FIVE-YEAR REVIEW 1998 1997 1996 1995 1994 Profit Turnover * 5,645 4,961 4,129 4,029 3,255 Operating profit * 287.8 248.6 113.6 77.5 6.0 Profit before taxation * 282.3 270.4 123.0 79.5 6.2 Gross profit margin (%) 5.0 5.5 3.0 2.0 0.2 Orders-on-hand Building and Heavy Construction * 2,682 2,710 2,261 1,944 1,731

Financial figures Cash flow from operating activities * 362.7 271.1 107.5 309.1 35.7 Gross investments * 875 475 368 235 182 Equity ratio (%) 29.3 31.9 30.9 28.5 27.5

Profitability Return on working capital (%) 25.6 28.9 15.7 12.6 5.1 Return on equity (%) 23.1 26.5 13.7 10.0 -0.1

Shares and shareholders Earnings per share (NOK) 16.52 16.13 6.92 4.57 -0.63 Dividend per share (NOK) 5.00 4.75 2.75 1.50 1.00 Market price 31 December (NOK) 90.00 129.00 100.50 63.13 58.25 Market value at 31 December * 1,026 1,470 1,145 719 655

Employees Number of employees at 31 December 3,794 3,176 3,111 2,888 2,785 Absence rate (%) 4.9 4.6 4.3 4.3 3.6 Absence hourly-paid employees (%) 6.1 6.0 5.4 5.4 4.6 Lost-time injuries per million working hours 11.9 12.5 16.3 19.9 18.7

* NOK million Key figures and definitions, see page 30

Turnover Profit before taxation Earnings per share NOK mill. NOK mill. NOK

6,000 300 18

16 5,000 250 14

12 4,000 200 10

3,000 150 8

6 2,000 100 4

2 1,000 50 0

0 0 -2 1994 1995 1996 1997 1998 1994 1995 1996 1997 1998 1994 1995 1996 1997 1998

1 OPERATIONS

Description Key figures

Building The Building Division is divided into 1998 1997 1996 four geographical regions covering Turnover * 2,345.0 2,230.3 1,823.2 most of Norway. Its operations include Operating profit * 94.0 74.7 28.3 41.5% 38% new building and renovation of resi- Profit before tax * 109.6 98.3 53.6 Number of employees 1,567 1,530 1,467 dential and non-residential buildings. * NOK mill. Many of the Division's contracts are planned in partnership with customers Turnover Profit and suppliers.

See also page 34-37

Heavy Construction The Heavy Construction Division ope- 1998 1997 1996 rates all over Norway. Its contracts Turnover * 2,223.9 1,716.7 1,389.4 Operating profit * 82.9 34.1 21.4 39% 31% include infrastructure projects, such as roads, bridges and railway lines, major Profit before tax * 88.1 46.3 28.3 Number of employees 1,451 962 931 excavation work, power plants, * NOK mill. industrial facilities, etc. The Division also has Turnover Profit international operations in Sweden, Italy and East Africa. See also page 38-41

Industry The Industry Division is responsible for 1998 1997 1996 the production and laying of asphalt Turnover * 1,031.7 910.5 868.6 and the production of gravel, crushed Operating profit * 68.7 45.1 47.6 18% 18% stone and ready-mix concrete. In 1998, Profit before tax * 52.0 37.0 36.1 Recycling was introduced as a separa- Number of employees 679 620 645 * NOK mill. te business sector under this Division and includes everything from the Turnover Profit demolition and transport of industrial waste to the recycling, sale and distri- See also page 42-45 bution of finished goods based on wood, concrete and other building waste.

Property The Property Division is responsible 1998 1997 1996 for the development of residential and Turnover * 84.7 126.2 62.6 Operating profit * 51.0 96.1 20.4 1.5% 13% non-residential properties for Veidekke's own account. The Division's Profit before tax * 37.3 90.5 6.3 * NOK mill. activities also include the manage- ment, operation and maintenance of Veidekke's property and property Turnover Profit belonging to other owners.

See also page 46-49

2 Priority areas in 1998 Achieved in 1998 Priority areas in 1999 Building • Strengthen our market oriented • 70% of contracts developed in • Increase productivity by focusing on corporate culture partnership with customers development of technical skills • Develop specialised technical expertise • Acquired 50% of technical • Develop a concept for management consultancy firm, Itech development in Veidekke and set up • Strategic recruitment separate company • Set up a company to look after electronic communication in • Give greater priority to the public projects, Prosjektnett sector • Recruited 58 chartered engineers, engineers and technical personnel Hea • Continued market selectivity and • Good production on two major • Increase volume in East Norway

choice of projects based on profitabili- projects for the offshore industry through interaction with Building vy Construction ty, capacity and available skills Division • All projects completed with generally • Focus on feasibility profitable results • Focus on transport and communi- cations projects in West and South • Skills development and recruitment to • More attention given to project Sweden reinforce the most crucial aspects of management the Division's value creation • Develop new forms of interaction and alliances with customers

• Environment and recycling • Establishment of Veidekke Gjenvinning • Consolidate affiliated companies and (Recycling) expand the recycling activities Industr • Rationalisation and improvement in • Took over shares in Dokken & Østdal • Strengthen our market position in our cost-efficiency and took over Wilhelmsen & Sønner basic operations: asphalt, gravel and • Strengthen our position in production • Asphalt carried out an extensive crushed stone of ready-mix concrete programme which significantly reduced y winter costs • Work actively to strengthen our market • Service contracts to improve utilisation position in ready-mix concrete of resources outside normal asphalt- • Increase in activity, new ventures, skills • Work actively to increase interaction laying season development and interaction with Heavy Construction Division have reinforced between Industry and Veidekke's other our position in the market for ready-mix divisions concrete • Successful start to two three-year con- tracts for the Municipality of Oslo

• Increase the attractiveness of the • Increased capacity at Veidekke's • Utilise know-how and contacts in inter- Pr company as a partner in the property regional and district offices action with the Building Division development sector oper • Acquired several properties with great • Continue to focus on building site • Participate in major property develop- development potential planning and preparation.

ment projects ty • Better access to housing projects • Increase capacity in selected • Increase focus on the residential market through acquisitions and options geografical areas • Improve climate for skills development • Involved in several projects in the care • Offer to rent out buildings in health and exchange of experience sector and care sector, schools, etc • Develop own organisation

3 THE BOARD OF DIRECTORS’ REPORT

General situation Veidekke has once again honoured its commitment to a 5% profit margin and a 20% return on equity. In 1998, its profit margin was 5.0% and the return on equity was 23.1%. Turnover rose by 14% to NOK 5,645 million and profit before taxation was NOK 282.3 million. With the exception of Property, which had a higher profit in 1997 due to sales gains from the Skøyen project, the divisions all showed an improvement in profit.

The positive developments in recent years are the result of the company's strategy of focusing on further expansion of its core operations, strict requi- rements regarding earnings and greater capacity and skills in project realisation. The company is also concentrating its efforts on strengthening its relati- ons with customers and suppliers.

The injury rate or number of lost-time injuries per million working hours fell to 11.9 in 1998 from 12.5 the year before. This is encouraging, but Veidekke has set a target of 8 by the end of the year 2000. As regards absence among hourly-paid employees, the company's target is 5%. The absence rate rose to 6.1% in 1998 from 6.0% a year earlier.

The level of activity in the building and heavy construction market remained high in 1998, but showed a falling tendency in the second half of the year. A certain decline was anticipated, in particular for non-residential building, but this trend was intensified by the steep increase in interest rates. There are considerable differences between the regi- ons, and the downswing was most noticeable in the Oslo area. course of six months, Vecon built up an order portfolio of NOK 200 million. The market pro- Strategic investments spects for heavy construction contracts in the south The divisions continued to concentrate on their stra- and west of Sweden are judged to be good. Vecon tegic priorities during the year under review. will work closely with the Heavy Construction Division in The Property Division added to its portfolio of resi- Norway on major construction projects. dential and non-residential development properties, particularly in the Oslo area. Most of the new deve- In the Industry Division, the focus on new areas of lopment properties are partially developed and activity was maintained. In just over a year generate a continuous cash flow which covers inte- Veidekke has built up a position for itself as one of rest charges. Most of the completed development the key players in the market for ready-mix concre- properties were sold during the year. te. The founding of Veidekke Gjenvinning (Recycling) has given Veidekke an interesting positi- The Heavy Construction Division extended its mar- on in a growth market. The Industry Division has ket territory through the establishment of Veidekke also consolidated its core activities through a num- Construction AB, Vecon, in Gothenburg. In the ber of acquisitions in the asphalt, crushed stone and gravel sector.

4 Members of the Board of Directors (left to right): Karsten Houm, Christian Bruusgaard (chairman), Helge B. Andresen, 1998 was the plant hire company Bautas' first full Bjørn H. Madsen, Steinar Krogstad, Flemming Vejgaard year in operation. This concept has been well recei- Andersen, Håkon Langballe and Peder Chr. Løvenskiold. ved in the market and Bautas is already one of Norway's leading companies in this field. Bautas is 188.2 million (NOK 183.8 million). Earnings per now established at seventeen locations in Norway. share were NOK 16.52 (NOK 16.13) and return on equity 23.1% (26.5%). These new ventures have led to wider involvement in the building and construction value chain and Veidekke has a strong financial position. Even with they offer possibilities of utilising expertise and an increase in turnover and substantial investments, achieving synergy in combination with Veidekke's the company was able to maintain a satisfactory other divisions. They also give the company more equity ratio of 29.3% in 1998, as against 31.9% in breadth and new growth potential and thus the pos- 1997. sibility of levelling out market fluctuations. The order books for Building and Heavy Profit performance Construction showed a total of NOK 2,682 million In 1998 Veidekke had a turnover of NOK 5,645 at the end of 1998 (NOK 2,710 million). Building million (NOK 4,961 million), which is an increase increased its orders-on-hand, while Heavy of 14%. This gave a pre-tax profit of NOK 282.3 million (NOK 270.4 million) and a profit margin of 5.0% (5.5%). The total profit for the Building, Heavy Construction and Industry Divisions was Areas of activity Orders-on-hand, Building NOK 249.7, while the average profit margin was and Heavy Construction 4.5%. This is a substantial improvement on the pre- NOK mill. vious year, when the profit was NOK 181.6 million 18% 3,000 and the profit margin 3.7%. The Property Division 39% achieved a profit of NOK 37.3 million (NOK 90.5 1.5% 2,500 million). 2,000 Operating profit for the Group was NOK 287.8 million (NOK 248.6 million). Net financial items 41.5% 1,500 were NOK -5.5 million (NOK 21.8 million). The fall in net financial items is due to heavy invest- 1,000 ments in the Industry and Property Divisions and in Building Bautas. Heavy Construction 500 Industry Property The profit after taxes and minority shares was NOK 0 1994 1995 1996 1997 1998

5 THE BOARD OF DIRECTORS’ REPORT

Construction showed a decrease during the year. of greater focus on priority market areas. Turnover This order situation is considered to be good, as was NOK 2,224 million (NOK 1,717 million), regards both quantity and quality. The Industry which corresponds to a growth of 30%, and the Division, which represented almost 20% of the profit for the year was NOK 88.1 million as against turnover in 1998, does not operate in terms of 46.3 million in 1997. orders-on-hand, but the market prospects and Veidekke's position at the beginning of 1999 indi- In contrast to previous years, the Heavy cate an increase in turnover in this business area. Construction Division's activities in 1998 were con- centrated on large projects, such as the Kårstø ter- In light of the company's financial results and future minal for Statoil, which is Veidekke's largest heavy prospects, the Board of Directors proposes a divi- construction project so far. dend of NOK 5.00 per share for 1998 (NOK 4.75). Orders-on-hand amounted to NOK 1,185 million at The Building Division the end of the year, as against NOK 1,507 million The Building Division gives high priority to develo- the year before. ping and realising projects in partnership with its customers. The expertise this division has built up Vecon has signed contracts for a total of NOK 150 over the years in integrated project realisation has million since its establishment in February 1998. In also attracted the attention of public clients. If the Sweden, the Heavy Construction Division and Division is to be able to achieve a more customer- Vecon have orders totalling NOK 200 million. oriented model for the realisation of projects, it Vecon had sixty employees at the end of the year. must be able to offer cost-efficient products. For that reason, it has turned its attention to its own International operations outside Scandinavia pro- productivity and cost development and established gressed well and showed a turnover of NOK 449 a special unit whose responsibility it is to ensure million and a profit of NOK 10.8 million. As previ- continuity in quality and improvement measures. ously reported, a dispute arose with the client regar- ding our tunnel project in Susa in Italy. In February Throughout 1998, the Building Division gave priori- 1999, an agreement was reached which shows that ty to feasibility and profitability rather than to adequate provision had been made for this project. growth. Turnover rose by 5% compared with 1997, The tunnelling work is being carried out by Nocon, from NOK 2,230 million to NOK 2,345 million. of which Veidekke owns 50%. Pre-tax profit was NOK 109.6 million as against NOK 98.3 million the year before. This gives a pro- Bautas fit margin of 4.7% compared with 4.4% in 1997. Since Bautas was established in June 1997, this plant hire company has achieved very good results. Orders-on-hand stood at NOK 1,497 million at the Income from external hire increased from NOK 14 end of the year, which is 24% higher than at the million in 1997 to NOK 90 million in 1998. Profits end of the previous year. In view of the weaker mar- have also shown a positive trend. Operating profit ket trend during the second half of 1998, this order for 1998 was NOK 27.2 million (NOK 7.1 million) situation can be described as positive. The Building and profit before tax was NOK 18.5 million (NOK Division is working closely with the Property 5.8 million). The turnover and profit have been split Division on a number of residential and non-resi- between the Building and Heavy Construction dential projects which will be initiated in 1999. Divisions.

The Heavy Construction Division The Industry Division The heavy construction market remained relatively In 1998, the Industry Division consolidated its posi- high in 1998. This was due in particular to a num- tion in the asphalt, crushed stone/gravel and ready- ber of major offshore-related projects, which com- mix concrete markets through acquisitions and sys- pensated for the anticipated decline following the tematic efforts directed at customers and products. completion of the Gardermoen development. By purchasing companies in the recycling business, Veidekke has gained considerable expertise, capacity The Heavy Construction Division showed a marked and market access in the field of demolition and improvement in profits in 1998, mainly as a result transport, separation and recycling of building and

6 construction waste. injury statistics and job satisfaction. High priority is Turnover for 1998 was NOK 1,032 million (NOK therefore given by Veidekke to the work of making 911 million). 80% of this turnover derives from the production and products environmentally-friendly production and laying of asphalt. The profit for the and to providing a good and safe place to work. year was NOK 52.0 million (NOK 37.0 million), Veidekke has registered an improvement in injury and the profit margin rose from 4.1% to 5.0% in figures over the past few years. The number of lost- 1998. time injuries per million working hours fell from 12.5 in 1997 to 11.9 in 1998. By way of compari- The Industry Division carried out a comprehensive son, we can mention that the injury rate for the cost-cutting programme during the winter and industry as a whole is 25. In spite of the attention spring of 1998 and this has helped to boost its com- paid to safety in production, Veidekke had two fatal petitive strength and improve profits. accidents in 1998. This shows that the work of increasing awareness about health, safety and envi- The asphalt work on the runways at Gardermoen ronment can never be stressed strongly enough. was completed in 1998. In terms of customer satis- faction, financial results, and injury and absence The absence rate for all employees was 4.9% figures, this was a successful contract. The (4.6%), while the rate for hourly paid employees Gardermoen project enabled Veidekke to acquire was 6.1% (6.0%). This is still too high in relation considerable expertise in rational planning and to our target of 5%. Veidekke has initiated a num- management of large, complex contracts. ber of preventive measures and a scheme to follow- up employees who are often absent or are absent Property Division for a long time. The company's occupational health This Division is responsible for developing non-resi- service and local rehabilitation committees try to dential and residential projects for Veidekke's own find alternative types of work for employees in the account. Turnover in 1998 was NOK 85 million latter category. (NOK 126 million). The Property Division showed a profit of NOK 37.3 million in 1998 as against Organisation and skills development NOK 90.5 million in 1997, when the profit reflec- Veidekke sustained its strategic focus on skills deve- ted gains on the sale of the Skøyen project. lopment in 1998, among other things, by opening a resource centre. From its start in April 1998 until The Division has sold all of its completed develop- the end of December, the Veidekke Resource Centre ment properties, and in 1998 it invested NOK 304 arranged thirty courses for a total of 600 partici- million in property. During the same period, the pants. This gave a total of 3,800 (3,100) course Division developed and sold property for NOK 265 days for 1,400 (1,300) employees. Trainee schemes million. have been developed for recently graduated engine- ers and the company maintains a high intake of During the year, the construction of 249 dwellings apprentices: 117 (117). was commenced for Veidekke' own account. This also includes dwellings that will be rented out. At Number of lost-time injuries Number of employees the end of the year, the company had 47 unsold per million working hours dwellings. These are spread over a number of pro- 20 4,000 jects and represent little risk. 3,500

Several residential and non-residential projects will 15 3,000 be ready for development in 1999. In view of the 2,500 somewhat uncertain market prospects, more attenti- on will be given to the risk factor in the individual 10 2,000 projects and to Veidekke's total exposure to risk. 1,500

Health, safety and environment 5 1,000 Experience shows that quality in planning and per- 500 formance helps to ensure good financial results, low 0 0 1994 1995 1996 1997 1998 1994 1995 1996 1997 1998

7 THE BOARD OF DIRECTORS’ REPORT

Veidekke is responsible for an "On-the-Site Sales of fixed assets amounted to NOK 255 million Learning" programme, which is being introduced in (NOK 417 million), of which NOK 228 million the counties of Østfold and Vestfold in cooperation (NOK 394 million) referred to buildings and sites. with the upper secondary schools and the employ- ment services. This project, which is the first of its Cash flow from operating activities was NOK 363 kind in Norway, qualifies pupils for second-year million (NOK 271 million). The Group's net inte- courses at upper secondary school and represents an rest bearing position at the end of the year was important contribution to Veidekke's work on stra- NOK -32.4 million (NOK 232 million). Total assets tegic skills development and recruitment. were NOK 3,220 million (NOK 2,501 million). The increase in total assets should be related to the rise In 1998, a number of development projects were in turnover and the higher level of investment. Total completed, such as projects belonging to the equity capital increased from NOK 798 million in "Integrated Building Process" programme, which is 1997 to NOK 944 million in 1998. being carried out in collaboration with major sup- pliers and consultants and with financial support Shareholders and the stock market from the Research Counsil of Norway. Veidekke is At the end of the year, Veidekke had 2,960 (2,592) involved in several development projects that will shareholders. The largest shareholders are have considerable influence on future business ope- Storebrand with a 13.0% ownership share and rations. These include new ways of co-operating Folketrygdfondet with 10.2%. The percentage of with customers and suppliers on the realisation of foreign shareholders was reduced from 9.7% to projects and Internet-based project communication. 1.5% during the year. A total of 4.4 million Veidekke-shares were traded on the Oslo Stock At the end of the year, Veidekke had 3,794 (3,176) Exchange in 1998. Veidekke effected a share split in employees. 1,260 (1,137) of these are administrative the ratio 1:2 on 29 April 1998. and technical personnel and 2,534 (2,039) craftsmen and production workers. The increase of It has long been Veidekke's policy to encourage the 618 employees includes 150 who are employed in involvement of its employees in the ownership of companies acquired in 1998. the company and it attaches importance to making this possible. The participation of the employees - Financial situation and particularly of the managers - is vital to the Total investments in 1998 amounted to NOK 875 positive development of the company. In 1998, million (NOK 475 million). The higher figure com- employees were again given the opportunity to pared with the year before is due to investments in purchase shares at 20% less than the market price. new activities amounting to NOK 282 million, The response to this offer was very good and 998 including NOK 90 million in plant-hire company employees purchased shares for a total value of Bautas, reinvestment in machinery totalling NOK 288 million and the acquisition of property for NOK 305 million. Return on equity Equity ratio % % The largest single investments in 1998 were the 30 35 acquisitions of Hans Gaarder A.S in the asphalt and 25 30 ready-mix concrete segment and Dokken & Østdal A/S and Wilhelmsen & Sønner A/S, both of which 20 25 companies are involved in demolition and recycling. 15 20 The Property Division invested a total of NOK 180 10 15 million in the purchase and development of proper- ties. The capital tied up in housing development for 5 10 Veidekke's own account increased slightly during the year to NOK 229 million. 0 5

-5 0 1994 1995 1996 1997 1998 1994 1995 1996 1997 1998

8 NOK 18.2 million. At the end of the year, 14% of on heavy construction operations in Sweden. The the shares were held by 1,550 employees. scope and speed of further growth must be conside- red continuously in light of the market situation and Prospects Veidekke's requirements regarding profitability. The The activity in the market for new building and prospects are good, as a result of a competitive basis heavy construction is expected to fall by 10% from in each of the business areas and the company's the present high level, while the maintenance market strong financial position. will remain fairly stable. Provided that there is a fall in the interest rates, building activity may pick up Distribution of the profit for the year again towards the end of the year and continue into Veidekke ASA achieved a profit for 1998 of the year 2000. This applies particularly to house- NOK 127.5 million in 1998 (NOK 162.8 million). building. However, there is a great deal of uncer- The Board of Directors will propose to the Annual tainty and this underlines the importance of flexibi- General Meeting on 28 April 1999 that the parent lity and adaptability. Veidekke will continue its company's profit be distributed as follows: work to improve productivity and to arrive at new solutions in partnership with customers and suppli- NOK million ers. Group contribution 27.7 Dividend, NOK 5 per share 57.0 The new market situation is expected to lead to Distributable reserve 42.8 further restructuring and Veidekke will take an acti- Total 127.5 ve part in this process. The company aims to increa- se its market shares in Norway through both orga- nic growth and acquisitions. It will continue to focus on growth areas in the Industry Division and

Oslo, 17 February 1999 VEIDEKKE ASA

Christian Bruusgaard Chairman of the Board

Flemming Vejgaard Andersen Helge B. Andresen Karsten Houm

Steinar Krogstad Peder Chr. Løvenskiold Bjørn H. Madsen

Håkon Langballe Terje R. Venold President and CEO

9 PROFIT AND LOSS ACCOUNT

GROUP (Figures in NOK million) Note 1998 1997 1996

Turnover 1, 2, 24, 25 5,645.0 4,960.8 4,129.4

Subcontractors -1,983.3 -1,720.0 -1,565.7 Cost of materials -1,415.2 -1,359.1 -1,048.3 Wages and social costs 18 -1,374.5 -1,162.7 -1,024.5 Other operating expenses -378.8 -324.1 -246.8 Depreciation 12 -198.4 -144.9 -129.3 Bad debts -7.0 -1.4 -1.2 Total operating costs -5,357.2 -4,712.2 -4,015.8

Operating profit 287.8 248.6 113.6

Financial income/expenses 3 -5.5 21.8 9.4

Profit before taxation 1 282.3 270.4 123.0

Taxation 19 -80.9 -76.9 -36.6 Minority interests' share 20 -13.2 -9.7 -8.7

Profit for the year 188.2 183.8 77.7

Earnings per share (NOK) 4 16.52 16.13 6.92

10 B ALANCE SHEET

GROUP (Figures in NOK million) At 31 December Note 1998 1997 1996

ASSETS

Current assets Liquid assets 5 369.1 400.4 324.0 Debtors 6 836.2 699.4 557.8 Other short-term receivables 46.9 74.4 75.7 Stocks 7 128.9 112.4 85.0 Development projects for sale 8 228.9 151.3 70.8 Total current assets 1,610.0 1,437.9 1,113.3

Fixed assets Long-term receivables etc. 11, 18, 19 184.7 122.4 113.6 Goodwill 12 184.3 77.2 27.0 Machinery etc. 12 731.8 491.0 373.0 Buildings 12 338.8 279.0 382.1 Land 12 170.4 93.3 135.7 Total fixed assets 1,610.0 1,062.9 1,031.4

Total assets 3,220.0 2,500.8 2,144.7

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities Debts to credit-issuing institutions 13 246.2 12.1 6.8 Creditors etc. 14 1,003.5 821.3 707.7 Unpaid government charges etc. 15 266.4 189.8 178.8 Other short-term debts 16 331.0 326.0 155.6 Total current liabilities 1,847.1 1,349.2 1,048.9

Long-term liabilities Long-term liabilities 17, 18 323.6 252.2 358.5 Deferred taxes 19 105.3 101.2 75.5 Total long-term liabilities 428.9 353.4 434.0

Minority interests 20 84.2 69.6 62.8

Shareholders' equity Share capital 21 57.0 57.0 57.0 Other shareholders' equity 802.8 671.6 542.0 Total shareholders' equity 22 859.8 728.6 599.0

Total liabilities and shareholders' equity 3,220.0 2,500.8 2,144.7

Secured liabilities 23 265.0 202.6 302.6 Guarantees 23 47.9 87.0 74.7

11 CASH FLOW STATEMENT

GROUP (Figures in NOK million) Note 26 1998 1997 1996

OPERATING ACTIVITIES Profit before taxation 282.3 270.4 123.0 Tax paid -51.5 -17.7 -34.8 Depreciation 198.4 144.9 129.3 Gain on sale of fixed assets -62.7 -109.6 -23.0 Pensions, difference cost/paid -2.6 -10.1 -11.3 Other differences profit/payment -3.8 0.3 -2.1 Generated from operating activities 360.1 278.2 181.1

Change in debtors -130.8 -131.9 16.2 Change in other current assets -84.9 -105.7 19.0 Change in creditors 176.3 106.7 -93.3 Change in other operating debts 42.0 123.8 -15.5 Net cash flow from operating activities (A) 362.7 271.1 107.5

INVESTMENT ACTIVITIES Purchase of property, plant and equipment -803.5 -394.5 -307.9 Proceeds from sale of property, plant and equipment 279.7 403.4 245.5 Purchase of companies -45.0 -58.9 -38.5 Other investments -54.2 2.8 -24.4 Net cash flow from investment activities (B) -623.0 -47.2 -125.3

FINANCING ACTIVITIES New long-term borrowing 182.9 80.0 119.8 Repayments long-term debts -132.7 -206.1 -108.8 Change short-term debts 234.1 4.0 -46.5 Sale own shares 14.1 Additions minority interest 2.1 0.4 Dividend paid -57.4 -39.5 -19.5 Net cash flow from financing activities (C) 229.0 -147.5 -54.6

NET CHANGE IN LIQUID ASSETS (A+B+C) -31.3 76.4 -72.4

Liquid assets at 1 January 400.4 324.0 396.4 Liquid assets at 31 December 369.1 400.4 324.0

12 A CCOUNTING POLICIES

CONSOLIDATION tion) for joint venture operations. When using the gross method, the relevant proportion of the joint venture Consolidated accounts account is included, and each line of the Profit and Loss The consolidated accounts include the parent company, Account and Balance Sheet is incorporated. Activities in subsidiaries and joint venture operations and give the working partnerships and joint and several liability com- Group’s profit/loss and financial position as collective sta- panies are included in the parent company’s accounts, tements. while activities in public limited companies are consolida- ted in the Group accounts. The acquisition method of Subsidiaries accounting is used for the purchase of a share in a joint Subsidiaries are companies in which Veidekke has a venture operation. controlling interest. The subsidiaries' profit and loss accounts and balance sheets are included in their entire- Limited partnerships – ships ty in the Consolidated Accounts. The minority interests' Veidekke is also a partner in limited partnerships which share of the profit for the year (after taxation) and share- own ships. The equity method is used for these invest- holders' equity are shown as separate items in the ments. When using the equity method, the relevant pro- accounts. portion of the profit/loss is entered as a financial item, while net investment is entered as a capital asset. Shares purchased in subsidiaries are dealt with accor- ding to the purchase value method of accounting, by Conversion of foreign companies which the cost price of the shares is set off against the Balance sheet items relating to foreign companies are book value of the shareholders' equity in the subsidiary at converted at the exchange rate applying on the date of the time of purchase. Any added or reduced value is sha- the Balance Sheet, while Profit and Loss Account items red among the respective assets. Added value which can- are converted at average exchange rates for the year.. not be assigned to material assets is entered as goodwill. Conversion differences for foreign subsidiaries are ente- Added value and goodwill are depreciated via the profit red against the Group’s shareholders’ equity, while con- and loss account. version differences for foreign joint ventures, etc. are entered in the Profit and Loss Account. Joint venture operations Some of Veidekke’s operations are run as joint ventures Internal transactions with other companies. This kind of general partnership All internal transactions between consolidated units have applies to building and construction, asphalt operations, been eliminated. This applies to internal trading, interest, ready-mix concrete and property, and includes working dividends and internal gains. It also applies to internal partnerships, joint and several liability companies and receivables and liabilities, in addition to share and capital public limited companies. In working partnerships, investment. construction contracts are completed with other contractors. Liability is shared by all parties in working RECORDING INCOME partnerships. Projects A joint venture operation is one in which two or more par- Veidekke operates mainly as contractors on projects ties manage the operation together and which last from a few months to two or three years. • the operation is within the normal operating areas of Invoicing is done monthly (payment net 30 days) and the partner usually as the contract activity progresses. However, • the operation is jointly managed by the partners. other payment plans are sometimes used.

Joint venture operations account for part of Veidekke’s For projects, income is entered as the work progresses overall activities, and Veidekke participates actively in and in proportion to the percentage of completion. This these ventures. Financial investments, etc. do not means that the accumulated proportion of the estimated constitute joint venture operations. Joint venture control profit on the project is taken to income. The percentage of means that no single partner has a controlling interest, completion is determined on the basis of completed pro- and that important decisions are made together. duction.

Veidekke uses the gross method (proportional consolida- In the case of projects that are expected to show a loss,

13 A CCOUNTING POLICIES

the estimated loss is entered in its entirety as a cost. company's funds (premium reserves). "Pension expen- Provisions are made for guarantee work and other uncer- ses" includes the present value of the year's pension ear- tainties. The guarantee period is normally three years. nings plus interest on commitments less return on pen- Disputed claims are entered as income once they have sion funds. been settled or the outcome is certain. Taxes Development projects for sale This year's tax expenses consist of payable tax and the These development projects refer to the building of hou- change in deferred tax. Payable tax is fixed on the basis ses for sale on Veidekke’s own account. These projects of the year's taxable profit. Deferred tax is a provision for are entered as income at a conservative level, in step future payable tax, calculated on timing differences be- with the sale and completion of the houses, based on tween accounts and tax. The reason why timing differen- anticipated final profit. Allocations are made for uncertain- ces arise is that some of the items in the Profit and Loss ty, work under guarantee, etc. In the case of projects that Account are treated differently for accounting purposes are expected to give a loss, the whole anticipated loss is and for tax purposes. Deferred tax is calculated in nomi- entered under expenses. Costs incurred on units not nal amounts, i.e. with no discount. There are moreover entered as income and development sites are entered in strict criteria for entering deferred tax benefits in the the Balance Sheet under "Development projects for sale". accounts. Development projects for Veidekke's own account are valued at production cost or anticipated net sales value, Depreciation whichever is lower. Production cost includes all assigna- Depreciation is based on the financial lifetime of the fixed ble project costs. Projects for own account that are taken assets. to income, but not paid, are classified as receivables and entered under "Debtors" (completed, not invoiced). Research and development costs Costs relating to research and development of technology Development projects for Veidekke’s ownership are charged to expenses. Veidekke also develops and builds non-residential buil- dings on its own account for rental and subsequent sale, Receivables and debts as well as for its own use. Non-residential buildings for Receivables and debts that relate to production are clas- Veidekke ownership are entered as capital assets under sified as current assets and short-term liabilities. Other manufacturing costs, including interest charges during the receivables and debts which are not due for more than construction period. Development projects for Veidekke a year are classified as fixed assets and long-term liabili- ownership are entered as operating income. ties.

Sales of fixed assets Receivables are entered in the Balance Sheet at their Gains on sales of machinery, buildings and other fixed nominal value less provision for bad debts. assets are entered as turnover. Current assets and short-term liabilities in foreign curren- OTHER ACCOUNTING POLICIES cy are converted at the exchange rate on the date of the Balance Sheet. Long-term receivables in foreign currency Pensions are entered at the rate of exchange on the date of the Veidekke has a group pension scheme for its employees Balance Sheet or on the date of acquisition, whichever is that is covered in a life assurance company. Veidekke lower. Long-term liabilities in foreign currency are entered also has unsecured pension commitments, including pen- at the rate of exchange on the date of the Balance Sheet sions under the agreed early retirement scheme, which or on the date of acquisition, whichever is higher. are paid directly out of operations. The employees' pen- sion rights are charged to expenses as they are earned Stocks and net pension commitments/pension funds are entered Stocks are assessed at full cost price or net realisable in the Balance Sheet. An actuarial calculation is made value, whichever is lower. annually of pensions expenses and pension commit- ments, taking into account anticipated wage growth Shares based on linear accumulation. "Pension funds" includes Financial investments are classified as current assets, premium funds and Veidekke's share of the insurance while strategic investments are classified as fixed assets.

14 NOTES TO THE ACCOUNT

GROUP (Figures in the tables in NOK million)

1. SEGMENT ANALYSIS

PROFIT AND LOSS Building Heavy Construction Industry ACCOUNT 1998 1997 1996 1998 1997 1996 1998 1997 1996 Turnover 2,345.0 2,230.3 1,823.2 2,223.9 1,716.7 1,389.4 1,031.7 910.5 868.6 Operating costs -2,221.1 -2,137.1 -1,777.7 -2,065.8 -1,631.6 -1,335.1 -876.7 -795.4 -761.4 Depreciation -29.9 -18.5 -17.2 -75.2 -51.0 -32.9 -86.3 -70.0 -59.6 Operating profit/loss 94.0 74.7 28.3 82.9 34.1 21.4 68.7 45.1 47.6 Net financial items 15.6 23.6 25.3 5.2 12.2 6.9 -16.7 -8.1 -11.5 Profit before taxation 109.6 98.3 53.6 88.1 46.3 28.3 52.0 37.0 36.1

BALANCE SHEET at 31 December Liquid assets 350.1 413.8 386.7 127.0 80.7 130.4 -147.4 -86.9 Other current assets 319.9 448.9 306.2 475.0 400.9 315.9 205.0 142.9 135.1 Fixed assets 274.0 181.4 85.7 373.0 237.6 109.4 528.0 365.2 296.5 Total assets 944.0 1.044.1 778.6 975.0 719.2 555.7 733.0 360.7 344.7 Interest-bearing liabilities 48.2 7.8 16.3 15.6 296.0 21.0 10.8 Other liabilities 677.0 739.0 571.4 698.0 506.8 387.7 229.0 159.8 151.1 Shareholders' equity 267.0 256.9 199.4 277.0 196.1 152.4 208.0 179.9 182.8 Total liabilities and shareholders' equity 944.0 1,044.1 778.6 975.0 719.2 555.7 733.0 360.7 344.7 Gross investments in fixed assets 95.4 76.0 35.7 167.3 128.2 48.2 308.1 116.8 128.2

PROFIT AND Property Other activity/ Eliminations Group LOSS ACCOUNT 1998 1997 1996 1998 1997 1996 1998 1997 1996 Turnover 84.7 126.2 62.6 -40.3 -22.9 -14.4 5,645.0 4,960.8 4,129.4 Operating costs -26.7 -24.7 -22.6 31.5 21.5 10.3 -5,158.8 -4,567.3 -3,886.5 Depreciation -7.0 -5.4 -19.6 -198.4 -144.9 -129.3 Operating profit/loss 51.0 96.1 20.4 -8.8 -1.4 -4.1 287.8 248.6 113.6 Net financial items -13.7 -5.6 -14.1 4.1 -0.3 2.8 -5.5 21.8 9.4 Profit before taxation 37.3 90.5 6.3 -4.7 -1.7 -1.3 282.3 270.4 123.0

BALANCE SHEET at 31 December Liquid assets 53.3 -106.2 -108.0 369.1 400.4 324.0 Other current assets 241.0 44.8 32.1 1,240.9 1,037.5 789.3 Fixed assets 435.0 278.7 539.8 1,610.0 1,062.9 1,031.4 Total assets 676.0 376.8 465.7 -108.0 3,220.0 2,500.8 2,144.7 Interest-bearing liabilities 330.0 155.3 308.6 -108.0 518.0 240.8 342.8 Other liabilities 154.0 56.2 29.9 1,758.0 1,461.8 1,140.1 Shareholders' equity 192.0 165.3 127.2 944.0 798.2 661.8 Total liabilities and shareholders' equity 676.0 376.8 465.7 -108.0 3,220.0 2,500.8 2,144.7 Gross investments in fixed assets 304.4 153.8 155.4 875.2 474.8 367.5

15 Criteria for division of areas of activity Non-distributed items The areas of activity are divided into business areas In the Profit and Loss Account, some items are not which have different risks and earnings. This is the shared between the areas of activity. Non-distributed same grouping as is used for internal control and items appears under "Other activities/Eliminations" reporting purposes. The activities of Bautas, which and consist of: hires out machinery and equipment to the Building and Heavy Construction Divisions and to external • Elimination of inter-divisional turnover/profit customers, are shared between Building and Heavy • Share of shipping partnerships' profit or loss Construction in proportion to turnover. • Cost of discount on sale of shares to employees • Gain on sale of short-term share investments Presentation of areas of activity The effect on profits of cash flow from the projects In the Balance Sheet, eliminations of liquid assets constitutes a substantial part of net financial items. and interest-bearing liabilities are shown under The profit or loss before taxation therefore gives a "Other activities/Eliminations". more correct picture of the earnings of the areas of activity than operating profit or loss does. Financial Inter-divisional transactions items and the profit or loss before taxation are there- There are relatively few sales between the areas of fore presented in addition to the operating profit or activities, but some contracts are performed in colla- loss. As complete profit and loss account is presen- boration with external parties. Internal sales and co- ted, a complete balance sheet for each area of activi- operation are carried out on commercial terms. ty is also presented. For that reason, complete balan- ce sheets are also given for the areas of activity. Distribution of turnover by geographical market NOK 514.4 million (NOK 350.0 in 1997 and NOK Distribution of items that are not directly 197.0 in 1996) of the Group's total turnover derives assignable from operations outside Norway, thus totalling 9.1% Costs that are not directly assignable are shared in (7.1% in 1997 and 4.8% in 1996) of the Group's total proportion to turnover. Shareholders' equity, liquid turnover. assets and interest-bearing liabilities are shared in proportion to total assets.

TURNOVER

Building Heavy Construction Other activities Group 1998 1997 1996 1998 1997 1996 1998 1997 1996 1998 1997 1996 Norway 2,345.0 2,230.3 1,823.2 1,709.4 1,366.7 1,182.6 1,076.1 1,013.8 926.6 5,130.5 4,610.8 3,932.4 Other Nordic countries 42.3 25.2 13.4 42.3 25.2 13.4 Germany 5.5 5.5 East Africa 369.5 255.7 167.6 369.5 255.7 167.6 Other countries 102.7 69.1 25.8 -15.3 102.7 69.1 10.5 Total 2,345.0 2,230.3 1,823.2 2,223.9 1,716.7 1,389.4 1,076.1 1,013.8 916.8 5,645.0 4,960.8 4,129.4

Orders-on-hand Building Heavy Construction Total 1998 1997 1996 1998 1997 1996 1998 1997 1996 Total 1,497 1,203 1,125 1,185 1,507 1,136 2,682 2,710 2,261 Of which due for completion within 12 months 1,283 1,177 964 1,009 1,292 846 2,292 2,469 1,810

16 2. TURNOVER

Turnover includes the following gains on sale from: 1998 1997 1996 Machinery etc. 10.1 10.2 4.8 Buildings, land 52.6 99.4 18.2 Total gains on sales 62.7 109.6 23.0

3. FINANCIAL ITEMS

1998 1997 1996 Interest received 41.4 50.6 34.9 Other financial income 5.8 2.4 7.5 Financial income 47.2 53.0 42.4 Interest charges, long-term loans -19.7 -11.6 -20.0 Interest charges, short-term loans -30.0 -18.1 -10.8 Other financial expenses -3.0 -1.5 -2.2 Financial expenses -52.7 -31.2 -33.0 Financial income/financial expenses -5.5 21.8 9.4

4. EARNINGS PER SHARE

1998 1997 1996 Earnings per share (NOK) 16.52 16.13 6.92 Profit/loss for the year (NOK '000) 188,225 183,812 77,715 Time-weighted average number of ordinary shares 11,395,660 11,395,660 11,238,526 Number of ordinary shares at 31 December 11,395,660 11,395,660 11,395,660

Figures have been adjusted for the share split (1:2) on 29 April 1998.

5. LIQUID ASSETS

1998 1997 1996 Bank deposits 280.4 270.7 158.1 Short-term investments 37.2 72.7 94.1 Withheld tax on salaries and wages 39.8 41.8 42.2 Securities 10.1 10.5 26.4 Shares 1.6 4.7 3.2 Liquid assets 369.1 400.4 324.0

6. DEBTORS

1998 1997 1996 Book debtors 780.6 700.5 611.0 Provision for bad debts -22.7 -22.9 -24.1 Due from customers 137.7 117.9 118.1 Completed, not invoiced 204.1 132.1 81.7 Invoiced, not completed -263.5 -228.2 -228.9 Debtors 836.2 699.4 557.8

17 7. STOCKS

Stocks include project stocks and Industry Division stocks. Project stocks consist of materials, spare parts, tools etc., while Industry Division stocks consist of crushed stone and raw materials for the production of asphalt and ready-mix concrete etc.

8. DEVELOPMENT PROJECTS FOR SALE

1998 1997 1996 Projects in progress 92.4 29.0 52.8 Sites for development 136.5 122.3 18.0 Development projects for sale 228.9 151.3 70.8

Veidekke also has sites for development under fixed assets (Note 12).

Development projects for sale are concerned with house-building for Veidekke's own account for sale. The item "Projects in progress" above consists of costs incurred on units that have not been taken to income.

9. SHARES IN SUBSIDIARIES

Total share Ownership Nominal Balance capital share in % value sheet value* Topp-Dekke A/S 0.5 100 0.5 25.7 Dokken & Østdal AS 0.2 60 0.1 24.7 Korsbrekke og Lorck AS 5.0 60 3.0 16.9 Seby AS 0.6 70 0.4 16.0 Wilhelmsen & Sønner AS 16.0 100 16.0 16.0 A/S Noremco Construction 5.0 100 5.0 12.6 Veidekke Bolig AS 2.5 100 2.5 10.9 Hokksund Pukkverk A/S 0.1 48 0.0 8.9 Veidekke Construction AB 11.0 76 8.5 8.5 Veidekke Shipping AS 6.4 100 6.4 6.4 Prosjektutvikling Bergen A/S 5.8 100 5.8 6.0 Veidekke Eiendom A/S 5.0 100 5.0 5.1 Bautas AS 5.0 100 5.0 5.0 Veidekke Finans A/S 5.0 100 5.0 5.0 Arog AS 0.8 70 0.6 4.2 HG Asfalt Larvik AS 3.0 100 3.0 3.0 HG Betong Larvik AS 2.0 100 2.0 2.0 Kongsvinger Asfalt AS 2.0 50 1.0 1.0 Other subsidiaries 3.5 Owned by Veidekke ASA 181.4 Kongsvinger Asfalt AS 2.0 50 1.0 19.5 Økern Næring AS 12.0 100 12.0 12.0 Hokksund Pukkverk A/S 0.1 48 0.0 2.0 Owned through subsidiaries 33.5

*Book value in the accounts for Veidekke ASA. In 1998, Veidekke purchased 60% of the shares in the company Dokken & Østdal AS, 70% of the shares in the compa- ny Arog AS and the remaining shares in the company Kongsvinger Asfalt AS (50%). Furthermore, the following new sub- sidiaries have been established: Wilhelmsen & Sønner AS, Økern Næring AS, Veidekke Construction AB, Veidekke Shipping AS, HG Asfalt Larvik AS and HG Betong Larvik AS.

18 10. SHARES IN JOINT VENTURE OPERATIONS

Total share Ownership Nominal Balance capital share in % value sheet value* HF-Gruppen AS 6.2 43 2.7 54.8 Bergheim Terrasser AS 10.0 50 5.0 5.0 Nocon AS 6.0 50 3.0 3.0 A/S Fosskvartalet 0.1 50 0.1 Other companies 0.4 Owned by Veidekke ASA 63.2 Lørenskog Næringspark AS 40.0 40 16.0 16.0 Amrock JV AS 30.0 30 9.0 9.0 Porsgrunn Næringspark AS 16.6 33 5.5 5.6 Martin Haraldstad A/S 0.1 50 0.1 2.0 Owned through subsidiaries 32.6 Total Group 95.8 *Book value in the accounts for Veidekke ASA. Bergheim Terrasser AS, Lørenskog Næringspark AS and Porsgrunn Næringspark are recently established companies.

11. LONG-TERM RECEIVABLES ETC.

1998 1997 1996 Loan to employees 61.0 34.1 17.3 Loan to customers 42.5 14.8 25.2 Loan to partners 29.3 Net pension funds 27.7 20.7 9.5 Miscellaneous shares 20.4 14.0 7.8 Loan to foundation for employees' share purchases 16.0 23.0 10.1 Deferred tax benefit 6.6 5.8 6.3 Other 10.5 10.0 8.1 Long-term receivables etc. 184.7 122.4 113.6

12. FIXED ASSETS

Accum. Book Depre- Depre- depre- value ciation ciation Cost 1 Jan. Additions Disposals ciation 31 Dec. for year in % Goodwill 120.8 127.1 0.2 63.4 184.3 20.0 10-20 Machinery etc. 1,289.9 427.3 106.3 879.1 731.8 170.2 10-25 Buildings 362.1 220.5 158.0 85.8 338.8 8.2 2-5 Land 93.3 100.3 23.2 170.4 Total 1,866.1 875.2 287.7 1,028.3 1,425.3 198.4

"Land" includes properties for development with a book value of NOK 98.6 million (38.7).

Investments and sales (sales price) in the last five years 1998 1997 1996 1995 1994 Inv. Sale Inv. Sale Inv. Sale Inv. Sale Inv. Sale Goodwill 127.1 62.0 24.0 2.8 7.1 Machinery etc. 427.3 26.6 255.0 22.5 181.6 15.8 171.3 33.6 88.0 24.2 Buildings 220.5 203.3 140.5 333.2 129.3 188.5 38.6 29.0 82.9 17.8 Land 100.3 24.8 17.3 61.1 32.6 52.8 21.8 5.1 3.8 3.7 Total 875.2 254.7 474.8 416.8 367.5 257.1 234.5 67.7 181.8 45.7

19 13. DEBT TO CREDIT-ISSUING INSTITUTIONS ETC.

1998 1997 1996 Bank overdraft 11.2 5.7 6.8 Certificate loans 235.0 Project financing 6.4 Debt to credit-issuing institutions etc. 246.2 12.1 6.8

14. CREDITORS ETC.

"Creditors" includes accrued costs (accrued, not entered) and provisions for work under guarantee etc.

15. UNPAID GOVERNMENT CHARGES ETC.

These include unpaid VAT, withheld tax, social security contributions, holiday pay, etc.

16. OTHER SHORT-TERM LIABILITIES

1998 1997 1996 Tax payable 75.9 49.8 14.1 Allocation dividend 61.3 57.4 39.3 Advance payments from customers 101.7 198.2 77.4 Other liabilities 92.1 20.6 24.8 Other short-term liabilities 331.0 326.0 155.6

17. LONG-TERM LIABILITIES

Book value Repaid New loans Book value 31 Dec. 97 1998 1998 31 Dec. 98 Loans secured in buildings/land 202.6 126.4 188.8 265.0 Other loans 26.1 6.3 10.9 30.7 Total loans 228.7 132.7 199.7 295.7 Net pension commitments 23.5 27.9 Long-term liabilities 252.2 323.6

Repayment structure 1999 2000 2001 2002 2003 After 2003 Loans secured in buildings/land 13.2 15.2 17.6 16.1 15.8 187.1 Other loans 4.8 4.7 4.7 4.1 4.0 8.3 Total 18.0 19.9 22.3 20.2 19.8 195.4

Of total long-term liabilities (excluding pension commitments) of NOK 295.7 million at 31 December 1998, NOK 25.2 million was non interest-bearing.

Key figures for interest-bearing liabilities 1999 1998 1997 1996 Proportion with interest period of less than one year (including floating interest rate) 83% 41% 45% 42% Weighted effective loan interest as at 31 December 9.0% 7.3% 6.9% Average interest period as at 31 December 0.7 years 3.0 years 2.6 years

Drawing rights Unused long-term drawing rights 65.0 300.0 300.0 Unused short-term drawing rights (bank overdraft) 51.0 51.0 51.0

20 18. PENSIONS

Veidekke has a collective pension scheme for its employees that is covered by an agreement with a life assurance company. Veidekke also has unsecured pension commitments including early pensions guaran- teed by contract, paid directly out of operations. The pension schemes cover 2,480 current employees and 560 pensioners.

1998 1997 1996 Veidekke ASA Kolo * Other Group Group Group Secured Unsecured companies Total Total Total Pension expenses Earned during year (present value) -15.3 -7.1 -1.0 -2.6 -26.0 -18.5 -13.1 Interest on commitments -16.4 -3.1 -1.3 -1.1 -21.9 -17.4 -16.3 Return on funds 19.2 3.0 0.8 23.0 20.5 17.8 Deviation in estimate in P&L Acct. -0.3 -1.8 -0.6 -0.4 -3.1 -1.1 -0.9 Change over-financing -0.9 -0.9 -0.6 -0.6 Pension expenses -12.8 -12.0 -0.8 -3.3 -28.9 -17.1 -13.1 Entered in Balance Sheet Pension funds 262.4 40.1 13.9 316.4 280.6 244.1 Pension commitments (present value) -261.6 -53.4 -20.4 -20.1 -355.5 -273.6 -253.3 Net funds/commitments 0.8 -53.4 19.7 -6.2 -39.1 7.0 -9.2 Deviation in estimate not entered in P&L Acct. 20.4 29.8 5.1 3.7 59.0 9.3 14.9 Over-financed not entered -20.1 -20.1 -19.2 -18.6 Net funds/commitments entered in Balance Sheet 21.2 -23.6 4.7 -2.5 -0.2 -2.9 -12.9

* Korsbrekke og Lorck AS.

NOK 27.7 million of net pension funds/pension commitments is entered under long-term receivables etc., while NOK 27.9 million is entered as a long-term liability. Pension commitments and the amount earned during the year include employer's contributions.

An annual deviation occurs between the estimated and actual return on pension funds and between estima- ted and actual pension commitments. The deviation in estimate is entered in the Balance Sheet until 10% is reached of pension funds or pension commitments, whichever is largest. When the accumulated deviation exceeds this limit, the excess amount is entered in the Profit and Loss Account over the remaining accumu- lation period.

Financial assumptions (%) Return on pension funds 8.0 Discount rate 7.0 Annual wage growth 3.3 Annual basic pension rate adjustment 3.3 Annual adjustment of pension being paid 2.5

21 19. TAX

TAXATION 1998 1997 1996 Tax payable 77.6 52.1 11.9 Deferred tax 3.3 24.8 24.7 Taxation 80.9 76.9 36.6

DEFERRED TAX 1998 1997 1996 Timing differences: Short-term items 208.9 264.1 164.8 Accelerated depreciation 93.2 51.8 23.9 Gain and loss account 46.8 27.3 74.4 Other long-term items 27.2 18.2 6.5 Basis deferred tax 376.1 361.4 269.6 Deferred tax (28 %) 105.3 101.2 75.5 Deferred tax benefit * 6.6 5.8 6.3

* Calculated on net pension commitments of NOK 23.6 million (NOK 20.8 million in 1997 and NOK 22.4 million in 1996).

20. MINORITY INTERESTS 1998 1997 1996 Minority interests 1 January 69.6 62.8 54.9 Minority share of profit for year 13.2 9.7 8.7 Dividends -4.3 -3.4 - 8.0 Sales of own shares 5.5 Additions minority 5.7 0.5 1.7 Minority interests 31 December 84.2 69.6 62.8

MINORITY SHARE OF PROFIT AND LOSS ACCOUNT 1998 1997 1996 Turnover 141.8 108.3 104.7 Operating expenses -124.3 -97.2 -94.2 Operating profit 17.5 11.1 10.5 Net financial items 1.2 1.7 1.5 Profit before taxation 18.7 12.8 12.0 Taxation -5.5 -3.1 -3.3 Minority share of profit for year 13.2 9.7 8.7

The minority interests derive primarily from Korsbrekke og Lorck AS of which Veidekke owns 60%. 21. SHARE CAPITAL (SHARES HELD BY BOARD MEMBERS ETC.) Number of shares * Christian Bruusgaard, Chairman of the Board 10,036 Flemming Vejgaard Andersen, Board Member 550 Helge B. Andresen, Board Member 12,608 Karsten Houm, Board Member 1,000 Peder Chr. Løvenskiold, Board Member 5,200 Steinar Krogstad, Board Member 658 Bjørn H. Madsen, Board Member 1,000 Terje R. Venold, President and CEO 30,850 Total 61,902

*Including shares held by closely associated persons or companies.

22 22. SHAREHOLDERS' EQUITY

1998 1997 1996 Shareholders' equity 1 January 728.6 599.0 545.3 Profit for year 188.2 183.8 77.7 Dividends -57.0 -54.2 -31.3 Sales of own shares 8.6 Adjustment minority -1.3 Shareholders' equity 31 December 859.8 728.6 599.0

23. MORTGAGES, GUARANTEES AND JOINT SEVERAL LIABILITIES

Mortgages 1998 1997 1996 Book liabilities secured by mortgages etc. 265.0 202.6 302.6 Book value of mortgaged buildings 242.9 175.8 322.3 Book value of mortgaged land 87.7 20.4 19.5

Guarantees 1998 1997 1996 Guarantees to employees 0.1 0.1 6.2 Guarantees to associated companies 43.3 82.4 60.2 Other guarantees 4.5 4.5 8.3 Total guarantees 47.9 87.0 74.7

The Group has issued negative mortgage declarations for loans and guarantees.

Guarantees furnished by Veidekke ASA to subsidiaries: 1998 1997 1996 Total 562.5 485.5 316.3 of which joint and several liability for subsidiaries' with drawals from Group account 342.9 301.5 171.9

As a result of its participation in partnerships and joint ventures, Veidekke could become liable for other par- ticipants' inability to fulfil their obligations. However, Veidekke cannot be called to account until the company in question actually fails to fulfil its obligations.

24. PROJECTS IN PROGRESS

Taken to income on projects in progress 1998 1997 1996 Accumulated income 3,049 2,992 2,125 Accumulated contributions 148 152 133

Loss-bringing projects in progress* 1998 1997 1996 Remaining turnover 105 164 127

* Provision has been made in the accounts for the anticipated loss on these projects.

23 25. CLOSELY ASSOCIATED PARTIES

Sales of Veidekke shares to employees 1998 1997 1996 Number of shares sold to employees 411,860 303,690 302,302 Employee discount 5.5 6.3 5.3 Contribution to foundation 8.0 2.0 5.3 Paid employer's contributions 0.6 0.7 0.5

Veidekke has a foundation which purchases Veidekke shares in the market and resells them to employees at a discount. Veidekke pays a contribution to the foundation and this is charged to the Profit & Loss Account. Veidekke also pays employer's social security contributions on the discount.

26. CASH FLOW STATEMENT

Purchase of companies

In 1998 Veidekke purchased subsidiaries and shares in joint venture companies for a total net cash outlay of NOK 45.0 million (NOK 58.9 million in 1997 and NOK 38.5 million in 1996). The following figures have been entered in the Group Balance Sheet:

1998 1997 1996 Liquid assets 3.4 28.0 19.6 Other current assets 12.7 11.3 77.8 Fixed assets 72.0 81.5 59.6 Debts to credit-issuing institutions -1.3 -41.7 Operating debts -15.5 -10.4 -46.2 Payable/deferred tax -3.8 -3.0 -8.4 Long-term liabilities -20.4 -8.2 -0.8 Cost price for purchases 48.4 97.9 59.9 Credit for purchases -11.0 - 1.8 Liquid assets taken over -3.4 -28.0 - 19.6 Net cash outlay 45.0 58.9 38.5

Fixed assets Investments 1998 1997 1996 Entered in accounts * 875.2 474.8 367.5 Purchases of subsidiaries -71.7 -80.3 -59.6 Cash outlay 803.5 394.5 307.9

Sales 1998 1997 1996 Entered in accounts * 254.7 416.8 257.1 Credit for sale -25.0 -11.6 Payments referring to last year 25.0 11.6 Cash payments received 279.7 403.4 245.5

* See Note 12 - Fixed assets

24 PROFIT AND LOSS ACCOUNT

VEIDEKKE ASA (Figures in NOK million) Note 1998 1997

Turnover 4,501.1 3,978.6

Subcontractors -1,950.9 -1,596.1 Cost of materials -1,016.7 -970.2 Wages and social costs 18, A -1,074.8 -924.5 Other operating expenses B -203.7 -191.4 Depreciation E -92.5 -83.6 Bad debts -31.2 -33.7 Total operating costs -4,369.8 -3,799.5

Operating profit 131.3 179.1

Financial income C 45.4 50.5 Financial expenses -14.4 -25.0

Profit before taxation 162.3 204.6

Tax payable G -43.6 -20.8 Change deferred tax G 8.8 -21.0

Profit for the year 127.5 162.8

Transfers: Group contribution 27.7 3.1 Dividend 57.0 54.1 Legal reserve 55.8 Distributable reserve 42.8 49.8

Total transfers 127.5 162.8

25 B ALANCE SHEET

VEIDEKKE ASA (Figures in NOK million) At 31 December Note 1998 1997

ASSETS

Current assets Liquid assets 551.1 393.5 Debtors 552.7 489.7 Short-term receivables, group companies 32.4 26.1 Other short-term receivables 15.3 36.6 Stocks 7 85.2 56.3 Development projects for sale 24.5 26.6 Total current assets 1,261.2 1,028.8

Fixed assets Shares in subsidiaries 9 181.4 109.7 Shares in associated companies 10 63.2 58.6 Long-term receivables etc. D 155.4 100.4 Long-term receivables, group companies 237.5 130.1 Goodwill E 14.1 7.2 Machinery etc. E 293.3 248.1 Buildings E 82.5 189.2 Land E 80.8 65.5 Total fixed assets 1,108.2 908.8

Total assets 2,369.4 1,937.6

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities Debts to credit-issuing institutions 238.0 Creditors etc. 14 843.1 671.0 Unpaid government charges etc. 15 205.9 163.4 Short-term debt, group companies 90.0 16.9 Other short-term debts F 214.3 229.2 Total current liabilities 1,591.3 1,080.5

Long-term liabilities Long-term liabilities 62.9 176.6 Deferred tax G 80.8 88.9 Total long-term liabilities 143.7 265.5

Shareholders' equity Share capital (11,395,660 shares at NOK 5 each) 57.0 57.0 Legal reserve 145.5 145.5 Distributable reserve 431.9 389.1 Total shareholders' equity H 634.4 591.6

Total liabilities and shareholders' equity 2,369.4 1,937.6

Secured liabilities I 36.2 127.0 Guarantees 23 610.4 572.5

26 CASH FLOW STATEMENT

VEIDEKKE ASA (Figures in NOK million) 1998 1997

OPERATING ACTIVITIES Profit before taxation 162.3 204.6 Tax paid -21.8 -1.2 Depreciation 92.5 83.6 Gain on sale of fixed assets -38.7 -70.3 Pensions, difference cost/paid -2.7 -12.4 Other differences profit/payment 0.1 Generated from operating activities 191.6 204.4

Change in debtors -63.0 -75.7 Change in other current assets -36.8 -12.8 Change in creditors 172.1 54.6 Change in other operating debts 51.3 96.9 Net cash flow from operating activities (A) 315.2 267.4

INVESTMENT ACTIVITIES Purchase of property, plant and equipment -204.2 -262.8 Proceeds from sale of property, plant and equipment 214.7 154.2 Other investments -232.5 -102.2 Net cash flow from investment activities (B) -222.0 -210.8

FINANCING ACTIVITIES New long-term borrowing 110.7 Repayments long-term debts -116.4 -90.2 New short-term borrowing 238.0 Group contribution paid -3.1 -20.5 Dividend paid -54.1 -31.3 Net cash flow from financing activities (C) 64.4 -31.3

NET INCREASE IN LIQUID ASSETS (A+B+C) 157.6 25.3

Liquid assets at 1 January 393.5 368.2 Liquid assets at 31 December 551.1 393.5

27 NOTES TO THE ACCOUNT

VEIDEKKE ASA The accounting policies on pages 13 and 14 and part of the notes for the Group, also apply to the parent company.

A. SALARIES Remuneration to Board Members amounts to NOK 675,000.-, while the President and CEO's salary amounts to NOK 1,610,976.00.

B. OTHER OPERATING COSTS Remuneration to the company's auditors amounts to NOK 1,175,000.00 for auditing fees and NOK 198,200.00 for consultancy fees.

C. FINANCIAL INCOME AND FINANCIAL EXPENSES Financial income includes dividends of NOK 7.2 million (13.4), of which NOK 7.0 million (12.0) was paid from subsidiaries to the parent company. Other financial income from subsidiaries amounts to NOK 0.3 million (0.8).

D. LONG-TERM RECEIVABLES ETC. Long-term receivables etc. includes a deferred tax benefit of NOK 6.6 million (5.8).

E. FIXED ASSETS (Figures in the tables in NOK million) Accumlated Book value Depreciation Depreciation Cost 1 Jan. Additions Disposals depreciation 31 Dec. for year in % Goodwill 12.3 7.7 5.9 14.1 0.8 10-20 Machinery 683.4 145.8 73.8 462.1 293.3 87.9 10-25 Buildings 236.1 24.2 130.6 47.2 82.5 3.8 2-5 Land 65.5 26.5 11.2 80.8 Total 997.3 204.2 215.6 515.2 470.7 92.5

F. OTHER SHORT-TERM LIABILITIES Accrued taxes payable amount to NOK 39.5 million (17.7). Dividends payable amount to NOK 57.0 million (54.1).

G. TAX

PROFIT ASSESSABLE FOR TAX PURPOSES 1998 1997

Profit before taxation 162.3 204.6 Group contribution -27.7 -3.1 Other permanent differences -15.2 -14.7 Change in timing differences 31.8 -121.6 Difference accounts/assessed tax -10.5 Profit assessable for tax purposes (basis) 140.7 65.2

DEFERRED TAX 1998 1997 Timing differences: Short-term items 224.1 281.0 Accelerated depreciation 34.3 31.2 Gain and loss account 32.1 17.3 Other long-term items -1.9 -12.0 Basis deferred tax 288.6 317.5 Deferred tax (28 %) 80.8 88.9 Deferred tax benefit * 6.6 5.8

* Calculated on net pension commitments of NOK 23.6 million (20.8).

28 H. SHAREHOLDERS' EQUITY

1998 1997 Shareholders' equity at 1 January 591.6 486.0 Profit for the year 127.5 162.8 Dividends -57.0 -54.1 Group contribution -27.7 -3.1

Total shareholders' equity at 31 December 634.4 591.6

I . SECURED LIABILITIES

1998 1997 Book liabilities secured by mortgage etc. 36.2 127.0 Book value of mortgaged buildings 39.1 97.6 Book value of mortgaged land 9.2 20.4

AUDITORS’ REPORT FOR 1998

To the Annual Shareholders' Meeting of Veidekke ASA

We have audited the annual report and accounts of Veidekke ASA for 1998, showing a net income for the year of NOK 127.5 million for the parent company and a consolidated profit for the year of NOK 188.2 mil- lion. The annual report and accounts, which comprise the report of the Board of Directors, the profit and loss account, the balance sheet, the statement of cash flows, the notes to the accounts and the Group accounts, are presented by the company's Board of Directors and its President and C.E.O. Our responsibility is to examine the company's annual report and accounts, its accounting records and other related matters. We have conducted our audit in accordance with relevant laws, regulations and the generally accepted stan- dards of Norwegian auditing. We have performed those audit procedures considered necessary to confirm that the annual report and accounts are free of material misstatements. We have examined selected parts of the evidence supporting the accounts and assessed the accounting principles applied, the estimates made by mana- gement, and the contents and presentation of the annual report and accounts. To the extent required by gene- rally accepted standards of Norwegian auditing, we have reviewed the company's internal control and the management of its financial affairs. The Board of Directors' proposal for the allocation of the profit for the year and transfers between equity accounts complies with the provisions of the Norwegian Public Companies Act. In our opinion, the annual report and accounts have been prepared in accordance with the requirements of the Norwegian Joint-Stock Companies Act and present fairly the financial position of the company and group as of 31 December 1998 and the result of its operations for the year ended, in conformity with generally accepted Norwegian accounting principles.

Oslo, 25 February 1999 ERNST & YOUNG AS

Ernst Alsaker State Authorised Public Accountant (Norway) Note: The translation into English has been prepared for information purposes only

29 KEY FIGURES

1998 1997 1996 1995 1994

OPERATIONS * Turnover 5,645.0 4,960.8 4,129.4 4,029.0 3,255.4 Operating profit 287.8 248.6 113.6 77.5 6.0 Profit before taxation 282.3 270.4 123.0 79.5 6.2 Ordinary profit for the year 1) 188.2 183.8 77.7 50.7 -6.9 Orders-on-hand Building and Heavy Construction 2,682 2,710 2,261 1,944 1,731

PROFITABILITY Gross profit margin (%) 2) 5.0 5.5 3.0 2.0 0.2 Return on total assets (%) 3) 11.5 13.0 7.3 6.3 2.8 Return on working capital (%) 4) 25.6 28.9 15.7 12.6 5.1 Return on equity (%) 5) 23.1 26.5 13.7 10.0 -0.1

CAPITAL ADEQUACY * Total assets 3,220.0 2,500.8 2,144.7 2,105.9 2,007.9 Total shareholders' equity 6) 944.0 798.2 661.8 600.2 552.3 Equity ratio (%) 7) 29.3 31.9 30.9 28.5 27.5 Gross investments 875.2 474.8 367.5 234.5 181.8

LIQUIDITY Liquidity 31 December * 369.1 400.4 324.0 396.4 382.5 Current ratio 8) 0.87 1.07 1.06 1.00 1.07 Quick ratio 9) 0.68 0.87 0.91 0.88 0.90 Net interest-bearing liabilities * 10) -32.4 232.3 63.8 83.1 -41.1

SHARES** Market price 31 December (NOK) 90.00 129.00 100.50 63.13 58.25 Earnings per share (NOK) 11) 16.52 16.13 6.92 4.57 -0.63 Market price/earnings (P/E) 5.45 8.00 14.54 13.83 - Cash flow per share (NOK) 12) 34.21 31.02 20.78 15.36 4.07 Market price/cash flow 2.63 4.16 4.84 4.11 14.32 Dividend per share (NOK) 5.00 4.75 2.75 1.50 1.00 Outstanding shares (average 1,000) 11,396 11,396 11,238 11,110 11,018

EMPLOYEES Number of employees 31 December 3,794 3,176 3,111 2,888 2,785 Wages and social benefits * 1,375 1,163 1,025 859 774

* Amounts in NOK million ** The figures have been adjusted for the share split (1:2) on 29 April 1998

1) Ordinary profit for the year: Profit for the year plus extraordinary items less tax on extraordinary items. 2) Gross profit margin: Profit before taxation as a percentage of turnover. 3) Return on total assets: Profit before taxation plus financial expenses as a percentage of average total assets. 4) Return on working capital: Profit before taxation plus financial expenses as a percentage of average total assets less interest-free short-term liabilities and interest-free long-term liabilities. 5) Return on equity: Profit after taxation as a percentage of average total shareholders' equity. 6) Total shareholders' equity: Book equity including minority interests. 7) Equity ratio: Total equity as a percentage of total assets at 31 December. 8) Current ratio: Current assets divided by short-term liabilities. 9) Quick ratio: Most liquid current assets divided by short-term liabilities. 10) Net interest-bearing liabilities: Liquid assets plus interest-bearing receivables from project financing less short-term interest-bearing liabilities less long-term interest-bearing liabilities. 11) Earnings per share: Ordinary profit for the year divided by the average number of non paid-up shares (fully watered down). 12) Cash flow per share: Profit before extraordinary items plus ordinary depreciation less payable tax on ordinary profit less minority interests divided by the average number of non paid-up shares.

30 LARGEST ONGOING PROJECTS AS AT 31 DECEMBER 1998

Name of project Estimated total Remaining Type of project turnover work as at Customer Veidekke’s share* 31 Dec. 1998* Completion date Type of contract BUILDING Stenersgaten 2, Oslo Offices and shops 210 159 August 1999 Turnkey contract Olav Thon Gruppen Storbyen, Sarpsborg Turnkey contract Shopping centre 184 156 November 1999 as part of VS-Gruppen Storbyen Sarpsborg AS NKL, Langhus Warehouse 116 109 December 1999 Turnkey contract NKL Eiendom Bystasjonen, Bergen Turnkey contract Shopping centre/commercial building 115 38 March 1999 as part of VS-Gruppen Olav Thon Gruppen Nittedal Utvikling, Nittedal Offices/commercial building 109 88 November 1999 Turnkey contract Nittedal Utvikling AS S-Gruppen, Vinterbro Offices and warehouse 78 27 June 1999 Turnkey contract S-Gruppen Klosterenga, Oslo Eco-housing 74 64 January 2000 Main contract USBL Utbygging AS Bristol Hotel, Oslo Renovation and new building 67 61 January 2000 Turnkey contract Olav Thon Gruppen Enebakkveien 19, Oslo Turnkey contract Housing 62 31 June 1999 for Veidekke’s own Veidekke Bolig account Åsane Alders- og sykehjem, Bergen Old People’s and Nursery Home 50 49 February 2000 Turnkey contract Municipality of Bergen

HEAVY CONSTRUCTION Kårstø, Civil II Building and civil engineering works 439 142 October 1999 Main contract Statoil The North Cape tunnel, Finnmark Road tunnel 350 3 February 1999 Main contract Public Roads Administration Oil and gas terminal, Sture Upgrading and extension 260 144 September 1999 Sub-contract Norsk Hydro ASA Coca-Cola, Nittedal Production plant 185 10 February 1999 Main contract Coca-Cola Drikker A/S Såstad - Haug, Akershus Double railway track 179 23 June 1999 Main contract Norwegian State Railway Måna - Vassum, Akershus Tunnel/road, Oslo Fjord Connection 160 74 September 2000 Main contract Public Roads Administration Helland Bridges, Vestfold Two motorway bridges on the E-18 140 138 June 2001 Main contract Public Roads Administration Berger gravel quarry, Jessheim Stone crushing 107 10 December 1999 Main contract Gardermoen Railway line Tana Quartzite Quarry, Tana Drilling and blasting of quartzite ore 90 75 April 2001 Main contract Elkem Tana A/S Gaustadtrikken, Oslo Tram line to the new National Hospital 82 48 September 1999 Main contract Oslo Public Transportation * NOK million

31 growth and development Historically good results are the best driving force for continued profitable growth

Last year's 5% profit margin helps to consolidate autumn 1998 still brought us challenges. In our the level for our financial objectives. We will need prognoses, we had foreseen a levelling off of growth to maintain this level if we are going to be able to and thus the possibility of a slight decline in buil- continue our development of Veidekke into the new ding and heavy construction in 1999. Then, with millennium, not least to ensure that we have room the relatively steep increase in interest rates towards for growth, both technically and commercially. All the end of the year, prospects became dimmer. four of Veidekke's divisions showed an improve- However, since the investment tax was stopped and ment in financial results and it is gratifying to regis- the interest rates are now showing a positive trend, ter that following our long-range strategic plans has we find ourselves back at practically the same helped us to achieve the results we had anticipated. growth prognoses on which we based our strategic In 1998, the top management of all four divisions plans for 1999 and 2000: a decline of 7-10% in were relocated in our new offices at Skøyen and building and heavy construction, from a very high throughout the year we invested in new operations level, and a more stable trend for the maintenance that give us larger shares of the value by the inter- market. We are justified in being optimistic, but linking activities in our organisation. there is clearly an element of uncertainty here. However, provided there is a fall in the interest rates Creating value through interaction as anticipated in 1999, we have good reason to Behind our results for the year, there also lies a posi- anticipate a slight upward turn in the market tive feature of our relationship with many of our towards the end of the year - which in turn will major customers, and we may well have the largest offer opportunities for the new millennium. share in the industry of contracts developed in partnership with our customers. This shows that, Continued restructuring in a Nordic building and where the total economy of a project is evaluated on construction market the basis of more than just unit prices, interaction People who follow developments in the building with the customer opens for many new possibilities. and construction business know that we can expect In several of the contracts we won in 1998, confi- more restructuring in the near future. This is partly dence in the quality of our product and delivery was the result of a slightly tighter market, but it is also a one of the most important parameters, and we will consequence of greater focus on a more united continue to work on quality as the basis for our Nordic market. Veidekke will continue to take an strategy of creating value through interaction with active part in this restructuring process, but we will customers and partners. continue to focus on profitability. Through the acquisitions and investments we made in 1998, we Changing operating conditions emphasised the importance of increasing our share Autumn 1998 reminded us that changes can happen of the value-adding process in our organisation. quickly and seriously effect the conditions under This is natural for our operations in Norway, while which an enterprise operates. Turbulent internatio- outside Norway we will tend more to look for nal financial markets, falling oil prices and rising niches where potential earnings are greatest. In interest rates contributed to uncertainty in the mar- Sweden, we see that the restructuring process has ket. Then, to crown it all, the government threate- advanced much further than it has in Norway, while ned to introduce a tax on investment in building the earnings for the key players are relatively low. and construction. It is understandable that many We therefore believe that it is difficult to enter this people started foreseeing a really tough time. market with the full breadth of our operations and still meet our targets regarding earnings. However, Thanks to the healthy state of our order books, we we can achieve this in selected niches and we will had no immediate cause for concern, but the seek out such opportunities in the future.

32 As regards our domestic market, we will give priori- Hunting for costs ty to further development in the Oslo market, South For Veidekke, too, higher costs are a constant chal- and West Norway, and the county of Møre og lenge. In the face of ever-increasing competition, we Romsdal. We have a relatively low market share are dependent on a cost trend which guarantees our here, and we can see from the level of activity that competitive ability. At the end of 1998, we initiated there is potential for growth in these areas. a broad survey of all costs that are not related to projects. The result of this survey will enable us to Recruitment - the greatest challenge in the industry adjust costs in line with market and company deve- For a number of years, Veidekke has led the field as lopments. The challenge here, however, is to avoid regards intake of apprentices. During the last slump, defining all expenses as costs and thereby cutting we continued to take in apprentices and this gave an back too much on investments in vital improve- edge when activities picked up again. However, we ments. did not focus to the same extent on intake of gradu- ate engineers and technicians. As a result, there are The millennium bug years we have missed. Knowing now that the appli- A special group has been working systematically cations for engineering studies have dropped drasti- since the autumn of 1997 reviewing computer cally, we are having to work hard to step up our equipment and contingency plans in order to deal own, and the industry's, efforts to improve this situ- with any problems that may arise in connection ation. with the transition to the year 2000. Our computer systems and technical control systems are being eva- We have implemented our own comprehensive pro- luated and if necessary updated or replaced. This is gramme to secure both apprentices and engineers, a comprehensive task, which includes the equipment and we are participating actively in various projects we use ourselves as well as the technical installati- initiated by the industry to increase recruitment. ons in projects for which we can be held liable The largest of these programmes is BAROK 2007 under guarantees at the turn of the millennium. (Building and Construction - Recruitment and Skills Development towards the Year 2007), which is a The first choice general effort to encourage more young people to Veidekke will continue to work to secure its posi- choose our trades, while also endeavouring to in- tion as first choice for customers, suppliers and crease the share of women among skilled workers employees. This requires us to focus on strategic and salaried staff. development throughout the Group and it requires us, not least, to continue our efforts to become even For our own account, we have entered into more market-oriented. We know that our customers partnerships with lower and upper secondary scho- want quality in everything we deliver; our suppliers ols, colleges and universities. In this way we are see- want to work with the best partners, and our king to influence young people in their choice of employees want interesting, challenging work tasks. career at an early stage and we are hoping that this, Our most important task will then be to create the along with more effort directed at the authorities, prerequisites for this, while “Creating Value through will produce positive results in the time to come. Interaction”.

In-house skills development As an extension of our focus on recruitment, we are expending substantial resources on in-house training and professional development. We can provide sup- plementary education in most of the fields covered by our activities. Veidekke has its own resource centre in Son, where we arrange courses for our Terje R. Venold employees and endeavour with the help of suppliers President & CEO and other partners to secure better skills throughout the value chain.

We have also set up a comprehensive course in management development and team building and we can see that this has produced more motivated and efficient management teams both for individual projects and in the different entities.

33 Greater market orientation shows results building Closer proximity to the customer is no longer a goal - it is a must in today's market Veidekke was the turnkey contractor for the Halden Shopping Market Centre, which has a gross floor area of 20,000 sq.m. The growth in the building market continued into The new airport express terminal in Oslo was opened on 1 August 1998. This contract was for approximately the first half of 1998. The turbulence in the finance NOK 100 million. and foreign exchange markets and the steep increase Veidekke built these terraced flats, totalling 6,800 sq.m., for in interest rates that we saw in the second half of the Elvehavnbygg a.s in Trondheim under a turnkey contract worth NOK 43 million. year led to uncertainty among the investors. This in turn led to a decline in building activity, especially in activity on a fall in the interest rates in the course of the east of Norway. The greatest contribution to the 1999 to about two per cent below the level at the decline was seen in new building in public adminis- beginning of the year. This means that we can tration, education and industrial buildings. expect the demand for housing to pick up again, Dwellings commenced on in 1998 numbered about especially on the outskirts of the cities, while the 19,400 units. This is a reduction of about 6%. decline in the non-residential building market may come to a halt. The recent months' unrest in the international eco- nomy, the low oil prices and, not least, the political Activities situation in Norway have given rise to more uncer- Although the building market fell during the second tainty than before regarding developments in the half of the year, the level of activity in Veidekke's building market. We were reminded by national and building operations, seen as a whole, remained high international events last autumn and the subsequent in 1998. For example, we are carrying out four rise in the interest rates that the building sector has major projects for the Olav Thon Group: Two become more dependent on the outside world than combined commercial and office buildings in Oslo, it used to be. The high level of interest rates we saw renovation of the Bristol Hotel in Oslo and a shop- at the end of 1998 is not expected to last. We have ping centre in Bergen. Other major projects worth therefore based our assumptions regarding building mentioning are a warehouse and office building for

35 UILDING DIVISION B

the Norwegian cooperative union and wholesale There are many players involved in the building society at Langhus outside Oslo, and a shopping process. The customer has its goals for the product, centre in Sarpsborg. (See also list on page 31.) but the authorities, neighbours and users will also have views about the design of the building. The Building Division continued to focus on skills Facilitating the processes in order to satisfy the development and feasibility. Our focus on feasibility expectations of all the parties involved is a deman- means that we systematically give priority to pro- ding business. We have put a great deal of effort jects which are compatible with our strategy, skills into developing our skills in these areas. We have and capacity. Turnover for the Building Division found it important to develop the ability of our pro- increased from NOK 2,230 million in 1997 to NOK ject managers to communicate with our customers 2,345 million in 1998. This growth means that the in order to make sure that we can meet our custo- Division also increased its market shares in 1998. A mers' criteria for success as far as possible. We have profit of NOK 109.6 million compared with NOK also increased our capacity and knowledge to en- 98.3 million the year before is most satisfactory and able us to direct the planning of turnkey contracts. it is a result of consciously focusing on improve- This includes the ability to control the technical and ments at all levels of the organisation and of selecti- creative processes connected with the design and vity in the market. architecture of the products. An important challenge in many of our most complex projects is guiding the Improvement and further development customer's and end-user's decision-making proces- As a result of our efforts to become more market- ses. There is a demand for this know-how in the oriented, we still have a large number of projects private market today, and we expect the focus on which have been developed in collaboration with these aspects to become gradually stronger in the our customers and suppliers. Our customers in the public market, too. private market have three main concerns as regards their projects: that we meet budget, quality and deli- Our customers demand continuous improvement very date specifications. In many projects, it is also and development. Naturally enough, the building important to relieve the customer's organisation at industry is project-oriented. In project-oriented acti- the development stage to enable the customer to vities, it is a difficult job systematically looking after concentrate on its role as principal. and developing the experience that is gained in indi- vidual projects. A special staff unit has been set up in the Building Division to strengthen our improve-

36 ment efforts. This unit is working on simple Left: This housing project at Rekkevik was the first in the country to be approved centrally under Norway's new improvement techniques which can be used to solve Planning and Building Act. problems in the projects. These techniques ensure Above: The Cato Zahl Pedersen Centre in Son, a rehabilitation that we focus on the basic, underlying causes of the centre for persons injured in road accidents and problems. The commitment of all the parties invol- persons suffering from rheumatism. ved at all organisational levels is required, along with an adequate data basis, before decisions can be made. NOK million Key figures 1998 1997 1996 We are also working on standard technical solutions Turnover 2,345.0 2,230.3 1,823.2 and the exchange of experience between the regio- Operating profit 94.0 74.7 28.3 nal activities. Information technology is a useful Profit before taxation 109.6 98.3 53.6 tool, and our projects are all connected up to Shareholders’ equity 267.0 256.9 199.4 Veidekke's intranet. This provides a good communi- Total capital 944.0 1,044.1 778.6 cations platform for common techniques and solu- Gross investment in tions. property, plant and equ. 95.4 76.0 35.7

Veidekke and three other partners have established Orders-on-hand Projects distributed by size a company, Prosjektnett, which is responsible for NOK mill. (total 463) electronic communication between projects. This Number 1,600 350 company provides electronic systems for the storage of drawings, specifications, minutes of meetings and 1,400 300 1,200 other documents in Internet-based systems. This 250 makes for quicker communication and ensures a 1,000 common data basis, and it weeds out a number of 200 800 error sources in the information process in the pro- 150 jects. 600 100 400

50 We have also established a separate entity for busi- 200 ness development, which specialises in setting up, 0 0 acquiring and developing companies. 1994 1995 1996 1997 1998 0-5 5-20 20-50 Over 50 NOK mill.

37 heavy Technology and tradition construction

Today's heavy construction operations are strengthened in a continuous interaction between new technology and many years of experience Above: These road bridges at Kjennsmyr on a new stretch of the E6 motorway in Østfold are 196 and 192 metres long. The contract price was NOK 29.9 million.

Right: Veidekke was responsible for extensions to the Holmenkollen ski stadium and ski museum and of the jumping hill to K115.

Market Activities The level of activity in the heavy construction mar- The Heavy Construction Division had a turnover of ket remained relatively high throughout 1998. The NOK 2,224 million in 1998, which is an increase of decline that was anticipated after the completion of 30% compared with the year before. The profit for the Gardermoen airport did not materialise and this 1998 was NOK 88.1 million and the profit margin was largely due to an increase in activity in oil-rela- before tax was 4%. These are the best results this ted heavy construction projects. Division has had for many years. They can be attri- buted to a strategic prioritisation of projects where However, the heavy construction market in Norway Veidekke has a competitive edge and also to the is facing major challenges. Cuts in public budgets, effects of a long-term focus on productivity low oil prices and financial unrest were prominent improvements, good project planning, correct man- features of the heavy construction market in the ning and thorough follow-up and control at the second half of 1998. We must therefore expect a production stage. general downswing in 1999 in, for example, munici- pal construction and industrial plants. In 1998, the Heavy Construction Division was invol- ved in two major projects of special interest in the In Sweden the heavy construction market is clearly offshore sector. One was the building and construc- growing. A number of major transport and commu- tion work for the processing plant at Kårstø for nications projects and excavation projects will be Statoil, where work for a total of NOK 439 million put out for tender in the course of the next two is to be completed in the course of 16 months. This years. is the largest contract Veidekke has performed so far.

39 UCTION DIVISION Left: Veidekke's subsidiary Noremco is one of the largest contractors in Tanzania. Its contracts include the concrete VY CONSTR work at the Madibira Irrigation Project on a 10,000 acre rice farm for 3,000 farmers in the Mbeya region. The photo shows work on one of the irrigation canals. HEA

The other project was the development and upgra- Construction, which operates in East Africa, and ding of the oil and gas terminal at Sture in through the Norwegian Construction Group, Hordaland for Norsk Hydro, where Veidekke is Nocon, which is owned equally by Veidekke and subcontractor to Raytheon Engineers and Selmer. International operations showed positive Constructors BV. progress in 1998, achieving a turnover of NOK 515 million and a profit of NOK 10.8 million. The Division also maintained a high level of activity in the transport and communications sector in Improvement and development 1998. One of the largest projects is road and tunnel The success of any heavy construction project rests construction for the Oslo Fjord Connection. heavily on planning procedures and follow-up of costs at every stage of the project. The Heavy One of the Division's priority areas is the develop- Construction Division has worked hard to improve ment, construction and renovation of hydro-electric routines and tools, and the resulting solutions have power plants. The largest project of this type that been implemented in operations through training on Veidekke is involved in is the construction of the a wide front. Mo power plant in Førde for Sunnfjord Energi. This is a turnkey contract which includes both planning The development of technology plays a central role and construction. (See also list on page 31). in the Heavy Construction Division's improvement and development work. Increases have been made in In 1998, Veidekke started a new company, Veidekke the staff, especially in the field of concrete Construction AB (Vecon), in Sweden. The local technology, and in expertise in the field of technical management and employees own 32% of the compa- IT applications. ny, while Veidekke owns the remaining 68%. Vecon is located in Gothenburg and through this company, Work has been done to step up the transfer of the Heavy Construction Division has acquired an knowledge and experience between heavy important bridgehead to the heavy construction mar- construction projects, with a view to greater re-use ket in the west and south of Sweden. Vecon and the of successful technical and administrative solutions. Heavy Construction Division have entered into This exchange of experience is mainly achieved contracts worth just over NOK 200 million. through organisation and personnel rotation, semi- nars and an electronic storage system for knowledge Other international operations were mainly carried and experience. There will also be a strong focus on out through Veidekke's subsidiary, Noremco this work in 1999.

40 Strategy Left: Oslo's first Ikea shop with a floor area of 16,000 sq.m. and 900 parking places was opened after a 12-month buil- The Division's strategy for 1999 contains a number ding period. of measures which aim at ensuring the continuation Above: The extension of the gas terminal at Kårstø is of profitable operations. Its main priority in the Veidekke's largest heavy construction contract so far. At its peak the workforce numbered more than 500 men. Norwegian market is greater focus on water power development, maintenance contracts and projects developed by the Division. NOK million Regional operations in Norway are concentrated in Key figures 1998 1997 1996 central parts of Eastern Norway and parts of Turnover 2,223.9 1,716.7 1,389.4 Western Norway. Where feasible, this focus will be Operating profit 82.9 34.1 21.4 coordinated with Veidekke's other regional units. Profit before taxation 88.1 46.3 28.3 Shareholders’ equity 277.0 196.1 152.4 The Division also envisages several interesting op- Total capital 975.0 719.2 555.7 portunities in the Swedish market, most importantly Gross investment in in major transport and communications projects in property, plant and equ. 167.3 128.2 48.2 the west and south of Sweden in close cooperation with Vecon. We are also working to consolidate our Orders-on-hand Projects distributed by size position as a leading contracting company in East NOK mill. (total 98) Number Africa through further development of our subsi- 1,600 40 diary Noremco. 1,400

The Heavy Construction Division will have to cont- 1,200 30 inue increasing its competitive strength in the future 1,000 by offering more cost-efficient products and servi- 800 20 ces. Steps are now being taken to increase cost-effi- 600 ciency in all parts of the Division, and continuous improvement measures are being implemented. An 400 10 important part of this work is to increase our skills 200 and experience in new and more customer-oriented 0 0 interaction models. 1994 1995 1996 1997 1998 0-5 5-20 20-50 Over 50 NOK mill.

41 Waste - an unexploited resource industry Our focus on the recycling of building waste represents a significant contribution to added value Above: The 53-metre high Ceres Dam is the first dam with an The Industry Division includes the following seg- asphaltic core in South Africa. ments: Asphalt, Crushed Stone and Gravel, Ready- Left: Veidekke has expanded in its activities in the ready-mix concrete sector. This photo shows one of the facilities belong- Mix Concrete and Recycling. Its total turnover for ing to HG Betong, Larvik. 1998 was NOK 1,032 million (NOK 911 million), giving a profit of NOK 52.0 million (NOK 37.0 Along with NCC, Veidekke is the co-owner of million). These figures include the turnover and pro- Benab AB, a company which makes and sells bitu- fit for subsidiary Korsbrekke og Lorck AS. men emulsions in Sweden. This company increased its production considerably last year. Veidekke owns Asphalt 40% of the shares in this company. Production of asphalt in Norway fell from 5.2 milli- on tonnes in 1997 to about 5 million tonnes in Crushed stone and gravel 1998, in spite of an increase in both the private and There was an increase in the level of activity for crus- the municipal markets. This fall in production was hed stone and gravel in 1998 as a result of the acqui- due to the completion of the new main airport at sition of companies and higher sales from existing Gardermoen in 1998. In view of the need for exten- plants. The production of crushed stone and gravel is sive maintenance of the Norwegian roads, the for Veidekke's own operations, external sales in asphalt market is expected to remain relatively Norway and export, and total production for exter- stable in the years to come. nal sale was NOK 3.7 million (NOK 3.2 million). The export market was characterised by keen price The contracts for the paving of the runways at competition in 1998, too, and we will continue to Gardermoen and the asphaltic core for the Ceres concentrate on improving this part of our operations. Dam in Cape Town, South Africa were both completed in 1998, in a satisfactory way. The work of securing supplies of raw materials for asphalt and ready-mix concrete production was By increasing production at existing plants and continued. The acquisition of A/S Aasmund Berg, acquiring new operations, Veidekke maintained a a stone-crushing company in Sandefjord, was one volume of asphalt production of about 1.5 million of the steps in this strategy. tonnes in 1998. In the course of the year, Veidekke purchased the remaining 50% of the shares in Ready-mix concrete Kongsvinger Asfalt AS and 100% of the shares in Veidekke holds 43% of the shares in HF-Gruppen HG-Asfalt, Larvik. AS, which is one of the largest producers of ready- mix concrete in Norway. There was an increase in

43 Y DIVISION INDUSTR

the activity linked with HF-Gruppen AS' mobile 60% of the shares in Dokken & Østdal A/S has plants in 1998; this was partly a result of its coope- given us access to substantial volumes of waste and ration with the Heavy Construction Division. know-how relating to environmentally acceptable demolition. Dokken & Østdal A/S is a demolition In the summer of 1998, Veidekke purchased the company, which covers most of the southern half of operations of Hans Gaarder A.S in Larvik, thereby Norway. Dokken & Østdal A/S also owns 50% of expanding its interests in ready-mix concrete. the shares in BA-Gjenvinning which has its main base at the Grønmo waste disposal plant in Oslo. Recycling BA-Gjenvinning also has reception and treatment In Norway the volume of waste from the building centres in other parts of Norway and thus acts as a and construction industry is higher than that of supplement to Veidekke's own network of reception household waste and disposal facilities are beco- facilities for heavy building waste. ming increasingly limited. At the same time, the aut- horities are requiring more and more waste to be With the purchase of Wilhelmsen & Sønner A/S in recycled. Veidekke aims to provide facilities for the Oslo, Veidekke has acquired further expertise and reception and recycling of heavy building materials capacity relating to the transport, reception and in areas where we operate stone quarries and in separation of waste. A subsidiary company, other locations that are suitable for such operations. Spesialrenovasjon AS, specialises in the collection and disposal of problem waste. We also own 70% In line with this goal, Recycling was established as a of the shares in Arog A/S and this has given us separate business area in 1998 under the Industry reception and treatment capacity for building waste Division. There is a natural interaction between the in Asker and Bærum. activities of this Division and of the other divisions which possess and produce large volumes of building To complete the value chain and exploit the com- and construction waste. These operations are coordi- mercial potential, we are working on new nated by Veidekke Gjenvinning A/S and, through technology and market opportunities for various this company, we wish to take an active part in the end products. To this end, we have joined forces developments in this field, and primarily in the field with Norsk Hydro in setting up Veidekke Biobrensel of heavy building and construction waste. A/S to manufacture biofuels based on waste wood.

To become a major operator in this area, we must Strategy have a continuous supply of waste. The purchase of An active effort is being made in the asphalt seg-

44 ment to improve overall quality and to build up Opposite page: Veidekke laid a total of 510,000 tonnes of asphalt at the new airport at Gardermoen. expertise linked with new forms of contracts and Left: Crushed stone and gravel are important raw materi- tighter operating conditions. It is important for us als for this division. This is the Haraldstad crushing plant to consolidate the market position we have establis- near Tønsberg. Above: Hovinmoen on the E6 motorway at Jessheim now hed in the asphalt market in Norway. comprises 45 acres of quarry, crushing facilities and Norway's largest asphalt plant, which is being demonstrated here for Ullensaker's mayor, Mr. Ole Crushed stone and gravel are essential ingredients in the production of asphalt and ready-mix concrete, NOK million and we will continue to focus strongly on securing Key figures 1998 1997 1996 cost-efficient supplies of raw materials. We will also Turnover 1,031.7 910.5 868.6 continue to watch the ready-mix concrete market Operating profit 68.7 45.1 47.6 with a view to increasing our market share. Profit before taxation 52.0 37.0 36.1 Shareholders’ equity 208.0 179.9 182.8 In the field of recycling, we are working to acquire Total capital 733.0 360.7 344.7 good insight into and control of the operations in Gross investment in which we are involved. The market is growing and property, plant and equ. 308.1 116.8 128.2 we will assess the possibilities of further expansion both geographically and in related fields, and in relation to future market opportunities. Given the The Asphalt Market Asphalt Production increasing emphasis on the environment by the aut- 15% 9% 1,000 tonnes horities and the private business sector, we see this 6% 1500 as a market with considerable growth potential. 19% 1200 There has been a steep rise in the level of activity in the Industry Division in recent years. To ensure 31% 900 further growth, we will therefore work on the deve- lopment of the organisation and the management 20% 600 systems. As regards the further development of our Veidekke Group industrial operations, there is also considerable Nodest Asfalt Public Roads Administration 300 potential in achieving good interaction between the Icopal Vei different segments of the Industry Division and bet- Selmer Asfalt Other companies 0 ween this division and Veidekke's other divisions. 1994 1995 1996 1997 1998

45 Interaction increases competitive strength property With know-how, capital and closeness to the market, we create value for Veidekke and our partners The two remaining buildings in the developed commercial properties for a total of NOK Skøyen project for Vår Bank og Forsikring were completed in 1998. 265 million during the year, and these sales gave a gain of NOK 39 million. In February 1999, The development of Fornebuveien 7-9 was carried out as a turnkey contract Veidekke sold its share in an office building in for the Property Division and has been Drammen at a profit of NOK 7 million. sold to the Bull Group. Veidekke invested in a number of new non-residen- tial development properties during the year. In July, The Property Division is responsible for the deve- Veidekke and several other investors purchased a lopment of non-residential and residential projects property at Lørenskog for NOK 253.5 million. for Veidekke's own account and for the manage- Veidekke's share is 40%. At the end of the year, ment and operation of our own and other owners' Veidekke took over the remaining 50% of a large properties. development property at Økern in Oslo and, along with other investors, purchased Atlas Copco's head Market office in Ski. Veidekke's share is 29%. Veidekke has The operating conditions for this Division were also purchased an adjoining site for its own favourable during the first half of 1998, but became account. All in all, Veidekke purchased development more turbulent during the latter months due to the properties and sites for NOK 180 million in 1998. steep increase in the interest rates introduced by the These properties give net rental revenues of about Bank of Norway in August. In the first instance, this NOK 15 million and, once the plans have been affected the housing part of the Division, but later approved by the authorities, they are expected to be on it also had significance for the level of activity in developed by another 200,000 square metres. non-residential building. Fewer projects were initia- Veidekke's share is approximately 100,000 square ted than we had anticipated, due chiefly to time- metres. consuming dealings with the authorities. This appli- ed to several housing projects in the Oslo region. Investments in new building projects were relatively low in 1998. Veidekke has been working actively to Non-residential property acquire parts of the of the old airport site at 1998 was an active year for non-residential proper- Fornebu, but the outcome is still uncertain because ty. During the first quarter, Fornebuveien 7-9 in of the political handling of plans for an IT centre Bærum was completed and sold for NOK 65 milli- there. on. This was followed by Olav Brunborgsvei 4 and 6 in Asker, which was sold for NOK 175 million. Dwellings Towards the end of the year, Trygve Nilsensvei 8 in In 1998, construction was started on 249 dwellings, Oslo was sold for NOK 16 million. Veidekke sold in which Veidekke's share averages 72%. The lar-

47 TY DIVISION OPER PR

gest of these projects are: 68 dwellings in Ålesund, Veidekke is building terraced flats of a high standard at Måltrostveien 53 in Oslo. of which 32 are sheltered housing, and the Sjølyst plass 4, one of the buildings in the Skøyen project. construction of 119 dwellings for lease in Oslo. Sales of dwellings progressed much as planned in 1998, but slowed down slightly during the second The demand for housing in Norway is estimated to half of the year. At the end of the year, Veidekke be about 20,000 units per year. This demand is met had 47 unsold dwellings. irregularly, subject to fluctuations and cost and price trends. The market seems to be more stable Veidekke has consciously gone in for special-purpo- now, but prices are showing a tendency to fall. se dwellings, such as sheltered housing, and houses to let. The building of 65 sheltered houses was initi- We are not anticipating any dramatic changes in the ated in 1998 and several projects of this kind will operating conditions in 1999. probably be started in 1999. The market for non-residential building is expected Management, operation and maintenance to become more difficult. The demand is falling and Management, operation and maintenance are an rents are under pressure. On the long term, however, important part of the total package offered by we believe that a fall in building prices and interest Veidekke. By managing the properties we have deve- rates will have a positive effect. One segment loped, we find out more about the durability, quali- ty and operating economy of the solutions chosen. Key figures 1998 1997 1996 This is valuable experience in the planning of new Rental revenues 32.4 37.6 45.8 projects. Veidekke is currently managing property Property management -8.0 -9.0 -16.7 with a total area of about 145,000 square metres. Ordinary depreciation -7.0 -5.4 -8.2 Interest charges -11.9 -11.5 -12.0 Strategy Net property management 5.5 11.7 8.9 Veidekke aims to be one of the most prominent ope- Sales dwellings 4.9 - - rators in the property market. Capacity and know- Operating costs dwellings -6.1 - - how were increased in 1998, and we are well prepa- Profit dwellings -1.2 - - red to handle an increase in activity in line with the company's target of 500 completed dwellings each Project development -6.0 -7.2 -5.3 year for its own account. Sales gain 39.0 86.0 16.8 Of which depreciation - - -14.1 Profit project development 33.0 78.8 -2.60

Profit Property Division 37.3 90.5 6.3

48 which is showing growth is public buildings such as residential and non-residential property will be tur- schools and nursing homes, and Veidekke will give bulent and uncertain for some years, and for this more attention to this market in the future. reason even higher priority will be given to risk assessment. Veidekke is still considering new project opportuni- ties, even though there is also considerable focus on In the field of management, operation and mainte- developing the properties already in our portfolio. nance, we will endeavour to manage and operate Risks and capital costs are moderated either the properties we own or have built and sold. This through options or by revenues coming in from the will give the tenants security and ensure the best property during the planning stage. The market for possible transition from construction to use.

List of properties as at 31 December 1998 *

Gross floorage in square metres Total rent Ownership Offices/ Warehouse/ 1999 Propety District share % Site business industry Parking Total NOK ’000 Økern Næring Oslo 100 Leasehold 11,192 1,000 12,192 9,000 Lørenskog Næringspark Lørenskog 40 46,800 3,684 12,476 16,160 10,400 Atlas Copco Ski 29 15,000 2,474 3,086 5,560 2,813 Porsgrunn Næringspark Porsgrunn 33 2,607 1,604 1,604 1,683 Langbakken 16 Ås 100 3,800 1,578 1,578 900 Totlandsveien Bergen 100 6,493 100 618 718 80 Haavard Martinsens vei 27 Oslo 100 Leasehold 432 5,263 105 5,800 900 Total external leases 21,064 22,443 105 43,612 25,776 Total internal leases 6,938 10,776 769 18,483 10,200 Total properties 28,002 33,219 874 62,095 35,976

Gross floorage in square metres Non-residential proper- Ownership Offices/ Warehouse/ ties under development District share % Site business industry Parking Total Lørenskog Næringspark Lørenskog 40 46,800 20,000 25,000 45,000 Økern Næring Oslo 100 Leasehold 26,000 1,000 27,000 Atlas Copco Ski 100 35,000 3,000 12,000 15,000 Olav Brunborgs vei Asker 100 3,000 7,600 3,500 11,100 Trygve Nilsens vei 10 Oslo 100 5,500 2,800 1,400 4,200 Nonneseter Bergen 50 600 2,800 2,800 Vøyenenga senter Bærum 33.3 Leasehold 2,100 2,100 Porsgrunn Næringspark Porsgrunn 33.3 11,100 1,400 150 1,550 Total non-residential properties 65,700 38,550 4,500 108,750

Residential properties Ownership Number of under development District share % dwellings Lørenskog Næringspark Lørenskog 40 460 Bergheim Terrasse Trondheim 50 130 Strandveien Tromsø 50 100 Bekkestua Bærum 100 80 Årvollveien 70 Oslo 100 60 Løktabakken Frogn 100 60 Vestre Voksen Oslo 100 60 Smedasundet Haugesund 100 58 Høgseteveien Bergen 100 40 Gamle Bygdevei Oslo 50 40 Berskaug Gård Drammen 100 34 Total number of dwellings 1,122 Veidekke also has some small sites where planning permission is pending. * Veidekke’s share

49 Health, safety, environment It pays to invest in HSE!

Good results in health, safety and environment help to make HSE us the first choice for our customers Waste minimisation and separation at source are the main elements of project at Enebakkveien 19 in Oslo. The buil- ding site has an agreement to return waste to Rockwool.

are easy to carry out, but without the commitment and participation of the whole organisation it is impossible to achieve our HSE targets. That is why Veidekke emphasises factors that lead to job satis- Health, Safety and Environment is an integrated faction, responsibility, participation, opportunities part of Veidekke's activities and an area which is for development and a good social environment. given high priority by the management. This is clear Veidekke also helps to increase awareness through from Veidekke's strategy, in which two of three tar- the many 40-hour HSE courses that are arranged get indicators relate to HSE. In the year 2000 each year. Veidekke aims to attain an injury rate (lost-time injuries per million working hours) that is lower Health than eight and an absence rate among hourly paid Veidekke's company medical service has the follo- employees that is lower than five. These are ambiti- wing motto: "More good working years for every- ous goals in an industry which is struggling with a one", and its goals are to prevent damage to health high absence rate and where the average injury rate that is due to risk factors at work and to prevent is 25. exclusion from employment.

Commitment to health, safety and environment is Preventive health programme important because it helps to make Veidekke a good Veidekke's preventive health programme consists of place to work. Good results in this field also help to general measures directed at all employees. Correct make us the first choice for our customers. Veidekke equipment, correct clothing, job satisfaction surveys has won several contracts where low injury and and information and courses play an important part absence rates were decisive factors, and this is pro- here. It is very important for employees who are bably something we can expect to see more of in the involved in strenuous physical work to have com- future. fortable and ergonomically correct clothing, tools and protective equipment. In 1998, different types The system and structure of our HSE programme is of protective footwear were tested in order to find the responsibility of the management. A key concept models which satisfied the standards for shock here is "improvement through simplification". To absorption, safety and durability. New recommen- achieve results, it is essential to have routines that dations for ear protectors were also introduced.

51 ONMENT SAFETY AND TH, ENVIR HEAL

Musculo-skeletal complaints Environment Musculo-skeletal complaints are the most frequent Veidekke's environmental vision is: reason for sick leave at Veidekke. Veidekke's com- • To contribute to sustainable development pany medical service makes use of various methods • To integrate environmental work at Veidekke in to prevent this type of complaint. In the spring of all aspects of day-to-day activities 1998, for example, a course was arranged for all the • To gain a competitive edge through its active, employees in the Building Division in Trondheim. long-term focus on environmental concerns Here they were given theoretical tuition, advice and guidance about various types of exercise, and a note The work on the external environment and end-user was made of the need for improvement at each indi- environment was intensified in 1998. An environ- vidual workplace. This project produced immediate mental coordinator has been appointed for Region results in the form of a reduction in short-term Oslo, and an environmental strategy has been adop- absence. These good results will be maintained by ted for the Building and Property Divisions in the continuing to focus on preventive work in all buil- Oslo area. Experience gained here will in time be ding projects. transferred to Veidekke's other regions.

Measures like the one described above will also help The main guidelines in the environmental strategy to prevent employees who already have ailments are: from becoming worse. The health surveys we carry • To be responsible and attentive when it comes to out every third year also help to uncover a number environmental issues of these complaints. • To focus on "the external environment" and "the end users' environment" by setting environmental When it comes to following up employees on sick targets and achieving these leave, this is generally done by the absenteeism and • To comply with the authorities' environmental rehabilitation committees. The company medical requirements and always be at the leading edge in service, elected representatives and personnel selected areas department are jointly responsible for following up • To increase its know-how about the environ- long-term absentees and employees who frequently mental impact of its products and activities take self-certified leave. The aim here is to help as many persons as possible to come back to work or In 1998, most of Veidekke's environmental effort to transfer to another job. consisted of implementing this environmental strate- gy through information meetings for salaried staff and managers in the various sections. At the same

52 time, attention was given to increasing knowledge off somewhat. Sixty-eight lost-time injuries gave a by augmenting the part of Veidekke's 40-hour HSE total injury rate of 11.9% in 1998. The correspon- course which deals with the external environment. ding figure for 1997 was 12.5. The Heavy Construction Division showed the best results with Veidekke has also intensified its work on waste an improvement from 20 in 1995 to 8 in 1998. minimisation and separation at source. One way of reducing the volume of waste is to use prefabricated The work of preventing accidents and creating a products, such as bathroom units. These have pro- safe workplace goes on continuously. A useful tool ved very successful at a number of building sites. in the improvement process is learning from undesi- Work is also being done on the integration of routi- rable episodes and near-accidents and using this nes for waste planning, so that Veidekke's projects knowledge to implement measures to reduce the will all eventually have their own waste disposal number of injuries and accidents. The role of safety plans. delegates has been emphasised in order to underline their importance in the HSE programme. Green Building In the late summer of 1998, a working group, called In 1998, two people lost their lives while working Green Building, was formed. It was composed of for Veidekke. This shows that the work of increa- representatives from the Building and Property sing awareness about health, safety and environ- Divisions. The job of this group was to discuss how ment can never be stressed strongly enough. Veidekke could best contribute to making buildings environmentally acceptable for the end user. The The HSE prize emphasis was on dust minimisation and environ- Veidekke's HSE prize was launched in 1997 as a mental awareness in choice of materials, especially follow-up to the "Avoid Accidents - Be Safe" cam- paint. paign. In awarding this prize, Veidekke wishes to bring to light the creativity and the good ideas that Interaction with customers exist in many workplaces. The prize is also intended Klosterenga is the name of an ecology project in the as a recognition of persons whose achieve a good old part of Oslo. Here Veidekke is going to build working environment and reduce injuries and green dwellings, or more precisely, flats with a solar absence through well-planned and systematic collector on the roof and a small-scale ecological efforts. The prize is presented at the company's circuit in the yard. A special environmental plan has annual senior union representatives' conference. been drawn up for this project, based on the client's environmental specifications. This is a unique opp- Employees of Veidekke can nominate candidates or ortunity for Veidekke to increase its own expertise apply themselves on behalf of a unit. The 1998 jury as regards environmental concerns at all stages of had to decide between fourteen well-founded nomi- the building process. In October last year, this pro- nations. The prize, a sculpture by Kirsten Kokkin, ject was presented at the closing of Green Building was awarded to the steering group for Challenge '98 in Canada, as one of the thirty best "Improvements in Region South", a comprehensive buildings from fourteen countries. Green Building improvement project in the Building Division. The Challenge '98 was held to mark a two-year process jury emphasised the project's systematic improve- of international building performance assessments. ment work and the positive trend in injuries and absence in the region. The main theme of the pro- Safety ject was participation and active exchange of experi- For a number of years, the level of safety at ence. Veidekke, measured in number of injuries per milli- on working hours, has shown a very positive trend, but the marked decline in injuries has now levelled

53 SHAREHOLDER POLICY AND OWNERSHIP STRUCTURE

Jørgen G. Michelet (43), Finance Director with respon- sibility for finance and inves- Veidekke has been listed on the Oslo Stock Exchange tor relations. Attends since 1986. Veidekke shares are sold in blocks of 100. meetings of the Board of Directors and Corporate Employee-owners Management. MBA St. Gallen, It is beneficial to Veidekke as a company, and there- Switzerland 1981. State-aut- horised public accountant fore to all its shareholders, that its employees hold a since 1983. Began working substantial number of the company shares. The for Veidekke in 1986. Holds value of a contracting company depends to a consi- 25,866 shares in Veidekke. derable extent on its structure and employees. The Shareholder policy involvement of its employees as shareholders is the- Veidekke aims to secure for its shareholders a high refore an important and positive element in the and stable return over time on their investment in development of the company. It is the company's Veidekke shares. The shareholders' return is a com- aim that at least half of its employees will be share- bination of the quoted share price and the dividend, holders with an ownership share approaching 15%. and it should reflect the financial development of the It is desirable that those in senior management posi- company. Veidekke shares should be regarded as a tions each hold a significant number of shares. liquid and promising investment option, and the company stresses the importance of providing the Veidekke endeavours to encourage greater employee market with accurate and relevant information at participation and as part of this policy gives its the right time. Existing shareholders will be given employees the opportunity each year to purchase pre-emption rights whenever the share capital is shares in the company at a discount price. In 1998, increased. employees were given the opportunity to purchase up to 500 shares. 998 employees took advantage of Dividend policy this offer, purchasing 200,000 shares for a total Veidekke aims to pay a competitive dividend which value of NOK 18.2 million. Veidekke gives financial gives its shareholders a substantial share in profits. assistance to employees when they purchase The company intends its dividends, over a period of employee-shares. time, to average out at between 25% and 40% of its profit for the year. For the last six years, dividends A detailed list of the shares held by members of the paid by Veidekke have been equivalent to approxi- Board of Directors and the President and CEO is mately 30% of the company's profit for the year. given in Note 21 to the Accounts. For the 1998 financial year, the Board of Directors proposes to pay a dividend of NOK 5 per share. Inside information This corresponds to a payout ratio of 30.3%. The Veidekke places great emphasis on incorporating dividend will be paid on 20 May 1999 to all share- both current legislation regarding the handling of holders who are registered as owners on the date of confidential information and the rules for reporting the Annual General Meeting. share transactions in company procedures. Veidekke follows a stricter practice than is required by law in Ownership structure its internal trading rules. In addition to the statu- As at 31 December 1998, Veidekke had 2,960 share- tory, extended clause concerning the duty to investi- holders, including 29 foreign investors. The percen- gate, the company has maintained the clearance tage of shares owned by foreign investors fell during obligation for primary insiders, to ensure more the year to stand at 1.5% at the end of the year. thorough compliance with the duty to investigate. This is in keeping with the recommendations of the The company's largest shareholders are Storebrand Oslo Stock Exchange. Veidekke has also drawn up (13.0%) and Folketrygdfondet (10.2%). 1,550 internal rules which have been made known to all employees hold shares in the company and their employees in key positions and to senior union total ownership share is 14%. representatives. These rules ensure that specific per- DISTRIBUTION OF SHARES sonnel cannot trade in the company's shares at cer- tain times. They are, for example, not permitted to Shareholding Number of Number of trade in shares one and two months before the issue From To shareholders shares % of the quarterly and annual reports respectively. 1 - 100 1,180 59,667 0.5 101 - 1,000 1,278 505,275 4.5 Share capital 1,001 - 10,000 393 1,184,862 10.4 Veidekke's share capital as at 31 December was 10,001 - 100,000 90 2,474,108 21.7 NOK 57 million, divided into 11,395,660 shares 100,001 - 19 7,171,748 62.9 with a nominal value of NOK 5 each. Changes in Total 2,960 11,395,660 100.0

54 Figures in NOK million Amount No. of shares Share capital Adjustment Form of issue paid in after increase (’000) after increase factor* 1986 Issue, price 57.50 25.3 3,053 30.5 1986 Issue employees, price 51.75 3.1 3,113 31.1 1988 Bonus issue 1:5 3,736 37.4 0.8333 1989 Merger Hesselberg Vei 4,693 46.9 1989 Dividend shares 0.5 4,746 47.5 0.998 1990 Merger Folke A. Axelson A/S 4,802 48.0 1990 Dividend shares 0.6 4,861 48.6 0.9999 1991 Merger Stoltz Røthing Haugesund A/S 4,912 49.1 1991 Merger Aker Entreprenør A/S 5,623 56.2 1995 Issue employees, price 107.- 8.0 5,698 57.0 1998 Share split 1:2 11,396 57.0 *Adjustment factors are calculated according to the standards of the Norwegian Financial Analysts’ Association. the company's share capital since it was first listed on the Oslo Stock Exchange in 1986 are shown Return on equity Profit margin above. % % 30 6 Authorisation to issue shares and purchase own shares 25 5 The Annual General Meeting has authorised the Board of Directors to issue up to 2 million shares. 20 4 This authorisation is valid until 1 July 1999. To the greatest extent possible, resolutions concerning 15 changes in share capital will be passed by the 3 10 Annual General Meeting. Since 1986, authorisation 2 has been granted for two years at a time. The autho- 5 risation has primarily been used to issue shares to employees and in connection with minor mergers. 0 1

The Board of Directors is also authorised to -5 0 repurchase the company's own shares up to a limit 1994 1995 1996 1997 1998 1994 1995 1996 1997 1998 of 10% of the share capital. This authorisation is valid until 31 August 1999.

Investor relations Dividend per share Market price/earnings (P/E) Veidekke considers it important to keep the market NOK NOK regularly informed about the company's develop- 5 15 ment. Quarterly reports for 1999 will be issued on the dates given on the inside front cover of this 4 12 report.

When annual and interim reports are published, 3 9 Veidekke normally holds presentations for sharehol- ders, brokers, analysts and the press, both in 2 6 Norway and abroad. The company also maintains regular contact with investors and analysts. A num- ber of stockbroking houses at the Oslo Stock 1 3 Exchange carry out analyses of Veidekke shares.

0 0 The company publishes information in Norwegian 1994 1995 1996 1997 1998 1994 1995 1996 1997 1998 and English.

55 SHAREHOLDER POLICY AND OWNERSHIP STRUCTURE

VEIDEKKE SHARE 1998 1997 1996 1995 1994 Market price at 31 December 90.00 129.00 100.50 63.13 58.25 - high 148.50 146.00 102.50 73.00 118.00 - low 80.00 98.00 67.75 57.50 50.50 Earnings per share 16.53 16.13 6.92 4.57 -0.63 Price/earnings (P/E) 5.4 8.0 14.5 13.8 - Cash flow per share 34.21 31.02 20.78 15.36 4.07 Price/cash flow 2.6 4.2 5.0 4.1 14.3 Dividend per share 5.00 4.75 2.75 1.50 1.00 Payout ratio (%) 30.3 29.5 39.8 32.9 - Earnings yield (%) 5.6 3.7 2.7 2.4 1.7 Outstanding shares (average ‘000) 1) 11,396 11,396 11,239 11,110 11,018 Market value at 31 December (NOK million) 1,026 1,470 1,145.3 719.4 655.1 No. of shareholders at 31 December 2,960 2,592 2,430 2,245 1,988 RISK amount 3.632) 3.42 -2.75 3.29 4.43

1) The number of outstanding shares has been adjusted by shares owned by the company, ref. Note 4 to the Accounts. 2) Estimate. The final RISK amount is fixed by the tax authorities and shareholders are notified direct by the Norwegian Registry of Securities.

The Internet Largest shareholders as at 31 December 1998 Veidekke presents its quarterly reports and impor- tant press releases on its home page on the same Ownership date as these are published through the traditional Name share % channels. Storebrand livs- og skadeforsikring 13.0 Folketrygdfondet 10.2 RISK adjustment Vital Forsikring 8.6 (RISK = adjustment of opening value of shares) Avansefondene 7.1 The RISK amount is calculated annually, based on Norsk Hydros Pensjonskasse 5.0 the change in Veidekke’s retained, taxed capital divi- K-Holding 4.9 ded by the number of outstanding Veidekke shares. K-fondene 3.7 It is only Norwegian shareholders who have to Storebrandfondene 3.6 adjust their cost price by a RISK amount. The RISK amounts for the last five years are shown in the Gjensidige livs- og skadeforsikring 2.2 table above. The RISK amount passes to Norwegian Vesta Liv og Vesta Forsikring 2.0 shareholders on 1 January of the following year.

Shareholders as at 31 December 1998 Veidekke share: Price development and volume traded on the Oslo Stock Exchange 2% 4% 6% 14% 150 Employees and Board Members State companies 10% Credit institutions and units trust Veidekke share Insurance companies and 100 pension funds Private companies 36% Individuals 28% Foreign investors

50 600,000 500,000

400,000

300,000

200,000

100,000

0 0 1994 1995 1996 1997 1998 1999

56 ORGANISATION

PRESIDENT AND CEO Terje R. Venold

BUILDING HEAVY CONSTRUCTION INDUSTRY PROPERTY Petter Eiken Ole Arnfinn Opsahl Vidar Aarvold Leif E. Johansen Eigil Flaathen

Region Oslo Industrial Projects Raw Materials Veidekke Residential Trond Bølviken Jon Sørby Veidekke ASA Roar Foss Vidar Aarvold Region East Infrastructure & Raw Materials Veidekke Magnar Huse Tunnelling Korsbrekke og Lorck AS Non-Residential Ingrid Dahl Hovland Eigil Flaathen Leif E. Johansen Region South Section East Recycling Project Development Per Johan Plünnecke Harald Sangnes Ole Skytterholm Bergen Odd Solheim Region North/West Veidekke Ready-Mix Concrete Veidekke Development Carl Inge Veland * Construction AB HG-Betong North Ivan Alexanderson HF-Gruppen (43 %) Rune Forbord Business Development Noremco BAUTAS Management, Operation Pål P. Syse * Mikael Lööf Kurt Opseth and Maintenance Noricil Arne Kristian Dehli Paul Hinks

FINANCIAL CONTROL STRATEGY & INFORMATION & FINANCE DEVELOPMENT Kai Krüger Henriksen Dag Andresen Torkel Backelin

* Arild Ingierd is the Board Chairman of Noremco, Noricil and Vecon, and Veidekke’s advisor on international operations.

57 THE CORPORATE MANAGEMENT Veidekke's divisional heads and staff management are members of the Corporate Management.

TERJE VENOLD (48), President and CEO. Graduated from the Norwegian School of Business BI with a OLE ARNFINN OPSAHL (43), MBA in 1973. Started working Senior Vice President, Heavy for the company in 1981. Construction Division. Numbers of shares in Graduated from the Norwegian Veidekke: 30,850 Institute of Technology in Trondheim in 1978. Doctorate in concrete technology, 1986. Started working for the company in 1987. Number of shares in Veidekke: 19,118

PETTER EIKEN (43), Senior Vice President, Building Division. Deputises for the President and CEO. Graduated from the Norwegian Institute of Technology in Trondheim in 1980. Started working LEIF E. JOHANSEN (54), for the company in 1986. Numbers of Senior Vice President, shares in Veidekke: 10,764 Property Division. Graduated from the Norwegian Institute of Technology in Trondheim in 1967. Started working for the company in 1995. Number of shares in Veidekke: 18,150 DAG ANDRESEN (37), Senior Vice President, Corporate staff. Responsible for finance, financial control and legal affairs. Graduated in 1986 from the Norwegian School of Management BI with a MBA. Started working for the company in 1986. Number of shares in Veidekke: 17,550

58 TORKEL BACKELIN (55), Senior Vice President, Corporate staff. Responsible for strategy and development. Graduated in 1965 from the Stockholm School of Economics. Started working for the company in 1989. Number of shares in Veidekke: 29,410

Kai Krüger Henriksen (48), Senior Vice President. Responsible for information and communication. Graduated in 1977 from Handelsakademiet with a degree in economics. Started working for the VIDAR AARVOLD (47), company in 1998. Number of shares Senior Vice President, Industry in Veidekke: 3,158 Division. Graduated in 1976 from the University of Sunderland with a B.Sc. (Eng.) Started working for the company in 1995. Previously employed with Veidekke from 1976 to 1988. Number of shares in Veidekke: 5,392

EIGIL FLAATHEN (54), Managing director of Veidekke's subsidiary Korsbrekke og Lorck AS. Graduated from the University of Washington in 1968 with a degree in engineering. Started working for the company in 1977. Number of shares in Veidekke: 20,128

59 ADDRESSES

HEAD OFFICE REGION NORTH/WEST Region Nordland/Troms Box 1455 Vika, N-0116 Oslo District Bergen Box 243, N-8201 Fauske Office address: Karenslyst allé 24, Skøyen Box 294 Slåtthaug, N-5851 Bergen Telephone: +47 75 64 85 02 Telephone: +47 21 05 50 00 Office address: Kokstadveien 48 B Fax: +47 75 64 85 06 Fax: +47 21 05 50 01 Telephone: +47 55 99 03 00 New address 1 June 99: Fax: +47 55 99 01 20 Region Finnmark Box 505 Skøyen, N-0214 Oslo Raipas, N-9517 Alta E-mail: [email protected] District Haugesund Telephone: +47 78 44 97 00 Internet: http://www.veidekke.no/ Address: Smedasundet 50, Fax: +47 78 44 97 01 N-5528 Haugesund BUILDING DIVISION Telephone: +47 52 72 95 00 CRUSHED STONE AND GRAVEL REGION OSLO Fax: +47 52 72 80 14 Box 1878 Vika, N-0124 Oslo Box 1779 Vika, N-0122 Oslo Office address: Karenslyst allé 24, Skøyen Office address: Karenslyst allé 24, Skøyen District Sogn og Fjordane Telephone: +47 21 05 50 00 Telephone: +47 21 05 50 00 Box 63, N-6851 Sogndal Fax: +47 21 05 50 21 Fax: +47 21 05 50 41 Office address: Kaupanger Industriområde, New address 1 June 99: New address 1 June 99: Kaupanger Box 508 Skøyen, N-0214 Oslo Box 506 Skøyen, N-0214 Oslo Telephone: +47 57 67 90 10 Fax: +47 57 67 90 11 RECYCLING REGION EAST Box 1878 Vika, N-0124 Oslo Staff Centre Rygge District Central Norway Office address: Karenslyst allé 24, Skøyen Box 70, N-1581 Rygge Box 6101 Sluppen, N-7435 Trondheim Telephone: +47 21 05 50 00 Office address: Office address: Sluppenveien 11 Fax: +47 21 05 50 21 Sognshøy Næringspark, Råde Telephone: +47 73 82 35 00 New address 1 June 99: Telephone: +47 69 28 31 00 Fax: +47 73 82 35 90 Box 508 Skøyen, N-0214 Oslo Fax: +47 69 26 09 15 District Tromsø READY-MIX CONCRETE District Østfold and S. Akershus Box 2502, N-9266 Tromsø HF-Gruppen A.S. Box 55, N-1431 Ås Office address: Søren Zakariassens gate 14 Box 75, N-3502 Hønefoss Office address: Langbakken 16 Telephone: +47 77 69 80 50 Office address: Hensmoen Industriområde Telephone: +47 64 97 47 00 Fax: +47 77 69 80 51 Telephone: +47 32 13 10 00 Fax: +47 32 13 15 17 Fax: +47 64 97 47 01 HEAVY CONSTRUCTION DIVISION District Indre Østland Box 1870 Vika, N-0124 Oslo KORSBREKKE OG LORCK AS Box 203, N-2391 Moelv Office address: Karenslyst allé 24, Skøyen Box 1827 Vika, N-0123 Oslo Office address: Marisagveien 8 Telephone: +47 21 05 50 00 Office address: Karenslyst allé 24, Skøyen Telephone: +47 62 33 17 00 Fax: +47 21 05 50 26 Telephone: +47 21 05 50 00 Fax: +47 62 36 90 30 New address 1 June 99: Fax: +47 21 05 50 51 Box 504 Skøyen, N-0214 Oslo New address 1 June 99: District Romerike Box 509 Skøyen, N-0214 Oslo Seby AS PROPERTY DIVISION Address: Vestvollveien 6, Box 1715 Vika, N-0121 Oslo BAUTAS N-2019 Skedsmokorset Office address: Karenslyst allé 24, Skøyen bygg- og anleggsutleie as Telephone: +47 63 87 82 80 Telephone: +47 21 05 50 00 Box 5, N-1340 Skui Fax: +47 63 87 60 17 Fax: +47 21 05 50 11 Office address: Ringeriksveien 201 C New address 1 June 99: Telephone: +47 21 05 55 00 REGION SOUTH Box 507 Skøyen, N-0214 Oslo Fax: +47 21 05 55 01 District Vestfold Box 300, N-3101 Tønsberg INDUSTRY DIVISION A/S NOREMCO CONSTRUCTION Office address: St. Olavs gate 1 ASPHALT Box 1832 Vika, N-0123 Oslo Telephone: +47 33 30 79 79 Box 1878 Vika, N-0124 Oslo Office address: Karenslyst allé 24, Skøyen Fax: +47 33 30 79 77 Office address: Karenslyst allé 24, Skøyen Telephone: +47 21 05 50 60 Telephone: +47 21 05 50 00 Fax: +47 21 05 50 61 District Telemark Fax: +47 21 05 50 21 New address 1 June 99: Box 166, N-3901 Porsgrunn New address 1 June 99: Box 519 Skøyen, N-0214 Oslo Office address: Dokkveien 10 Box 508 Skøyen, N-0214 Oslo Telephone: +47 35 93 11 11 Branch office: Fax: +47 35 93 11 12 Region East Box 23287, Oyster Bay Box 124, N-2051 Jessheim Dar es Salaam, Tanzania District Sørlandet Office address: Industriveien 14 Telephone: + 255 5166 7164 Address: Barstølveien 4, Telephone: +47 63 94 78 50 Fax + 255 5166 7676 N-4636 Kristiansand S Fax +47 63 94 78 51 Telephone: +47 38 17 90 30 VEIDEKKE CONSTRUCTION AB (VECON) Fax: +47 38 17 90 31 Region Trøndelag Box 6273, S-400 60 Göteborg, Sweden Box 6100 Sluppen, N-7435 Trondheim Office address: Norra Gubberogatan 32 District Buskerud Office address: Sluppenveien 11 Telephone: + 46 31 707 1950 Address: Gråterudveien 45, N-3036 Drammen Telephone: +47 73 82 35 00 Fax: + 46 31 846 861 Telephone: +47 32 88 05 90 Fax: +47 73 82 35 95 Fax: +47 32 88 05 07 Region West District Ringerike Box 8042 Spjelkavik, N-6022 Ålesund Address: Kongens gate 13 A, Office address: Bingsa Industriområde N-3510 Hønefoss Telephone: +47 70 17 54 00 Telephone: +47 32 12 50 15 Fax: +47 70 17 54 10 Fax: +47 32 12 50 14

60 VEIDEKKE is one of Norway's largest and best known contractors. The company has a diverse portfolio of operations and enjoys a leading market position in the buil- ding, heavy construction, industrial and property sectors.

Veidekke was founded in 1936 to manufacture and lay cobble stones - the name Veidekke means ‘road surface’. The company expanded, especially in the 1980s, into a company providing comprehensive contractor services throughout Norway. Veidekke has been listed on the Oslo Stock Exchange since 1986.

There are significant areas of overlap between the four divisions in which the compa- ny is organised, and importance is attached to achieving maximum synergy and interaction between these divisions.

Vision and objectives Veidekke's vision is to be the first choice for customers, suppliers and employees, and thereby achieve its aim to be the leading contractor in Norway. The company is committed to a five per cent profit margin, an absence rate of less than five per cent, and an injury rate of less than eight lost-time injuries per million working hours.

TABLE OF CONTENTS: FINANCIAL HIGHLIGHTS 1998 1 Five-Year Review • Profit targets achieved 2 Operations - Profit margin 5% 4 Board of Directors' Report 10 Accounts for Group - Return on equity 23.1% 25 Accounts for Veidekke ASA • Improvement in performance in all divisions 29 Auditor's Report • 14 % growth in turnover 30 Key Figures • Successful new ventures 31 List of projects 32 Further Growth and - Vecon in Sweden Development - Plant hire (BAUTAS) 34 Building - Recycling and Ready-mix Concrete 38 Heavy Construction 42 Industry • All completed property sold, invested in new development projects 46 Property • Healthy order books 50 Health, Safety, Environment • Increase in employees' ownership share 54 Shareholder policy and Ownership Structure 57 Organisation 58 Corporate Management 60 Addresses

Publication dates for interim reports 1999: The shares will be quoted ex dividend on 29 April 1999. 1st quarter: 28 April Distribution of dividends to shareholders on 20 May 1999. 2nd quarter: 12 August 3rd quarter: 3 November Investor Relations: telephone +47 21 05 77 22 Internet: http://www.veidekke.no The Annual General Meeting will be held on 28 April 1999. Information about Veidekke is also available at: http://www.huginonline.no/VEI/ RDCIN NETWORK PRODUKSJON PRODUCTION: WILBERG ROLF A. ANDERS BENTZRØD, YNGVAR ELLINGBØ, PAULSEN, OLE OLE R. WALTERPHOTO: JACOBSEN, VEIDEKKE BURSON-MARSTELLER, DESIGN: ANNUAL REPORT 1998 VEIDEKKE ASA

1998 annual report

Veidekke ASA, P.O. Box 1455 Vika, N-0116 Oslo (From 1 Juni 1999: P.O. Box 505 Skøyen, N-0214 Oslo) Phone: +47 21 05 50 00 E-mail: [email protected] Internet: http://www.veidekke.no/ RDCIN NETWORK PRODUKSJON PRODUCTION: WILBERG ROLF A. ANDERS BENTZRØD, YNGVAR ELLINGBØ, PAULSEN, OLE OLE R. WALTERPHOTO: JACOBSEN, VEIDEKKE BURSON-MARSTELLER, DESIGN: ANNUAL REPORT 1998 VEIDEKKE ASA

1998 annual report

Veidekke ASA, P.O. Box 1455 Vika, N-0116 Oslo (From 1 Juni 1999: P.O. Box 505 Skøyen, N-0214 Oslo) Phone: +47 21 05 50 00 E-mail: [email protected] Internet: http://www.veidekke.no/ Veidekke

• Table of Contents • Overview 1998 annual report • Summary 1998 • Key figures • Report of the Board of Directors • Income Statement • Balance Sheet • Cash Flow Analysis • Notes • Shareholders Policy

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