is Europe's most modern company. The business will be integrated reception facility for recycling decommis- as part of the land-based demolition sioned oil installations. operations in Norway.

In February, AF Decom Offshore UK Limited 2010 in brief and the Lerwick Port Authority signed an In 2010 Environment reported revenues of exclusive letter of intent to develop an envi- NOK 767 million (743) and earnings before ronmental base with a deep-water quay at tax of NOK 90 million (43). The sale of 60 per Dales Voe, Lerwick, Shetland. The environ- cent of Miljøbase Vats AS resulted in a gain mental base will be built to handle the in- of NOK 42 million. creased British demand for demolition and recycling of large offshore installations from the North Sea. Because large parts of the mar- The purpose of the breakwaters that are being built ket in the North Sea are in the British sector around the wreck of the "Murmansk" is to shelter the it is a natural step to have a base in Shetland. dry dock from swells and waves. 2012

Ineos Bamble factory The HDPE plant was demolished The Environment business area during the winter of 2010, while demolition of the next phase, the is a leader in Scandinavia in the PP plant, is scheduled to begin in 2011. However, the final start-up removal, demolition and environ- date has not been clarified. The mental clean-up of buildings, demolition will free up important industrial areas that can be used for industrial plants and offshore other Ineos production or be leased installations. to other companies.

Completion: 2012 Client: Ineos Bamble AS

45 Offshore activities itive edge in the demolition and recycling Norwegian and British continental shelf. In AF Decom Offshore saw considerable activity of offshore installations. all, there are about 500 installations on the in both the British and Norwegian sectors Norwegian continental shelf, where the in 2010. The company performed extensive Land-based demolition cost of removal and demolition is estimated and complex work offshore using the re- After a challenging 2009, systematic efforts at NOK 160 billion. In a report from 2002 versed installation and small piece methods. to improve profits were initiated. The focus DNV estimated that more than 30 installa- Through its work, the company has again on project management and strengthening tions would be removed and demolished demonstrated its ability to perform demand- the capacity of central management are from 2010 to 2020. On the British continental ing operations in an efficient and safe now visible in 2010's good result. In 2010 shelf the removal and demolition market is manner, protecting both personnel and AF Decom made preparations for the dem- expected to total approximately NOK 250 the environment. olition and dismantling of the wreck of the billion until 2040. Recent years have shown Russian cruiser, the “Murmansk”. During the that decommissioning is proceeding slower In 2010 the Environmental Base at Vats re- year the project worked to build a breakwater than expected, and that there is great un- ceived approximately 30,000 tonnes of and dry dock so that demolition, clean-up certainty about when it will be implemented. decommissioned offshore installations and recycling of the vessel can be completed During 2010, activity has increased within from the North Sea. The work of ensuring in the summer of 2011. Front End Engineering and Design (FEED) an environmentally sound end of the installa- studies, and tendering activity is on the rise. tions' lifecycle is well under way. During the Market outlook year the company worked hard to streamline An increased level of activity and continued At the end of the year, Environment had an the operations of the Environmental Base good earnings are expected for the onshore order backlog of NOK 892 million (1,070). at Vats. The effort is important for enabling activities in 2011. The market potential for AF Decom Offshore to maintain its compet- offshore demolition is large on both the

Through its work, the company has again demonstrated its ability to perform demanding operations in an efficient and safe manner, protecting both personnel and the environment.

The Environmental Base at Vats is Europe's most modern and environmentally correct reception facility for decommissioned offshore installations. A large number of offshore installations will be recycled over the next few years.

46 AF Group annual report 2010 Environment

An increased level of activity and continued good earnings are expected for the onshore activities in 2011. Strategy

Through state-of-the-art expertise, Environment's mission is to In addition to expanding onshore demolition activities in Norway offers solutions that meet the environmental challenges faced by the company is working to obtain adequate volume of demolition the Group's customers. AF will continue to work on establishing operations in Sweden and Poland. Vici Ventus continues to work the environmental base at Dales Voe, Shetland to strengthen the on concept development, and has signed a contract with competitiveness of the British side of the North Sea. In Norway Vestavind Offshore on the further development of technical work on streamlining production at the Environmental Base at solutions in conjunction with the planned Havsul 1 wind farm. Vats will continue.

47 Energy 2010

The world needs more energy. Key figures This will create more business NOK million 2010 2009 2008 opportunities. Revenue 564 598 542

The Energy business area comprises Earnings before interest, taxes, depreciation the following units: and amortisation (EBITDA) -6 30 54 Earnings before interest and taxes (EBIT) -15 21 48 • AF Energi og Miljøteknikk AS Earnings before taxes (EBT) -21 16 46 • Aeron AS • Mollier AS EBITDA % -1.1 % 5.0 % 10.0 % EBIT % -2.6 % 3.5 % 8.8 % EBT % -3.7 % 2.6 % 8.5 %

Capital employed 371 366 405 Return on capital employed -3.9 % 4.5 % 20.5 % Order backlog 299 463 556

48 AF Group annual report 2010 Energy

Number of employees Turnover in NOK million Earnings before taxes EBT % (EBT) NOK million

400 10 310 5 220 130 % 40 Energy 211 (11 %) Energy 564 (10 %) -50 -5 AF Group 1,933 AF Group 5,828 Energy -21 (-6 %) Energy -3.7 % AF Group 372 AF Group 6.4 %

49 Energy – demanding 2010, opportunities in the market

With extensive industry knowledge and cutting-edge expertise in energy reduction, operation optimisation, service and maintenance, AF contributes to the implementation of reliable, clean and cost-effective solutions. 2010 2011

Dubai Yme platform In the summer of 2010, AF's wholly- Mollier has been commissioned to owned subsidiary Aeron carried out modify and complete the HVAC rebuilding and upgrading work on system on the Yme platform an oil tanker in Dubai. Among other docked at Rosenberg shipyard in things, the job included creating Stavanger. Built to serve the Yme good indoor air quality, increasing field for Talisman Energy, the jack-up cooling capacity and reducing the platform was built at the Adyard Liva yard in Abu Dhabi. need for energy.

Completion: 2011 Completion: 2010 Client: Bergen Group Rosenberg Client: Teekay Corporation and SBM Offshore

50 AF Group annual report 2010 Energy 51 AF Group is a leading supplier the AF Group Aeron Through

of HVAC systems to the shipbuilding industry. to systems of HVAC The solutions that are delivered delivered The solutions that are with customers provide will help to production.stable and efficient

Maintenance and modification of HVAC Maintenance and modification of HVAC installations is supplied on offshore systems delivered solutions that are The via Mollier. with stable and customers will help provide production.efficient

2011 2011 Skedsmo Municipality ompletion: The world needs more energy. This will create more business opportunities. business more will create This energy. more needs world The energy-efficient more of smarter, the development drive will Energy sectors. marine offshore and industry, the building, solutions for technical and the environment. the customer for both will be profitable AF's solutions Through Energy, AF supplies offshore and AF supplies offshore Energy, Through marine heating and cooling sys- ventilation, systems supplies HVAC Aeron (HVAC). tems service offshore vessel newbuildings at for the world. around shipyards AF Energi & MiljøteknikkAF Energi works with the building and industry market in segments the deliveryThrough of technical Norway. guarantee and solutions AF can systems consumption. energy lower customers energy product range includes detailed The and design in system analyses resulting rationalise to implementation of measures provides it addition, In consumption. energy monitoring services. and energy energy local installs and monitors AF also designs, buildings commercial heating plants for and industries. Energy's mission is to utilise engineering utilise engineering mission is to Energy's expertise their lower help customers to possible best the achieve and costs operating use. energy efficient solutions for Skedsmo Municipality one is of the most active municipalities in Norway in energy efficiencymeasures. AF Energi & Miljøteknikk has a framework Skedsmo Municipality agreement with the municipality focusing on energy conservation measures, and has carried out projects C Client: including a conversion from electric water-borneto heating for the municipality. 2010 in brief Energy reported revenues of NOK 564 million (598) in 2010 and earnings before tax of NOK -21 million (16). The year was marked by a weak market within the entire business area, which resulted in low activity.

AF Energi & Miljøteknikk reported a loss of NOK 22 million in 2010. The loss is mainly related to technical contracting. The unit is winding up all of its activities related to purely technical contracting to focus on its core activities of energy conservation and energy services.

Aeron saw a decline in sales and profits in 2010. Although the market was challenging, implementation of the project portfolio was solid. Thanks to long-term work on international procurement Aeron is competitive in the market.

While Mollier also had lower revenues in 2010, it maintained its operating margin by focusing on costs. Its result and revenue were marked by the postponement at short notice of major offshore projects due to An energy conservation analysis provides a specific recommendation of the measures weather conditions and a lack of accom- that are profitable, the investment required and the savings this will provide customers. modation capacity.

Thanks to long-term work on international procurement Aeron is competitive in the market.

Market outlook or build, new heat production based on Aeron is exposed to the market for offshore renewable energy sources may also have service vessel newbuildings. The market a positive impact in 2011. picked up somewhat after a year with very few newbuilding contracts in 2009. The After the end of the year AF Energi & market is expected to remain challenging Miljøteknikk signed an energy conservation in 2011. For Mollier the market gradually contract with Avinor. The contract covers improved during 2010. The level of investment nine airports. Through the agreement AF is in the North Sea is expected to rise in 2011, to ensure profitable energy use at Avinor's contributing to positive earnings for Mollier. airports. The contract is based on energy conservation contracts designed for public A profitable bottom line for customers The effects of the new technical regulations procurements. and the environment – AF calls it the BLUE ENVIRONMENTAL EFFECT! and the energy labelling scheme are expected to contribute to an improvement of The Energy business area had an order backlog AF Energy & Miljøteknikk's market. Enova's of NOK 299 million (463) as at 31 December. support for players who want to convert to,

52 AF Group annual report 2010

Energy 53

range of services under the slogan 'Blue environmental effect'. of services effect'. range under the slogan 'Blue environmental effectmust Blue environmental meansbe profitable that solutions and the environment. who invests both for the customer develop to will continue Energy build competitiveness to In order countries. low-cost from skills for procurement and systems Along with the industrialisation and standardisation of project level. cost a competitive to implementation this will contribute

trategy

Energy aims to grow both through organic growth and acquisitions. growth organic both through grow aims to Energy management increased capacity and This requires good access of and follow-up expertise. identification to targeted Through future and will retain develop we talents within our organisation, managers. sets high standards for sales and marketing situation The market workingto professionalise in 2011 efforts.continue will Energy its combined will market and Energy sales work. relations customer S Shareholder information

54 AF Group annual report 2010 Shareholder information 55 - - - ers and investors, and give us freedom of freedom us give and investors, and ers action in our business. and an operating margin have to are We higher than that are on investment return and comparable listed for the average companies. seek opportunities, to and organise are We value the that so business the conduct and is recognised. create we We will create continuous value growth, continuous value growth, will create We which will make sharehold us attractive to 2. Activities consists of the parent (AF) AF Group The AF Gruppen ASA and its subsidiaries. company operations purposeThe of the AF Group's owners, customers, for value create is to and society suppliers within the employees, at any in effect framework legislation of the ArticlesThe are of Association time. given its to According website. on the Group's objec- Articles the Company’s of Association, include all typestives of business operations, including participation in other undertakings. report of Directors' Board contains an The objectives and strat account of the Group's • • egies, and the market through egies, is updated connection in with presentations investor the quarterly accounts. the Board In processes the annual strategy whether the goals and guidelines reviews ade clear, are the strategies ensuing from well-operationalised un- and easy to quate, policies significant All employees. for derstand Group's AF the via employees to available are intranet. objective is to Over the Company’s time, on investment return a competitive achieve the Group for maximise value creation to and its owners: • - - environment, a good working environment, environment workplace employees. and a safe for prerequisite a is governance corporate Good and company, a sound and sustainable for treatment equal and transparency on built is man- Company's The of our shareholders. ensure us help routines control and agement conductthat we our business in a prudent for the benefit of manner and profitable partners, cus- shareholders, our employees, A healthy and societytomers in general. is a keycorporate culture driver in instilling access providing Company, the in confidence capital and ensuringto sound value creation be a clear division of is to There time. over and the manage work between Board the at scribed on page 18 and on our website www.afgruppen.com. challeng- By towards steering the AF Group over our operations will, ing tasks and goals, position their maintain and improve time, value in the market create continue to and - custom employees, our owners, for growth AF The and society suppliers ers, at large. a fundamental understanding has Group and acceptance that injuries persons, to materials and the working shall environment focus strong a has Group AF The avoided. be This and safety. on health, the environment is described in further detail on page 16 of the annual report. None. Deviation of Practice: the Code from ment. While the AF Group does not have a does not have While the AF Group ment. employees it has three corporate assembly, on the Board. and on safety focus wants to AF Group The meetingclear ethical guidelines in addition to social responsibilities. and its environmental a booklet has designed AF Group that The describes goals and values and its purpose, conduct to themselves are employee how - environ AF Group's The of Conduct). (Code de are mental and social responsibilities

Issued by the Norwegian Corporate Governance Board - NUES, the Norwegian Code of Practice is available at www.nues.no the Norwegian is available - NUES, the NorwegianIssued by Governance Board of Practice Corporate Code

1) The Company must have high standards of standards high must have Company The and A transparent corporate governance. structure is necessarysound governance if goals financial its achieve to is Company the CompanyThe and meet its social obligations. finds it important that all of its to ensure with business activities in accordance are This and rules. standards the recommended the integrity of the example, for concerns, market proper its employees, and Group the external consideration for behaviour, The AF Group wishes to contribute to sus- contribute to wishes to AF Group The responsible through tainable development safeguarding involves This business practices. of aspects social and environmental ethical, project implementation within Building, Environment Property, Civil Engineering, social responsibility Corporate and Energy. business risk, controlling also involves in one's order maintaining environmental operations and being an attractive own on has focused AF Group The workplace. finding future-oriented of creating ways - Environ The value since it was established. good are business areas ment and Energy competitiveness create we how of examples our operations in accordance and develop and environmental with the resource dictated our society. by requirements Corporate governance is a broad subject is a broad governance Corporate between that deals with the relationship and the the Board the owners, society, management of the AF Group. 1. Corporate Governance Governance 1. Corporate Statement

Each year the management and Board of the management and Board Each year its evaluates of the AF Group Directors principles corporate governance and how follows Group AF The Group. the in work they Corporate for Practice of Code Norwegian the followingThe Governance of 21 October 2010. description the 15 points are explains how up in the AF Group. followed Corporate governance Corporate The Company’s objectives are described in most favourable price possible. The Board number of options that could be granted more detail in the booklet “Purpose, Goals is free with respect to the methods used to was 12,500,000. Each option entitled the and Values”. In addition, all employees and acquire and dispose of treasury shares, though holder to purchase one share in AF Gruppen officers at AF must follow the Company’s always with the provision that the general ASA. Allocation of options started in 2008 Code of Conduct. Both booklets have been principle of equal treatment of shareholders and was completed in 2010. An option distributed to employees and Board members must be observed. Shares sold to employees could only be exercised if the holder was and can be downloaded from the Company’s and elected representatives may be sold at still employed by the Company on 31 website. a discount of up to 20 per cent below the December 2010. In accordance with the prevailing market price. This authority is valid authorisation, the Board adopted a capital Deviation from the Code of Practice: None. from 31 May 2010 until the 2011 Annual increase of 5,163,750 shares on 14 February General Meeting, hence not beyond 30 2011 in connection with the exercise of 3. Share capital and dividends June 2011. share options for employees. The option programme is thus concluded. At 31 December the equity of AF Gruppen Capital increase For further information on options, see ASA amounted to NOK 460 million. The Board In connection with the Company's share information about the Share on page 60. undertakes ongoing assessment of the scheme for employees, a private placement capital situation in light of the Company's of 622,000 shares was carried out in May The Board was authorised by the General objectives, strategy and desired risk profile. 2010, thereby increasing the share capital Meeting to draw up detailed guidelines for by NOK 31,100. the scheme within the set framework. Dividend The AF Group's goal is to manage the Group's At an extraordinary general meeting on 31 Deviation from the Code of Practice: None. resources so that shareholders get a return January 2011, the Board was authorised to in the form of dividends and share price increase share capital by up to NOK 300,000 4. Equal treatment of share- appreciation that is competitive relative to divided into 6,000,000 shares, each with a holders and transactions with comparable investments. The Company par value NOK 0.05. The power of attorney related parties assumes that future dividends will be stable may only be used to issue shares in connection and, preferably, rise. In 2010, it paid a dividend with the Company’s option programme and Equal treatment of shareholders of NOK 1.60 per share in June and an extraordi- share programme for employees in the Group, AF Gruppen ASA has one class of shares nary dividend of NOK 2.00 per share in by one or more issues. The Board may decide and all shares have equal voting rights. In November. Overall, NOK 256 million of the to deviate from the shareholders’ pre-emptive their work the Board and management Group's profits were paid out as dividends right to subscribe for shares under Section emphasise that all shareholders are to be in 2010. 10-4 of the Public Limited Companies Act. treated equally and have the same opportunities for influence. Authority to acquire treasury shares This authority is valid until the 2011 Annual The General Meeting has authorised the General Meeting, hence not beyond 30 Capital increase Board to acquire treasury shares. A more June 2011. During capital increases, existing shareholders detailed description of this is provided in are to be given priority, unless special circum- the minutes of the Annual General Meeting Option scheme for employees stances dictate that this can be waived. Such of AF Gruppen ASA on 28 May 2010. In 2008, the Extraordinary General Meeting deviation would then be justified and made When buying and selling treasury shares adopted an option scheme covering all public in stock exchange announcements the Company should seek to achieve the employees in the AF Group. The maximum in connection with the capital increase.

Shareholder/ The Board elected by employees Shares Options Tore Thorstensen1) Elected by shareholders 11,500 - Carl Henrik Eriksen 2) Elected by shareholders - - Peter Groth 3) Elected by shareholders 11,500 - Eli Arnstad 4) Elected by shareholders - - Mari Broman Elected by shareholders - - Tor Olsen 5) Elected by employees 11,000 20,000 Henrik Nilsson Elected by employees 12,300 2,500 Arne Sveen Elected by employees - 1,250

1) Represents, in addition to his own shares, KB Gruppen Kongsvinger AS, which owns 23,295,235 shares and Tokanso AS, which owns 346,100 shares. 2) Represents OBOS Forretningsbygg, which owns 20,466,730 shares. 3) Represents, in addition to his own shares, Aspelin Ramm Gruppen AS, which owns 4,092,040 shares and Ringkjøb Invest AS, which owns 76,355 shares. 4) A party related to Eli Arnstad owns 1,440 shares. 5) Represents, in addition to his own shares, T Olsen Holding AS, which owns 96,515 shares.

56 AF Group annual report 2010 Shareholder information 57 - None of the shareholder-elected Board None of the shareholder-elected Board the Board’s size, composition and work size, the Board’s methods. General an annual report the for Prepare Meeting. 8. Corporate Assembly and Assembly 8. Corporate composition – Directors of Board and independence AF Gruppen ASA, is a Company, Parent The and without employees holding company of the Limitedis not subject provisions the to corporate Act regarding Liabilities Company assemblies. largest and the Group’s employees The AS, AF Gruppen Norge operating company, stating agreement an into entered have AS is not required that AF Gruppen Norge Assembly. a Corporate have to organisation In with the group accordance the Industrial by Democracyapproved in 2007, AF Gruppen ASA and Committee the same Board AS have AF Gruppen Norge of Directors. compo has a diverse Board AF Group's The sition and wide range of competencies suitedsition and wide range of competencies - Information regard needs. the Company's to education and age, members’ the Board ing experience on the is published professional - Apart representa website. from Company’s none of the Board of the employees, tives performed or have employed members are work is Board's The the AF Group. work for board with the AF Group's in accordance instructions and applicable policies and held eight meetings Board The procedures. in 2010. members, AF Gruppen ASA has eight Board elected the employees. by are of whom three Of members elected the by the Board men and two three are there shareholders, is elected ChairmanThe of the Board women. Board the Annual Generalby Meeting. at a time. one year elected for members are independence Board • • Members of the Nominating Committee at 31 March: Arne Baumann (Chair) Øivind Fjeld Tor Thronsen Jan Fredrik None. Deviation of Practice: the Code from - - - Comment on and, if necessary, make if necessary, pro on and, Comment the General Meetingposals to regarding Propose remuneration for Board members Board for remuneration Propose the General Meeting. to Nominate shareholder-elected Board shareholder-elected Nominate Board election. for members and alternates • • 7. Nomination committee 7. Nomination General on a Nomina- The Meeting votes mem- consisting of three tion Committee at a time, one year elected each for bers, Articlessee the Company's of Association. mem- are members or Board No employees bers of the Nomination Committee. duties of the Nomination Committee The as follows: are • holders under the address registered in the registered holders under the address of the Norwegian Central register shareholder Securities Documents Depository. regarding at the General be considered to items Meeting must either be sent as enclosures the to notice or made available the to at website on the Company’s shareholders - is sent. Sharehold the same time the notice documents the receive to demand still may ers not demand may Company The mail. by sending doc- for of remuneration form any must Shareholders shareholders. uments to no the Company to notify their attendance the General before than two days later attend. Meeting be entitled to to Minutes of of General powers Meetings, the General by the Board to attorney granted Meeting Articles and the current - of Associa tion will be published on the AF Group’s - also contains informa website The website. appointing a proxy for tion on procedures the right the General Meeting, of share for put forward a motion at the holders to etc. forms, proxy General Meeting, election The the Board of new members to is arranged so and Nomination Committee that the General on each Meeting can vote General The Meeting is chaired candidate. the Chairmanby of the Board. None. Deviation of Practice: the Code from Nomination Committee and auditor shall and auditor Committee Nomination at the General Meetings. be present 2011 Annual GeneralThe Meeting will be will be sent in the Notice held on 13 May. all share in advance to mail at least 21 days - The shareholders exercise the highest au- exercise shareholders The the Generthority through in the AF Group 6. General Meeting6. General Deviation from the Code of Practice: None. Deviation of Practice: the Code from that the shall ensure Board The al Meeting. for forum General Meeting is an effective the Board, The and the Board. shareholders Team, Management Corporate AF Group's 5. Negotiability on the Oslo Stock listed are shares The The negotiable. freely and are Exchange restrictions no contain Association of Articles on negotiability. eviation from the Code of Practice: None. of Practice: the Code Deviation from Transactions with related parties conducted related with are Transactions has guidelines Board The on market terms. the inform that senior executives ensure to directly a material interest, if they have Board into entered agreement in any or indirectly, members Board the of Two Company. the by customers major are that companies represent with them are Transactions of the AF Group. done at market price. Transactions with close associates with Transactions the AF Group its reputation, safeguard To supports and caution in relation openness circumstances are there where investments to as an unfortunate that can be perceived or close relationship, close involvement, member, and a Board between the Company of them. or close associate senior executive of Code in the AF Group's is stated This 1). ItConduct (see paragraph is incumbent assess to member Board individual the upon - circum are on an ongoing basis whether there that objectively speaking likely are stances weaken public confidence in the to Board member's impartiality rise to give or may conflicts of interest. The Company’s transactions in its own Company’s The em- of sales to with the exception shares, There take place at marketployees, price. between agreements no shareholder are shareholders. the Company’s Treasury share transactions share Treasury shall be carried at market out Transactions asks the Board the price where in cases repurchase the authorise to Meeting General the deviations from Any of treasury shares. the by equality principle must be approved General Meeting. members are involved in the day-to-day ensuring that the Group is satisfactorily CFO of the AF Group, is the Audit Commit- management of the Company. managed and organised. The Board sets tee’s secretary. • Chairman Tore Thorstensen is CEO of KB financial structure goals and adopts the Gruppen Kongsvinger AS, the Company's Company's plans and budgets. Major issues The purpose of the Audit Committee is to largest shareholder. KB Gruppen of a strategic or economic nature are con- assist the Group Board with management Kongsvinger is also a major supplier to sidered by the Board. The CEO is hired by and performance of the Board’s supervisory the Group. and receives his powers from the Board. responsibility pursuant to Sections 6-12 and • Board Member Carl Henrik Eriksen represents The Board determines the CEO's salary 6-13 of the Public Limited Liability Companies one of the principal shareholders, OBOS and work instructions. Act. The Audit Committee’s duties are de- Forretningsbygg AS, which is a large scribed in the “Mandate for the Group Board’s customer of the Company. Each year the Board evaluates its performance Audit Committee”. They meet when necessary, • Board Member Peter Groth also represents and competence, and the need for the use but at least four times annually, including at one of the principal shareholders, Aspelin of Board committees is assessed on a regular least once a year with the Company's auditor Ramm Gruppen AS, which is also a large basis. At least once a year the Board carries and its management. The Committee is customer of the Group. out a review of the Company's main risk elected for one year at a time. areas and internal control in the Company. Two of the five Board members elected by The following tasks are included in the the shareholders are independent of the Instructions for the Board Audit Committee’s mandate: Company’s principal shareholders and busi- The Board has adopted instructions that ness associates. Three of five Board members provide rules for its work and procedures. • Assess the Group’s financial and account elected by the shareholders represent These instructions are reviewed annually reporting companies that are major customers and/ or as needed. The instructions deal with the • Evaluate the auditing, nominate an auditor or suppliers of the AF Group. Board's duties, the CEO's duties and obliga- for election and explain the auditor’s fees tions to the Board, Board procedure, minutes, broken down by auditing and other services The Board has assessed its independence follow-up of Board meetings, conflict of to the Annual General Meeting and believes that it is in accordance with interest, confidentiality and formalities • Assess the Company’s internal controls, the applicable standards. requiring new Board members to familiarise including: themselves with and accept the instructions - the Group’s management of risk Information about the shareholdings of to the Board. - the Group’s internal control functions Board members can be found in Note 23. - the Group’s authority matrix The Board has prepared an authority matrix - the Group’s cash management Deviation from the Code of Practice: that describes and clarifies what authority - the Group’s ability to perform assessments, According to the Code, the majority of the the CEO and management have and define improve, execute and follow up investment shareholder-elected members of the Board what matters have to be dealt with by the decisions should be independent of the Company’s Board. The Board is continuously informed - organisational matters related to financial executive personnel and material business about the Company’s financial position, reporting and control in the Group. contacts. In the AF Group, three of the five activities, and asset management. As part shareholder-elected board members are of the accounts procedure, the CEO and The Committee produces an annual report material business contacts. CFO submit a declaration to the Board presented to the General Meeting. stating that the annual accounts have been 9. Work of the Board of Directors prepared in accordance with the generally Compensation Committee accepted accounting principles and that all In 2008 the Board elected a Compensation The tasks of the Board information is consistent with the Company’s Committee to help ensure thorough and The Board has overall responsibility for the actual situation, and that no relevant infor- independent preparation of matters relating management of the Group and implemen- mation or material has been omitted from to the remuneration of the CEO and other tation of the Company’s strategy. This means the accounts. senior executives: salaries, bonuses, options, that the Board is responsible for establishing severance pay, early retirement and pensions. control systems and shall ensure that the Audit Committee The Committee's work is described in the Group is operated in accordance with the Effective 2008, the Board appointed an “Mandate for the Compensation Committee”. established core values, business ethics Audit Committee. The Company's Audit See also the statement of the Board regarding policies and the owners' expectations for Committee consists of two shareholder- the determination of salary and remuneration socially responsible operations. The Board elected members who meet the independ- of senior executives. shall safeguard shareholders' interests while ence and competence requirements laid also being responsible for the Company's down in the Public Limited Liability The Committee produces an annual report other interests. Companies Act. presented to the General Meeting.

The Board's main tasks are to help the Group Members of the Audit Committee as at The Compensation Committee is made up become competitive, and that it develops 31 March are: of three shareholder-elected Board members. and creates value. The Board shall be involved Carl Henrik Eriksen (Chairman) Peter Groth (Chairman) in developing the Group's strategy, per- Mari Broman Eli Arnstad forming necessary control functions and Sverre Hærem, Executive Vice President/ Tore Thorstensen

58 AF Group annual report 2010 Shareholder information 59 - - 11. Directors’ fees 11. Directors’ Nomination the by as set fees, Directors' the General by and adopted Committee or connect not earnings-related are Meeting, of senior 12. Remuneration executives - Com the In cooperation with the Board, determines guide pensation Committee ed with the share price performance with the share of AF ed any approve must Board The Gruppen ASA. fees, other than directors' remuneration and Compensation fees Committee Audit to the Company paid by fees Committee the con- 5 to Note members of the Board. remu- shows financial statements solidated members and senior neration of Board in the Group. executives None. Deviation of Practice: the Code from of senior executives. remuneration lines for of senior the remuneration Guidelines for the General to will be presented executives its information. Meeting for salary at a Board is set annually CEO’s The establishes of Directors Board The meeting. of senior the remuneration guidelines for in consultation with the CEO. executives and the Remuneration senior executives of the annual 5 to in Note can be found Board accounts. market- are salariesThe of senior executives salarybased and made up of a fixed and a Value (Economic bonus based on the EVA is a method of calculating EVA model. Added) in the Group and analysing value creation level. Group and economic units below linked are model Bonuses based on the EVA performance the profit to Company of the Bonuses time. or the economic unit over managers on a straight- eligible paid to are line basis in proportion the economic to an and above, over, value creation unit’s of the in excess individually set threshold cost of capital (WACC). average weighted some of their invest may managers Eligible shares. net bonus after tax in the Company’s sold at a 20 % discount on are shares The The the market price at the turn of the year. is one year. the shares period for lock-in em- scheme for has a share AF Group The given are all employees whereby ployees an opportunity at a discount buy shares to marketof 20 per cent on the current price. - - - - rules and regula with laws, Compliance tions maintained. The Board receives quarterly receives Board The maintained. position financial reports on the Company's the situ- assessment of and management's risk to and its manage ation with regard management from signals • Control internal control accounting Company's The separation is based on an organisational and attestation. control between execution, has extensive written job de Company The scriptions of the organisation. at all levels economists who assist project man- Project agement with the financial monitoring of all major for been hired projects have along heads of business units, The projects. for responsible are with financial managers, At reporting financial to the Group. regular function a controller has the corporate level been established with the main task of checking and verifying reporting the from reported Deviations di- are business units. Team. Management the Corporate rectly to reporting business units is from Financial Management the Corporate by reviewed meeting in conjunction at a separate Team with each reporting period. None. Deviation of Practice: the Code from ment. Effective and risk management ment. Effective the help protect sound internal control and Company's investments shareholders' assets. most im- Company’s the reviews Board The portant at and internal controls risk areas the also covers review The least once a year. ethical guidelines values, core Company’s risks relevant that can influence and any business of the Company’s achievement goals. competitive create aims to AF Group The its maintaining and developing ness by with the resource business in accordance society requirements and environmental places on us. control Internal and initiated Internal a process is control man- board, conducted the Company's by It to is designed agement and employees. assurance of goal reasonable provide in: achievement cost-effective operations Targeted, • • Reliable externalreporting financial • ------10. Risk and management control internal Risk management Risk is good management in management risk management has practice. Systematic competitive the AF Group’s strengthened discussed in connectionAll project risks are with the quarterly report. Each business unit undertakes risk of the review an overall project portfolioentire in each business analyses composed group unit. A broadly the projects and arrives at a prioritised list consists of rep group The of uncertainties. purposeThe of risk is to management manage the risks with successful associated business performance and enhance the qualityreportingto of financial in order loss-makingavoid projects and serious risk analyses Numerous decisions. wrong imple have and we been completed have ensuring that for is responsible Board The has sound internal control the Company and risk that are management systems Deviation from the Code of Practice: None. None. Deviation of Practice: the Code from Extensive profitability. ness and increased work has been carried since 2006 to out risk manage for systems uniform introduce everyone whereby culture a create and ment of risk.has a conscious awareness A special to in the Group unit has been established and projects identifyhelp the business units risk.and systematise Risk carried analyses are in projects in out in all tendering processes, evaluation of uncertainty and for progress activities. An overview in all project-based of the risk elements as early as the tendering overall our ability reduce phase increases to The risk price properly. and to the tender the forms phase tendering the in analysis risk and control further basis for follow-up analysis, the project's lifecycle. of risk throughout Manage the Corporate from resentatives management of the projects, Team, ment AF the from business unit and a facilitator quarterlyThe risk risk own unit. Group's concludes with a summaryreview the by riskThe is Team. ManagementCorporate reported summarisedfor and quantified, the year. each business unit throughout risks negative reduce to measures mented and actions take to advantage of positive risk management has been Proper risks. important achieving our goal of value for on risk More manage growth. and creation sectionment is written under a separate on page 14. The Company introduced an option scheme The Company has been awarded the Oslo 15. Auditor for all employees in 2008. The option scheme Stock Exchange Information Symbol. The is described in more detail under “Option Information Symbol is a quality mark indicating Ernst & Young is the auditor of the AF Group. scheme for employees” under No. 3. that the Company satisfies a number of There have never been any qualifications in requirements stipulated by the Oslo Stock the auditor’s report. The auditor gives the Deviation from the Code of Practice: Exchange with regard to financial information. Board an account of his work and assesses In the AF Group, the Board and the Compen- the Company’s financial reporting and in- sation Committee have decided there should Deviation from the Code of Practice: None. ternal controls in connection with the annual be no cap on earnings-related remuneration accounts. At this meeting, the Board is infor senior executives. 14. Company takeover formed about the services in addition to auditing that have been provided during 13. Information and The Board does not have any written guide- the year. communication lines for how to act in the event of a possible takeover bid by another company. The Board The auditor attends the AF Group’s General The AF Group’s objective is for all investors assumes that it will follow the Norwegian Meeting and confirms in writing to the Board and other stakeholders to have access to Code of Practice for Corporate Governance annually whether the stipulated independ- the same financial information about the if such a situation should arise. ence requirements for auditors have been Company at any given time. The information met. The Board has established guidelines provided by the AF Group should ensure Nor does the Board have any written guide- for when the management can use the au- that the valuation of the share is as correct lines for how to act in the event of a possible ditor for services other than auditing. The as possible. Information that may affect the takeover bid for the Company’s shares. The required independence of the auditor indi- price of the shares will be disclosed through Board believes, nevertheless, that it would cates that the Company should minimise stock exchange announcements to the Oslo not seek to prevent bids for the Company’s its use of the elected external auditor for Stock Exchange and via the Company’s business or shares without special reason services other than the statutory financial website. The AF Group assigns high priority for doing so. The Board would not exercise audit. However, the auditor is used never- to contact with the stock market, and it its authority to issue shares or take other theless for assignments that are related to desires an open dialogue with the players. measures to prevent the execution of a bid, the audit, including technical tax return without the approval of the General Meeting assistance, annual accounts, interpretation Reporting after the bid was announced. of accounting and tax rules and the verifi- The AF Group holds public presentations cation of financial information in various for its quarterly and annual results. The If a bid is made for the Company’s shares, the contexts. See Note 6 “Other operating costs” presentations are transmitted directly via Board of Directors will issue a statement for further information about the size of the the Internet and are available on the Oslo containing an assessment of the bid and a audit fee. Stock Exchange’s website and the AF Group’s recommendation to shareholders as to own website. In addition, the Company whether they should accept or reject the bid. The General Meeting considers the deter- maintains ongoing contact with investors As part of this process, the Board will obtain mination of the auditor's fee. and analysts. a valuation from an independent expert. To ensure the auditor’s independence and Information about the Company is published Deviation from the Code of Practice: While the competitive audit fees, the Board has decided in Norwegian and English. The Company Board has no written guidelines for prepara- that auditing should be put out to tender has drawn up a contingency plan to provide tion of takeover bids, it still believes that the on a regular basis. The Audit Committee information in case matters of a special guidelines will be followed. believes that it is natural to request such nature should arise or interest by the media. tenders every 5-7 years.

60 AF Group annual report 2010 Shareholder information

31.21.10

31.12.09

31.12.08

31.12.07 31.12.06 Market value value Market AF Group NOK million 500 3,000 2,500 2,000 1,500 1,000 owned approximately 17 per cent of the shares in the Company the Company in shares 17 per cent of the approximately owned 0.63 per equivalent to 450,000 shares, owned and the Company cent of the shareholding. the Company’s in light of will be considered buyback of shares The for financial situation, and need options, investment alternative option schemes,treasury in connection employees, shares with sales to is authorised the by AF Group The bonus schemes and acquisitions. outstanding General 10 per cent of the shares Meeting up to buy to in the Company. Return and turnover a through shareholders value for create goal is to company's The alternatives. comparable investment to relative return competitive price will be a combination of dividends and share return This

KB Gruppen Kongsvinger AS (32.8 %) AS (28.8 %) OBOS Forretningsbygg RammAspelin Gruppen AS (5.8 %) (17.0 %) in the AF Group Employees Other (15.7 %) Largest shareholders Largest in the AF Group cent duringperiod. the same cent The Oslo Stock Exchange’s benchmark index fell 10 per benchmark fell index Exchange’s Oslo Stock The has increased by 82 per cent, adjusted for dividends. dividends. for adjusted 82 per cent, by has increased was 37 per cent. Over the last three years the AF share the AF share years Over the last three cent. 37 per was of 26 per cent in 2010. The return including dividend including return The in 2010. of 26 per cent share price was NOK 40, which represents an increase an increase which represents NOK 40, was price share 2010 was a good year for the AF share. At year-end the At the AF share. for a good year 2010 was The AF Group had 914 (733) shareholders at the end of the year. of the year. at the end had 914 (733) shareholders AF Group The long-term structure is still characterised stable, shareholder by The owned shareholders largest December31 at as and ten the owners, of AF employees year-end, At shares. 81 per cent of the Company's Share capital and shareholder composition capital and shareholder Share capital was NOK 3,524,797 divided of 2010, the share the beginning At of NOK 0.25. In each with a face value 2010 14,099,188 shares, into for issue carried split and a share out a 1:5 share the Company 3,555,897 NOK was capital share the 2010, of end the At employees. value of NOK 0.05. each with a face 71,117,940 shares, divided into The AF Group’s shares are listed on the Oslo Stock Exchange’s OB Exchange’s on the Oslo Stock listed are shares AF Group’s The is only one class There Match list and trade under the ticker AFG. carry and all the shares of shares rights. voting The share The appreciation. The AF share rose by 26 per cent in 2010. Two dividends Share scheme for employees were paid during the year: an ordinary dividend of NOK 1.60 per The AF Group would like all employees to participate in joint value share in May and an extraordinary dividend of NOK 2.00 kroner per creation by becoming a shareholder in the Company. In addition, share in November. The return including dividend for 2010 was 37 the share scheme should contribute to making the AF Group an per cent. Over the last 3-year period the AF share has yielded an 82 attractive workplace for employees and attract new employees. per cent return, adjusted for dividends. During the same period an unweighted average of the share prices of competing contractors AF therefore has a share scheme for employees whereby they are rose 25 per cent. given an opportunity to buy shares at a discount of 20 per cent on the current market price. The liquidity of the share is characterised by the fact that several large, long-term shareholders own a substantial portion of the During 2010, 221 employees subscribed for a total of 784,700 shares. Company’s shares. In 2010, a total of 2,968,717 shares were traded The purchase price after a 20 per cent discount was NOK 31.28. In on the stock exchange, up 53 per cent from the year before. On 1 connection with the sale the Board used its authority and issued February 2009 the AF Group entered into a market-making agreement 622,000 shares. The remaining shares were transferred from the with the brokerage firm Fondsfinans ASA. The purpose of the Company's treasury shares. agreement is to promote the liquidity of the Company’s shares and decrease the spread between bid and ask prices when the Company’s The Company will continue the share scheme for employees in 2011. shares are traded. AF will seek to buy shares in the market to cover its needs in connection with the share scheme for employees. Any additional need will be Two major transactions in company shares were carried out off- covered by exercising the Board’s authority to issue shares. The Board exchange in 2010. Two of the company's founders decided to sell is authorised to issue up to 6,000,000 shares pursuant to resolutions all and part of their holdings in the Company, selling a total of of the Extraordinary General Meeting on 31 January 2011. 16,410,400 shares. Of these, OBOS Forretningsbygg AS bought 10,770,400 shares and KB Gruppen Kongsvinger AS bought 5,640,000 shares.

Key figures Shares 2010 2009 2008 2007 2006 Market value (NOK million) 2,845 2,242 1,269 1,859 1,549 Number of shares traded (1,000) 2,969 1,945 1,605 3,735 4,800 Total number of shares as at 31/12 71,117,940 70,495,940 69,349,440 68,849,440 68,849,440 Share price as at 31/12 40.00 31.80 18.30 27.00 22.50 - High 43.00 31.80 27.70 27.00 22.80 - Low 32.60 18.20 16.90 22.00 16.60 Earnings per share 3.92 3.85 3.10 2.55 1.95 Dividend per share 2.00 1.60 1.40 1.20 1.00 Extraordinary dividend 2.50 2.00 - - - Distribution ratio* 51.00 % 41.60 % 45.10 % 47.10 % 51.40 % Direct return 5.00 % 5.00 % 7.70 % 4.40 % 4.40 % P/E 10.2 8.3 5.9 10.6 11.6 * Based on ordinary dividend

Financial calendar 2011 Share price over last three years compared with competing 13 May 2011 Presentation of results for first quarter of 2011 contracting companies and Oslo Stock Exchange 13 May 2011 Annual General Meeting of AF Gruppen ASA 26 August 2011 Presentation of results for second quarter of 2011 200 180 11 November 2011 Presentation of results for third quarter of 2011 160 The Company reserves the right to amend these dates. 140 120 100 80 60 40 20

31.12.07 31.12.08 31.12.09 31.12.10

AF Group Veidekke Skanska Oslo Stock Exchange (OSEBX) NCC Peab

31 December 2007 = 100 Local currency, total return 62 AF Group annual report 2010 Shareholder information 63 www.afgruppen.no/investor Dividend per share Extraordinary dividend

Over time the AF Group shall give its shareholders a competitive a competitive its shareholders shall give Over time the AF Group the underlying that Provided shares. on the Company’s return assumes Company the satisfactory, is Group AF the of development rise future. in the preferably, will be stable and, that dividends a dividend of to pay proposes the Board year, the 2010 financial For Of NOK 2.50 is extraordinary this, NOK 4.50 (1.60) per share. dividend. on registered are who shareholders will be paid to dividends The 20 May 2011. relations Investor stakeholders and other investors all objective is for AF Group’s The Company the about information the same financial access to have to time. given at any that the should ensure the AF Group by provided information The exchange Information is as correct that may as possible. valuation of the share stock through disclosed be will shares the of price the affect Company’s the on and Exchange Stock Oslo the to announcements high priority assigns AF Group contactThe to with the stock website. market, an open dialogue with the players. and it desires its quarterly for holds public presentations and annual AF Group The directly via the Internet transmitted are presentations The results. own and AF’s website Exchange’s on the Oslo Stock available and are maintains ongoing contact In with the Company addition, website. a list of the provides website Company’s The and analysts. investors the AF share. analysts that follow in Norwegian information and English, and provides Company The (l) Provider for the Symbol (i) and Liquidity it qualifies Information Exchange. on the Oslo Stock for is responsible President/CFO, Vice Executive Hærem, Sverre relations. investor Dividend

2010 2009

0.63 % 0.91 % 0.97 % 1.00 % 2.07 % 2.40 % 2.90 % 3.53 % 5.75 % 18.29 % 2008 28.78 % 32.76 % 81.08 %

100.00 % % of total

2007 2006 Dividend per share * Proposed dividend * Proposed 4.5 2.5 0.5 1.5 4.0 3.5 3.0 2.0 1.0 450,000 650,000 691,560 710,000 1,471,860 1,704,720 2,064,621 2,513,900 4,092,040 13,007,274 20,466,730 23,295,235 71,117,940 57,660,666

Number of shares

2010

2009

2008

2007 2006 Earnings per share 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 Total number of shares Total Treasury shares Treasury Total other shareholders Total Total 10 largest Total Midtskog, Morten Holstad Invest AS Holstad Invest Evensen, Jon ErikEvensen, Staavi, BjørnStaavi, Skogheim, Arne Moger AS Invest LJM AS Aspelin RammAspelin AS Gruppen Obos Forretningsbygg AS Obos Forretningsbygg KB Gruppen Kongsvinger AS Shareholder 10 largest shareholders as at 31 December 2010 31 December as at shareholders 10 largest A total of 5,163,750 options were exercised on 15 February 2011, 2011, on 15 February exercised were of 5,163,750 options A total number of The issued. was shares number of and a corresponding after this is 0. AF Group options in the outstanding non-exercised after the issue is 76,281,690. of shares number total The In subscribed options and 644 employees 2010 AF issued 2,751,250 options in the Group. for Option scheme for employees Option scheme for in all the employees scheme for an option adopted AF Group The at the Extraordinarythe Group General Meeting in January 2008. options for subscribe to opportunity an provided scheme option The from years three in each of the in the Company shares purchase to 2010. 2008 to commitment long-term encourage to was scheme the of purpose The purchase The activities. in the Company’s involvement and greater was based on marketprice of the shares value as at 31 December a minimum price of NOK 27.00. with, however year, of the previous to be em- was NOK 0.60 per option. Staff had premium option The as at 31 December or one of its subsidiaries, AF Group, the by ployed the options. exercise to 2010 in order Board of Directors’ report

Operations operations within civil engineering, building Property The AF Group is a leading contracting and and property, while increasing its commit- The business area acquires land and devel- industrial group with five business areas: ment to energy-related and environmental ops residential and commercial property for Civil Engineering, Building, Property, services. The Group’s mission is supported its own account in areas where the AF Environment and Energy. by the operative organisation model and Group is engaged in contracting operations. the Civil Engineering, Building, Property, Property development is often carried out Ever since it was established in 1985, the AF Environment and Energy business areas. in cooperation with partners to spread project Group has relied on its strength and ability risk and benefit from each other’s expertise. to perform complex tasks. A strong entre- Civil Engineering preneurial spirit and ability and willingness AF is a turnkey supplier of civil engineering Environment to think differently and into the future have services in Norway. In Sweden, Civil Engi- Activities in the Environment business area characterised the Group's history. We help neering carries out foundation services in include offshore and onshore demolition, our customers succeed by delivering projects the Stockholm area. For 25 years, Civil Engi- recycling and environmental clean-up. En- and services in accordance with their needs neering has built up the experience and vironment is Norway’s leading demolition at the agreed cost. Our conduct is to be expertise required to carry everything from contractor for buildings, plants and installa- characterised by professionalism and high small and simple to large and demanding tions, as well as demolition in connection ethical standards. construction projects. Customers include with rehabilitation jobs. Environment also both public sector agencies and large in- has land-based demolition operations in AF Gruppen ASA, the Group’s Parent dustrial companies. Civil Engineering has Sweden and Poland. Environment's offshore Company, is listed on Oslo Stock Exchange. state-of-the-art expertise in the market areas operation removes and recycles decommis- The head office of the AF Group is located of oil, energy, underground construction, sioned petroleum installations in the North in Oslo. infrastructure and harbours. Sea (EPRD - Engineering, Preparation, Removal and Disposal). Operations have been estab- Vision Building lished in Norway and the UK. The work is Clearing up the past, building for the future. Building performs all types of building work performed offshore or at the Environmental for private and public clients. The business Base at Vats outside Haugesund. Mission area includes the development, engineering The AF Group is an industrial group delivering and building of commercial, residential and Energy value by clearing up the past and building public buildings, as well as rehabilitation The Energy business area in the AF Group for the future through contracting, energy projects. Building has a solid local base with offers expertise in energy efficiency and and environmental services. The Group has a strong market position in Oslo and the energy-related services for buildings, industry, an uncompromising attitude towards safety central Eastern Norway region, as well as offshore and the marine sector. and ethics. The mission highlights the AF Kristiansand. In addition, AF has building This business area offers measurable result Group’s intention to develop its contracting activities in Gothenburg, Sweden. guarantees for energy savings based on

Revenue Earnings before tax NOK million NOK million

6,000 400 5,000 350 300 4,000 250 3,000 200 2,000 150 100 1,000 50 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010

64 AF Group annual report 2010 Board of Directors’ report 65 . The AF Group AF Group The . 2 of the space to its new of the space to 2 mercial projects in Østfold and the southern projects in Østfold mercial part Akershus. of and completed During the AF Group 2010, major projects: several delivered In the spring of 2010 Helsfyr Atrium, the AF new headquarters, was completed. Group's million structure is a modern NOK 700 The consumptionlow energy office building with of 38,000 m area and a total main office. main office. Infirst part the autumn of 2010 the of project, the eastern part,Sørenga was - of the infrastructure devel Part delivered. opment in Bjørvika the project in Oslo, and tunnel construction.includes road final amount of the contractThe is NOK 1,350 million. Other in 2010 completed major projects airport Inn Park million 310 NOK the include at Gardermoen and the NOK 260 millionhotel in 4 inSkøyen office building at Hoffsveien Oslo. competitive several won AF Group The quarter in 2010 and the first tenders of 2011. are: largest The In a contract March with the was signed the expan- for Roads Administration Public in Oppland County. Tretten sion of E6 Øyer – startedWork in April the con- and includes struction of a 4 km tunnel and 10 km of open work includes tunnel work,The blasting, road. The earth construction. and road moving value of the contract excl. is NOK 680 million in the first work will be completed The VAT. half of 2013. with the was signed In an agreement June Municipal Undertaking Educational for has leased 22,000 m -

Earnings per share in 2010 were NOK 3.92 2010 were in Earnings share per NOK 4.5 (1.6) divided is proposed The (3.85). the order of the year the end At per share. 6,193 million (6,033). at NOK book stood sickness and frequency accident Group's The with the on a par level are absence rates of 1.7 rate with an LTI best in the industry, (3.1) and sickness absence of 3.7 % (4.0 %). was signedIn of intent a letter 2010 February base at Dales an environmental develop to environmental The Lerwick in Shetland. Voe, handle the anticipatedbase should be able to offshore large recycling for demand increased installations in the British sector of the North Sea. pur 2010 the AF Group On 1 September chased all the shares of the machinerychased all the shares con- nationwide The tractor Johan AS. Rognerud and state-of- 70 employees has company the-art com- The expertise in earth moving. as part was acquired to pany of a move of the infrastructure share a larger capture projects market. Johan AS will Rognerud subsidiarycontinue as a wholly owned and is partof the AF Group of the Civil business area. Engineering in Miljøbase sale of 60 % of the shares The 11 November on AS was completed Vats of NOK 42 a profit sale generated The 2010. and NOK 54 million million in Environment In connection with the in the AF Group. an extraordinarysale, of NOK 2.00 dividend was paid in November. per share In of the AF Group December 2010 the Board decided that the building operations of AF AF Bygg and Øst should be Bygg Glomsrød Bygg one unit, AF Østfold. combined into on 1 January was completed merger The 2011. By pooling its expertise the business capacity unit will gain increased and flexi- and com- bility take residential to on more

2010

2009

2008

2007 2006 Order book Order NOK million 2,000 1,000 6,000 5,000 4,000 3,000 7,000 Highlights and other operating posted AF Group The of NOK 5,828 million (5,401) in revenues million tax was NOK 372 before 2010. Profit in the compa- (366), the best annual result the five While the situation for history. ny's the AF Group overall varies, business areas handle continued positioned to is well growth. Presentation of the annual of the annual Presentation accounts Introduction for financial statements consolidated The in ac- been prepared have the AF Group with the Internationalcordance Financial financial The Reporting (IFRS). Standards AF Company, the Parent for statements in ac- been presented Gruppen ASA, have IFRS with IFRS and the simplified cordance accounts laid down company for provisions in Section 3.9, fifth of special paragraph the Norwegian pursuant to regulations is of of Directors Board The Act. Accounting financial the opinion that the consolidated and truthful an accurate provide statements for results financial picture of the Group’s 2010 and its financial position as at 31 confirmto pursuant We December 2010. Section 3-3a of the Norwegian Accounting for the Act that the financial statements and the consolidated Company Parent basis the on prepared been have operations for of a going concern Figures assumption. appear in brackets. year the previous Statement Governance Corporate Board's The part is an integral of Directors' of the Board on page 55. is presented statement The report. analyses and monitoring of energy flows in flows monitoringanalyses and of energy has operations in Oslo, Energy buildings. Trondheim, and Skien, Stavanger, Bergen, and a subsidiary been established in has in advantage competitive gain a China to and logistics. procurement Buildings and Property in Oslo for new con- will be an adjoining new building. The project in Oslo. The agreement includes construction struction and renovation of Kjelsås School will be carried out as a turnkey contract and of 25,000 m2 of office space in two buildings. in Oslo. The work includes demolition of is valued at NOK 130 million, excl. VAT. The project will be carried out as a turnkey portions of existing buildings, construction Construction will start in April 2011. contract and is valued at NOK 264 million, of new school building and renovation of The AF Group has signed contracts for several excl. VAT. An option agreement was signed existing buildings. The work started in October large projects since the end of the financial for the construction of three additional and the school will be completed in the year: buildings. summer 2012. The value of this contract is NOK 188 million, excl. VAT. In January 2011 the Building business area In March 2011 Civil Engineering signed a entered into an agreement with Sørenga contract with the Public Roads Administration In September an agreement was signed Utvikling for the construction of apartments for the development of the Ringway West with OBOS to build apartments and com- and commercial space for Sørenga Building project in Bergen. Ringway West includes mercial space in Kværnerbyen in Oslo. The Phase 3. The agreement includes construc- a new four-lane motorway between Flyplass- agreement includes construction of 264 tion of 127 apartments, the framework for a vegen (airport road) and Liavatnet in Bergen. apartments, 309 parking spaces, a shop and day care centre and commercial space. The The work includes construction of two smaller commercial premises. The project will project will be carried out as a turnkey tunnels and connection to existing roads. be carried out as a turnkey contract and is contract and is valued at NOK 230 million, The value of the contract is NOK 821 million, valued at NOK 381 million, excl. VAT. excl. VAT. Construction began in March excl. VAT. Work started in March 2011 and Construction started in February 2011. 2011, with delivery expected in the 4th will be completed in April 2015. quarter of 2012. In November, AF was chosen by the City of Income statement Oslo as the contractor for the construction In February 2011, an agreement was entered Revenues for 2010 amounted to NOK 5,828 of the Vettakollen Elevated Basin to safeguard into with Stovner Utvikling KS for the con- million (5,401) and the operating profit was the supply of water in parts of Oslo. The client struction of apartments and commercial NOK 366 million (335). This is equivalent to is the City of Oslo. The work includes con- space. The project includes construction of an operating margin of 6.3 % (6.2 %). EBITDA struction of the elevated basin, tunnel and 128 apartments in four buildings and 2,000 was NOK 463 million (417), and profit before piping to the basin. Value of the contract is m2 of commercial space. A turnkey project, tax was NOK 372 million (366). NOK 157 million, excl. VAT. Commencement the contract is valued at NOK 205 million. is planned for the first half of 2011 with a Construction started in February 2011 with The net profit for 2010 was NOK 277 million building period of 2.5 years. completion the 1st quarter of 2013. The AF (270), which corresponds to earnings per Group has a 33 % stake in Stovner Utvikling KS. share of NOK 3.92 (3.85). In November an agreement was signed with Idun Industri Eiendom AS to build apartments In February 2011 an agreement was signed Balance sheet and liquidity in Sandaker in Oslo. The new agreement is with Sandakerveien 99B KS to build 145 The balance sheet total at 31 December for the construction of 98 new apartments apartments at Sandaker in Oslo. The agree- 2010 was NOK 3,013 million (3,059). As at 31 in three buildings. The project will be carried ment includes construction of 145 apartments, December 2010, the Group had net interest- out as a turnkey contract and is valued at a day care centre and parking basement. bearing receivables of NOK 580 million (185). NOK 158 million, excl. VAT. Construction The project will be carried out as a turnkey Cash and cash equivalents amounted to commenced in January 2011 and work will contract and is valued at NOK 240 million, NOK 623 million (223) as at 31 December continue until November 2012. excl. VAT. Construction will start in April 2011 2010. Shareholders’ equity at the end of the and will continue until September 2013. year was NOK 968 million (915), which cor- In December, AF signed an agreement with responds to an equity ratio of 32.1 % (29.9 %). Kirkeveien 71 AS to build 85 apartments at In February 2011, Building entered into an Haslum in Bærum. One building will be agreement with Østre Aker Vei 90 AS for Cash flow renovated and converted from an office the construction of a new energy-efficient Net cash flow from operating activities in building to housing and the other building headquarters for Siemens Norway at Linderud 2010 was NOK 260 million (941). Net cash

Cash ow from operating activities NOK million

1,000 800 600 400 200 2006 2007 2008 2009 2010

66 AF Group annual report 2010 Board of Directors’ report 67 - 888 122 130 5.9 % 6.4 % 2,044 2008 82 105 5.9 % 4.6 % 2,175 1,768 2009 NOK 66 million NOK 343 million NOK 409 million 198 194 9.2 % 9.0 % 1,899 2,158 2010 Distribution of profit for the year the for Distribution of profit for AF Gruppen year for the net profit The 409 million and the following ASA was NOK distributionis proposed: other equityto Transferred dividend for Provision distributed Total distrib at 31 December 2010, the Group’s As equity was NOK 45 million after utable of the proposed, allocations as a result dividend. adopted but not yet and dividend Return, share was employed capital average on return The Earnings36.0 % (35.7 %) in 2010. per share divi- NOK 3.92 (3.85) and the proposed were share The 1.6). (NOK 4.5 NOK is share per dend price on 31 December 2010 was NOK 40.0. Business areas Engineering Civil comprises area business Engineering Civil The construction activities in Norway and AF’s operations com- Engineering Civil Sweden. business units: prise three • AF Anlegg Construction & Civil • AF Offshore AB i Sverige • Pålplintar Highlights NOK 2,158 million 2010 were Revenues for tax was NOK 198 million before (1,768). Profit 2010 was for operating margin The (105), Order backlogOrder EBT % EBT EBIT % Earnings before taxes (EBT) taxes Earnings before Operating profit (EBIT)Operating profit Revenue NOK million - - and liquidity risk. The AF Group's reporting AF Group's The and liquidity risk. of its has 90 % Group The currency is NOK. expenses in NOK, and revenue 8 % in SEK Group's The currencies. and 2 % in other primarily and limited currency risk is therefore rate changes in the exchange to related between NOK and SEK. In connection with contracts the start-up and operations of in the UK, is also exposed to the AF Group The EUR and USD. fluctuationsof the GBP, exchange hedges against foreign Group forward using contracts by for exposure steel scrap contracts for Forward currency. scrap steel the price limit used to risk for are demolition activities in the Northfrom Sea. limit price seeks to continuously Group The clauses for standard is done by This risk. price adjustments in the contracts and pay prices in local cur purchase and hedging rency by entering into framework agreements agreements framework into entering by rency of goods and services. the procurement for has established guidelines to Group The risk in cash and against credit safeguard loans and receivables. cash equivalents, has had negligible the Group Historically, losses. credit financial posi- strong Based on the Group's tion at 31 December 2010 the liquidity risk NOK has a three-year, AF Group The is low. facility 900 million (900) credit and credit limit with Handelsbanken, in which expires December at 31 this facilityJune 2012. As Inunutilised. net inter was had AF addition, of NOK 580 million receivables est-bearing Group's The (185) at the turnyear. of the of follow-up through liquidity is monitored Differences of the projects. the cash flows and actualbetween anticipated cash flows in conjunction monthly reviewed with a are Inrisk of the projects. review addition, daily central the Group’s by liquidity is monitored finance function.

2010

2009

2008

2007 2006 Net interest bearing Net interest (debt) receivables NOK million 0 600 500 400 300 200 100 -100 -200 -300 Risk and financial risk management various to is exposed types AF Group The operational and financial of market-related, portion A substantial risks. of the Group’s of assets and liabili- balance sheet consists with ongoing projects. ties associated subject estimate to are Some of the items the Corpo these items uncertainty, and for changes in situations or In cases, many market arise conditions may during a changes entail may they and period, project company’s the affect thus and estimates the to The and earnings. equity, liabilities, assets, routines and meticulous has systems Group analyses Risk risk. managing and analysing for the tender done continuously from are project. assessment until the completed embedded risk are The systems management projects the from organisation, the throughout via the management of the business units and Team Management the Corporate to of AF Gruppen ASA. of Directors the Board purposeThe of risk limit management is to undesirable financial and production-related corrective action.consequences through exploit is to the focus the same time, At opportunities through positive manifested the risk analyses of the projects. is exposed its activities, the AF Group Through variousto typesFinancial of financial risk. market divided into risks are risk, risk credit used in investing activities was NOK -1 millionused in investing the sale from cash consideration The (-364). of the Environmental shares of 60 % of the flow is included in net cash Vats Base at activities. Other investing cash flows from of dividends and the payment used for are debt. of repayment - and project man Team Managementrate and made judgment exercised agers have principles assumptions based on uniform con- assumptions are These and guidelines. realistic. sidered 9.0 % (4.6 %). CIvil Engineering reported its pany was acquired as part of a move to The Building business area comprises activi- highest level of activity and earnings ever in capture a larger share of the infrastructure ties related to new construction and reno- 2010. projects market. Johan Rognerud AS will vation in Norway and Sweden. continue as a wholly owned subsidiary of Civil Engineering scored many good contracts the AF Group and is part of the AF Anlegg Building is divided into five business units: in 2010. In March, AF Anlegg signed a contract business unit. with the Public Roads Administration for • AF Bygg Oslo the development of E6 Øyer – Tretten in In February 2011, the AF Group signed a • AF Byggfornyelse Oppland County. Work started in April and final agreement to acquire parts of the op- • AF Bygg Østfold includes the construction of a 4 km tunnel erations of Båtservice Offshore/Verft AS. • AF Bygg Sør and 10 km of open road. The NOK 680 million The business will continue as part of the AF • AF Bygg Göteborg AB, Sweden contract includes tunnel work, blasting, earth Group's services to the offshore market. All moving and road construction. The contract employees of Båtservice Offshore/Verft will Highlights is worth NOK 680 million. The work will be be transferred in 2011 to the newly estab- Revenues for 2010 were NOK 2,267 million completed in the first half of 2013. lished undertaking AF Offshore Mandal. The (2,561). Profit before tax was NOK 51 million unit will strengthen the land-based activities (221). The operating margin for 2010 was In November, AF Anlegg was chosen by the of AF Offshore & Civil Construction and 2.0 % (8.5 %). Building posted a lower turnover City of Oslo as the contractor for the con- expand the service spectrum. AF Offshore and profits in 2010 compared with 2009. struction of the Vettakollen Elevated Basin. Mandal will also continue to provide services The result was strongly influenced by the The facility is being built to ensure water to the offshore market. result of AF Bygg Göteborg, which posted supplies in parts of Oslo. The work comprises a loss before tax of NOK 84 million in 2010. the construction of an elevated basin and Outlook Norwegian building activities are delivering tunnel and piping to the basin. The contract AF's Civil Engineering operations entered good earnings and demand for services has has a value of NOK 157 million, excl. VAT. 2011 with an order backlog of NOK 1,899 been particularly strong. Commencement is planned for the first half million (2,175). Together with the two new of 2011 with a building period of 2.5 years. projects of almost NOK 1,000 million won The Building business area signed a series by Civil Engineering in 2011 the order back- of new contracts in 2010. In June, AF Bygg- After the end of the financial year, AF Anlegg log was record high in February 2011. The fornyelse signed an agreement with the signed a contract in March 2011 with the civil engineering market is driven primarily Municipal Undertaking for Educational Public Roads Administration for the devel- by major public infrastructure projects. The Buildings and Property in Oslo for new con- opment of Ringway West Stage II in Bergen. investment level for civil engineering is ex- struction and renovation of Kjelsås School Ringway West includes a new four-lane pected to remain at a high level going for- in Oslo. The work includes demolition of motorway between Flyplassvegen (airport ward. Growth in the market is expected to portions of existing buildings, construction road) and Liavatnet in Bergen. The work be in the form of investments in railways of a new school building and renovation includes construction of two tunnels between and roads. Civil Engineering strengthened of existing buildings. The work started in Sandeide and Liavatnet and connection to its organisation in 2010 and is well posi- October and the school will be completed existing roads. The value of the contract is tioned for profitable growth in 2011. in the summer of 2012. The value of this NOK 821 million, excl. VAT. Construction contract is NOK 188 million, excl. VAT. started in March 2011 with completion Building scheduled for the first half of 2015. In September, AF Bygg Oslo entered into an NOK million 2010 2009 2008 agreement with OBOS to build apartments On 1 September 2010 the AF Group pur- Revenue 2,267 2,561 2,881 and commercial space in Kværnerbyen in chased all the shares of the machinery con- Operating profit (EBIT) 46 218 140 Oslo. The agreement includes construction tractor Johan Rognerud AS. The nationwide Earnings before taxes (EBT) 51 221 156 of 264 apartments, 309 parking spaces, a EBIT % 2.0 % 8.5 % 4.9 % company has 70 employees and state-of- shop and small commercial premises. The EBT % 2.3 % 8.6 % 5.4 % the-art expertise in earth moving. The com- project will be carried out as a turnkey Order backlog 3,067 2,324 2,382

Return on capital employed NOK million

10 2006 2007 2008 2009 2010

68 AF Group annual report 2010 Board of Directors’ report 69 -33 -45 102 2008 -32.6 % -43.6 % -11.6 % 51 -10 -15 2009 -3.6 % -19.1 % -29.1 % 42 35 134 2010 31.2 % 25.8 % 14.6 % Earnings before Earnings before (EBT)taxes EBIT % Revenue Operating profit (EBIT) % EBT ROaCE NOK million expected to remain stable at a high level stable at a high level remain expected to public of many age The going forward. energy the ambitious public buildings and a substantial buildings represents goals for potential. renovation market building The is growing in Sweden economy in the Swedish Growth rapidly. in the improvement implies a gradual organisational Through building market. the addition of expertisechanges, and initi- on project management and focused atives AF Byggproject implementation, Göteborg in results better achieve is also expected to 2011 and 2012. Property comprises Property the The business area housing units of residential development own account in for and office buildings the Eastern Norway region. Highlights 2010 was NOK 134 for Operating revenue tax was NOK before million (52) and profit Return(-15). million 35 employed capital on housing marketThe in was 14.6 % (-3.6 %). in 2009. level a low from 2010 rebounded In at the 2010, 30 housing units completed sold. end of 2009 were Q and R and sale of the RolvsrudThe Park projects has commenced. Grefsenkollveien of 89 apartments projects sold a total The of the apartments share sold is in 2010. AF’s - - of office space in 2 A turnkey the contract project, is worth Construction VAT. excl. NOK 205 million started 2011 with completion February in has AF Group The the 1st quarter of 2013. Utviklinga 33 % stake in Stovner KS. In an AF Bygg 2011 Oslo signed February with Sandakerveienagreement 99B KS to build 145 apartments at Sandaker in Oslo. includes 145 apartments agreement The in parking buildings plus underground three project will be The centre. care and a day carried out as a turnkey contract and is valued start Planned VAT. at NOK 240 million, excl. continue will and 2011 April is construction of 2013. until September In 2011, AF Bygg Oslo entered February 90 Vei Aker with Østre an agreement into the construction of a newAS for energy-efficient headquartersfor Siemens Norway at includes agreement The Linderud in Oslo. construction of 25,000 m two buildings. The project will be carriedThe two buildings. out as a turnkey contract and is valued at An option agree VAT. NOK 264 million, excl. ment was signed for the construction of of construction the for ment was signed additional buildings. three book order the total the end of the year At (2,324). at NOK 3,067 million stood Outlook marketThe Building gradually situation for and is ex year the throughout improved The in 2011. improve continue to pected to home building market is in the Oslo area particularly Normalisation of the good. in higher economic situation has resulted positive a have will This starts. project housing Property on both the effect and Building business areas. - and renova marketThe maintenance for the Government’s by tion was boosted stimulus package, and the market is

2010

2009

2008

2007 of commercial space. space. of commercial 2006 2 Accident frequency rate Accident Incidents per million hours worked 6 4 2 In February 2011 AF Bygg Oslo entered into into In 2011 AF Bygg Oslo entered February Utvikling with Stovner an agreement KS for the construction of apartments and com- project includes con- The space. mercial struction of 128 apartments build- in four ings and 2,000 m In January into 2011 AF Bygg Oslo entered Utvikling with Sørenga an agreement for the construction of apartments and com- 3. Phase Building Sørenga space for mercial construction includes of 127 agreement The care apartments, a day the framework for project The space. and commercial centre will be carried out as a turnkey contract VAT. and is valued at NOK 230 million, excl. Construction 2011, with in March began delivery expected in the 4th quarter of 2012. Building has signed several major contracts several Building has signed year:since the end of the financial In December an agree AF Bygg Oslo signed with Kirkeveien build 85 71 AS to ment apartments at Haslum in Bærum. One building an and converted from will be renovated and the other to housing office building building will be an adjoining new building. project will be carriedThe out as a turnkey contract and is valued at NOK 130 million, Construction will start in April 2011. VAT. excl. The new agreement is for the construction is for newThe agreement of 98 new apartments buildings. in three will be carried project The out as a turnkey contract valued at NOK 157 million, and is Construction commenced in January VAT. excl. 2011 and work until November will continue 2012. In November AF Bygg Oslo signed an In AF Bygg Oslo signed November Industri with Idun agreement Eiendom AS apartments build to in Sandaker Oslo. in contractNOK 381 million. and is valued at Construction started 2011. in February 34. AF's share of unsold apartments in these lition and environmental clean-up of buildings, ronmental base should be able to handle projects is 10. Since these development industrial plants and offshore installations. the anticipated increased demand for projects are organised as associate companies The business area comprises the following recycling large offshore installations in in the AF Group, these projects are not business units: the British sector of the North Sea. included in the order backlog. • AF Decom Offshore (Norway and the UK) In January 2011 Vici Ventus Technology AS 2010 also saw the initiation of the sale • AF Decom signed an agreement with Vestavind Offshore of the Fossumhagen, Lillohagen and to develop solutions for offshore wind tur- Blomsterstykket projects numbering 131 In addition, Environment also has activities bines at Norway's first full-scale wind farm, residential housing units. 65 residential in the subsidiaries AF Decom Sweden, AF Havsul at Møre. Havsul I will be able to pro- housing units had been sold by the end Decom Poland, Palmer Gotheim Skiferbrudd, duce energy equivalent to the annual con- of the year. After the end of the year, AF BA Gjenvinning and the associated companies sumption of 50,000 households. It will thus Eiendom, through Stovner Utvikling KS, of Miljøbase Vats and Vici Ventus Technology. make a significant contribution to Norwegian which AF owns 33 % of the shares, decided wind power production and alleviate some to commence construction of Fossumhagen. Highlights of the strain on the power situation in Middle This is expected to be completed in 2013. Revenues for 2010 amounted to NOK 767 Norway. The total order backlog for the million (743) and earnings before tax amount- Environment business area at 31 December Outlook ed to NOK 90 million (43). The operating 2010 was NOK 892 million (1,070). Brisk housing sales are expected to continue margin for 2010 was 14.0 % (6.2 %). In in 2011. The economy is growing at a healthy November 2010, 60 % of the shares in Outlook pace and interest rates are expected to remain Miljøbase Vats AS were sold. The sale The future market for AF’s offshore-related low. AF Eiendom is well positioned to increase generated capital gains of NOK 42 million environment services is considered to be sales in the housing segment. in Environment. large and interesting. The level of activity for new demolition projects is increasing. Environment AF Decom has a high level of activity and is Several FEED (Front End Engineering Design) performing well in line with the improved studies have been initiated and there is an NOK million 2010 2009 2008 building market. AF Decom has been making increasing supply of projects. AF’s land- Revenue 767 743 667 preparations since the summer of 2009 for based activities are closely related to the Operating profit (EBIT) 107 46 56 the demolition and dismantling of the wreck demand for new housing, non-residential Earnings before taxes of the Russian cruiser, the “Murmansk”. The buildings and industrial projects, and the (EBT) 90 43 54 AF method involves demolishing the wreck level of activity in the market is expected EBIT % 14.0 % 6.2 % 8.4 % in a dock that is protected by jetties. The to remain high going forward. EBT % 11.7 % 5.8 % 8.1 % onshore demolition market is showing a Order backlog 892 1,070 1,285 positive trend in line with stepped up Energy building activity. NOK million 2010 2009 2008 The Environment business area encompasses AF Decom Offshore is performing well at Revenue 564 598 542 the AF Group’s environmental services related the Environmental Base at Vats and received Operating profit (EBIT) -15 21 48 to demolition and recycling services offshore five platforms for demolition and recycling Earnings before taxes and onshore. The business area has activities during the year. AF Decom Offshore AS (EBT) -21 16 46 in Norway, Sweden, Poland and the UK. signed a 15-year lease for the environmental EBIT % -2.6 % 3.5 % 8.8 % Land-based demolition is carried out in base in conjunction with the sale of the EBT % -3.7 % 2.6 % 8.5 % Norway, Sweden and Poland, while offshore shares of Miljøbase Vats AS. In February Order backlog 299 463 556 demolition and recycling are aimed at the 2010 AF Decom Offshore UK signed a letter market in the North Sea. Environment is a of intent to develop an environmental base leader in Scandinavia in the removal, demo- at Dales Voe, Lerwick in Shetland. The envi-

Total sick leave Per cent

1 2006 2007 2008 2009 2010

70 AF Group annual report 2010 Board of Directors’ report 71 - - This applies for example to matters relating relating matters to example applies for This and general recruitment promotion, pay, to has AF Group The development. career a promote written objectivesto and rules good working with equality environment and without discrimination or harassment. in the laid down and rules are goals The of Code The of Conduct. Code Company's When rule book.Conduct is the AF Group's in the AF all employees hired, they are received off that they have must sign Group undertake they that and Conduct of Code the with it. In comply to line with the Discrimi- Conduct of Code the of object the Act, nation equal oppor ensure equality, promote is to discrimina- and prevent tunities and rights, nationality, of ethnicity, tion on the grounds or religion language, skinheritage, colour, into In moved 2010 the AF Group beliefs. new quarters. All joint facilities in the new that they so can are designed main office including those all employees, be used by the of adaptation Individual disabilities. with workplace is otherwise the extent done to of the work.possible based on the nature and the environment Health, safety assumes that all activities AF Group The should be planned and carried out based on a fundamental understanding and acceptance that all personal injuries and the external equipment and damage to can be avoided. environment in its tools analysis employs company The identify risk work to associated preventive activities with future and define and initiate - reporting, investi The measures. risk-reducing conditions, of hazardous and analysis gation as regarded near misses and accidents are investigation The improvement. for tools on identifying the under and analysis focus management can be improved. The Corporate and lying causes so that the organisation Corporate The improved. be can management - in the inves is involved Team Management in a lost tigation of all accidents that result

Information on environment Information and organisation Personnel 1,933 (1,974) were of 2010 there the end At (977) of whom 972 in the Group, employees paid by salaried and 961 (997) were were and supply of recruitment The the hour. was satisfactorynew employees in 2010. AF Gruppen ASA, Company, Parent The at the end of 2010. had no employees % (8.5 %) are 8.5 Of employees, the Group's the and 91.5 % (91.5 %) men. Given women of the work and workingnature conditions, the contractor industry traditionally has recruitment the For men. by dominated been economists, and of newly qualified engineers balance between even men is a more there as a whole. than in the Group and women among salaried of women percentage The staff was 15.4% (15.5%) at the end of 2010. In conducted December 2009 the AF Group satisfaction surveyan employee showing of satisfactiona higher level among AF in the industry. than the average employees which is made In Council, 2010 the Group senior representatives, up of employee and management representatives safety continued its work on representatives, cooperation between all partsimproving of the organisation. where workplace a be to seeks Group AF The of discrimination is no on grounds there or sexual orientation. beliefs gender, ethnicity, from 1 July 2010. Infrom the public addition, lifetime the on focus its increased has sector efficiency and energy costs of buildings of an improved 2011, For existing buildings. market higher of is expecteda result as of increase prices a gradual and energy conservation.in energy investments In the longer term, the market is expected potential. growth great offer to

2010

2009

2008

2007 2006 Number of employees 500 2,000 1,500 1,000 2,500 Outlook mandatoryIn area, business Energy the labelling of houses was introduced energy The total order backlog order at 31 total The in Energy December NOK 299 million (463). 2010 was Mollier of activity level had a low in 2010. saw the end of 2010, the company Towards in activityincreasing and an improvement Inoperations. 2010, Mollier March signed with ConocoPhillips a two-year agreement work on the Ekofisk field in the HVAC for North performed Sea. in 2010, Aeron well but demanding market conditions have marketThe of activity. level in a low resulted contracting of more in the signs is showing Norwegian shipping industry. AF EMT wound up all of its activities related up all of its activities wound related AF EMT contracting technical and will purely to activities core its on future the in concentrate conservation of energy and energy-related AF EMT services. the end of the year, After plan and to a contractsigned with Avinor conservationimplement energy measures contractThe is based on energy at 9 airports. conservation public contracts for designed procurements. Highlights NOK 564 million (598).Revenues in 2010 were was NOK -21 million (16). tax before Profit 2010 was -2.6 % for margin operating The was impacted a by result (3.5 %). Energy’s AF EMT. for tax of NOK 22 million loss before • AF Energi og Miljøteknikkk og • AF Energi EMT) AS (AF • Mollier AS AS • Aeron The Energy business area comprises the area business Energy The services energy land-based for AF Group’s and the installations activities, offshore area business The maritime industry. units: business comprises three time injury, while the management of the illnesses affect sickness absence. The survey management. This will be done by identifying business unit concerned is involved in all in- shows that measures to combat musculoskel- and monitoring the main environmental vestigations of incidents that have the po- etal disorders will help to reduce sickness impacts represented by the various business tential to cause serious injury. The safety of absence further. As part of the company's units. In 2010, 18 (10) incidents with an un- each project is principally measured through HSE improvement efforts, sickness absence desirable impact on the external environment registration of injuries. The registration of in- committees have been established in all were reported. Most of the events concern juries provides the basis for calculating the business units. AF has a well-functioning minor oil and diesel spills from machinery. LTI (loss time injury) rate. The LTI rate is de- internal occupational health service, and AF systematically investigates all undesired fined as the number of lost time injuries per the Group’s working environment can be incidents and is facilitating working methods million man-hours and includes all described as good. and control procedures to prevent recurrence employees and sub-contractors. The overall and damage to the external environment. goal is to avoid all lost time injuries. The Group uses control systems that comply with the Norwegian Working Environment Two new measurement parameters, carbon In 2010, the LTI rate for the company's Act, the Regulations relating to Systematic footprint and source separation rate, were Norwegian business was the lowest ever Health, Safety and Environment Work in introduced in 2010 to enhance environ- and among the lowest in the industry. The Enterprises (Internal Control Regulations) mental awareness and to measure the impact LTI rate in 2010 was 1.7 (3.1). 2010 had a and the Regulations relating to Safety, Health of our operations on the external environ- total of 8 (14) lost time injuries, of which and Working Environment on Construction ment. Measuring our carbon footprint will 4 (11) occurred at sub-contractors. Sites (Construction Client Regulations). map and measure the emission of green-

house gases in tonnes of CO2 equivalents. Lost time injuries included five hairline fractures External environment The purpose of the measurements is to in- or fractures, an amputation of a finger, a sprain The Group is engaged in operations that spire environmentally friendly resource and a corneal inflammation. AF's activities can affect the external environment in the consumption. The Group's carbon footprint in Sweden had 6 (6) lost time injuries. The form of noise, dust, vibrations, discharges for 2010 was measured at 22,730 tonnes of

operations in Poland did not have any lost and other means of pollution. Its activities CO2 equivalents. This is equivalent to 3.9 time injuries. may also entail encroachments on and tonnes per NOK million of revenue. Measuring changes to the landscape and nature. The the source separation rate was introduced Absence due to illness in Norwegian opera- Group aims to carry out its activities in a to improve the handling of waste from our tions was 3.7 % (4.0 %) in 2010. AF's activities manner that reduces its impact on resources operations. The source separation rate indi- in Sweden had a sickness absence rate of and the environment to a level well within cates how much of the waste is sorted and 3.3 % (3.5 %) and in Poland, sickness ab- what is required by the authorities and clients. can be recycled. The source separation rate sence was 3.0 % (0.9 %). The company's for the Group will be measured from 2011. goal for sickness absence is to prevent The Group's management systems and work Measurements from the last half of 2010 work-related illness. The goal is a sickness methods are designed to safeguard the indicate a source separation rate of 80 % absence rate under 3.0 %. The goal repre- interests of the environment. The goal is for building, 78 % for renovation and 95 % sents a normal sickness rate, without work- to prevent, avert and reduce undesirable for demolition. related illness. AF has great ambitions to impacts on the environment. Each AF business eliminate work-related illness. To achieve unit must follow the principles of ISO 14001, Measuring and monitoring carbon footprint this AF is surveying which work-related the international standard for environmental and source separation rate targets will help

The Board of Directors Oslo, 31 March 2011

Chairman Tore Thorstensen Eli Arnstad Mari Broman Carl Henrik Eriksen

72 AF Group annual report 2010 Board of Directors’ report 73 Arne Sveen Arne In the Energy business area, mandatoryIn business area, the Energy introduced labelling of houses was energy 1 July 2010. Infrom the public addition, lifetime the on focus its increased has sector efficiency and energy costs of buildings of 2011, an improved For existing buildings. market of higher is expected as a result of increase prices a gradual and energy conservation.in energy investments In the long term, the market offer is expected to potential. growth backlog, together order record-high The market situation is laying with an improved in 2011. growth revenue for the foundation chal- By towards the organisation guiding will the AF Group tasks and goals, lenging our for value growth create continue to suppliers customers, employees, owners, of a high level has AF Group and society. expertise corporate culture and a strong and high ethical on professionalism founded Company's the with together This, standards. financial situation means that AF is strong handle the opportunities equipped to well the market in 2011. offers employees the thank to like would Board The contributionto the good their significant for 2011 will believes Board The in 2010. result and a good revenues also bring increased profit. - Henrik Nilsson pected to remain low. This indicates that indicates This low. remain pected to the brisk continue in 2011. sales of homes will the market AF's off- In for Environment, services environmental shore-related is of activity level The be large. to considered new demolition projects is increasing. for Design) End Engineering Several FEED (Front an is there and been initiated studies have supply of projects. increasing operations are land-based Environment's and the building advance activities for construction is therefore Business industry. new the demand for to closely related buildings and non-residential housing, of activity and the level industrial projects, in the market be high going is expected to forward. housing project starts. This will have a positive positive a have will This starts. project housing Property and on both the Building effect market maintenance The for business areas. - the Gov by was boosted and renovation market the and package, stimulus ernment’s a high level stable at remain is expected to In the rapid growth Sweden in the future. a to lead is expected to of the economy in the building market. improvement gradual the addition changes, organisational Through project on focused initiatives and expertise of implementation, management and project achieve to expected also is Göteborg Bygg AF in 2011. results better commenced Several housing projects were is growing economy The in Property in 2010. prices of existing homes at a good pace, ex are rates and interest record-high are Tor Olsen Tor Peter Groth Peter The marketThe - situation within Building gradu 2010. Normalisation in of the ally improved in higher economic situation has resulted The investment level for civil engineering civil engineering for level investment The going at a high level remain is expected to in the market Growth expected is forward. come particularlyto in investments from and roads. railways The AF Group operates in an industry where where industry an in operates Group AF The is normally uncertaintythere connected factors. with assessments of future The results of AF Gruppen ASA and the results The with in accordance 2010 were for AF Group trend positive The expectations. the Board’s the end continue in 2011. At is expected to had a solid order the Group of the year, anticipates and million 6,193 NOK of backlog that the earnings on new and ongoing projects will be good. Outlook Acquisition of treasury shares Acquisition In treasury 2010 AF Gruppen ASA purchased use as consideration for potential for shares sales to and for acquisitions of companies AF Gruppen ASA purchased employees. Of these, during the year. 692,055 shares employees. been sold to have 492,100 shares AF Gruppen ASA of the year, the end At held 450,000 treasury shares. Other factors manifest AF's environmental profile and the and profile AF's environmental manifest in the business involvement company's of recyclingdemolition, and development solutions. friendly energy environmentally Annual accounts AF Group

Consolidated statement of comprehensive income 75 Consolidated balance sheet 76 Consolidated statement of changes in equity 78 Consolidated cash flow statement 79

74 AF Group annual report 2010 Annual accounts group 75 - 1 1 -4 37 11 11 -74 -14 -21 -88 218 219 229 328 308 219 219 231 231 3,16 3,16 -620 5,880 2008 2008 5,916 -1,028 -2,408 -1,440 -5,588 - 1 1 -8 87 17 32 -75 -96 -19 -19 269 270 251 335 366 270 270 251 251 3,85 3,85 -884 -604 5,314 2009 2009 5,401 -2,100 -1,412 -5,067 1 January December to 31 - - 6 -1 77 62 10 10 -87 -10 -95 277 277 287 366 372 277 277 287 287 3,92 3,82 -817 -671 5,751 2010 2010 5,828 -2,428 -1,511 -5,462 5 6 7 8 9 12 13 17 11 11 3, 4 3, 4 3, 4 Note

Amounts in NOK million Operating revenue Other revenue Total operating and other revenue and operating Total Cost of materials Cost Subcontractors costs Payroll Depreciation and impairment of property, plant and equipment and impairmentDepreciation of property, Amortisation assets and impairment of intangible Other operating expenses Net gains (losses) Profit (loss) from investments in associates in investments (loss) from Profit Net financial items Total operating expenses operating Total (EBIT) and taxes interest Earnings before Tax expense Tax Earnings before taxes (EBT) taxes Earnings before Earnings per share (amounts in whole NOK)Earnings per share Total Attributable to: Company Parent in the Shareholders Non-controlling interests Profit for the year for the Profit Diluted earnings per share (amounts in whole NOK) earningsDiluted per share Total comprehensive income for the year for income comprehensive Total Statement of comprehensive income of comprehensive Statement Amounts in NOK million year for the Profit differences Translation Attributable to: Company in the Parent - Shareholders - Non-controlling interests Total other comprehensive income other comprehensive Total the year for income comprehensive Total

of comprehensive income of comprehensive Consolidated statement statement Consolidated Consolidated balance sheet as at 31 December

Amounts in NOK million Note 2010 2009 2008 ASSETS Non-current assets Buildings and prod. facilities 12,35 46 562 258 Machinery and equipment 12,35 262 186 205 Intangible assets 13 467 458 475 Investments in associates 17 126 27 31 Deferred tax assets 10 39 - 15 Retirement benefit plan assets 25 15 14 10 Available-for-sale financial assets 30 1 1 - Interest-bearing receivables 30,31 23 44 23 Other receivables 30 1 1 8 Total non-current assets 979 1,294 1,025

Current assets Inventories 18 93 76 99 Projects for own account 19,35 207 257 377 Trade and other non-interest-bearing receivables 21,30,35 1,103 1,187 1,549 Interest-bearing receivables 30,31 6 12 12 Financial assets at fair value through profit or loss 30 2 3 1 Financial derivatives 30 1 7 - Cash and cash equivalents 22,30,31 622 223 130 Total current assets 2,034 1,765 2,168

Total assets 3,013 3,059 3,194

76 AF Group annual report 2010 Annual accounts group 77 - 2 3 2 3 54 -38 352 205 110 775 320 741 778 1,725 2008 3,194 2,453 2,133 - - - 5 1 4 Peter Groth Groth Peter 53 73 22 276 911 299 915 915 1,715 2009 3,059 2,144 1,845 Henrik Nilsson Henrik Nilsson Employee elected Employee CEO Pål Egil Rønn Egil Pål 7 1 1 4 69 95 23 11 49 302 963 363 968 967 1,488 2010 3,013 2,045 1,682 Arne Sveen Arne Sveen Employee elected Employee 9 28 30 10 28 25 Note 29,30 23,24 22,23 Mari Broman 26,30,31 26,30,31 Oslo, 31 March 2011 31 March Oslo, Tor Olsen Tor Employee elected Employee Eli ArnstadEli Carl Henrik Eriksen Tore Thorstensen Tore Chairman of the Board

Total equity and liabilities Total Total liabilities Total Total current liabilities current Total Current tax payable Current Provisions Financial derivatives Financial Trade payables and non-interest-bearing debt and non-interest-bearing payables Trade Current liabilities Current loans and credits Interest-bearing Total non-current liabilities Total Deferred tax Deferred Provisions Retirement benefit liabilities Retirement Non-current liabilities loans and credits Interest-bearing Total equity Total Non-controlling interests Total equity attributable to the Company's shareholders the Company's equity to attributable Total Other equity EQUITY AND LIABILITIES Equity capital Share Amounts in NOK million

as at 31 December 31 as at Consolidated balance sheet sheet balance Consolidated Consolidated statement of changes in equity

Amounts in NOK million Equity attributable to Parent Company shareholders Non-con. Total interests equity Share Other Other Share Treasury premium contributed unrecognised Retained Note capital shares 1) account capital equity earnings Total Equity as at 1 January 2008 3 - - - -14 620 609 -39 570 Profit for the year - - - - - 218 218 2 219 Comprehensive income for the year - - - - 11 - 11 - 11 Total comprehensive income for the year - - - - 11 218 229 2 231 Capital increase - - 11 - - - 11 - 11 Purchase of treasury shares 24 ------21 -21 - -21 Sale of treasury shares 24 - - - - - 29 29 - 29 Reclassification of gains on sale of treasury shares - - - 8 - -8 - - - Dividend paid in 2008 ------83 -83 - -83 Share value-based remuneration - - - 4 - - 4 - 4 Equity as at 1 January 2009 3 - 11 12 -3 755 778 -38 741 Profit for the year - - - - - 269 269 1 270 Comprehensive income for the year - - - - -19 - -19 - -19 Total comprehensive income for the year - - - - -19 269 251 1 251 Capital increase - - 17 - - - 17 - 17 Purchase of treasury shares 24 ------7 -7 - -7 Sale of treasury shares 24 - - - - - 6 6 - 6 Dividend paid in 2009 ------99 -99 - -99 Share value-based remuneration 5 - - - 4 - - 4 - 4 Transactions with non-controlling interests ------37 -37 37 - Equity as at 31 December 2009 4 - 28 16 -21 888 915 - 915 Profit for the year - - - - - 277 277 - 277 Comprehensive income for the year - - - - 10 - 10 - 10 Total comprehensive income for the year - - - - 10 277 287 - 287 Capital increase - - 19 - - - 19 - 20 Purchase of treasury shares 24 ------26 -26 - -26 Sale of treasury shares 24 - - - - - 17 17 - 17 Reclassification of gains on treasury shares - - - -6 - 6 - - - Dividend paid in 2010 ------256 -256 - -256 Share value-based remuneration 5 - - - 12 - - 12 - 12 Equity as at 31 December 2010 4 - 47 21 -11 907 967 1 968

1) As at 31 December 2010 the AF Group had share capital related to treasury shares in the amount of NOK -23,000.

78 AF Group annual report 2010 Annual accounts group 79 ------5 4 -2 -8 -3 -6 33 18 11 28 92 21 88 64 -21 -44 -83 -16 -96 -14 -70 136 181 117 308 130 402 -149 -254 -222 -338 2008 ------7 6 4 -7 -6 -2 -8 -2 -4 -7 -1 -6 -6 17 17 10 24 83 93 -19 -31 -99 -15 -32 130 144 416 366 223 578 941 -363 -394 -484 -364 2009 ------2 9 3 1 4 -3 -5 -1 -1 -3 -6 -1 -1 17 19 25 35 97 12 -26 -19 -11 -26 -36 -59 -10 223 400 119 172 372 622 401 142 259 260 -255 -106 -318 2010 8 8 7 7 7 7 8 5 22 24 24 14 14 12 13 17 Note 18,19 12,13

Cash and cash equivalents as at 31 December as at and cash equivalents Cash Effect of exchange rate fluctuations rate on cash and cash equivalents Effect of exchange Disposal of cash and cash equivalents on sale of companies Cash and cash equivalents as at 1 JanuaryCash of undertaking transfer on and cash equivalents received Cash Purchase of treasury shares Purchase during the year Net change in cash and cash equivalents Net cash flow from financing from activities Net cash flow Interest and other financial expenses paid Interest received and other financial income Interest Proceeds from the sale of treasury from shares Proceeds Proceeds from new interest-bearing debt new interest-bearing from Proceeds debt of interest-bearing Repayment Payments due to change in interest-bearing receivables change in interest-bearing due to Payments Non-controlling interests and other equityNon-controlling transactions interests receivables change in interest-bearing due to Proceeds Dividends paid to Company's shareholders Company's Dividends paid to Proceeds from issuance of shares from Proceeds Net cash flow from investment activities investment from Net cash flow financing activities before Net cash flow Proceeds from sale of shares in other enterprises sale of shares from Proceeds Proceeds from derivatives from Proceeds Proceeds from sale of companies from Proceeds Proceeds from sale of joint ventures from Proceeds Purchase of property, plant and equipment of property, Purchase equipment plant and sale of property, from Proceeds Purchase of intangible assets of intangible Purchase Acquisition of companies Acquisition Investments in associates Investments shares in available-for-sale Investments Net cash flow from operating activities operating from Net cash flow Profit attributableto associates Profit Change in inventories and projects for own account own and projects for Change in inventories Net foreign exchange gains/(losses) related to operations to gains/(losses) related exchange Net foreign Change in non-interest-bearing receivables Change in non-interest-bearing Income tax paid Change in trade payables and non-interest-bearing debt and non-interest-bearing Change in trade payables Fair value change in financial derivatives Fair Gains/losses on sale of subsidiaries (Gains)/losses on sale of joint ventures and associates and associates (Gains)/losses on sale of joint ventures (Gains)/losses financial assets on available-for-sale (Gains)/losses on sale of property, plant and equipment (Gains)/losses on sale of property, Net financial expenses/(income) Profit before tax before Profit Depreciation, amortisationDepreciation, impairment and losses Difference in retirement benefits carriedretirement as expense/paid in Difference Share value-basedShare remuneration ------= + + = = + + + + + + = = + + + + + = + + + + +/- -/+ +/- +/- +/- +/- Cash flow from financing from activities flow Cash Cash flow from investment activities investment from flow Cash Change in operating capital (excl. effects of acquisitions and curr. trans. diff.) trans. of acquisitions and curr. effects Change in operating capital (excl. Cash flow from operating activities operating from flow Cash Amounts in NOK million

statement Consolidated cash flow flow cash Consolidated Notes to the accounts AF Group

Note 1 Accounting policies 81 Note 19 Projects for own account 108 Note 2 Estimate uncertainty 88 Note 20 Projects in progress 109 Note 3 Segment information 88 Note 21 Trade and other non-interest-bearing receivables 109 Note 4 Operating and other revenue 91 Note 22 Restricted funds 110 Note 5 Remuneration of employees and senior executives 92 Note 23 Share capital and shareholder information 110 Note 6 Other operating expenses 95 Note 24 Treasury shares 111 Note 7 Net gains (losses) 95 Note 25 Retirement benefits 112 Note 8 Net financial items 96 Note 26 Interest-bearing loans and credits 114 Note 9 Tax expense 96 Note 27 Leases 115 Note 10 Deferred tax/deferred tax assets 97 Note 28 Provisions 116 Note 11 Earnings and dividend per share 98 Note 29 Trade payables and non-interest-bearing liabilities 117 Note 12 Property, plant and equipment 99 Note 30 Financial risk and financial instruments 117 Note 13 Intangible assets 101 Note 31 Capital management 124 Note 14 Changes in the Group’s structure 104 Note 32 Contingencies 124 Note 15 Subsidiaries 106 Note 33 Related parties 125 Note 16 Joint ventures 98 Note 34 Events after the balance sheet date 126 Note 17 Investments in associates 107 Note 35 Pledged assets and guarantees 126 Note 18 Inventories 108

80 AF Group annual report 2010 Annual accounts group 81 - - Amendments to IFRS 1 - First-time Adoption Adoption IFRS 1 - First-time Amendments to of IFRS in a IFRIC 16 - Hedges of a Net Investment Operation Foreign IFRIC 17 Distribution of Non-cash Assets Ownersto Instruments - Disclosures IFRS 7 Financial concerns require revision note The (revised). financial of transfer the with connection in ments has an involve still assets in which the company ment. The revisions aim to give users a better users a better give aim to revisions The ment. transfers that entity the of exposure the of picture for annual IFRS 7 is effective the financial assets. on or afterperiods 1 July 2011, but beginning the EU. by be approved to has yet the standard from expects standard apply the Group to The 1 January 2012. IFRS 9 replaces instruments. IFRS 9 Financial rules in IAS the classification and measurement Instruments: and Meas Recognition - 39 Financial IFRS 9 financial assets that to Pursuant urement. contain ordinary loan terms shall be recognised at amortised cost unless the entity chooses to while other financial them at fair value, recognise clas- The at fair value. assets shall be recognised for financial rules sification and measurement the with continued, liabilities in IAS 39 are at of financial liabilities designated exception option), or loss (fair value profit fair value through own to changes in fair value relating where in other and presented separated risk are credit for IFRS 9 is effective income. comprehensive on or afterannual periods 1 January beginning be approved to has yet 2013, but the standard expects apply the to Group The the EU. by 1 January from standard 2013. Party - Related Disclosures. IAS 24 (revised) the revised IAS 24, the current In to relation b) Standards and amendments to and interpretations interpretations and to amendments and Standards b) but been adopted that have of existing standards an impact financial on the consolidated do not have of the AF Group: statements • IFRS 2 - Share-based• Amendments to Payment • IFRIC 12 - Service Arrangements Concession • • Customers from of Assets Transfer • IFRIC 18 – - and interpreta to and amendments c) Standards not entered that have tions of existing standards has not chosen which the Group and for force into early implementation. • • • - IFRS 3 – Business Combinations (revised). (revised). IFRS 3 – Business Combinations business for accounting of method acquisition The Any combinations has changed significantly. the acquisition of a business consideration for value on the acquisition at fair shall be recognised consideration is normally Contingent clas- date. and subsequent changes in sified as a liability, in the income statement. recognised value are may each individual acquisition, the Group For non-controlling interests choose whether any be measured to are company in the acquired of net assets, at fair value or only as the share All the transaction costs goodwill. excluding will standard revised The be recognised. to are business accounting of future the Group’s affect combinations. the Construction for IFRIC 15 - Agreements introduction of IFRIC 15 The of Real Estate. means that an individual assessment will have and contracts that be made of all agreements to in the sale of property establish involved to are using IAS 11 Constructionwhether the criteria for Contracts or IAS 18 Revenue should be applied. on the date this has affected the AF Group, For when recognised are and profit which revenue income The sold. housing units are residential and all the will be deferred, date recognition costs) will be (including the related revenue normally on on one specific date, recognised implementation of The completion/delivery. financial state IFRIC 15 in the 2010 consolidated ments does not have any effect on the equity effect any ments does not have is because the number This as at 1 January 2010. of new project starts in 2009 was limited. IAS 27 – Consolidated and Separate Financial Financial Separate and Consolidated – 27 IAS In with the (revised). accordance Statements transactions the all of effect the standard, revised in is recognised with non-controlling interests Such equity is no change of control. if there transactions in goodwill or will no longer result any ceases, When control capital gains or losses. in the unit will be measured interests remaining at fair value and the gain or loss will be recognised. the Group’s will affect standard revised The business combinations accounting of future in interests of remaining purchase/sale and any subsidiaries. The following new standards and supplements new standards following The obligatory are from standards effect with to 1 January 2010: • • • - -

AF Gruppen ASA is a public limited company company limited AF Gruppen ASA is a public in Norway on Oslo Børs and listed registered office is located head Company’s The Match). (OB at Innspurten Norway. 15, 0603 Oslo, activities described 3 in note are Group’s The financial statements The information). (segment 2011. on 31 March the Board by signed were 1.1 Basis of preparation 1.1.1 Introduction of the AF financial statements consolidated The been pre year have the 2010 financial for Group sented in accordance with the EU-approved IFRS with the EU-approved in accordance sented Reporting(International and Financial Standards) as additional as well interpretations, the associated that follow Norwegian requirements disclosure the Norwegian Act, Stock from Accounting Rules, Exchange Regulations and Stock Exchange as at 31 December applicable 2010. which are based are financial statements consolidated The The on the modified historical cost convention. primarily available-for-sale to deviations refer financial assets and financial assets and liabilities profit (including derivatives) at fair value through and loss. - in accord of financial statements preparation The the use of estimates. ance with IFRS requires In Company’s addition, the application of the management the that requires policies accounting of with a high degree judgement. Areas exercise discretionary of com- a high level assessments or estimates and assumptions where areas or plexity, described in are the accounts, essential to are 2. note stan- published accounting 1.1.2 Recently and interpretations dards implemented a) New and amended standards the Group by the following In implemented 2010 the Group and the intro and amendments, new standards duction or the interpretation of the standards the have has been assessed to of the standards impact accounts on the consolidated following financial of the consolidated or the presentation of the AF Group: statements

Notes Accounting policies Accounting 1 Note cont. note 1

standard clarifies and simplifies the definition of IFRS 3, an acquirer may exchange its share value- cluded on the acquisition date. Acquisition-related related parties. The revised standard is effective based payment awards (replacement awards) for costs are expensed as incurred. Identifiable assets for annual periods beginning on or after 1 Janu- awards held by employees of the acquiree. acquired and liabilities and contingent liabilities ary 2011. The Group expects to apply the re- assumed in a business combination are measured vised IAS 24 from 1 January 2011. The option schemes are measured at their fair initially at their fair values at the acquisition date. value at the acquisition date and the equity asso- The excess of the consideration transferred, the • IAS 32 - Financial Instruments - Presentation ciated with the new option schemes is classified amount of any non-controlling interest in the - Classification of Rights Issues (amendment). as non-controlling interests. acquiree and the acquisition-date fair value of The amendment to IAS 32 means that subscription any previous equity interest in the acquiree over rights issued in currencies other than the entity’s • IFRS 7 – Financial Instruments – Disclosures: the fair value of the Group’s share of the identifiable functional currency may be classified as equity. The amended standard describes the interaction net assets acquired is recorded as goodwill. If this The amendment is effective for annual periods between quantitative and qualitative disclosures is less than the fair value of the net assets of the beginning on or after 1 February 2010. and the nature and extent of exposure to risks subsidiary acquired in the case of a bargain The Group expects to apply the amendments arising from financial instruments. Amendments purchase, the difference is recognised directly from 1 January 2011. have also been made to the note requirements in the statement of comprehensive income. regarding quantitative and credit risk disclosures. • FRIC 14 IAS 19 – The Limit on a Defined Benefit The Group expects to apply the amendments The recognition of any non-controlling interests Asset, Minimum Funding Requirements and with effect from 1 January 2011. is measured on the basis of the net value of identi- their Interaction (amendment). The amendment fiable assets and liabilities of the transferor company means that entities subject to minimum funding • IAS 27 – Consolidated and Separate Financial or fair value (i.e., including a goodwill element). requirements for pension schemes will be per- Statements: The standard requires amendments mitted to treat prepayments of premiums in a to IAS 21, IAS 28 and IAS 31 resulting from the Provision is made for deferred tax on the difference defined benefit pension scheme as an economic amendments to IAS 27 to be applied prospectively between fair value and book value for all assets benefit. After the amendment such prepayments for accounting periods commencing on or after and liabilities, with the exception of goodwill and will qualify for recognition on the balance sheet. 1 July 2009, or earlier in the case of early adoption assets in transactions that are not business com- The amendment to IFRIC 14 is effective for annual of IAS 27. binations. When a property company is acquired, periods beginning on or after 1 January 2011. a concrete assessment is made to establish The Group expects to apply the amendment • IAS 1 – Presentation of Financial Statements: whether the acquisition concerns the business from 1 January 2011. The standard requires an analysis of each individual itself or assets (e.g. land). For purchases of assets component of other comprehensive income for the entire purchase price is allocated to acquired • IFRIC 19 - Extinguishing Financial Liabilities each individual component of equity to be pre- assets on the acquisition date. with Equity Instruments. The interpretation sented, either in the statement of changes in provides guidance for how transactions should equity or in the notes to the financial statements. 1.2.1.c) Step-by-step acquisitions be treated in the financial statements when a company settles all or part of financial obligations • IAS 34 - Interim Financial Reporting: The For step-by-step acquisitions, the earlier equity by issuing equity instruments, and applies when amended standard provides guidelines on the interest in the acquired company shall be re- debt conversion takes place due to the renego- application of the disclosure requirements con- measured at fair value on the acquisition date. tiation of the loan agreement. The issuance of tained in IAS 34. There are also additional disclosure Any gains or losses are recognised in the income equity instruments shall be measured at fair value requirements regarding circumstances that will statement. The gain is calculated as the difference and is viewed as consideration for the settlement affect the fair value of financial instruments and between the fair value of the earlier equity interest of the debt. The difference between the carrying their classification, transfers between different at the acquisition date and the carrying amount, amount of the financial liability and the fair value categories of financial instruments in the fair value adjusted for the cumulative amount recognised of the equity instruments is recognised in profit hierarchy, changes to the classification of financial in consolidated equity through the Group’s or loss. The interpretation is effective for annual assets and changes to contingent liabilities and presentation of ‘other comprehensive income’ periods beginning on or after 1 July 2010. The assets. in earlier periods. Group expects to apply IFRIC 19 from 1 January 2011. 1.2.1 Subsidiaries 1.2.1.d) Loss of control

d) In its annual improvements project, the IASB 1.2.1.a) General When the Group no longer has control any remain- has adopted amendments to a number of standing equity interest is measured at fair value through ards. These amendments are effective for accounting The consolidated financial statements include AF profit or loss. In further accounting fair value at periods commencing on or after 1 July 2010. The Gruppen ASA and companies in which AF Gruppen the time of loss of control constitutes cost, either amendments have yet to be approved by the EU. ASA has a controlling influence. A controlling in- as an investment in associates, joint ventures or The Group expects to apply the amendments fluence is normally achieved if the Group owns financial asset. Amounts previously recorded in with effect from 1 January 2011. more than 50 % of the shares in the company the presentation of ‘other comprehensive income’ and is able to exercise actual control over it. related to this company are treated as if the • IFRS 3 – Business Combinations: The standard Companies that are bought or sold during the Group had disposed of the underlying assets or states that the amendments to IFRS 7, IAS 32 year are included in the consolidated financial liabilities. This could mean that amounts previously and IAS 39 that remove the exemption for statements from the date on which control is recognised in the presentation of ‘other compre- contingent consideration do not apply to con- achieved or ceases. hensive income’ are reclassified to profit or loss. tingent consideration that arose from business combinations whose acquisition dates precede 1.2.1.b) Business Combinations Gains and losses on the disposal of an entity include the application of IFRS 3 (revised in 2008). the carrying amount of goodwill allocated to the The Group uses the acquisition method of account- entity sold. It also introduces a limit on the scope of the ing to account for business combinations. The measurement choices for components of non- consideration transferred for the acquisition of a 1.2.1.e) Business combinations completed before controlling interests (minority interests). subsidiary is the fair values of the assets transferred, 1 January 2010 the liabilities incurred and the equity interests The rules on accounting for share value-based issued by the Group. If elements of the consideration The following differences with the aforementioned payments are also clarified. Under the revised are contingent the fair value of these is also in- policies applied to business combinations com-

82 AF Group annual report 2010 Annual accounts group 83 - - - - The income statement is translated at the average average the at translated is statement income The rate exchange (if the average rate exchange of estimate overall a reasonable does not give then the use of the transaction rate, exchange shall be used). the transaction rate exchange The balance sheet is translated at the rate at the rate balance sheet is translated The on the balance sheet date. prevailing Translation differences are recognised under recognised are differences Translation and specified in income’ comprehensive ‘other the equity item. as a separate b) b) c) period in line with progress. Projects for own own for Projects period in line with progress. recognised are development for account and land Other and payables assets. as current receivables classified as are a year than due in more that are non-current assets and non-current liabilities. currency translation 1.6 Foreign currency and presentation 1.6.1 Functional currency in units individual the for statements financial The currency in the measured primarily are the Group (functional the unit operates currency).used where pre are financial statements consolidated The in Norwegiansented kroner (NOK), which is both functional currency and Company’s the Parent currency. presentation the Group’s items sheet and balance Transactions 1.6.2 translated are currencies in foreign Transactions the functionalto currency at the transaction ex gains or exchange Realised foreign change rate. or translation of monetary the settlement losses from at the currency recognised are in a foreign items If the on the balance sheet date. prevailing rate as cash flow currency is regarded position foreign in of a net investment or the hedging hedging then the gain or loss will be enterprise, a foreign income’. comprehensive ‘other under recognised trade to related losses and gains exchange Foreign and other balance trade payable receivables, presented are operations, to related sheet items under net gains and losses in the income state ment, with other specification in notes. loans, to gains or losses related exchange Foreign under presented cash and cash equivalents are and in the income statement net financial items specified otherwise in the notes. on non-monetary effect exchange foreign The (both assets and liabilities) is included as items ex part Foreign of the assessment of fair value. to non-monetaryrelating change differences profit at fair value through such as shares items, as part recognised of a combined are and loss, relating differences exchange Foreign gain or loss. included for sale are available classified as shares to under in the change in value that is recognised income’. comprehensive ‘other companies 1.6.3 Group and balance sheet for income statement The with companies (none with hyperinflation) group a functional currency other than the presentation as follows: currency translated are a) - - - cation of resources to and assessment of earningsof assessment and to resources of cation is defined as the in the operating segments, Team. ManagementCorporate of the in preparation of estimates 1.4 Use financial statements and assump management has used estimates The revenues, liabilities, assets, affected tions that have liabilities. on potential and information expenses, apply in particular estimates These recognition to of income and valuations linked long-term to benefit liabilities, manufacturing retirement projects, lead may events Future and valuation of goodwill. and the underlying Estimates changed estimates. to Changes assessed continuously. assumptions are reported in the period are in accounting estimates future If to they also relate in which they occur. and present over is spread the effect periods, 2. See periods. also note future 1.5 Classification the to related that are Receivables and payables construction business areas and civil engineering liabilities. assets and current classified as current are and means that balances with customers This balance the in presented are invoicing prepayment For liabilities. assets and current sheet as current amounts contracts, where all civil engineering contract on account exceed revenue invoiced less contract the surplus is included in the losses, ‘trade and other non- payables balance sheet as are Prepayments liabilities’. interest-bearing the project over revenue invoiced deducted from ment, and its share of post-acquisition movements movements post-acquisition of share its and ment, in income is recognised in other comprehensive from applies This income. other comprehensive until influence is achieved significant the date share When the Group’s such influence ceases. in an associate, the investment of losses exceeds and zero to book value is reduced the Group’s unless the further not recognised losses are the loss. cover to is obligated Group - consoli of transactions by 1.2.5 Elimination dation transactions including and accounts, Intercompany are gains and losses, and unrealised internal profit transactions to linked gains Unrealised eliminated. eliminated are and joint ventures with associates stake in the company/ in proportion the Group’s to also eliminated, losses are Unrealised enterprise. no indications of impairment are but only if there of assets sold internally. reporting1.3 Segment reported in the same are operating segments The Company’s the to reporting internal the as manner highest Company’s The highest decision-maker. the allo for which is responsible decision-maker, equity method. The carryingThe include amounts equity method. - and goodwill identi fair value adjustments any depreciation, net of future fied on acquisition, amortisation and impairment losses. post-acquisition of its associates’ share group’s The state income the in recognised is losses or profits - - pleted before 1 January before pleted Business combina- 2010: using the purchase for accounted tions were Directly attributable transactionmethod. costs as part viewed were consideration. Non- of the as the to referred (previously interests controlling as a proportional measured minority) share were identifiable net assets. entity’s of the acquired as for accounted acquisitions were Step-by-step transactionsseparate acquisitions and additional recog- the previously did not affect of interests nised goodwill. interests 1.2.2 Non-controlling based recognised are Non-controlling interests of net share on the non-controlling owners’ i.e., or fair value, identifiable assets and liabilities Non-controllingincluding a goodwill element. equity. included in consolidated are interests transactions treats with non-control- Group The as transactions with equityling interests owners non-controlling from purchases For of the group. consideration between any the difference interests, of the carry acquired share paid and the relevant - ing value of net assets of the subsidiary is recorded Gains non- or losses on disposals to in equity. in equity. also recorded are interests controlling include the non-conNon-controlling interests - of the carrying share amount of owners’ trolling of identified subsidiaries including the share acquisition date. values on the excess subsidiaryA loss in a consolidated be that can exceed may non-controllingattributed to interests of equity in share the non-controlling interests’ subsidiary. the consolidated ventures 1.2.3 Joint enterprises in which the Group are Joint ventures a contractual through joint control exercises between the parties. agreement Joint ventures the method from using the gross recognised are and until is achieved on which joint control date method means gross The ceases. joint control earnings, of the joint venture’s share that the Group’s included are items balance sheet and cash flow line. line by common in construction are and Joint ventures two or more projects where civil engineering project/contract joint a out carry to decide parties decisions strategic and financial operational, all and The must be taken the parties. unanimously by with joint ventures in several is involved Group other contractingfor particular firms contracts. take of unregistered the form Joint ventures general partnerships, partnercompanies, limited ships, limited companies, etc. companies, limited ships, 1.2.4 Associates business units in which the Group are Associates influence (normally with a a significant enjoys stake between 20 % and 50 %), but does not Invest financial or operational control. exercise at cost at for accounted are ments in associates the and subsequently by the time of purchase cont. note 1

Translation differences related to net investments since the expected profit can be assessed then right to receive a dividend has been established in foreign enterprises and financial instruments with a greater degree of certainty. When the out- by the General Meeting. designated as hedges for such investments are come of the project cannot be estimated reliably, recognised under ‘other comprehensive income’ only revenue equivalent to the incurred project 1.8 Payable and deferred tax and as a separate item in equity. Upon the sale of costs will be recognised. In the period in which it all or any portion of a foreign enterprise, the asso- is identified that a project will produce a negative The tax expense consists of current tax payable ciated translation difference will be reclassified result, the estimated loss on the contract will be and deferred tax. Tax is recognised in the income from ‘other comprehensive income’ to part of the fully recognised as an expense, irrespective of the statement except when it is related to items that gain or loss from the sale through profit and loss. degree of completion. have been recognised in the presentation of ‘other comprehensive income’ or directly in equity. If Goodwill and fair value adjustments from the The recognition of revenue from disputed claims, this is the case, then the tax is also recognised acquisition of a foreign unit will be treated as claims for additional work, change orders, incentive under ‘other comprehensive income’ or directly assets and liabilities in the acquired unit and bonuses, etc. starts when it is probable that the in equity. translated at the rate prevailing on the balance customers will approve the claim. Provisions are sheet date. made for identified and expected warranty work. The current tax payable for the period is calculated in accordance with the tax laws and regulations 1.7 Principles of revenue recognition Contribution margin earned on projects in progress that have, or have essentially, been adopted by involves a number of assessments. These assess- the tax authorities on the balance sheet date. It is 1.7.1 Revenue in general ments are made to the management’s best esti- the legislation in the countries where the Group’s mate. The extent and complexity of the assessments subsidiaries or associates operate and generate Revenue is recognised as income when it is probable mean that the actual contribution margins at the taxable income that determine how the taxable that transactions will generate future economic end of projects may deviate from the assessments income is calculated. The management assesses benefits that will benefit the Company and the made at year end. the points of view asserted in the tax returns size of the amount can be reliably estimated. wherever the tax laws are subject to interpretation. Sales revenue is presented less value-added tax Customers are billed monthly in relation to the Provisions are allocated for the expected tax and discounts. proportion of the contract price and for additional charges, as considered necessary, based on the work carried out and approved in the period. management’s evaluations. 1.7.2 Projects in general Deviating payment plans can occur, but these arrangements do not affect the accrual of revenue Deferred tax is calculated by means of the liability Revenue from the sale of services and long-term and expenses. method on all temporary differences between manufacturing projects is recognised in the income the tax values and consolidated accounting values statement in line with the project’s degree of Demolition work is defined under IAS 11 and dealt of assets and liabilities. If deferred tax arises upon completion when the result of the transaction with by using the same accounting policies as for the initial recognition of liabilities or assets in a can be estimated reliably. Progress is measured projects for third-party accounts. transaction that is not part of a business combi- on the basis of an assessment of the work carried nation and does not affect either the reported or out. When the result of the transaction cannot be 1.7.4 Projects for own account taxable profit on the transaction date, it will not estimated reliably, only revenue equivalent to in- be recognised in the balance sheet. Deferred tax curred project costs will be recognised. In the Some production is carried out for the Group’s is determined by means of the tax rates and tax period when it is identified that a project will lead own account, which means that the projects are laws that have been adopted or essentially adopted to a negative result, the estimated loss on the self- financed. Projects for own account largely on the balance sheet date, which are assumed to contract will be recognised in full in the income involve the development and construction of apply when the deferred tax asset is realised or statement. residential housing for sale. A residential housing when the deferred tax is settled. project may consist of many units, and the majority 1.7.3 Projects for third-party accounts of the units are sold before a project starts. Deferred tax assets are recognised in the balance sheet if it is probable that future taxable income The AF Group’s business consists mainly of con- In accordance with IFRIC 15 projects for own will be generated so that the tax-reducing tem- struction and civil engineering activities that are account in the AF Group are recognised according porary differences can be utilised. carried out for public and private clients and to IAS 18. Under IAS 18 all the revenue (including based on contracts of varying duration. The the related costs) will be recognised on one Deferred tax is calculated based on temporary characteristic feature of such contracts is that specific date, normally on completion/delivery. differences from investments in subsidiaries and they are client financed. The treatment of con- associates except when the Group controls the struction and civil engineering contracts in the 1.7.5 Sales of plant and equipment timing for the reversal of the temporary differences, financial statements conforms to IAS 11. and it is probable that they will not be reversed Gains/losses from sales of plant and equipment in the foreseeable future. Revenue related to projects is recognised in the are recognised in the income statement once income statement as the project progresses. Each delivery has taken place and most of the risk and Deferred tax assets and deferred tax are to be offset project is recognised in the income statement return has been transferred. if there is a legally enforceable right to offset assets based on the project’s degree of completion and in respect of the current tax payable against lia- the estimated contribution margin at the end of 1.7.6 Other revenue bilities in respect of the current tax payable, and the project (percentage-of-completion method). the deferred tax assets and deferred tax refer to The degree of completion is mainly calculated on Revenues from sales of goods are recognised in income tax that is imposed by the same tax author- the basis of incurred costs on the balance sheet the income statement once delivery has taken ity on the same taxable enterprise or different tax- date as a percentage of estimated total costs or place and most of the risk and return has been able enterprises with the intent to settle liabilities based on a concrete assessment of the physical transferred. and assets in respect of the current tax payable degree of completion. on a net basis. 1.7.7 Financial income In the early stages of a project, a smaller than the 1.9 Property, plant and equipment proportionate share of the expected profit is Interest income is recognised based on the effective normally recognised as income, while in the final interest rate method as it is earned. Dividends are Property, plant and equipment are measured at stages of a project, a larger share is recognised, recognised as revenue when the shareholders’ cost minus accumulated depreciation and im-

84 AF Group annual report 2010 Annual accounts group 85 - servable market data. and commodity contracts exchange are Forward in on the contract and measured date recognised observable on based value fair at periods subsequent within assets that mature market data. Financial financial as current presented 12 months are than more in and assets that mature derivatives, classified as non-current12 months are financial derivatives. pense, and a repayment portion, and a repayment which reduces pense, Sale-leaseback recognised the liability. gains are sales transaction if a immediately is carried out at In from fair value. resulting addition, gains/losses lease future by compensated underpricing or over- amortised are the lease period. payments over leases 1.12.2 Operating classified as operating costs are payments Lease the over in the income statement and recognised term of the contract. immediately Sale-leaseback recognised gains are if a sales transaction is carried In out at fair value. or over- from addition, gains/losses resulting - lease pay underpricing future by compensated amortised ments are the lease period. over instruments 1.13 Financial assets 1.13.1 Financial classified has financial assets that are Group The categories: in the following or loss, profit fair value through a) At and receivables b) Loans financial assets c) Available-for-sale based on the purpose of classifications are The classifications takeThe place at acquisition the asset. on each reporting reviewed date. and are or loss profit fair value through a) At or loss profit assets at fair value through Financial other financial assets that are derivatives and are classified in assets are Financial trading. held for this category mainly acquired been if they have short-term from price profit fluctuations. to has financial assets at fair value in the Group The and commodity of forward exchange con- form contracts entered exchange are tracts. Forward to con- related cash flows hedge future to into futures commodity and currencies foreign in tracts hedge the price to of into contracts entered are does hedging This be sold. to recycled steel scrap hedge accounting not meet the conditions for fair value with at recognised and is therefore or loss. profit changes in value through Non-forward contract financial assets at fair value reported at fair value on or loss are profit through and the transactionthe acquisition date costs are assets The in the income statement. recognised basis at fair value with on a current measured are All financial or loss. profit changes in value through as current assets in this category presented are at fair value based on ob assets and measured - - - - in business combinations are recognised in the recognised are in business combinations at fair value on the acquisition balance sheet Quarrying date. useful life a limited rights have cost less at the acquisition recognised and are is Depreciation depreciation. the accumulated ex the carried basis over out on a straight-line of the quarryingpected life rights. 1.11 Impairment of non-financial assets and Intangible life useful assets with an indefinite impair for but tested not depreciated, goodwill are plant and equipment Property, annually. ment depreciated assets that are fixed and intangible impairment in value when there assessed for are earnings cannot future that the indicators are asset. justify the book value of the between the book value and difference The in the income amount is recognised recoverable recoverable The as an impairmentstatement loss. amount is the higher of the fair value less selling When impairment is assessed, costs or it value in use. at the together grouped assets are the intangible identify independent it is possible to level lowest (cash-generating cash flows units). impairment previous reversing possibilityThe of plant and equipment and in- property, on losses is evaluated depreciated assets that are tangible impairment of reversal The on each reporting date. in the same manner as impair calculated is losses ment losses. 1.12 Leases is a lease, determine whether an agreement To or contains a lease element, the substance of the on the earlier is assessed of the date agreement when the parties date and the of the agreement the main terms of the to commit themselves If performanceagreement. of the agreement of group the use of a specific asset or requires indirect more provides or if the agreement assets, of group use a specific asset or entitlement to as a lease is treated the agreement assets, agreement. acquires Group the which in arrangements Leasing associated most of the risk and are and return financial leases. of the assets are with ownership as operating leases. Other treated leases are leases 1.12.1 Financial financial leases in the financial presents AF Group The the beginning At as assets and liabilities. statements included financial leases are of the term the lease, of present the or value fair to equivalent amount an at is the whichever value of the minimum payment, calculate to used is cost interest implicit The lower. Direct costs involved value of the lease. the present the cost of added to the lease are in arranging the asset. depreciated plant and equipment are Leased the same principles to as the Group’s according annual payment The other plant and equipment. portion,- consists of an interest which is recog ex as an interest nised in the income statement - - pairment losses. When assets are sold or retired, retired, sold or assets are When pairment losses. loss or gain is deductedthe book value and any in the income statement. recognised all expenses that are cost includes Acquisition manufacture or purchase the to attributable directly of the asset. In the case of plant and equipment a proportionmanufactured in house, of other also in- attributable costs and loan expenses are Expenses that have cluded in the acquisition cost. such use, after the asset has been put to incurred in the recognised are as ongoing maintenance, while other expenses that are income statement, are benefits economic future generate to expected value residual The sheet. balance the in recognised re to in the balance sheet relating recognised placed parts in the income statement. is recognised Every plant component of property, significant its estimated over and equipment is depreciated machinery is mainly Production-related useful life. balance method, using the reducing depreciated plant and equipment are while other property, basis. on a straight-line depreciated depre leased are and equipment that are Plants the term of the lease or useful life, over ciated certain unless it is reasonably is shorter, whichever the asset when the acquire will that the Group lease expires. method period and deprecation depreciation The value annually and the retirement evaluated are recognised Changes are end. at year is estimated as a change of estimate. assets 1.10 Intangible 1.10.1 Goodwill Goodwill carried is impairment at cost less any Goodwill is not amortised, losses. but is tested impairment impairment. of Any annually for the if the basis for even goodwill is not reversed impairment no longer exists. cash-generating to Goodwill is allocated units or of cash-generating expectedgroups units that are which the the acquisition from benefit from to goodwill arose. relationships customer 1.10.2 Contractual acquired that are relationships Contractual customer in the balance sheet at recognised are separately Contractual fair value on the acquisition date. business in acquired are that relationships customer sheet balance the in recognised are combinations contrac- The at fair value on the acquisition date. useful a limited have relationships tual customer at the acquisition cost less recognised and are life is Depreciation depreciation. the accumulated the carried basis over out on a straight-line relationship. of the customer expected life 1.10.3 Quarrying rights Quarrying are separately acquired rights that are in the balance sheet at fair value (cost) recognised Quarrying date. acquisition the on rights acquired cont. note 1

See also section 13.2 a) for a description of forward change and commodity contracts. Forward ex- sation) and interest accrued during the construction exchange and commodity contracts. change contracts are entered into to hedge future period. The net selling price is an estimated selling cash flows related to contracts in foreign currencies price less completion and selling costs. b) Loans and receivables and commodity futures contracts are entered into to hedge the price of recycled scrap steel to 1.16 Projects for outside account Loans and receivables are non-derivative financial be sold. This hedging does not meet the conditions assets with fixed or determined payments that for hedge accounting and is therefore recognised Projects for third-party accounts are presented in are not traded in an active market. Loans and at fair value with changes in value through profit the financial statements using the percentage of receivables that are included in the Group’s ordinary or loss. completion method in accordance with IAS 11 operating cycle, including trade receivables, or Construction Contracts. This means that ‘income are expected to be realised within 12 months of Transaction costs are recognised immediately. earned but not invoiced’ is presented as a trade the balance sheet date are classified as current The contracts are recognised on the contract receivable. Payments on account and prepayments assets. Other loans and receivables are classified date and are measured in subsequent periods at received from a customer in connection with a as non-current assets. fair value based on observable market data. Financial construction contract reduce the receivable. If assets/liabilities that mature within 12 months are payments on account, prepayments, and any ex- Loans and receivables are recognised initially in the presented as current financial derivatives, and assets/ pected losses exceed the earned contract income, balance sheet at fair value plus transaction costs. liabilities that mature in more than 12 months are the surplus is recognised as a prepayment from Loans and receivables are measured on a current classified as non-current financial derivatives. the customer under current liabilities. Provision basis at amortised cost using the effective interest for expected losses on remaining contractual rate method. Gains and losses are recognised in See also Section 13.1 a) for a description of forward production is classified as a current liability after the income statement when loans and receiva- exchange and commodity contracts. the ‘income earned but not invoiced’ is recognised bles are recognised, written down or amortised. in the balance sheet and written down. Trade re- b) Other financial liabilities ceivables are not offset against prepayments on Loans and receivables are written down when different contracts or if other circumstances suggest there are objective indications that the Group will Financial liabilities that are not recognised at fair that it would not be permitted. not receive settlement in accordance with the value through profit or loss are measured at fair original terms. Objective indications of impairment value on initial recognition, less transaction costs. 1.17 Trade and other current receivables are evaluated specifically for each customer and Thereafter financial liabilities are recognised at will typically consist of serious financial problems amortised cost using the effective interest rate Trade receivables arise from the sale of goods or experienced by the other party and late or non- method. Any issuing costs, discounts or premi- services within the ordinary operating cycle. If payment. The amount of the write-down is rec- ums are taken into account in the calculation of settlement is expected during the ordinary oper- ognised in the income statement. If the cause of amortised cost. ating cycle, then the receivables are classified as the write-down no longer applies in a subsequent current assets. If this is not the case, then the period and this can be linked to an event that Financial liabilities that are expected to be settled receivables are classified as non-current assets. occurred after the impairment was recognised, in the Group’s ordinary operating cycle or due for Trade receivables are measured at fair value for the earlier write-down is reversed. The reversal settlement within 12 months of the balance sheet the initial recognition in the balance sheet. For sub- must not result in the book value of the financial date are classified as current liabilities. Other financial sequent measurement, the trade receivables are asset exceeding what amortised cost would have liabilities are classified as non-current liabilities. recognised at amortised cost using the effective in- been if the impairment had not been recognised terest method. Current receivables that mature in when the write-down is reversed. 1.14 Inventories less than three months are not normally discounted.

c) Available-for-sale financial assets Inventories are recognised at cost or net selling Changes in the value of trade receivables related price, whichever is the lower. Inventories mainly to estimate changes are recognised as an adjust- Available-for-sale financial assets are non-derivative consist of spare parts, equipment, and materials ment of the operating revenue. Impairment of financial assets that are placed in this category by for use in production. Cost is determined using trade receivables related to capacity to pay is choice or do not fall under any other category. the first-in, first-out (FIFO) method and includes recognised as losses on trade receivables. They are classified as non-current assets, provided all costs of purchase and other costs incurred in the investment does not mature or the manage- bringing the inventories to their present location 1.18 Cash and cash equivalents ment does not intend to sell the investment and condition. within 12 months from the balance sheet date. Cash and cash equivalents include bank deposits 1.15 Projects for own account and other short-term fixed income securities. Available-for-sale financial assets are recognised Bank overdrafts are included in loans under current initially at fair value. Available-for-sale financial Projects for own account are basically manufac- liabilities in the balance sheet. assets are assessed subsequently at fair value turing for inventory. Usually, some or all of the and changes in fair value are recognised in ‘other projects are sold during the project period. If this is 1.19 Equity comprehensive income’ until the asset is sold or the case, the project for own account is reclassified assessed to have suffered impairment in value, from inventory to a construction contract in which 1.19.1 Treasury shares whereupon accumulated gains or losses recog- the contract costs are compared with earned in- nised in ‘other comprehensive income’ are included come. Earned income that has not been settled is When treasury shares are bought back, the purchase in the income statement for the period. regarded as a trade receivable. Land for develop- price, including directly attributable costs, is rec- ment and costs incurred for the part of the project ognised as a deduction from equity. Treasury shares 1.13.2 Financial liabilities that has not been sold/recognised as revenue are are presented as a reduction of equity. The cumu- included in the balance sheet as projects for own lative gain or loss on sales of treasury shares is a) At fair value through profit or loss account. Own-account projects are recognised at presented net in equity. Net accumulated losses cost or net selling price, whichever is the lower. on sales of treasury shares are recognised under The Group has financial liabilities at fair value Acquisition costs include direct costs, a proportion other retained earnings, while net accumulated through profit or loss in the form of forward ex- of indirect costs (based on normal capacity utili- gains are recognised under other contributed equity.

86 AF Group annual report 2010 Annual accounts group 87 - - - - If the impact is significant, the provisions are cal- If are the impact the provisions is significant, cash future discounting the estimated by culated reflects that tax before rate by a discount flows pricing value of money of the current the market’s risks specifically linked relevant, to the where and, liability. included when the Restructuring are provisions re a detailed and formal has approved Group structuring plan, and the restructuring has either startedannounced. or been when recognised are guarantees for Provisions the underlying and services projects sold. are based on historical information are Provisions of possible out and a weighting on guarantees of their occurrence. comes against the probability loss-making for contracts recognised are Provisions a con- from expected revenue when the Group’s costs incurred tract is less than the unavoidable fulfil the obligations under the contract. to in order expenses 1.23 Loan in the balance recognised expenses are Loan the extent directly attributsheet to that they are manufacture of an asset that it takesable to a use or makesubstantial amount of time to for loan expenses that recognises AF Group The sale. own accrue during for the production of projects housing) and plant and account (residential use in the balance sheet. own equipment for the balance sheet ceases when in Recognition finished. If a loan is raised specificallythe assets are a project, the actual loan expense is used. for Otherwise on the the loan expense is calculated financing costs. basis of the Group’s liabilities and assets 1.24 Contingent in the not recognised liabilities are Contingent contingent liabili Significant financial statements. contingent of exception the with disclosed are ties asset contingent A probability. low a with liabilities but financial statements, in the is not recognised that it will benefit the disclosed if it is probable Group. sheet date after the balance 1.25 Events financial concerningNew the Group’s information that is received position on the balance sheet date in the is considered after the balance sheet date after the balance Events financial statements. financial the Group’s that do not affect sheet date but will affect position on the balance sheet date, disclosed if are its financial position in the future, significant. they are flow 1.26 Cash in has been prepared statement cash flow The with the indirect method and shows accordance financing and investing operating, from cash flows and it explains the change activities, respectively, the period. for and cash equivalents’ ‘cash in - - fined-benefit multi-company schemes. Due to the to Due schemes. multi-company fined-benefit calcu- is no basis for there structure of the plans, lating plan surpluses or deficits or their impact on therefore have schemes The premiums. future as defined-contributionbeen recognised plans. b) Defined contribution plans In the defined-benefit plan described addition to has a defined-contribution the Group above, in Norway all employees pension scheme for the scheme mentioned by not covered who are as an is recognised pension premium The above. has no and the Group expense when it incurs, this. and above obligations over discounts 1.21.3 Share and the sale offerings Discounts on private share as recognised are of treasury employees to shares The expenses at fair value on the allotment date. using an op value of the discounts is calculated collective agreement between Norwegian the collective agreement - and the Confed (LO) Unions Trade of Federation eration of Norwegian Enterprise is a (NHO). AFP Future multi-companydefined-benefit scheme. financed with this scheme are liabilities associated annual The unfunded. the operations and are by with former liabilities associated cost and future included in this scheme are who are employees included in the actuarial calculations. of two members de are in Sweden Employees tion pricing model that takes period the vesting payroll to is charged discount The account. into equity. to costs and credited 1.21.4 Share-based remuneration at fair value measured are employees Options for - is recog value Calculated on the allotment date. costs and set off under other nised under payroll expense is distributed The contributed equity. an acquires period the until the employee over estimated The unconditional right the options. to - be earnednumber of options expected to is reas sessed on every changes Any balance sheet date. as an expense with a corresponding recognised are adjustment of equity. recognised social security options are The costs for the expected vesting over in the income statement period. one purchase to entitlement Each option gives Company The price. at a predetermined share right settle the value to an agreed does not have of the options issued in cash. 1.22 Provisions has an when the Group is recognised A provision consequence a as self-imposed) or (legal obligation probable (more probable is it and event earlier an of than not) that an economic settlement will be made as a consequence of the obligation and reliably. of the amount can be measured the size - - - 1.19.2 Translation differences Translation 1.19.2 arise connection in with differences Translation for in the consolidation of differences exchange eign units. eign unit, the accumulated On disposal of a foreign re to the unit is relating translation difference in the income statement and recognised versed in the same period in which the gain or loss on in the income statement. disposal is recognised 1.19.3 Dividend as a liability once it is Dividend is recognised means that This the General by Meeting. adopted are adopted not yet dividends that are proposed included in equity. benefits 1.21 Employee benefits 1.21.1 Retirement a) Defined benefit plans employees for plans defined-benefit has Group The of the Norwegian companies born in or before prior 1 January to 1951 who joined the Group ac- funded through pension plans are The 2003. The reserves cumulated companies. in insurance present the of basis the on calculated is liability net benefits that the em- retirement value of future earned sheet date on the balance have ployees calculations The less the fair value of plan assets. The plan’s carried actuary. a qualified are out by the allocation method is used as formula credit proportion takesunless a large of crediting place the end of the pension-earningtowards period. In is used. this case a linear allocation method Introducing a a new benefit plan or changing result in changes in the benefit plan will current is carried change Any benefit liabilities. retirement of as an expense in a straight line until the effect introduction of The the change has been earned. existing schemes new schemes or changes to so that employees effect retroactive that have earn unconditional pension rights immediately, at once. in the income statement recognised are restrictions to or terminationGains or losses relating in the recognised benefit plans are of retirement when they take income statement place. impact changes and An accumulated of estimate changes in financial and actuarial assumptions (actuarial gains or losses) of less than 10 % of the benefit retirement higher of the defined-benefit liabilities or plan assets at the start is of the year In case of deviations the in ex not recognised. in the in- cess of 10 %, the surplus is recognised and distributed in a straight line come statement pension-earning the assumed average over period benefit expense net retirement The remaining. costs. the period is included under payroll for in the Norwegian enti- Employees are companies under a pension (AFP) an earlytled to retirement Note 2 Estimate uncertainty

Estimates and judgements are continually evalu- Goodwill and other intangible assets additional consideration. For large acquisitions, ated and are based on historical experience and The Group tests annually to assess whether the AF Group uses independent external advisers other factors, including expectations of future goodwill and intangible assets have suffered any to assist in determining the fair value. events that are believed to be reasonable under impairment, see note 13. In the impairment test the circumstances. the book value is measured against the recovera- Retirement benefits ble amount from the cash-generating unit to which The present value of the retirement benefit obli- The Group makes estimates and assumptions the asset is allocated. Recoverable amounts from gations depends on a number of factors that are- concerning the future. The resulting accounting cash-generating units are determined by estimating determined on an actuarial basis using a number estimates will, by definition, seldom equal the their value in use. These calculations require the of assumptions. This includes assumptions related related actual results. The estimates and assump- use of estimates. to the discount rate, wage inflation, adjustment tions that have a significant risk of causing a material of retirement benefits, expected return on plan adjustment to the carrying amounts of assets and Plant and equipment assets, and demographic factors such as disability liabilities within the next financial year are addressed The expected economic life of the Group’s plant and mortality. These assumptions are based on below. and equipment is very much affected by the observable market prices and historical develop- nature and duration of the assignments, as well ments in the Group and society as a whole. Revenue recognition during execution as the development of technology. Production- Changes in assumptions will affect the projected of projects related machinery is mainly depreciated using retirement benefit obligations and retirement The AF Group’s activities are mainly project-based. the reducing balance method to the expected benefit expense. Revenue from projects is recognised in the income residual value at the end of the period of use, statement in line with the project’s degree of while other plant and equipment is depreciated Income tax completion and final outcome. The ongoing rec- in a straight line over its economic life of 3-10 The Group is taxed on its income in several countries. ognition of revenue from projects entails uncer- years. Considerable judgement is required in determin- tainty, since it is based on estimates and assess- ing the income tax for all countries together in ments. For projects in progress, uncertainty exists Plant and equipment are tested for impairment the consolidated financial statements. There regarding the progress of remaining work, if there are indications of a reduction in value. will be uncertainty about the final tax liability disputes, warranty work, end results, etc. For The method corresponds to that described in for many transactions. The Group recognises tax completed projects, there exists uncertainty the section on goodwill and intangible assets. liabilities relating to future decisions in tax and regarding hidden defects or faults, as well as pos- dispute cases, based on estimates of whether sible disputes with the customer. The estimates Business combinations additional income taxes will be incurred. If the used in the accounts are based on uniform policies The AF Group allocates the purchase price for final outcome of a case differs from the originally and are subjected to control procedures that are acquired businesses to acquired assets and liabili- allocated amount, such differences will impact intended to ensure reliable measurement of ties based on the estimated fair value. In this the recognised tax expense and provision for project results and progress. The complexity and connection, the management must make assess- deferred tax in the period the difference is scope mean, however, that there is an inherent ments to determine the method of valuation, determined. risk that the final results of projects may deviate estimates and assumptions. In addition, best from the expected results. judgement is often used to determine any

Note 3 Segment information

The operating segments are identified based on are included in the Building or Civil Engineering Geographic segments the reporting the Corporate Management Team business areas. The Group’s property portfolio is The division into geographic segment is not uses when they allocate resources and make included in the Property business area. Services reported on an ongoing basis to the Corporate assessments of performance and profitability at related to offshore and onshore demolition and Management Team. Geographically segmented key a strategic level. recycling are included in the Environment business figures required by IFRS 8 are presented in a separate area. Energy comprises offshore and onshore table and supplement information to analysts and Business areas energy optimisation services. other users of the financial statements. The Group is engaged in industrial and contracting operations. The Corporate Management Team What remains after allocation to the business Accounting policies assesses the business operations on the basis of areas is presented as Other and mainly includes Segment information is presented in accordance the Civil Engineering, Building, Property, Environ- activities in the Parent Company and some with the Group’s accounting policies in accordance ment and Energy business areas. general services. with IFRS with the exception of IFRIC 15 (Agreements for the Construction of Real Estate). The effect of While the majority of its operations take place in Transactions between segments in the Group are IFRIC 15 on the consolidated accounts is illustrated Norway and Sweden, the AF Group also has oper- carried out based on market terms and in accord- in a separate table in the segment information. ations in other EU countries, and a small portion ance with the arm’s length principle. Transactions of the Energy operations are located outside the between the various segments are eliminated. EU. Ordinary building and construction projects

88 AF Group annual report 2010 Annual accounts group 89 - - -1 941 417 335 260 463 366 578 366 259 372 -364 6.8 % 6.2 % 7.7 % 6.4 % 6.3 % 7.9 % 1,974 6,033 1,009 3,059 5,401 1,933 6,193 Total 3,014 1,040 5,828 Total 5,401 5,828 35.7 % 36.0 % ------32 -12 -11 -32 -12 -12 -32 -12 IFRIC 15 IFRIC 15 ------21 -13 -13 -13 251 272 -315 -587 -171 -109 -108 -315 -171 -108 4.3 % Elim. Elim. -1,090 -1,182 -1,018 ------9 9 -2 -7 -8 -6 20 91 83 -94 -10 -26 -96 102 148 484 105 437 130 123 112 139 140 -217 -4.4 % Others Others 7 9 -9 -8 -3 -6 64 30 21 55 16 -15 -11 -21 222 463 366 501 592 211 299 480 371 556 598 564 4.5 % 2.6 % 3.5 % 5.0 % -3.9 % -3.7 % -2.6 % -1.1 % Energy Energy 43 80 46 28 43 90 143 373 787 104 700 322 892 782 366 739 147 107 743 767 -325 -247 -182 -143 7.3 % 5.8 % 6.2 % 1,070 1,043 ment ment 10.8 % 16.9 % 11.7 % 14.0 % 19.2 % - Environ - Environ - 8 8 3 1 -4 -1 36 74 52 42 42 32 51 47 35 -10 -10 -27 -15 271 320 327 287 134 134 -3.6 % 14.6 % 25.8 % 31.2 % 31.2 % -29.1 % -19.1 % -19.1 % Property Property - 2 -1 50 46 51 -11 328 619 306 223 218 283 617 938 385 317 221 283 8.6 % 8.5 % 8.7 % 2.3 % 2.0 % 2.2 % 2,324 1,099 2,562 3,067 2,265 2,561 2,267 14.2 % 163.5 % Building Building 2 1 82 69 -33 -68 213 650 221 795 247 114 670 446 227 194 180 105 198 Civil Civil Civil Civil 5.9 % 4.6 % 6.5 % 9.2 % 9.0 % 2,175 1,521 1,899 1,079 2,157 1,768 2,158 63.3 % 60.8 % 10.5 % Engineering Engineering Net cash flow before financing activities before Net cash flow Cash flow Cash operating activities from Net cash flow activities investment from Net cash flow Number of employees as at 31 December Number of employees Order backlogOrder as at 31 December Return on capital employed Capital employed as at 31 December employed Capital Assets as at 31 December Assets EBT % EBT EBIT % Internal revenue Total revenue Total and depreciation taxes, interest, Earnings before amortisation (EBITDA) (EBIT) and taxes interest Earnings before (EBT) taxes Earnings before sheet and balance figures Key % EBITDA Net cash flow from investment activities investment from Net cash flow 2009 statement Income Cash flow Cash operating activities from Net cash flow financing activities before Net cash flow External revenue Number of employees as at 31 December Number of employees Order backlogOrder as at 31 December Assets as at 31 December Assets as at 31 December employed Capital Return on capital employed EBT % EBT EBIT % Amounts in NOK million Amounts in NOK 2010 statement Income Internal revenue and depreciation taxes, interest, Earnings before amortisation (EBITDA) External revenue revenue Total Earnings before interest and taxes (EBIT) and taxes interest Earnings before Earnings before taxes (EBT) taxes Earnings before Key figures and balance sheet and balance figures Key % EBITDA cont. note 3 cont. note cont. note 3

2008 Civil Environ- Income statement Engineering Building Property ment Energy Others Elim. IFRIC 15 Total External revenue 1,907 2,772 102 657 478 - - - 5,916 Internal revenue 137 109 - 10 64 - -320 - - Total revenue 2,044 2,881 102 667 542 - -320 - 5,916

Earnings before interest, taxes, depreciation and amortisation (EBITDA) 172 144 -33 90 54 -2 -8 - 417 Earnings before interest and taxes (EBIT) 130 140 -33 56 48 -2 -10 - 328 Earnings before taxes (EBT) 122 156 -45 54 46 -13 -13 - 308

Key figures and balance sheet EBITDA % 8.4 % 5.0 % -32.4 % 13.5 % 10.0 % - - - 7.0 % EBIT % 6.4 % 4.9 % -32.6 % 8.4 % 8.8 % - - - 5.6 % EBT % 5.9 % 5.4 % -43.6 % 8.1 % 8.5 % - - - 5.2 %

Assets as at 31 December 783 969 398 620 563 375 -514 - 3,194 Capital employed as at 31 December 296 182 317 403 405 42 -444 - 1,202 Return on capital employed 42.8 % 82.3 % -11.6 % 22.6 % 20.5 % - - - 33.0 % Order backlog as at 31 December 888 2,382 9 1,285 556 - -207 - 4,912 Number of employees as at 31 December 679 737 14 348 183 86 - - 2,047

Cash flow Net cash flow from operating activities 162 62 78 38 52 -71 80 - 402 Net cash flow from investment activities -4 -26 3 -248 -221 16 142 - -338 Net cash flow before financing activities 158 36 81 -210 -169 -55 222 - 64

Geographic distribution of revenue and assets The tables below show revenue and assets broken down by the countries in which the Group operates.

2010 Civil Environ- Geographic distribution of revenue Engineering Building Property ment Energy Others Elim. IFRIC 15 Total Norway 2,034 1,911 134 642 564 140 -171 -32 5,222 Sweden 125 356 - 12 - - - - 493 Other - - - 112 - - - - 112 Total 2,158 2,267 134 767 564 140 -171 -32 5,828

Geographic distribution of non-current assets excl. financial instruments and deferred tax assets Norway 150 54 52 180 294 51 -26 - 754 Sweden 11 134 - 3 - - - - 147 Other ------Total 161 187 52 182 294 51 -26 - 901

Geographic distribution of assets Norway 1,023 646 327 732 480 437 -1,018 -12 2,616 Sweden 56 292 - 5 - - - - 353 Other - - - 44 - - - - 44 Total 1,079 938 327 782 480 437 -1,018 -12 3,013

90 AF Group annual report 2010 Annual accounts group 91 8 47 98 29 66 37 440 825 190 554 264 2,754 5,091 2,822 Total 4,749 Total 5,550 2008 3,194 5,916 3,059 5,401 5,916 5,880 ------IFRIC 15 IFRIC 15 - - - - -3 -1 -514 -320 -310 -514 -320 -315 Elim. Elim. -1,182 -1,182 ------7 -6 -6 375 491 375 484 71 17 17 87 110 Others Others 5,186 2009 5,401 5,314 - - - - - 2 563 542 499 598 563 542 501 598 Energy Energy 6 17 14 45 14 99 603 653 993 630 620 667 743 ment ment 1,043 - Environ - Environ ------51 51 398 102 320 63 14 98 12 398 102 320 77 5,641 2010 5,828 5,751 Property Property - - 38 354 615 635 946 431 969 2,246 2,130 1 099 2,881 2,561 Building Building - - 69 714 176 153 757 112 783 795 Civil Civil Civil Civil 1,868 1,656 2,044 1,768 Engineering Engineering

Total operating and other revenue operating Total Total other revenue Total Other revenue Rental income Total operating revenue operating Total Revenue from projects for own account own projects for Revenue from Other sales revenue Contract income Amounts in NOK million Total Total Sweden Geographic distribution of revenue Geographic Norway Total Total Sweden 2008 distribution of revenue Geographic Norway Sweden Total Other Total Total distribution of revenue Geographic Norway Sweden Other 2009 distribution of revenue Geographic

Norway Operating and other revenue and other revenue 4 Operating Note cont. note 3 cont. note Note 5 Remuneration of employees and senior executives

Amounts in NOK million 2010 2009 2008 Fixed pay -1,197 -1,143 -1,118 Social security costs -180 -159 -183 Retirement benefit costs (see note 25) -41 -33 -42 Share-value based remuneration (option cost) -12 -4 -4 Other benefits -80 -74 -93 Total payroll costs -1,511 -1,412 -1,440

Average number of employees Norway 1,702 1,826 1,921 Sweden 181 191 252 Poland 10 8 6 China 3 2 - Total 1,896 2,027 2,179

Remuneration of senior executives The salaries of senior executives are made up of a fixed salary and a bonus The CEO’s salary is set at a Board Meeting every year. The Board of Directors based on the EVA model. The AF Group uses EVA as a management and establishes guidelines for the remuneration of senior executives in consultation control tool. EVA is a method of calculating and analysing value creation in with the CEO. There are no agreements with the Corporate Management the Group and in economic units below group level. The aim of this analysis Team or Chairman of the Board regarding severance pay or early retirement is to ensure that every part of the Group works to increase value creation. if their employment is terminated or modified. The Corporate Management Incentive systems based on the EVA model have been introduced for execu- Team participates in the general retirement benefit scheme for the AF Group’s tives in large parts of the Group. Senior executives may invest 25-50 % of employees as described in note 25 on retirement benefits. their net bonus after tax in shares in the Company. The shares are sold at a 20 % discount based on the prevailing market price at the end of the year. No loans or guarantees have been granted to the Board of Directors or The lock-in period for the shares is 1 year. Corporate Management Team.

Corporate Management Team 2010 (Amounts in NOK 1,000) Fixed pay Bonus Retirement benefits Other benefits Total Pål Egil Rønn, CEO 2,645 2,066 33 114 4,858 Sverre Hærem, Executive Vice President/CFO 1,681 1,405 33 92 3,211 Robert Haugen, Executive Vice President 1,690 1,405 33 90 3,218 Tore Fjukstad, Executive Vice President 1,726 1,405 33 104 3,267 Paul-Terje Gundersen, Executive Vice President from 1 October 1,640 1,661 33 100 3 434 Jørgen Hals, Executive Vice President until 1 October 534 275 8 45 863 Total remuneration of the Corporate Management Team 1,168 1,405 22 123 2,718 Samlet godtgjørelse til konsernledelsen 9,445 7,961 161 568 18,134

Corporate Management Team 2009 (Amounts in NOK 1,000) Fixed pay Bonus Retirement benefits Other benefits Total Pål Egil Rønn, CEO 2,286 1,503 31 91 3,911 Sverre Hærem, Executive Vice President/CFO 1,622 1,042 31 93 2,788 Robert Haugen, Executive Vice President 1,655 1,042 31 93 2,821 Tore Fjukstad, Executive Vice President 1,667 1,042 31 105 2,845 Arild Moe, Executive Vice President 1,425 1,040 31 74 2,570 Jørgen Hals, Executive Vice President 1,463 1,042 31 148 2,684 Total remuneration of the Corporate Management Team 10,118 6,711 186 604 17,619

Corporate Management Team 2008 (Amounts in NOK 1,000) Fixed pay Bonus Retirement benefits Other benefits Total Pål Egil Rønn, CEO 1,955 1,139 34 170 3,298 Sverre Hærem, Executive Vice President/CFO 1,365 871 34 153 2,423 Robert Haugen, Executive Vice President 1,669 871 34 152 2,726 Tore Fjukstad, Executive Vice President 1,546 871 34 121 2,572 Jørgen Hals, Group Vice President from 1 June 2008 748 - 15 57 820 Total remuneration of the Corporate Management Team 7,283 3,752 151 653 11,839

Shares owned by senior executives and subscribed options are described in note 23.

92 AF Group annual report 2010 Annual accounts group 93 - - - - - 40 70 275 110 110 110 130 130 110 110 130 551 605 880 -946 27.00 27.00 21.60 21.60 2008 Total 2008 2008 1,325 -3,081 153,500 500,000 500,000

14 47 48 Other benefits ------90 285 115 115 135 135 155 155 115 15.20 19.00 18.30 2009 14.64 2009 2009 -1,023 1,210 257,000 342,500 804,000 11 12 29

benefits Retirement Retirement ------300 120 150 165 120 150 150 145 2010 Bonus 25.44 31.80 2010 31.28 39.10 2010 1,300 -2,321 -2,138 329,400 162,700 622,000

526 546 803 pay Fixed Fixed 1) Nils-Henrik Pettersson, Chairman of the Board until 28 May 2008, is a partner in the law firm Schjødt. In addition to regular to ordinary directors’ fees, fees, until 28 May Chairman 2008, is a partner of the Board Nils-Henrik firmto ordinary in the law regular Pettersson, Schjødt. to directors’ In addition legal services in 2010. the income statement for to Schjødt was charged NOK 88,000 in fees from Bonus for the purchase of shares the purchase Bonus for some of their net bonus after tax in the invest managers may Eligible model. Added) Value (Economic is based on the EVA pay of the senior executives’ Part is 1 year. the shares period for lock-in The market sold at a 20% discount based on the prevailing are price at the end of the year. shares The shares. Company’s Arne Sveen Henrik Nilsson Tor Olsen Tor on the Board representatives to employee and other benefits Pay Amounts in NOK 1,000 Impact (NOK 1,000): statements on the financial of bonus shares including social security costs (discount costs) Payroll Number of bonus shares from newissue - without discount from Number of bonus shares Selling price (amounts in whole NOK) Leif Jørgen Moger, Board Member Board until 9 May 2008 Moger, Jørgen Leif Member 23 May Board until 2008 Erik Frogner, Member until 9 May Andersson, Board 2008 Leif Member Board until 9 May 2008 Anne Mürer, Member Board until 9 May 2008 Woon, Litt Long of Directors' fees Board Total Arne Røthe, Board MemberArne Board Røthe, Member Board Rune Dale, until 9 MayLars A. Christensen, Chairman 2008 of the Board Number of shares/price Number of shares sold from own holdings own sold from Number of shares Number of shares/price Number of bonus shares sold from own holdings own sold from Number of bonus shares (Amounts in NOK 1,000) in NOK (Amounts fees of Directors’ Board Tore Thorstensen, Chairman of the Board from 28 May 2010 from Chairman of the Board Thorstensen, Tore Carl Henrik Member Eriksen, Board 10 May 2008 Member Larssen, Board from Lange Torstein Market (amounts in whole NOK) price of agreement as at date Eli Arnstad, Board Member from 10 May 2008 Member Board from Arnstad, Eli 4 January MemberMari Board from Broman, 2008 9 May 2008 Member Board from Groth, Peter 28 May 2010 10 May 2008 to from Chairman of the Board Nils-Henrik Pettersson, Selling price (amounts in whole NOK) Number of shares from new issue - without discount from Number of shares Market price during subscription period (amounts in whole kroner) Impact of sale of shares to employees on the financial statements on the financial statements Impact employees to of shares of sale (amounts in NOK 1,000): including social security costs (discount costs) Payroll In recent years, the AF group has given all its employees the opportunity to buy shares at a 20 % discount. The discount is calculated as the difference as the difference discount is calculated The the opportunity all its employees at a 20 % discount. has given buy shares to the AF group In years, recent marketbetween the average price during the subscription period and the market price of purchase. on the date employees to Sale of shares 1) cont. note 5 cont. note cont. note 5

Option scheme year, with, however, a minimum price of NOK 27.00. When options were In January 2008, the General Meeting adopted an option scheme for all allotted in 2010, employees subscribed for a total of 2,751,250 (2009: employees in the AF Group. The maximum number of options that could 505,000, 2008: 2,520,000) options. Total number of outstanding options as be granted was 12,500,000. Each option entitled the holder to purchase one at 31 December 2010 was 5,251,250, adjusted for options subscribed by share in AF Gruppen ASA. The option scheme entailed an annual allotment employees who have left the Group. Weighted average value of the options of options for 2008, 2009 and 2010, with the allotting starting in 2008 and is NOK 14.75 as at 31 December 2010. ending in 2010. 5,163,750 options were exercised on 15 February 2011. An option could The employees paid an option premium of NOK 0.60 per option. The exercise only be exercised if the holder was still employed by the Company on price was set at the market value of the shares on 31 December of the previous 31 December 2010.

The AF Group used Merton’s model to value the options. The following assumptions were used in the model:

2010 2009 2008 Expected dividend yield (%) 4.20 7.37 4.00 Historical volatility (%) 41.4 43.5 32.8 Risk-free interest (%) 4.0 3.9 4.7 Expected life of option (years) 1 2 3 Share price (NOK) 31.8 27.0 27.0 Payment for option (NOK) 0.6 0.6 0.6

Accounting effect of the option scheme:

Amounts in NOK 1,000 2010 2009 2008 Payroll costs -11,510 -4,087 -4,171 Debt - option premium paid 3,132 1,659 1,512

Since further grants of options will not be made in 2011 the option scheme is not expected to affect earnings in 2011. The debt will be redeemed when the options are exercised in February 2011, while the effect on equity as at 31 December 2010 will remain in the accounts.

Reconciliation of options Number of options as at 31 December 2009 2,771,250 Options subscribed for in 2010 2,751,250 Adjusted for employees who have left -271,250 Number of options as at 31 December 2010 5,251,250

Guidelines for 2010 Shares can be sold to senior executives, subject to the approval of the Board The Board will submit a statement to the General Meeting in accordance of Directors at a 20 % discount on the prevailing market price. Shares are with section 6-16a of the Norwegian Public Limited Companies Act. The offered to senior executives in the same way as to other employees. contents of the statement are explained below in accordance with section 7-31b, seventh paragraph of the Norwegian Accounting Act: In January 2008, the General Meeting of AF Gruppen ASA adopted an option scheme that included all the employees in the AF Group. The option Guidelines regarding fixed pay and other remuneration for senior executives scheme was established by the Board, and was to provide an incentive for have been established. The Board of Directors establishes guidelines for the all the employees in the Group. The purpose of the scheme was to encourage remuneration of senior executives in consultation with the CEO. The CEO’s long-term commitment and greater involvement in the Group’s activities. fixed pay is set by the Board. Base pay is fixed in line with the market rates. It is believed that the Group’s future objectives will best be achieved if the Base pay is adjusted annually on 1 July based on an individual assessment. interests of the Group and its employees coincide. The scheme gave the Senior executives receive payments in kind and participate in the Group’s employees an opportunity to buy shares in AF Gruppen ASA. retirement benefit schemes on the same terms as other employees as described in the Group’s Personnel Guide. There are no termination pay- Under the options scheme the Group’s employees were given the opportu- ment schemes. nity to buy options each year in 2008, 2009 and 2010. This was accomplished by granting the individual employee a certain number of options annually. Bonuses for senior executives are based on the EVA (Economic Value Added) Employees were granted a specific number of options each year, all of which model. EVA is a method of calculating and analysing value creation in the had to be accepted. Group and in economic units below group level. Bonuses based on the EVA model are linked to the Group’s value creation during the financial year. If The remuneration of senior executives in 2010 was in accordance with the the performance requirements are met, the bonus payment should repre- statement submitted to the General Meeting in 2010. sent 5-8 months’ pay. This is, however, not the absolute maximum limit. Of the total bonus earned, 25 % can be used to buy shares at a 20 % discount and the remainder is paid in cash.

94 AF Group annual report 2010 Annual accounts group 95 ------2 -3 -5 -41 -705 -235 -252 -981 -208 -112 -620 2008 2008 2008 -1,006 -2,227 -5,157 -1,241 -3,916 6 4 4 3 1 -2 -5 -1 17 -85 -68 -58 -771 -231 -120 -209 -100 -856 -604 2009 2009 2009 -2,518 -1,042 -3,747 -4,603 - - - 3 -5 -3 10 54 62 -28 -94 -52 -10 -973 -162 -332 -100 -180 -671 2010 2010 2010 -1,729 -2,992 -1,857 -1,135

Total net gains/(losses) Total Net foreign exchange gains/(losses) related to operations to gains/(losses) related exchange Net foreign Net gains/(losses) on sales of property, plant and equipment Net gains/(losses) on sales of property, Total fair value adjustments of financial derivatives Total Total gains/(losses) on sale of shares in joint ventures gains/(losses) on sale of shares Total Total gains/(losses) on sale of shares in subsidiaries gains/(losses) on sale of shares Total Dividend Total remuneration of auditor remuneration Total Total of other auditors Remuneration Statutory auditing Assistance Total Sundry other operating expenses expenses other operating Total Amounts in NOK 000) Young of Ernst & Remuneration Statutory auditing Other verification services consulting Tax Other non-audit services Amounts in NOK million Amounts in NOK million Amounts in NOK

Other expenses operating Rent Other expenses rental Remuneration of auditor consultant, etc.) Other (attorney, fees Bad debts Net gains (losses) 7 Net Note

Value-added tax not is included in the audit fees. Other operating expenses 6 OtherNote operating 3 4.7 0.6 4.00 32.8 27.0 1,512 2008 2008 -4,171 2 3.9 0.6 7.37 43.5 27.0 1,659 2009 2009 -4,087 1 4.0 0.6 4.20 41.4 31.8 3,132 2010 2010 -11,510 -271,250 2,771,250 2,751,250 5,251,250 Expected dividend yield (%) Historical volatility (%) (%) interest Risk-free of option (years) Expected life price (NOK)Share option (NOK) for Payment effect of the option scheme: Accounting Amounts in NOK 1,000 costs Payroll paid Debt - option premium redeemed when The debt will be Since further earnings affect is not expected of options will not be made in 2011 the option scheme in 2011. to grants on equity 2011, while the effect remain in the accounts. in February as at 31 December 2010 will exercised the options are of options Reconciliation Number of options as at 31 December 2009 in 2010 Options subscribed for left who have employees for Adjusted Number of options as at 31 December 2010 Note 8 Net financial items

Amounts in NOK million 2010 2009 2008 Financial income Interest income 7 66 18 Other financial income 2 1 - Total financial income 9 67 18

Financial expenses Interest expense on loans and overdraft facilities -1 -16 -24 Interest expense on financial leases -1 -2 -5 Other interest expenses -3 - - Other financial expenses - -1 - Total financial expenses -5 -19 -29

Financial gains (losses) and changes in value Net foreign exchange gains (losses) related to financing 3 -8 6 Value adjustment of financial assets at fair value through profit or loss -1 2 -10 Impairment of financial investments - -10 -16 Revaluation of financial liability - - 10 Total financial gains (losses) and changes in value 3 -16 -10

Net financial items 6 32 -21

Note 9 Tax expense

Amounts in NOK million 2010 2009 2008 Current tax payable for the year -72 -5 -2 Adjustment for previous years -31 1 - Total current tax payable -103 -4 -2

Change in temporary differences 8 -92 -87 Total deferred tax 8 -92 -87

Total tax expense -95 -96 -88

Reconciliation of current tax payable in income statement against current tax payable in balance sheet: Current tax payable for the year 72 5 2 Effect related to sale and purchase of operations -3 - - Currency translation differences -1 - - Current tax payable in balance sheet 69 5 2

Reconciliation of income tax expense calculated at the Norwegian tax rate and tax expense as presented in the income statement:

Profit before tax 372 366 308 Expected income tax at Norwegian nominal rate -28.0 % -104 -28.0 % -103 -28.0 % -86 Tax effects of: - Divergent foreign tax rate -0.5 % -2 - - - - - Non-deductible expenses -1.4 % -5 -2.9 % -11 -3.1 % -10 - Non-taxable income 4.8 % 18 2.7 % 10 3.0 % 9 - Change in valuation of deferred tax assets -0.3 % -1 1.2 % 5 -1.0 % -3 - Excessive/insufficient provisions in previous years -0.2 % -1 0.8 % 3 0.5 % 2 Effective tax rate/tax expense in income statement -25.6 % -95 -26.3 % -96 -28.7 % -88

There are no tax expenses related to items in comprehensive income.

96 AF Group annual report 2010 Annual accounts group 97 - - - 6 4 4 1 5 80 87 23 -1 -2 -7 -4 -6 10 -92 -49 -13 -10 -23 -46 -29 190 325 355 315 335 2008 31 December31 2010 31 December31 2010 31 December31 2009 December31 2009 Balance sheet as at Balance sheet as at Balance sheet as at Balance sheet as at - - 8 ------8 -6 -6 -1 -5 92 -12 -12 190 276 2009 enterprise enterprise enterprise enterprise Acquisition of Acquisition of Acquisition of Acquisition of 2 - 1 5 1 6 -3 -1 -2 -1 -3 -4 -3 -1 -8 -4 -1 10 82 22 85 11 20 -31 -11 -19 276 263 2010 statement statement statement statement to the income to the income to the income to the income Charged/(credited) Charged/(credited) Charged/(credited) Charged/(credited) - - - - - 1 2 4 6 -2 -1 10 -53 -49 -11 -15 -28 -23 -10 -13 243 325 230 315 January 2010 January 2010 January 2009 January 2009 Balance sheet as at 1 Balance sheet as at 1 Balance sheet as at 1 Balance sheet as at 1 2) 2) 1) 1)

Charged/(credited) to the income statement to Charged/(credited) of enterprise Acquisition Currency translation difference Carrying 1 January amount as at Carrying 31 December at as amount Amounts in NOK million Amounts in NOK tax deferred in recognised Change Projects in progress in progress Projects 2009 tax Deferred Intangible assets Other Retirement benefits Retirement Total Other assets Other Total Total tax assets Deferred plant and equipment Property, Provisions tax value of tax loss carryforwardRecognised Retirement benefits Retirement Provisions Total Other Other assets Provisions value of tax loss carryforward tax Recognised Deferred tax assets tax Deferred plant and equipment Property, 2010 tax Deferred plant and equipment Property, Intangible assets in progress Projects

The movement in deferred income tax assets and liabilities during the year, without takinginto consideration the offsetting of balances within the same tax of balances without takinginto consideration the offsetting during income tax assets and liabilities the year, in deferred movement The jurisdiction, is as follows: Deferred tax/deferred tax assets tax/deferred 10 Deferred Note cont. note 10

Balance sheet Charged/(credited) 2008 as at 1 January to the income Acquisition of Balance sheet as at Deferred tax 2008 statement enterprise 31 December 2008 Intangible assets -5 6 8 10 Projects in progress 1) 151 73 6 230 Retirement benefits -1 4 - 2 Other 16 -15 - 1 Total 161 68 14 243

Balance sheet Charged/(credited) as at 1 January to the income Acquisition of Balance sheet as at Deferred tax assets 2008 statement enterprise 31 December 2008 Property, plant and equipment -12 1 - -11 Other assets - 2 -1 - Provisions -8 -6 -1 -15 Recognised tax value of tax loss carryforward 2) -61 22 11 -28 Total -81 19 9 -53

1) Projects in progress have a major impact on the calculation of deferred tax This tax loss carryforward is subject to a time limit. Recognised tax loss carry- and the current tax payable. Projects in progress are valued at the direct forwards are not subject to a time limit and amount to NOK 151 million production cost and revenue is not recognised until completion. (NOK 75 million in 2009 and NOK 99 million in 2008).

2) Deferred income tax assets are recognised for tax loss carryforwards to the No deferred tax is calculated on unremitted earnings of subsidiaries and as- extent that the realisation of the related tax benefit through future taxable sociates since the companies are within the EU and the earnings can be dis- profits is probable. The Group did not recognise deferred income tax assets tributed tax-free as dividends. of NOK 8 million (NOK 6 million in 2009 and NOK 2 million in 2008) in respect of losses in Poland that can be carried forward against future taxable income.

Classification in the balance sheet 2010 2009 2008 Deferred tax assets -39 - -15 Deferred tax 302 276 205 Net deferred tax in the balance sheet 263 276 190

Note 11 Earnings and dividend per share

Earnings per share Amounts in whole NOK 2010 2009 2008 Profit for the year attributable to Parent Company shareholders 276,716,400 269,346,721 217,725,000

Number of shares: Time-weighted average number of externally owned shares1) 70,506,090 69,923,185 68,860,590

Dilutive effect of share value-based remuneration 2) 1,993,913 91,321 - Time-weighted average number of externally owned shares after dilution 72,500,003 70,014,506 68,860,590

Earnings per share 3.92 3.85 3.16 Diluted earnings per share 3.82 3.85 3.16

1) Time-weighted average number of shares issued minus treasury shares.

2) The AF Group’s share-value based remuneration scheme (options), see note 5, entails that externally owned shares may be diluted as a result of the redemption of options. To take the future increase in the number of externally owned shares into account, the diluted earnings per share is calculated in addition to the earnings per share. In this calculation the average number of externally owned shares is adjusted to take the dilution effect into account.

98 AF Group annual report 2010 Annual accounts group 99 - - 3 3 -2 -2 -5 90 62 -87 -80 -75 748 106 109 570 463 381 308 308 748 1,40 -658 -261 Total 2008 69,029,290 96,641,006 69,349,440 - - 3 3 -2 -2 -5 1,60 55 81 62 65 -92 -68 -79 -64 2009 186 100 522 205 262 262 186 -259 70,245,895 70,495,940 112,393,432 equipment Machinery and 4,50 ------6 2010 -2 -1 35 28 48 46 46 -19 -11 562 258 316 562 -566 5,163,750 71,117,940 76 281 690 343,267,605 Buildings and prod. facilities prod. dividend will be paid to all shareholders registered with the Norwegian Central Central Norwegian the with registered shareholders all to paid be dividend will the on paid be will dividend No 2011. May 13 (VPS)on Depository Securities finan- the 2010 dividend for estimated total The treasury shares. Company’s is NOK 343 million. cial year 2011 increase Capital 5) (see note In employees, of options by connection with the redemption issue 5,163,750 shares to of AF Gruppen ASA resolved of Directors the Board after the issue is 76,281,690. number of shares total The in a private placing. 2010. for dividends entitled to are issued shares The -

Translation differences, acquisition cost acquisition differences, Translation 2010 financial year 2010 financial Carrying amount as at 1 January 2010 Amounts in NOK million Dividend per share dividend estimated Total Issue of new shares 14 February 2011 14 February Issue of new shares shares Number of dividend entitled Total number of shares as at 31 December number of shares Total Amounts in whole NOK Translation differences, accumulated depreciation accumulated differences, Translation acquisition of enterprises from Additions Ordinary additions Disposals at cost price Reclassification from non-current assets Reclassificationto intangible from assets the year and impairmentDepreciation for Disposals, accumulated depreciation accumulated Disposals, Accumulated depreciation Accumulated 2010 Carrying 31 December as at amount acquisition cost differences, Translation Carrying amount as at 31 December 2010 Carrying 31 December as at amount 2010 31 December at As cost Acquisition year 2009 financial Carrying amount as at 1 January 2009 depreciation accumulated differences, Translation Additions from acquisition of enterprises from Additions Ordinary additions depreciation accumulated Disposals, Disposals at cost price the year and impairmentDepreciation for 2009 Carrying 31 December as at amount As at 31 December 2010 the AF Group had 450,000 treasury shares. Treasury shares are not entitled to dividend. The AF Group is not expected to have treasury have is not expected to AF Group The dividend. not entitled to are shares Treasury had 450,000 treasury at 31 December AF Group 2010 the As shares. paid. are at the time dividends shares cont. note 11 cont. note Dividend per share repre year, financial 2009 the for ordinaryshare An per 1.60 NOK of dividend

senting a total of NOK 113 million, was paid to shareholders on 8 June 2010. on 8 shareholders to NOK 113 million, was paid of senting a total NOK of total a extraordinaryAn representing share, per 2.00 NOK of dividend in connection adopted 141 million, was of the Environmental with the sale 2010. and was paid on 4 November Vats Base at 4.50 per a dividend of NOK proposes the Board year, the 2010 financial For It on the shareholders share. is expected to that the dividend will be paid the General Meeting, by must be approved dividend The 1 June 2011. proposed The the liability in the balance sheet. for is no provision and there Property, plant and equipment and equipment plant 12 Property, Note cont. note 12

Buildings and Machinery and Amounts in NOK million prod. facilities equipment Total As at 31 December 2009 Acquisition cost 575 500 1,075 Accumulated depreciation -12 -314 -327 Carrying amount as at 31 December 2009 562 186 748

2008 financial year Carrying amount as at 1 January 2008 45 239 284 Translation differences - - - Ordinary additions 202 52 254 Additions from acquisition of enterprises 12 7 19 Disposals at cost price - -70 -70 Disposals, accumulated depreciation - 50 50 Depreciation and impairment for the year -1 -73 -74 Carrying amount as at 31 December 2008 258 205 463

As at 31 December 2008 Acquisition cost 260 520 780 Accumulated depreciation -2 -315 -317 Carrying amount as at 31 December 2008 258 205 463

Leasing 2010 2009 2008 Operating leases (annual rent) 274 267 249 Financial leasing (Capitalised leases, machinery and equipment) 17 35 59

Depreciation rates Non-current assets are depreciated over the expected economic life of the asset. Production-related machinery is normally depreciated using the reducing balance method, while other property, plant and equipment are depreciated on a straight-line basis.

The following depreciation rates have been used: Machinery and equipment 10–33 % Buildings and prod. facilities 2–5 % Land 0 %

Collateral Information about collateralised property, plant and equipment is given in note 35.

Capitalised interest In 2008 and 2009, property, plant and equipment, buildings and production facilities include capitalised interest related to the Environmental Base at Vats. The Environmental Base at Vats was built in house and was completed in 2009. As at 31 December 2008 the environmental base was plant and equipment in progress that was included in Buildings and production facilities. The Environmental Base at Vats was sold on 15 November 2010. AF Group has no other capitalised interest included in property, plant and equipment.

Environmental Base at Vats 2010 2009 2008 Capitalised interest - 8 3 Carrying amount as at 31 December - 547 240

100 AF Group annual report 2010 Annual accounts group 101 - - 1 2 6 2 6 -1 -8 -9 -2 -8 11 -33 -27 -14 -19 458 500 475 484 244 238 493 467 467 458 458 475 475 Total rights 22 years Quarrying Straight-line ------4 4 3 3 4 4 4 4 -8 -8 -7 -8 12 12 11 12 rights 5 years Customer Customer Quarrying Straight-line relationships ------1 2 7 1 -1 -8 -8 -7 -7 24 42 31 38 30 38 17 17 24 24 31 31 -24 -15 5 years Licences Customer Customer Straight-line relationships ------1 2 1 1 1 1 1 1 Licences ------6 6 -9 -2 11 429 445 440 429 226 208 440 445 445 429 429 440 440 Goodwill

Amounts in NOK million 2010 financial year 2010 financial Carrying 1 January amount as at 2010 Ordinary additions Additions from acquisition of enterprises acquisition from Additions Reclassification from non-current assets Reclassificationto intangible from assets Disposals from sale of enterprises Disposals from Impairment losses Amortisation the year for Translation differences Translation Carrying amount as at 31 December 2010 Carrying 31 December at as amount As at 31 December 2010 31 December at As cost Acquisition Accumulated amortisationAccumulated and impairment losses Carrying amount as at 31 December 2010 Carrying 31 December as at amount 2009 financial year 2009 financial Carrying amount as at 1 January 2009 Translation differences Translation Ordinary additions Additions from acquisition of enterprises from Additions Disposals from sale of enterprises sale Disposals from Amortisation the year for Carrying amount as at 31 December 2009 Carrying 31 December as at amount As at 31 December 2009 31 December at As cost Acquisition Accumulated amortisationAccumulated and impairment losses Carrying amount as at 31 December 2009 Carrying 31 December as at amount 2008 financial year 2008 financial Carrying amount as at 1 January 2008 Translation differences Translation Ordinary additions Additions from acquisition of enterprises from Additions Amortisation the year for Carrying amount as at 31 December 2008 Carrying 31 December as at amount As at 31 December 2008 31 December at As cost Acquisition Accumulated amortisationAccumulated and impairment losses Carrying amount as at 31 December 2008 Carrying 31 December as at amount Economic life Economic Amortisation schedule

Intangible assets related to customer relationships were written down by NOK 1 million in BA Gjenvinning AS in 2010. NOK 1 million in BA Gjenvinning by written down were relationships customer to Intangible assets related Intangible assets assets 13 Intangible Note cont. note 13

Allocation of goodwill to cash generating units Goodwill is allocated to the Group’s cash-generating units that are expected to draw synergies from business combinations. Goodwilll is mainly allocated to business units. The allocation is shown in the summary below:

Amounts in NOK million 2010 2009 2008 AF Anlegg 11 - - Pålplintar i Sverige AB 3 3 3 Total Civil Engineering 14 3 3

AF Bygg Østfold 47 47 47 AF Bygg Gøteborg AB 77 72 80 Total Building 124 119 127

AF Decom AS 37 37 37 Svensk Kross & Återvinning AB - - 2 Total Environment 37 37 39

AF Energi & Miljøteknikk AS 55 55 55 Mollier AS 29 29 29 Aeron AS 186 186 186 Total Energy 270 271 270

Carrying amount as at 31 December 445 429 440

Impairment tests for goodwill The Group carries out annual tests to assess the impairment of goodwill and intangible assets. In the impairment test the book value is measured against the recoverable amount from the cash-generating unit to which the asset is allocated. Recoverable amounts from cash-generating units are determined by estimating their value in use. The value in use is calculated on the basis of discounting the future anticipated cash flows before tax with a relevant discount rate (WACC) before tax that takes the term and risk into account. Different discount rates were used for the Norwegian and Swedish operations as a result of differences in risk-free interest and tax.

The principal assumptions used in the calculation of recoverable amounts:

Norway 2010 2009 2008 Growth rate 1) 2.00 % 2.50 % 2.50 % WACC before tax 11.51 % 12.60 % 11.60 %

Sweden 2010 2009 2008 Growth rate 1) 2.00 % 2.50 % 2.50 % WACC before tax 10.72 % 12.60 % 11.60 %

1) In 2009 and 2008, growth was estimated for only the first four years. Perpetual growth is assumed for 2010.

Anticipated cash flows are based on the budget for 2011 approved by the management. Insofar as they exist, management approved business plans for 2012 are also included in these calculations. Budgets and business plans are based on assumptions regarding, among other things, demand, cost of materials, cost of labour and the overall competitive situation in the markets in which the AF Group operates. The assumptions made are based on management’s experience as well as external sources. A 4.0 % wage increase and 2.0 % increase in material costs are anticipated for all business units.

102 AF Group annual report 2010 Annual accounts group 103 84 76 75 78 64 257 289 101 166 196 221 127 500 bp 50.0 % 355 122 399 139 229 107 354 135 397 141 228 115 Estimated cash flow reduced by: reduced cash flow Estimated 100 bp 10.0 % Remaining amount with increase of WACC with: WACC of with increase Remaining amount 100 100 100 100 100 100 100 100 100 100 100 100 'Break even' cash flow even' 'Break Book value of assets of Book value - In as an index of 100. the recovera how is expressed it shows addition, test respectively (WACC) by changes if the discount rate ble amount changes factors points). All other 1 and 5 percentage points (i.e. 100 and 500 basis constant in the calculation. held are that this indicates amount is less than 100, the recoverable If for the index than the carrying amount is lower the recoverable of the assets in amount the impairment making test, a write-down example, For of goodwill necessary. will make it WACC the in point increase that a 5 percentage the table shows AF to the goodwill allocated necessary an impairment loss for recognise to AS. and Aeron Bygg Gøteborg amounts change if the cash flow is reduced respectively by 10 % and 50 %. respectively reduced is amounts change if the cash flow that the If is less than 100, this indicates cash flows the index of estimated the carrying than amount is lower recoverable amount of the assets in the impairment making test, a write-down example, For of goodwill necessary. necessitate will flow cash estimated in reduction % 50 a that shows table the AF Bygg to the goodwill allocated of an impairment loss for the recognition og Miljøteknikk AF Energi AS. Gøteborg, AS and Aeron 392 137 441 154 253 119 393 151 441 156 253 127

Estimated cash flow Estimated Recoverable amount Recoverable Indexed values AF Bygg Østfold AB AF Bygg Göteborg AF Decom AS og MiljøteknikkAF Energi AS Mollier AS AS Aeron Indexed values AF Bygg Østfold AF Bygg Göteborg AB AF Bygg Göteborg AF Decom AS AF Energi og MiljøteknikkAF Energi AS Mollier AS Aeron AS Aeron Sensitivity analysis for key assumptions key Sensitivity for analysis of the individual cash-generating value calculated the The exceeded units of 2010. Based on at the end carrying margin good a relatively amount by moderate that believes management Company’s the knowledge, existing the amounts calculation of recoverable key the changes in the assumptions for of an impairment loss. the recognition not necessitate will probably (WACC) rate a) Sensitivity of discount analysis recoverable between the estimated the relationship shows table below The of the assets in the impairmentamount and the book value of the AF test impairment the in assets the of value book The items. goodwill largest Group’s Sensitivity of cash flows b) analysis between normalised the relationship cash flows shows table below The ’break amount and the estimated assumed in the calculation of recoverable goodwill largest impairment in the of the AF Group’s test cash flow even’ in the impairmenttest, i.e. even’ the ’break providing cash flow The items. to book value of amount equal recoverable a that provides the cash flow as an index of 100. In recoverable how is expressed addition, it shows assets, cont. note 13 cont. note Note 14 Changes in the Group’s structure

Business combination in 2011 machinery contractor Johan Rognerud AS. The nationwide company has 70 In February 2011, the AF Group signed a final agreement to acquire parts of employees and state-of-the-art expertise in earth moving. The company the operations of Båtservice Offshore/Verft AS. AF Group is taking over all was acquired as part of a move to capture a larger share of the infrastructure employees and net working capital and property, plant and equipment at projects market. Johan Rognerud AS will continue as a wholly owned sub- the fair value of NOK 4 million. The business will continue as part of the AF sidiary of the AF Group. Group’s services to the offshore market. All employees of Båtservice Offshore/ Verft will be transferred to the AF Group and the newly established under- The acquisition of Johan Rognerud AS resulted in goodwill of NOK 11 million taking AF Offshore Mandal. The division will continue to provide services to related to anticipated economies of scale resulting from the coordination the offshore market in particular. The acquisition strengthens the AF Group’s of activities with the AF Group’s other activities. No part of the goodwill is focus on the offshore maintenance and modification market. expected to be tax deductible.

Business combination in 2010 The following table shows the consideration and the fair value of assets On 1 October 2010 the AF Group purchased 100 % the shares of the acquired and liabilities relating to the acquisition of Johan Rognerud AS:

Amounts in NOK million Johan Rognerud AS Cash consideration 10 Contingent consideration, estimated fair value 6 Total consideration to seller 16

Property, plant and equipment 58 Deferred tax assets 3 Receivables 76 Non-current interest-bearing liabilities -22 Current interest-bearing liabilities -13 Trade payables -97 Total net fair value of identifiable assets and liabilities 5

Goodwill 11

Based on the agreement on contingent consideration the AF Group is to pay building in the Gothenburg area and was acquired free of charge. Spalding the former owners of Johan Rognerud AS 50 % of the company’s operating was previously classified as an associate and consolidated according to the profit (EBIT) beyond an operating margin of 3.0 % for the next four years. equity method.

Since 1 October 2010 Johan Rognerud AS has contributed NOK 66 million On 26 October 2010 AF Miljø AS purchased the remaining 50 % of BA in operating revenues and NOK 0 million in profit for the year in the consoli- Gjenvinning AS. BA Gjenvinning AS was previously consolidated as a joint dated income statement. venture by the proportionate method. If BA Gjenvinning AS had been 100 % owned throughout 2010 revenues would have been NOK 10 million higher On 1 April 2010 AF purchased the remaining 50 % the shares of the property and the profit for the year would have been NOK 1 million less. company Spalding Fastigheter KB. The company owns an industrial and office

Sale of companies in 2010: On 11 November 2010 60 % of the shares in Miljøbase Vats AS, a wholly owned subsidiary, were sold. As a result of the sale Miljøbase Vats AS was reclassified from subsidiary to an associate in the Group.

104 AF Group annual report 2010 Annual accounts group 105 1 2 4 2 -1 -4 -3 -1 -2 90 10 26 58 17 17 42 82 37 54 -44 -13 -16 120 128 323 186 228 119 -224 60 % Aeron AS Aeron 3 -3 -2 -27 539 137 -373 100 % In April 2009, the AF Group bought the remaining 49 % stakeIn 49 bought the remaining in Mollier April AS AF Group 2009, the Kulde NOK 42 million. In AS was 40 % of Stavanger for 2009 the remaining business Energy the of part are companies Both million. 2 NOK for bought also og Miljøteknikk AF Energi into Kulde AS was merged and Stavanger area AS 1 January from with accounting effect 2010. Svensk in the joint venture In sold its 50 % interest July 2009, the AF Group and the sale consideration was NOK 10 million The Kross & Återvinning AB. a gain of NOK 4 million. generated structure in 2008: Group’s in the Changes NOK 228 AS for of Aeron On 4 July 2008 AF bought 100 % of the shares AS is part business area. million. Aeron of the Energy Cash consideration Cash in AF Gruppen ASA (treasuryShares shares) Intangible assets receivables Trade Amounts in NOK million Cash consideration for sale for consideration Cash costs Transaction costs Transaction fair value consideration, estimated Contingent seller to consideration Total plant and equipment Property, Inventories and cash equivalents Cash liabilities Non-current interest-bearing Amounts in NOK million Amounts in NOK Net cash consideration for sale for Net cash consideration plant and equipment Property, liabilities and other current payables Trade tax Deferred Cash and cash equivalents Cash tax payable Current liabilities assets and of identifiable net fair value Total Goodwill Non-current interest-bearing liabilities Non-current interest-bearing Current interest-bearing liabilities interest-bearing Current Direct gains on sale of operations (d) see IAS 27.34 on sale of operations, interest ownership gain on remaining Latent gains on sale of operations Total Current tax payable Current assets and liabilities Net identifiable Trade payables Trade Legal changes in the corporate structure in 2010: corporate changes in the Legal decided that the building of the AF Group On 16 Decemberthe Board 2010 and AF Bygg Øst should be combined into operations of AF Bygg Glomsrød 1 January from operationally merged units were The one unit, AF Bygg Østfold. AF Bygg of the merger accomplished by will be the merger 2011. Legally, the respective decided by was This Norway. the AF Group into Glomsrød 2011. on 14 February of directors boards structure in 2009: Group’s in the Changes business and Environment Energy the AS demerged AF Gruppen Norge AF Gruppen ASA. by companies owned separate to areas NOK for in RCO2 In 100 % of the shares December 2009, AF acquired is part company The business area. of the Energy 167,000. cont. note 14 cont. note Note 15 Subsidiaries

Date Business Ownership Voting Company name acquired address stake share Primary activity AF Gruppen Norge AS 05/09/1985 Oslo 100 % 100 % Civil Engineering, Building, Property Johan Rognerud AS 01/10/2010 Oslo 100 % 100 % Civil Engineering Pålplintar i Sverige AB 14/01/2000 Södertälje 100 % 100 % Civil Engineering AF Bygg Göteborg AB 01/07/2001 Gothenburg 100 % 100 % Building AF Bygg Glomsrød AS 01/09/2005 Halden 100 % 100 % Building Kilen Brygge AS 15/03/2005 Sandefjord 100 % 100 % Property Kilen Bygg AS 25/05/2004 Oslo 100 % 100 % Property Kilen Boliger AS 31/08/2010 Oslo 100 % 100 % Property Kilen Høyhus AS 31/08/2010 Oslo 100 % 100 % Property Blomsterstykket Utbygging AS 08/12/2009 Oslo 100 % 100 % Property Kirkeveien Utbyggingsselskap AS 01/07/2006 Oslo 100 % 100 % Property Rolvsrud Utbygging AS 31/10/2008 Oslo 100 % 100 % Property Rolvsrud Bygg AS 31/10/2008 Oslo 100 % 100 % Property AF Miljø AS 01/01/2009 Oslo 100 % 100 % Environment AF Decom AS 01/01/2009 Oslo 100 % 100 % Environment AF Decom Offshore AS 01/01/2009 Oslo 100 % 100 % Environment Palmer Gotheim Skiferbrudd AS 01/01/2007 Oppdal 100 % 100 % Environment AF Decom AB 15/12/2007 Gothenburg 100 % 100 % Environment AF Group Polska Sp.z.o.o. 24/10/2007 Warsaw 100 % 100 % Environment BA Gjenvinning AS 1) 01/11/2010 Oslo 100 % 100 % Environment AF Decom Offshore UK Ltd. 24/05/2010 London 100 % 100 % Environment AF Energi og Miljøteknikk AS 31/05/2006 Asker 100 % 100 % Energy Mollier AS 12/10/2007 Sandnes 100 % 100 % Energy Aeron AS 01/07/2008 Flekkefjord 100 % 100 % Energy Aeron Energy Technologies Ltd. 16/11/2009 Shanghai 100 % 100 % Energy RCO2 AS 21/12/2009 Langhus 100 % 100 % Energy AFG Invest 2 AS 08/12/2009 Oslo 100 % 100 % Others AFG Invest 3 AS 08/12/2009 Oslo 100 % 100 % Others

1) In 2009, AF Miljø AS owned 50 % of the shares in BA Gjennvinning AS, which was accounted for as a joint venture. The remaining 50 % of the shares were purchased on 1 November 2010, from which date the company was consolidated as a subsidiary.

Note 16 Joint ventures

Acquisition Business Ownership Voting Company date address stake share Primary activity BA Gjenvinning AS 1) 01/03/2003 Oslo 50 % 50 % Environment Kjørbokollen Utbygging AS 02/09/1999 Bærum 50 % 50 % Property Ørebekkstranda AS 30/01/2006 Råde 50 % 50 % Property Karlstadgata Utbygging ANS 29/04/2005 Oslo 50 % 50 % Property

1) BA Gjenvinning AS was consolidated as a joint venture until 1 November 2010, when the remaining 50% of the shares were purchased. BA Gjenvinning AS has been consolidated as a subsidiary since 1 November 2010.

106 AF Group annual report 2010 Annual accounts group 107 ------6 4 -4 -2 11 28 57 25 29 31 -10 -52 2008 2008 Primary activity Building Building Building Building Building Property Property Property Property Property Property Property Property Property Property Property Property Environment Environment - - 2 1 4 4 7 5 -4 -1 -1 -5 -2 -4 31 27 17 -17 Voting Voting share 38.00 % 25.00 % 50.00 % 50.00 % 34.00 % 40.00 % 49.00 % 33.33 % 33.33 % 33.33 % 33.33 % 33.33 % 33.33 % 45.00 % 45.00 % 45.00 % 45.00 % 33.33 % 40.00 % 2009 2009 Ownership stake 38.00 % 25.00 % 50.00 % 50.00 % 34.00 % 40.00 % 49.00 % 33.33 % 33.33 % 33.33 % 33.33 % 33.33 % 33.33 % 45.00 % 45.00 % 45.00 % 45.00 % 33.33 % 40.00 % ------3 3 1 -2 -1 11 27 99 -13 126 2010 2010 Business address Gothenburg Gothenburg Gothenburg Gothenburg Gothenburg Lillestrøm Bodø Oslo Oslo Oslo Oslo Oslo Oslo Oslo Oslo Oslo Oslo Stavanger Oslo Acquisition Acquisition date 01/02/2007 30/06/2008 01/12/2009 14/05/2008 14/05/2008 02/11/1993 10/08/2005 20/08/2007 20/08/2007 09/11/2007 09/11/2007 12/02/2010 12/02/2010 30/04/2010 30/04/2010 30/04/2010 30/04/2010 26/09/2009 15/11/2010 1)

Miljøbase Vats AS was previously a 100 % owned subsidiary. Miljøbase Vats AS was classified as an associate from the sell-down date on 15 November 2010. the sell-down on 15 November from date AS was classified as an associate Vats Miljøbase subsidiary. a 100 % owned AS was previously Vats Miljøbase Carrying in associates amount of investments as at 1 January Company Amounts in NOK million Amounts in NOK million Amounts in NOK Additions Additions AB Skummeslövsgården Non-current assets Disposals AB Sandarna Fastighetsutv. Vestra Current assets Current Reclassification of investments AB Tower Surte Share of profit after tax for the year for the after tax of profit Share i Strandvägen AB Fastigheter Non-current liabilities liabilities Current Net assets Income and loss profit through Adjustments 3 AB Lagerhyllan AF Göteborg Impairment losses Other equity adjustments Currency translation differences Investments in associates December as at 31 Romerike Boligutvikling AS Expenses Randemjordet AS Sandakerveien 99B AS Profit before tax before Profit Sandakerveien 99B KS Grefsenkollveien 16 AS Grefsenkollveien Grefsenkollveien 16 KS Grefsenkollveien Stovner UtviklingStovner AS Stovner UtviklingStovner KS Rolvsrud Utbygging 1 AS Rolvsrud Utbygging Rolvsrud Utbygging 1 KS Rolvsrud Utbygging Rolvsrud Utbygging 2 AS Rolvsrud Utbygging Rolvsrud Utbygging 2 KS Rolvsrud Utbygging Vici Ventus Technology AS Technology Ventus Vici Miljøbase Vats AS Vats Miljøbase

1) Investments in associates 17 Investments Note The table below shows the Group’s share (50 %) of assets and liabilities, sales and profit before tax of the investments in joint ventures. in joint tax of the investments before and profit sales and liabilities, (50 %) of assets share the Group’s shows table below The cont. note 17

The Group’s share of profit, assets and liabilities in associates. Amounts in NOK million Company Assets Liabilities Equity Income Profit Book value Skummeslövsgården AB 7 - 7 - - 7 V. Sandarna Fastighetsutv. ------Surte Tower AB 1 1 - - - - Fastigheter i Strandv. AB 11 11 - - - - AF Göteborg Lagerh. 3 AB 2 - 2 2 - 2 Romerike Boligutvikling AS 3 2 1 - -1 1 Randemjordet AS 9 7 2 1 - 2 Sandakerveien 99B AS 5 - 5 - 1 5 Sandakerveien 99B KS 51 49 2 - -1 2 Grefsenkollvn. 16 AS 2 - 2 - -7 2 Grefsenkollvn. 16 KS 38 32 6 - 7 6 Stovner Utvikling AS 2 - 2 - - 2 Stovner Utvikling KS 9 1 8 - - 8 Rolvsrud Utbygging 1 AS 1 - 1 - - 1 Rolvsrud Utbygging 1 KS 33 15 8 21 2 9 Rolvsrud Utbygging 2 AS 1 - 1 - - 1 Rolvsrud Utbygging 2 KS 9 5 4 1 - 4 Vici Ventus Technology AS 3 - 1 - -1 1 Miljøbase Vats AS 1) 226 163 63 2 - 72 Total 413 286 115 27 -1 126

1) Revenues and profits apply to the period Miljøbase Vats AS was an associate in the Group, i.e. from 15 November 2010 to 31 December 2010.

Note 18 Inventories

Amounts in NOK million 2010 2009 2008 Spare parts and project inventories 44 25 54 Raw materials 25 33 32 Finished products 24 18 13 Total inventories 93 76 99

Inventories mainly consist of spare parts, project inventories, and raw materials for use in production. Inventories are valued at cost or fair value on the balance sheet date, whichever is the lower. Inventories were not subject to impairment in 2010, 2009 or 2008.

Note 19 Projects for own account

Amounts in NOK million 2010 2009 2008 Housing projects in progress 18 12 111 Completed housing units for sale 99 153 187 Impairment of completed housing units for sale - - -7 Land for development 90 92 87 Total projects for own account 207 257 377

Of which capitalised interest 5 7 10 Interest rate for capitalised interest 4 % 4 % 4 %

Projects in progress represent housing units under construction. Inventories are valued at cost or the expected selling price, whichever is the lower, less the estimated selling costs on the balance sheet date. Land for development represents sites and building rights for which no decision on development has yet been taken. These sites can be used to Sensitivity to price changes for completed residential units for sale build approximately 608 residential housing units, whereof AF’s share is A price decrease corresponding to 10 % of fair value of completed housing 436 (644) and 22,200 m2 (22,200) of commercial space. units for sale would not have resulted in impairment of the carrying value at year end 2010.

108 AF Group annual report 2010 Annual accounts group 109 - - - - 2 -5 -1 -3 -3 63 88 77 15 88 210 398 283 -122 210 -200 -122 1,312 -322 1,309 -322 2008 2008 2008 5,230 1,758 3,472 1,309 1,549 -1,670 -3,794 - - 2 2 -2 -3 -5 -5 46 10 75 43 934 219 214 929 929 653 178 -234 219 214 -305 -234 -539 -539 2009 2009 6,283 2,562 3,721 2009 1,187 -2,349 -4,260 - 2 4 2 -5 49 45 57 45 24 -10 -13 -13 533 198 168 995 995 198 168 -237 -358 -358 -595 -595 1,008 1,824 2010 2010 2010 1,103 -1,656 12,129 10,305 -10,900 6 30 21 30 21 29 20 21 20 20 Note Note Note 1) Trade and other non-interest-bearing receivables and other non-interest-bearing Trade

Expected loss on production outstanding on onerous contracts is recognised in the income statement. in the income contracts Expectedloss on production outstanding on onerous is recognised Provision for losses as at 31 December as at losses for Provision Provisions for the year for Provisions Reversal of last year's provisions Reversal of last year's Bad debts during the year Movement in provision for losses on trade receivables losses on trade for in provision Movement losses as at 1 January for Provision Production outstanding on onerous contracts outstanding on onerous Production Trade receivables recognised in balance sheet in balance recognised receivables Trade Accumulated project contributions Accumulated Provisions for bad debt for Provisions Recognised in the income statement under projects in progress: statement in the income Recognised revenue Accumulated Gross trade receivables trade receivables Gross Credit balances with customers balances Credit Total trade and other non-interest-bearing receivables and other non-interest-bearing trade Total Total earned revenue not invoiced not earned revenue Total Other current non-interest-bearing receivables Other non-interest-bearing current Invoiced on projects in progress Invoiced Prepaid expenses Prepaid Earned revenue not invoiced not invoiced Earned revenue under projects in progress revenue as Recognised Value-added tax and other public charges paid in advance tax and other public charges Value-added Total unearned revenue invoiced invoiced unearned revenue Total Tax paid in advance Tax Production invoiced in advance included in other current liabilities in advance included in other current invoiced Production Credit balances with clients Credit Distribution in the balance sheet Distribution in the balance in advance included in trade receivables invoiced Production Unearned revenue, invoiced on projects in progress invoiced Unearned revenue, Total unearned revenue invoiced invoiced unearned revenue Total Earned revenue, not invoiced on projects in progress not invoiced Earned revenue, Invoiced on projects in progress Invoiced Trade receivables Trade Contracts in progress at year end year at in progress Contracts invoiced Unearned revenue under projects in progress as revenue Recognised Amounts in NOK million Amounts in NOK million Amounts in NOK million Amounts in NOK Number of completed residential housing units for sale units for housing residential Number of completed Number of completed homes for sale that are temporarily rented out temporarily rented that are sale homes for Number of completed

1) Note 21 Note Completed housing units that are not sold are rented out on short-term if a sale is imminent. rented terminated contractssold are not and are units that are housing Completed in progress Projects 20 Note cont. note 19 cont. note cont. note 21

Provisions for bad debt only covers provisions related to the customers’ ability to pay. Other risk related to trade receivables is considered in the assessment of each project. Amounts posted to the provisions account are written off when there is no expectation of collecting additional cash.

Note 22 Restricted funds

Of the Group’s cash and cash equivalents as at 31 December 2010 NOK 5 million (2) was restricted funds. The AF Group has provided a bank guarantee of NOK 80 million as security for tax withholding funds in the Group.

Note 23 Share capital and shareholder information

Amount in NOK The share capital consists of: Number Par value Book value A shares 71,117,940 0.05 3,555,897

Shareholder Share (%) Number of shares KB Gruppen Kongsvinger AS 32.8 23,295,235 OBOS Forretningsbygg AS 28.8 20,466,730 Aspelin Ramm Gruppen AS 5.8 4,092,040 LJM A/S 3.5 2,513,900 Moger Invest AS 2.9 2,064,621 Arne Skogheim 2.4 1,704,720 Bjørn Staavi 2.1 1,471,860 Jon Erik Evensen 1.0 710,000 Holstad Invest AS 1.0 691,560 Morten Midtskog 0.9 650,000 Ten largest shareholders 81.1 57,660,666 Total other shareholders 18.3 13,007,274 Treasury shares 0.6 450,000 Total number of shares 100.0 71,117,940

The shares are not subject to any voting restrictions and are freely negotiable. Each share represents one vote.

Total number of shares as at 1 January 2010 70,495,940 Issue for employees 26 March 2010 622,000 Total number of shares as at 31 December 2010 71,117,940

Shares and options owned by senior executives as at 31 December 2010

The Board Number of options Number of shares Tore Thorstensen 1) Elected by shareholder (Chairman) - 11,500 Peter Groth 4) Elected by shareholders - 11,500 Carl Henrik Eriksen 3) Elected by shareholders - - Eli Arnstad 2) Elected by shareholders - - Mari Broman Elected by shareholders - - Henrik Nilsson Elected by employees 2,500 12,300 Tor Olsen 5) Elected by employees 20,000 11,000 Arne Sveen Elected by employees 1,250 - Total 23,750 46,300

110 AF Group annual report 2010 Annual accounts group 111 8 29 21 -21 26.5 24.9 2008 16,008 320,150 450,500 653,500 831,500 76,500 83,800 86,000 shares 172,075 144,350 278,620 677,945 1,104,000 Number of 40,000 90,000 7 7 140,000 120,000 120,000 120,000 -8 -1 options 135,589 18.7 24.4 2009 Number of 12,502 91,105 250,045 257,000 278,000 348,105 - 1 17 26 -15 34.2 38.1 2010 22,500 450,000 492,100 692,055 492,100 CEO President Vice Executive President Vice Executive Executive Vice President Vice Executive Executive Vice President/CFO Vice Executive President Vice Executive Treasury shares Treasury

A party Arnstad 1,440 shares. Eli owns to related and Ringkjøb Ramm 76,355 shares. owns AS, which Aspelin Invest 4,092,040 shares AS, which owns Gruppen shares, his own in addition to Represents, shares. 96,515 which owns T Olsen Holding AS, shares, his own in addition to Represents, shares. 346,100 owns AS, which Tokanso and KB Gruppen Kongsvinger shares 23,295,235 owns AS, which shares, his own in addition to Represents, 20,466,730 shares. which owns Forretningsbygg, OBOS Represents Par value of treasury each (amounts in NOK million) at NOK 0.05 shares Par Number of treasury as at 31 December shares Gain (loss) on shares sold (amounts in NOK million) sold (amounts Gain (loss) on shares - Purchase price for shares sold (amounts in NOK million) shares price for - Purchase Sales proceeds (amounts in NOK million) (amounts Sales proceeds Average sales price per share (amounts in whole NOK)* sales price share per Average Total disposal of shares Total Shares forming part forming acquisition of companies Shares for of consideration Number of shares sold to employees to sold Number of shares Total acquisition cost acquisition Total Average acquisition cost per share (amounts in whole NOK)* acquisition cost per share Average Number of shares purchased Number of shares Share transactions Share Corporate Management Team Management Corporate Pål Egil Rønn Egil Pål Fjukstad Tore Gundersen Paul-Terje Robert Haugen Sverre Alf Hærem Alf Sverre Arild Moe Total Transactions recognised directly in equity are specified in the ’Consolidated statement of changes in equity’. of changes statement ’Consolidated directly in equity specified in the are recognised Transactions

Treasury shares have been bought to sell to employees and as partial payment for company acquisitions. acquisitions. and as partial company employees to sell for been bought to payment have shares Treasury parties related in 2010 or 2009. not bought from were Shares Note 24 Note 4) 5) 1) 2) 3) cont. note 23 cont. note The Board is authorised to acquire up to 10 % of the share capital. This authority This is scheduled for which the 2011 Annual General is valid until Meeting, capital. 10 % of the share up to is authorised acquire to Board The at an Extraordinary AF Gruppen ASA and its subsidiaries of was approved all employees General Meeting13 May 2011. An option scheme for held on employees. in a private placing for of 5,163,750 shares issued a total 2011 when the Board option scheme was concluded in February The 4 January 2008. Note 25 Retirement benefits

The Norwegian companies in the Group are obligated to have an occupa- the company’s co-payment, which is 25 %, to individuals who retired early tional pension scheme in accordance with the Norwegian Mandatory under the old plan. Future liabilities associated with this scheme are financed Occupational Pensions Act. The Group’s pension schemes satisfy the require- by operations and are unfunded. At the end of the year the Group had 48 ments of the Act. (22) AFP pensioners. The expense for the year and future liabilities associated with this scheme have been included in the statement below. Defined-contribution plan A defined-contribution pension scheme for all employees born in or after A significant shortfall was identified when the old AFP pension plan was 1952 or employed in or after 2003 has been established for the Group’s terminated. This shortfall will have to be made up by the member companies employees in Norway. The contributions constitute 4 % of pay between 1 G continuing to pay premiums for the next five years. The company’s share of and 6 G and 8 % of pay between 6 G and 12 G, with the employee paying 2 this shortfall has been estimated and provision has been made for it in the % of pay up to a maximum of half of the contribution. Contributions to accounts. See note 28 ’Provisions’. defined-contribution schemes are recognised in the income statement in the year to which they apply. A new AFP pension plan has been established as a replacement for the old one. Unlike the old plan, the new AFP plan is not an early retirement scheme, Defined-benefit pension plan but a plan that provides a lifelong supplement to the regular pension. Employees The Group has a collective pension scheme for employees born in or before can take the new AFP scheme from the age of 62 or remain in employment 1951 that is defined as a defined-benefit plan. The scheme only covers re- and earn further benefits until the standard retirement age of 67. The new tirement pensions. The plan aims to pay benefits of 60 % of the pay level AFP pension scheme is a defined benefit multi-employer pension plan, up to 12 G (G is National Insurance base amount) at retirement. This benefit funded through premiums that are defined as 1 % of salary. The scheme’s level is based on a 30-year qualification period. The retirement age is 67 and *retirement benefit obligation and plan assets cannot be reliably measured there is a 15-year payment period. Parts of the retirement benefit payments and allocated at present. For accounting purposes, the scheme is treated as are covered by the Norwegian National Insurance Scheme and expected a defined contribution plan, with premium payments expensed as incurred, payments from this scheme. The rest is funded through accumulated and no provisions made in the accounts. No premiums will be paid into the reserves in insurance companies. At the end of 2010 there were 74 (102) new scheme before 2011, when the premium will be fixed at 1.4 % of total active participants in the scheme and 91 (91) pensioners. payments between 1 G and 7.1 G to the company’s employees. There are no accumulated reserves in the scheme and it is expected that the level of In addition, in Norway the company has participated in the Norwegian premiums will rise over the coming years. Federation of Trade Unions (LO)/Norwegian Confederation of Norwegian Enterprise (NHO) agreement under which employees were entitled to early Employees in Sweden are members of two defined-benefit multi-company retirement pension (AFP) from the age of 62. It was decided to discontinue schemes that are recognised under the defined-contribution scheme this plan in February 2010 and early retirement under the plan was only (see note on accounting policies). The schemes cover 189 (171) people. possible until 31 December 2010. There is a remaining provision covering

Retirement benefit expense for the year has been calculated as follows: Amounts in NOK million 2010 2009 2008 Current service cost -3 -3 -3 Interest expense on incurred pension liabilities -4 -3 -4 Expected return on pension plan assets 5 5 4 Social security costs -1 -1 - Actuarial gains/losses recognised in the income statement -2 -1 - Total defined-benefit retirement benefit -5 -3 -3 Defined-contribution pension, Norway*) -31 -24 -27 Contributions to pension schemes, Sweden *) -5 -5 -5 Other retirement benefit costs*) - - -7 Service cost for the year -41 -33 -42

*) Exclusive of social security costs.

The service cost for the year is based on financial assumptions at the start of the year, while the balance sheet status is based on financial assumptions at the end of the year.

112 AF Group annual report 2010 Annual accounts group 113 -

3 4 4 1 9 5 3 2 -4 -5 -3 -4 -3 -6 -5 -1 -8 -8 85 75 13 - 83 86 10 2 2 -15 76 -74 Total 2006 ------3 2 3 2 2 2 2 -1 -1 -1 -1 2008 Unfunded - 9 - - 3 4 4 1 9 2 3 -5 -7 -4 -4 -3 -4 -5 -5 -4 85 82 75 13 80 86 -75 10 -15 -10 -10 2007 Funded - - 3 3 2 5 6 5 4 3 1 -5 -4 -7 -7 -5 -8 -6 -2 83 86 86 93 14 -13 -13 Total 4 -3 -3 83 -86 ------2008 2 2 3 2 1 3 1 1 1 -1 -2 -1 -2 2009 Unfunded - - - - - 3 3 5 6 5 4 2 -4 -4 -9 -5 -4 -6 80 86 83 93 14 -10 -14 -14 - -2 -7 86 -93 Funded 2009 3 5 5 3 1 3 5 1 -2 -5 -9 -3 -2 -4 -5 -3 -2 86 93 86 88 15 -13 -13 -14 -14 Total 2 ------9 -2 3 6 7 1 1 2 7 1 1 1 86 -2 -7 -2 -2 -88 2010 2010 Unfunded - - - 3 5 5 3 3 3 -8 -3 -9 -3 -5 -4 -3 -3 83 93 79 88 15 -10 -14 -15 -15 Funded

Actuarial (losses)/gains on plan assets Actuarial (losses)/gains on retirement Actuarial (losses)/gains on retirement benefit obligations Net retirement benefit obligations as at as obligations benefit retirement Net security social costs before 31 December, Fair value of plan assets as at 31 December value of Fair Gross retirement benefit obligations as at retirement Gross 31 December Development The above information was determined prospectively. information above The Change in gross retirement benefit retirement in gross Change obligations as at benefit obligations retirement Gross 1 January plan assets Amounts in NOK million Amounts in NOK and benefit obligations Retirement Current serviceCurrent cost Interest expense on retirement benefit benefit expense on retirement Interest obligations Actuarial gains/losses Retirement benefit payments, excl. social excl. benefit payments, Retirement security costs Gross retirement benefit obligations as at as obligations benefit retirement Gross 31 December Change in gross plan assets in gross Change value of plan assets as at 1 January Fair Expected on plan assets return Actuarial (losses)/gains Premium payments payments Premium Retirement benefit payments Retirement Fair value of plan assets as at 31 December of plan assets as at value Fair benefit obligations Net retirement Social security costs Unrecognised actuarial gains or losses Unrecognised (plan assets) as at 31 December (plan assets) as at Net book retirement benefit obligations Net book retirement Actual return on plan assets on Actual return Expected premium payment for next year for payment Expected premium Expected benefit payments for nextyear Expected payments benefit Changes in obligations Changes Net book retirement benefit obligations as at Net book retirement 1 January Retirement benefit expense recognised in the recognised benefit expense Retirement income statement Premium payments, incl. social security social incl. costs payments, Premium Retirement benefit payments, unfunded schemes benefit payments, Retirement (plan assets) as at 31 December (plan assets) as at Net book retirement benefit obligations Net book retirement Book retirement benefit obligations as at as benefit obligations Book retirement 31 December Book plan assets as at 31 December Book plan assets as at cont. note 25 cont. note cont. note 25

Assumptions for actuarial calculations 31.12.2010 31.12.2009 31.12.2008 Discount rate 3.20 % 4.40 % 4.30 % Return on plan assets * 4.60 % 5.60 % 6.30 % Pay growth 3.50 % 4.00 % 4.25 % Adjustment of National Insurance base amount (G) 3.75 % 4.00 % 4.25 % Adjustment of retirement benefits 0.50 % 1.30 % 2.00 % Turnover 10.00 % 10.00 % 10.00 % Disability ** ** **

*) Based on historical return for Norwegian life insurance companies. **) K2005 adjusted for observed development.

2010 2009 2008 Life expectancy Men Women Men Women Men Women Age 65 84.28 86.84 82.60 84.89 82.60 84.89 Age 45 82.40 85.58 77.10 82.42 77.10 82.42 Age 40 82.24 85.47 76.76 82.18 76.76 82.18

Distribution of plan assets by investment category 31.12.10 31.12.09 31.12.08 Equities 13.6 % 7.0 % 6.0 % Property 19.0 % 21.0 % 23.0 % Non-current bonds 43.1 % 45.0 % 48.0 % Current bonds 22.7 % 26.0 % 22.0 % Other 1.6 % 1.0 % 1.0 % Total 100.0 % 100.0 % 100.0 %

Note 26 Interest-bearing loans and credits

Amounts in NOK million Effective interest rate 2010 2009 2008 Bank overdraft 1) 3.4 % 6 - 63 Building loans and other bank loans 3.7 % 16 50 145 Financial lease liabilities 3.6 % 19 35 59 Other liabilities 4.5 % 23 6 7 Loans related to acquisition of enterprises 4.0 % 8 4 188 Total interest-bearing loans and credits 72 95 462

Classification in the balance sheet: Current liabilities 23 73 352 Non-current liabilities 49 22 110 Total interest-bearing loans and credits 72 95 462

Maturity groupings: Liabilities maturing within 1 year 23 73 352 Liabilities maturing in between 1 and 5 years 34 22 53 Liabilities maturing in more than 5 years 15 - 57 Total 72 95 462

1) At the end of 2010 the Group had an unutilised bank overdraft facility of NOK 546 million (541) linked to a corporate cash pooling system. Assuming that additional collateral is furnished, the Group had unused credit lines for bank loans including overdraft facilities of NOK 900 million (900) at the end of 2010.

114 AF Group annual report 2010 Annual accounts group 115 8 2 1 59 35 19 55 13 25 81 66 36 20 146 161 356 307 369 215 542 757 757 Total Total Total 2008

------2 2 After 5 years After After 5 years After After 5 years After 70 16 44 171 196 381 114 367 396 257 620 877 877 2009

4 1 1 34 17 12 38 19 13 1-5 years 1-5 years 1-5 years - 3 1 7 7 14 15

23 17 27 18 100 207 119 462 749 219 669 763 321 1,750 2010 1,331 1,652 1,652 13,000 22,750 341,250 0-1 years 0-1 years 0-1 years

(NOK) 2

See note 30 for further 30 for See note information. Minimum payment Interest Repayment Repayment 2008 Minimum payment Interest Repayment Repayment 2009 4 years. debt for of 3.6% and average rate based on an interest 1-5 is calculated on leasing loans years rate interest The Minimum payment Interest Repayment Repayment Machinery and vehicles 1 due in year of machinery, Leasing Leasing of machinery, due in years 1-5 due in years of machinery, Leasing Total and furnishings installations rent, Office 1 Rent due in year 1-5 Rent due in years Amounts in NOK million leases Minimum liabilities - operating Leasing of machinery, due after 5 years of machinery, Leasing Rent due after 5 years Financial lease liabilities are due for repayment as follows: repayment due for are lease liabilities Financial 2010 Total lease liabilities operating Total Maturity groupings Operating lease liabilities due within 1 year Operating lease liabilities due in 1-5 years Operating lease liabilities due after 5 year Total operating lease liabilities operating Total metres number of square New offices at Helsfyr, Rent per m

Annual rent (NOK million) Annual rent Rental period (years) Minimum contractual payment (NOK million) Note 27 Leases Note The leases do not contain restrictions regarding the Group’s dividend policy or financing options. the Group’s leases do not contain restrictionsThe regarding Group as lessee Group The majorityan have of the non-terminable leases extension offices and other facilities. machinery, various into operating leases for has entered Group The option. non-terminable operating leases as at 31 December: to minimum liabilities related future has the following Group The cont. note 26 cont. note cont. note 27

In 2007 a 15-year lease was entered into for new office premises at Helsfyr in sublease income. Non-terminable operating leases are agreed for an average Oslo. The lease will run from 2010 to 2025 and covers an area of approximately period of 5-10 years for offices and 3-5 years for machinery. Lease agreements 13,000 square metres. The total minimum payment under the lease is NOK usually contain a right to extend the term of the lease. For offices leases, the 341,250,000. agreements normally contain a clause for renewal at market rent once the minimum term expires. In connection with the sale of Miljøbase Vats a new long-term lease was entered into between Miljøbase Vats and AF Decom Offshore AS to regulate An expense of NOK 274 million (267) is recognised in the consolidated income the lease agreement concerning the environmental base facility at Vats. statement for operating leases for 2010, including NOK 94 million (58) in Entered into on 31 August 2010, the lease is non-terminable and runs until rent. Operating leases primarily consist of rent for non-terminable leases, 1 July 2025. The rental fee is NOK 47 million, excl. VAT per year. machine hire for non-terminable leases, and short-term terminable leases for machinery and equipment. Some of the assets leased under non-terminable operating leases are subleased. The figures for non-terminable leases are shown gross before deductions for

Group as lessor Revenue of NOK 14 million (17) is recognised in the consolidated income statement for operating leases in 2010. Lease income consists mainly of short-term renting of offices. Minimum sublease income is:

Sublease of offices 2010 2009 Sublease rent due in year 1 5 2 Sublease rent due in years 1-5 12 2 Sublease rent due after 5 years - - Total 16 4

Note 28 Provisions

Provisions for Provision Social sec. Other Total Amounts in NOK million warranty work AFP costs options provisions provisions As at 1 January 2010 37 - - 16 53 Reversal of previous provisions -32 - - -13 -45 Provisions for year 36 11 11 43 101 Used during the year -3 - - - -3 As at 31 December 2010 38 11 11 46 106

Classification in the balance sheet 2010 2009 2008 Non-current liabilities 11 - 3 Current liabilities 95 53 54 Total 106 53 57

Provisions for warranty work represent the management’s best estimate of the warranty liability for ordinary building and civil engineering projects and warranty liability under the Housing Construction Act. The warranty period is normally 3-5 years. The provisions include completed projects and are based on experience.

116 AF Group annual report 2010 Annual accounts group 117 124 200 133 211 1,057 2008 1,725 73 686 305 131 520 2009 1,715 92 455 237 134 570 2010 1,488 (1) Credit risk (1) Credit has established management The level. risk is handled at the Group Credit risk are credit to and exposure credit that granting ensure guidelines to risk is the risk Credit of financial loss if a customer continuously. monitored or counterparty his con- to fulfil does not manage a financial instrument to trade risk is usually a consequence of the Group’s tractual Credit obligations. risks linked also credit transactions to are with derivatives There receivables. and deposits in banks and financial institutions. current other and and other receivables Trade receivables trade to linked risk credit to exposure Group’s The to a relating circumstances individual by affected principally is receivables of the such as the demographics Other circumstances, particular customer. risk. on the credit little affect have etc. factors, geographical base, customer losses. anticipated for net of provisions amounts in the balance sheet are The is objective evidence that a credit losses when there is made for Provision If risk is identified on the in a loss. a credit risk result can be expected to as security a bank guarantee for will ask for the Company contract date, with the contract. in accordance payment - Roads the Norwegian Administra are Public customers largest Group’s The and other oil companies on the Norwegian Shelf. Continental tion, Statoil, high interna- agencies or they have either government are customers These risk rankings, that the credit tional credit and the management believes In with the Norwegian is minimal. accordance represent these customer provide must customer the contracts, construction and building for standard security 17.5 % of the contract fulfilment of his contractual of 10 to price for before contract a on work start to obligated not is contractor The obligations. security the customer. he receives from number of con- a large over is spread risk of the Group credit remaining The tract a deposit of at least pay partners always Homebuyers and homebuyers. The contract. price a purchase when entering into 10 % of the purchase The residential housing units. on sold charge fixed has a vendor’s Company low. and is considered number of homebuyers a large over risk is spread credit 20 Note Trade payables and non-interest-bearing non-interest-bearing and payables Trade

Amounts in NOK million Trade payables Trade liabilities Public customers from Prepayments Accrued holiday pay, incl. social security incl. costs pay, holiday Accrued liabilities and other current Accruals liabilities and non-interest-bearing payables trade Total Trade payables and other current liabilities consist primarily of liabilities linked to purchases, advances on construction contracts, employee benefits, benefits, on construction advances liabilities consist primarily current and other employee contracts, payables of liabilities linked purchases, to Trade value-added tax and other public liabilities.

Note 29 Note liabilities Financial risk and financial instruments 30 Financial Note instruments: risk Financial the use of financial risks through the following is exposed to Group The instruments: risk 1 Credit 2 Market risk risk rate 2.1 Interest 2.2 Currency risk price and scrap steel risk 2.3 Other price risks 3 Liquidity risk risks and each of the above to on exposure information provides note This them. measuring and managing for principles and processes the goals, in the consolidated is included elsewhere information quantitative Further financial statements. establishing and supervising responsibility for has the overall the Board The risk management framework. Risk management principles have Group’s identify and analyse the risk which the Group to to been established in order risk, monitor acceptable risk controls, and relevant set limits for is exposed, Risk and comply with the limits. management principles are and systems reflect changes in activities to regularly and the marketreviewed conditions. risk the Group management, for and procedures standards training, Through in of control, a disciplined and constructive develop environment aims to which every and duties. understands his/her roles employee such as bank loans and settlement instruments, uses financial Group The purposeThe in connection with the acquisition of companies. agreements, for needed for investments to raise capital of these financial instruments is also has financial instruments such as trade Group The activities. the Group’s and commodity forward exchange contracts, trade payables, receivables, directly linked the day-to-day which are to operation of the business. etc., cont. note 30

Maximum exposure to credit risk in respect of trade receivables on the balance sheet date according to age:

Amounts in NOK million 2010 2009 2008 Trade receivables - age distribution 1-30 days overdue 107 100 366 31-60 days overdue 26 37 21 61-90 days overdue 62 16 12 91-120 days overdue 3 11 1 More than 120 days overdue 114 168 270 Total receivables overdue, but not written down 312 332 670

Receivables not yet due 683 602 641 Total receivables not written down 995 934 1,312

Age distribution 2010 Not yet due 1–30 31–60 61–90 91–120 >120 Total Trade receivables, gross 683 107 28 62 4 124 1,008 Provision for losses - - -2 - -1 -10 -13 Trade receivables in the balance sheet 683 107 26 62 3 114 995

A relatively large proportion of trade receivables are more than 120 days Cash, cash equivalents and money market investments overdue. This is linked to the complexity of the final account for the projects. Investments in money market funds, certificates, etc., are permitted only in The final account lists all the work performed under the contract against the the case of liquid securities and only with counterparties with good credit- contract prices. In addition, the actual work performed will normally include worthiness. The credit risk linked to cash and cash equivalents is limited, items that are not described in the contract, and the parties have to reach as the counterparties are banks with a high credit ranking that is assessed an agreement on how to calculate the price and quantity of such items. This and published by international credit rating institutes such as Moody’s and work normally takes several months and, in the case of complex contracts, Standard & Poors. The strict creditworthiness requirements mean that can take up to a year. Impairment due to unwillingness or inability to pay is counterparties are expected to fulfil their obligations. rare. Changes in the value of receivables are primarily due to changes in project revenue estimates and are entered as an adjustment of project revenue.

The tables below show the maximum credit exposure. The maximum credit exposure corresponds to book value.

Amounts in NOK million 2010 2009 2008 Financial assets Interest-bearing receivables (non-current) 23 44 23 Other receivables (non-current) 1 1 8 Trade and non-interest-bearing financial receivables 1,052 1,173 1,549 Interest-bearing receivables 6 12 12 Cash and cash equivalents 623 223 130 Maximum credit exposure 1,705 1,453 1,722

118 AF Group annual report 2010 Annual accounts group 119 - - 165 -462 -297 2008 2008 - 7 -95 279 185 2009 2009

1 -7 -72

652 580 2010 2010 31 December 2010 by NOK 14 million (15). The analysis assumes that other analysis assumes The 31 December NOK 14 million (15). 2010 by constant. variables remain of earnings after tax the translation to related Changes companies was NOK -60 million in 2010. foreign Book earnings after tax for If 10 % against other currencies, the NOK had weakened/strengthened primarily SEK, been NOK 6 million (1) lower/ earnings have after tax would higher. (2.3) Other risks price equity to is exposed securities Group priceThe risk because of investments balance sheet either as and classified on the consolidated the Group held by Total financial assets or loss. profit sale or at fair value through for available priceexposed to risk was NOK 3 million (4) as at 31 December 2010. The AF Group’s financing is based on variable interest rates and the Group is, is, Group and the rates on variable financing is based interest AF Group’s The interest has no fixed Group The risk. rate interest exposed to therefore, See further loans and agreements. description 26 Interest-bearing in note credits. exposure. rate interest hedge effective does not use derivatives to Group The recycled from price the sale of scrap steel is exposed to risk from Group The Norththe in structures steel hedged of demolition pricesSea. are Scrap steel policy prices hedge scrap steel in is to Group’s The forward contracts. by expected sales of scrap steel. about 75 % of the coming year’s NOK for companies to Group management has issued guidelines that require The manage the Inmanage their currency to order scrap steel. and price risk for transactionscurrency and recognised commercial and price future risk from and scrap steel entities use forward exchange assets and liabilities Group contracts. Current assets/liabilities Current Financial liabilities with variable interest rates with variable liabilities interest Financial Amounts in NOK million Financial assets with variable interest rates with variable assets interest Financial (debt) receivables Net financial Forward commodity contractsForward Forward currencyForward contracts Amounts in NOK million Fair value of forward contracts entered into as at 31 December: as at into entered contracts of forward value Fair Sensitivity to changes in exchange rates Sensitivity changes in exchange to currencies and liabilities in foreign Assets raised loans and have AS have AF Gruppen ASA and AF Gruppen Norge USD and SEK. in Net bank deposits and receivables deposits in EUR, GBP, If NOK 62 million at year-end. to the NOK had amounted currencies foreign the earnings after 10 % against these currencies, weakened/strengthened analysis The in 2010 (10). been NOK 4 million higher/lower have tax would constant. assumes that other variables remain to equity related differences translation to linked Changes If was NOK 140 million at year-end. currencies the Book equity in foreign primarily 10 % against other currencies, NOK had weakened/strengthened in book equitySEK, entailed an increase/reduction as at have this would (2.2) Currency risk and scrap steel price risk price steel risk and scrap (2.2) Currency countries currency in several to and is exposed operates risks Group The riskThis is particularly SEK, to in relation GBP relevant currencies. in several transactions, commercial risk future arises exchange from and EUR. Foreign operations. in foreign and net investments assets and liabilities recognised make in their companies in the AF Group most of their purchases The NOK 6 gains in 2010 were Net exchange functionalrespective currencies. million (-8). (2) Market risk (2) Market risk rate (2.1) Interest especially building activities risk and, rate for interest is exposed to Group The level rate interest in which the general account, own for home building for, an impact on the saleabilitywill have and consequently homes of completed minimise this risk to by endeavours Group The tied-up capital. the Group’s homebuyers. units and deposits from advance sales of housing requiring account. own for See also the description 19 Projects in note rates Sensitivity changes in interest to follows: as were financial instruments interest-bearing the Group’s the end of the year At assumes analysis The tax. after million 4/-4 NOK by earnings increased/reduced have would date sheet balance the on bp 100 by rate interest the in change A constant. that other variables remain cont. note 30 cont. note cont. note 30

(3) Liquidity risk million (541). Assuming that additional collateral is furnished, AF had unused Liquidity risk is the risk that the Group will not be able to service its financial credit lines for bank loans including overdraft facilities of NOK 900 million obligations when they are due. The Group’s strategy for handling liquidity (900) at the end of 2010. See note 31 Capital management for information risk is to have sufficient cash and cash equivalents at all times in order to fulfil about targets for capital management debt ratio in the Group. its financial obligations when due without risking unacceptable losses or damaging its reputation. All companies in the AF Group are connected to a The following table provides a summary of the maturity structure of the Group’s corporate cash pooling system. Surplus liquidity on a consolidated account financial liabilities based on contractual payments including estimated interest beyond the part which constitutes necessary working capital, is managed rates. Financial derivatives that are liabilities are included in the maturity by the company’s finance function. Surplus liquidity is mainly invested in analysis. In cases where the other contracting party can demand early re- money market funds The management monitors cash and cash equivalents demption, the amount is included in the earliest period in which payment on a weekly basis, and each month the Corporate Management Team reviews can be required by the other party. If liabilities are subject to redemption the liquidity in the projects. At the end of the year the Group had an unutilised on demand, they have been included in the column under 6 months. bank overdraft facility linked to a corporate cash pooling system of NOK 546

Maturity groupings of financial liabilities Maturity groupings of contractual cash flows

Amounts in NOK million Carrying Future Less than 6 6-12 More than 31.12.10 amount payment months months 1-2 years 2-5 years 5 years Non-derivative financial liabilities Drawings on the corporate cash pool 6 6 6 - - - - Building loans and other bank loans 16 17 - 3 6 8 - Financial lease liabilities 19 20 4 3 5 8 - Other non-current liabilities 23 29 5 - 1 3 19 Loans related to acquisition of enterprises 8 9 2 - 2 4 - Trade payables and other financial debt *) 1,025 1,025 1,025 - - - -

Financial derivatives Forward commodity contracts 7 7 4 3 - - - Total 1,104 1,113 1,047 10 15 23 19

31.12.09 Non-derivative financial liabilities Drawings on the corporate cash pool ------Building loans and other bank loans 50 51 25 24 1 1 - Financial lease liabilities 35 37 9 9 4 15 - Other non-current liabilities 6 6 6 - - - - Loans related to acquisition of enterprises 4 4 2 - 2 - - Trade payables and other financial debt *) 1,206 1,206 1,206 - - - - Total 1,301 1,304 1,248 33 7 16 -

31.12.08 Non-derivative financial liabilities Drawings on the corporate cash pool 63 63 63 - - - - Building loans and other bank loans 145 170 41 40 6 24 59 Financial lease liabilities 59 66 13 13 8 30 2 Other non-current liabilities 7 7 7 - - - - Loans related to acquisition of enterprises 188 193 189 - 2 2 - Trade payables and other financial debt *) 1,268 1,268 1,268 - - - - Total 1,730 1,767 1,581 53 16 56 61

120 AF Group annual report 2010 Annual accounts group 121 - - - 1 -7 -59 130 Fair Fair -403 1,592 value -1,268 - - - 1 -7 -59 2008 130 -403 1,592 -1,268 amount Carrying - 1 7 3 -60 -35 223 Fair Fair 163 1,230 value -1,206

- 1 7 3 -60 -35 2009 223 163 1,230 -1,206 amount Carrying based on factors not obtained from observablebased on factors not obtained from markets. 1 1 2 -7 -19 -53 623 Fair Fair 605 1,082 value -1,025 Valuation derived directly or indirectly from the quoted price the quoted derived directly or indirectly from Valuation 1 in level Available-for-sale financial assets, financial derivatives financial assets, Available-for-sale and or loss profit value through at fair financial assets financial derivatives and financial financial assets, Available-for-sale at fair value measured are or loss profit assets at fair value through 3 in IFRS 7. 1 - Level Level the valuation hierarchy, to according lease agreements and financial Loans by using fair value of loans and financial leases has been estimated The and the market rates based on current that are interest cash flows future rate. a variable interest liabilities have term. All interest-bearing remaining in the balance recognised included at fair value when they are are Loans no discrepancies Based on the assessments made, the first time. sheet for been identified between book value and fair value. have 3) 1 1 2 prepayments from customers and statutory customers from obligations such as unpaid prepayments costs. value-added benefits and other personnel-related tax, retirement assets pledged to a description of the terms related and conditions For see furtherand guarantees, 34. details in note -7 -19 -53 Other information note valuation method reclassified so that the been assets have No financial amortisedis changed from versa. fair value or vice cost to 623 2) prices 1 - Quoted in an active market an asset or liabilityLevel for 2 - Level Valuation 3 - Level 605 1,082 -1,025 amount Carrying - 2010 1) 1) 3) 3) 3) 1) 2) 2) 3) **) *)

Loans and receivables, cash and cash equivalents and trade and trade cash and cash equivalents and receivables, Loans and other financial liabilities payables other non- trade receivables, fair value of cash and cash equivalents, The bear other non-interest and trade payables bearing receivables, interest ing liabilities is evaluated as equal to book value based on the short as equal to ing liabilities is evaluated time and customer this type of financial instrument. for horizon Interest-free between value if the difference present to discounted are supplier credits of loans and The assessed values book value and fair value is significant. with receivables Long-term bad debts. for net of provision are receivables rates, based on interest the Group valued by are rates variable interest market risk, and other risk factors ratings, linked each individual credit to a floating interest liabilities have financial instrument. All interest-bearing have discrepancies no significant Based on the assessments made, rate. been identified between book value and fair value. Trade payables and other financial liabilities consist of ordinary trade payables payables trade ordinary of consist liabilities financial other and payables Trade prepayments include not do liabilities Financial liabilities. current other and and statutory customers from unpaid value-added obligations such as tax, costs. and other personnel-related benefits retirement Trade payables and other financial liabilities consist of ordinary payables trade Trade liabilities do not include Financial liabilities. and other current payables Loans and receivables include trade receivables, other non-interest bearing non-interest other include trade receivables, and receivables Loans not are and receivables Loans bearing receivables. and interest- receivables expenses. prepaid Financial leases Financial Total Financial derivatives - forward currency contracts Financial and other financial debt payables Trade Loans Financial assets at fair value through profit or loss profit assets at fair value through Financial Amounts in NOK million (liabilities) Assets financial assets Available-for-sale Cash and cash equivalents Cash Financial derivatives - forward commodity contracts Financial Loans and receivables Loans **) *) Fair value of financial instruments compared with carrying amounts See Note 26 - Interest-bearing loans and credits for information on interest- information for loans and credits 26 - Interest-bearing See Note bearing leases. in respect of financial loans and liabilities *) cont. note 30 cont. note 1) fair value determining for Principles cont. note 30

The following table shows the Group’s assets and liabilities as measured by the valuation hierarchy in IFRS 7:

Amounts in NOK million Assets (liabilities) 2010 Level 1 Level 2 Level 3 Total Shares quoted on the OTC list 2 - - 2 Financial derivatives - forward currency contracts - 1 - 1 Various non-current investments - - 1 1 Financial derivatives - forward commodity contracts - -7 - -7 Total 2 -6 1 -3

2009 Level 1 Level 2 Level 3 Total Shares quoted on the OTC list 3 - - 3 Various non-current investments - - 1 1 Financial derivatives - forward currency contracts - 7 - 7 Total 3 7 1 11

2008 Level 1 Level 2 Level 3 Total Shares quoted on the OTC list 1 - - 1 Various non-current investments - - - - Financial derivatives - forward currency contracts - - - - Total 1 - - 1

122 AF Group annual report 2010 Annual accounts group 123 ------1 1 9 2 7 3 - 1 - - 1 - - -5 -9 -3 11 10 11 11 -10 Total ------1 1 - 1 - 1 - - - 1 1 fin. assets Avail.-for-sale Avail.-for-sale ------7 7 - 7 1 - - - - 7 7 -4 -9 -6 Financial Financial derivatives ------1 3 2 1 2 3 1 3 2 -1 11 -10 profit or loss profit Fin. assets at fv in assets at Fin. Current liabilities Current Current assets Current Classification in the balance sheet in the balance Classification Non-current assets Book value as at 31 December 2008 31 December as at Book value Changes in value Impairment the company distributions to due from Disposals Additions 2008 Book value as at 1 January 2008 Current liabilities Current Current assets Current Classification in the balance sheet in the balance Classification Non-current assets Book value as at 31 December 2009 31 December as at Book value Changes in value Impairment the company distributions to due from Disposals Additions 2009 Book value as at 1 January 2009 Current liabilities Current Current assets Current Classification in the balance sheet the balance in Classification Non-current assets Book value as at 31 December 2010 31 December at as Book value Changes in value Impairment the company distributions due to from Disposals Additions Bookas at 1 January value 2010 Amounts in NOK million Amounts in NOK 2010 The following table shows the changes in financial instruments classified by valuation hierarchy Level 1 - Level 3 at 31 December: at 3 Level 1 - Level hierarchy valuation by classified instruments the changes in financial table shows following The cont. note 30 cont. note Note 31 Capital management

The main objective of the Group’s management of its capital structure is Net interest-bearing debt is defined as interest-bearing debt less interest- to maintain a good credit rating for the Group in order to obtain reasonable bearing receivables and cash and cash equivalents. Equity includes total loan terms that are proportionate to the business conducted. equity including non-controlling interests.

The Group manages its capital structure and makes the necessary changes The AF Group has a three-year credit facility and credit limit with based on a continuous assessment of the economic conditions under Handelsbanken that expires in June 2012. At the end of 2010 AF had used which the business is conducted, as well as the short- and medium-term NOK 546 million (541) of the limit through an unused line of credit connected outlook. to a corporate cash pooling system. Assuming that AF furnishes further security, the Group, according to the agreement with Handelsbanken, had The Group’s capital structure is managed by adjusting dividends, buying unused credit lines for bank loans including unutilised overdraft facililties back treasury shares, reducing the share capital or issuing new shares. No of NOK 900 (900) million year-end. changes were made in the Group’s capital management guidelines in 2010. The agreement with Handelsbanken contains financial covenants. The most The Group monitors its capital structure by reviewing the debt ratio, which important covenants dictate an equity ratio > 20 % and net interest-bearing is defined as net interest-bearing debt devided by the shareholders’ equity. debt/EBITDA < 4. All of the conditions of the loan agreement that relate to The Group’s policy is to have a debt ratio between 20 % and 50 %. the overdraft facility were met at the end of 2010, 2009 and 2008.

Amounts in NOK million 2010 2009 2008 Interest-bearing liabilities 72 94 462 Interest-bearing receivables -30 -56 -35 Cash and cash equivalents -622 -223 -130 Net interest-bearing liabilities (receivables) -580 -185 297

Equity 968 915 741 Total shareholders' equity and non-interest-bearing liabilities 388 730 1,038

Debt-to-equity ratio -149.5 % -25.3 % 28.6 %

Note 32 Contingencies

The performance of building and civil engineering assignments occasionally million in compensation. The judgement was appealed by both parties leads to disagreements/disputes between the contractor and client regarding and a new judgement was handed down by Gulating Court of Appeal on how to understand the underlying contract. The Group prefers to resolve 25 February 2011. The Court of Appeal ordered AF to pay NOK 6 million in such disagreements/disputes through negotiation outside the courts. compensation. Raunes Fiskefarm was ordered to pay NOK 3 million to AF for At the end of 2010, the AF Group is only involved in the following lawsuits costs. The judgement is within AF’s expectations concerning the outcome. of special significance: The judgement was appealed by Raunes Fiskefarm.

Raunes Fiskefarm sued AF Gruppen Norge in connection with the expan- In March 2011 AF and Krüger AS brought suit against the City Oslo in sion of the Vats Disposal Yard. On 8 October 2009 the Haugaland District connection with the settlement for the construction of the Oset water Court delivered its judgement in the case and ordered AF to pay NOK 40 treatment plant.

124 AF Group annual report 2010 Annual accounts group 125 - - - - 4 6 3 3 17 1 3 16 16 16 10 63 46 25 30 66 187 196 399 407 399 868 2008 - - - - - 4 9 3 4 13 10 18 13 75 62 44 24 21 92 126 170 359 321 232 850 2009 ------5 1 1 3 1 -6 14 45 76 17 14 43 151 243 234 262 244 739 2010 On 15 November 2010, 60 % of the shares in the wholly-owned 2010, 60 % of the shares subsidiaryOn 15 November NOK of AF Gruppen ASA for the shareholders AS was sold to Vats Miljøbase AS and 120 milion. KB Gruppen Kongsvinger AS, OBOS Forretningsbygg parties, a total Ramm purchased related Aspelin Gruppen AS, all which are that 87 % of the shares representing of NOK 105 million worth of shares, for sale. offered were AF Bygg Oslo and AF Byggfornyelse have ongoing contracts with the OBOS have AF Bygg Oslo and AF Byggfornyelse in competi- won contractsThe were Ramm and the Aspelin Group. Group of members of the Board of these companies are tion. Representatives of AF Gruppen ASA. Directors

Total Leases (index-linked) AS, annual rent OBOS Forretningsbygg Joint ventures/associates Total Loans and guarantees as at 31 December as at and guarantees Loans OBOS Group KB Gruppen Kongsvinger AS Joint ventures/associates Senior executives and Board of Directors and Board Senior executives Aspelin RammAspelin Group Senior executives and Board of Directors and Board Senior executives Total Receivables as at 31 December as at Receivables OBOS Group Senior executives and Board of Directors and Board Senior executives Joint ventures/associates Total KB Gruppen Kongsvinger AS Purchase of goods and services Purchase OBOS Group Joint ventures/associates Turnover OBOS Group Ramm Aspelin Group of Directors and Board Senior executives Total Joint ventures/associates Contract price Contract OBOS Group Ramm Aspelin Group Amounts in NOK million Transactions with related parties: with related Transactions Along with related parties, and the of Directors members of the Board Along with related in AF Gruppen ASA. % of the shares 69 control management of the Group of the on the remuneration information 5 for note is made to Reference transactions or agreements no are There management. and Directors of Board parties with related this. beyond

The Group’s related parties consist of associates (note 17), joint ventures parties 17), joint ventures related (note consist of associates Group’s The the OBOS Forretningsbygg by represented shareholders 16), the Company’s (note RammAS, the Aspelin Kongsvinger Gruppen AS and KB Gruppen AS, and Team. Management and Corporate of Directors members of the Board Related parties 33 Related Note Note 34 Events after the balance sheet date

There have been no events after the balance sheet date and before the date the accounts were presented which provide new information about circumstances that existed at the balance sheet date (that is not already reflected in the financial statements). Nor have other significant post-balance sheet date events been identified that require information in the notes.

Note 35 Pledged assets and guarantees

Amounts in NOK million 2010 2009 2008 Carrying amount of liabilities secured by pledges etc. 53 77 152

Carrying amount of pledged assets Buildings and production facilities - - 17 Machinery * 48 36 59 Trade and non-interest-bearing receivables 34 50 142 Projects for own account 20 72 171 Inventories 5 4 4 Total carrying amount of pledged assets 107 162 393

* NOK 19 million (32) of the liabilities related to leasing liabilities and security are attributed to machinery.

A negative letter of charge has been provided for trade receivables and furnishes further collateral, the Group had unused credit lines for bank loans inventories related to the Group’s financing framework. including overdraft facilities of NOK 900 million (900) at year-end.

The unutilised NOK 546 million (541) overdraft facility at Handelsbanken Through participation in general partnerships and joint ventures, the Group is partially secured by a fleet pledge of NOK 300 million (300) in non-current could be held liable for the inability of other participants to fulfil their assets and NOK 16 million (50) in properties (note 30). Assuming that AF obligations. Joint and several liability cannot be enforced until the company in question is unable to fulfil its obligations.

Group guarantees not recognised in the balance sheet 2010 2009 2008 Guarantees issued to clients 1,068 1,133 822 Other commercial guarantees 87 17 - Total 1,156 1,150 822

The guarantees consist of commercial guarantees that are not included in on behalf of the Parent Company, subsidiaries and associates. If any of the the AF Group’s balance sheet. These are guarantees related to contractual contractual obligations are breached, the AF Group may be requested to obligations that are primarily issued in favour of clients as tender guarantees, cover the loss up to the amount of the guarantee. delivery guarantees and payment guarantees. These guarantees are issued

126 AF Group annual report 2010 Annual accounts AF Gruppen ASA

Annual accounts AF Gruppen ASA

Statement of comprehensive income 128 Balance sheet 129 Cash flow statement 130

Note 1 Accounting policies 131 Note 9 Investments in subsidiaries 134 Note 2 Operating revenue 131 Note 10 Intercompany balances with Group companies 135 Note 3 Dividend and group contribution 132 Note 11 Non-current receivables 135 Note 4 Payroll costs, loans and fees 132 Note 12 Interest-bearing loans and credits 136 Note 5 Other operating expenses 133 Note 13 Share capital and shareholder information 136 Note 6 Financial income and expenses 133 Note 14 Equity 137 Note 7 Tax expense 134 Note 15 Guarantees and pledged assets 138 Note 8 Shares held as current assets 134 Auditor’s report 139

127 Statement of comprehensive income 1 January - 31 December

Amounts in NOK million Note 2010 2009 2008 Operating revenue 2 - - - Group contributions received 3 202 53 - Dividend from subsidiaries 3 203 - - Total operating and other revenue 405 53 -

Other operating expenses 5 -7 -2 -2 Total operating expenses -7 -2 -2

Operating profit 398 50 -2

Financial income 6 32 6 1 Financial expenses 6 -18 -12 -12 Net financial items 14 -6 -11

Profit before tax 413 44 -13

Tax expense 7 -3 - 1 Profit for the year 409 44 -12

Other comprehensive income: Profit for the year 409 44 -12 Other income and expenses - - - Total comprehensive income for the year 409 44 -12

128 AF Group annual report 2010 Balance sheet as at Annual accounts AF Gruppen ASA 31 December

Amounts in NOK million Note 2010 2009 2008 ASSETS Deferred tax assets 7 - 3 4 Total intangible assets - 3 4

Investments in subsidiaries 9 357 357 357 Other financial investments 9 - - - Non-current interest-bearing receivables 10,11 25 23 - Total non-current financial assets 382 380 357

Total non-current assets 382 384 360

Receivables from Group companies 10 208 985 207 Taxes and public charges receivable - 8 - Total current receivables 208 993 207

Shares held as current assets 8 2 3 1 Bank deposits 12 131 180 - Total current assets 342 1,176 208

Total assets 723 1,560 569

EQUITY AND LIABILITIES Share capital (71,117,940 shares with a par value of NOK 0.05) 13,14 4 4 3 Share premium account 14 47 28 11 Other contributed equity 14 2 8 8 Total contributed equity 53 40 22

Other equity 14 -345 99 226 Profit for the year 14 409 44 -12 Total retained earnings 64 143 214

Total equity 116 182 236

Interest-bearing loans and credits 12 - - 63 Trade payables and other non-interest-bearing debt 4 3 2 Taxes and public charges payable 10 3 - 36 Debt to Group companies 10 256 1,261 136 Proposed dividend 14 343 113 97 Total current liabilities 607 1,377 332

Total equity and liabilities 723 1,560 569

Oslo, 31 March 2011

Tore Thorstensen Eli Arnstad Mari Broman Pål Egil Rønn Peter Groth Chairman of the Board CEO

Carl Henrik Eriksen Tor Olsen Arne Sveen Henrik Nilsson Employee elected Employee elected Employee elected

129 Cash flow statement

Amounts in NOK million 2010 2009 2008 Cash flow from operating activities + Profit before tax 413 44 -13 - Current tax payable - - - - Gains on the sale of shares - - - +/- Value adjustment of shares held as current assets 1 -2 - +/- Change in trade receivables and payables 1 - 14 +/- Changes in balances with Group companies -230 348 -128 +/- Change in accruals 11 -42 45 = Net cash flow from operating activities 196 347 -82

Cash flow from investment activities - Acquisition of companies - - - +/- Payments/proceeds from other investments - -23 - + Proceeds from the sale of shares - 1 - = Net cash flow from investment activities - -22 -

Cash flow from financing activities + Proceeds from issuance of shares 19 17 11 + Proceeds from the sale of treasury shares 17 7 18 - Purchase of treasury shares -26 -7 -21 - Payment of dividends -255 -99 -83 = Net cash flow from financing activities -245 -82 -75

Net change in cash and cash equivalents during the year -49 243 -157 + Cash and cash equivalents as at 1 January 180 -63 94 = Cash and cash equivalents as at 31 December 131 180 -63

130 AF Group annual report 2010 Annual accounts AF Gruppen ASA 131 - The financial statements for the Parent Company, AF Gruppen ASA, were were AF Gruppen ASA, Company, Parent the for financial statements The 2011. on 31 March of Directors the Board by publication for approved with those consistent are the Group accounting principlesThe described for 1 in the consolidated note is made to Reference Company. the Parent used for for a detailed description of the accounting policies financial statements Company the Parent for only relevant principles that are Accounting applied. follows: as are financial statements the consolidated from or deviate in subsidiaries 1.1 Shares accounts. the cost method in the company to valued according Subsidiaries are unless impair is valued at the acquisition cost of the shares, investment The Itment was necessary. when the impairment fair value to is is written down be transient, and deemed neces- that cannot be assumed to reasons due to Impairment principles. accounting accepted generally with accordance in sary the impairment longer exists. no when the basis for reversed losses are contributions 1.2 Dividends and group accounts company keep to accounts and prepare required Entities that are Section pursuant to 3.9 of the Norwegianthe regulations with in accordance in these regulations, of other provisions regardless Act may, Accounting - with the provi contributions in accordance group dividends and recognise means that dividends and This sions of the Norwegian Act. Accounting will be company the parent and paid by contributions received group is adopted. or payment prior when the receipt to the year recognised of such transactions. tax effect any same applies to The -

AF Gruppen ASA is a holding company without any activities without any other than AF Gruppen ASA is a holding company in other companies. investing with the in accordance Inter been prepared have financial statements The General The in Norway. registered company limited AF Gruppen ASA is a public at head office is located Innspurten Norway. 15, 0663 Oslo, Company’s

national Financial Reporting the EU and the by (IFRS) as adopted national Financial Standards in Section accounts laid down for company 3.9, simplified IFRS provisions to the NorwegianAccounting pursuant regulations fifth of special paragraph the application of international accounting to Act. (Regulations relating the Ministry by 4, laid down Chapter on 21 Januarystandards, Finance of to required entities that are any can be used by regulations These 2008). unless accounts, and consolidated accounts keep both company accounts, IFRS. use the full to required they are - simpli from An account of the accounting principles and changes resulting to the accounts. 2 and in note below fied IFRS is provided with the in accordance been prepared accounts have consolidated The ReportingInternational (IFRS). Financial Standards earnings areas, business of sale/acquisition parties, related on information For the is made to reference after the balance sheet date, and events per share financial statements. in the consolidated notes relevant Notes The company has not had operating revenues. company The

Operating revenue 2 Operating Note Accounting policies Accounting 1 Note Note 3 Dividend and group contribution

Amounts in NOK million 2010 2009 2008 Group contribution received 202 53 - Dividend from subsidiaries 203 - - Total 405 53 -

Group contributions and dividends are considered to be a part of the operation of AF Gruppen ASA and have therefore been reclassified from financial income to other income in the year’s accounts. Group contributions of NOK 53 million received in 2009 have been reclassified in this year’s accounts.

Note 4 Payroll costs, loans and fees

Amounts in NOK 1,000 Remuneration of the CEO 2010 2009 2008 Fixed pay 2,645 2,286 1,955 Bonus 2,066 1,503 1,139 Other benefits 1,142 91 170 Total 5,853 3,879 3,264

Retirement benefits 33 31 34

Board of Directors’ fees 1,389 1,210 1,325

AF Gruppen ASA has no employees and is not required, therefore, to have a pension scheme. The CEO is employed formally by the subsidiary AF Gruppen Norge AS.

Complete information on the pay and remuneration of the CEO, Board of Directors and senior executives is provided in the consolidated financial statements, and reference is made to note 5 in the consolidated accounts for further information.

132 AF Group annual report 2010 Annual accounts AF Gruppen ASA 133 ------1 6 - 6 -8 -1 -1 -2 -10 -17 -326 -253 -579 2008 2008 2008 ------2 1 6 9 -2 -3 -2 -2 -10 -15 -68 -248 -140 -456 2009 2009 2009 ------2 3 -1 -1 -7 -7 27 32 -16 -18 -112 -112 2010 2010 2010

Total financial expenses financial Total Other financial expenses Foreign exchange losses exchange Foreign Net loss on sale (impairment) of financial assets Financial expenses Financial companies group expenses from Interest Other expenses interest Foreign exchange gains exchange Foreign of receivables adjustment Value of financial assets adjustment Value financial income Total Net gains on the sale of financial assets Amounts in NOK million Financial income Financial companies group income from Interest Other income interest Total audit fees Total Other services auditing beyond Other services verification Audit fees Audit Ordinary audit fees Amounts in NOK 1,000

Total other operating expenses other operating Total Other expenses operating Audit fees fees Audit Amounts in NOK million Amounts in NOK Value-added tax is not included in the audit fees. tax is not included Value-added

Financial income and expenses and income 6 Financial Note Other operating expenses 5 OtherNote operating Note 7 Tax expense

Amounts in NOK million 2010 2009 2008 Tax cost for the year can be broken down as follows: Current tax payable - - - Change in deferred tax 3 - - 1 Tax expense 3 - - 1

Calculation of the tax base for the year: Profit before tax 413 44 -13 Non-deductible expenses -9 10 10 Non-taxable income - -3 - 3 % of gains on shares - - - Application of loss carryforward -2 - - Repaid capital (dividends) without tax effect -203 - - Group contributions received without tax effect -198 -51 - Tax base for the year - - -3

Tax for the year (28 % of the tax base for the year) - - -1

Summary of temporary differences: Provisions 10 10 1 Tax loss carryforward - 2 11 Total 10 12 13

Deferred tax assets recognised - 3 4 Deferred tax assets not recognized 3 - -

The deferred tax assets are based on future revenue. The tax loss carryforward of NOK 14,000 is not subject to a time limit.

Note 8 Shares held as current assets

Shares held as current assets are assessed at fair value and the value is based on the quoted price on the balance sheet date. The amount consists of shares in investment funds that invest in listed shares. The acquisition cost of the investment is NOK 7.8 million. NOK 0.6 million was recognised in the income statement as a fair value adjustment in 2010.

Note 9 Investments in subsidiaries

Name of company Date acquired Business address Ownership interest Voting share AF Gruppen Norge AS 05/09/1985 Oslo 100 % 100 % AF Entech AS 02/04/2009 Oslo 100 % 100 % AF Miljø AS 15/01/2009 Oslo 100 % 100 % AFG Invest 2 AS 08/12/2009 Oslo 100 % 100 % AFG Invest 3 AS 08/12/2009 Oslo 100 % 100 %

134 AF Group annual report 2010 Annual accounts AF Gruppen ASA 135 - - - - 36 96 40 100 100 171 2008 2008 37,635 60,565 258,561 Carrying amount 101 101 68,815 11,683 Equity 459,343 - 33 23 62 17 -10 923 2009 2009 1,244 100 100 722 10,000 10,000 Share capital Share - 7 35 25 25 -10 208 249 2010 2010 100 100 9,869 10,000 10,000 Number of shares 1 1 5,547 62,809 254,058 Earnings 2010

AF Gruppen Norge AS AF Gruppen Norge AS AF Entech AF Miljø AS 2 AS AFG Invest 3 AS AFG Invest Gross non-currentGross receivables bad debts for Allowance Carrying amount Non-current interest-bearing receivables receivables Non-current interest-bearing Other receivables current liabilities interest-bearing Current Other liabilities current Receivables that mature later than one year Amounts in NOK million Current interest-bearing receivables receivables interest-bearing Current Amounts in NOK million Amounts in NOK 1,000 Amounts in NOK

Non-current receivables 11 Non-current Note Intercompany balances with balances 10 Intercompany Note companies Group Overview of the subsidiaries’ earnings, equity and carrying amount in the company accounts of AF Gruppen ASA: accounts equity carrying and earnings, in the company amount Overview of the subsidiaries’ cont. note 9 cont. note Note 12 Interest-bearing loans and credits

A NOK 80 million corporate guarantee has been furnished for tax deductions.

Amounts in NOK million Effective interest rate 2010 2009 2008 Corporate cash pooling system 3 %–5 % 131 180 -63

The AF Group has a three-year credit facility of NOK 900 million with The agreement with Handelsbanken contains financial covenants that apply Handelsbanken that expires in June 2012. to the Group. The most important covenants dictate an equity ratio > 20 % and net interest-bearing debt/EBITDA < 4. All of the conditions of the loan At the end of the year, the Group had deposits of NOK 131 million (180) agreement that relate to the overdraft facility were met at the end of 2010 linked to a corporate cash pooling system. In the corporate cash pooling and 2009. system AF Gruppen ASA has the direct account with the bank. Other accounts in the corporate cash pooling system are regarded as intercompany balances.

Note 13 Share capital and shareholder information

The share capital consists of: Number Par value Carrying amount Class A shares after split 71,117,940 0.05 3,555,897

Ownership structure Voting share/ Number stake % Shareholders with a stake >1% KB Gruppen Kongsvinger AS 23,295,235 32.8 % OBOS Forretningsbygg AS 20,466,730 28.8 % Aspelin Ramm Gruppen AS 4,092,040 5.8 % LJM A/S 2,513,900 3.5 % Moger Invest AS 2,064,621 2.9 % Skogheim, Arne 1,704,720 2.4 % Staavi, Bjørn 1,471,860 2.1 % Evensen, Jon Erik 710,000 1.0 % Total with stake of >1% 56,319,106 79.2 %

Total other shareholders 14,798,834 20.8 % Total outstanding shares 71,117,940 100.0 %

There is only one class of shares, with equal voting rights.

Owned by senior executives as at 31 December 2010 Number of shares Number of options Board of Directors Tore Thorstensen, Board Chairman 1) Elected by shareholders 11,500 - Eli Arnstad 2) Elected by shareholders - - Mari Broman Elected by shareholders - - Carl Henrik Eriksen 3) Elected by shareholders - - Peter Groth 4) Elected by shareholders 11,500 - Tor Olsen 5) Elected by employees 11,000 20,000 Henrik Nilsson Elected by employees 12,300 2,500 Arne Sveen Elected by employees - 1,250 Total 46,300 23,750

136 AF Group annual report 2010 Annual accounts AF Gruppen ASA 137 - 7 -7 -2 17 44 19 17 -26 236 182 409 116 -113 -343 -142 Total 90,000 40,000 120,000 120,000 140,000 120,000 630,000

- 6 6 -7 -2 44 17 64 -26 409 214 143 -113 -343 -142 Number of options Treasury shares have have shares Treasury earnings Retained ------8 8 2 -6

Other 76,500 86,000 83,800 equity 144,350 278,620 172,075 841,345 contributed contributed Number of shares

------17 19 11 28 47 account

Share premium premium Share ------shares Treasury Treasury ------3 4 4 Executive Vice President Vice Executive President Vice Executive Executive Vice President Vice Executive CEO President/CFO Vice Executive President Vice Executive Share Share capital

Share capital in accordance with Articles with a par value of NOK 0.05. capital in accordance 71,117,940 shares Share of Association: with a par value of NOK 0.05. issued: 71,117,940 shares Number of paid-up shares and Ringkjøb Ramm 76,355 shares owns AS, which Aspelin Invest 4,092,040 shares AS, which owns Gruppen shares, his own in addition to Represents, 96,515 shares AS, which owns Olsen Holding T. Represents shares 346,100 owns AS, which Tokanso 23,295,235 and which owns KB Gruppen Kongsvinger, shares, his own in addition to Represents, A party Arnstad 1,440 shares Eli owns to related shares 20,466,730 owns AS, which Forretningsbygg OBOS Represents Tore Fjukstad Tore Arild Moe Total Robert Haugen Corporate Management Team Management Corporate Pål Egil Rønn Egil Pål Hærem Alf Sverre Gundersen Paul-Terje Amounts in NOK million Equity as at 1 January 1 Equity as at 2009 Capital increase Capital Purchase of treasury shares Purchase Sale of treasury shares Total comprehensive income for the year income for comprehensive Total Proposed dividend for 2009 dividend for Proposed Dividend paid in 2009 beyond 2008 provision Dividend paid in 2009 beyond Equity as at 31 December 2009 31 December Equity as at Capital increase Capital Purchase of treasury shares Purchase Sale of treasury shares Reclassification of gains on sale of treasury shares Total comprehensive income for the year income for comprehensive Total Proposed dividend for 2010 dividend for Proposed Dividend paid in 2010 beyond 2009 provision Dividend paid in 2010 beyond Equity as at 31 December 2010 31 December Equity as at cont. note 13 cont. note 1) 2) The company has 450,000 treasury with a par value of NOK 0.05 (250,045 treasury company The with a par value of NOK 0.05 in 2009). shares shares parties related in 2010. not bought from were Shares acquisitions. and as partial company employees sell to for been bought to payment At an extraordinaryAt of AF Gruppen ASA and its subsidiaries general meeting on 4 January all employees for option scheme was adopted 2008, a share 2011. 5,163,750 15 February that could be redeemed allocated with the right options were subscribe 2008, 2009 and 2010. 5,251,250 to in the years exercised. options were The Board is authorised to acquire up to 10 % of the share capital. This authority This which is scheduled for is valid until the 2011 Annual General Meeting, capital. 10 % of the share up to is authorised acquire to Board The 13 May 2011. Note 14 Equity Note 4) 5) 1) 2) 3) Note 15 Guarantees and pledged assets

Amounts in NOK million 2010 2009 2008 Warranty liability 1,156 1,150 814

In connection with the construction contracts entered into, the subsidiaries are subject to customary contracting obligations associated with associated guarantees. AF Gruppen ASA guarantees the warranty liability of its subsidiaries.

See note 35 to the consolidated accounts for further information.

Responsibility statement

With regard to the 2010 annual accounts for AF Gruppen ASA, we confirm to the best of our knowledge that:

• The consolidated financial statements have been prepared in accordance with IFRS, as adopted by the EU, and the additional disclosure requirements that follow from the Norwegian Accounting Act.

• The financial statements for the Parent Company, AF Gruppen ASA, have been presented in accordance with IFRS and the simplified IFRS provisions for company accounts laid down in Section 3.9, fifth paragraph of special regulations pursuant to the Norwegian Accounting Act.

• The amounts and disclosures in the accounts provide a true and fair view of the Company’s and the Group’s assets, liabilities, financial positions and results as a whole.

• The amounts and disclosures in the annual report provide a true and fair view of performance, earnings and the position of the Company and Group, along with a description of the most important risk and uncertainty factors the AF Group faces.

Oslo, 31 March 2011

Tore Thorstensen Eli Arnstad Mari Broman Pål Egil Rønn Peter Groth Chairman of the Board CEO

Carl Henrik Eriksen Tor Olsen Arne Sveen Henrik Nilsson Employee elected Employee elected Employee elected

138 AF Group annual report 2010 Annual accounts AF Gruppen ASA / Auditor’s report

139 140 AF Group annual report 2010 Glossary Annual accounts AF Gruppen ASA / Auditor’s report

Finansial ratios

EBITDA % (Operating profit + depreciation, amortisation and impairment) / operating revenue

EBIT % Operating profit/operating revenue

EBT % Earnings before taxes/operating revenue

Return on equity Net profit/average shareholders’ equity

Return on capital employed (ROACE) (Earnings before taxes + interest expenses) / average capital employed

Economic Value Added (EVA) (Return on capital employed)* 0.72 - average capital costs after tax)* average capital employed

Capital employed Shareholders’ equity + interest-bearing liabilities

Equity ratio Shareholders’ equity / total capital

Net interest-bearing receivables (debt) Interest-bearing receivables + liquid assets - interest-bearing liabilities

Debt-to-equity ratio Net interest-bearing liabilities / (shareholders’ equity + net interest-bearing liabilities)

Basic earnings per share Net profit / average number of shares outstanding

Cash flow per share (Net profit + depreciation - taxes paid)/average number of shares outstanding

141 Definitions

Other definitions

Own account When AF buys land, develops projects and then sells units for its own account.

LTI-1 rate Number of lost time injuries per million man-hours

The AF Group includes all subcontractors when calculating the LTI-1 value

LTI-2 rate Number of lost time injuries+number of injuries requiring medical treatment+number of injuries resulting in alternative work per million man-hours

The AF Group includes all subcontractors when calculating the LTI-2 value.

HVAC Heating, ventilation, air conditioning and cooling system

142 AF Group annual report 2010 Operational structure Addresses Contents

Design Cox design/cox.no Photo Werner Anderson, Jan Lillehamre (Cox) Translation Amesto Translations AS Print TS-trykk™

ER JØM KE IL T M

2 4 6 1 1 7 T RYKKSAK Highlights 2010 2010 AF Group annual report

Record profit The AF Group ended its 2010 anniversary year with the highest annual net profit in the history of the

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