bwg homes annual report 2008

nOTES PaREnT

67BWG HOmES annUal REPORT

2008

“Our long-term goal will still be achieving profitable growth and adding value for our shareholders.

OMSETNING PERFORETNINGSOMRåDE

11.6%

EBiTda maRGin 2008

LARS NILSENCEO

SWEDEN

1 713

NORWAY

1 459

REVEnUE PER BUSinESS aREaS(nOK milliOn)

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70

BWG Homes ANNUAL REPORT 2008

Key figuresand Highlights

Letter from the CEO

Letter from country managers

This isBWG Homes

Report from the Board of Directors

Annual accounts and notes Group

Annual accountsand notes Parent

Corporate governance

About thereporting

2008 2007 2006 (nOK milliOn) nOTE aCTUal PRO FORma aCTUal PRO FORma

New orders 1 2 347 2 482 3 387 1 686 3 260Order backlog 2 1 169 1 950 1 950 966 1 909

Operating revenue 3 172 2 572 3 272 1 529 3 059EBITDA 368 385 441 246 397EBIT 121 345 429 243 402EBT -32 274 333 218 325Net profit for the year -82 201 242 163 240 EBITDA margin 3 11.6% 15.0% 13.5% 16.1% 13.0%EBIT margin 4 3.8% 13.4% 13.1% 15.9% 13.1%

Number of employees at 31.12 965 1 363 1 363 606 1 140

Net cash flow from operating activities -226 -28 112Dividend paid -132 -113 0Net change cash & cash equivalents -21 -4 -43

Total assets 4 796 4 872 4 872 2 150 4 588Net interest bearing debt 5 2 073 1 621 1 621 622 1 550Book value equity 1 540 1 703 1 703 715 1 643Capital employed 6 3 887 3 652 3 652 1 422 3 341

Equity ratio 7 32.1% 35.0% 35.0% 33.3% 35.8%Return on equity 8 -5.1% 16.6% 14.5% 20.9% 14.6%Return on capital employed 9 3.3% 13.6% 12.3% 17.2% 12.0%

Number of shares at 31.12 66 000 000 66 000 000 66 000 000 45 000 000 45 000 000Average number of shares 66 000 000 58 619 233 66 000 000 43 958 904 45 000 000Earnings per share (NOK) -1.25 3.43 3.66 3.70 3.64Dividend per share (NOK) 0.00 2.00 2.50Share price at 31.12 (NOK) 2.56 31.30 38.00

Definitions/notes 1 New orders registrated less cancelled orders received the same year2 Rest income of new orders registrated3 EBITDA/operating revenue 4 EBIT/operating revenue5 Interest-bearing debt incl. subordinated debt excl. cash & cash equiv.6 Total assets excl. non interest-bearing debt 7 Book value equity/total assets8 Profit after tax/average book equity9 EBIT/average capital employed

Key figures

mYRESjÖHUS

Launches ”Effekthusen” – six low-energy houses and ”En smak av Skåne” – seven houses in local style.

New general agent, raken-nusalfa, in Finland. Finnish website introduced.

GROUP

Dividend of NOK 2 per share paid. This corresponds to 65.6 per cent of profit for fiscal year 2007.

New CFO, Arnt Eriksen, takes up position.

Production capacity and costs adapted to lower sales. Staff reduced by approximately 30 per cent.

BlOCK WaTnE

regional office established in Hamar.

New website and new edition of the house book.

Launches five campaign houses.

Highlights 2008

01Key figures and Highlights 01Letter from the CEO 02–03Letter from country managers 04–05This is BWG Homes 06–07Report from the Board of Directors 08–18

Annual accounts and notes Group 19–44Income statement 19Balance Sheet 20–21Cashflow statement 22Notes 24–44

Annual accounts and notes Parent 45–56Income statement 45Balance Sheet 46–47Cashflow statement 48Notes 49–56

Auditor s report 57

Corporate governance 58–63About the reporting 64Contact information 65

SmålandSVillan

Introduces two new house types Villa Granna and Villa Visingsö.

New website and house catalogue.

New general agent, Plania Talo, in Finland.

GROUP

Loan terms renegotiated for three years.

Private placement and a sub-sequent repair issue imple-mented with gross proceeds of NOK 163.38 million.

HETlandHUS

Launches nine modern and functional standard houses.

New website and catalogue. First house is built outside

Oslo.

Highlights1Q 2009

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02



Letter from the CEO


This isBWG Homes





About thereporting

laRS nilSEn (41) CEO BWG HOmES aSa

EdUcATiON: MBA Finance and real estate

SHARES iN BWG HOMES: 31 958 000

03lETTER FROm THE CEO

Caution and focus in a challenging market

Dear Co-owner of BWG Homes. In many ways, 2008 was a year of large and dramatic changes. The trend of a US housing market in freefall and rising interest rates, became much more pronounced, culminating in the autumn of 2008 with the virtual collapse of international financial markets. Our customers faced high interest rates and big difficulties getting mortgages. In November this caused the complete paralyzation of the housing market. In spite of that, BWG Homes was able to conclude 2008 with acceptable margins.

The falling price of credit has in recent years increased consumers’ purchasing power, helping to push up the price of both resale and new homes. Easy access to financing has also led to overinvestment, with a large number of speculators entering the housing market. Even before the financial crisis culminated in the collapse of Lehman Brothers, the sale of new houses had come to a virtual standstill in both Norway and Sweden. Far more homes, and in particular flats, were being built than the market could absorb. In the autumn of 2008, the banks changed their attitude to one of completely irrational pessimism, leading to the strict rationing of credit. When the banking industry in much of the world stops functioning, the outcome is a crisis. When customers are unable to get loans, they are also unable to buy homes. We had never before experienced a situation like that.

aBOUT THE HOUSinG maRKETThe term “housing market” does not refer to a homogenous entity. The market can be split into two main segments: tower blocks in towns and detached/semidetached houses outside town centres. The detached/semidetached house segment has traditionally been more stable. There are several reasons for this. These homes are less subject to price fluctu ations, and are relatively unaffected by speculators and overbuilding. The detached/semidetached market is also mainly aimed at customers with a real need for housing based on their situation in life: firsttime buyers, growing families and second families.

The tower block segment has historically experienced major fluctuations. A large proportion of these newbuild units are bought by investors/speculators – not to live in, but to make a profit by selling them on. These conditions allow over investment in expensive homes.

What we saw in 2008 was that the tower block segment, which had seen overbuilding and very high prices, was hit first and hardest by falling prices. But in the second half of the year, the detached/

semidetached segment was also hit badly. A lack of financing, combined with general concern about the future outlook and the banks’ demand that “you sell before you buy”, meant that home sales came to a juddering halt. With equity “locked into” existing homes that were impossible to sell, potential customers were shut off from the housing market.

RESTRUCTURinG OUR BUSinESS FOR lOWER SalESIn the spring of 2008 we noticed signs of falling demand for our products. Over the course of 2006 and 2007 we had expanded our organisation to handle higher sales. We always aim to optimise production capacity in relation to demand, and it therefore became urgent to adjust our capacity and costs in line with lower sales and earnings. Over the second half of the year we implemented a number of measures, and we have now reduced staffing by approximately 35 per cent. The full impact of the reduction in staffing will be seen in the first half of 2009.

FOCUSinG On CORE aCTiViTiESIn the first months of 2009 we have seen a recovery in sales in both Norway and Sweden. Significantly lower interest rates and less restrictive credit policies are contributing factors. The resale housing market is also starting to function more normally. More people are coming to viewings now, and overall

levels of activity in the market have picked up. On the other hand, we must be prepared for increa sing unemployment and anticipated slower economic growth to hold back demand. 2009 will almost certainly be a year of uncertainty and fluctuations in the housing market.

Our core business is building and selling quality homes at affordable prices. Our customer segment is the “man in the street”. This section of the housing market is not driven by speculators. Our customers need a home regardless of the changing economic climate, because demand is led by people’s family situations, general population growth and moving patterns. Historically it has also been true that demand for family houses and the detached/semidetached segment are much more stable over the long term than demand for the tower block segment.

BWG Homes entered 2009 with a lower cost base, revised loan terms and a stronger financial position as a result of completed share issues. We have a strong focus on operational efficiency and on being conservative in all areas of our organisation. Our homes and projects are tailored to the needs of our market segment. We prioritise profitability and the quality of our housing projects above shortterm topline growth. We are therefore in a good position to meet these challenging times. And we will maintain our longterm goal of achieving profitable growth and adding value for our shareholders.

lars nilsenCEO

04



Letter from the CEO


This isBWG Homes





About thereporting

OlE FEET (49)

CEO BlOCK WaTnE aS

EdUcATiON: Master of Civil Engineering, Business Administration.

SHARES iN BWG HOMES: 15 400

We make it easier for customers to buy a new home

Throughout the autumn of 2008, the finance crisis and a declining property market repre-sented an ever-growing challenge for house builders in Norway and Sweden, including Block Watne, Myresjöhus and SmålandsVillan.

Our core business is building and selling homes – and to create profitability. In a demanding market, it is even more important to make it simple and attractive for customers to buy a new home, state Ole Feet, CEO of Block Watne and Mikael Olsson, CEO of Myresjöhus and SmålandsVillan.

Q How is Block Watne adapting to the market situation?

A Almost 90 per cent of our turnover comes from housing projects under our own name, in which we control the entire value chain – from buying properties to sale, building and handover to the customer. This requires us having the flexibility to adjust along the way, and select the products the market demands and which are efficient to produce. The ideal housing project involves several subprojects which are developed over time, and the types of housing can be detached, terraced and small apartment buildings. Affordable and spaceefficient family homes are what we currently are building most of. These products are popular regardless of the state of the economy, because they fulfil a real housing need.

Q Realising sales has been a challenge in 2008. What is the key to success?

A We have focused on selling completed and nearly completed homes, which has been important to reduce capital investments and maintain our margins. We also believe it is important to have a certain stock of homes which are ready to move into, because customers in the current market want to be able to take occupation as soon as they have sold their existing home.

When we throughout the autumn of 2008 experienced that customers were having problems with bridging loans due the banks’ highly restrictive lending policies, we introduced a five year interest rate guarantee, double home insurance and trained our sales personnel in financial consultancies. A large part of our homes have a universal design in accordance with Husbanken’s rules, which means we can offer Husbank financing for many of our projects.

Local marketing activities combined with the Internet have shown to be very effective and will be continued in 2009. The first few months of 2009 have been positive, with low interest rates and better access to credit giving increased sales. We have a trimmed organisation and good products. We have cautious optimism for 2009.


letter from the CEO


This isBWG Homes

Report from the Board of directors

annual accounts and notes Group

annual accountsand notes Parent


about thereporting

05lETTER FROm

COUnTRY manaGERS

miKaEl OlSSOn (49)

CEO BWG HOmES aB

EdUcATiON: Business administration and accounting

SHARES iN BWG HOMES: 136 279

Q The need for new housing in Sweden is significant, yet there is a lot of competition for the same customers. How will Myre sjöhus and SmålandsVillan tackle this?

A Myresjöhus targets the more established families who set high standards for their home and want individual design. Whilst SmålandsVillan’s customers are often firsttime buyers, and more price sensitive. Our competitive advantage is that we have known brands, lots of experience and continuous product development. We can sustain the latter because we have inhouse resources in the form of architects, development staff and production facilities.

In a declining market, we find that the simple and reasonablypriced houses are those which sell best. Consequently, Myresjöhus launched two new house

collections in 2008 – the “Effect Houses” which are productionefficient lowenergy houses and the “Skåne Houses”, specially developed for southern part of Sweden. SmålandsVillan introduced two new house types, and we can also offer a “Do it yourself” concept for customers who want to save money by building and fitting out themselves. And in January, we launched the Villa 2009 campaign house, which has already proved a success. We also have high expectations for our joint project with the Norwegian business – the Hetlandhus collection. The Hetlandhus house types are built as modules on SmålandsVillan’s production facilities. In this way the Norwegian and Swedish businesses are exploiting products, competence and resources across the borders.

Thanks to intensive sales work with the emphasis on local activities, efficient operations and high productivity, we managed to achieve higher turnover and profit in 2008 than in 2007, even though sales were significantly lower. This confirms that the product portfolio is attractive.

In 2009, we will benefit from the extensive downsizing we had to perform to reduce costs. The cost base is now much lower and we can see that sales are on the rise again. Surveys show that more than 70 per cent of the population wants to live in their own home. We are one of the few house builders which operate nationwide, and we have the products and competence to ensure success.

06



Letter from the CEO


This isBWG Homes

Report from the Board of directors




About thereporting

house catalogue. Customers can opt for a house which is ready for occupation or can make their own contribution to the building. “Professional customers” account for 8 per cent of turnover. These customers are professional players – public or private – with their own land and project management.

OBjECTiVES FOR PROFiTaBlE GROWTH

BWG Homes will create good profitability with moderate risk by owning and developing leading residential builders. The Group’s companies will be leaders and represent strong brands in their markets. The Group shall maintain a controlled organic growth with good profit margins.

By giving priority to housing projects outside urban centres, the Group seeks to achieve a more stable earnings trend than general market fluctuations might indicate. The Group prioritises profitability and quality of housing projects ahead of shortterm topline growth.

Systematic training, development opportunities, good profitability and market alignment mean that the Group is able to offer attractive and stable workplaces.

The Group will take an active role in possible consolidation processes in the Nordic market.

Dividends to the company’s shareholders will be an area of particular focus. The target is to pay between 50 and 70 per cent of profit after tax in dividends to shareholders. A dividend is proposed if in the Board’s view it will not adversely impact the BWG Homes’ future growth ambitions or capital structure.

This isBWG Homes

PROFiTaBiliTY WiTH mOdERaTE RiSK lEVElBWG Homes Group’s main goal is to create good profitability with a moderate risk level. We do so by constantly standardising and industrialising our production processes, maintaining a longterm land bank containing properties on the outskirts of large cities and densely populated areas. We develop housing projects which remain under our own control throughout the value chain – from site purchase to delivery of a house which is ready for occupation. And we constantly develop new spaceefficient house types.

laRGE PROdUCT PORTFOliOOur portfolio reflects our extensive experience and broad expertise in residential building. Our production methods combine the finest craftsmanship with streamlined production. The product portfolio contains more than 100 different standard houses in modern and classic style, as well as houses which

BWG Homes’ mission is to operate and develop leading resi-dential builders with strong brands. Our brands Block Watne and Hetlandhus in Norway and Myresjöhus and Smålands-Villan in Sweden sell and produce affordable homes through own residential projects and for individual customers.

lOW End/SPECial nEEd

BlOCK WaTnEmYRESjÖHUS

HiGHEnd

HETlandHUSSmålandSVillan

affordablehomes,attractive living

Standardization, value for money

POSiTiOninG STRaTEGY

are specially developed for our projects. The houses are developed in collaboration with leading architects. Particular areas of focus are house quality, low energy consumption, healthy indoor climate, functional space utilisation and efficient production.

COnTROlS THE ValUE CHainBWG Homes delivers some 2 000 new houses every year. “Housing projects under our own control”, where Block Watne and Myresjöhus control the entire value chain, account for 53 per cent of turnover. Products include detached houses, terraced houses and lowrise apartments. Housing projects are based on a land bank with a long development horizon, situated on the outskirts of large cities and populated areas. “Detached houses on customers’ own land” represent 39 per cent of turnover. The customer chooses a standard house type with optional extras from the Block Watne, Hetlandhus, Myresjöhus or SmålandsVillan

07THiS iS BWG HOmES

Norway

Myresjöhus and SmålandsVillan build around 1 200 houses every year. Since the company was founded in 1927, Myresjöhus has built more than 80 000 houses, most of them in Sweden. SmålandsVillan which was established in 1997 has built some 2 400 houses. The core business is the development and production of prefabricated detached or multidwelling houses, both for customers with their own plots of land and as housing projects – either independently or with development partners.

Components for Myresjöhus and modules for SmålandsVillan are produced at the company’s production facilities, and are assembled and finished at the building site. Myresjöhus and SmålandsVillan products are sold through a nationwide sales network.

Block Watne builds approximately 1 000 houses each year, and the company has delivered over 86 000 houses since the 1950s. The core business is the development of housing projects on the outskirts of urban centres and the construction of standard houses for customers with their

own land. Operations are conducted from 21 regional offices – from Trøndelag in the north down to the south. The company’s teams of carpenters build the house at the construction site.

Hetlandhus is launched in first quarter 2009.

KEY FiGURES nORWaY (nOK milliOn) 2008 2007 2006

Operating revenue 1 459 1 641 1 528EBITDA 229 302 253EBIT 222 294 249EBITDA margin 15.7% 18.4% 16.5%EBIT margin 15.2% 17.9% 16.3%Order intake 1 158 1 438 1 686Order backlog 452 782 966Number of employees 503 717 604

KEY FiGURES SWEdEn (nOK milliOn) 2008* 2007 2006

Operating revenue 1 713 1 631 1 529EBITDA 169 153 152EBIT 155 149 158EBITDA margin 9.9% 9.40% 9.90%EBIT margin 9.0% 9.10% 10.40%Order intake 1 189 1 949 1 574Order backlog 717 1 168 943Number of employees 457 643 534* The figures do not include write-down goodwill NOK 266 million and restructuring costs NOK 11 million.

Sweden

SWEDEN

54

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46

SWEDEN

41

NORWAY

59

SHaRE OF OPERaTinG REVEnUE(PER CEnT)

SHaRE OF PROFiT (EBiTda)(PER CEnT)

8



Letter from the CEO


This isBWG Homes





About thereporting

POSiTiON: CEO and main owner of Pecunia AS. PRiOR POSiTiONS: CEO in Nevinvest AS 1983–1985, management consultant in The Boston Consulting Group 1981–1983. EdUcATiON: MBA degree, Columbia University, New York, 1981, MSc, Universite Fribourg, Switzerland, 1978. BOARd POSiTiONS: Director of the board of BWG Homes since 2006. Director of the board of Formuesforvaltning AS since 2003. Serves as chairman or director of the board of a number of privately owned companies. SHARES iN BWG HOMES: 810 000

POSiTiON: Practising lawyer with his own firm. PRiOR POSiTiON: Consultant in the Ministry of Finance, 1971–73. EdUcATiON: Law degree, University of Oslo, 1970. BOARd POSiTiONS: Chairman of the board of BWG Homes since 2005. Director of the board of Block Watne since 1994, chairman of the board of Block Watne 2000–2006, deputy chairman since 2006. Serves as chairman or director of the board of a number of privately owned companies. SHARES iN BWG HOMES: 417 500

POSiTiON: Salary administrator in Block Watne since 1998. EdUcATiON: Otto Treider Commercial college. BOARd POSiTiONS: Director of the board of BWG Homes since 2005. Director of the board of Block Watne since 2001. SHARES iN BWG HOMES: 400

POSiTiON: Carpenter in Block Watne since 1983. EdUcATiON: Technical college.BOARd POSiTiONS: Director of the board of BWG Homes since 2005. Director of the board of Block Watne since 2001. Senior trade union representative for the carpenters in Block Watne. Member of the boards of Målervirksomhetens Felles-utvalgs Fond AS and Fellesforbundet Avd. 766 Snekker og Tømmermennenes Forening. SHARES iN BWG HOMES: 200

POSiTiON: CEO in Landic Property Bonds IX AB. PRiOR POSiTiONS: CEO in Union Property Investment AB, 2008, CEO in Norgani Hotels ASA, 2006–2007, Regional manager, Kungsleden AB (publ), 2005–2006, Manager of property development and transactions, JM AB (publ), 2000–2005, Manager property sales, NCC Fastigheter AB, 1999–2000, Manager real estate finance Sweden, Landes-bank Schleswig-Holstein, Stockholm, 1997–1999, Manager real estate finance, Föreningsbanken AB, 1994–1997. EdUcATiON: MSc degree, KTH, Stockholm, 1983. BOARd POSiTiONS: Director of the board of BWG Homes since 2007. Director of the board of Byggpartner AB since 2007. SHARES iN BWG HOMES: 20 000

POSiTiON: Carpenter in Block Watne since 1983.EdUcATiON: Technical college. BOARd POSiTiONS: Director of the boards of BWG Homes and Block Watne since 2008. Deputy chairman of Fellesforbundet Avd. 751 Snekker og Tømmermennenes Forening. SHARES iN BWG HOMES: 0

EVa ERiKSSOn (49)diRECTOR OF THE BOaRd

PETTER nESlEin (55) diRECTOR OF THE BOaRd

BRiT HaGElUnd (55)EmPlOYEE REPRESEnTaTiVE

EinaR SalBU (51) EmPlOYEE REPRESEnTaTiVE

TORE mORTEn RandEn (43)EmPlOYEE REPRESEnTaTiVE

POSiTiON: Master of Business Administration PRiOR POSiTiONS: Financial analyst in Orkla Finans (Fondsmegling) AS and in Fearnley Finans (Fondsmegling) AS, project manager in AS Eiendomsutvikling. EdUcATiON: MBA degree, Norges Handelshøyskole, Bergen, 1987. BOARd POSiTiONS: Deputy chairman of the board of BWG Homes since 2006. Director of the board of BWG Homes since 2005. Director of the boards of Scandinavian Property Development ASA and Oslo Aquapark AS. SHARES iN BWG HOMES: 0

HEGE BømaRK (45)dEPUTY CHaiRman

HaRald WalTHER (63) CHaiRman OF THE BOaRd

9REPORT FROm THE

BOaRd OF diRECTORS

In 2008, BWG Homes reported revenues of NOK 3 172 million and an operating profit before depreciation and restructuring costs (EBITDA) of NOK 379 million. After a goodwill writedown of NOK 226 million, operating profit before finance costs (EBIT) was NOK 121 million. Profit before tax was negative at NOK 32 million. Earnings per share was NOK 1.25. Corrected for the goodwill writedown, EPS was positive at NOK 2.18. In 2008, BWG Homes paid a dividend of NOK 132 million for the financial year 2007, corresponding to NOK 2 per share.

HiGHliGHTS OF THE YEaRBWG Homes was generally less exposed to market fluctuations than was housing production in Norway and Sweden as a whole. However, the turbulence on the international financial markets, with financial institutions

2008 will go down in history as a very demanding year. The rapidly escalat-ing financial crisis resulted in bankruptcies, lending restrictions and rising unemployment. Despite this situation, BWG Homes was able to report relatively good turnover, improved margins and profitability until the financial crisis seriously kicked in during the autumn. The Group has carried out significant cost reductions, renegotiated its loan terms and strengthened its equity in order to position itself for challenging times ahead.


During June and the second half of the year, major staff cuts were made in all parts of the organisation in order to adapt production capacity and costs to a lower level of sales. The number of employees was reduced by approx. 400 between the end of 2007 and the end of 2008. Another 170 employees are in their period of notice and will leave during the first half of 2009.

In 2008 the Group has had a satisfactory longterm land bank for future development of housing projects within the framework of the market situation. Consequently, no new sites were acquired. Completion of housing projects in progress has been prioritised in order to release capital. While awaiting more stable demand, new housing projects will not be initiated without relatively high advance sales. For projects which are in an early development phase, the startup of capitalintensive infra structure is being postponed.

In addition to reducing the cost level, the main focus of the Group’s operations in 2008 has been targeted sales of selected projects and products, completion of projects and optimisation of production processes. Reason ably priced family homes are the priority in projects. To expand our market share, we are also developing more productionefficient and reasonable standard houses for customers wanting to build on their own land.

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REVEnUE andEBiTda maRGin(2007 PRO FORma FiGURES)

finding themselves in a deep crisis, and the lack of access to home financing also fuelled uncertainty in our market segments in 2008.

In the first half of 2008, the number of resale and newly built homes was unusually high. This situation and rising interest rates created a significant uncertainty, and customers adopted a waitandsee attitude where house investments were concerned. The global financial turmoil escalated in the 3rd quarter and made its presence felt with a vengeance in the 4th quarter, with stock markets plummeting and large numbers of financial institutions facing serious crises. A highly restrictive lending policy left customers unable to finance their home purchases. In late October and November, sales of new and resale homes virtually grounded to a halt. For BWG Homes it led to an increased number of unsold units. The situation improved somewhat in early 2009 as a result of a noticeable decline in prices in the home market and relatively sharp interest rate cuts.

During 2006 and 2007, the Group increased its production capacity in response to a growing market with high demand for new homes. In spring 2008, the Group saw a need to adapt to a weaker market and reduced volumes.

10



Letter from the CEO


This isBWG Homes





About thereporting

The Swedish operation has entered into agreements with the general agents Rakennusalfa and Plania Talo for the sale of Myresjöhus and SmålandsVillan on the Finnish market. The Hetlandhus trademark will be relaunched in Norway in 2009 with a portfolio of nine standardised reasonably priced houses.

After facing challenges during the commissioning of its new Sundsvall production facility in 2007, the Swedish operation has achieved good productivity growth. This has contributed to improved margins up to and including the 3rd quarter of 2008. The Norwegian operation maintained its strong margins until the end of the 3rd quarter, with profitability on a par with the previous year.

FinanCial REViEW OF 2008Basis of preparationThe annual financial statements have been prepared in accordance with IFRS (International Financial Reporting Standards) as endorsed by the EU. The Board confirms that the annual financial statements have been prepared on the basis of a going concern, assumption in accordance with section 33 of the Norwegian Accounting act.

Results2008 is the first year in which the Norwegian and Sweden operations have been consolidated for the full year. The purchase of the Swedish operations was completed on 31 May 2007.

Despite a difficult market situation in 2008, the Group achieved good development in turnover until the 4th quarter. Operating revenue for the year was NOK 3 172 million, which is a decline of NOK 101 million (3%) on the pro forma figure for 2007. Consolidated sales rose by NOK 600 million in 2008 compared with the previous year. Q4 revenues were NOK 210 million lower than in the same quarter the previous year.

Earnings before depreciation and amortisation (EBITDA) and before restructuring costs amounted to NOK 379 million,

which is a decline of NOK 62 million (14%) on the pro forma figure for 2007. This represents a decline of NOK 6 million (1.5 per cent) compared with the consolidated figure for 2007. EBITDA for the 4th quarter fell by NOK 86 million compared with the 4th quarter the previous year.

The EBITDA margin for 2008 was 12 per cent, compared with 13.5 per cent in 2007 (pro forma). The largescale staff cuts and other rationalisation measures implemented in 2008 helped the Group deliver relatively good results in what was a very demanding year.

At the end of 2008 the Board decided to recognise goodwill impairment losses of NOK 226 million in the Swedish operation. The reason for this decision is the major uncertainty in the financial markets and the consequences of this on the real economy in Sweden. The Board has made a downward revision of its estimates of the Swedish operation’s earnings. At the end of 2008, restructuring costs of NOK 11 million associated with the staff cuts in the Swedish operation were recognised.

Operating profit (EBIT) after the goodwill writedown and the mentioned restructuring costs amounted to NOK 121 million. This is a decline of NOK 309 million (72.0%) on the figure for 2007 (pro forma). When adjusting for writedowns and restructuring costs, EBIT for 2008 amounted to NOK 358 million which is a decline of NOK 72 million (17%) on the 2007 figure (pro forma).

Net finance costs for the year amounted to NOK 153 million, including a fall in the value of for ward rate agreements by NOK 43 million. Net finance costs for 2007 (pro forma) amounted to NOK 107 million, while the consolidated figure for 2007 was NOK 71 million. In addition to the declining value of forward rate agreements, interest rates were relatively

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11E10E09E0807060504030201009998979695949392

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11E10E09E0807060504030201009998979695949392

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(Source: Prognoscentret, Sweden)

(Source: Prognosesenteret, Norway)

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high during most parts of 2008. During the year, the Group incre ased its interestbearing debt, which also contributed to the increased finance costs.

Profit before tax (EBT) for 2008 was negative at NOK 32 million, which is NOK 364 million down on the 2007 figure (pro forma). After adjusting for the goodwill writedown and restructuring costs in the Swedish operation, profit before tax for 2008 was NOK 205 million.

Tax expense for the year amounted to NOK 50 million, which is a decline of NOK 42 million compared with the 2007 pro forma figure. This is mainly due to a fall in the Group’s taxable profit and a reduction in the Swedish tax rate, which cut NOK 9 million off the tax liability in Sweden. The writedown of goodwill of NOK 226 million in the Swedish operation has not affected taxable profit.

Profit for the year was negative at NOK 82 million, which is a decline of NOK 322 million compared with the 2007 pro forma figure, and down 283 million compared with the consolidated figure.

Net order intake for 2008 was NOK 2 347 million. This is 30.7 per cent lower than in 2007 (pro forma NOK 3 387 million). The Group’s order backlog at the end of the year amounted to NOK 1 169 million, compared with NOK 1 949 million the previous year, which is a decline of 40 per cent.

Financial factors and capital structureThe Group’s cash flow from operations in 2008, taking into account interest and tax paid, was negative at NOK 226 million. Cash flow from operations was adversely affected by changed VAT rules in Sweden, which increased forced VAT payments by NOK 80 million on a oneoff basis in 2008. In addition, the Group had an increased number of unsold completed houses at the end of 2008, representing a considerable amount of tiedup capital. At the end of 2008, the Group had approx. 150 completed unsold houses. This is approx. 100 units more than normal. The increase is due to a considerable slowdown in sales in the latter part of 2008.

Net cash flow from investments for 2008 was NOK 20 million. This includes interest on bank deposits of approximately NOK 8 million. Investments in operating assets in 2008 amounted to NOK 27 million, compared with NOK 19 million in 2007.

The Group’s usage of from project financing and other shortterm credit facilities increased with NOK 357 million during the year. After the dividend payment of NOK 132 million, net cash flow from financing was positive at NOK 225 million in 2008. Net interestbearing debt ended 2008 on NOK

2 073 million, compared with NOK 1 622 million at the end of 2007. NOK 784 million of this figure relates to project financing (land/building loans) and working capital loans. The increase is largely due to an increased number of unsold completed houses as a result of lower sales in 2008, particularly in the 4th quarter. A number of measures were implemented in 2008, aimed at adapting production to lower sales, thereby reducing tiedup capital. The full effects of the measures are expected to be felt in the first half of 2009.

In addition to financing needs connected with land and construction work in progress, the Group also has a considerable need for provision of guarantees. These are mainly statutory guarantees in favour of customers. The Group has a good working relationship with a number of banks and insurance companies, and the current facilities for borrowing and guarantees are considered adequate for the present activity level.

At the end of the year, the Group’s equity was NOK 1 540 million, which corresponds to an equity ratio of 32.1 per cent, while equity for 2007 was

NOK 1 703 million, with an equity ratio of 35 per cent.

The Group’s cash & cash equivalents amounted to NOK 61 million at the end of 2008, with an additional NOK 97 million available under credit facilities. In addition to cash & cash equivalents and working capital loans, the Group had a varying level of available cash in the form of project financing. The level of this type of additional liquidity is dependent on individual project status which varies during the year.

SHaREHOldERSThe largest shareholder is CEO Lars Nilsen, who owned 23 958 000 shares (36.3%) at the end of 2008, through Lani Industrier AS, Lani Development AS and Lagulise AS. The rest of the shareholder structure is

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Letter from the CEO


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dominated by institutional shareholders. The total number of shareholders at 31 December was 847. The number of foreign shareholders was 55, corresponding to an ownership share of 18.8 per cent.

A list of the 20 largest shareholders at 31 December 2008 and Board and management shareholdings can be found in Note 8. The top 20 shareholders are updated every Monday on the company website.

EVEnTS aFTER THE BalanCE SHEET daTERenegotiated loan terms In January 2009, the Group renegotiated the loan terms with its main bank Nordea. The new terms involve establishment of new covenants. In addition, debt management during the next three years has been clarified – this is not only necessary, but will also be useful both for the company and lender. Despite the increased pricing of the Group’s financing, the Board is satisfied with the new covenants, which are better adapted to the challenges the Group faces. A binding term sheet is in place, although the final loan agreements are still being drawn up.

The main elements of the renegotiated terms are as follows:

All longterm liabilities now due on 1 January 2012 (previously, NOK 499 million was due in 2010)

New covenants associated with new sales, operating profit (EBITDA) and available cash; all at levels which reflect the difficult market situation

New installment structure Repricing of entire commit

ment with generally higher margins.

Share issueAs part of efforts aimed at giving the company the flexibility and financial soundness it needs, the Board issued shares in BWG Homes ASA in the form of a private placement on 12 February. A total of 28 000 000 shares were issued at NOK 5.00 per share with gross proceeds of NOK 140 million. After the resolution of the Extraordinary General Meeting on 6 March 2009, a subsequent repair issue was implemented in the period 16–31 March 2009, in which 4 276 000 shares were issued at NOK 5.00 per share, with gross proceeds of NOK 21.38 million.

Under the amended loan terms, the share issue proceeds will not be used to repay debt. The Board is pleased to note that participation by both existing and new shareholders has strengthened the company’s financial position. The fact that we were able to implement such a measure in a very difficult capital market is particularly heartening.

Sale of Gar-BoIn January 2009, an agreement was signed for the sale of the ownership stake in the Swedish insurance company GarBo AB. The sale is conditional on approval by the supervisory authorities in Sweden and Luxembourg. The final selling price and settlement structure will be defined on the assumption that the sale will be implemented be fore the end of April 2009. The total selling price will be on a par with the carrying amount (SEK 65 million).

BUSinESS aREaSThe business areas of BWG Homes encompass the development, sale and construction of residential homes. The Group’s present brands are Block Watne and Hetlandhus (Norway) and Myresjöhus and SmålandsVillan (Sweden).

norwegian operationBlock Watne AS is the largest independent house builder in Norway. The core business is the development of the company’s own residential projects on the outskirts of urban centres, and standard houses for customers with their own land. Operations are conducted from 21 regional offices – from Trøndelag in the north down to the south. The company’s own employees work on development of properties, projects, sales and construction.

At the start of 2008, Block Watne had a large number of projects in production. Sales and production in the second half of 2008 and of 2009 have largely concerned projects in progress and the order back log. In the 4th quarter of 2008, sales hit a historically low point, due to a highly restrictive lending policy on the part of banks which left customers unable to finance their home purchases.

Operating revenue for 2008 amounted to NOK 1 459 million, which is a decline of NOK 182 million (11.1%) on the 2007 figure. Operating profit (EBIT) was NOK 222 million, a decline of NOK 72 million (24.6%) compared with the previous year. The EBIT margin was 15.2 per cent, compared with 17.9 per cent in 2007. The order intake for 2008 was NOK 1 158 million, which is NOK 280 million (19.5%) lower than in 2007. The order backlog ended 2008 on NOK 452 million, compared with NOK 782 million (42%) at the end of 2007.

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Production capacity was substantially reduced during 2008 in order to adapt operations to lower sales. At the end of 2008, the staffing level was 215 employees lower (30%) than at the end of 2007. In the 1st quarter of 2009, the production capacity is expected to be at the right level in relation to expected sales. With effect from January 2009, the Kongsberg and Notodden regional offices were merged in order to obtain better utilisation of resources.

The company is constantly developing new dwelling types for projects under its own control. In 2008, Block Watne was able to provide lowenergy houses based on the new energy regulations which come into force in August 2009. The company will also deliver solutions which exceed the new requirements. All the standard houses in the House Book were adapted in 2007, in order to incorporate technical solutions which give a 20 per cent reduction in energy consumption.

Sales work has been intensified, and market initiatives, customer followups and property viewings are being conducted with the emphasis on local activities. Further focus will be on selling the right products and projects, and optimisation of all areas of the company operations.

FOREIGN

18.8

NORWEGIAN

81.2

SHaREHOldER STRUCTURE(PER CEnT)

Hetlandhus AS is relaunched in the 1st quarter of 2009, with a portfolio of nine reasonably priced standardised houses with defined optional extras. The target customer segment for Hetlandhus consists mainly of young families and priceconscious firsttime buyers. The houses, which will be produced in modules at SmålandsVillan’s production facilities in Sweden, satisfy Norwegian building regulations. A sales catalogue has been produced, the Hetlandhus website is up and running and the new manager of the company took up his position in January 2009. A network of retailers is going to be established in the central parts of Eastern Norway. Hetlandhus products will also be offered to the professional market as private branding.

Swedish operationBWG Homes AB, with Myresjöhus and SmålandsVillan, is Sweden’s leading producer of small houses. The core business of Myresjöhus is the development and production of standard houses for customers with their own land, or as residential projects, either independently or with development partners. SmålandsVillan develops and produces prefabricated detached houses for customers with their own land. Wall sections and house modules are produced at the company’s own production facilities and assembled at the construction site.

The operation achieved satisfactory sales, good operating efficiency and sound production development during the first nine months of the year. After a challenging startup at the new Sundsvall production facility in 2007, in 2008 its production time per house could be cut by half as a result of rationalised working processes. Operating margins (EBITDA) at the end of the 3rd quarter were 1.4 percentage point higher than at the same point in 2007.

The 2008 order intake for Myresjöhus and SmålandsVillan was 39 per cent lower than in 2007, when the order intake was exceptionally high. 2008 was a year which was dominated by major uncertainty in the financial markets, an economic downturn and rising unemployment. Demand for new homes fell sharply in the second half of the year, with sales reaching a historically low point in the 4th quarter.

Operating revenue for 2008 was NOK 1 713 million, which is an increase of NOK 82 million (5%) on the 2007 figure (pro forma). Operating profit (EBIT) before the goodwill writedown and restructuring expenses was NOK 155 million, which is a rise of NOK 6 million (4%). The EBIT margin was 9 per cent which is on a par with the previous year. The order intake for 2008 was NOK 1 189 million, which is NOK 760 (39%) million lower than in 2007. The order backlog ended 2008 on NOK 717 million, compared with NOK 1 168 million (38.6%) at the end of 2007.

Staffing and production capacity were substantially reduced during the second half of the year in order to adapt to lower sales. At the end of 2008, the staffing level was 190 employees lower (29%) than at the end of 2007. At the end of 2008, another 120 employees received redundancy notices, which will make the total staffing reduction approximately 48 per cent. In the first half of 2009, the factory at Vrigstad will have periods of reduced operation, while the Sundsvall factory has been converted into an assembly factory.

In 2008, particular focus was directed towards developing new products in response to new design trends and demand for more reasonable houses, and in order to prepare products for imminent energy requirements. The company will continue to align its production with future energy requirements during 2009, with focus on construction and component design. The product portfolio has also been adapted to Finnish regulations.

Sales work was intensified, and market initiatives, customer followups and property viewings are being conducted, with the emphasis on local activities. In 2008, Myresjöhus launched two new house collections – “En Smak av Skåne”, which comprises seven houses designed in local style, and “Effekthusen”, which is a collection of six spaceefficient and productionoptimal standard houses with low energy consumption. SmålandsVillan added two new house types to its portfolio. The market area has been expanded to include Finland via two local agents (Rakennusalfa and Plania Talo) who will sell Myresjöhus and SmålandsVillan on the Finnish market.

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Letter from the CEO


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RiSK FaCTORS The main risks to which the Group is exposed are market risk, interest rate risk and risks inherent in implementation of the building process. The Group is also exposed to a certain degree of credit risk, currency risk and liquidity risk.

market riskThe Group’s share of the total new housing market in Norway and Sweden lies between 3.5 and 5 per cent. In order to sell and produce houses, the Group is equally dependent on its own market performance as the market performance per se. The Group seeks to limit its market risk by concentrating its building operations on projects outside urban centres, thus avoiding the market’s most volatile area. Priority is also given to production efficient and reasonably priced family homes designed for the main core of our market.

There is also a focus on longterm brand building and professional customer service. The Group has a number of defined and wellestablished decisionmaking processes for acquisition of land and production starts and prebuilding sales. Started but unsold units are monitored very closely.

implementation riskImplementation risk relates to the ability to deliver, which can be affected by failure to keep to schedule (daily fines), costs related to building/production processes and excessive claim/warranty costs.

Measures to ensure project schedules are adhered to include order backlog monitoring, re source plans, use of the company’s own carpenters and production workers, efficient logistics systems and central and local agreements. With regard to cost risk, a large proportion of component prices are fixed in the short term by means of land purchase contracts, agreements to the purchase

building materials, fixedprice contracts with subcontractors and agreements on wages and working conditions. Although increases in the prices of components may occur, the majority of customer contracts have a regulation clause linked to the construction cost index. The Group also invests considerable resources in calculating projects which are in progress or planned, and seeks to avoid overruns by means of active construction management.

The Group endeavours to keep the cost of claims and warranties to a minimum by ensuring quality in all parts of the chain. The Group’s quality systems (ISO 9001 certification) play a central role in this regard. These systems document processes and routines for the entire operation, including procedures for nonconformances, claims and improvements. The Swedish operations are also environmentally certified to ISO 14001. New products and processes are tested on a small scale before being taken into use in all the companies.

Credit riskThe Group aims to minimise credit risk by ensuring that customers produce proof of financing and that houses are paid for before being handed over. Special credit checks are conducted for potential major customers. Conse quently, bad debts are insignificant.

interest rate riskChanges in interest rates represent a market risk through their effect on demand for housing and a cost risk associated with interest rates for the company’s borrowings and working capital loans. Most of the Group’s working capital loans carry floating interest rates. The Group has forward rate agreements hedging approximately 40 per cent of its mortage loan.

Currency riskThe Group’s investment in the Swedish subsidiary BWG Homes AB is largely financed by means of a bank loan in SEK, thereby reducing the currency risk associated with the subsidiary’s net assets. The remainder of the Group is exposed to direct currency risk only to a minor extent. Only a small part of the Group’s purchases are directly from abroad. These purchases are hedged by means of forward exchange contracts in NOK. The Group may be indirectly exposed to currency risk associated with the purchase of materials and services from subcontractors, although such risk is considered to be low.

liquidity riskIn the event of a considerable decline in activity, maturity of the company’s landrelated obligations could mean proportionately higher drawings from the Group’s borrowing facilities than is the case at present. Reduced earnings could also result in weaker liquidity. However, the Group has a considerable liquidity reserve, which means that, with good warning systems, there will be sufficient time to implement the necessary restructuring. At the present time there is no indication of a need for such restructuring measures.

internal controlBlock Watne has a comprehensive system for internal control of its activities. Internal control systems encompass quality systems, decisionmaking procedures, planning processes, reporting, risk assessment and ethical guidelines.

SWEDEN

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EmPlOYEES PER SEGmEnT aT 31 dECEmBER 2008(PER CEnT)

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CORPORaTE GOVERnanCEThe Group’s guidelines and regulations on corporate governance are in line with the Norwegian Code of Practice for Corporate Governance. The Board has adopted instructions for its own work, the CEO’s work, the Board’s dealings with the auditor, guidelines for the nomination committee, investor relations work and ethical guidelines. Please also see the section of the annual report entitled Corporate Governance.

BOaRd OF diRECTORS and GROUP manaGEmEnTComposition of the BoardThe Board of BWG Homes consists of seven members four shareholderelected members and three employee representatives. The shareholderelected members have extensive experience in the housing sector, property development, finance and law. The shareholderelected members serve until the annual general meeting in 2009.

Board members’ CVs are published in the annual report, and their shareholdings are listed in Note 8.

Group management Group management comprises CEO Lars Nilsen, CFO Arnt Eriksen, CEO of Block Watne AS Ole Feet, CEO of BWG Homes AB Mikael Olsson and CFO of BWG Homes AB Jonas Karlsson. Director of Communications Elisabet Landsend participates in Group management as coordinator and the referrer.

Remuneration policyThe CEO’s salary is set by the Board. The salary of the CFO is set by the CEO. The salaries of the CEOs of Block Watne AS and BWG Homes AB are set by the boards of their companies.

Members of Group management have termination agreements which under certain conditions give entitlement of up to 12 monthly salaries beyond the standard period of notice. Members of Group management have company cars, and their tele

phone, newspaper and other relevant expenses are covered.

Members of Group management have individual bonus agreements based on individual criteria. The bonus agreements have individual limits up to a maximum of one annual salary. The bonus criteria are decided by the CEO and are largely performancebased in the indivi dual’s area of responsibility. No member of Group management has any equity compensation benefits or share option schemes. The Group is not under any obligation to grant the Group management, board or other employees profitsharing, options or similar benefits.

More information can be found in Note 8.

Pensions and retirement benefitsThe Group’s retirement benefit arrangements consist of definedcontribution pension plans (funded), contractual early retirement pension (AFP) and collective definedbenefit plans (funded).

At the end of the year, the pension plans had 967 members. At the end of the year, 16 employees had taken out an AFP pension (11 in 2007), while 2 persons were paid a pension directly from the company.

The Swedish operation has different pension plans, both definedcontribution and definedbenefit plans, which are financed via payments to pension institutions or managed funds. More information can be found in Note 7 and in the accounting policies.

ORGaniSaTiOn, WORK and EnViROnmEnTAt the end of 2008, the Group had 965 employees. Of these, 400 were salaried employees (230 of them associated with productionoriented operations) and 782 were production workers and carpenters. 503 were employed in the Norwegian operation and 457 in the Swedish operation. The number of employees was reduced by approximately 400 (approx. 30%) between the end of 2007 and the end of 2008. Another 170 employees are in their period of notice and will leave during the first half of 2009.

The staff cuts were implemented in accordance with Hovedavtalen – the General Agreement for Civil Servants (Norway), collective bargaining agreements (Sweden) and applicable legislation, and in negotiation with the employee repre sentatives of the trade unions (Fellesforbundet in Norway, the Swedish Forest and Wood Trade Union, Unionen and the Swedish Organisation for Managers). The selection process involved an overall assessment which not only took into account the period of service, but also other selection criteria such as formal expertise, personal aptitude and social conditions (family responsibilities, age). Temporary contracts were terminated before permanent employees.

Apprentices were, as far as possible, protected in the staff reduction process at Block Watne. In cases where the company was unable to justify apprenticeship under the training scheme, apprentices lost their

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Letter from the CEO


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place. Older employees with a short period to retirement were also protected from redundancy.

Following the reduction in staffing, the Swedish company implemented a major reorganisation. With effect from January 2009, the Myresjöhus and Småland sVillan brands will be more closely integrated. The management structure has been reestablished, with construction manage ment, development departments and administrative support functions now integrated to enable them to serve both brands more effectively.

Group administration comprises five persons, including the CEO. Two fulltime equivalents have also been added in order to ensure tighter economic followup and more capacity with regard to the investor and financial market.

Working environmentA safe and good working environment is a crucial determinant of the Group’s capacity for longterm value creation. The Board considers the Group’s working environment satisfactory. Management and representatives of the trade union organisations hold regular meetings

during the year. The Board wishes to give credit to the employees and management for their solutionoriented attitude in implementing such a demanding restructuring process.

Total sick leave in 2008 was 7.9 per cent in the Norwegian operation and 4.2 in the Swedish operation, compared with 6.2 per cent and 3.6 per cent in 2007. In 2008, there were 62 losttime accidents and injuries, compared with 45 in 2007. Typical injuries included wounds from nail guns and other tools and lowheight falls. None of the reported accidents resulted in serious or permanent injury.

iSO certificationThe Norwegian and Swedish companies are certified to ISO 9001:2000. The certification applies to product and project development, sales and construction of houses. The Swedish companies are also environmentally certified to ISO 14001:1996. In addition, Myresjöhus’s building systems are SITACapproved.

HSEBlock Watne AS conducts regular statutory training programmes and inhouse training in the area of HSE. To ensure that HSE routines are complied with by the company’s employees and subcontractors, unannounced inspections are done of building sites with subsequent internal discussion of nonconformances. Unannounced inspections of building sites are conducted by third parties according to the routines practised by the Norwegian Labour Inspection Authority. There were 127 unannounced inspections in 2008, with the number of reported nonconformances 48 per cent lower than in 2007.

Equal opportunities When recruiting employees, BWG Homes makes a focused effort to increase the percentage of women, although this is made more difficult by a marked recruitment bias in the building sector. Working conditions have been organised to suit women and men of any ethnicity.

Two of the four shareholderelected Board members are women. One of the three employee representatives on the Board is a woman. There is one woman in Group management. 12 per cent of employees in the Norwegian company are women. 5 per cent of employees in sales and production are women. Two of the nine members of the Block Watne AS management group are women. 21 per cent of employees in the Swedish company are women. 18 per cent of employees in sales and production are women. There are no women in the BWG Homes AB management group.

External environment BWG Homes aims to be a leader in the development of the space and energyefficient houses of the future. The Group’s products satisfy regulatory energy consumption requirements. Energy and environmental issues are taken into consideration when selecting building materials and solutions from subcontractors. BWG Homes mainly builds timber frame houses. As a building material, wood is environmentally friendly. Wood products achieve negative CO2 emissions throughout their lifecycle.

Norway In 2008, Block Watne was able to provide lowenergy houses based on the new energy regulations contained in the Norwegian Planning and Building Act, which comes into force in August 2009. All the standard houses in the company’s portfolio were adapted to accommodate technical solutions that cut energy consumption by 20 per cent. This means that a

mEaSURES FOR REdUCinG EnERGY COnSUmPTiOn(BlOCK WaTnE PROdUCTS)

ANNUAL SAVINGS PERMEASURE kWh/M2 USABLE FLOOR SPACE

External walls: increase insulation from 15 cm to 20 cm 7Roofs: increase insulation from 25 cm to 30 cm 2Windows: double-glazing with insulated frame reduces U-values from 1.4 to 1.2 6Balanced ventilation with 80% energy recovery effect 4Leakage figure (tightness) changed from 4.0h-1 to 2.5h-1 15Total kWh/m2 usable floor space 36

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house with 105 m2 usable floor space, will reduce its annual energy consumption by approximately 4 000 kWh. The company will also be able to deliver solutions which exceed the new requirements.

An environmental and lifecycle report is produced for each dwelling produced. The report contains environmental and energy consumption data for the dwelling. All subcontractors contributing products to a Block Watne house submit their own environmental reports. The annual energy consumption (average 17 000 kWh) of houses is generated from specific heatloss and energy calculations. These calculations are included in the overall documentation for the house, in line with the requirements of the building code.

Waste generated in the production phase is dealt with in accordance with specified waste management plans. These plans include separation at source, which is handled by companies specialising in sorting and recycling.

Most of the building materials are made of timber. The insulation materials are produced from recycled glass, and the company uses interior cladding which does not emit gases. Balanced ventilation with 80 per cent energy recovery is standard in all the houses the company builds. This satisfies the in door climate regulations and also reduces heating costs.

Most houses produced are delivered in a universal design according to Husbanken’s standards. Production systems are based on a limited number of components, acknowledged building details, and optimised material dimensions. By continually improving building methods, the company will be able to cut material consumption even more and also reduce transportation of goods. Under framework agreements with suppliers, any surplus material from the building work is returned.

Sweden Environmental work is part of the company’s standard quality programme. The aim is for all products to be recyclable or reusable. The company has annual environment goals relating to energy consumption in the house portfolio, reduction of nonapproved chemicals at the production facilities and the proportion of waste going to landfill.

The company’s three production facilities have the same technical production solutions which satisfy regulatory energy requirements for residential buildings. Building materials and solutions from subcontractors are checked to ensure they follow quality and environmental specifications.

The building regulations issued by the Swedish National Board of Housing, Building and Planning

(Boverket) require residential buildings (detached and semidetached) to be designed with a maximum specific energy consumption of 110 kWh/m2 in zone south and 130 kWh/m2 in zone north. The regulations are checked by calculating the building’s expected energy consumption in the project phase and measuring the specific energy consumption in the completed building. A list of expected purchased energy needs in normal use has been produced for all standard houses in the portfolio.

Average energy consumption per kWh/m2 in 2008 as shown in the table above.

In 2009, the company will be testing a number of construction changes aimed at reducing energy consumption further.

Energy consumption is measured continuously at the production facilities. The Myresjö factory uses district heating fuelled by renewable energy (wood chippings). 2008 energy consumption in the production facilities was 272 kWh/m2 in Myresjö, 201 kWh/m2 in Vrigstad and 103 kWh/m2 in Sundsvall.

Chemicals used in house production are checked against the Swedish Chemicals Agency PRIO List and registered in the Sunda Hus Miljödata environmental database. It is the

company’s aim to continuously reduce the use of environment harmful substances.

Waste from the production facilities and offices are sorted at source. Waste at construction sites is separated at source in accordance with local authority requirements. Waste produced at the production facilities in 2008 was as follows: Myresjöhus 1 241 tonnes (1.5% to landfill), Vrigstad 1 090 tonnes (2.9% to landfill) and Sundsvall 498 tonnes (3.1% to landfill). Targets for 2009 are to reduce landfill waste by 1 per cent for Myresjöhus, 2.5 per cent for Vrigstad and 3 per cent for Sundsvall.

aCCOUnTinG POliCiES FOR THE PaREnT COmPanY Basis of preparationThe annual financial statements for BWG Homes ASA have been prepared in accordance with the Norwegian Public Limited Liability Companies Act, the Norwegian Accounting Act and Norwegian GAAP as at 31 December 2008.

Earnings 2008In 2008, the parent company’s group contributions from subsidiaries amounted to NOK 32 million. This amount was recognised in the income statement. The company has in connection with the impairment of goodwill in the Group written down the value of the shares in BWG Homes AB to book value of the

aVERaGE EnERGYCOnSUmPTiOn

TyPE OF hOUSE kWh PER M2

1-storey Myresjöhus 781½-storey Myresjöhus 612-storey Myresjöhus 70SmålandsVillan 79

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Swedish business. The amount written down is NOK 112.9 million.

After a tax expense of NOK 9 million the income statement for the parent company shows a deficit after tax of NOK 112.4 million. Profit after tax for 2007 was NOK 166 million.

allocation of profitThe Board will propose to the annual general meeting that no dividend be paid to the company’s shareholders for the financial year 2008. In view of the challenging market situation and volatile financial markets, the Board finds it necessary to prioritise strengthening the company’s capital ahead of paying a dividend.

The Board proposes that the deficit in the parent company in its entirety to be transferred to other equity.

PROSPECTS FOR 2009The longterm aim of BWG Homes is to create stable good profitability with moderate risk by owning and developing leading house builders. For many years, the Group has created good profit by building on the outskirts of urban centres. In these areas, access to property is generally more stable, and costs are lower than in highly populated areas. In the Group’s markets, family houses at affordable

OSLO, 31 MARCh 2009Board of Directors inBWG Homes ASA

HaRald WalTHERCHAIrmAN OF THE BOArD

HEGE BømaRKDEPuTy CHAIrmAN

EVa ERiKSSOn DIrECTOr OF THE BOArD

PETTER nESlEinDIrECTOr OF THE BOArD

BRiT HaGElUndEmPLOyEE rEPrESENTATIVE

TORE mORTEn RandEnEmPLOyEE rEPrESENTATIVE

EinaR SalBUEmPLOyEE rEPrESENTATIVE

laRS nilSEnCHIEF EXECuTIVE OFFICEr

prices have proved less exposed to fluctuations both in price and demand.

2008 was a particularly difficult year for the building industry, with a significant imbalance in the housing market and quite unusual low sales, particularly in the latter part of the year. Although housing market dynamics are low, the early months of 2009 have shown a rising sales trend compared to the 4th quarter 2008. Both the Norwegian and Swedish operations have noted a clear increase in the number of potential home buyers at arranged viewings and higher demand for our products. It is the Board’s opinion that if the banks make further interest rate cuts and above all adopt a less restrictive lending policy, this will have a positive effect on sales. On the other hand, rising unemployment and expectations of lower growth in the real economy will have a dampening effect on demand for new homes. The Board therefore believes that demand for housing will take longer to stabilise than was originally predicted and that the market will continue to be un stable and demanding in 2009.

The Board and Group management are monitoring developments closely to allow optimal adaption of production capacity and products to the prevailing market situation.

It is the Board’s opinion that the amended loan terms, which ensure the Group’s financing over the next three years, and the share issues in early 2009 give the Group the necessary flexibility and manoeuvrability in what will be a demanding period. A continued strong focus on profitability and stable operation is required. It is the Board’s opinion that, overall, BWG Homes is in a good position to face up to these challenging times.

STaTEmEnT BY THE BOaRd and CEOThe Board of Directors and CEO have today reviewed and approved the Board of Directors’ report, the consolidated financial statements for BWG Homes ASA and the parent company accounts for the year ending as of 31 December 2008 (Annual report 2008).

BWG Homes ASA consolidated financial statements have been prepared in accordance with IFRS standards and IFRICs as adopted by the EU and additional disclosure requirements in the Norwegian Accounting Act that are applicable as of 31 December 2008. The separate financial statements for BWG Homes ASA have been prepared in accordance with the Norwegian Accounting Act and Norwegian accounting standards as of 31 December 2008.

We confirm that the consolidated and separate annual financial statements for 2008 have been prepared in accordance with applicable accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit (loss) as a whole as of 31 December 2008 for the Group and the parent company.

Further we confirm that the Board of Directors’ report for the Group and the parent company presents a true and fair view of the development and performance of the business and the position of the Group and the parent company, including a proper description of the most relevant the risk factors facing the Group and the parent company.

aCCOUnTS GROUP

19

Consolidated income statement Group (01.01–31.12)

(nOK 1 000) nOTE 2008 2007

Sales revenue 3 170 495 2 572 015Other income 2 1 030 23Total income 3 171 525 2 572 038 Cost of materials 20 -1 906 232 -1 465 151Payroll and personnel expenses 6, 7, 8 -599 557 -505 598Other operating expenses 33 -297 650 -215 913Total operating expenses -2 803 439 -2 186 662

Operating profit before depreciation/amortisation (EBITDA) 368 086 385 376

Income from associates 15 621 -2 695Impairment of goodwill 13 -226 050 0Amortisation of intangible assets 13 0 -22 589Depreciation of property, plant & equipment 13, 14 -22 061 -15 359Operating profit (EBIT) 120 596 344 733 Interest income 7 802 8 299Other finance income 24 830 122Change in market value of financial instruments 17 -42 500 -368Interest expense -137 562 -74 429Other finance expense -5 244 -4 587Net financial items -152 674 -70 963

Profit on ordinary activities before tax -32 078 273 770

Tax on profit 10 -50 204 -72 690

Profit for the period -82 282 201 080

EaRninGS PER SHaRE (nOK) 2008 2007

Earnings per share 11 -1.25 3.43 Diluted earnings per share, weighted 11 -1.25 3.43

nOTES GROUP20



Letter from the CEO


This isBWG Homes





About thereporting

Consolidated Balance Sheet Group (per 31.12)

(nOK 1 000) nOTE 2008 2007

aSSETSnon-current assetsintangible assets

Trademarks 13 501 650 477 199Goodwill 13 2 021 282 2 146 938Other intangible assets 13 4 473 5 160Total intangible assets 2 527 405 2 629 297

Property, plant & equipment

Land and buildings 14 23 692 17 119machinery and plant 14 78 064 73 980Fixtures, fittings and equipment 14 7 327 7 216Total property, plant & equipment 109 083 98 315

Financial assets

Investments in associates 15 69 758 66 697Investments in other companies 16 1 995 1 995Loans to associates 19 5 321 5 321Other receivables 19 190 229Total financial assets 77 264 74 243

Total non-current assets 2 713 752 2 801 855

Current assets land and buildings under construction

Construction work in progress 20, 32 472 393 369 892Assets held for sale 20, 32 0 4 687Other inventories 20, 32 36 548 55 214Land 20, 32 1 057 587 925 540Total land and buildings under construction 1 566 528 1 355 333

Receivables Trade receivables 21, 32 428 082 588 803Other receivables 19 26 305 37 432market value of financial assets 17 0 6 005Total receivables 454 387 632 240

Bank deposits, cash & cash equivalents 22 61 152 82 507

Total current assets 2 082 067 2 070 080

Total assets 4 795 819 4 871 934

aCCOUnTS GROUP

21

(nOK 1 000) nOTE 2008 2007

EQUiTY and liaBiliTiESEQUiTYPaid-in capital Share capital 23, 24 66 000 66 000Share premium reserve 24 1 414 897 1 414 897Total paid-in capital 1 480 897 1 480 897

Retained earnings Other equity 24 59 300 221 817Total retained earnings 59 300 221 817

Total equity 24 1 540 197 1 702 713

liabilities Provisions Pension obligations 7 20 867 18 229Deferred tax 10 201 722 226 564Total provisions 222 589 244 792

Other non-current liabilities Subordinated loans 0 95 000Liabilities to credit institutions 18, 25, 32 1 309 938 1 258 995Total other non-current liabilities 1 309 938 1 353 995

Current liabilities Liabilities to credit institutions 26, 32 784 340 350 362Other current interest-bearing liabilities 27 40 000 0Trade payables 292 108 412 408Tax payable 10 62 217 48 671Public duties payable 30 41 239 46 210market value of financial instruments 17 36 495 0Current liabilities – land and projects 20, 29 233 352 424 283Other current liabilities 28, 31 233 344 288 501Total current liabilities 1 723 095 1 570 435

Total liabilities 3 255 622 3 169 221

Total equity and liabilities 4 795 819 4 871 934










nOTES GROUP22



Letter from the CEO


This isBWG Homes





About thereporting

(nOK 1 000) nOTE 2008 2007

Cash flow from operating activities Profit on ordinary activities before tax -32 078 273 770

adjustment for Gains/losses on sale of non-current assets 14 -11 17Depreciation and write downs 14 22 061 15 359Goodwill impairment 13 226 050 0Amortisation of intangible assets 0 22 589Net financial items 152 674 74 026Income from associates 15 -621 2 695Cash flow from operations before change in working capital 368 075 388 456Change in inventories -194 552 -314 219Change in trade receivables 167 708 -96 993Change in trade payables -128 276 6 454Net change in liabilities – land 29 -191 389 74 671Change in liabilities to employees 6 2 638 2 826Change in other accruals 34 -52 560 33 812Change in working capital -396 429 95 007Paid interest -142 806 -70 826Paid tax -55 065 -51 863Net cash flow from operating activities -226 225 -27 682

Cash flow from investing activities Interest received 7 802 8 299Sale of non-current assets 14 300 0Purchase of property, plant & equipment 14 -27 819 -18 740Purchase of intangible assets 13 -208 -567Purchase of subsidiaries 0 -1 365 720Other investments (net) 1 463 283Net cash flow from investing activities -20 462 -1 376 445 Cash flow from financing activities Increase/decrease (-) current liabilities 31 413 532 -175 392New long-term liabilities 25 0 845 500repayment of long-term liabilities 25 -56 200 -94 205New share capital 0 937 014Dividend paid 24 -132 000 -112 500Net cash flow from financing activities 225 332 1 400 417 Net change in cash & cash equivalents -21 355 -3 710

Cash & cash equivalents 01.01 82 507 86 216

Cash & cash equivalents 31.12 22 61 152 82 507

Cash Flow Statement Group (01.01–31.12)

aCCOUnTS GROUP

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COnSOlidaTEd STaTEmEnT OF CHanGES in EQUiTY (nOK 1 000) nOTE 2008 2007

Equity 01.01 24 1 702 713 714 748 Profit for the year -82 282 201 080

Recognised in equity

Share issue expenses 24 0 -22 834Equity effect of group contribution from prior years 24 10 648 0Translation differences 24 41 118 -37 627 Equity transactions with owners Dividend 24 -132 000 -112 500Share issue 24 0 959 846

Changes in equity during year -162 516 987 965

Equity 31.12 1 540 197 1 702 713

Statement of changes in equity Group (01.01–31.12)

nOTES GROUP

24



Letter from the CEO


This isBWG Homes





About thereporting

1. General informationBWG Homes ASA Group is domiciled in Norway, with its registered office at Munke-damsveien 45 D, Oslo. The group operates in two geographic segments – segment Norway and segment Sweden.

The company’s consolidated financial statements for 2008 cover the company and its subsidiaries:

Block Watne AS (Oslo, Norway) Norpartner Sp. z.o.o (Opole, Poland) Hetlandhus AS (Oslo, Norway) BWG Homes AB (Vetlanda, Sweden) Myresjöhus AB (Vetlanda, Sweden) Myresjö Mark AB (Vetlanda, Sweden) SmålandsVillan AB (Vetlanda, Sweden) Boligbygg Prosjekt AS (Oslo, Norway) Nordiska Trähus AB* (Vetlanda, Sweden) Käglinge Bytomt AB* (Vetlanda, Sweden)* Dormant at present.

The financial statements were authorised for issuance by the Board on 31 March 2009.

ESTaBliSHmEnT OF THE GROUP/COmPaRaTiVE FiGURESBWG Homes ASA was established by Lani Invest AS on 20 September 2005.

BWG Homes ASA Group was established when the company purchased all the shares in Block Watne AS and Hetlandhus AS on 30 November 2005. The purchase was made from Lani Development AS, a wholly-owned subsidiary of Lani Invest AS. The purchase was an arm’s length transaction between related parties and was made at fair value.

The company purchased 100 per cent of the shares in BWG Homes AB on 15 March 2007 and the income statement items for this company were incorporated into the consolidated accounts from this date.

The Group took over 100 per cent of the shares in the Swedish group Prevesta AB with effect from 1 June. The group figures for 2007 therefore only contain the results for Prevesta Group for the period from June up to and including December 2007.

For comparison purposes, pro forma income statements have been produced for subsidiaries’ operations in 2007 and 2006, with adjustments for parent company items, as if Prevesta Group had been acquired on 1 January 2006. More detailed in-formation can be found in the separate note about this. In addition, the subsi diaries’ annual reports also provide further information on operations in these companies.

2. Accounting policiesSTaTEmEnT OF COmPlianCE WiTH iFRSThe consolidated financial statements have been presented in accordance with International Financial Reporting Standards (IFRS), as endorsed by the EU, and interpretations of the International Accounting Standards Board (IASB), and also Norwegian requirements under the Norwegian Accounting Act as at 31 December 2008.

BaSiS OF PRESEnTaTiOnThe financial statements are presented in NOK (the parent’s functional currency) rounded to the nearest thousand. The statements have been prepared under the historical cost convention with the exception of financial derivatives, which are recognised in the balance sheet at their fair value.

Preparing financial statements under IFRS requires management to make use of estimates and assumptions which affect the application of the accounting principles and the reported amounts of assets and liabilities, revenues and expenses. Estimates and associated assumptions are based on historical experience and other factors regarded as reasonable in the circum-stances. These calculations form the basis for measuring the carrying amount of assets and liabilities which do not find clear expression from other sources. The actual result can differ from these estimates.

Estimates and their underlying assumptions are measured regularly. Changes in accounting estimates are recognised in the period when the changes arise providing they apply only to that period. Should the changes also apply to future periods, the effect will be distributed over the present and future periods.

The annual financial statements are based on adopted and effective IFRS standards. The com-pany has assessed standards which have been adopted but have not yet become effective. More information on these standards can be found under “New standards and interpretations not yet adopted”.

The accounting policies specified below have been applied consistently for all the periods presented in the consolidated accounts.

These accounting policies have been applied consistently by all the companies in the Group. Comparative figures are restated where necessary, in order to obtain uniform presentation and allow comparison with the figures for the year.

BaSiS OF COnSOlidaTiOn ConsolidationThe consolidated financial statements show the Group’s financial position, earnings and cash flows for its total operations as one entity.

SubsidiariesSubsidiaries are companies over which BWG Homes ASA has control. Control exists when the company has a controlling influence, directly or indirectly, on an entity’s financial and opera-tional management, and thereby benefits from its operations. Such control is normally achieved

Notes to the consolidated financial statements Group

nOTES GROUP

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1. General information 24

2. Accounting policies 24

3. Estimates 27

4. Group structure 28

5. Segments 28

6. Payroll costs and

employee benefits 29

7. Pensions and retirement benefit 29

8. Remuneration of management

and board 30

9. Fee to auditors 31

10. Tax 31

11. Earnings per share 32

12. Related party transactions 32

13. Intangible assets 33

14. Non-current assets 34

15. Investments in associates 34

16. Other shares 35

17. Financial instruments 35

18. Financial risk and

capital management 36

19. Financial assets 38

20. Land and projects

under construction 38

21. Trade receivables 38

22. Cash & cash equivalents 39

23. Number of shares, shareholders 39

24. Equity 40

25. Non-current liabilities

to financial institutions 40

26. Current liabilities to

financial institutions 41

27. Other current interest-

bearing liabilities 41

28. Product warrenty provisions 41

29. Land obligations 41

30. Public duties payable 42

31. Other current liabilities 42

32. Pledged assets and

guarantee commitments 42

33. Leases 43

34. Cash flow statement 43

35. Events after the

balance sheet date 43

36. Pro forma income statement 2007 44

by ownership of 50 per cent or more. Financial statements for subsidiaries are consolidated from the time when control transfers to the Group, and de-consolidated when control ceases.

associatesAssociates are entities where the Group exercises significant influence, but not control, over financial and operational management. Such controlling influence is normally achieved by ownership of 20–50 per cent.

The consolidated accounts include the Group’s share of the associated company’s profit or loss in accordance with the equity method from the time when significant influence is established and until such influence ceases. The Group’s share of the profit and loss of associates is reported under Income from associates in the income statement. Insignificant holdings in as-sociates are recognised in accordance with the historical cost method. When the Group’s share of losses exceeds its investment in an associate, the carrying amount of its investment is reduced to zero. Further losses are not recognised unless the Group has undertaken legal or constructive obligations or has made payments on behalf of an associated company.

Elimination of transactions on consolidationIntra-group transactions and balances, including internal earnings and unrealised profits/losses, are eliminated.

Foreign currency transactions Foreign currency transactions are translated at the exchange rate prevailing on the transaction date. Assets and liabilities in foreign currencies are translated to Norwegian kroner at the ex-change rate prevailing on the balance sheet date. Exchange differences arising from the translation are recognised in profit or loss.

Translation of foreign companiesAssets and liabilities of foreign companies are translated to NOK at the exchange date prevail-ing on the balance sheet date. Income and ex-pense in foreign companies is translated to NOK using the average rate. Exchange differences are recognised directly in equity.

nOn-dERiVaTiVE FinanCial inSTRUmEnTS Non-derivative financial instruments consist of investments in debt and equity instruments, trade and other receivables, cash & cash equiva-lents, loans and trade and other payables.

Cash and bank deposits, including deposits under special conditions, are classified as cash & cash equivalents.

FinanCial dERiVaTiVESThe Group has entered into forward rate agree-ments. These financial derivatives are recognised initially at cost. In subsequent periods, they are measured at fair value. Changes in fair value are recognised immediately in profit or loss. The fair value of interest swap agreements is the estimated amount the Group will receive or be required to pay in order to settle the agreement on the balance sheet date, after taking into consideration current interest rates and the creditworthiness of the counterparty.

SHaRE CaPiTalOrdinary shares are classified as equity. Expenses which are directly attributable to the issue of ordinary shares are recognised as a net reduction in equity (share premium reserve) after tax.

nOn-CURREnT aSSETSNon-current assets are carried at their cost less accumulated depreciation and any impairment losses.

Gains or losses on the sale of assets are defined as the difference between the sales total and the carrying amount of the unit and are recognised (net) as other income.

The Group has a large stock of property which includes land, finished houses and projects in progress which are classified as current assets in the balance sheet.

depreciationDepreciation is calculated on a straight-line basis over the esti-mated life of items of property, plant & equipment and recognised in the income statement. Land is not subject to depreciation. Estimated useful lives are:• Buildings 20–50years• Plantandequipment 5–7years• Equipment,fixtures&fittings 3–7years

lEaSESThe Group does not have any finance leases. The Group has oper-ating leases for offices, warehouses and production premises. The leases have variable terms, although most remaining lease terms are between 3 and 8 years, with a renewal option. The leases are not based on variable rent conditions. The Group also has operat-ing leases relating to cars and fixtures & fittings. These expire during the period 2008–2010.

inTanGiBlE aSSETSGoodwillAll business combinations are accounted for by applying the acqu i-sition method. Goodwill arising on an acquisition is the difference between the cost on the acquisition date and the fair value of the net identified assets acquired.

Goodwill is recognised in the balance sheet as acquisition cost less any accumulated impairment. Goodwill is allocated to cash-generating units, and is not amortised but tested annually for impairment.

TrademarksWhen subsidiaries are acquired, values of trademarks are identified.

Trademarks are stated at cost less any accumulated impairment losses. Trademarks are not amortised, but are tested annually for impairment.

imPaiRmEnT TESTinGThe carrying amounts of the Group’s intangible assets are regular-ly reviewed in order to determine whether there is any indication of impairment. If such an indication exists, an estimation is made of the asset’s recoverable amount.

Recoverable amounts of goodwill and assets with an indefinite useful life are estimated annually on the balance sheet date, regard less of whether there is any indication of impairment. This is done for each cash-generating unit (the smallest identifiable group of assets that generates cash inflows which are largely independent of the cash inflows from other assets or groups of assets).

An impairment loss is recognised when the carrying amount of an asset or a cash-generating unit exceeds the recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit, and then to reduce the carrying amount of the other assets on a pro rata basis.

nOTES GROUP

26



Letter from the CEO


This isBWG Homes





About thereporting

Calculation of recoverable amount The recoverable amount is the higher of net selling price and value in use. The latter is calculated by discounting estimated future cash flows to their present value, using the discount rate before tax which reflects the market’s pricing of the value of money over time and the risk associated with a specific asset. For assets which do not primarily generate independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Goodwill impairment is not reversed.

COnSTRUCTiOn WORK in PROGRESSConstruction work in progress includes land costs and infrastructure for projects where sales have begun and production is underway. It also includes the buildings produced. Construction work in progress includes cost of acquisition and profit earned at the balance sheet date, less a provision for bad debts and advance payments. Cost of acquisition includes expenditure directly related to specific projects and a share of fixed and variable indirect costs incurred in the company’s contractual activities based on normal capacity utilisation.

OTHER inVEnTORiES Other inventories include mainly materials. Inventories are measured at the lower of cost and net realisable value. Cost of acquisition of inventories is based on the first-in, first-out principle and includes expenditure and costs relating to the acqui-sition, production, processing and bringing the materials and goods to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

land and land OBliGaTiOnSLand and associated obligations are classified as current items, as land is a com-ponent of the Group’s production/operating cycle. Binding agreements for the purchase of land are reported as land under current assets and as land obligations under current liabilities.

Land includes the carrying amounts of land at full cost, and the construction of infrastructure at large construction sites. As soon as a sale has been decided and work commenced at a sub-divided site, the land cost and infrastructure for that site is moved to construction work in progress. Land is recognised in the balance sheet at the lower of acquisition cost and net realisable value. Net realisable value is the estimated sales price in ordinary operation less estimated costs for completion and sales.

TRadE RECEiVaBlESTrade and other receivables are recognised at cost less bad debts. A provision for losses on trade receivables is recognised when there is objective evidence that the group will not be able to recover outstanding amounts. Indications of losses include major financial problems on the part of the debtor, the likelihood of the debtor being declared bankrupt and reduced payments from the debtor.

OPERaTinG REVEnUESIncome is recognised as it is earned. The Group’s activities consist of house construc-tion, both under its own control and for other parties. As soon as the outcome of a construction contract can be estimated reliably, revenue is recognised in proportion to the stage of completion of the contract. For identified onerous contracts, a provision is made for the entire expected loss. Operating income is less VAT and any discounts.

Only sold contracts are recognised. The stage of completion corresponds to contract costs incurred for work performed to date as a percentage of the estimated total costs. Degree of sale is defined as the number sold as a percentage of total expected sales. Recognised revenue is the estimated total revenue x degree of sale x stage of completion. The reported outcome is estimated final outcome x degree of sale x stage of completion.

inCOmE TaXIncome tax on the result for the period comprises tax for the period and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Tax for the period comprises the expected tax payable on profit for the period based on tax rates that have been enacted, and any corrections to tax payable in

prior years. The Swedish tax rate was reduced from 28 per cent to 26.3 per cent during the year.

Deferred tax is normally recognised for all ac-counting and taxable temporary differences for assets and liabilities. Deferred tax is recognised at nominal value and is designated as a non-current liability in the balance sheet. No account is taken of goodwill which is not tax-deductible. The provision for deferred tax is based on expec-tations on the realisation or settlement of assets and liabilities in the balance sheet, and is calculated using tax rates that have been enacted by the balance sheet date.

FinanCE inCOmE and COSTSFinance income consists of interest income on financial investments and dividend received. Interest income is recognised as interest accrues. The dividend is recognised when it has been adopted by the annual general meeting of share-holders of the company paying the dividend.

Finance costs consist of interest on loans, other fees and changes in the fair value of financial der ivatives and are recognised as incurred. Ex-change gains and losses are recognised in profit or loss as they arise and are classified as financial items.

Fees paid in advance for guarantees on construc-tion contracts are also recognised as finance costs.

EaRninGS PER SHaREEarnings per share is calculated by dividing the profit attributable to ordinary shares by the weighted average number of outstanding ordi-nary shares in the period. The Group has not had any potential shares, and diluted earnings per share is the same as earnings per share.

EmPlOYEE BEnEFiTSTermination payment agreementsKey management personnel have agreements which under certain conditions give entitlement to up to one annual salary after the normal 6-month period of notice. See note 8.

mandatory occupational pension The parent company and its Norwegian subsid-iaries are legally obliged to have a mandatory occupational pension scheme. This satisfies the requirements of the Norwegian mandatory occupational pension act.

Pension plansThe Group has defined-benefit and defined-contribution pension plans, in addition to its contractual early retirement plans and unfunded arrangements.

defined-contribution pension plansA defined-contribution pension plan is a plan whereby fixed contributions are paid to a fund or a pension fund and for which the company does not have a legal or constructive obligation to make further contributions. Compulsory con-tributions are recognised as personnel costs as they arise. Prepayments are recognised as an asset to the extent that the funds paid can be paid back or future payments to the plan can be reduced.

nOTES GROUP

27

defined-benefit pension plansA defined-benefit plan is a plan which is not based on contributions. The net obligation relating to defined benefit pension plans is calculated sep-arately for each plan by estimating the size of future benefits earned by employees through their service in the present and previous periods. These future benefits are discounted in order to calculate their present value, and the fair value of pension fund assets is deducted in order to establish the net obligation. The discount rate is based on the interest on 10-year Norwegian government bonds, adjusted to reflect the dura-tion of the pension obligations. These calculations are made by a qualified actuary, and based on a straight-line pension-earning model.

When benefits in a plan are improved, the share of the improvement in benefits earned by the employee is recognised as an expense in the income statement. All actuarial gains and losses are recognised immediately in profit or loss.

Other pension plansObligations in respect of early retirement pension (AFP) and an unfunded obligation are recognised in the balance sheet/income statement.

ProvisionsA restructuring provision is recognised when the Group has approved a detailed and formal restruct uring plan and the restructuring has either started or has been publicly announced.

Onerous contracts A provision for onerous contracts is recognised when the unavoidable costs of meeting the ob-ligations under a contract exceed the economic benefits expected to be received under it.

TRadE PaYaBlES and OTHER CURREnT liaBiliTiESTrade payables and other liabilities are recogn-ised at cost.

Interest-bearing loans and borrowings are rec og- nised initially at fair value. Borrowing costs are recognised as an expense. Interest-bearing liabili-ties are subsequently assessed at amortised cost. Any difference between cost and redemption value is recognised over the period of the loan.

SEGmEnT REPORTinGA business segment is a distinguishable compo-nent of the Group that is engaged in providing products or services, and that is subject to risks and returns that are different from those of other segments. A geographical segment is a distinguishable component of the Group that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of other segments. The accounting policies used to prepare the segment figures are the same as those applied when preparing the consolidated financial statements. Segment information is presented for geographical seg-ments and is based on the Group’s management and internal reporting.

Inter-segment sales are conducted under stan-dard market conditions.

Segment information includes interest income, costs, assets and liabilities directly associated with the segment, and other elements which can be reasonably allocated. Elements which cannot be allocated consist mainly of investments and associated operating income, loans and associated costs, common assets and costs related to the head office and tax assets and liabilities.

nEW STandaRdS and inTERPRETaTiOnS nOT YET adOPTEdIFRIC Interpretation 15 Agreements for the Construction of Real Estate was pub-lished in July 2008, but has not yet been adopted by the EU. The interpretation discusses principles for recognition of revenue on contracts. The interpretation will influence the timing of recognition of income and profit in the accounts also in the accounts of BWG Homes. The practical consequences will be delayed recognition of income and profit for a substantial part of the contracts entered into by the Group, so that all income and profit on a contract is recognised when delivery of house takes place. No specific date is known with respect to adoption by the EU, but it is anticipated that the interpretation will be applicable for accounts starting in 2010. The company awaits final adoption by the EU before changes are made in the reporting. Implementation of the interpretation will imply reworking of comparable figures for previous years in line with requirements in IAS 8.

The new standard IAS 23, that is in effect from 1 January 2009, requires capitalisation of interest costs that are directly linked to acquisition, production and development of qualifying assets. It is not any longer an option to expense the interest in the income statement continuously. For BWG Homes the consequence of this will be capitalisation of the part of the interest expenses that are caused by financing of projects and land. These interest expenses will in the following be reported as costs of the projects. The implementation of IAS 23 is required from 2009, but will not have any effect on historical figures. IFRS 8 Segments introduces a principle requiring management reporting being the basis for segment reporting. IFRS 8 is mandatory for the accounts for 2009. In current reporting from BWG Homes the segment information is presented for geographical segments/business segments. The introduction of IFRS 8 will not lead to changes in the structure of the segments of BWG Homes, but IFRS 8 might lead to changes in the information presented for each segment.

3. EstimatesMany accounting principles require management to use accounting estimates and assumptions for important items in the income statement and balance sheet. There follows a description of the important items in BWG Homes ASA for which accounting estimates and assumptions have been used, and which may therefore have a material effect on the financial statements of BWG Homes ASA if these assumptions change considerably.

inCOmE and PROjECTS (COnSTRUCTiOn WORK in PROGRESS)Income is recognised as it is earned. The Group’s activities consist of house construction, both under its own control and for other parties. As soon as the outcome of a con-struction contract can be estimated reliably, revenue is recognised in proportion to the stage of completion of the contract. For identified onerous contracts, a provision is made for the entire expected loss. Projects in progress (construction work in progress) is a counter-item in the consolidated balance sheet. Material changes in assumptions relating to the stage of completion or contribution margin may have an effect on the consolidated financial statements.

PEnSiOn COSTS and RETiREmEnT BEnEFiT OBliGaTiOnThe Group has defined-benefit and defined-contribution pension plans in addition to its contractual early retirement plans and unfunded arrangements. Measurement of pension costs and obligations requires the use of estimates and assumptions, such as salary increases and discount rates. Material changes in estimates and assumptions mayaffect the pension costs and obligations in the financial statements of BWG Homes ASA.

inTanGiBlE aSSETS and imPaiRmEnT When the Group makes an acquisition, it is required to measure the fair values of assets, liabilities and intangible assets at the date of acquisition. Any additional value (residual) is recognised as goodwill. Values associated with trademarks were identified when the Norwegian and Swedish subsidiaries were acquired. These values are identified using different valuation methods based on different assumptions. These assumptions may include projected cash flows, required rate of return and so on.

nOTES GROUP

28



Letter from the CEO


This isBWG Homes





About thereporting

IAS 36 Impairment of Assets requires goodwill and intangible assets to undergo impairment testing at least once a year. Goodwill impairment testing requires the fair value of cash-generating units to be estimated and compared with the carrying amount. If the car-rying amount exceeds the fair value, an impairment loss is recognised. This type of testing requires estimates and assumptions about uncertain factors such as future cash flows, required rates of return and macro-conditions (interest, unemployment, inflation etc). Any significant change to these assumptions may have a material effect on the consolidated financial statements.

FinanCE COSTS and ValUE OF FinanCial aGREEmEnTSThe Group has entered into forward rate agreements in order to reduce the risk associated with interest costs relating to its interest-bearing liabilities. Changes in the market value of forward rate agreements are recognised in profit or loss. The market value is based on the net present value of the company’s future floating interest less fixed interest. Changes in the estimates of future interest rates will therefore have a material effect on the Group’s finance costs.

TaX in THE inCOmE STaTEmEnT and BalanCE SHEETBWG Homes ASA reports income tax on the basis of reported figures from the Group’s subsidiaries. Deferred tax is calculated, in accor-dance with applicable tax rules, on the basis of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the balance sheet. Calculation of tax expense for the period and its categorisation as tax payable or deferred tax for the period requires use of judgement by management with regard to the sometimes complex tax rules in Norway and Sweden.

4. Group structureThe Group consists of the following units:

PaREnT COmPanY REG. nO. addRESS BWG Homes ASA 988 737 798 Oslo, Norway REGiSTEREd nUmBER EQUiTYSUBSidiaRiES COmPanY REG. nO. addRESS SHaRES HOldinG 31.12.08

Block Watne AS 986 757 954 Oslo, Norway 4 000 000 100% 430 480 Norpartner Sp.z.o.o. - - - Opole, Poland 3 676 100% 1 158Hetlandhus AS 986 157 913 Oslo, Norway 100 100% 133BWG Homes AB 556723-6087 Vetlanda, Sweden 1 100 000 100% 666 802 Myresjöhus AB 556031-7702 Vetlanda, Sweden 300 000 100% 152 414 Myresjö Mark AB 556070-7464 Vetlanda, Sweden 10 000 100% 3 458 SmålandsVillan AB 556210-9651 Vetlanda, Sweden 2 500 100% 19 320 Boligbygg Prosjekt AS* 993 469 696 Oslo, Norway 1 000 100% 115 Nordiska Trähus AB* 556120-9189 Vetlanda, Sweden 20 000 100% 2 205 Käglinge Bytomt* 556735-3114 Vetlanda, Sweden 1 000 100% 90* Dormant at present.

5. SegmentsThe Group has identified the following business segments, which are identical to geographical segments:

SEGmEnT nORWaYHouse production in Norway under the Block Watne trademark. Operations consist mainly of development, sale and expansion of housing projects in Norway. House production follows the traditional method on-site construction.

SEGmEnT SWEdEn House production in Sweden under the Myresjöhus and SmålandsVillan trademarks. Operations consist mainly of development and factory construction of house models for the Swedish market and some development, sale and expansion of housing projects in Sweden. As the segment was acquired with effect from 31 May 2007, the results only apply to the period June to December 2007.

There were no material inter-segment sales or other transactions in 2008. The Group is organised in such a way that each segment has its own management who report to Group management. The Group’s legal organisation also follows the same structure. Consumers repre-sent the main customers group for both segments. The segments’ production processes are different, as are the distribution channels.

SEGmEnT nORWaY SEGmEnT SWEdEn OTHER/EliminaTiOnS COnSOlidaTEd

(nOK 1 000) 2008 2007 2008 2007 2008 2007 2008 2007

External operating income 1 459 376 1 640 860 1 713 072 931 160 -923 18 3 171 525 2 572 038Internal operating income 0 0 0 0 0 0 0 0Operating profit before depreciation/amortisation (EBITDA) 228 717 301 599 158 131 97 907 -18 762 -14 130 368 086 385 376Depreciation -8 449 -7 425 -13 443 -7 891 -169 -43 -22 061 -15 359Goodwill impairment 0 0 -226 050 0 0 0 -226 050 0Income from associates 1 397 -104 -776 -2 591 0 0 621 -2 695

Assets 2 598 229 2 526 730 2 257 052 2 374 975 -59 462 -29 771 4 795 819 4 871 934Carrying amount, associates 3 681 3 629 66 077 63 068 0 0 69 758 66 697Liabilities -1 852 179 -1 738 787 -1 740 240 -1 602 100 336 802 171 666 -3 255 617 -3 169 221Investments during period 9 617 12 553 19 963 5 788 435 965 30 015 19 306

nOTES GROUP

29

6. Payroll costs and employee benefitsCOSTS RECOGniSEd aS PaYROll COSTS (nOK 1 000) 2008 2007

Salaries and holiday pay 457 694 387 025Social security tax 99 449 72 019Pension costs 18 152 16 723Other payroll costs 24 281 29 832Total 599 577 505 598 nUmBER OF EmPlOYEES Average number of full-time equivalents 1 079 1 303 Number of employees at end of year 965 1 363

7. Pensions and retirement benefit obligationThe Group has established pension plans for employees in Norway and Sweden. At the end of the year, collective pension plans covered 967 members (1 303 at 31.12.07), 140 (124) of whom were retired. At the end of the financial year, 16 (11) employees had taken out AFP pensions, while 2 (1) persons had been paid pension directly from the company. Block Watne has an established collective pension plan which is a defined contribution plan covering all employees. There is also a contractual early retirement pension agreement (AFP).In the Swedish company BWG Homes AB (and subsidiaries), there are different pension plans which are financed via payments to pensioninstitutions or managed funds. These include defined contribution and defined benefit plans.

The parent company has a collective pension plan which is a defined benefit plan covering all employees.

The carrying amount of the retirement benefit obligation in the balance sheet is as follows:

(nOK 1 000) 2008 2007

Retirement benefit obligation, Block Watne 19 869 17 267Retirement benefit obligation, parent company 999 962Total retirement benefit obligation 20 868 18 229

mORE inFORmaTiOn aBOUT PEnSiOn PlanS in nORWaYIn the Norwegian pension plans (AFP in Block Watne and defined benefit in parent), the calculation of the retirement benefit obligation is based on the following assumptions:

aSSUmPTiOnS USEd TO CalCUlaTE PEnSiOn COSTS 2008 2007

Discount rate 4.30% 4.70%Salary adjustment 4.50% 4.50%Pension adjustment 2.80% 2.75%NI base rate 4.25% 4.25%Turnover 12.50% 12.50%AFP - withdrawal propensity 65–67 years 75.00% 75.00%Expected return 6.30% 5.75%

The main elements of the calculated retirement benefit obligation associated with the contractual early retirement pension agreement (AFP) in Block Watne AS are shown below. 503 persons are members of Block Watne’s pension plans.

2008 2007

(nOK 1 000) aFP UnFUndEd TOTal aFP UnFUndEd TOTal

Estimated present value of retirement benefit obligation at 31.12 -13 607 -3 805 -17 412 -12 787 -2 346 -15 133- Estimated plan assets at 31.12 0 0 0 0 0 0Net retirement benefit obligation at 31.12 -13 608 -3 805 -17 412 -12 787 -2 346 -15 133Employer’s contribution -1 919 -538 -2 457 -1 803 -331 -2 134Net obligation recognised in balance sheet 31.12 -15 527 -4 343 -19 869 -14 590 -2 677 -17 267

The main elements of the calculated retirement benefit obligation in the parent company are listed in the parent company’s note 2. The pension plan covers 5 employees.

mORE inFORmaTiOn aBOUT PEnSiOn PlanS in SWEdEnIn the Swedish company BWG Homes AB (and subsidiaries), there are different pension plans which are financed via payments to pension institutions or managed funds. The companies have both defined-contribution and defined-benefit plans. The pension plans in Sweden cover a total of 457 persons. Defined contribution plans are recognised as an expense as incurred.

The defined benefit plans are insured with Alecta. According to the statement issued by the Emerging Issues Task Force of the Norwegian Accounting Advisory Council (URA 42), this is categorised as a defined-benefit plan. However, the company does not have access to the necessary information to present this plan as a defined benefit plan. This is because Alecta has been unable to give an overview of the necessary information in time. The pension plan is therefore presented as a defined contribution plan.

nOTES GROUP

30



Letter from the CEO


This isBWG Homes





About thereporting

8. Remuneration of management and boardThe Group paid NOK 963 000 (2007: NOK 906 000) in board fees in 2008. See below.

The following remuneration was paid to management and board in 2008:

(nOK 1 000) OTHER PEnSiOn BOaRd OTHER namE POSiTiOn SalaRY BOnUS BEnEFiTS PREmiUm FEES lOanS FEES

management Lars Nilsen CEO, BWG Homes ASA 1 822 0 56 127 0 0 0Arnt Eriksen CFO, BWG Homes ASA 301 0 24 22 0 0 0 1)

Ole Feet CEO, Block Watne AS 1 581 1 483 135 21 0 0 0 Mikael Olsson CEO, BWG Homes AB 1 360 154 106 323 0 0 0 Jonas Karlsson CFO, BWG Homes AB 870 67 96 274 0 0 0Ketil Kvalvik CFO, BWG Homes ASA 543 193 101 194 0 0 0 2)

Elisabet Landsend Director Corp. Communications 1 008 165 133 140 0 0 0 Board Harald Walther Chairman 0 0 0 0 270 0 261 3)4)

Hege Bømark Deputy Chairman 0 0 0 0 210 0 0 3)

Petter Neslein Board member 0 0 0 0 180 0 0 3)

Eva Eriksson Board member 0 0 0 0 60 0 0 3)

Brit Hagelund Employee representative 591 110 9 0 80 0 0 3)5) Tore M. Randen Employee representative 384 0 7 0 80 0 0 3)5)

Øyvind Wiik Employee representative 538 0 35 0 80 0 0 3)5)

Einar Salbu Employee representative 528 0 4 0 0 0 0 3)5)

Torunn Thiemer Employee representative, deputy 722 86 15 0 3 0 0 3)5)

Comments1) Arnt Eriksen took up his position on 6 October 2008

2) Ketil Kvalvik left his position on 31 October 2008

3) Board fees apply to BWG Homes ASA and Block Watne AS

4) Other fees are invoiced from the individual business areas. These fees have been approved by the board.

5) Employee representatives on the board, including deputies, are employees of Block Watne AS.

Salary includes holiday pay. Bonus paid refers to the bonus earned in 2007, which was paid in 2008. The bonus earned in 2008, which will be paid in 2009, is considerably lower than the previous year. Other benefits include taxable benefits, such as company car, car allowance, accident insurance, telephone etc.

Members of the management group have bonus agreements, based on performance and other individual criteria. The bonuses are limited to a certain number of monthly salaries. The maximum number of monthly salaries that can be paid as a bonus is 12.

The management group has agreements allowing early-retirement benefits up to 12 months beyond the standard 6-month period of notice. There are no other agreements for the management group or board with regard to special compensation on termination of employment or change of position. The CEO of Block Watne AS has a bonus agreement for 2008.

The Group is not under any obligation to grant the management group, board or other employees profit-sharing, options or similar benefits.

For comparative purposes, remuneration of management and board in 2007 is shown below:

(nOK 1 000) OTHER PEnSiOn BOaRd OTHER namE POSiTiOn SalaRY BOnUS BEnEFiTS PREmiUm FEES lOanS FEES

management Lars Nilsen CEO, BWG Homes ASA 1 735 0 73 66 0 0 0 Ketil Kvalvik CFO, BWG Homes ASA 599 88 120 115 0 0 0 Ole Feet CEO, Block Watne AS 1 499 800 138 0 0 0 0 Mikael Olsson CEO, Prevesta AB 741 0 48 218 1)

Jonas Karlsson CFO, Prevesta AB 478 0 48 140 1)

Board Harald Walther Chairman 0 0 0 0 270 0 524 2)3)

Hege Bømark Deputy Chairman 0 0 0 0 210 0 0 2)

Petter Neslein Board member 0 0 0 0 180 0 0 2)

Brit Hagelund Employee representative 562 120 7 14 80 0 0 2)4)

Tore M. Randen Employee representative 387 0 5 10 80 0 0 2)4)

Einar Hauge Employee representative 446 0 2 11 40 0 0 2)4)

Bjørn S. Ask Employee representative, deputy 393 45 27 10 3 0 0 2)4) John Brattebø Employee representative, deputy 441 0 22 11 3 0 0 2)4)

Øyvind Wiik Employee representative 504 104 27 13 40 0 0 2)4)

nOTES GROUP

31

Comments1) Applies to period 1 June 2007-31 December 2007

2) Board fees apply to BWG Homes ASA and Block Watne AS



Shares owned by management and board at 31 December 2008:

management SHaRES

Lars Nilsen CEO, BWG Homes ASA 23 958 000 *

Arnt Eriksen CFO, BWG Homes ASA 38 000 Elisabet Landsend Director Corp. Communications, BWG Homes ASA 10 400 Ole Feet CEO, Block Watne AS 15 400 Mikael Olsson CEO, BWG Homes AB 116 279 Jonas Karlson CFO, BWG Homes AB 93 023 Board

Harald Walther Chairman 201 000 *Hege Bømark Deputy chairman 0 Eva Eriksson Board member 0 Petter Neslein Board member 110 000 *Brit Hagelund Employee representative 400 Tore Morten Randen Employee representative 200 Øyvind Wiik Employee representative 400 * Including shares owned by related parties and/or companies

9. Fee to auditorsTHE FOllOWinG aUdiTORS’ FEES EXCl. VaT WERE Paid (nOK 1 000) 2008 2007

Standard auditing 1 635 893Tax advice 43 51Other 215 681Total 1 893 1 626

10. TaxTaX EXPEnSE RECOGniSEd in inCOmE STaTEmEnT (nOK 1 000) 2008 2007

Tax on profit for the year 74 937 60 148Change in deferred tax -24 733 12 542Total tax expense recognised in income statement 50 204 72 690

EFFECTiVE TaX RaTE RECOnCiliaTiOn (nOK 1 000) 2008 2007

Profit before tax -32 078 273 770Tax (income) based on nominal tax rate in Norway 28.0% 8 982 28.0% 76 656Effect of GW write-down (not taxable deduction) 197.3% -63 294 0.0% Effect of non-deductible expenses 0.1% -24 0.1% 178Effect of unutilised tax losses -11.8% 3 780 -1.5% -4 120Effect of tax-free revenue -16.0% 5 138 0.0% 7Changed tax rate in Sweden 26.3% -2 232 Other adjustments 8.0% -2 553 0.0% -31Total 156.5% -50 204 26.6% 72 690

TaX RECOGniSEd in EQUiTY (nOK 1 000) 2008 2007

Tax effect of share issue expenses 0 6 394

nOTES GROUP

32



Letter from the CEO


This isBWG Homes





About thereporting

BaSiS OF dEFERREd TaX in BalanCE SHEET (TEmPORaRY diFFEREnCES) (nOK 1 000) 2008 2007

Project reserve 242 128 294 962Trade receivables 568 509Profit and loss account -176 -220Net pension obligation -20 867 -18 229Inventories 7 961 7 652Non-current assets 24 299 17 813Other provisions -38 605 -45 565Financial assets measured at market value -36 495 6 005Loss carryforwards 0 -12 498Trademarks 501 650 477 199Added value, financial assets 27 351 25 576Added value, land 33 242 55 953Basis of deferred tax 741 057 809 157

dEFERREd TaX aSSET in BalanCE SHEET (nOK 1 000)

Norway 51 257 78 431Sweden 150 574 148 133Total 201 831 226 564

TaX PaYaBlE in BalanCE SHEET (nOK 1 000)

Norway 56 373 47 665Sweden 5 844 1 006Total 62 217 48 671

TaX RaTESNominal tax rate in Norway is 28 per cent. The Swedish tax rate was changed from 28 per cent to 26.3 per cent during the financial year. The effect of this reduction in the Group’s tax liabilities (approximately NOK 9 million) was recognised as income in the 4th quarter.

11. Earnings per shareCalCUlaTiOn OF EPS (nOK 1 000) 2008 2007

Profit for the period -82 282 201 080

Weighted average number of ordinary shares (in 1 000 shares) Ordinary shares outstanding at 01.01 66 000 43 959Effect of shares issued 0 14 660Weighted average number of shares at 31.12 66 000 58 616

Earnings per share (NOk) -1.25 3.43

dilUTEd EaRninGS PER SHaRE

Number of potential shares 0 0Diluted earnings per share (NOK) -1.25 3.43

12. Related party transactionsRelated parties are companies in which the CEO Lars Nilsen is majority owner through his investment companies. This applies to Lani Development AS and Waterguard International AS. Lani Development AS has issued two subordinated loans totalling NOK 95 million to Block Watne AS. The loans have been converted to standard loans, with NOK 55 million repaid during 2008. The balance at 31 Decem-ber 2008 was NOK 40 million. Interest paid in 2008 was NOK 8.13 million (2007: NOK 4.816 million). The outstanding loan was paid of in its entirety in February 2009.

Waterguard International AS sells water leakage systems to subsidiary Block Watne AS. These are sold through wholesalers and are conducted at market prices. Waterguard Intlernational AS leases premises and purchases certain administrative services from Block Watne AS. In 2008 these amounted to NOK 26 000 (2007: NOK 115 000).

The chairman of the board invoiced lawyer services of NOK 261 000 in 2008 (2007: NOK 524 000). See also note 8.

nOTES GROUP

33

13. Intangible assetsGoodwill and value of trademarks arose from the parent company’s acquisition of all the shares in Block Watne AS and Hetlandhus AS in 2005 and Prevesta in 2007. Goodwill and the value of trademarks are not amortised; instead, they are tested annually for impairment. If there is any indication of impairment, the recoverable amount is calculated, and if this is lower than the carrying amount, an impair-ment loss is recognised.

The Group’s Norwegian trademarks Block Watne and Hetlandhus have existed for 80 and 15 years respectively. The Swedish company’s Myresjöhus trademark has existed for more than 80 years, while SmålandsVillan has existed for more than 10 years. Operations will continue to be conducted under these trademarks. The Group’s trademarks have generated strong cash flows over a long period of time.

OTHER

inTanG.

(nOK 1 000) GOOdWill TRadEmaRKS aSSETS 2008 2007

at 01.01 Cost of acquisition 2 146 938 477 199 5 605 2 629 742 826 349Accumulated amortisation 0 0 445 445 253Carrying amount at 01.01 2 146 938 477 199 5 160 2 629 297 826 096 Translation differences 100 394 24 451 -895 123 950 0Purchases during year* 0 0 208 208 1 802 844Other additions 0 0 0 0 567Disposals during year 0 0 0 0 18Depreciation during year 0 0 0 0 0Impairment during year 226 050 0 0 226 050 192Carrying amount at 31.12 2 021 282 501 650 4 473 2 527 405 2 629 297 at 31.12 Cost of acquisition 2 146 938 477 199 5 813 2 629 950 2 629 742Accumulated amortisation 0 0 445 445 445Accumulated impairment 226 050 0 0 226 050 0Translation differences 100 394 24 451 -895 123 950 0Carrying amount at 31.12 2 021 282 501 650 4 473 2 527 405 2 629 297

* addiTiOnS FROm PURCHaSE OF SUBSidiaRiES (nOK 1 000) 2008 2007

Historical cost, intangible assets 0 386 300Historical accumulated amortisation, intangible assets 0 391Carrying amount of purchased intangible assets 0 385 910Goodwill and trademarks arising on acquisition 0 1 416 934Net additions 0 1 802 844

Other intangible assets are amortised over 3–5 years.

Goodwill impairment testing for cash-generating units. The following units have substantial trademark and goodwill values:

GOOdWill TRadEmaRKS

(nOK 1 000) 2008 2007 2008 2007

Block Watne AS 700 882 700 882 125 000 125 000BWG Homes AB 1 320 400 1 446 056 376 650 352 199Total 2 021 282 2 146 938 501 650 477 199

imPaiRmEnT TESTinGThe Group has defined two cash-generating units – segment Norway and segment Sweden. Impairment testing is conducted on the basis that the cash-generating units fulfil the going concern requirement.

Based on this the Group has performed an impairment test of assets focusing on goodwill and other intangible assets in line with IAS 36. The impairment test is particularly relevant for goodwill related to the Swedish operations. The Swedish operations produce houses using two brands, SmålandsVillan and Myresjöhus. For the impairment test the combined operations have been considered as one cash- generating unit. This because the activities are managed in one structure and the cash flow generated is not possible to split between the two brands. In internal reporting the combined Swedish operations are reported jointly and Group management monitor the opera-tions in total.

Key assumptions used in the analysis are sales/turnover, margins and the discount rate. We have based future estimates of sales and margins on a combination of market predictions, estimated macroeconomic conditions and past figures for the Swedish operation. The analysis is therefore based on both external and internal information. The discount rate is defined in accordance with the capital asset pricing model and WACC, and has been calculated at 11 per cent. The discount rate has been calculated by external experts. Future cash flow has been set at 2.5 per cent after 5 years.

The basis for measurement was a calculation of discounted cash flows (value in use) based on projected cash flows for the next 5 years and the terminal value.

nOTES GROUP

34



Letter from the CEO


This isBWG Homes





About thereporting

In view of the high level of uncertainty in the financial markets and the consequences of this on the real economy in Sweden, the Board has decided to make a downward revision of estimates of future turnover and earnings. Consequently, at the end of 2008, the Board decided to write down the value of goodwill in the Swedish operations by NOK 226 million.

Sensitivity analysisA 1 per cent increase in the discount rate would require a further goodwill write-down of SEK 237 million. A 10 per cent reduction in future cash flows would involve a further impairment loss of SEK 208 million.

14. Non-current assets maCHinERY, OFFiCE EQUiPmEnT, (nOK 1 000) PROPERTY EQUiPmEnT FiXTURES 2008 2007

Cost at start of period 18 751 96 444 24 615 139 810 57 511Accumulated depreciation 1 632 22 464 17 399 41 495 26 633Carrying amount at start of period 17 119 73 980 7 216 98 315 30 878 Translation differences 197 -1 833 556 -1 080 394Additions from acquisition of operations* 0 0 0 0 58 021Additions during year 8 240 23 112 3 166 34 518 18 740Disposals during year 316 292 0 608 222Depreciation during year 1 548 16 902 3 611 22 061 14 861Carrying amount at 31.12 23 692 78 065 7 327 109 083 92 950

The Group’s depreciation periods are 20–50 years 5–7 years 3–7 years

Straight-line depreciation is applied over assets’ expected useful lives.

* addiTiOnS FROm aCQUiSiTiOn OF OPERaTiOnS 2008 2007

Historical cost, property, plant & equipment 0 180 282Historical accumulated depreciation of property, plant & equipment 0 122 261Net additions 0 58 021

15. Investments in associatesAssociates in which the Group has a holding of 20–50 per cent are valued using the equity method, and the Group’s share of their profit or loss is recognised in the consolidated income statement. The Group’s share of equity in the companies is reported as an asset in the consolidated accounts.

REG’d SHaRE CaRRYinG amOUnT SHaRE OF PROFiT CaRRYinG amOUnT SHaRE OF PROFiT(nOK 1 000) OFFiCE CaPiTal HOldinG 31.12.08 2008 31.12.07 2007

associates

Smeheia Utb AS* Sandnes 2 000 40% Liquidated 63 1403 36Hetlandsgården AS Sandnes 200 50% 292 -198 194 1Lunde Utb AS* Sandnes 1 500 40% Liquidated 929 922 17A4 Bogafjell AS* Sandnes 200 50% Liquidated -20 72 169Buggeland Utb AS Sandnes 1 500 33% 574 0 574 -28Trøåsen Utb AS Trondheim 200 50% -210 0 -210 -59Skadberg Utb AS Sandnes 900 20% 105 607 478 -135Eivindsholen AS Sandnes 1 000 30% -89 16 195 -105Hemmingstad AS Sandnes 8 000 40% 3 009 0 0 0Gar-Bo AB Sweden 2 500 34% 66 077 -776 63 068 -2 590Total Associates 69 758 621 66 696 -2 694* Settlement and dividend to shareholders in connection with liquidation of company.

nOTES GROUP

35

Summary of financial information for associated companies – 100 per cent for 2008:

REG’d OPERaTinG PROFiT/lOSS

OFFiCE aSSETS EQUiTY liaBiliTiES inCOmE FOR THE YEaR

Smeheia Utb AS Sandnes Liquidated 2008 0 0 0 0Hetlandsgården AS Sandnes 809 784 25 400 -395Lunde Utb AS Sandnes Liquidated 2008 0 0 0 0A4 Bogafjell AS Sandnes Liquidated 2008 0 0 0 0Buggeland Utb AS* Sandnes 38 317 1 723 36 594 0 -86Trøåsen Utb AS* Trondheim 1 288 -419 1 707 0 -117Skadberg Utb AS Sandnes 2 851 1 423 1 429 0 -967Eivindsholen AS Sandnes 35 946 704 35 242 30 184 52Hemmingstad AS Sandnes 7 553 7 524 29 0 -435Gar-Bo AB Sweden 696 557 116 286 580 270 88 943 -2 103Total 783 321 128 025 655 296 119 527 -4 051* 2007 figure. 2008 accounts not yet available.

16. Other sharesOther companies in which the Group has a holding of less than 20 per cent are valued using the cost method.

REG’d SHaRE CaRRYinG amOUnT SHaRE OF PROFiT CaRRYinG amOUnT SHaRE OF PROFiT(nOK 1 000) OFFiCE CaPiTal HOldinG 31.12.08 2008 31.12.07 2007

Jåsund Utb AS Sola 1 000 18% 890 0 890 0Sørbø Hove AS Sandnes 2 000 16% 1 105 0 1 105 0Total 1 995 0 1 995 0

17. Financial instrumentsThe Group has entered into forward rate agreements of NOK 100 million and SEK 450 million. These are measured at fair value with value changes recognised in profit or loss.

TRanSaCTiOn STaRT maTURiTY inTEREST maRKET Val. maRKET Val.PROdUCT daTE CaPiTal SUm daTE daTE RaTE 31.12.08 (nOK 1 000) 31.12.07 (nOK 1 000)

Threshold Swap 17.01.06 100 000 TNOK 06.03.06 07.03.11 3.62% -1 219 3 518Interest Swap 29.05.07 150 000 TSEK 30.11.07 30.05.12 4.58% -9 518 46Extendable Interest Swap 29.05.07 150 000 TSEK 30.11.07 31.05.10 4.33% -10 382 -251Interest Swap 29.05.07 150 000 TSEK 30.11.07 30.05.17 4.67% -16 029 648Cap* 17.09.08 250 000 TNOK 02.01.09 02.01.14 6.50% 653 0Extendable Interest Swap** 0 2 044Total -36 495 6 005* The Group has entered into a forward rate agreement of NOK 250 million (Cap) with a ceiling of 6.5 per cent linked to 1 mth Nibor. This relates to Block Watne AS’s wish to offer some of

its customers an interest guarantee under corresponding conditions.** The extendable interest rate swap of NOK 150 million matured at the end of the year and was not extended.

The market value was confirmed by the financial institution which was the agreement counterparty. The maturity structure of the market value obligation is as follows:

2009 2010 2011 2012 2013 2014---->

TNOK -482 -753 21 150 454 45TSEK -9 295 -9 888 -6 836 -3 479 -1 777 -4 653

nOTES GROUP

36



Letter from the CEO


This isBWG Homes





About thereporting

18. Financial risk and capital managementCREdiT RiSKCredit risk is the risk of the company incurring losses on granted credit. The Group grants credit on the sale of homes, although the risk is reduced by requiring the customer to be able to provide documentary evidence of satisfactory financing before a contract is entered into. In addition, houses are not handed over until full payment has been received. Historically, the Group’s bad debt losses/credit losses has been low. Credit risk is considered to be the same in all the Group’s segments.

The carrying amount of outstanding receivables represents the maximum credit risk at the balance sheet date. The carrying amount of outstanding receivables at 31 December 2008 was NOK 454.387 million, compared with NOK 632.24 million at the end of 2007.

inTEREST RaTE RiSKInterest rate risk is the risk that changes in interest rates will result in fluctuations in future cash flows for the Group’s operations.Changes in interest rates will affect the company’s markets through their effect on demand for housing, as the borrowing rate is an important factor, perhaps the most important factor, on the house customer’s desire and ability to invest. Experience shows that ex-pected interest rate movements, or actual changes in the borrowing rate, cause a slowdown in demand, while a clearer interest picture helps boost demand for homes.

As the Group has considerable interest-bearing liabilities, interest rates and interest trends will have a direct effect on the Group’s prof-itability and earnings. Most of the Group’s working capital loans carry floating interest rates. The Group has entered into forward rate agreements of NOK 100 million and SEK 450 million which are shown overleaf. Consequently, approximately 40 per cent of the Group’s mortgage loans and 27 per cent of its net interest-bearing liabilities are hedged.

A 1 per cent change in interest rates would change borrowing costs in the company’s liabilities by approximately NOK 16 million. Changed interest rates will also affect present value calculations under normal circumstances. Present value calculations are carried out during impairment testing (see note 13) and when calculating pension obligations (see note 7) and the fair value of financial instruments/hedging instruments (see note 17).

CURREnCY RiSKCurrency risk is the risk of the company’s assets or cash flows being affected by exchange rate movements. The Group’s investment in the subsidiary BWG Homes AB is financed by loans in SEK, thereby reducing the Group’s net exposure in SEK. A 10 per cent change in the NOK/SEK exchange rate would result in a change of NOK 52 million in the Group’s equity.

Distribution of the Group’s monetary items by currency:

2008 2007

CURREnCY RiSK nOTE TnOK TSEK TPln TnOK TSEK TPln

Trade receivables 21, 32 309 768 130 849 0 421 283 198 131 77Other receivables 19 315 14 862 0 17 321 23 786 56Non-current liabilities to financial institutions 25, 32 -505 200 -984 296 0 -506 500 -890 000 0Current liabilities to financial institutions 26, 32 -675 873 -118 218 0 -310 606 -47 021 0Trade payables -121 148 -189 073 -20 -219 241 -228 465 -46Net balance of exposure -992 138 -1 145 876 -20 -597 743 -943 569 87

Relevant exchange rates during the year: aVERaGE RaTE ClOSinG RaTE

2008 2007 2008 2007

SEK 85.47 86.87 90.42 84.55PLN 2.34 2.12 2.36 2.22

With the Group having extensive operations in Sweden in SEK, currency risk associated with translation of the Swedish operations’ results will arise. NOK 1 713.072 million (54%) of the Group’s sales for 2008 was generated in Swedish kronor. NOK 158.133 million (43%) of the Group’s operating profit before depreciation/amortisation (EBITDA) was generated in Swedish kroner. A 10 per cent change in the NOK/SEK exchange rate would result in a change of NOK 15 million in the Group’s net profit. Only a minor part of the Group’s purchases are in foreign currency.

liQUidiTY RiSK Liquidity risk is the risk of the company being unable to fulfil its current conditions due to a lack of liquidity. Access to loan financing is crucial to ensure the Group is able to fulfil its current conditions. The Group had net interest-bearing debt of approximately NOK 2 billion at the end of 2008, and any failure on the part of the Group or the lender to comply with the conditions of the loan agreements will result in a lack of liquidity. In January 2009, the Group renegotiated the loan agreements with the largest lender and established a three-year loan agreement which takes into account the difficult market situation which is expected to persist. The Group also has loan financing from two other banks in Norway, SpareBank 1 SR Bank and Fokus Bank.

nOTES GROUP

37

The Group is also dependent on access to guarantees from banks, insurance companies and other sources, in order to allow it to operate efficiently, and ensuring earnings and profitability, and also as a instrument for releasing liquidity when required. The international financial crisis has had a significant impact on access to financing in Norway and Sweden, and this will to some extent increase the risk of present lenders being unable to fulfil their agreements with the Group. Nevertheless, this risk remains low, and is normally described as minimal.

The Group’s ability to fulfil its liabilities is highly dependent on current earnings and sales. The Group has reported good results in recent years and generated considerable cash flows. The Group has scaled down its operations substantially in 2008 and these are now at a level which allows the Group to fulfil its current obligations with much lower production and sales than in previous years. The Group’s share issues in the early part of 2009 brought additional liquidity, and the group has a satisfactory liquidity reserve.

The Group constantly monitors liquidity needs and available liquidity. If there is a need for liquidity somewhere in the Group, an internal allocation is made, within available limits. The Group has established working capital loans for operating units, which give flexibility throughout the year. The Group holds regular dialogue with Nordea with regard to capital requirements and liquidity management.

The table below shows the due dates for financial obligations (interest included) in nominal figures.

maTURiTY

liQUidiTY RiSK 1–3 mTHS 3–6 mTHS 6–12 mTHS 1 YR +

Pension obligations 19 868Deferred tax 201 831Total provisions 0 0 0 221 699

Other obligations Liabilities to credit institutions 16 361 16 351 72 687 1 476 368Total other non-current liabilities 16 361 16 351 72 687 1 476 368

Liabilities to credit institutions 110 881 95 771 191 546 425 803

liabilities to related parties Trade payables 281 838 7 500 2 922 Tax payable 62 217 Public duties payable 41 201

market value of financial instruments Other current liabilities, land and projects 71 919 31 205 50 485 79 743Other current liabilities 43 743 67 998 27 177 94 313Total current liabilities 549 582 202 474 334 347 599 859

The Group’s projected cash flows and liquidity base will fulfil the current financial obligations in each of the intervals.

CaPiTal manaGEmEnTThe main goal for the Group’s capital management is to ensure access to capital to allow satisfactory operation and maximise values for the owners. The Group manages its own capital structure and makes adaptations in the light of changes in the underlying economic conditions. Access to loan capital is constantly monitored and the Group maintains regular dialogue with lenders. Good dialogue with lenders is particularly important in establishing competitiveness and securing competitive financing terms.

The Group has established a dividend policy whereby 50–70 per cent of profit for the year is paid to shareholders, provided such payment is not detrimental to the company’s growth prospects or inappropriate in relation to the Group’s overall financial situation. The renegotiation of the loan agreements in January 2009 included a clause that a dividend cannot be paid without the approval of Nordea.

The Board has a mandate to increase capital by up to 30 million shares. The Group has covenants associated with the majority of its loan debt. Long-term monitoring ensures internal control over compliance with the covenants, and allows any compliance problems to be dealt with as quickly as possible.

As far as short-term liquidity needs are concerned, it is vital to have established adequate project financing for current projects. Draw-ing and writing-down of project financing is regulated constantly, and is dependent on invoicing/receipts and on projected liquidity trends.

Original covenants were suspended by Nordea in the 4 quarter as Nordea gave a waiver for over 12 months in anticipation of renego tiation of loan terms. In January 2009, the Group renegotiated its loan terms with Nordea. The due date of the acquisition liability relating to the Block Watne purchase has been deferred until 1 January 2012. A binding term sheet is in place, although the final loan agreements are still being drawn up. The renegotiation also involves changed repayment terms and repricing of the loans. Formalisation of loan agree-ments remain. See further discussion in the Board of Directors’ report.

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19. Financial assets(nOK 1 000) 2008 2007

Loans to associates 5 321 5 321Other non-current receivables

Long-term loans to customers 191 229Loans to employees 0Total other non-current receivables 191 229Other current receivables Prepaid expenses/accrued income 26 448 24 857Advances to landowners 4 650 4 650County tax inspector -6 600 6 389Other receivables 1 807 1 535Total other current receivables 26 305 37 432

Financial assets are measured at the lower of nominal and fair value. A concrete assessment of risk of bad debt losses has been made, particularly with regard to debtors’ ability to pay. No risk of bad debt losses has been identified.

20. Land and projects under constructionCOnSTRUCTiOn WORK in PROGRESS (nOK 1 000) 2008 2007

Unsold units capitalised 305 685 179 339Sold units capitalised 167 108 190 553Total holding 472 793 369 892

Recognised revenue relating to houses not yet handed over 1 121 038 1 228 110Costs relating to houses not yet handed over -821 868 -906 181Contributions relating to houses not yet handed over 299 170 321 929Remaining production relating to onerous contracts 0 0Earned, not invoiced income included in trade receivables 78 647 61 078Production invoiced in advance included in current liabilities 32 304 52 412

land (nOK 1 000)

Land at cost of acquisition 754 783 670 813Added value land 78 559 78 559Accumulated recognition of added value* -45 317 -29 504Main plant 269 562 205 672Total holding 1 057 587 925 540* In connection with the acquisition of Block Watne AS, added values of NOK 78.559 million arising from land were identified. These are recognised as an expense (cost of goods sold) when the land is taken into use (specified land) and on a straight-line basis (unspecified land).

21. Trade receivablesSPECiFiCaTiOn OF CaRRYinG amOUnT OF TRadE RECEiVaBlES (nOK 1 000) 2008 2007

Trade receivables 379 231 540 475Accrued income -91 000 -91 000Trade receivables with Norwegian Housing Bank financing 146 300 147 000Provision for bad debts -6 449 -7 672Total trade receivables 428 082 588 803

The Group does not have receivables for which payment is delayed due to contractual conditions, and all its trade receivables are due within one year.

ageing analysis of trade receivables 2008 2007

TRadE RECEiVaBlES (nOK 1 000) GROSS EXPECTEd lOSSES GROSS EXPECTEd lOSSES

Not due 250 495 0 346 088 -1 0640–30 days 62 529 -64 118 904 031–120 days 112 620 -642 120 999 -648More than 1 year 8 887 -5 743 10 483 -5 960Total 434 531 -6 449 596 475 -7 672

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22. Cash & cash equivalents(nOK 1 000) 2008 2007

Cash and bank deposits 61 152 82 507Of which reserved for tax 8 373 7 943

The Group has undrawn credit facilities and other loans totalling NOK 103.947 million.

23. Number of shares, shareholdersThe largest shareholders in BWG Homes ASA at 31 December 2008. SHaREHOldER SHaRES % OF TOTal

Lani Industrier AS 20 210 000 30.62%Pareto Aksje Norge 3 448 000 5.22%Lani Development AS 3 339 800 5.06%Ojada AS 2 331 200 3.53%Bank of New York, Brussels Branch 2 093 041 3.17%Pareto Aktiv 1 668 457 2.53%AB Invest A/S 1 525 183 2.31%Nordea Securities AB 1 451 349 2.20%Vital Forsikring ASA 1 424 300 2.16%Verdipapirfond Odin Norge 1 382 067 2.09%Verdipapirfond Odin Norden 1 313 800 1.99%MP Pensjon 1 275 500 1.93%Folketrygdfondet 1 262 644 1.91%DnB NOR Norge (IV) 1 247 551 1.89%BNP Paribas Secs Services Paris 1 205 800 1.83%Citibank Intl. PLC. (Lux Branch) 1 117 536 1.69%Swedbank 1 007 197 1.53%Euroclear Bank S.A./N.V. (‘Ba’) 991 851 1.50%Oslo Pensjonsforsikring AS Omløp 985 211 1.49%JPMorgan Chase Bank 961 400 1.46%Total 20 largest shareholders 50 241 887 76.12%Other 15 758 113 23.88%Total 66 000 000 100.00%

Total number of shareholders 847Par value of shares NOK 1.00

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24. Equity(nOK 1 000) SHaRE SHaRE PREmiUm TRanSlaTiOn RETainEd TOTalRECOnCiliaTiOn OF CHanGES in EQUiTY CaPiTal RESERVE diFFEREnCES EaRninGS EQUiTY

Balance 01.01.07 9 000 534 884 133 170 731 714 748Share issue 4 200 955 646 959 846Share issue expenses -22 834 -22 834Bonus issue 52 800 -52 800 0Dividend -112 500 -112 500Profit for the year 201 080 201 080Translation differences 0 0 -37 626 -37 626Balance at 31.12.07 66 000 1 414 896 -37 493 259 311 1 702 714

Balance 01.01.08 66 000 1 414 896 -37 493 259 311 1 702 714Dividend -132 000 -132 000Profit for the year -82 282 -82 282Equity effect of group contrib. prev. year 10 648 10 648Translation differences 41 117 41 117Balance at 31.12.08 66 000 1 414 896 -3 624 55 677 1 540 197

SHaRE CaPiTal and SHaRE PREmiUm 2008 2007

Issued at 01.01 1 480 896 543 884New share issue (cash) 0 937 012Issued at 31.12, fully paid 1 480 896 1 480 896

At 31 December 2008, registered share capital consisted of 66 000 000 ordinary shares (31.12.2007: 66 000 000). The par value of the share is NOK 1. Holders of ordinary shares are entitled to receive the adopted dividend and have one vote per share at the Group’s annual general meeting. All shares carry equal rights to net assets.

TRanSlaTiOn diFFEREnCESTranslation differences consist of all currency effects arising on translation of foreign subsidiaries in the consolidated accounts.

diVidEndA dividend of NOK 2 per share (total NOK 132 million) was paid in 2008. The dividend paid in 2007 was NOK 112.5 million. The Board will propose to the annual general meeting that no dividend be paid to the company’s shareholders for the financial year 2008. In view of the challenging market situation and volatile financial markets, the Board finds it necessary to prioritise strengthening the company’s capital ahead of paying a dividend.

25. Non-current liabilities to financial institutions 2008 2007

Mortgage loan NOK 499 000 499 000 499 000 NOK 7 500 6 200 7 500 SEK 890 000 (converted to NOK) 804 738 752 495Total 1 309 938 1 258 995

Interest rate at 31.12 Norwegian operations 5.52% 6.53% Swedish operations 5.43% 5.79%

The company’s long-term debt is secured against shares in its subsidiaries. The loan carries a floating interest rate (3-month NIBOR + margin). See note 17 on forward rate agreements. In addition, the Group has a small mortgage loan on office buildings.

Original covenants were suspended by Nordea in the 4 quarter as Nordea gave a waiver for over 12 months in anticipation of renego tiation of loan terms. In January 2009, the Group renegotiated the loan terms with Nordea. The due date of the acquisition liability relating to the Block Watne purchase has been deferred until 1 January 2012. A binding term sheet is in place, although the final loan agreements are still being drawn up. The renegotiation also involves changed repayment terms and repricing of the loans.

Based on the new term sheet, the repayments are as shown below.

2009 2010 2011 2012 2013

Repayments TNOK 41 200 41 200 41 200 380 200 1 200 TSEK 0 0 0 890 000 0

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26. Current liabilities to financial institutions(nOK 1 000) 2008 2007

Bank overdraft 106 893 39 756 Other working capital loans 75 110 0 Building and land loans 602 337 310 606Total current liabilities to financial institutions 784 340 350 362

Interest rate, Norwegian operations 31.12 5.34% 6.15%Interest rate, Swedish operations 31.12 3.07% 3.53%

Building and land loans are secured with collateral in projects and land. More information can be found in note 32, which shows the carry-ing amounts of collateral.

27. Other current interest-bearing liabilitiesThe loan consists entirely of the original related party subordinated loan which was converted into an ordinary loan in 2008, with repay-ments of NOK 55 million during the year. The remaining loan of NOK 40 million was repaid in full after the share issue in February 2009 (see note 35).

28. Product warranty provisionsIn its capacity as a construction company, the Group issues product warranties on houses that have been handed over. During the con-struction period, product warranties are purchased from banks or insurance brokers, although after a house is handed over the Group is required under Norwegian and Swedish law to establish product warranties. The Group has an ongoing provision for its product warranty commitments.

(nOK 1 000) 2008 2007

Product warranty provision, calculated 46 251 56 113Product warranty provisions, special projects 2 520 4 808Total product warranty provisions 48 771 60 921

Using reported warranty and claims costs over the last five years and their estimated distribution over five years (warranty period speci-fied in the Norwegian act on construction of buildings), a fair assessment of the warranty provision is made, based on the previous year’s turnover. In addition, a specific assessment is made to ascertain whether there is a need for special provisions relating to larger claims.

(nOK 1 000) 2008 2007

Product warranty provision, 01.01 60 921 61 767Used during year -12 150 -33 872Reversed during year 0 0Allocated during year 0 33 026Product warranty provision, 31.12 48 771 60 921

29. Land obligationsThe Group enters into binding agreements with land owners on allocation, planning and development of sites. When these agreements are drawn up, the company’s future payments are defined. The contracts may contain both conditional and unconditional commitments.

Future payments are not normally interest-bearing, although the agreements may in individual cases be adjusted to reflect the consumer price index. For agreements in which the land obligations are not conditional, the land is capitalised. Provision is made for associated payment obligations to the extent that payment has not been made in connection with establishing the agreement.

Other contracts with conditions that must be met before obligations arise often concern land which has not been approved for residential development.

At the end of 2008, conditional contracts totalled NOK 286 million (not balance sheet), and when these are approved for development, the Group’s land values and land obligations will increase correspondingly. Conditional contracts at the end of 2007 amounted to NOK 311 million.

It is considered highly likely that the local authorities will approve development.

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30. Public duties payable(nOK 1 000) 2008 2007

Public duties payable 9 252 19 207Social security tax 23 639 26 107VAT 8 348 895Total 41 239 46 210

31. Other current liabilities(nOK 1 000) 2008 2007

Accrued salaries, holiday pay etc 69 498 84 393Accrued interest expense 4 779 4 713Product warranty provision 48 771 60 291Provision for accrued expenses 34 665 48 225Advance payments from customers 63 815 89 342Restructuring costs 10 137 0Other current liabilities 1 680 1 538Total 233 344 288 502

32. Pledged assets and guarantee commitmentsCaRRYinG amOUnT OF THE COmPanY’S liaBiliTiES SECUREd aGainST mORTGaGES (nOK 1 000) 2008 2007

Building and land liabilities, other working capital loans 660 763 310 606Bank overdraft 106 893 39 756Mortgage loan 505 200 506 500Total 1 272 856 856 862 CaRRYinG amOUnT OF aSSETS PlEdGEd aS COllaTERal FOR liaBiliTiES (nOK 1 000)

Shares in subsdiaries* 1 616 935 1 550 115Trade receivables 104 458 104 168Land and buildings under construction 1 248 344 1 039 314Property, plant & equipment 16 808 26 530Total 2 986 545 2 720 128* The long-term liability with Nordea is secured against shares in Block Watne AS, Hetlandhus AS and BWG Homes AB.

Many small projects, in parts of or in the entire construction process, are not pledged as collateral for liabilities. Of the carrying amount of NOK 1 567 million in land and buildings under construction, NOK 233 million relates to land obligations (current liabilities).

The renegotiation of the loan terms with Nordea in January 2009 included an agreement that the liabilities to Nordea are secured by unpledged assets, mainly unpledged land. These collateral arrangements will be established during spring 2009.

GUaRanTEES iSSUEd BY FinanCial inSTiTUTiOnS (nOK 1 000) 2008 2007

Guarantee for advance payments 737 480 848 951Contract guarantees for building projects 155 273 133 396Other guarantees 235 714 244 954Total 1 128 467 1 227 301

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33. LeasesThe Group has a number of operating leases relating to offices and warehouses. The leases have variable lease terms, although the average lease term is between 3 and 8 years, with a renewal option. The leases are not based on variable rent conditions. The Group also has operating leases relating to cars and fixtures & fittings. These expire during the period 2008-2010. The Group does not have any finance leases.

annUal lEaSE PaYmEnTS FOR OFF-BalanCE SHEET aSSETS (nOK 1 000) 2008 2007

Cars, fixtures & fittings 8 013 4 326Rents 44 652 28 274Total 52 666 32 600

Lease payments are reported under other operating expenses.

34. Cash flow statementThe cash flow statement has been prepared using the indirect method.

CHanGES in OTHER aCCRUalS, iTEmiSEd (nOK 1 000) 2008 2007

Changes in other receivables 11 928 -2 338Change in social security tax -5 209 15 159Change in other current liabilities -59 279 20 991Total -52 560 33 812

35. Events after the balance sheet dateIn January 2009, the Group renegotiated its loan terms with Nordea. The due date of the acquisition liability relating to the Block Watne purchase has been deferred until 1 January 2012. A binding term sheet is in place, although the final loan agreements are still being drawn up. Formalisation of loan agreements remain. See further discussion in the Board of Directors’ report.

In February 2009, a private placement of NOK 140 million was completed, with a subsequent repair issue in March of NOK 21.38 million. The issues were settled in cash and the number of shares issued was 32 276 000. The subscription price was NOK 5.

In January 2009, an agreement was signed for the sale of the ownership stake in the Swedish insurance company Gar-Bo. The sale is conditional on approval by the financial supervisory authorities in Sweden and Luxembourg. The final selling price and settlement structure will be defined on the assumption that the sale will be implemented before the end of April 2009. The total selling price will be on a par with the carrying amount (SEK 65 million).

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36. Pro forma income statement 2007 – unauditedPro forma figures for 2007 have been prepared as if Prevesta had been acquired on 1 January 2006. These figures have not been audited. PRO FORma inCOmE STaTEmEnT – BWG HOmES aSa 2008 2007(nOK 1 000) aCTUal PRO FORma

Sales revenue 3 170 495 3 272 324Other income 1 030 23Total income 3 171 525 3 272 346

Cost of materials -1 906 232 -1 943 185Payroll and personnel expenses -599 557 -607 175Other operating expenses -297 650 -281 041Total operating expenses -2 803 439 -2 831 400

Operating profit before depreciation/amortisation 368 086 440 946

Income from associates 621 9 503Impairment of goodwill -226 050 0Depreciation of property, plant & equipment -22 061 -21 033Operating profit 120 596 429 416

Interest income 7 802 8 045Other finance income 24 830 396Change in market value of financial instruments -42 500 -368Interest expense -137 562 -74 316Other finance expense -5 244 -29 713Net financial items -152 674 -95 956

Profit/loss on ordinary activities before tax -32 078 333 460

Tax on profit -50 204 91 575

Profit/loss for the period -82 282 241 885

45aCCOUnTS PaREnT

Income Statement Parent (01.01–31.12)

(nOK 1 000) nOTE 2008 2007

Other income 11 0Total income 11 0

Payroll and personnel expenses 2, 3 -9 356 -4 838Other operating expenses -8 197 -8 461Total operating expenses -17 553 -13 299

Operating profit before depreciation/amortisation (EBITDA) -17 542 -13 299

Depreciation of property, plant & equipment 10, 11 -148 -51Operating profit (EBIT) -17 691 -13 350

Income from investment in subsidiaries 4, 7 32 034 243 468Interest income 5 37 414 7 540Other finance income 0 20Write-down shares in subsidaries 7 -112 857 0Interest expense 6 -42 201 -27 872Other finance expense 0 -16Net finance costs -85 610 223 140

Profit on ordinary activities before tax -103 301 209 892

Tax expense 9 -9 064 -43 504 Profit for the period -112 365 166 388

allocation of profit

Dividend 0 132 000Group contributions 0 14 789Transferred to other equity 14 -112 365 19 497Total allocated -112 365 166 286

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Balance Sheet Parent (per 31.12)

(nOK 1 000) nOTE 2008 2007

aSSETSnon-current assetsintangible assets

Intangible assets 10 259 326Deferred tax asset 9 228 228Total intangible assets 487 554 Property, plant & equipment Fixtures, fittings and equipment 11 421 358Total property, plant & equipment 421 358

Financial assets Investments in subsidiaries 7 1 616 935 1 879 095Loans to subsidiaries 8 353 114 0Total financial assets 1 970 049 1 879 095

Total non-current assets 1 970 049 1 880 007 Current assets Other receivables 12 36 781 406 795Bank deposits, cash & cash equivalents 13 1 574 12 610Total current assets 38 355 419 405 Total assets 2 009 312 2 299 413

47aCCOUnTS PaREnT

(nOK 1 000) nOTE 2008 2007

EQUiTY and liaBiliTiESEquityPaid-in capital Share capital 66,000,000 shares, par value NOK 1 14, 15 66 000 66 000Share premium reserve 14 1 414 897 1 414 897Total paid-in capital 1 480 897 1 480 897

Retained earnings Other equity 14 -41 241 60 476Total retained earnings -41 241 60 476

Total equity 1 439 656 1 541 373

liabilities Provisions Pension obligations 2 999 962Total provisions 999 962

Other non-current liabilities Liabilities to credit institutions 16, 17 499 000 499 000Total other non-current liabilities 499 000 499 000

Current liabilitiesCurrent interest-bearing liabilities 19 16 684 0Trade payables 877 1 371Public duties payable 18 367 391Tax payable 9 2 671 37 131Provision for dividend 0 132 000Other current liabilities 20 49 057 87 185Total current liabilities 69 657 258 078

Total liabilities 569 656 758 040

Total equity and liabilities 2 009 312 2 299 413










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(nOK 1 000) nOTE 2008 2007

Cash flow from operating activities Profit before tax -103 301 209 790

adjustments for Gains/losses on sale of non-current assets 9, 10, 11 -11 0Depreciation/amortisation//impairment 9, 10, 11 148 51Net finance costs 85 610 -223 140

Paid tax 9 -43 524 -51 863Paid interest 6 -39 738 -27 887

Change in working capital, incl. balances with subsidiaries -451 1 166

Net cash flow from operating activities -101 267 -91 884

Cash flow from investing activities Purchase of property, plant & equipment 11 -435 -735Sale of property, plant & equipment 11 300 0Purchase of shares 7 -115 -942 395Interest received (incl. from subsidiaries) 5 5 237 7 540Long-term loans to subsidiaries 8 -11 100 0Change in short-term balances with subsidiaries 22 -31 808 -37 933 Net cash flow from investing activities -37 921 -973 523

Cash flow from financing activities

repayment of long-term liabilities 16 0 0Dividend paid 14 -132 000 -112 500New current liabilities 16 684 0Group contributions from subsidiaries 4 243 468 236 017New share capital 14 0 937 014 Net cash flow from financing activities 128 152 1 060 531 Net change in cash & cash equivalents -11 036 -4 876 Cash & cash equivalents at start of period 12 610 17 486 Cash & cash equivalents at end of period 13 1 574 12 610

Cash Flow Statement Parent (01.01–31.12)

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Notes Parent

BWG Homes ASA was incorporated on 20 September 2005. The company changed its name from Block Watne Gruppen ASA to BWG Homes ASA on 20 September 2007. The company is the parent com-pany in a Group with operations both in Norway and Sweden. The company’s office address is Munke-damsveien 45, 0250 Oslo.

All figures in the tables presented below are in NOK thousands unless otherwise specified.

The annual financial statements comprise the income statement, balance sheet, statement of cash flow, and accompanying notes. The annual financial state-ments have been drawn up in accor dance with the Public Limited Companies Act, the Accounting Act and generally accepted accounting principles in Norway as of 31 December 2008.

BaSiC PRinCiPlES, ValUaTiOn and ClaSSi FiCaTiOn, OTHER iSSUESThe annual financial statements are based on the basic principles of historical cost, comparability, going concern, matching and prudence. Transactions are recorded at the value of the consideration paid/re-ceived at the time the transaction took place. Revenues are recognised when they are earned and costs are matched against accrued revenues.

Assets/liabilities associated with the production and sale of goods and items falling due for payment less than one year after the balance sheet day are classified as current assets/current lia bilities. Current assets/current liabilities are valued at the lower/higher of acquisition cost and fair value. Fair value is defined as the estimated future sales price, less esti-mated sales costs. Other assets are classified as non-current assets. Non-current assets are valued at cost. Non-current assets which have a finite life are depre-ciated. If the value of a non-current asset changes, and that change is deemed not to be temporary, an impairment loss is recognised for the asset.

aCCOUnTinG PRinCiPlES FOR SiGniFiCanT aCCOUnTinG iTEmS Revenue recognition Revenues are recognised when they accrue.

Cost recognition/matching Expenses are matched against and recognised at the same time as those revenues with which they are associated. Expenses which cannot be ascribed to specific revenues, are recognised when they accrue.

Property, plant and equipmentItems of property, plant and equipment are carried at acquisition cost, less accumulated depreciation and impairment. If the fair value of an item of property, plant or equipment is less than its carrying amount, and this is due to circumstances which are not ex-pected to be of a temporary nature, the value of the item is written down to fair value. Expenses associated with major replacements or renovations which extend the life of the asset are capitalised.

depreciationDepreciation is calculated on a straight line basis over the asset’s useful life, based on its historical cost price. Depreciation is classified as an ordinary operating expense.

Financial assetsSubsidiaries: A subsidiary is a company in which the Group holds 50 per cent or more of the shares. The company uses the cost method of accounting for subsidiaries.

Pension liabilities and pension costs The company has an occupational pension scheme which entitles em-ployees to agreed future pension benefits, ie a defined benefit scheme. The pension obligation is calculated on the basis of linear accrual, with the number of years to retirement, the discount rate, future returns on plan assets, future regulation of salaries, pensions and social security benefits, and actuarial assumptions relating to mortality, voluntary withdrawal, etc, being important factors. Changes in pension liabilities and plan assets which are due to changes in or deviations from previous financial assumptions (estimate changes) are recognised as they arise.

Net pension costs in the income statement are the change in the net pension obligation in the financial year. The change largely comprises the estimated earned pensions during the year less the estimated return on plan assets. Pension costs are classified as ordinary operating expenses and are presented with salaries and other benefits. The com-pany is legally obliged to maintain an occupational pension scheme, and the pension scheme meets the requirements of the Occupational Pension Schemes Act.

Forward rate agreements The company has entered into forward rate agreements. The agree-ments are not capitalized, but payments are recorded as interest income in the income statement.

Foreign exchangePurchases of goods and services in foreign currencies were insignificant.

deferred tax and tax expensesDeferred tax liabilities/assets are calculated on the basis of temporary differences between the accounting and taxable value of assets at the end of the financial year. The calculation is based on the nominal rate of tax. Positive and negative differences are offset within the same time period. Deferred tax assets arise if there are temporary differences which may lead to tax deductions in the future. The tax expense for the year comprises changes in deferred tax liabilities and deferred tax assets, as well as the tax payable for the financial year in question, corrected for errors in previous years’ calculations.

Cash flowThe cash flow statement is prepared using the indirect method and shows cash flows from operations, cash flow from investing activities and cash flows from financing activities.

Group contributions from subsidiaries to the parent company and from the parent company to subsidiaries during the period are re-ported under cash flow from financing activities. Long-term loans from subsidiaries to the parent company are reported under cash flow from financing activities.

Short-term intra-group balances with subsidiaries (loans and receiv-ables) are reported under cash flow from investing activities.

1. Accounting policies 49

2. Payroll costs and

employee benefits 50

3. Remuneration of management,

board and auditors 51

4. Income from investment

in subsidiaries 51

5. Interest income 51

6. Interest expense 52

7. Subsidiaries 52

8. Loan to subsidiaries 52

9. Tax 52

10. Intangible assets 53

11. Tangible fixed assets 53

12. Other receivables 53

13. Cash and cash equivalents 53

14. Equity 54

15. Number of shares, shareholders 54

16. Liabilities to financial institutions 55

17. Forward rate agreements

and financial risk 55

18. Public duties payable 55

19. Current liabilities 55

20. Other current liabilities 55

21. Pledge assets and

guarantee commitments 56

22. Cash flow statement 56

23. Events after the

balance sheet date 56

1. Accounting policies

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2. Payroll costs and employee benefitsCOSTS RECOGniSEd aS PaYROll COSTS (nOK 1 000) 2008 2007

Salaries and holiday pay 7 351 3 780Social security tax 1 195 597Pension costs 701 444Other payroll costs 109 16Total 9 356 4 837

nUmBER OF EmPlOYEES Average number of full-time equivalents 4.6 2.3Number of employees at end of year 5.0 3.0

PEnSiOnS/RETiREmEnT BEnEFiT OBliGaTiOnS The company is obliged to have mandatory occupational pension arrangements under the Norwegian mandatory occupational pension act. Pension obligations consist of a collective pension plan (funded).

The underlying estimates were reviewed in autumn 2008 and are considered reasonable. On 6 January 2009, the accounts committee released the following pension assumptions as at 31 December 2008:Discount rate 3.80%Salary adjustment approx. 4.00%Pension adjustment approx. 3.75%Expected return approx. 5.80%

The assumptions which were used to calculate the pension costs/retirement benefit obligation have not changed as a result of the new assumptions, as the effects of any change are not considered to be substantive.

The collective pension schemes had 5 (3) members at the end of the year.

CHanGES in nET OBliGaTiOnS RElaTinG TO dEFinEd BEnEFiT (nOK 1 000) 2008 2007

Defined benefit pension obligations 01.01 962 762Changes to estimates 0 0Deposits during the year -757 -278Cost recognised in income statement 794 478Defined benefit pension obligations 31.12 999 962 COST RECOGniSEd in inCOmE STaTEmEnT (nOK 1 000)

Current service cost 506 221Capital cost of past service cost 95 64Gross pension expense for the year 601 285Expected return on plan assets -92 -46Administrative expenses 36 29Accrued employer contributions 77 38Changes to estimates in profit or loss 0 0Change to pension obligations due to agreement changes 171 173Net pension cost for the year 794 478

RECOnCiliaTiOn OF BEnEFiT PEnSiOn OBliGaTiOnS

Estimated present value of accrued pension liability 31.12 2 739 2 819Estimated pension assets 31.12 -1 762 -916Social security tax 137 268Estimate deviations -115 -1 210Net liability for defined benefit pension obligations 31.12 999 961

aSSUmPTiOnS USEd TO CalCUlaTE PEnSiOn COSTS

Discount rate 4.30% 4.70%Salary adjustment 4.50% 4.50%Pension adjustment 2.80% 2.75%NI base rate 4.25% 4.25%Turnover 12.50% 12.50%Expected return 6.30% 5.75%

The company expects to contribute approximately NOK 0.7 (0.7) million in payments to pension plans in 2009.

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3. Remuneration of management, board and auditorsThe following remuneration was paid to management and board in 2008:

(nOK 1 000) OTHER PEnSiOn BOaRd OTHERnamE POSiTiOn SalaRY BOnUS BEnEFiTS PREmiUm FEES lOanS FEES

management Lars Nilsen CEO 1 822 0 56 127 0 0 0Arnt Eriksen CFO 301 0 24 22 0 0 0 1)

Ketil Kvalvik CFO 543 193 101 194 0 0 0 2)

Elisabet Landsend Director of Communications 1 008 0 133 140 0 0 0 Board 0 0 Harald Walther Chairman 0 0 0 0 180 0 261 3)

Hege Bømark Deputy Chairman 0 0 0 0 150 0 0Petter Neslein Board member 0 0 0 0 120 0 0Eva Eriksson Board member 0 0 0 0 60 0 0Brit Hagelund Employee representative 0 0 0 0 50 0 0 4)

Tore M. Randen Employee representative 0 0 0 0 50 0 0 4)

Øyvind Wiik Employee representative 0 0 0 0 50 0 0 4)

Torunn Thiemer Employee representative, deputy 0 0 0 0 3 0 0 4)

Comments1) Arnt Eriksen took up his position as CFO on 6 October 2008.

2) Ketil Kvalvik left his post on 31 October 2008



The management group has agreements allowing early-retirement benefits for 12 months beyond the standard 6-month period of notice. There are no other agreements for the management group or board with regard to special compensation on termination of employment or change of position.

The Group is not under any obligation to grant the management group, board or other employees profit-sharing, options or similar benefits.

The company paid NOK 663 000 in board fees in 2008. See above.

aUdiTORS’ FEES EXCl. VaT (nOK 1 000) 2008 2007

The following auditors’ fees were paid: Standard auditing 434 251Tax advice 0 6Other 28 375Total 462 633

4. Income from investment in subsidiaries(nOK 1 000) 2008 2007

Group contribution from Block Watne AS 32 000 243 468

5. Interest incomeTHiS iTEm COnSiSTS OF (nOK 1 000) 2008 2007

Interest from Block Watne AS 1 858 1 883Interest from BWG Homes AB 31 495 0Interest from bank 4 061 5 657Total interest income 37 414 7 540

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Letter from the CEO


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About thereporting

6. Interest expenseTHiS iTEm COnSiSTS OF (nOK 1 000) 2008 2007

Interest to Block Watne AS 2 463 2 142Interest to bank 39 738 25 730Total interest expense 42 201 27 872

7. Subsidiaries(nOK 1 000) HOldinG/ SHaRES, COST/ SHaRE OF EQUiTY SHaRE OF EQUiTY SUBSidiaRiES REG’d OFFiCE SHaRE CaPiTal VOTinG SHaRE PaR ValUE (nOK) CaRRYinG amOUnT 31.12.2008 31.12.2007

Block Watne AS Oslo 40 000 100% NOK 10 1 095 000 399 577 293 687Hetlandhus AS Oslo 100 100% NOK 1 5 008 253 110Boligbygg Prosjekt AS Oslo 100 100% NOK 100 115 115 0BWG Homes AB* Vetlanda 1 100 100% SEK 1 516 812 516 812 582 945Total 1 616 935 916 757 876 742* Prevesta AB was merged in BWG Homes AB in 2008. In connection with the impairment of goodwill in the Swedish business, (note 13 Intagible assets), the parent company has written down the value of the subsidiary to

book equity. The impairment amount to NOK 112.857 million

8. Loans to subsidiaries

THiS iTEm COnSiSTS OF (nOK 1 000) 2008 2007

Loans to BWG Homes AB 342 014 0Loans to Hetlandhus AS 11 100 0Total loans to subsidiaries 353 114 0

9. TaxTaX On PROFiT (nOK 1 000) 2008 2007

Profit before tax -103 301 209 790Group contribution without tax effect 0 -16 795Permanent differences 112 837 -22 834Temporary differences -1 70Group contribution 0 -14 789Basis of tax payable 9 535 155 443Tax payable on profit for the year 2 670 43 524Change in deferred tax 0 -20Adjustments in tax for previous years 6 394 0Tax expense in income statement 9 064 43 504

TaX RECOGniSEd in EQUiTY (nOK 1 000)

Tax effect of share issue expenses 0 6 394 CalCUlaTiOn OF dEFERREd TaX in BalanCE SHEET (nOK 1 000)

Offset differences Net pension obligation -999 -962Operating assets 151 130Other differences 34 18Basis of deferred tax -813 -814Deferred tax asset in balance sheet -228 -228

inCOmE TaX PaYaBlE in BalanCE SHEET (nOK 1 000)

Tax on profit for the year 2 670 43 524Tax on share issue costs recognised directly in equity 0 -6 394Income tax payable in balance sheet 2 670 37 130

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10. Intangible assets(nOK 1 000) 2008 2007

at 01.01 Cost of acquisition 337 0Accumulated amortisation 11 0At 01.01 326 0 Carrying amount 01.01 326 0Purchases during year 0 337Depreciation during year 67 11Carrying amount 31.12 259 326

at 31.12 Cost of acquisition 337 337Accumulated depreciation 79 11At 31.12 259 326

Intangible assets consist entirely of purchased software, which is depreciated over 5 years.

11. Tangible fixed assets(nOK 1 000) 2008 2007

at 01.01 Cost of acquisition 398 0Accumulated depreciation 40 0Carrying amount 01.01 358 0 Purchases during year 435 398Disposals during year 292 0Depreciation during year 81 40Carrying amount 31.12 421 358 at 31.12 Cost of acquisition 541 398Accumulated depreciation 120 40Carrying amount 31.12 421 358

Tangible fixed assets consist entirely of cars that are depreciated over 5 years.

12. Other receivablesTHiS iTEm COnSiSTS OF (nOK 1 000) 2008 2007

Receivable from Block Watne AS (interest-bearing) 0 243 468Receivable from BWG Homes AB (interest-bearing) 36 781 163 300Receivable from Hetlandhus AS (interest-bearing) 0 27Total other receivables 36 781 406 795

13. Cash & cash equivalentsThis item consists of bank deposits and small amounts of cash in hand.

(nOK 1 000) 2008 2007

Cash and bank deposits 1 574 12 610Of which reserved for deduction for employees 378 278

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Letter from the CEO


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14. Equity SHaRE SHaRE OTHER

(nOK 1 000) CaPiTal PREmiUm RESERVE EQUiTY TOTal

Equity 01.01.07 9 000 534 884 40 979 584 863Share issue 4 200 949 253 0 953 453Share issue expenses 0 -22 834 0 -22 834Tax effect of share issue expenses 0 6 394 0 6 394Bonus issue 52 800 -52 800 0 0Profit for the year 0 0 166 286 166 286Dividend 0 0 -132 000 -132 000Group contributions 0 0 -14 789 -14 789Equity 31.12.07 66 000 1 414 897 60 476 1 541 373 Equity 01.01.08 66 000 1 414 897 60 476 1 541 373Profit for the year 0 0 -112 365 -112 365Equity effect of group contribution from prior years 0 0 10 648 10 648Equity 31.12.08 66 000 1 414 897 -41 241 1 439 656

15. Number of shares, shareholdersThe 20 largest shareholders in BWG Homes ASA at 31 December 2008

SHaREHOldER SHaRES % OF TOTal

Lani Industrier AS 20 210 000 30.62%Pareto Aksje Norge 3 448 000 5.22%Lani Development AS 3 339 800 5.06%Ojada AS 2 331 200 3.53%Bank of New York, Brussels Branch 2 093 041 3.17%Pareto Aktiv 1 668 457 2.53%AB Invest A/S 1 525 183 2.31%Nordea Securities AB 1 451 349 2.20%Vital Forsikring ASA 1 424 300 2.16%Verdipapirfond Odin Norge 1 382 067 2.09%Verdipapirfond Odin Norden 1 313 800 1.99%MP Pensjon 1 275 500 1.93%Folketrygdfondet 1 262 644 1.91%DnB NOR Norge (IV) 1 247 551 1.89%BnP Paribas Secs Services Paris 1 205 800 1.83%Citibank Intl. PLC. (Lux Branch) 1 117 536 1.69%Swedbank 1 007 197 1.53%Euroclear Bank S.A./N.V. (‘Ba’) 991 851 1.50%Oslo Pensjonsforsikring As Omløp 985 211 1.49%JPMorgan Chase Bank 961 400 1.46%Total 20 largest shareholders 50 241 887 76.12%Others 15 758 113 23.88%Total 66 000 000 100.00%

Total number of shareholders 847Par value of shares NOK 1.00

Shares owned by management and board at 31 December 2008:

SHaRES

Lars Nilsen CEO 23 958 000 *Arnt Eriksen CFO 38 000 Elisabet Landsend Director of Communications 10 400 Board

Harald Walther Chairman 201 000 *Hege Bømark Deputy Chairman 0 Eva Eriksson Board member 0 Petter Neslein Board member 110 000 *Brit Hagelund Employee representative 400 Tore Morten Randen Employee representative 200 Øyvind Wiik Employee representative 400 * Including shares owned by related parties and/or companies

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16. Liabilities to financial institutions(nOK 1 000) 2008 2007

Long-term liabilities to financial institutions comprise a mortgage loan secured against shares in subsidiaries 499 000 499 000 At 31 December, the loan carries a floating interest rate (3-month NIBOR + margin). See note 17 on forward rate agreements. The loan agreement was renegotiated in January 2009. See also note 23. Based on the new term sheet (final loan agreements being drawn up), the repayments are as shown below.

(nOK 1 000) 2009 2010 2011 2012

Repayments 40 000 40 000 40 000 379 000

17. Forward rate agreements and financial riskThe Group has entered into forward rate agreements amounting to NOK 350 million. The agreements have not been recognised in the balance sheet.

(nOK 1 000) TRanSaCTiOn CaPiTal STaRT maTURiTY aCCRUEd maRKET Val. maRKET Val.PROdUCT daTE SUm daTE daTE inTEREST 31.12.08 31.12.07

Threshold Swap 17.01.06 100 000 06.03.06 07.03.11 137 -1 219 3 518Cap 17.09.08 250 000 02.01.09 02.01.14 653 0Extendable Interest Swap 24.04.06 150 000 05.09.06 06.06.11 299 0 2 044Total market value of interest-rate derivative products 436 -566 5 662

Market value has been confirmed by the financial institution which is agreement counterparty. FinanCial RiSK (nOK 1 000) 2008 2007

Net interest-bearing liabilities at 31.12 514 284 486 390Change in net interest expense in the event of a 1-per cent change in interest rates 4 143 2 364

Financial risk is described in more detail earlier in this annual report.

18. Public duties payable(nOK 1 000) 2008 2007

Tax for employees 339 264Social security tax 254 127VAT -225 0Total 367 391

19. Current liabilitiesThe total amount consists of current liabilities to Nordea.

20. Other current liabilities(nOK 1 000) 2008 2007

Accrued salaries, holiday pay etc. 2 141 1 251Short-term loans from subsidiaries 32 139 71 146Liabilities to group companies 14 777 14 789Total 49 057 87 185

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Letter from the CEO


This isBWG Homes





About thereporting

21. Pledged assets and guarantee commitmentsCaRRYinG amOUnT OF COmPanY’S liaBiliTiES SECUREd BY PlEdGEd aSSETS (nOK 1 000) 2008 2007

Mortgage loan 499 000 499 000Total 499 000 499 000

CaRRYinG amOUnT OF PlEdGEd aSSETS (nOK 1 000)

Shares in Block Watne AS and Hetlandhus AS 1 100 000 1 100 000Total 1 100 000 1 100 000

The company set itself a surety to Nordea for SEK 1 090 million ensuring BWG Homes AB s lending relationship with Nordea.

COllaTERal PROVidEd (nOK 1 000) 2008 2007

Collateral for guarantees to subsidiaries 175 000 175 000Total 175 000 175 000

A guarantee has been issued to a mortgage insurance company on behalf of the subsidiary Block Watne AS.

22. Cash flow statementChange of current balances with subsidiaries mainly comprise a liquidity loan to BWG Homes AB.

23. Events after the balance sheet dateIn January 2009, the Group renegotiated the loan terms with Nordea. The due date of the acquisition liability relating to the Block Watne purchase (cf note 16) has been deferred until 1 January 2012. A binding term sheet is in place, although the final loan agree-ments are still being drawn up. The renegotiation also involves changed repayment terms and repricing of the loans. See further discus-sion in the Board of Directors’ report.

In February 2009, a private placement of NOK 140 million was completed, with a subsequent repair issue in March of NOK 21.38 million. The issues were settled in cash and the number of shares issued was 32 276 000. The subscription price was NOK 5.00.

57aUdiTOR’S REPORT

Auditor’s Report

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Letter from the CEO


This isBWG Homes





About thereporting


BWG Homes shall ad-here to high corporate governance standards. A healthy corporate culture is a key driver in creating confidence in the company, pro-viding access to capital and ensuring value growth. All shareholders shall be treated equally and there shall be a clear division of work between the Board of directors and management.

The main ethos of BWG Homes’ corporate governance is based on the following principles:

BWG Homes will communicate with the external world in an open, reliable and relevant way about its operations and corporate governance

The Board of BWG Homes will be autonomous and independent of the company’s management

There will be a clear division of work between BWG Homes’ Board and management

All shareholders will be treated equally

1. CORPORaTE GOVERnanCE REPORT Compliance Implementation of the adopted corporate gover nance guidelines will strengthen confidence in the company and help create added value. A clear division of roles between shareholders, Board of directors and management has been defined based on current legislation.

BWG Homes’ corporate governance guide lines follow the Norwegian Code of Practice for Corporate Governance of 4 December 2007, the Public Limited Liability Companies Act, the Securities Trading Act and Stock Exchange regulations. The annual report contains descriptions of the company’s guidelines, compliance with the Norwegian Code and explanations of any deviations from it, and this information is also available on the company’s website. In accordance with the Norwegian Code of Practice, instructions have been drawn up for the Board’s work, the CEO’s work, the Board’s relationship with the auditor, guidelines for the nomination committee, investor relations work and ethical guidelines.

Each year the Board of directors reviews and evaluates compliance with the adopted guidelines and instructions. Values and ethical guidelines A healthy corporate culture and integrity throughout the company’s operations are important in building and maintaining internal and external confidence in the company and our products. With ethical guidelines and a set of internal values behind them, our employees and management are better able to comply with good business practice standards. The Board of directors and employees will exhibit fairness, honesty and integrity in all its dealings with other employees, business associates, customers, suppliers, shareholders, competitors, the general public and government authorities. Our ethical guidelines will also be a tool for selfevaluation and development of BWG Homes’ identity.

2. OPERaTiOnSThe area of operations of BWG Homes is defined in the company’s articles of association. The object

of the company is to engage in building operations and other associated operations, either under its own direction or by participation in other companies. The articles of association appear in their entirety on page 63 and are also available on the company’s website. Strategies for BWG Homes’ operations are adopted by the Board. The main strategies are discussed in the annual report and on the company’s website.

3. EQUiTY and diVidEndSEquityBWG Homes’ equity capital as at 31 December 2008 totalled NOK 1 540.2 million, corresponding to an equity ratio of 32.1 per cent. BWG Homes must maintain a level of equity that is reasonable in relation to the company’s object, strategy and risk profile.

dividend policyBWG Homes seeks to pay its shareholders an annual dividend of 50 to 70 per cent of profit after tax. A dividend is proposed if in the Board’s view it will not have an adverse impact on BWG Homes’ Group’s future growth ambitions or capital structure. The company’s dividend policy is discussed in the annual report and on the company’s website.

The Board will propose to the annual general meeting that no dividend be paid to the company’s shareholders for the financial year 2008. In view of the challenging market situation and volatile financial markets, the Board finds it necessary to prioritise strengthening the company’s capital ahead of paying a dividend.

Capital increaseThe Board will only propose a share capital increase if it is in the longterm interests of all shareholders. Existing shareholders will normally have preemptive allotment or subscription rights in any significant share issues. The

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Board may in accordance with the Public Limited Companies Act § 105 decide to waive existing shareholders preemptive rights when special reasons indicate that this is the company’s and shareholders’ common interest.

The Board’s share issue mandates are confined to specific purposes. At 31 December 2008, the Board had one such mandate, which was granted by the 2008 AGM and was to be valid until the 2009 meeting.

On 6 March 2009 the Board was authorised by the extraordinary General Meeting to increase the company’s share capital with NOK 30 000 000. As distinct from what is recommended in the Code of Practice, the authorisation is not dedicated to a specific purpose. The Board considers that it is in the best interest of the compnay that the Board has flexibility in this respect.

The new Board mandate granted by the Extraordinary General Meeting on 6 March 2009 is valid until the 2010 meeting and replaces the previously registered Board mandate. The new mandate covers only capital increase against cash deposits, and does cover resolution on mergers in accordance with section 135 of the Norwegian Public Limited Liability Companies Act. At 31 December 2008, the Board had no mandate to purchase its own shares.

4. EQUal TREaTmEnT OF SHaREHOldERS and TRanSaCTiOnS WiTH ClOSE aSSOCiaTESEqual treatmentBWG Homes has one class of shares. The articles of association do not contain any restrictions with regard to voting rights. Consequently, all shares have equal status, and this includes voting rights. All shareholders will be treated equally; there will not be any differential treatment that does not have a factual basis in the common interests of BWG Homes or the shareholders. Existing shareholders have preemptive rights in connection with share capital increases. Any waiver of these preemptive rights must be in the common interests of the company and shareholders.

Transactions with close associatesCEO Lars Nilsen has a 32.52 per cent holding in BWG Homes through his companies Lani Industrier AS, Lani Development AS and Lagulise AS. He is not a member of the Board of BWG Homes. If any not immaterial transactions are conducted between the company and close associates, the Board will obtain an independent valuation and inform the shareholders.

The company has rules which define who, outside the Board and executive management, are an insider. Insider trading in the BWG share must always be approved by the person in charge of trading clearance prior to the transaction. The Oslo Stock Exchange must be notified when the transaction is completed. Board members and executive management must notify the Board of any direct or indirect interest they have in a transaction or agreement entered into by the company.

5. FREElY nEGOTiaBlE SHaRES Shares in BWG Homes are freely negotiable; the articles of association do not contain any restrictions with regard to negotiability. BWG

Homes ASA is listed on the Oslo Stock Exchange. Active efforts are made to create interest among existing and potential investors and give an insight into the company. The BWG Homes management team holds regular meetings with Norwegian and international investors. In its communication with investors and analyst environments the company aims to give a picture of its strategy, activities, operations and financial position which is as precise as possible.

6. GEnERal mEETinGSThe shareholders exercise the highest authority in BWG Homes through the general meeting. The Board of directors takes steps to ensure the general meeting is an effective forum for the views of shareholders and the Board.

noticeAll shareholders are entitled to submit business for consideration, attend, address the meeting, and vote at a general meeting. The annual general meeting of shareholders is held before 30 June. The 2009 AGM will be held on 26 May. The financial calendar is published as a stock exchange notice, in the annual report and on the company’s website.

An extraordinary general meeting may be called by the Board of directors at any time. The BWG Homes’ auditor or shareholders representing at least five per cent of share capital may request the convening of an EGM.

Notice of the general meeting must be made in writing to all the shareholders with a known address no later than 14 days before the date of the meeting. Supporting documents, resolution proposals, the nomination committee’s recommendations/names of proposed candidates and registration and proxy forms will be sent to shareholders with the notice. The supporting documents will include all the necessary information to enable

shareholders to form a view on business that will be dealt with, and will indicate the procedure relating to proxies and use of the proxy form. The notice will also give information on the shareholders’ entitlement to submit resolution proposals on business to be considered by the general meeting, and the website address at which the notice and supporting documents are available. The notice and supporting documents will be available on the company’s website no later than 21 days before the date of the general meeting. The deadline for registration expires no earlier than three days before the date of the meeting.

attendanceRegistration for the general meeting must be sent in writing, by post, email or fax. Share holders who are unable to attend may vote by proxy. The proxy may be applied to each item of business dealt with. The Board of directors, chairman of the nomination committee, auditor, CEO and CFO all participate in the general meeting.

implementationThe general meeting elects a chairman of the meeting who is independent of the Board and management. The annual general meeting will approve the annual accounts and determine the fees to Board members. The general meeting elects the members of the nomination committee, and then the chairman of the committee in a separate election. The meeting also elects the Board’s shareholderelected members, and then the chairman of the Board and the deputy chairman in a separate election. There is voting on each individual candidate.

The general meeting also deals with matters which it is required to consider by law or the company’s articles of association. The CEO reports on the company’s status. The minutes of the general meeting are published as a stock ex change notice, and are also available on the company’s website.

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7. nOminaTiOn COmmiTTEE The organisation of the nomination committee is formalised in the company’s articles of association, and separate instructions for the committee’s work have been drawn up.

CompositionThe composition of the nomination committee will be independent of the Board and management and will take into account the interests of shareholders in general. The nomination committee consists of three members, all of whom are elected by the general meeting for a term of one year. The general meeting elects the nomination committee chairman and also decides on the committee’s fees.

The nomination committee was reelected by the annual general meeting held on 21 May 2008 and consists of Andreas Mellbye (chairman), Lise Lindbäck and Stine Rolstad Brenna. All members are up for election in 2009.

The work of the nomination committeeThe nomination committee’s duties consist of proposing candidates for election as Board members and making recommendations regarding Board fees. The nomination committee is required to report on its work and submit its recommendations, with reasons, to the general meeting. The recommendations will include relevant information about the candidates and an evaluation of their independence from the company’s management and its important business associations.

Information on the nomination committee and its members is available on the company’s website. The company gives notice of deadlines for submitting proposals for potential Board and nomination committee members on its website.

8. CORPORaTE aSSEmBlY and BOaRd OF diRECTORS: COmPOSiTiOn and indEPEndEnCEFollowing a resolution by Bedriftsdemokratinemda (Corporate Democracy Committee) on 30 August 2006, BWG Homes does not have its own corporate assembly. In accordance with this resolution the Board has three employee representatives elected by and from the employees of the Group. The General Meeting elects the Board after considering the recommendations of the nomination committee.

Composition of the BoardBoard members are elected according to BWG Homes’ need for expertise, capacity and balanced decisions. The composition of the Board will ensure that it can operate independently of any special interests and function effectively as a collegiate body.

The Board of BWG Homes consists of seven members four shareholderelected members and three em ployee representatives. Three of the Board members (two shareholderelected and one employee representative) are women. The shareholderelected members have extensive experience in the housing sector, property development, finance and law.

Three of the shareholderselected Board members were elected by the 2007 annual general meeting for a twoyear term of office. They are Harald Walther (chairman), Hege Bømark (deputy chairman) and Petter Neslein (member). The fourth shareholder elected Board member, Eva Eriksson, was elected by the EGM held on 20 December 2007, and has the same period of office as the other shareholderelected Board members. The three employee representatives were elected by and from the company’s employees on 16 September 2008 for a twoyear term of office. Board members’ CVs are published in the annual report, and their shareholdings are reported in note 8. Updated CV and information on share ownership can also be found on the company’s website.

BWG Homes ASA and its subsidiary Block Watne AS have the same employee representatives.

The Board’s independenceThe majority of the shareholderelected Board members do not have any association with BWG Homes’ management, its important business associations and principle shareholder(s).

Chairman Harald Walther is a lawyer with his own law business. Part of this business includes carrying out assignments for BWG Homes and in more limited extent also for its subsidiaries. The entire Board is informed of these assignments and fees for them are approved by the Board. In 2008, Harald Walther

among other matters performed assignments in connection with various schemes related to the financing of the Group’s business. See also note 8 to the consolidated income statement, which contains an itemisation of fees paid in 2008. Harald Walther does not have any connection with BWG Homes’ important business associations.

CEOCEO Lars Nilsen is chairman of the Board of the subsidiaries Block Watne AS and BWG Homes AB. He is not a member of the Board of BWG Homes ASA.

Election of the BoardAccording to the articles of association, the Board of BWG Homes shall consist of between five and seven members. In accordance with the agreement approved by the Corporate Democracy Committee, three of the Board members and their deputies are elected by and from the employees. The general meeting elects the shareholderelected Board members after considering the recommendations of the nomination committee. The chairman and deputy chairman are elected by the general meeting. Board members are elected for a term of two years. Remuneration of the Board is decided by the general meeting following a recommendation from the nomination committee.

information on Board members and candidatesRelevant information about Board members can be found in the annual report and on the company’s website. Detailed information about candidates is enclosed with the notice of the general meeting and is also available on the company’s website.

Board members’ holdingsThe shareholdings of Board members and executive management are reported in note 8. An updated list is also available on the company’s website.


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9. THE WORK OF THE BOaRd The Board’s tasksThe Board of directors has overall responsibility for the management of BWG Homes and implementation of the company’s strategy. This also includes monitoring and supervision of BWG Homes’ operations. The management of BWG Homes draws up proposals relating to strategy, longterm goals and budget. The final budget is app roved by the Board of directors. The CEO is appointed by the Board.

instructions for the BoardMore detailed regulations relating to the Board’s areas of responsibility and administrative procedures are specified in separate instructions. The chairman is responsible for ensuring the Board’s work is performed in an efficient and correct way, in accordance with current legislation and the adopted instructions. The Board produces an annual plan for its work.

instructions for the CEOThe CEO is responsible for the daytoday operations of BWG Homes. The CEO also ensures that the accounts of BWG Homes comply with legislation and other relevant regulations, and that the assets of BWG Homes are managed responsibly.

The CEO is appointed by the Board of directors and reports to the Board. The CEO’s remuneration is decided by the Board. The CEO’s authority and areas of responsibility are defined in separate instructions adopted by the Board.

At 31 March 2009 CEO Lars Nilsen has a 32.52 per cent holding in BWG Homes through his companies Lani Industrier AS, Lani Development AS and Lagulise AS.

Chairman of the BoardThe chairman of the Board is responsible for ensuring the Board’s work is well organised and effective. Board business is prepared by the CEO and management in consultation with the chairman of the Board. The chairman of the Board declares general meetings open.

meeting structure Seven Board meetings are normally held during the year, plus a separate strategy meeting. Extraordinary Board meetings are held, if required, to deal with business which cannot wait until the next ordinary Board meeting. Nine Board meetings were held in 2007.

The Board also has a fixed annual plan for its work. The annual plan encompasses approval of strategy, interim accounts, annual accounts and budget, review of risk areas,

internal control, values, ethical guidelines, organisation structure and corporate governance principles. The Board annually evaluates the company’s management and organisation structure.

Financial reportingThe Board periodically receives reports on the company’s economic and financial status. The CFO submits and reports on the interim and annual financial statements. The Company follows the deadlines from the Oslo Stock Exchange for interim reporting.

Board committeesThe Board did not have any Board committees in 2008. The Board will establish an audit committee when this becomes mandatory.

Board’s evaluation of its own workThe Board carries out an annual evaluation of its own performance, working arrangements and competence. A summary of this evaluation is communicated to the nomination committee. The Board also carries out a similar evaluation of the CEO.

10. RiSK manaGEmEnT and inTERnal COnTROl Responsibility and object of the BoardThe Board is responsible for

RElaTiOnS OF RESPOSiBiliTY

nOminaTiOn COmmiTTEE

GEnERal mEETinG

BOaRd OF diRECTORS

CEO

EXECUTiVE manGEmEnT

ensuring the company has sound internal control and risk management systems. The Board periodically receives reports which include operational, economic and financial status, as well as management’s evaluation of sig nificant risks and its own management of them. The Board’s annual plan includes an annual review of the company’s risk areas, internal control systems, values and ethical guidelines. The main components of the company’s risk areas and internal control systems associated with financial reporting are discussed separately in the annual report.

The auditor reviews BWG Homes’ internal control with the Board of directors. The review includes discussion of identifiable weaknesses and suggestions for improvement. See also note 18 “Financial risks”.

The subsidiaries Block Watne AS and BWG Homes AB have implemented authorisation and attestation instructions with rules for entering into agre ements and approving payments. All employees have clear guidelines on the extent of their own authority and where the next level for decisions or approvals lies. The CEO has operative responsibility for following up these guidelines. The planning, management, imple mentation and evaluation of construction processes and projects are integrated into BWG Homes’ business operations. Con struction projects are systematically reported to the company’s management.

11. REmUnERaTiOn OF BOaRd and nOminaTiOn COmmiTTEERemuneration of Board members is decided by the general meeting following a recommendation from the nomination committee. Remuneration of the Board is not performancebased on and no op tions are issued to Board members.

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In 2008, the chairman of the Board performed assignments for the company among other matters in connection with various schemes related to the financing of the Group’s business. The entire Board was informed of his assignments and fees for them were approved by the Board.

The AGM held on 21 May 2008 adopted the following Board fees, see below. See note 8 to the consolidated income statement for a breakdown of fees paid in 2008.

12. REmUnERaTiOn OF EXECUTiVE manaGEmEnT GuidelinesIn accordance with § 616a of the Public Companies Act, the Board draws up a statement about the determination of executive management salaries and other remuneration. The statement is presented to the general meeting and this is followed by a consultative vote on the statement.

The CEO’s remuneration is decided by the Board. Remuneration of executive management is decided by the CEO. Members of executive management have agreements allowing earlyretirement benefits for until 12 months beyond the period of notice. There are no other agreements for executive management or the Board with regard to special compensation on termination of employment or change of employment.

Performance-related remunerationMembers of executive management have a bonus programme based on the company’s results. Members of executive management do not have any equity compensation benefits or share option schemes.

BWG Homes is not under any obligation to grant executive management, the Board or other employees profitsharing, options or similar benefits. The CEO may propose payment of a discretionary bonus to executive management. This must be approved by the chairman of the Board.

Policy and reportingThe company’s executive management remuneration policy is described in the annual report. For payment of all components of remuneration to the CEO and other executive management, see note 8.

13. inFORmaTiOn and COmmUniCaTiOn Guidelines on reporting financial and other information BWG Homes’ information and communication is based on open ness and equal treatment of all shareholders. The company provides investors and analysts with equal and simultaneous access to new and pricesensitive information. The company has defined guidelines for investor relations and financial information.

BWG Homes’ communication with the financial market must give investors and analysts the best possible basis for creating an accurate picture of the company’s financial position, key value drivers, risk factors and other considerations which may affect future creation of added value. At the same time, company management must try to harness policy signals from the market.

The company has pledged to provide the financial market with precise, relevant, timely and consistent information about factors of importance in valuing

the company’s securities, when BWG Homes is the correct source of such information.

Company spokespersons have been designated for different subjects. The company has a con tingency plan for management of the media in response to events of a particular nature.

Reports and announcmentsBWG Homes follows the Securities Trading Act in its interim reporting. The complete annual financial statements, Board of directors’ report and annual report are available on the company’s website no later than 21 days before the AGM and are sent to shareholders no later than 14 days before the date of the meeting. The financial calendar is published annually as a stock exchange notice, and can be found on the website and in the annual report. Announcements are published and distri buted in an “efficient and nondiscriminatory way” to the Oslo Stock Exchange and simultaneously to national and international news agencies, in accordance with §512 of the Securities Trading Act and the Stock Exchange regulations.

dialogue with shareholders and the financial market The CEO and CFO are the company’s financial market spokespersons, and have ongoing dialogue with investors and analysts. Open presentations are arranged in conjunction with the publi cation of interim reports. All interim presentations are also available as live webcasts. After the interim presentation, investor presentations are held, both nationally and internationally.The company does not hold any meetings with analysts or investors for a period of four weeks prior to the publication of its interim results.

All pricesensitive information is published in an “efficient and nondiscriminatory way”

REmUnERaTiOn TO THE BOaRd OF diRECTORS

NOk

Chairman 180 000Deputy Chairman 150 000Board member 120 000Employee representative 50 000Deputy member per meeting 3 000


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in Norwegian and English. Stock exchange announ cements, press releases, reports, presentation material and webcasts are available on the company website. BWG Homes satisfies the requirements for the Oslo Stock Exchange Information Symbol (I) and English Symbol (E).

14. TaKEOVERSEqual treatment and opennessThe company’s articles of association do not contain any restrictions with regard to share purchase. The Board works on the basis that all shareholders are treated equally. The Board will not, without good reason, seek to obstruct or hinder takeover bids for shares in BWG Homes.

Evaluation of offerIn the event of a takeover bid for some or all of the company, the Board will ensure that shareholders are treated equally and that BWG Homes’ business activities are not disrupted unnecessarily. If a bid is made for BWG Homes’ shares, the Board will issue a statement evaluating the offer and making a recommendation as to whether the shareholders should accept it or not. The Board will obtain an independent valuation and communicate this to the shareholders in its statement. If the Board is unable to make such a recommendation, it will report on the background to this decision. If the Board’s views are not unanimous, it must explain the basis on which specific members of the Board have excluded themselves from the Board’s statement. The Board’s statement will in other respects follow the guidelines of the Securities Trading Act.

disposal of activitiesAny transaction that is in effect a disposal of the company’s activities is decided by the general meeting.

15. aUdiTORElection of the auditorBWG Homes has used KPMG as its auditor in 2008 and continues to do so in 2009. The auditor’s primary duty is to perform the auditing mandated by the law and professional standards with the accuracy, competence and integrity prescribed by the law and professional standards.

The Board of directors’ relationship to the auditorSpecial instructions have been adopted for the Board of Directors’ relationship to the auditor. The instructions include guidelines for the company’s access to make use of the auditor for other services than auditing. The auditor shall meet with the Board of Directors at least once a year without the management being present. The auditor shall once a year present a letter of confirmation of the established requirements on independence. The auditor shall participate at Board meetings that discuss the annual accounts. The auditor is entitled to be present at General Meetings.

The auditor shall present the main elements of the plan for performing the auditing work to the Board of Directors every year. The auditor shall review any material changes to the BWG Homes’ accounting principles, evaluations of significant accounting estimates and any material matters where there may have been disagreement between the auditor and the management. The auditor shall review the BWG Homes’ internal control with the Board of Directors, including identifiable weaknesses and improvement proposals, at least once a year. The Board of Directors will inform about the auditor’s fees broken down into auditing and other services at the Annual General Meeting.

aRTiClES OF aSSOCiaTiOn OF BWG HOmES aSa§1 The company’s name is BWG Homes ASA,

and it is a public limited liability company.

§2 The object of the company is to engage in building operations and other similar operations, either under its own direction or through participation in other companies. The company may grant loans and furnish security in this connection.

§3 The company’s registered business address is in Oslo.

§4 The company’s share capital is NOK 98 276 000 divided into 98 276 000 shares each with a nominal value of NOK 1.

§5 The company shall have a Board of Directors consisting of five to seven Board Members, as determined by the General Meeting. The Board of Directors, including its Chairman and the Deputy Chairman, shall be elected by the General Meeting for a term of two years. The Company can be signed for by the Chairman of the Board or the Deputy Chairman individually, or by two Board members jointly or by whomsoever the Board otherwise delegates signatory rights.

§6 The company shall have a Nomination Committee consisting of three members which are elected by the General Meeting for a term of one year. The Nomination Committee shall nominate candidates for the Board of Directors and the Corporate Assembly (if any) and the remuneration for the members of these bodies. The Board of Directors may lay down instructions for the Nomination Committee.

§7 The Annual General Meeting of shareholders shall consider and decide on the following matters:

a) Approval of the annual report and accounts, including the dividend to the shareholders.

b) Any other matters that shall be dealt with by the General Meeting by law or pursuant to the Articles of Association.

§8 In all other respects, the provisions of the Public Limited Companies Act shall apply.

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Letter from the CEO


This isBWG Homes





About thereporting

About the reporting

For the Annual Report 2008 BWG Homes has chosen to publish parts of the business description at the company’s website. See below for an overview of where the various articles can be found.

www www/annual print

Our brands Block Watne Hetlandhus Myresjöhus SmålandsVillan Key figures and Highlights letter from the CEO letter from country managers This is BWG Homes History Value chain Business areas management review Report from the Board of directors annual accounts Group Income statement Balance Sheet Cashflow statement Notes annual accounts Parent Income statement Balance Sheet Cashflow statement Notes auditor’s report Corporate governance investor information

www.bwghomes.no www.bwghomes.no/annualreport08 annual report 2008

nOTES PaREnT

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Contact information

BWG HOmEs AsA P.O. Box 1817 Vika, NO-0123 OsloTel: (+47) 23 24 60 00Fax: (+47) 23 24 60 13E-mail: [email protected]

smÅLANDsVILLAN ABMyresjö SE-574 85 Vetlanda Tel: (+46) 382 345 50Fax: (+46) 383 962 05E-mail: [email protected]

BWG HOmEs ABMyresjö SE-574 85 Vetlanda Tel: (+46) 383 963 00Fax: (+46) 383 914 40

BLOCk WATNE AsP.O. Box 1817 VikaNO-0123 OsloTel: (+47) 23 24 60 00Fax: (+47) 23 24 60 01E-mail: [email protected]

HETLANDHUs AsP.O. Box 1817 VikaNO-0123 OsloTel: (+47) 22 01 20 00Fax: (+47) 22 01 20 01E-mail: [email protected]

myREsjöHUs ABMyresjö SE-574 85 Vetlanda Tel: (+46) 383 960 00Fax: (+46) 383 914 40E-mail: [email protected]

Design: CrEuNA Photo: Bård Ek, page 2, 4 and 8 Kjell Israelsson, page 5 Jarle Nyttingnes, page 7 Kolonihaven Studio, page 7Duo fotografi, page 7Print: rK Grafisk

nOTES PaREnT

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Letter from the CEO


This isBWG Homes





About thereporting

www.bwghomes.no

BWG Homes ASA P.O. Box 1817 Vika

NO-0123 OSLO

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bwg homes annual report 2008

Documents

share nok

new website

income statement

new edition

net profit

new cfo

net cash flow

group dividend of nok