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Annual Report 1998

Dyckerhoff, founded in 1864, is a public company in which the founding family owns a controlling interest. The Dyckerhoff trademark is a sign of distinction in building materials and product systems for construction and renovation. Dyckerhoff s success is based on customer focus, high standards of quality, innovation and our highly motivated people identifying with the company s goals. Our corporate objective is to continually create value for our customers, our shareholders and our employees. Dyckerhoff Group Key Figures 1989 to 1998 The Dyckerhoff Group and its Divisions

Dyckerhoff Group Key Figures 1989-1998 (millions of DM) 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Sales 1,283 1,409 1,592 1,705 1,758 2,178 2,473 2,968 3,278 3,454 Cement 786 855 997 1,075 1,044 1,161 1,139 Cement Germany 1,212 1,269 1,263 Cement International 415 572 634 Luxembourg 216 313 Concrete 111 119 131 140 194 260 296 639 741 815 Finishing Products 386 435 464 490 520 582 768 770 790 820 Employees 3,691 3,956 5,454 4,816 4,621 5,094 6,103 8,319 8,856 9,717 Capital expenditure 150 197 389 264 285 357 333 619 441 510 Depreciation, disposals 96 152 174 254 249 248 217 249 298 283 Equity 303 327 437 445 464 652 1,059 1,207 1,315 1,416 % of total assets 29 29 31 32 33 38 41 39 39 39 Net income 54 57 56 50 55 115 148 151 164 177 Dividend of Dyckerhoff AG 17 20 23 23 25 31 38 41 44 47 Dividend per share (DM) 8.50 10.00 10.00 10.00 11.00 12.00 12.00 13.00 14.00 15.00 Additional tax credit 4.78 5.63 5.63 5.63 4.71 5.14 5.14 5.57 6.00 6.43 1998 Financial Highlights Sales: DM 3,454 million (in %) Operating cash flow: DM 586 million (in %) Cement International 18 % Concrete 23% Cement International 20 % Concrete 13% Finishing Products 8 % Cement Germany 36 % Finishing Products 23 % Cement Germany 59 %

The Dyckerhoff Group and its Divisions Cement Germany Cement International Concrete Finishing Products Dyckerhoff Zement GmbH Dyckerhoff Zement International GmbH Dyckerhoff Beton GmbH Dyckerhoff Ausbauprodukte GmbH Cement Luxembourg Ready-Mixed Concrete Facade Technology Other Building Materials Concrete Products Fine Mortar Spain Concrete International DIY Hardware Czech Republic Poland USA Capital expenditure: DM 510 million (in %) Employees: 9,717 (in %) Cement International 29 % Cement International 27 % Concrete 16% Concrete 34% Finishing Products 25 % Cement Germany 21 % Holding 3 % Finishing Products 13 % Cement Germany 31 % Holding 1 %

contents 1 Contents 2 Report of the Supervisory Board 4 Letter to Shareholders 7 Supervisory Board and Management 8 8 10 13 17 19 20 22 24 25 Review of Operations of Dyckerhoff Group and Dyckerhoff AG Group Highlights Business Environment Sales and Earnings Capital Expenditure and Financing Balance Sheet Employees Research and Development Environment Outlook 28 Dyckerhoff Shares 30 30 32 33 35 Division Reports Cement Germany Division Cement International Division Concrete Division Finishing Products Division 37 The Fascination of Dyckerhoff Cement 43 Consolidated Financial Statements for the year ended December 31, 1998 73 Financial Statements of Dyckerhoff AG for the year ended December 31, 1998 77 Consolidated Financial Statements for the year ended December 31, 1998 Additional Information in euros Dyckerhoff Solves Problems

2 report of the supervisory board Report of the Supervisory Board The Supervisory Board oversaw the management of the Company s business and supported the Board of Management in an advisory capacity. At joint meetings, the Board of Management presented its reports, which were then extensively discussed. Whenever decisions or transactions planned by the Board of Management required the endorsement of the Supervisory Board as stipulated by law or other regulations, we reviewed and discussed the issues in detail. Resolutions were also passed in writing, apart from these meetings. Between meetings, the Chairman of the Supervisory Board was consistently kept informed by the Chairman of the Board of Management about all significant current issues. During the 1998 business year, the Supervisory Board convened on January 29, March 11, May 8, June 24, October 1, and December 10. At these meetings, we dealt with the Company s position and progress, the position of the Company s four Divisions as well as the Company s strategic investment, financing and human resources policy. Key issues were Dyckerhoff s profitable growth, the progress in the Company s internationalization and major financial investments. In particular, our investment consultations focused on the acquisition of CerCol S.p.A. and Excluton B.V., the purchase of shares in ZAPA beton a.s. and Cementownia Warszawa Sp. z o.o., the increase of interests in Betonbau GmbH and in Cementos Hispania a.s., as well as the establishment of a joint venture by Dyckerhoff Inc. and Lehigh Portland Cement Company. The Supervisory Board installed an executive committee to deal with contractual issues involving the Board of Management and an intermediary committee in accordance with Article 27, Section 3 MitbestG (Co-determination Law). A meeting of the executive committee took place on May 4, 1998. The intermediary committee did not need to convene. The consolidated financial statements were drawn up in conformity with the International Accounting Standards (IAS). For the first time this year, Dyckerhoff made use of the option in Article 292a, Section 1 and 2 of the German Commercial Code, which exempts companies from having to issue consolidated financial statements according to the rules stipulated by the German Commercial Code. The consolidated financial statements, the financial statements of Dyckerhoff AG and management s combined report on the Dyckerhoff Group and Dyckerhoff AG as well as the conditions governing the exemption according to Article 292a of the German Commercial Code were audited by KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Berlin and Frankfurt am Main, who were appointed as independent auditors at the Annual Meeting. In accordance with international practice, the auditors report includes a reference to the responsibility of the Board of Management and that of the auditors, and it informs about the auditing principles as well as the audit s focus. The auditors confirmed that the accounting of Dyckerhoff AG is in complete conformity with the International Accounting Standards. The financial statements of Dyckerhoff AG were endorsed by the auditors unqualified certificate in accordance with Article 322 of the German Commercial Code. In conformity with Article 317, Section 4 of the German Commercial Code, the auditors examined the risk management and surveillance system employed by the Dyckerhoff Group, which is now also required by Corporation Law (Article 91, Section 2 AktG). The auditors found that the risk management and surveillance system installed by the Board of Management is suitable to meet the Company s risk exposure.

report of the supervisory board 3 Dr. Jürgen Lose, Chairman of the Supervisory Board of Dyckerhoff AG Also resigning from their offices on the Supervisory Board upon conclusion of the 1998 Annual Meeting were Dr. Peter C. von Harder, our long-standing Chairman, Alexander von Engelhardt and Horst Johannes. We wish to extend our deep gratitude to these three gentlemen for their commitment and valuable counsel. The financial statements, management s report and the auditors report were forwarded immediately to all members of the Supervisory Board. At the annual report meeting of the Supervisory Board on May 7, 1999, the auditors presented the results of the audit. The accounts and reports were extensively discussed in the presence of the auditors. The auditors report on the Company s risk management and surveillance system were also discussed in depth. After reviewing the financial statements, management s report and the Board of Management s proposal for the appropriation of profits, the Supervisory Board had no objections to raise. The Supervisory Board therefore approved management s report and the financial statements as at December 31, 1998 in its meeting on May 7, 1999, which are thus adopted. We agree to the Board of Management s proposal for the appropriation of profits. Effective May 1, 1998, Peter Steiner was appointed to the Board of Management. Mr. Steiner is responsible for Finance and Administration. Dr. Peter Rohde had temporarily headed this department in addition to his assignment as Chairman of the Board of Management. Concurrent with the conclusion of the Annual Meeting on June 24, 1998, Dr. Jürgen Lose resigned from his office on the Board of Management. The Supervisory Board wants to thank Dr. Lose for his many years of distinguished service which has importantly contributed to the Company s progress. Klaus Bussau, Dr. Jürgen Förterer and Dr. Jürgen Lose have joined the Supervisory Board in their places. At its constituent meeting, the Supervisory Board elected Dr. Jürgen Lose as its Chairman and Ulrich Schowalter as its Vice Chairman. Both these gentlemen and Kurt Morgen are members of the executive committee that was reinstalled. The intermediary committee established in accordance with Article 27, Section 3 MitbestG (Co-determination Law) consists of the Chairman and Vice Chairman of the Supervisory Board as well as Karl-Heinz Horstkotte and Kurt Morgen. We want to thank the senior officers, management and employees of all the companies in the Dyckerhoff Group for their commitment and outstanding performance, as well as the employees representatives for their constructive contributions. Wiesbaden, May 7, 1999 The Supervisory Board Dr. Jürgen Lose

4 letter to shareholders To Our Shareholders Ladies and gentlemen, Dyckerhoff your company again performed successfully in 1998, despite the difficult business environment. Our achievements reflect the efforts of all the people at Dyckerhoff a highly motivated team who identifies with the company and whose objective it is to create value for Dyckerhoff s customers, its shareholders and its employees. Dividend to rise again In 1998, we succeeded in improving profits in Germany and in expanding our international activities, thereby generating an 8% rise in the net income, which totaled DM 177 million this year. DVFA/SG earnings (adjusted to exclude special effects) climbed 20% and now amount to DM 58.13 per share. The return on equity after taxes remained unchanged at 12.5%. At the Annual Meeting on June 24, 1999, the Supervisory Board and the Board of Management will therefore recommend raising the dividend by DM 1.00 to DM 15.00 per share. Including the corporation tax credit, eligible shareholders will receive a payment of DM 21.43 per share. Continued profitable growth In 1998, we continued our strategy of profitable growth by expanding the Company s international presence. Sales of the Dyckerhoff Group advanced 5% to DM 3.454 billion. Sales in Germany remained at the 1997 level, with business in the construction industry still being impacted by a slow market. In international markets, we registered sales growth of 16%. Dyckerhoff s business outside of Germany now accounts for 37% of Group sales. This year s growth came from new acquisitions in all fields of Dyckerhoff s business. In 1998, we spent DM 268 million on investments. Not counting these acquisitions, sales would have been in line with those of last year. In Germany, we complemented our range of joint sealing systems with specialty products made by the BBZ Group of Willich, and we expanded our range of engineering concrete products by acquiring a share in Betonbau, Waghäusel, a manufacturer of concrete room cells. Internationally, we enhanced the vertical integration in our Luxembourg group by acquiring concrete product businesses in eastern France, and we strengthened our position in Poland by purchasing a majority share in Cementownia Warszawa. Another investment was in ZAPA beton, which has made us one of the leading ready-mixed concrete supplier in the Czech Republic. The purchase of CerCol has created an entry to Italy s fine mortar market. In the Netherlands, NCD Nederlandse Cement Deelnemingsmaatschappij acquired Excluton, the country s market leader for concrete paving bricks. Improved competitiveness In addition to focusing on the Company s growth, we looked to improve the competitiveness of our business fields in 1998. Emphasis was placed on new, innovative products to serve our customers growing needs and on cost-cutting programs to create additional leverage for a profitable future. This year saw the successful launch of ultra-fine cements for use in tunnel construction and subsoil stabilization. We also introduced important innova-

letter to shareholders 5 Dr. Peter Rohde, Chairman of the Board of Management of Dyckerhoff AG The prime contributor towards the growth was the Cement Germany Division, with both the Cement International and Concrete Divisions also recording gains in the operating cash flow. By contrast, the operating cash flow for the Finishing Products Division fell below last year s level. Pressured by a difficult market, facade products as well as the hardware segment were below expectations. tive products in the field of facade technology and for decorative concrete floor coatings, which met with excellent response in the marketplace. Our Company-wide cost-cutting programs achieved sizeable energy savings through greater use of secondary fuels in clinker production and by exploiting electricity purchasing opportunities which have opened due to deregulation in Germany s electricity market. We also succeeded in utilizing the cost-cutting potential inherent in more flexibly organizing employees working hours, work assignments and work locations. Focus on further growth and international presence In 1999, we intend to continue our strategy of profitable growth and expand the Company s international presence. We plan to increase sales by at least 5% to DM 3.7 billion and raise the share of our international business to at least 39% of Group sales. We expect that, for the first time in four years, building investment in Germany will not recede again, but will match that of 1998. By contrast, we anticipate sustained growth in most of our key European markets, although possibly at a lower rate than in 1998. These activities that improve the Company s competitiveness were supported by a capital expenditure program, for which we spent DM 242 million in 1998. The funds were focused on our two Cement Divisions and largely served to modernize and expand production of slag cement and white portland cement. However, there are signs of growing difficulties in many international markets. The effects of these difficulties on the economic development for Germany in particular and for Europe in general should not be underestimated. The risks involved for the 1999 financial year could therefore be greater than in 1998. Profit from operations increased Forward-looking investment policy to be continued Overall, we clearly improved our operating business in 1998: The Group operating cash flow the standard of measure for our operating business rose by 10% to DM 586 million. This means that the operating cash flow grew twice as strongly as Group sales. We plan to continue the Company s forward-looking investment strategy for all of its business fields in 1999. The capital spending scheduled for this current year amounts to approximately DM 360 million. Key projects are the construction of a new cement plant at Lengerich and the modernization of the Nowiny cement plant.

6 letter to shareholders We will continue to seek acquisition opportunities to further expand the Company s businesses. Steps in this direction include increasing our stake in Betonbau GmbH to 49.0%, in Cementos Hispania s.a. to 99.5% and in Sucholoshskzement to 61.5%. Furthermore, we established a joint venture with the Lehigh Portland Cement Company, merging the production and import activities of both companies in the northeastern states of the USA into the new Glens Falls Lehigh Cement Company. Share split and transition to the euro At the Annual Meeting on June 24, 1999, the Supervisory Board and the Board of Management will recommend redenominating the share capital from DM to euros and passing a resolution to amend the articles of association accordingly. To simplify the transition, we intend to make use of the option of converting existing par value shares to non-par value shares. The conversion is planned to involve a share split at a ratio of 1:10. With these steps, we want to pave the way into the euro future at an early date, while at the same time enhancing the attractivity of Dyckerhoff shares. Geared to the future Dyckerhoff enters the 1999 fiscal year on a sound financial basis. We intend to utilize our chances: Markets that are subject to constant change create opportunities for attractive acquisitions and cost reductions. As last year, we want to exploit additional sources of income by entering new markets and launching competitive products as well as by cost management and realignments in the portfolio. This constitutes an outstanding platform on which Dyckerhoff your company will again be able to perform successfully in 1999 and continue its pattern of progress. Our unchanged objective for 1999 is to achieve results which will permit an adequate return on equity and enhance the value of Dyckerhoff shares. We intend to pursue a policy of paying shareholderfriendly dividends and strengthening the Company s resources to finance sustained profitable growth. Sincerely yours, Dr. Peter Rohde

supervisory board and management 7 Supervisory Board and Management Supervisory Board Dr. sc. agr. Peter C. von Harder, Wiesbaden Chairman (until June 24, 1998) Former Chairman of the Board of Management of R+V Versicherungsgruppe Dr. jur. Jürgen Lose, Wiesbaden Chairman (from June 24, 1998) Former Member of the Board of Management of Dyckerhoff AG Ulrich Schowalter *, Dreisen Vice Chairman, Chairman of the Employees Council of the Göllheim plant, Dyckerhoff Zement GmbH Jürgen Birk *, Wiesbaden Chairman of the Employees Council of ispo GmbH Christa Blötsch *, Preist Chairwoman of the Employees Council of schneider + klein GmbH Otto Boehringer, Mainz Partner of C.H. Boehringer Sohn Klaus Bussau *, Wiesbaden (from June 24, 1998) Head of the Laboratory of the Wilhelm Dyckerhoff Institute for Building Materials Technology Dr. rer. nat. Götz Dyckerhoff, Aachen Managing Director of Grünenthal GmbH Alexander von Engelhardt, Kronberg (until June 24, 1998) Former Chairman of the Board of Management of Dyckerhoff AG Gunter Ernst, München Director of Bayerische Hypo- und Vereinsbank AG Dr. rer. pol. Jürgen Förterer, Wiesbaden (from June 24, 1998) Chairman of the Board of Management of R+V Versicherungsgruppe Werner Haß *, Nordhorn, Union Secretary Dr. jur. Tessen von Heydebreck, Frankfurt am Main Member of the Board of Management of Deutsche Bank AG Karl-Heinz Horstkotte *, Lengerich Chairman of the Employees Council of the Lengerich plant, Dyckerhoff Zement GmbH Horst Johannes *, Bermel (until June 24, 1998) Foreman of TUBAG Trass-, Zement- und Steinwerke GmbH Winfried Mehlhose *, Wiesbaden Head of the Central Personnel Department of Dyckerhoff Zement GmbH Kurt Morgen, Wiesbaden Former Member of the Board of Management of Dresdner Bank AG Thomas Weisgerber, Berlin Member of the Management of Bundesverband deutscher Banken Hans-Joachim Wilms *, Barmstedt Vice Chairman of the Board of Industrie- Gewerkschaft Bauen-Agrar-Umwelt * elected by employees Board of Management Dr.-Ing. Peter Rohde, Wiesbaden, Chairman Kurt Bischof, Taunusstein Dipl.-Kfm. Michael Busch, Wiesbaden Dr. jur. Jürgen Lose, Wiesbaden (until June 24, 1998) Dipl.-Wirtsch.-Ing. Philipp Magel, Wiesbaden Dipl.-Kfm. Peter Steiner, Wiesbaden (from May 1, 1998) Senior General Managers Dr.-Ing. Hans Otto Gardeik, Wiesbaden Dipl.-Kfm. Ulf Grüber, Wiesbaden Peter Trapp, Wiesbaden

8 review of operations Review of Operations of Dyckerhoff Group and Dyckerhoff AG Group Highlights Dyckerhoff registered another year of sales and profit growth in 1998. The growth in sales came exclusively from our international activities. In Germany, the construction industry experienced another decline in building investment, despite the friendly climate in the country s economy. Group sales rose to DM 3,454.0 million, up 5.4% over the previous year (DM 3,278.5 million). The increase stems exclusively from new acquisitions. Key investments were the enhancement of our concrete product activities in eastern France, a stake in one of the leading suppliers of ready-mixed concrete in the Czech Republic and the acquisition of a specialist company for high-grade concrete paving bricks by our affiliated company in the Netherlands, NCD Nederlandse Cement Deelnemingsmaatschappij B.V. These growing international activities again led to an increase in the share of business outside Germany, which amounted to 37.4% in 1998 following 33.9% the previous year. The operating cash flow the standard of measure for our operating performance improved by 10.4% to DM 585.9 million (1997: DM 530.6 million), thereby considerably exceeding the growth in sales. Due to higher tax rates, the net income advanced at a lower percentage, increasing by 7.9% to DM 177.1 million (1997: DM 164.2 million). Resulting from the expansion in the Cement International and Concrete Divisions, the number of employees at year-end 1998 was 9,717 compared with 8,856 in 1997. This equals a 9.7% increase. The share of staff employed at international locations grew to 43.6%, compared with 39.9% the year before. Net income for Dyckerhoff AG totaled DM 89.0 million (1997: DM 84.9 million). Of this, DM 42.0 million (1997: DM 41.0 million) will be allocated to retained earnings. The Board of Management and the Supervisory Board propose using the distributable profit of DM 47.0 million (1997: DM 43.9 million) to pay a dividend of DM 15.00 (1997: DM 14.00) on each share with a par value of DM 50.00. Including the tax credit of DM 6.43 (1997: DM 6.00), eligible shareholders will receive DM 21.43 per DM 50.00 par value share this year (1997: DM 20.00 per share). The economy in Germany is expected to continue to grow in 1999, although at a lower rate. For the first time in four years, we do not anticipate another decline in Germany s construction industry; investments are forecast to reach the 1998 level. Except for the Czech Republic, the construction business in international markets will continue to develop favorably. Capital expenditure for fixed assets and investments amounted to DM 509.9 million (1997 DM 440.7 million). Spending for property, plant and equipment totaled DM 241.6 million, which is approximately level with last year (DM 235.9 million) and represents about 7,0% of Group sales. Financial investments increased to DM 268.3 million in 1998, following DM 204.8 million the prior year.

review of operations 9 We anticipate somewhat slower growth in our markets in the European Union and a high level of building activity in Poland. Based on these market assumptions, Dyckerhoff Group sales should advance by at least 5% in 1999 to DM 3.7 billion, generated primarily by our international activities. Expenditure for property, plant and equipment is planned to amount to approximately DM 360 million, which is significantly more than in 1998. The funds will be focused on modernization projects at the Lengerich and Nowiny plants. The number of employees in 1999 will be at a comparable level to in 1998. Despite prevailing market difficulties, we aim to again achieve results in 1999 which will permit an adequate return on equity and enhance the value of Dyckerhoff shares. We intend to continue our policy of paying a shareholder-friendly dividend, while further enhancing the Company s resources to permit sustained profitable growth. The Board of Management of Dyckerhoff Aktiengesellschaft: Kurt Bischof, Philipp Magel, Dr. Peter Rohde (Chairman), Michael Busch, Peter Steiner (left to right)

10 review of operations Business Environment Germany s economy grew again Germany s economy continued to develop positively in 1998. The gross domestic product gained 2.8%, following 2.2% the prior year. Growth was driven by capital spending, which climbed 10.1% in 1998 (1997: 3.9%). Prime contributors towards this development were low interest rates and good prospects for German economy at least for the first half of the year. Exports also rose another 5.4% (1997: 11.1%); the momentum, however, tapered off during the course of the year, as the economic slowdown in South America, Russia and Asia became evident. Prize-winning facade in Warsaw The facade of this apartment building was designed with ispo products Private consumption grew by 1.9% (1997: 0.5%), spurred by a moderate upturn in employment and net income rates. Public spending took a slight turn for the better, up 0.6% after receding by 0.7% in 1997. However, this is considered a return to normalization of public spending patterns, following strict budgetary restraint to meet Maastricht criteria. Kyll valley bridge near Bitburg The Kyll valley bridge, built with Dyckerhoff ready-mixed concrete, shortly before its completion Accelerated growth in Dyckerhoff s important international markets The countries of the European Union (EU) experienced sustained growth in 1998, with the gross domestic product recording a gain of 2.8% (1997: 2.7%). Spending for plant and equipment advanced a sizeable 7.8%, whereas exports which rose 6.0% compared with 9.2% in 1997 lost some of their dynamism as the year progressed, due to the economic downturn in key export markets. Spurred by slight improvements in employment rates and net wage hikes, private consumption grew 2.5% (1997: 2.1%) and also contributed towards this growth. Public spending, which increased by 1.5% (1997: 0.3%), was also supportive of the growth, although to a lesser extent.

review of operations 11 The economies in our eastern European markets exhibited diverging development: The reform policy pursued in Poland has led to receding inflation and lower interest rates. By contrast, a program launched in 1997 by the government of the Czech Republic to curb public spending and consolidate the national budget has not yet incited a revival of the economy. The gross domestic product in Poland advanced by another 5.3 %, following strong growth of 6.9% in 1997. After weak growth of only 1.0% in 1997, the gross domestic product in the Czech Republic suffered a setback of 1.9% in 1998. There was sustained economic growth in the USA in 1998, and the gross domestic product again rose by 3.9% (1997: 3.9%). The US economy profited from favorable raw material prices as well as low interest and unemployment rates. A slowdown in dynamism from export markets was more than offset by rising private spending. The northeastern states of the USA, which are key to Dyckerhoff s business, participated in the growth. Construction in Germany receded Construction activity in Germany was on an accelerated decline in 1998. The recessionary trend has now been continuing for the fourth consecutive year. Building investment dropped 4.3% in 1998, which was even more than the year before (-2.5%). Bad weather in the fourth quarter, which saw an extensive rainy period in October and early winter conditions at the beginning of November, additionally impacted this year s business. All segments of Germany s construction industry were hit by the recession; housing fell by 3.8% (1997: -0.7%); commercial construction declined 6.0% (1997: -2.4%); and public building lost another 2.7% (1997: -9.0%). In the housing segment, one-family home construction developed positively, totaling 161,000 new units (1997: 148,000 units). A new government program and attractive financing terms boosted the improvement. Apartment buildings experienced another decrease to 268,000 units (1997: 348,000 units). Existing surpluses, less attractive write-off modalities, rises in property transfer taxes and uncertainty concerning future taxation negatively affected business in this segment. Consequently, total housing investment receded by another 1.9% (1997: -0.9%), whereby the development in eastern Germany was impacted by a particularly sharp drop of 9.6% (1997: -0.1%). A reversal of the downtrend in commercial building construction was not in sight, despite the generally friendly business climate. Commercial construction fell 3.7% (1997: -1.1%) in the western part of Germany and by as much as 11.0% (1997: -4.9%) in eastern Germany. Building investment in Germany by segments (in billions of DM at 1991 price points) 204.2 113.1 212.1 120.3 Residential building Commercial building Public building 52.5 53.9 1998 1997

12 review of operations New Inter-City Express railway line Frankfurt-Cologne Dyckerhoff Varilith was used to compact and improve the subsoils under this high-speed train track Public building did not stimulate building activity. In fact, public building contracts receded by another 2.7% (1997: -9.0%). A decline of 4.6% in western Germany (1997: -9.0%) was offset slightly by a 1.0% improvement (1997: -9.0%) in eastern Germany. The rise largely reflects infrastructure projects in the government s German Unification transportation systems program. Construction investment up in Dyckerhoff s key international markets The construction industry in nearly all countries of the European Union profited from the positive course of business development. Building investment gained a total of 0.7% in 1998 (1997: 0.5%). Growth, however, differed from country to country. Rates were particularly pronounced in Spain, where construction activity increased by 4%. In Poland, building investment climbed again. Surging ahead by 15.0% in 1997, growth in 1998, however, slackened off somewhat to 13.1%. Early winter weather strongly impacted construction in the fourth quarter in Poland, too. Building activity in the Czech Republic was lamed by the general political and economic situation. A 3.4% decline in 1998 against -4.9% in 1997 seems to indicate that the downtrend is tapering off. Building investment in the USA continued to develop satisfactorily, recording an increase of 3.6% after 3.0% in 1997, with the northeastern states important to Dyckerhoff s business participating in the growth.

review of operations 13 Sales and Earnings International sales stronger Room cells made by Betonbau, Waghäusel These turn-key concrete room cells are ready to go to their final destination Sales of the Dyckerhoff Group advanced 5.4% in 1998 to DM 3,454.0 million. Despite the persisting difficulties experienced by the construction industry, Dyckerhoff Group sales in Germany reached DM 2,163.5 million, which is practically in line with last year s revenues of DM 2,167.9 million. By contrast, Dyckerhoff s international activities grew again. Sales outside Germany rose 16.2% to DM 1,290.5 million, compared with DM 1,110.6 million in 1997. This constitutes 37.4% of Group sales, following 33.9% the prior year. Changes in exchange rates did not significantly influence Group revenues. Of total Dyckerhoff Group sales, 80.7% (1997: 81.6%) were generated by fully consolidated and 19.3% (1997: 18.4%) by proportionately consolidated companies. Sales of companies consolidated in 1998 for the first time totaled DM 192.0 million (1997: DM 246.4 million); without the contribution of these newly consolidated companies, Group sales would have decreased by 0.5% (1997: +2.1%). Dissimilar development in sales across the Divisions Sales (in millions of DM) Cement Germany Cement International Concrete Finishing Products Divisions Intercompany sales Group 1998 1997 Change % 1,263.0 633.9 815.3 819.7 3,531.9 77.9 3,454.0 1,268.5 572.4 741.2 790.4 3,372.5 94.0 3,278.5 0.4 10.7 10.0 3.7 4.7 Sales of the Cement International Division grew by 10.7%. The contribution of this Division to Group sales rose slightly to 17.9% (1997: 17.0%). The growth came exclusively from the purchase of concrete products activities in eastern France. 5.4 Share 1998 % 35.8 17.9 23.1 23.2 Share 1997 % 37.6 17.0 22.0 23.4 As in the past, the Cement Germany Division is the largest contributor towards Group sales. However, its share of Group revenues fell to 35.8% (1997: 37.6%). Sales of this Division declined slightly to DM 1,263.0 million (1997: DM 1,268.5 million), caused by Germany s persisting slow construction market. Sales: DM 3,454 million (in %) Cement International 18 % Concrete 23% Cement Germany 36 % Finishing Products 23 %

14 review of operations Cement Germany Cement International Concrete Finishing Products Holding/Reconciliation Group In the Concrete Division, sales rose by 10.0% to DM 815.3 million (1997: DM 741.2 million). This Division s share towards Group sales increased to 23.1%, compared with 22.0% in 1997. The growth was largely generated by the purchase of interests in Betonbau GmbH and the acquisition of Excluton B.V. by NCD Nederlandse Cement Deelnemingsmaatschappij B.V. Sales of the Finishing Products Division totaled DM 819.7 million, up 3.7% over the year before (1997: DM 790.4 million). Its share of total Group sales was 23.2%, which is virtually level with last year (1997: 23.4%). The growth stems from new consolidations in the Division s fine mortar activities and do-it-yourself hardware business. Sales in the facade technology segment match those of last year. Net income clearly improved In 1998, the profit before income taxes for the Dyckerhoff Group grew even more strongly than the operating cash flow, up 11.4% to DM 313.6 million (1997: DM 281.6 million). A key factor for this sizeable improvement was that depreciation on fixed and intangible assets rose only slightly by 2.8%. This more than offset the decline in income from investments by DM 11.9 million to DM 30.8 million Operating Cash Flow (in millions of DM) 1998 1997 Change % 343.0 120.1 79.3 45.7 2.2 585.9 286.6 99.2 76.9 66.9 1.0 530.6 19.7 21.1 3.1 31.7 10.4 Share 1998 % 58.5 20.5 13.5 7.8 0.3 Share 1997 % 54.0 18.7 14.5 12.6 0.2 (1997: DM 42.7 million) and a slight rise in net interest of DM 4.4 million to DM -48.5 million (1997: DM -44.1 million). Income taxes rose over-proportionately to DM 136.5 million (1997: DM 117.4 million). The tax rate on the profit grew to 43.5% (1997: 41.7%), due primarily to an increase in non-deductible goodwill amortization. Additionally, in 1997 special effects also came from income from investments which had been taxed locally and which was tax-exempt in Germany. Net income for the Dyckerhoff Group, therefore, advanced 7.9% to DM 177.1 million (1997: DM 164.2 million). Net income grew considerably stronger than sales, which were up 5.4%. Thus, the profit margin the ratio of net income to sales improved slightly to 5.1%, after 5.0% in 1997. Of net income, DM 16.0 million are attributable to minority interests (1997: DM 15.9 million). We appropriated DM 114.1 million (1997: DM 104.4 million) to retained earnings. The distributable profit for 1998, therefore, amounts to DM 47.0 million (1997: DM 43.9 million). Profit from operations grew strongly Income from operating activities of the Dyckerhoff Group as expressed by the operating cash flow the operating result before depreciation on fixed and intangible assets improved by 10.4% to DM 585.9 million (1997: DM 530.6 million). Operating activities displayed dissimilar growth over in Divisions. Profit from operations of the Cement Germany Division

review of operations 15 Operating Cash Flow: DM 586 million (in %) Cement International 20 % Concrete 13% grew to DM 56.4 million, up 19.7% over the previous year. This Division generated 58.5% (1997: 54.0%) of the Group s operating cash flow, which still makes it the largest contributor. The operating cash flow of the Cement International Division grew by a strong 21.1% or DM 20.9 million to a total of DM 120.1 million. Its share toward the Group s operating result moved ahead to 20.5%, after 18.7% in 1997. In the Concrete Division, the operating result improved moderately by DM 2.4 million or 3.1% to DM 79.3 million (1997: DM 76.9 million). However, this Division s contribution to the Group s operating result fell slightly to 13.5%, against 14.5% in 1997. With the market for finishing products particularly in the facade technology and do-it-yourself hardware businesses under extreme pressure, the Finishing Products Division registered a considerable decline in the operating result, down by DM 21.2 million, or 31.7% against the year before. Consequently, this Division s contribution to the Group s operating cash flow fell to 7.8% (1997: 12.6%). Dividend to rise again Cement Germany 59 % credit of DM 6.43 (1997: DM 6.00), eligible shareholders will receive earnings of DM 21.43 (1997: DM 20.00) per share with a par value of DM 50.00. Earnings per share grew Finishing Products 8 % DVFA/SG earnings less minority interests totaled DM 182.1 million, compared with DM 152.4 million the previous year. The total number of shares is unchanged at 3,133,130. This resulted in a 19.5% rise in DVFA/SG earnings to DM 58.13 per share. Earnings per share according to IAS 33 amounted to DM 51.41 (1997: DM 47.33). Net income for Dyckerhoff AG totals DM 89.0 million (1997: DM 84.9 million). After appropriating DM 42.0 million (1997: DM 41.0 million) to retained earnings, the distributable profit for the year is DM 47.0 million (1997: DM 43.9 million), which equals a rise of 7.1% over the previous year. The Board of Management and the Supervisory Board therefore recommend increasing the dividend by DM 1.00 to DM 15.00 to be paid on each DM 50.00 par value share. The dividend payment will come in full from domestic income. Including the tax Market-square in Wroclaw Edifices along the front of the market-square were restored using products by ispo Polska DVFA/SG Earnings (in millions of DM) Net income Depreciation on goodwill Other additions/ deductions Total DVFA/SG earnings Minority interests DVFA/SG earnings less minority interests Number of common and preferred shares DVFA/SG earnings per share in DM 1998 1997 Change % 177.1 22.1 1.1 198.1 16.0 182.1 3,133,130 58.13 164.2 16.8 12.7 168.3 15.9 152.4 3,133,130 48.63 7.9 31.5 17.7 0.6 19.5 19.5

16 review of operations New cyclone preheater for Dyckerhoff Weiss production New installation at the rotary kiln for production of white cement clinker Gains in value added The company s gross income consisting of sales revenues, inventory changes, own work capitalized, other income and investment income advanced 5.6% to DM 3,633.2 million (1997: DM 3,441.7 million). After deducting operating costs, the value added created by the Dyckerhoff Group totaled DM 1,064.6 million, which is 10.6% more than the prior year (1997: DM 962.8 million). Value Added for the Dyckerhoff Group (in millions of DM) Sources Gross income Depreciation Materials Other costs Value added 1998 1997 3,633.2 260.1 1,552.4 756.1 1,064.6 3,441.7 250.7 1,484.9 743.3 962.8 The Dyckerhoff staff profited from an unchanged two thirds of the value added. Personnel payments increased by 10.0% against the year before to DM 718.6 million (1997: DM 653.0 million). Due to higher rates, taxes were up DM 19.1 million compared with the previous year; their share of the value added rose to 12.8% (1997: 12.2%). With the dividend increasing to DM 15 per DM 50 par value share, shareholders benefited from 4.4% of the value added, practically matching last year s level (1997: 4.6%). The increase in the nominal amount to creditors reflects the rise in loans used to finance the Group s expansion. At 4.5%, their portion of the value added was commensurate with that of last year. DM 114.1 million (1997: DM 104.4 million) will be added to reserves to further enhance the Company s financial position. Use 1998 1997 Employees Fiscal authorities Shareholders Creditors Company (reserves) Value added 718.6 136.5 47.0 48.4 114.1 1,064.6 653.0 117.4 43.9 44.1 104.4 962.8

review of operations 17 Capital Expenditure (in millions of DM) Capital Expenditure and Financing Capital spending increased In 1998, expenditure for property, plant and equipment totaled DM 241.6 million (1997: DM 235.9 million), meaning that we reinvested 7.0% of Group sales (1997: 7.2%). This capital spending is set against depreciation of DM 232.6 million (1997: DM 230.8 million), so that the financing quota from depreciation is 96.3% (1997: 97.8%). There was another decline in capital expenditure in the Cement Germany Division this reporting year, decreasing by 16.9% to DM 95.7 million (1997: DM 115.1 million). In the Cement International Division, spending on property, plant and equipment was up 51.0% to DM 66.6 million (1997: DM 44.1 million). The rise exclusively relates to the modernization program at our Polish cement plant, Nowiny. Spending in the Concrete Division increased by 10.4% to DM 39.3 million (1997: DM 35.6 million), resulting from the expansion of international activities. In the Finishing Products Division, expenditure for property, plant and equipment was DM 39.0 million, matching that of last year. In 1998 again, capital spending was focused on the Cement Germany and Cement International Divisions and amounted to 67.2% (1997: 67.5%) of total funds spent. The share spent at international subsidiaries was 41.3% (1997: 26.8%). Greater investing activity Capital Expenditure Cement Germany Cement International Concrete Finishing Products Holding Group 1998 1997 Change % 109.2 146.5 175.7 65.3 13.2 509.9 172.7 93.7 67.4 50.1 56.8 440.7 Major new investments include the acquisition of one third of the shares in Betonbau GmbH in Germany. In the Czech Republic we purchased a 50% interest in ZAPA beton a.s., one of the leading supplier of ready-mixed concrete. In Poland, the financial position of our ready-mixed concrete companies was improved. In the Netherlands, NCD Nederlandse Cement Deelnemingsmaatschappij B.V. acquired Excluton B.V. The Cement International Division expanded its concrete products business by purchasing additional companies in eastern France, and it bought a 51% interest in Cementownia Warszawa Sp. z o.o., Poland. The Finishing Products Division enhanced its presence in Italy by acquiring CerCol S.p.A. The Cement Germany Division purchased the shares of BBZ Injektions- und Abdichtungstechnik GmbH in Germany and BBZ AG in Switzerland. Capital Expenditure: DM 510 million (in%) 36.8 56.4 160.7 30.3 76.8 15.7 Share 1998 % 21.4 28.7 34.5 12.8 2.6 Share 1997 % 39.2 21.2 15.3 11.4 12.9 In 1998, investments were up DM 63.5 million to a total of DM 268.3 million. The focus of this year s investing activity was in the Concrete Division, accounting for DM 136.4 million (1997: DM 31.8 million) of total Dyckerhoff Group investments. Cement International 29 % Cement Germany 21 % Holding 3 % Concrete 34% Finishing Products 13 %

18 review of operations Cash flow up again The cash flow the sum of net income and total depreciation gained 5.4% or DM 22.3 million to a total of DM 437.2 million (1997: DM 414.9 million). Of this rise, DM 12.9 million came from the increase in net income, while DM 9.4 million resulted from higher depreciation incurred exclusively by the expansion in the group of consolidated companies. The cash flow margin determined by the ratio of cash flow to sales remained unchanged at 12.7%. The rise of DM 80.5 million in the net cash used in investing activities to DM 442.0 million (1997: DM 361.5 million) is primarily the result of greater acquisition activity. Bank loans were increased to finance the Group s growth. Net cash provided from financing activities therefore amounts to DM 16.8 million, following the DM 31.8 million used for financing activities the previous year. In 1998, the company s liquidity the net change in cash and cash equivalents grew by DM 14.1 million (1997: DM 11.4 million). Financial position improved The net cash provided from operating activities grew by DM 34.6 million, or 8.5%, to a total of DM 439.3 million (1997: DM 404.7 million). Contributing factors were the cash flow, which gained DM 22.3 million to DM 437.2 million (1997: DM 414.9 million), a reduction in receivables and increases in liabilities. In 1997, there were allocations made to provisions. Development of Liquidity (in millions of DM) Development of Liquidity 1998 1997 Renewing the compensators Working on the exhaust-gas pipes of the cyclone preheater at the rotary kiln for white portland cement Net cash provided from operating activities Net cash used in investing activities Net cash used in/provided from financing activities Net increase/decrease in cash and cash equivalents 439.3 442.0 16.8 14.1 404.7 361.5 31.8 11.4

review of operations 19 Balance Sheet Balance Sheet Summary (in millions of DM) Equity stronger Total assets of the Dyckerhoff Group increased to DM 3,664.4 million, a 9.8% rise against the previous year (1997: DM 3,336.0 million). The high level of spending for property, plant and equipment as well as financial investments led to a gain of 10.4% in long-term assets to DM 2,707.6 million (1997: DM 2,451.6 million). Inventories, receivables, cash and securities rose 8.2% to DM 956.8 million (1997: DM 884.4 million), resulting mainly from new acquisitions in 1998. Balance Sheet Summary Assets Long-term assets Current assets Liabilities and shareholders equity Shareholders equity Provisions Liabilities to banks, bond with warrants attached Other liabilities 1998 1997 Change % 2,707.6 956.8 3,664.4 1,415.7 1,071.7 653.5 523.5 3,664.4 2,451.6 884.4 3,336.0 1,315.2 1,043.1 529.5 448.2 3,336.0 10.4 8.2 9.8 7.6 2.7 23.4 16.8 9.8 Equity increased by 7.6%, now totaling DM 1,415.7 million (1997: DM 1,315.2 million). The gain largely comes from retained earnings. Provisions grew to DM 1,071.7 million (1997: DM 1,043.1 million), which primarily mirrors a revaluation of pension provisions according to the International Accounting Standards (IAS). Pursuant to the Company s extensive investing activity in 1998, liabilities to banks were up 23.4% to DM 653.5 million (1997: DM 529.5 million). The increase in other liabilities of 16.8% to DM 523.5 million (1997: DM 448.2 million) results from the Dyckerhoff Group s expansion. The following key figures reflect the Dyckerhoff Group s assets and equity structure: Equity coverage of long-term assets amounted to 52.3% (1997: 53.6%). Turnover of inventories and receivables was virtually unchanged at 9.6 (1997: 10.3) and 7.4 (1997: 7.2) respectively. The equity to total assets ratio was 38.6%, approximately matching that of last year (1997: 39.4%). The return on equity remained unchanged at 12.5%. Net debt the net amount between bank liabilities and cash totaled DM 477.2 million in 1998 (1997: DM 367.3 million). In relation to sales, net debt amounted to 13.8% (1997: 11.2%). Total return on equity the ratio of income before taxes and interest to interest-yielding total capital was 14.7% (1997: 14.6%).

20 review of operations Employees: 9,717 (in %) Cement International 27 % Concrete 16 % Employees Finishing Products 25 % Number of employees grew again At December 31, 1998, there were 9,717 employees working within the worldwide operations of the Dyckerhoff Group, 861 more than the previous year. This rise came exclusively from the expansion of our business in the Cement International, Concrete and Finishing Products Divisions. As in the past, the Cement Germany Division employed the largest part of our staff; the percentage, however, declined slightly to 31.5% (1997: 34.6%). This year, 26.6% (1997: 26.4%) of the staff was assigned to the Cement International Division, whereas a total of 40.8% (1997: 37.9%) worked for the Concrete and Finishing Cement Germany 31 % Holding 1 % Products Divisions. Reflecting the Group s growing international presence, the share of employees assigned to locations outside Germany was 43.6% (1997: 39.9%), 19.8% more than the year before. Staff employed by proportionately consolidated companies totaled 1,524 (1997: 1,145). Personnel expenses increased Workshop in Amöneburg Practical training on the milling machine for up-coming industrial mechanics Personnel expenses moved ahead by 10.0% to DM 718.6 million (1997: DM 653.0 million) in the reporting year. More than two thirds of the increase is attributable to the expansion in the group of consolidated companies. As last year, 81% was spent for wages and salaries, 18% for social contributions and 1% for pension plans. Training and apprenticeship programs Employees Employees at Dec. 31 Cement Germany Cement International Concrete Finishing Products 1998 1997 Change % 3,058 2,589 1,549 2,417 3,062 2,337 1,116 2,246 0.1 10.8 38.8 7.6 Share 1998 % 31.5 26.6 15.9 24.9 Share 1997 % 34.6 26.4 12.6 25.3 At year-end, 283 young people were participating in Group-wide training and apprenticeship programs in technical/vocational or administrative fields. Our international companies, giving many young people the opportunity to qualify for a skilled profession, offer similar programs. Dyckerhoff wants to do its part in relieving the current undercoverage of apprenticeship workplaces by training more young people than the company actually requires. Holding 104 95 9.5 1.1 1.1 Group 9,717 8,856 9.7

review of operations 21 Rewarding creativity This year again, the suggestion program at Dyckerhoff has met with outstanding interest a sign of the commitment and dedicated service to the Company and its objectives by our employees worldwide. Suggestions put into practice this year will save Dyckerhoff some DM 500,000 annually. Employees ideas are targeted to cost-cutting, optimization of processes, innovations, but also extend to suggestions on improving job safety. Prize for a good idea Dyckerhoff employees won the Job-Safety-Health prize awarded by the quarry employers trade association Job safety again improved Demonstrations and training events for the Company s safety engineers, safety deputies as well as all line managers and employees at Dyckerhoff locations in Germany and internationally serve to improve job safety and accident prevention. These high safety standards have also been set at our international cement plants and mills: on-the-job accidents in the Czech Republic, Poland and the USA have dropped significantly. Honored for long years of service One impressive achievement this year is that Dyckerhoff Zement GmbH again improved its outstanding safety record. The number of accidents per one million work hours dropped from 5.4 to 4.0. The Division only registered a total of eight accidents in 1998, or three less than last year. At the Neuss plant, not one accident happened this year, extending the plant s accident-free record to the fourth consecutive year. For the second year in a row, there were no accidents at the Amöneburg plant. Efforts to continually improve job safety and accident prevention at Dyckerhoff plants are mirrored in a national safety comparison conducted by the Verein Deutscher Zementindustrie (VDZ): Our Amöneburg and Neuss plants lead the way in the German cement industry, taking first place for their safety record. In 1998, we had the special honor of thanking one employee for 50 years of dedicated service to the Company. 26 employees celebrated their 40th anniversary at Dyckerhoff, 145 looked back upon 25 years of service, and 142 employees had joined the staff 10 years ago. We value our employees long years of service as a sign of outstanding loyalty and dedication to the Company. Our thanks to our employees We would like to thank all of our employees for their exceptional effort and commitment, which have contributed importantly towards the Company s success and progress. In a difficult business environment, a priority issue for everyone was customer satisfaction. We also want to thank the employees representatives for their constructive, responsible work.

22 review of operations Research and Development Solid absorber at the Bau 99 fair Using concrete to retain heat for energy Realignment showing results Following the strategic realignment of the Wilhelm Dyckerhoff Institute for Building Materials Technology, 1998 saw successful market launches of new and improved products. Linking research and development with problem-solving applications led to a series of high-interest customer-oriented product innovations. Smart binders Dyckerhoff Montadur R-F is a new smart shotcrete binder for use in tunnel construction. Dyckerhoff Montadur does not react with moist aggregate when being mixed. Rather, it starts unfolding its special properties when impacting the wall. The benefit is that concrete types matched precisely to a specific application can be produced in advance at the readymixed concrete plant using moist aggregates and delivered directly to the construction site. Dyckerhoff Varilith, an innovative product consisting of mineral binders, was developed to compact and improve the properties of subsoils. After being mixed mechanically it with the most varied types of soils, Dyckerhoff Varilith warrants evenly compacted subsoils that exhibit very high load-bearing capacity. Using Dyckerhoff Varilith offers the advantage of achieving even-strength subsoils without having to substitute soils. Dyckerhoff Varilith has been used successfully in compacting subsoils for high-speed train tracks. Innovations in facade technologies Based on performance-tested ispo facade insulating systems, ispo developed an entirely new facade design concept. For the first time, this concept links the insulating properties of high-grade jointless insulating systems with the facade design needs of architects and home owners by combining a number of materials, such as glass, ceramics or brick facings with classical decorative plastering. Research at the Wilhelm Dyckerhoff Institut Examining the use properties of cement glue in a rheometer Ispotherm, a new solar facade technology, not only helps save energy, but also collects it. Integrated into the facade are solar collectors. This technology optimally exploits solar energy particularly in winter, when the sun s angle of incidence is low.

review of operations 23 ispo Lotusan is the first self-cleaning facade paint. Developed and patented by ispo, the self-cleaning effect of ispo Lotusan, a microsilicon paint, was copied from nature and is based on the self-cleaning capacity of lotus leaves. The microstructure of a facade finished with a coat of ispo Lotusan paint resembles the surface of a lotus leaf and is aligned to ward off both dirt particles and water. Water beads off without leaving any residue. In fact, the water beads pick up dirt particles and sweep them off the surface. Facades finished with ispo Lotusan stay clean permanently. Floorings in decorative colors Thanks to a new self-levelling mortar, performancetested ispo Concretin floor coating systems are highly resistant to loads and wear. And now, they can be dyed any color. The color design may either be applied freehand or by using stencils. An additional transparent topcoat guarantees particularly long wear. The ispo EuColor Studio offers support in developing colored floor designs. Reinforcing the statics Edifices that are to be restructured often no longer stand up to new static loads. Fortifying the supports can involve extensive construction work. This work is no longer necessary when using a new composite material made of carbon fiber lamillars developed by ispo. The carbon fiber lamillar are mounted to the bottom surface of the structure requiring reinforcement by ispo Concretin SK 14 epoxy resin adhesive, which instantly improves the structure s supporting properties. Self-cleaning facade paint ispo Lotusan causes raindrops and dirt particles to bead off the surface, permanently leaving facades clean and dry

24 review of operations Environment Renatured quarry in Lengerich A new habitat for plant and animal life after quarrying limestone Energy consumption reduced Manufacturing cement necessarily requires high temperatures and, consequently, high amounts of energy. Reducing energy consumption was a priority goal in the energy-intensive cement industry long before the political debate on ecology taxes. First of all, reducing energy consumption contributes to a reduction in emissions. And secondly, energy management is a significant cost issue; the energy used to produce cement constitutes a major part of the manufacturing costs. Important progress in reducing fuel energy requirements was realized in the production of white portland cement with the aid of a state-of-the-art preheater system. This process recovers the remaining heat lost in emissions, utilizing it to preheat the combustion air. To further enhance efficiency, computersupported automated kiln control systems were installed. These installations resulted in considerable fuel energy savings and lower gaseous emissions, in addition to optimizing kiln operation processes. Lower emissions A key focus of the projects completed in 1998 to further improve environmental protection standards involved facilities to reduce nitric oxide emissions (NOx) at Dyckerhoff cement plants. We have also equipped our concrete plants with modern cement silo filters and forced dedusting facilities to eliminate cement dust emissions. Extensive investments were also conducted at the Nowiny and Hranice plants to reduce dust emissions. Concrete surpluses recycled Surpluses occuring in concrete production are recovered by our modern recycling facilities and returned completely to production processes. Dyckerhoff is also participating in several projects to recycle scrap concrete from demolition work, grinding it to aggregates and returning it to production. Recycling concrete waste not only reduces rubble, but also saves natural raw materials such as sand, gravel and chippings. Soil and water protection enhanced Detail of the cyclone preheater Excess-pressure valve on the new cyclone preheater for the rotary kiln Closed water circuits have been installed at our plants, through which used water is redirected to production processes, thereby saving precious water supplies. Special storage for chemical additives to prevent any possible seepage into the soil or ground water is another part of our environmental protection efforts.

review of operations 25 Outlook Further growth anticipated The prospects for the economy continue to be favorable for 1999, although growth rates are expected to be lower than prior years. In Germany, the gross domestic product is anticipated to gain 1.5%, down from 2.8% in 1998. Building investment will stay at the 1998 level, thereby not driving economic growth. However, compared with the recessionary trend in building investment since 1995, which had put a strong damper on economic development, there will at least be no negative momentum on the economy coming from the construction industry. The industry believes that 1999 will be the year to prepare the ground, with new growth in construction to be expected by the year 2000. In the member states of the European Union (EU), the 1999 gross domestic product is forecast to advance at a slightly decelerated rate of 2.0%, compared with 2.8% in 1998. The construction industry s contribution to economic growth in the EU is expected to be considerably higher, achieving a rise of 2.5% (1998: 0.7%). The economy in Poland will also be continuing its pattern of progress, with the gross domestic product gaining another 4.8% (1998: 5.3%). Construction, forecast to rise by another 11.0% in 1999, will be an important growth driver. In the Czech Republic, there are no signs of a change in the political environment currently encumbering the economy. Expectations are that business will decline again, although perhaps not as strongly as last year: the gross domestic product is predicted to recede by 0.5% (1998: -1.9%), building investment by 1.1% (1998: -3.4%). The economy in the USA has so far displayed resistance to the financial turmoil in South America and Asia. Current estimates are that the gross domestic product will grow by 2.5 to 3.0% in 1999 (1998: 3.9%). The construction industry will also be contributing to the growth. On this platform, we have targeted sales of the Dyckerhoff Group to rise by at least 5% to DM 3.7 billion in 1999. The growth will largely be generated by our international markets. In Germany, we expect cement volumes to stagnate. However, as imports recede further, domestic supplies from Germany s cement industry should recover slightly. We anticipate the Cement Germany Division to profit from the recovery. Ready-mixed concrete volumes in Germany will probably remain unchanged. New competitors providing new capacities will aggravate the situation in the market place. Facade systems, fine mortar and particularly do-it-yourself hardware will continue to encounter a slow market in Germany in 1999. We anticipate that growth in Dyckerhoff s international cement and ready-mixed concrete markets will continue at the same high level as in 1998. The Company s important international markets for facade systems, fine mortar and do-it-yourself hardware should also register good development in 1999. Bau 99 fair in Munich Dyckerhoff Group companies jointly presented their new products, soliciting outstanding audience response

26 review of operations by the difficulties in South America, Russia and Asia. There are no risks coming from this situation for Dyckerhoff s progress. Other risks that may endanger the asset, financial or earnings position of the Dyckerhoff Group are not discernible. Conveyor belt Doing repair work on a conveyor system We will continue to invest strongly in the Company s businesses. We plan to spend some DM 360 million in property, plant and equipment. Key projects include replacing three Lepol kilns installed in the early 60s with a new state-of-the-art rotary kiln line at the Lengerich plant, and pushing forward the modernization program at the Nowiny plant. In 1999, we will again seek opportunities for new investments that suitably strengthen Dyckerhoff s core businesses. The number of employees will be approximately level with 1998. Our policy of achieving profitable growth remains unchanged for 1999. Innovative products, additional cost reductions throughout the entire Dyckerhoff organization and the Company s growing internationalization will be key contributors towards this goal. Dyckerhoff s business is not importantly affected Despite the challenges imposed on all of the Company s Divisions, we feel confident that we will again be able to earn a profit which will allow an adequate return on equity and create value for Dyckerhoff shares. We will continue our policy of paying a shareholder-friendly dividend and again strengthen the Company s resources to finance Dyckerhoff s further profitable growth. Prepared for the Year 2000 Dyckerhoff early on identified possible problems in handling dates beyond the year 2000 and has generated plans to ensure a smooth transition. A project team of staff members from all Divisions has been installed to coordinate the activities. The year 2000 activities at Dyckerhoff are scheduled for completion by the beginning of October 1999. These activities include test runs of critical single components as well as lines of communication between different systems and any reciprocity that may be involved. We have also developed an emergency plan to assure fast and effective action for any unforeseeable problems. The Board of Management of Dyckerhoff AG regularly supervises the implementation of all scheduled activities.

review of operations 27 Transition to the euro The introduction of the euro, the new single currency in 11 countries of the European Union, on January 1, 1999 represents another important step towards a common European market. All companies of the Dyckerhoff Group are geared to the currency change and are capable of processing all business transactions in euros. That means that invoices can be booked and issued and that payments can be made and accepted in euros. The accounting in the Dyckerhoff Group will be converted to the euro on January 1, 2000; information directed to our shareholders will be presented exclusively in euros starting June 30, 2000. In preparing for the euro transition, we have, for the first time, attached an issue of the 1998 financial statements translated into euros. At this year s Annual Meeting, the Board of Management and the Supervisory Board will recommend a 1:10 split for existing par value shares, and to convert them to non-par value shares. Additionally, they will ask the Annual Meeting to resolve that DM currency quotations in the articles of association be redenominated into euros. We acquired an additional 37.9% interest in Cementos Hispania s.a. from our long-standing partner. Dyckerhoff now owns 99.5% of the shares. Furthermore, we have also raised our stake in OAO Sucholoshskzement to 61.5%. Effective January 1, 1999, we increased our interest in Betonbau GmbH to 49.0%. We initially invested in this company in 1998. Events subsequent to the balance sheet date Effective January 1, 1999, Dyckerhoff Inc. and the Lehigh Portland Cement Company entered an agreement to establish a joint venture, merging their production and import activities in the northeastern states of the USA into the new Glens Falls Lehigh Cement Company.

28 dyckerhoff shares Dyckerhoff Shares Dyckerhoff share prices Stock market pricing of Dyckerhoff shares The stock market pricing of Dyckerhoff common stock is frequently marked by volatility, resulting from low trade volumes. The reason is that approximately 90% of Dyckerhoff common stock is held in firm hands. The following constitutes the principal shareholder base: Pool of family shareholders of Dyckerhoff AG, Wiesbaden 41.02 % Dresdner Bank AG, Frankfurt am Main 15.40 % E. Schwenk Baustoffwerke KG, Ulm 12.00 % R+V Versicherung AG, Wiesbaden 10.71 % Holderfin B.V., Amsterdam, Netherlands 9.93 % In 1998, prices of Dyckerhoff common shares moved parallel to the industry index, CDAX construction, losing 10.4% over the course of the year. Dyckerhoff preferred shares experienced a rise in stock market prices during the first part of 1998, outperforming the CDAX construction by 50% until July 1998. During the subsequent downtrend, the share price gain of Dyckerhoff preferred stock outpaced the CDAX construction by 30 percentage points until December 1998 and still by as much as 11 percentage points at year-end. Including the gross dividend return of 4.3%, total performance exceeds the CDAX construction index by 15.3%. We have commissioned a market maker to tend to Dyckerhoff preferred stock on the Xetra exchange system. The market maker s activities are targeted to improving liquidity and reducing volatility of share prices when order-routing large trading volumes of Dyckerhoff preferred stock. Cement shipping ramp Loading loose portland cement into silo trucks Performance of Dyckerhoff stocks relative to the CDAX construction index 180 % 170 % 160 % 150 % 140 % 130 % 120 % 110 % 100 % 90 % 80 % 70 % 30.12.97 30.01.98 28.02.98 30.03.98 30.04.98 30.05.98 30.06.98 30.07.98 30.08.98 30.09.98 30.10.98 30.11.98 30.12.98 Dyckerhoff common stock Dyckerhoff preferred stock CDAX construction

dyckerhoff shares 29 Dyckerhoff Share Price Development Shareholder-friendly dividend policy continued Dyckerhoff again improved its income position in 1998, and our shareholders will be participating in the gain. The Board of Management and the Supervisory Board will recommend raising the dividend by DM 1.00 to DM 15.00 on each share with a par value of DM 50.00. The total amount distributed to shareholders will therefore rise by 7.1% to DM 47.0 million, following DM 43.9 million the previous year. The dividend payment comes from domestic income. Including a tax credit of DM 6.43, eligible shareholders will receive a gross dividend of DM 21.43 per share, after DM 20.00 the prior year. At the Annual Meeting on June 24, 1999, the Board of Management and the Supervisory Board will recommend redenominating the subscribed capital from DM to euros. To simplify the transition, we plan to convert existing par value shares to non-par value shares. The conversion will be accompanied by a share split of 1:10. To round off the amounts in euros, it is proposed to increase the capital stock from company funds by DM 217,000 or euro 111,000. These steps are intended to pave the way into the euro future at an early date, while also enhancing the attractivity of Dyckerhoff shares. Financial Summary Dyckerhoff Shares Dividend Tax credit DVFA/SG earnings Operating cash flow Equity Number of shares Amount distributed DM DM DM DM DM in thousands in millions of DM 1998 1997 15.00 6.43 58.13 186.99 401.57 3,133 47.0 14.00 6.00 48.63 169.34 373.67 3,133 43.9 Year-end stock price (DM) Highest price point (DM) Lowest price point (DM) Turnover (thousands of shares) Price/earnings ratio Price/cash flow ratio Investor relations activities Common Shares Preferred Shares 1998 1997 1998 1997 455.00 665.00 455.00 314 7.8 2.4 508.00 750.00 500.00 340 10.4 3.0 Our intent is to comply with shareholders needs by subscribing to a policy of open, comprehensive and continual information. Investor relations activities at Dyckerhoff are aimed at informing present and potential shareholders and financial analysts about the company s progress so that they might adequately evaluate Dyckerhoff stock. 465.00 788.00 414.00 3,420 8.0 2.5 In addition to quarterly reports, Dyckerhoff offers financial analysts an opportunity to discuss the Company s current position, its markets and perspectives in teleconferences with members of the Board of Management. Upon presentation of the annual financial statements, financial analysts are invited to an analysts meeting directly following the annual press conference. To meet the interests of international investors, we conduct presentations on Dyckerhoff stock at international stock exchanges, among them London and New York. Apart from these scheduled events, our forward-looking information policy is to welcome individual inquiries from financial analysts, interested investors and shareholders throughout the year. 461.00 660.00 420.00 4,740 9.5 2.7

30 division reports Division Reports Cement Germany Division Cement consumption declined again With building activity continuing to recede, cement consumption in Germany dropped by another 4% in 1998. Cement imports lost even more strongly. Domestic supplies by the German cement industry therefore only decreased by about 2%. Dyckerhoff s cement companies in Germany registered a slight improvement in cement volumes over the previous year. In total, however, the Cement Germany Division lost approximately 3% in volumes of cement and other mineral products, particularly due to weaker trading activities. Despite lower volumes, the 1998 sales of the Cement Germany Division amounted to DM 1,263.0 million, which is in line with last year s revenues (1997: DM 1,268.5 million). Without the new consolidation of BBZ Injektions- und Abdichtungstechnik GmbH, sales would have declined by 1%. Operating cash flow increased The operating cash flow for the Cement Germany Division grew by DM 56.4 million to DM 343.0 million. Key contributors to this sizeable improve- Cement Germany Division (in millions of DM) ment were cost reductions and special effects from the release of provisions. Through its ongoing costmanagement program, important cost-savings potential has been identified and exploited in energy, plant maintenance and the environmentally-friendly use of secondary fuels. Additionally, the Division was able to profit from the cost-cutting potential inherent in more flexibly organizing employees working hours, jobs and job assignments. Capital expenditure decreased Capital expenditure declined by DM 63.5 million to DM 109.2 million (1997: DM 172.7 million). Spending on property, plant and equipment totaled DM 95.7 million (1997: DM 115.1 million), representing 7.6% (1997: 9.1%) of the Division s sales. The decline in fixed asset expenditure is largely due to a shift in the scheduling of certain projects. As last year, the funds were largely focused on Dyckerhoff Zement GmbH. Key projects were: constructing a cyclone preheater for the production of clinker for white portland cement and a five-chamber silo at the Amöneburg plant, replacing the electro-technical control facilities at the plant Göllheim, modernizing electro-technical installations at the Neuwied plant, and restructuring a cement silo into a multi-chamber system at Deuna Zement GmbH. Sales Operating cash flow Capital expenditure Employees at Dec. 31 1998 1997 Change % 1,263.0 343.0 109.2 3,058 1,268.5 286.6 172.7 3,062 0.4 19.7 36.8 0.1

division reports 31 The control room the heart of a cement plant Monitoring and controlling the entire process of manufacturing cement Further projects primarily involved replacements and rationalization of existing facilities. We also invested in improving environmental protection standards and in quality assurance programs for our products. The Division also purchased properties to ensure the availability of raw material supplies. In 1998, investments totaled DM 13.5 million (1997: DM 57.6 million). Major projects were the purchase of BBZ Injektions- und Abdichtungstechnik GmbH and BBZ AG by Tricosal GmbH and the acquisition of GLT Gleit- und Lagertechnik GmbH. The 1997 investments included the share of the purchasing price paid by Anneliese Zementwerke AG for Hermann Milke KG GmbH & Co. Focus on training and continued education The number of employees was virtually unchanged against the year before. Declines in the staff at Dyckerhoff Zement GmbH, Deuna Zement GmbH and Anneliese Zementwerke AG were offset by additions from BBZ Injektions- und Abdichtungstechnik GmbH. inspectors who are assigned to its laboratories, the Division also trains industrial processing mechanics. The Division sees good prospects for employment for industrial processing mechanics who are capable of controlling production processes as well as conducting inspections, maintenance and repair work. Programs in commercial occupations extend to industrial administration. Continuing education programs for its employees were again expanded in all parts of the Division. This business year, 1,865 employees participated in in-house and outside courses, seminars and workshops. In addition to continually up-dating knowledge due to new legislation, regulations and technologies, special emphasis was placed on enhancing management and methodological skills. Courses were again held in data processing. There were internal seminars for secretaries, employees representatives and managerial staff. Employees also participated in external programs in accounting, human resources management and industrial production technology of the Verein Deutscher Zementwerke (VDZ). In 1998, 203 young people participated in apprenticeship programs offered by the Cement Germany Division. More than two thirds of the apprentices were employed at Dyckerhoff Zement GmbH. The young people train and work at the central office in Wiesbaden and at the plants in Amöneburg, Göllheim, Lengerich, Neubeckum and Geseke. Technical/vocational qualification programs focus on industrial mechanics and energy electronics, with both specializing in operating technology. In addition to training Artist's view of a cement plant Silos and conveyor systems seen against the sun

32 division reports Cement mill in Warsaw A new investment by the Cement International Division in Poland Cement International Division Rise in sales In the Cement International Division, most key markets with the exception of the Czech Republic continued to develop very satisfactorily. The Division particularly profited from the expanding construction markets in Spain and the USA. The construction business in Luxembourg received momentum from the country s infrastructure activities. Construction in Poland again advanced strongly. Only in the Czech Republic did construction recede. Volumes in cement and other mineral products were up slightly by 1% in 1998. Key contributors were the companies in Spain, the USA, Luxembourg and Poland. The market-related setback in the Czech Republic negatively affected total volumes. Sales gained 10.7%, totaling DM 633.9 million this business year (1997: DM 572.4 million). The rise is exclusively due to newly consolidated concrete products businesses in eastern France. Without these new consolidations, sales would have been at last year s level. Income improved The operating cash flow of the Cement International Division advanced by DM 20.9 million in 1998 to a total of DM 120.1 million (1997: DM 99.2 million). This improvement primarily comes from the Division s activities in Luxembourg as well as the companies in Spain and the USA. Restructuring costs in Poland led to a decline in the operating cash flow. Capital expenditure rose strongly Large-diameter concrete pipe A product made by Chaux de Contern for civil engineering projects Capital expenditure increased by 56.4% in 1998 to DM 146.5 million (1997: DM 93.7 million). Spending on property, plant and equipment amounted to DM 66.6 million (1997: DM 44.1 million); this is equal to 10.5% (1997: 7.7%) of the Division s sales. The funds were primarily focused on expanding the Nowiny plant in Poland.

division reports 33 Investments in 1998 largely centered on the purchase of concrete product activities in eastern France and the acquisition of shares in Cementownia Warszawa Sp. z o.o.; the Division also raised its share in Sucholoshskzement, Russia. Number of employees grew The expansion of Dyckerhoff s international activities is mirrored by the growing number of employees in the Cement International Division. At year-end 1998, the staff totaled 2,589 (1997: 2,337). This increase largely resulted from new consolidations, which included the Warsaw cement mill and the concrete product activities in eastern France. There was a decline in the employee count in Nowiny and the Czech companies. In addition to enhancing specialized knowledge and skills, the Division s training program focused on job safety and quality management this year. Cement International Division (in millions of DM) Sales Operating cash flow Capital expenditure Employees at Dec. 31 1998 1997 Change % 633.9 120.1 146.5 2,589 572.4 99.2 93.7 2,337 10.7 21.1 56.4 10.8 Concrete Division Sales improved again The recessionary trend in the construction industry also affected the ready-mixed concrete market. In 1998, volumes in Germany declined by 7%. Regionally, ready-mixed concrete volumes in western Germany remained constant, whereas in eastern Germany they dropped sharply by 29%. However, volumes achieved by Dyckerhoff companies in 1998 were clearly above the total ready-mixed concrete market, receding by only 2%. The ready-mixed concrete business in international market places continued to develop favorably. Dyckerhoff significantly expanded its presence in Poland and the Czech Republic. Ready-mixed concrete volumes also rose in the Netherlands. In total, volumes were up 4% in the Concrete Division in 1998. The markets displayed dissimilar development in the field of engineering concrete products. For concrete room cells, the strategic realignment momentarily taking place among energy suppliers has led to investment restraint. Nevertheless, sales in this category remained constant, subsequent to soliciting new groups of customers in industry. There were slight declines in environmental technology products, which were offset in part by new product launches. Public investment restraint in sewer systems led to Ready-mixed concrete facility of ZAPA beton a.s. in Prague New investment in one of the leading ready-mixed concrete suppliers in the Czech Republic

34 division reports Products for subground construction Automated production of concrete shafts at Rhebau Capital expenditure up significantly another decrease in concrete pipe sales. In prefabricated ceilings and hollow core walls, the Division expanded its position, despite strong market pressure. Sales of the Concrete Division progressed by 10.0% to DM 815.3 million in 1998 (1997: DM 741.2 million). The increase results from the expansion in the group of consolidated companies on international markets and new share investments in the field of concrete products. On a comparable platform with last year, sales would have remained constant. Capital expenditure in 1998 totaled DM 175.7 million, up considerably over last year s DM 67.4 million. Funds spent on property, plant and equipment amounted to DM 39.3 million (1997: DM 35.6 million), or about one fourth of total investing activity. In addition to replacement and rationalization projects, the funds were also spent on constructing new ready-mixed concrete plants in international markets. Investments amounted to DM 136.4 million (1997: DM 31.8 million). They include the purchase of Excluton B.V. by our jointly controlled company NCD Nederlandse Cement Deelnemingsmaatschappij B.V., a 33% share in Betonbau GmbH, approximately 50% of the shares in ZAPA beton a.s. and capitalization of our Polish subsidiaries. Operating cash flow improved In 1998, the operating cash flow for the Concrete Division improved 3.1% to DM 79.3 million (1997: DM 76.9 million). The increase is solely attributable to newly consolidated companies. Concrete Division (in millions of DM) Rise in number of employees The number of employees in the Concrete Division increased by 433 to 1,549 at year-end 1998, compared with 1,116 the previous year. The rise results solely from new consolidations of ZAPA beton a.s., Betonbau GmbH and Excluton B.V. In eastern Germany, personnel adjustments had to be made in response to the weak construction market. Sales Operating cash flow Capital expenditure Employees at Dec. 31 1998 1997 Change % 815.3 79.3 175.7 1,549 741.2 76.9 67.4 1,116 10.0 3.1 160.7 38.8

division reports 35 In 1998, 23 young people were qualifying for skilled vocations in the Concrete Division s apprenticeship program. The Division opened additional apprenticeship opportunities for young people to qualify as process control mechanics specializing in ready-mixed concrete. This relatively new vocation which Dyckerhoff helped to establish in Germany is in response to the growing complexity of processes involved in producing concrete. The Division s apprenticeship program also extends to industrial administration and building material testing. This year, 167 employees participated in the Concrete Division s continued education program. In addition to management and leadership seminars, emphasis was placed on specialists training and product seminars. The Division also conducted in-house sales training and seminars for junior managerial staff. Finishing Products Division Sales expanded The Finishing Products Division sells a broad range of products used in building construction, with a particular focus on housing. Products centering on remodeling and modernization generate the greater part of the Division s sales. Another business area is do-it-yourself hardware, where the Division s presence extends throughout Europe. In 1998, the building supplies market in Germany was marked by another decline in demand as well as even stronger price and competitive pressure than the year before. The growth registered at the beginning of the year caused by mild weather was not sustainable over the entire course of the year. Building activity in key international markets for Dyckerhoff developed particularly well in Spain and Poland, whereas new housing construction tapered off in Austria, the Netherlands, Hungary and the Czech Republic. The hotly contested market for do-it-yourself hardware saw significant realignments in 1998. There were a number of mergers as well as bankruptcies of large retailers. As a result, pricing and terms were under considerable pressure. Maintaining historical edifices in Berlin This tiled facade in Karl-Marx-Allee was restored using Dyckerhoff Sopro products On this difficult market, the Finishing Products Division achieved sales growth of 3.7% to a total of DM 819.7 million in 1998 (1997: DM 790.4 million). The increase in sales comes from the fine mortar and do-it-yourself hardware businesses and is due to new consolidations. In the facade technology category, sales reached last year s level. Without new consolidations, sales would have receded by 2.3%.

36 division reports State-of-the-art container logistics An ispotainer on its way to the construction site Number of employees rose At year-end, the Finishing Products Division employed a staff of 2,417, or 171 more than the previous year. The decline in staff in Germany was more than offset by the first-time consolidation of ispo Polska Sp. z o.o., Dyckerhoff Sopro Polska Sp. z o.o., CerCol S.p.A. and Triplex S.A. Earnings down The operating cash flow was DM 45.7 million, down 31.7% against the previous year (DM 66.9 million). In the facade technology category, persisting pressure on prices and terms as well as declining demand led to lower earnings. Also, the do-it-yourself hardware business fell below expectations. A cost reduction program was not able to completely offset the sales losses. By contrast, the fine mortar category again significantly improved its profitability. Intercompany work groups for production, purchasing and R&D as well as regular management conferences serve to promote the transfer of knowhow on a Division-wide basis. In addition to EDP training and foreign language courses, product and sales training play a prominent role in the Division s continuing education program. Finishing Products Division (in millions of DM) Capital expenditure increased In 1998, capital expenditure in the Finishing Products Division increased by 30.3% to DM 65.3 million (1997: DM 50.1 million). The rise largely constitutes a higher level of investing activity, which totaled DM 26.3 million (1997: DM 11.5 million). The key investment was the majority acquisition of CerCol S.p.A., an Italian manufacturer of tiling adhesives, which represents an entry opportunity into this attractive market. Expenditure for property, plant and equipment was DM 39.0 million, in line with that of last year (1997: DM 38.6 million). The funds were primarily spent on modernizing and optimizing production processes and on expanding capacities. This financial year, a computer-controlled warehouse was completed for facade technology products; in the fine mortar line of business, a new dry mortar plant in Poland started operations. Sales Operating cash flow Capital expenditure Employees at Dec. 31 ispo s new automated warehouse in Kriftel Automatic access and recovery of goods and materials stored on 7,000 pallet sites 1998 1997 Change % 819.7 45.7 65.3 2,417 790.4 66.9 50.1 2,246 3.7 31.7 30.3 7.6

informationen zu den geschäftsbereichen 37

The Fascination of Dyckerhoff Cement

the fascination of dyckerhoff cement The origins of cement Cement is a finely pulverized binder which becomes as hard as stone when it is mixed with water in the air or under water. Chemically, cement consists of what is referred to as clinker phases (calcium silicates, calcium aluminates and calcium aluminate ferrites), which form when the raw materials are burned at 1,450 C. From ammonites to lime marl Lime marl The raw material that cement is made of The rocks that supply these chemical constituents are limestone, chalk and clay or a mixture of these as it occurs in nature: lime marl. This sedimentary rock was formed millions of years ago from shells and skeletons of ocean organisms, melted silicate mass and weathered magmatic igneous rock.

A high-quality building material It was years after the death of its discoverer (Aspdin 1855) that science understood the mechanism that gives cement its special properties. The secret lies in the mixing proportion and homogeneity of the raw materials. One of the pioneers in researching the scientific principles was Prof. Rudolf Dyckerhoff. As early as 1864, he developed technologies to control the raw materials natural variations to consistently ensure the product s high manufacturing quality. From lime marl to cement clinker Polished clinker section A look at the mineral structure to check the quality Cement clinker Intermediate product for the production of white portland and portland cement

Cement hydration Hardening process of cement after water is added Dyckerhoff Weiss the designer cement Cements are normally gray in color. In 1931, Dyckerhoff developed a process for the production of white cement clinker the basis for Dyckerhoff Weiss, a white portland cement soon to become known the world over. This designer cement paved the way to new applications: Dyckerhoff Weiss made it possible to produce colored concretes. From cement clinker to cement

Cement is a fascinating, moderately priced building material. Cement is the adhesive in concrete, giving concrete its tensile strength. Cement is a natural product that is environmentally friendly and saves resources.

The fascination of Dyckerhoff cement. Available in all kinds of packaging: in silo containers on trucks and railroad cars, in big bags holding 1,000 kg ready to be shipped around the world and in sacks of 25 kg for delivery to building material suppliers or the next construction site.

consolidated financial statements 43 Consolidated Financial Statements for the Year Ended December 31, 1998 44 Consolidated Balance Sheet 45 Consolidated Profit and Loss Account 46 Development of Long-Term Group Assets 48 Consolidated Cash Flow Statement 49 Segment Reports 51 51 54 61 67 68 69 Notes to the Consolidated Financial Statements 1998 Notes to Consolidation and Accounting Principles Notes to the Consolidated Balance Sheet Notes to the Consolidated Profit and Loss Account Notes to the Consolidated Cash Flow Statement Notes to the Segment Reports Other Information 72 Auditors Report

44 consolidated balance sheet Consolidated Balance Sheet for the year ended December 31, 1998 (in thousands of DM) Assets Long-term assets Intangible assets Property, plant and equipment Investments Notes Dec. 31, 1998 Dec. 31, 1997 6. 7. 324,832 276,332 8. 2,122,202 1,967,212 9. 260,574 208,053 2,707,608 2,451,597 Current assets Inventories 10. 358,214 317,030 Accounts receivable and other assets 11. 468,529 452,442 Cash and securities 12. 126,292 112,213 953,035 881,685 Prepaid expenses 3,743 2,754 3,664,386 3,336,036 Liabilities and shareholders' equity Shareholders' equity Share capital of Dyckerhoff AG 13. 156,657 156,657 Additional paid-in capital 215,391 215,391 Retained earnings 14. 886,126 798,699 Distributable profit of Dyckerhoff AG 15. 46,997 43,864 1,305,171 1,214,611 Minority interests 16. 110,495 100,582 Provisions Liabilities 17. 21. 1,071,727 1,176,993 1,043,127 977,716 3,664,386 3,336,036

consolidated profit and loss account 45 Consolidated Profit and Loss Account for 1998 (in thousands of DM) Notes 1998 1997 Sales 24. 3,454,034 3,278,494 Changes in inventories and other capitalized expenses 25. 20,846 2,775 3,474,880 3,281,269 Other operating income 26. 117,644 111,148 Cost of materials 27. 1,552,377 1,484,900 Personnel costs 28. 718,590 653,040 Depreciation and amortization on intangible assets and property, plant and equipment 29. 254,612 247,573 Other operating expenses 30. 735,701 723,922 Net investment income 31. 30,813 42,679 Net interest 33. 48,463 44,050 Profit before income taxes 313,594 281,611 Income taxes 34. 136,488 117,394 Net income 177,106 164,217 Minority interests 16,022 15,916 Group net income (attributable to Dyckerhoff ) 161,084 148,301 Transfer to retained earnings 114,087 104,437 Distributable profit of Dyckerhoff AG 46,997 43,864

46 development of long-term group assets Development of Long-Term Group Assets (in thousands of DM) At Jan. 1, 1998 Development 1998 Original values Long-term assets Acquisition and manufacturing costs Depreciation Book value Changes in consolidated companies/ currency rate differences Additions I. Intangible assets 1. Concessions, patents and similar rights 22,549 13,729 8,820 869 546 2. Goodwill 303,591 36,079 267,512 14,345 104,808 326,140 49,808 276,332 15,214 105,354 II. Property, plant and equipment 1. Land and buildings and rights on land and buildings 1,109,776 469,199 640,577 72,898 46,821 2. Production facilities and machinery 2,990,604 1,794,988 1,195,616 54,735 60,028 3. Office and operational equipment 429,888 338,057 91,831 20,066 51,001 4. Prepayments and construction in progress 40,171 983 39,188 10,433 87,198 4,570,439 2,603,227 1,967,212 158,132 245,048 III. Investments 1. Investments in affiliated companies 42,147 13,288 28,859 6,002 31,871 2. Investments in associated companies 20,762 20,762 435 726 3. Other investments 143,235 26,173 117,062 5,811 27,040 4. Other loans and securities 43,086 1,716 41,370 305 21,228 249,230 41,177 208,053 11,073 80,865 Total long-term assets 5,145,809 2,694,212 2,451,597 162,273 431,267

development of long-term group assets 47 Development 1998 Depreciation At Dec. 31, 1998 Disposals Reclassifications Changes in consolidated companies/ currency rate differences 1998 Disposals/ reclassifications Acquisition and manufacturing costs Depreciation Book value 4,511 8,576 40 1,900 7,429 10,877 8,240 2,637 8,187 38,933 3 24,728 7,375 375,624 53,429 322,195 12,698 47,509 37 26,628 14,804 386,501 61,669 324,832 14,532 67,810 15,399 38,456 4,709 1,282,773 518,345 764,428 30,326 32,057 24,870 133,256 27,675 3,107,098 1,925,439 1,181,659 29,259 5,642 12,434 55,411 27,598 477,338 378,304 99,034 1,070 58,000 71 861 264 78,732 1,651 77,081 75,187 47,509 52,774 227,984 60,246 4,945,941 2,823,739 2,122,202 437 2,281 155 1,318 52 69,860 14,709 55,151 2,228 1,434 18,261 18,261 3,559 831 1,008 4,178 881 160,074 30,478 129,596 5,305 16 65 8 57 59,298 1,732 57,566 11,529 1,228 5,504 990 307,493 46,919 260,574 99,414 54,039 260,116 76,040 5,639,935 2,932,327 2,707,608

48 consolidated cash flow statement Consolidated Cash Flow Statement (in thousands of DM) Notes 1998 1997 Net income 177,106 164,217 Depreciation and amortization on property, plant and equipment and intangible assets 254,612 247,573 Depreciation on investments 5,504 3,110 Total depreciation 260,116 250,683 Cash flow 437,222 414,900 Gains/losses from sale of long-term assets 9,653 17,200 Non-cash income 4,857 672 Decrease in accounts receivable and other assets 21,810 3,737 Decrease/increase in liabilities 5,227 2,645 Net cash provided from operating activities 35. 439,295 404,754 Purchase of intangible assets 5,776 2,249 Purchase of property, plant and equipment 235,793 233,670 Purchase of investments 268,303 204,770 Proceeds from sale of assets 33,027 62,243 Additions to cash from initial consolidations 34,859 16,904 Net cash used in investing activities 36. 441,986 361,542 Increase in liabilities to banks 79,323 46,359 Dividend paid by Dyckerhoff AG 43,864 40,731 Other changes 18,689 37,427 Net cash used in/provided from financing activities 37. 16,770 31,799 Net increase/decrease in cash and cash equivalents 38. 14,079 11,413 Cash and cash equivalents at start of period 112,213 100,800 Cash and cash equivalents at end of period 126,292 112,213

segment report 49 Segment Report by Divisions (in millions of DM) Cement Germany Cement International Concrete Finishing Products Holding/reconciliation intercompany sales Total 1998 1997 1998 1997 1998 1997 1998 1997 1998 1997 1998 1997 Sales 1,263 1,269 634 572 815 741 820 790 78 94 3,454 3,278 thereof, to third parties 1,224 1,229 599 521 812 739 819 789 3,454 3,278 thereof, intra-group 39 40 35 51 3 2 1 1 78 94 Segment assets 1,437 1,457 1,086 976 613 393 428 389 100 121 3,664 3,336 Ratio of assets to sales 0,9 0,9 0,6 0,6 1,3 1,9 1,9 2,0 0,9 1,0 Segment debt 254 270 100 84 154 125 139 109 203 174 850 762 Operating cash flow 343 287 120 99 79 77 46 67 2 1 586 531 Operating cash flow in % of sales 27.2 22.6 18.9 17.3 9.7 10.4 5.6 8.5 17.0 16.2 Operating cash flow in % of assets 23.9 19.7 11.0 10.1 12.9 19.6 10.7 17.2 16.0 15.9 Depreciation and amortization on intangible assets and property, plant and equipment 120 121 60 55 38 35 35 34 2 3 255 248 Net income from investments in associated companies 1 3 1 3 Capital expenditure 109 173 146 94 176 67 65 50 14 57 510 441 Employees at balance sheet date 3,058 3,062 2,589 2,337 1,549 1,116 2,417 2,246 104 95 9,717 8,856

50 segment report Segment Report by Regions (in millions of DM) Germany International Total 1998 1997 1998 1997 1998 1997 Sales 2,163 2,168 1,291 1,110 3,454 3,278 in % 62.6 66.1 37.4 33.9 100 100 Segment assets 2,115 2,079 1,549 1,257 3,664 3,336 in % 57.7 62.3 42.3 37.7 100 100 Segment debt 635 597 215 165 850 762 Operating cash flow 431 401 155 130 586 531 in % 73.5 75.5 26.5 24.5 100 100 Operating cash flow in % of sales 19.9 18.5 12.0 11.7 17.0 16.2 Operating cash flow in % of assets 20.4 19.3 10.0 10.3 16.0 15.9 Depreciation and amortization on intangible assets and property, plant and equipment 174 179 81 69 255 248 Net income from investments in associated companies 1 3 1 3 Capital expenditure 203 309 307 132 510 441 Employees at balance sheet date 5,481 5,321 4,236 3,535 9,717 8,856

notes to the consolidated financial statements 51 Notes to the Consolidated Financial Statements Notes to consolidation and accounting principles 1. General notes The consolidated financial statements for the Dyckerhoff Group are drawn up as at the balance sheet date per December 31, 1998 in Deutschmarks. For ease of reference, all figures are quoted in thousands of DM (TDM). For the sake of clarity, certain individual positions in the balance sheet and profit and loss account have been presented together. Detailed disclosures and compulsory additional information are contained in the notes. 2. Accounting policies The financial statements of Dyckerhoff AG were drawn up in accordance with the valid standards issued by the International Accounting Standards Committee (IASC) and in conformity with EU Directive 83/349. The financial statements of Group companies based on standardized accounting policies are drawn up as at December 31, the Group balance sheet date. Companies valued at equity were valued on the basis of the previous year's financial statements. 3. Principles of consolidation In conformity with IAS 22 (revised 1993), the capital consolidation has been performed using the book value method, i.a., by matching the cost of investment against the Group's share of the equity of the subsidiary at the date of purchase, which, in general, is identical to the date of the first consolidation. For details of the treatment of differences arising on consolidation, see notes 7. Intangible assets and 14. Retained earnings. In conformity with IAS 31 (reformatted 1994), major jointly controlled companies have been proportionately consolidated in the Group financial statements. Associated companies were valued at equity according to IAS 28 (reformatted 1994). In computing the carrying amounts of the investments, the book value method on the basis of the financial statements issued by these companies was employed. Pursuant to IAS 27 (reformatted 1994), receivables and liabilities as well as expenses, sales and other income from inter-company transactions have been offset. Due to the negligible amounts involved, we refrained from eliminating inter-company profits. In conformity with IAS 12 (revised 1996), deferred income taxes are basically recognized according to the balance sheet liability method for all temporary differences between the tax base and balance sheet valuation in the local statutory financial statements and in accordance with IAS. Deferred income taxes are recognized exclusively for those loss carryforwards that were generated in countries outside Germany and that, in accordance with respective local laws, are utilizable within a predictable period of time.

52 notes to the consolidated financial statements 4. Consolidated companies Two new domestic and 11 new international subsidiaries were fully consolidated for the first time this year. A further five major jointly controlled domestic companies and one international company were consolidated proportionately. Two international subsidiaries are no longer consolidated due to merger or dissolution. A further two associated companies are no longer consolidated. In addition to Dyckerhoff AG, a total of 55 domestic and 39 international companies are now fully consolidated, 18 domestic and two foreign jointly controlled companies are consolidated proportionately, and nine international associated companies were valued at equity. Changes by Division in the group of consolidated companies as compared with the prior year were as follows: Cement Germany BBZ Injektions- und Abdichtungstechnik GmbH (fully consolidated) Cement International Klein Agglomérés S.A., France (fully consolidated) Heinrich & Bock S.A., France (fully consolidated) Tubagglo S.A., France (fully consolidated) EUROBETON INTERNATIONAL S.A., France (fully consolidated) Cementownia Warszawa Sp. z o.o., Poland (fully consolidated) Matbel S.A., Belgium (excluded due to dissolution) J.P.R. S.à r.l., Luxembourg (excluded due to merger with Marbrerie Jacquemart S.à.r.l. as at Jan. 1, 1998) Luxengrais S.à r.l., Luxembourg (excluded by divestiture) Préfalor S.A., France (excluded due to nonfulfilment of consolidation criteria) Concrete Dyckerhoff Beton International GmbH (fully consolidated) Dyckerhoff Transportbeton Wroclaw Sp. z o.o., Poland (fully consolidated) Blank Transportbeton GmbH & Co. KG (proportionately consolidated) ZAPA beton a.s., Czech Republic (proportionately consolidated) Betonbau GmbH, Waghäusel (proportionately consolidated) Betonbau GmbH, Bockenem (proportionately consolidated) Betonbau GmbH, Ingolstadt (proportionately consolidated) Betonbau GmbH, Schkeuditz (proportionately consolidated) Finishing Products ispo Polska Sp. z o.o., Poland (fully consolidated) Dyckerhoff Sopro Polska Sp. z o.o., Poland (fully consolidated) CerCol S.p.A., Italy (fully consolidated) Triplex S.A., France (fully consolidated) Holding Dyckerhoff Polska Sp. z o.o., Poland (fully consolidated) The Group companies included in the consolidation are listed in note 32. Companies of minor importance for the Group in respect of their revenues, total assets and profit contribution, individually and when taken together, have not been included. These are recognized under investments in affiliated companies.

notes to the consolidated financial statements 53 5. Currency translation In conformity with the functional currency concept as in IAS 21 (revised 1993), all assets and liabilities of Group companies in euro-zone countries have, for the first time, been translated on the basis of euro conversion rates. Those of non-euro zone companies were translated this year again using the closing rate method. Income and expenditure are translated at the average annual exchange rates. Monetary positions in the individual company financial statements stated in foreign currency are translated at the closing rates, in accordance with IAS 21 (revised 1993). All currency rate differences for monetary positions are recognized in income. Currency rate differences from the translation of foreign subsidiaries' equity are taken directly to reserves under retained earnings. For details see note 14. Retained earnings. Translation differences resulting from the different exchange rates used in the balance sheet and profit and loss account are taken to reserves. There have been no significant fluctuations in the exchange rates since the balance sheet date, which would have a bearing on a fair presentation of the Group s asset, financial and income position. The following currency rates were used to translate the financial statements of international subsidiaries: Currency (in DM) 100 Luxembourg/Belgian francs 100 French francs 100 Spanish pesetas 1 US dollar 100 Polish zloty 100 Czech koruna 100 Austrian schillings 100 Hungarian forints 100 Swiss francs 100 Dutch guilders 100 Swedisch krona 1.000 Italian lira Closing rate 1998 4.8484 29.8164 1.1755 1.6730 47.4554 5.5463 14.2136 0.7736 122.2000 88.7517 20.7050 1.0101 Average exchange rate 1997 1998 1997 4.8478 4.8476 4.8464 29.8830 29.8290 29.7050 1.1814 1.1779 1.1843 1.7921 1.7592 1.7348 51.1600 50.2866 52.9620 5.1700 5.4561 5.4806 14.2130 14.2130 14.2100 0.8790 0.8187 0.9251 123.2500 121.4140 119.5080 88.7390 88.7140 88.8570 22.6820 22.1280 22.7180 1.0132

54 notes to the consolidated financial statements Notes to the Consolidated Balance Sheet 6. Long-term assets of the Dyckerhoff Group The composition and development of long-term assets are presented on page 46. 7. Intangible assets Intangible assets are stated at acquisition cost less regular depreciation using the straight-line method. Since 1995, goodwill from initial consolidations has been capitalized in accordance with IAS 22 (revised 1993). In 1998, goodwill which arose from the initial consolidation of 11 fully consolidated and four proportionately consolidated companies was capitalized in the amount of TDM 60,772 as per December 31, 1998. Following clarification of property rights at Cementownia Nowiny S.A., property that had not yet been valued in the opening balance was capitalized in the amount of TDM 36,300, with goodwill being diminished accordingly. Goodwill is generally amortized over a period of ten years, for cement manufacturing companies over a period of 20 years, in line with estimated useful economic life. The depreciation is included under the position Depreciation and amortization on intangible assets and property, plant and equipment. For details see note 29. Intangible assets included in individual company accounts are consolidated and depreciated on a straight-line basis over a maximum period of 15 years, according to their useful life. There was no extraordinary depreciation (1997: TDM 541). Development costs that meet the requirements for capitalization according to IAS 9 (revised 1993) do not exist. Self-generated intangible assets are not capitalized. 8. Property, plant and equipment Property, plant and equipment are valued at purchase or manufacturing cost, less regular depreciation based on normal useful life and extraordinary depreciation. Manufacturing costs include all direct costs and overheads, excluding financing costs. Extraordinary depreciation is made if the reduction in value is presumably long-lasting. For the cement business, depreciation on production facilities and machinery is on a straight-line basis; estimated useful lives are as generally applied in the international cement industry. The following table provides an overview of the useful lives of property, plant and equipment: Write-off periods for property, plant and equipment Buildings Production facilities and machinery Cement Concrete and Finishing Products Office and operational equipment EDP hardware Years 25 20 610 38 3 The depreciation charge for the year includes extraordinary depreciation totaling TDM 3,502 (1997: TDM 5,990).

notes to the consolidated financial statements 55 Inventories (in thousands of DM) 9. Investments Investments are valued at the lower of acquisition cost or book value. Non-interest bearing loans are discounted to their net present value. Depreciation for the reporting year contains extraordinary depreciation totaling TDM 2,527 (1997: TDM 1,061). Raw materials and supplies Work in progress Finished products and merchandise Prepayments 1998 1997 129,887 128,771 51,179 36,226 176,714 151,163 434 870 358,214 317,030 The additions to investments in associated companies include surpluses from the valuation at equity less any profit distribution received during the current year. The disposals result from the sale of 14% of the shares in Transco S.A., the divestiture of Luxengrais S.à.r.l., as well as changes in the results of subsidiaries valued at equity. Principal subsidiaries and associated companies are listed in note 32. 11. Accounts receivable and other assets Interest and bad debt risks on receivables and other assets are provided for by write-offs and allowances. Receivables and other assets increased by TDM 44,283 resulting from newly consolidated companies. 10. Inventories Raw materials, supplies and merchandise are stated at the lower of cost or market. Work in progress and finished goods are valued at their average production cost for the year. In addition to direct material and labor costs, these also include indirect material costs and manufacturing overheads, not, however, financing costs. Accounts receivable and other assets (in thousands of DM) Trade accounts receivable Receivables from affiliates 1998 258,152 32,407 due in more than 1 year 295 0 1997 258,940 36,307 due in more than 1 year 0 294 The book value of inventories before depreciation totaled TDM 388,001 (1997: TDM 346,334). Inventories held in domestic subsidiaries continue to be valued using the LIFO method. The LIFO effect amounts to less than 1% of the book value of inventories. Newly consolidated companies account for TDM 42,710 of total inventories. Receivables from companies in which shares are held thereof, from associated companies Other assets 66,395 3,213 111,575 468,529 1,563 0 11,456 13,314 54,905 4,551 102,290 452,442 940 0 11,111 12,345

56 notes to the consolidated financial statements 12. Cash and securities Securities are stated at the lower of cost or current value. The securities are held almost exclusively by our US subsidiaries, Dyckerhoff Inc. and Glens Falls Cement Company Inc., as well as our Czech companies, Cement Hranice a.s. and Cemos Ostrava a.s. The book value corresponds to the market value at the balance sheet date. Cash and securities (in thousands of DM) The voting common stock of Dyckerhoff AG is currently registered as being held by the following shareholders in the percentages stated: Shareholders Pool of family shareholders of Dyckerhoff AG, Wiesbaden Dresdner Bank AG, Frankfurt am Main E. Schwenk Baustoffwerke KG, Ulm R + V Versicherung AG, Wiesbaden Holderfin B.V., Amsterdam, Netherlands 41.02 % 15.40 % 12.00 % 10.71 % 9.93 % 89.06 % Securities 1998 53,907 1997 30,916 14. Retained earnings Checks, cash, credits on Bundesbank accounts, credits on bank accounts 72,385 81,297 Retained earnings have developed as follows: 126,292 112,213 Retained earnings (in thousands of DM) 13. Share capital of Dyckerhoff AG The subscribed capital of Dyckerhoff AG is unchanged at TDM 156,657 and is divided into 1,580,460 shares of common stock with a par value of TDM 79,023 and 1,552,670 shares of non-voting preferred stock with a par value of TDM 77,634. Preferred stock is entitled to a preferred share of profit or guaranteed dividend of DM 2.50 per share. At December 31, 1998, conditionally authorized capital for non-voting preferred shares amounted to TDM 1,167 covering a bond with warrants attached, issued in 1995. Retained earnings at Jan. 1, 1998 Transfers a) from currency translation b) from other consolidation transactions c) from net income 1998 Retained earnings at Dec. 31, 1998 4,174 22,486 114,087 798,699 87,427 886,126 Other consolidation transactions include TDM - 22,002 which relate to changes in the valuation of pension and anniversary provisions as detailed in notes 17. to 20.

notes to the consolidated financial statements 57 15. Distributable profit of Dyckerhoff AG 18. Pension provisions The consolidated distributable profit is stated after allocations to retained earnings. It corresponds to the distributable profit of Dyckerhoff AG. 16. Minority interests Minority interests in shareholders equity developed as follows: Minority interests (in thousands of DM) Minority interests at Jan. 1, 1998 a) from initial consolidations b) from currency translations c) from other consolidation transactions d) from net income 1998 Minority interests at Dec. 31, 1998 17. Provisions 11,924 24 18,057 16,022 100,582 9,913 110,495 The figures listed in the column captioned Changes in valuation of the chart Development of Group Provisions (page 58) relate to the changes in valuation of pension and anniversary provisions as detailed in note 18. Pension provisions and note 20. Other provisions as well as to the deferred taxes incurred by the changes in valuation. The translation of opening balances as per January 1, 1998 resulted in an increase from currency translation adjustments amounting to TDM 1,955. The Dyckerhoff Group has various retirement programs for its employees, depending on local statutory, economic and fiscal standards prevailing in the various countries. In 1998 for the first time, the pension obligations of our domestic subsidiaries, which account for approximately 96% of total pension provisions, were valued on the basis of the projected unit credit method in accordance with IAS 19 (revised 1998). The new Heubeck actuarial charts have been recognized in the computation; this, however, did not significantly affect valuations, since past actuarial assumptions had previously added a surcharge to existing actuarial charts. Pension obligations were determined using a discount rate of 5% (1997: 6%), an assumed trend rate of 2.5% (1997: 2%) for salary adjustments, annual inflation of 1.5% (1997: 2%) and an unchanged average staff turnover of 1.5%. Changes in valuation based on IAS 19 (revised 1998), the new actuarial assumptions and a review of interest rates are recorded as a separate component of shareholders' equity in conformity with IAS 8 (revised 1993). For details, please refer to the chart Development of Group Provisions (page 58) and the information contained in note 14. Retained earnings. The Company obtains annual actuarial valuations as at the balance sheet date. The largest part of the obligations for present pension benefits and employees future benefits are covered by the pension accruals disclosed under this caption. Pension obligations are based on employees' fixed income and years of service, and they include survivors benefits. The non-forfeitable pension benefits of our employees and retirees in Germany are insured by the Pensions- Sicherungs-Verein (Pension Security Association).

58 notes to the consolidated financial statements Development of Group Provisions (in thousands of DM) Provisions Changes in group of consolidated compapanies/currency At Jan. 1, 1998 rate differences Changes in valuation Expenditure Release Additions At Dec. 31,1998 I. Pension provisions 342,150 2,997 36,001 6,376 14,965 6,237 366,044 II. Tax provisions 387,428 3,715 23,665 24,877 4,005 32,655 379,261 III. Other provisions 313,549 12,494 3,369 95,503 15,059 107,572 326,422 Total 1,043,127 19,206 15,705 126,756 26,019 146,464 1,071,727 For international subsidiaries, pension obligations covered by pension provisions are determined on a similar basis. Fund-linked pension obligations exist for the Glens Falls Cement Company Inc., USA, and the NCD Nederlandse Cement Deelnemingsmaatschappij B.V., Netherlands. The increase in pension provisions results from the conversion to the valuation method in accordance with IAS 19 (revised 1998). Tax provisions are as follows: Tax provisions (in thousands of DM) 1998 Deferred taxes 315,441 Other tax provisions 63,820 379,261 1997 322,268 65,160 387,428 19. Tax provisions Tax provisions include TDM 315,441 for deferred taxes, as based on IAS. Deferred tax debits totaling TDM 395,557 were netted against deferred tax credits of TDM 80,116. In Germany, we used the applicable corporate income tax rate for accumulated income and a standardized municipal trade tax rate. For foreign subsidiaries, deferred taxes were determined using the respective countries specific tax rates. Deferred taxes relating to changes in valuation as specified in note 18. Pension provisions and note 20. Other provisions are disclosed in the table above Development of Group Provisions. There are tax loss carryovers of TDM 73,598 largely from international activities which were not included in determining the tax expense. 20. Other provisions In accordance with IAS 10 (reformatted 1994), other provisions include all recognizable commitments at their probable realistic value. Accruals for expenses were not made. Parallel to pension provisions, changes in valuation for anniversary provisions resulting from IAS 19 (revised 1998), new actuarial assumptions and interest rate adjustments were recognized as a sepa-

notes to the consolidated financial statements 59 rate component of shareholders equity. For details, please refer to the chart Development of Group Provisions (page 58) as well as the information in note 14. Retained earnings. Of the rise in other provisions, TDM 10.279 are attributable to newly consolidated companies. 21. Liabilities Liabilities are valued at their repayment price. Other provisions most importantly include funds for: Other provisions (in thousands of DM) Recultivation of closed quarries Supply contract commitments Personnel-related commitments Other provisions 1998 97,404 47,003 82,654 99,361 326,422 1997 96,754 44,183 78,115 94,497 313,549 The increase in liabilities is due to new consolidations as well as the increase in liabilities to banks used by Dyckerhoff AG to finance capital expenditure. Liabilities (in thousands of DM) Total due in Total 1998 less than 1 year 1 to 5 years more than 5 years 1997 Bond with warrants attached 50,000 50,000 50,000 Liabilities to banks 603,508 127,211 225,953 250,344 479,524 thereof backed by mortgage bonds 13,149 9,823 Trade accounts payable 165,649 165,631 15 3 152,782 Accounts payable to affiliated companies 75,344 75,291 53 67,716 Accounts payable to associated companies 455 455 5,668 Accounts payable to companies in which an interest is held 15,079 12,713 27 2,339 17,533 Other liabilities 266,958 211,038 38,487 17,433 204,493 thereof related to taxes from income and earnings 6,789 6,961 related to other taxes 9,213 3,208 related to social taxes/contributions 20,304 15,502 backed by mortgage bonds 741 940 1,176,993 592,339 314,482 270,172 977,716

60 notes to the consolidated financial statements The following table provides an overview of the terms of major loans (all non-secured): Terms Interest % Term Currency Volume in thousands DM Bond with warrants attached 6.50 1995-2000 DM 50,000 50,000 Bank loans 3.95 5.85 1993-2008 DM 382,640 382,640 Bank loans 4.15 revolving, short-term DM 20,000 20,000 Bank loans 5.65 6.32 1996-2001 FRF 200,000 59,640 Bank loans 4.29 5.95 1996-2006 NLG 48,960 43,454 Bank loans 4.25 revolving, short-term NLG 22,800 20,235 22. Financial instruments We made greater use of current interest rates, which are at a historic low, and have taken out long-term loans to finance the Company s further growth. Liabilities denominated in foreign currency were used to finance international subsidiaries. Derivative financial instruments amounting to TDM 35,590 were used to hedge risks resulting from changes in currency rates. 23. Contingent liabilities and other financial commitments Contingent liabilities (in thousands of DM) The increase in guarantees primarily results from the initial consolidation of Betonbau GmbH, Waghäusel. Bills of exchange Guarantees Committed capital investments and repairs 1998 14,723 77,054 59,667 1997 18,845 70,973 55,097 Rentals and leasing 58,300 53,136

notes to the consolidated financial statements 61 Notes to the Consolidated Profit and Loss Account 24. Sales The increase in sales results exclusively from the expansion in the group of consolidated companies. Without new consolidations, sales would have been level with the previous year. 26. Other operating income This position includes income i.a. from rentals and leases, earnings from other incidental business as well as from exchange profits. The rise in income from release of provisions and allowances largely results from the release of pension provisions at Dyckerhoff Zement GmbH. Other income declined; last year, this caption had included exchange profits. Break-down by Divisions and Regions: Other operating income (in thousands of DM) Sales (in thousands of DM) 1998 1997 Income from release of provisions and allowances 41,452 18,674 Cement Germany Cement International Concrete Finishing Products Intercompany sales 1998 1,262,990 633,911 815,280 819,717 77,864 1997 1,268,459 572,386 741,230 790,367 93,948 change % 0.4 + 10.7 + 10.0 + 3.7 17.1 Income from recharged costs for material and personnel Income from long-term asset disposals Other income 16,632 12,879 46,681 117,644 13,164 17,200 62,110 111,148 Total Sales 3,454,034 3,278,494 + 5.4 Germany 2,163,475 2,167,903 0.2 International business 1,290,559 1,110,591 + 16.2 Total Sales 3,454,034 3,278,494 + 5.4 25. Changes in inventories and other capitalized expenses (in thousands of DM) Changes in inventories Capitalized expenses 1998 17,991 2,855 20,846 1997 216 2,991 2,775

62 notes to the consolidated financial statements 27. Cost of materials Number of employees on an annual average: The cost of materials rose exclusively due to the expansion in the group of consolidated companies (TDM 89,414). Employees 1998 1997 Cost of materials (in thousands of DM) Fully consolidated subsidiaries Production workers 4,546 4,356 1998 1997 Salaried employees 3,307 7,853 3,074 7,430 Cost of raw materials, supplies and purchased merchandise Cost of purchased services 1,486,185 66,192 1,552,377 1,426,964 57,936 1,484,900 Apprentices Proportionately consolidated subsidiaries 248 8,101 1,499 236 7,666 1,167 Group 9,600 8,833 28. Personnel costs Personnel costs include TDM 47,476 incurred by initial consolidations in 1998. Personnel costs (in thousands of DM) 29. Depreciation and amortization on intangible assets and property, plant and equipment This caption includes the amount of TDM 17,451 which is attributable to first-time consolidations. 1998 1997 Depreciation and amortization (in thousands of DM) Wages and salaries 579,623 529,893 Social security costs Pensions 129,268 9,699 718,590 115,048 8,099 653,040 on goodwill from consolidations on intangible assets and property, plant and equipment 1998 22,053 232,559 1997 16,803 230,770 254,612 247,573

notes to the consolidated financial statements 63 30. Other operating expenses This item largely contains out-going shipping costs, outside services, administration expenses, audit and consultancy costs, commissions, rentals and leases (thereof, TDM 6,146 (1997: TDM 5,478) for longterm operating leasing commitments), traveling expenses, insurance as well as other personnel-related costs and other taxes (TDM 11,747; 1997: TDM 13,157). Other operating expenses attributable to first-time consolidations amounted to TDM 43,458. In total, however, other operating expenses only rose by TDM 11,779. In 1997, exchange losses and losses from disposals incurred a rise in expenses. 31. Investment income Investment income (in thousands of DM) Income from profit transfer agreements relates to non-consolidated companies. In addition to losses relating to loss transfer agreements, expenditure for losses absorbed also includes losses of non-consolidated private companies. Income from investments Income from investments in associated companies Income from profit transfer agreements 1998 38,815 1,173 752 1997 45,795 2,833 634 The decrease in income from investments primarily reflects the 1996 investment earnings from Cement Hranice a.s., which were contained in the 1997 figures. Losses absorbed Depreciation on investments Profit from investments thereof, from affiliated companies: 4,423 5,504 30,813 3,473 3,110 42,679 32. Principal subsidiaries and associated companies as per December 31, 1998 Income from investments Losses absorbed 2,808 3,635 10,607 2,964 The principles of currency translation used are stated in note 5. Currency translation.

64 notes to the consolidated financial statements Principal subsidiaries and associated companies (in millions of DM) Name and location of head office Interest % Equity Net income 1. Consolidated affiliated companies Cement Germany Dyckerhoff Zement GmbH, Wiesbaden 543 Dyckerhoff Baustoffsysteme GmbH Tiefbau/Umwelttechnologie, Wiesbaden 1 0.6 Deuna Zement GmbH, Deuna 148 UNICEMENT Handelsgesellschaft mbh, Berlin 1 Dyckerhoff Weiss Marketing- und Vertriebs-Gesellschaft mbh & Co. KG, Wiesbaden Intermoselle S.à r.l., Rumelange (Luxembourg) 50.0 29 0.9 * Kalkwerk Lengerich GmbH, Lengerich 10 0.5 Tricosal GmbH, Illertissen 6 Leschuplast Fugenabdichtungsprodukte GmbH, Schwelm 1 BBZ Injektions- und Abdichtungstechnik GmbH, Willich 1 0.8 TUBAG Trass-, Zement- und Steinwerke GmbH, Kruft 17 SAKRET-Tubag Trockenbaustoffe GmbH & Co. KG, Neuss 50.0 1 Cement International Dyckerhoff Zement International GmbH, Wiesbaden 843 6.8 Ciments Luxembourgeois S.A., Esch-sur-Alzette (Luxembourg) Intermoselle S.à r.l., Rumelange (Luxembourg) 68.4 50.0 124 29 4.2 0.9 * Zementwerk Saar GmbH, Völklingen 10 0.6 Matériaux S.A., Luxembourg (Luxembourg) 99.4 22 Mixolith S.à r.l., Contern (Luxembourg) 2 Eurimex S.A., Luxembourg (Luxembourg) 5 0.6 Crame-Crame S.A., Farciennes (Belgium) 2 S.A. des Chaux de Contern, Contern (Luxembourg) 99.6 21 tbw Betonwerk Brust GmbH & Co. KG, Idar-Oberstein 1 Marbrerie Jacquemart S.à r.l., Luxembourg (Luxembourg) 3 EUROBETON S.A., Luxembourg (Luxembourg) 35 Hafenbetonwerk Trier GmbH, Trier 1 Collot Produits TP S.A., Bar-le-Duc (France) 66.0 1 Klein Agglomérés S.A., Mondelange (France) 5 2.0 Heinrich & Bock S.A., Steinbourg (France) 7 3.1 Tubagglo S.A., Dannemarie-Sur-Crête (France) 2 0.7 EUROBETON INTERNATIONAL S.A., Steinbourg (France) 39 Cementos Hispania s.a., Madrid (Spain) 61.6 89 11.7

notes to the consolidated financial statements 65 Principal subsidiaries and associated companies (in millions of DM) Name and location of head office Interest % Equity Net income Cementownia Nowiny S.A., Nowiny (Poland) 87.1 76 0.9 Cementownia Warszawa Sp. z o.o., Warsaw (Poland) 51.0 50 Cement Hranice a.s., Hranice (Czech Republic) 97.5 173 16.6 Cemos Ostrava a.s., Ostrava (Czech Republic) 92.8 14 Dyckerhoff Inc., Dover (USA) 70 Glens Falls Cement Company Inc., Glens Falls (USA) 96 14.3 Concrete Dyckerhoff Beton GmbH, Wiesbaden 115 Beton Union GmbH & Co. KG, Wiesbaden 96.2 17 Dyckerhoff Transportbeton GmbH, Wiesbaden 25 Dyckerhoff Transportbeton Elbe GmbH, Magdeburg 40 Dyckerhoff Beton International GmbH, Wiesbaden 50 Dyckerhoff Betonprodukte GmbH, Wiesbaden 50 Finishing Products Dyckerhoff Ausbauprodukte GmbH, Wiesbaden 159 ispo GmbH, Kriftel 38 Südwest Lacke + Farben GmbH & Co. KG, Böhl-Iggelheim 5 Dyckerhoff Ausbauprodukte AG, Recherswil (Switzerland) 1 Dyckerhoff Ausbauprodukte Service GmbH, Kesselsdorf Eduard Dyckerhoff GmbH, Wiesbaden 6 isoned b.v., Tiel (Netherlands) 2 0.6 Snöland ispo AB, Alingsås (Sweden) Dyckerhoff Épitöanyag Kft., Budapest (Hungary) 4 0.8 ispo Polska Sp. z o.o., Warsaw (Poland) 6 0.7 Dyckerhoff Sopro GmbH, Wiesbaden 30 Dyckerhoff Matériaux S.A., Paris (France) 16 1.6 Dyckerhoff Materiales S.A., Pasajes (Spain) 6 0.5 Dyckerhoff Austria Ausbauprodukte Ges.m.b.H., Asten (Austria) 5 Dyckerhoff Spécialités S.A., Paris (France) 20 Dyckerhoff Sopro Polska Sp. z o.o., Warsaw (Poland) 9 CerCol S.p.A., Sassuolo (Italy) 63.6 5 0.5 schneider + klein GmbH, Landscheid 20 0.5 Vynex S.A., Balaives (France) 2 3.9

66 notes to the consolidated financial statements Principal subsidiaries and associated companies (in millions of DM) Name and location of head office Interest % Equity Net income Cloviss S.A., Trémuson (France) 1 0.6 Triplex S.A., Paris (France) 1 3.1 Holding Dyckerhoff Luxembourg S.A., Luxembourg (Luxembourg) 241 0.8 Dyckerhoff Polska Sp. z o.o., Warsaw (Poland) 9 2. Proportionately consolidated jointly controlled companies Cement Germany Anneliese Zementwerke AG (Group), Ennigerloh 48.8 180 32.0 Beton NCD Nederlandse Cement Deelnemingsmaatschappij B.V. (Group), Nieuwegein (Netherlands) 45.6 191 14.8 3. Associated companies Belgium Gralux S.A., Bruxelles 50.0 14 1.8 André Frères et Broos S.A., Saint Mard 30.0 1 Arlon Béton S.A., Bruxelles 30.0 1 Netherlands NCH Nederlandse Cement Handelmij. B.V., Nieuwegein 46.1 7 1.2 Luxembourg S.A. des Bétons Frais, Schifflange 41.0 4 0.8 Transass S.A., Schifflange 41.0 1 Transco S.A., Esch-sur-Alzette 35.0 2 Cobéton S.A., Strassen 33.3 4 Bétons Feidt S.à r.l., Luxembourg 30.0 18 2.9 * financial statements in accordance with national legal requirements = value less than DM 0.5 million In the above listing we have not included the net income for companies which have profit and loss transfer agreements, as these companies do not have income of their own. The complete list of shareholdings will be filed within the proper time. The figures above refer to the individual company financial statements drawn up on the basis of uniform valuation principles used by the Dyckerhoff Group.

notes to the consolidated financial statements 67 33. Net interest The increase in interest expense is largely due to a rise in bank loans taken up by Dyckerhoff AG to finance investments. Notes to the Consolidated Cash Flow Statement 35. Net cash provided from operating activities Net interest (in thousands of DM) Income from long-term loans in financial assets Other interest and similar income Interest and similar expenses Interest portion of pension accruals Thereof, from affiliated companies: Income from long-term loans in financial assets Other interest and similar income Interest and similar expenses 34. Income taxes 1998 5,148 18,505 54,016 18,100 48,463 270 1,382 2,948 1997 6,902 11,674 44,348 18,278 44,050 18 1,497 387 Income tax expenses include corporate and municipal trade taxes imposed on our German operations and similar taxes imposed internationally. Actual tax expenses totaled TDM 121,013 (1997: TDM 93,917). Deferred taxes contained in tax expenses amount to TDM 15,475 (1997: TDM 23,477). Other taxes are contained in Other operating expenses. Tax expenses rose over-proportionately to TDM 136,488 (1997: TDM 117,394). The income tax rate increased to 43.5% (1997: 41.7%), particularly resulting from a rise in non-deductible goodwill amortization. In 1997, income from investments, which had already been taxed abroad and was exempt from taxes domestically, lowered tax expenses. The cash flow totals DM 437 million. After eliminating non cash-effective transactions, the cash provided from operating activities amounts to DM 439 million. Tax expenditure totaled DM 139 million. 36. Net cash used in investing activities The net cash used for investing activities results from the cash used for the purchase of property, plant and equipment as well as investments and the gains from the sale of assets as well as initial consolidations. Major investments were the purchase of BBZ GmbH and BBZ AG, Cementownia Warszawa Sp. z o.o., and the acquisition of companies in east France: Klein Agglomérés S.A., Heinrich & Bock S.A. and Tubagglo S.A. In 1998, shares were also purchased in ZAPA beton a.s. in the Czech Republic; Betonbau GmbH, Waghäusel, and its subsidiaries; the Italian company CerCol S.p.A.; and in schneider + klein GmbH. Investments also include Dyckerhoff s portion of the acquisition of Excluton B.V. by NCD Nederlandse Cement Deelnemingsmaatschappij B.V. The parties agreed to maintain silence concerning the purchasing prices.

68 notes to the consolidated financial statements 37. Net cash used in/provided from financing activities To fund further Group growth, bank loans increased by DM 79 million. Interest payments amounted to DM 51 million. Other changes contain dividend payments to minority shareholders. 38. Net increase/decrease in cash and cash equivalents These are defined to include cash and marketable securities as disclosed in note 12. In 1998, the effects of currency rate differences on cash and cash equivalents amounted to TDM -1,765. Notes to the Segment Reports 39. Commentary The segment reports of the Dyckerhoff Group have been adapted to IAS 14 (revised 1997). For the first time, the segment reports present annual sales revenues detailed according to sales to third parties and intra-group sales, segment debt and net income from investments in associated companies. Segment debt constitutes other provisions, trade accounts payable, trade accounts payable to affiliated and associated companies, trade accounts payable to companies in which an interest is held, as well as other liabilities. The segment information is based on internal procedures governing segment reporting. The operating cash flow as a key indicator for the Divisions is defined as earnings before depreciation on property, plant and equipment and intangible assets. Intra-Group business relations are transacted on a fair market-value basis.

notes to the consolidated financial statements 69 Other Information 40. Earnings per share Earnings per share in accordance with IAS 33 amounted to DM 51.41 (1997: DM 47.33); DVFA/SG earnings per share total DM 58.13 (1997: DM 48.63). 41. Research and development In 1998 expenses for research and development not capitalized according to IAS 9 (revised 1993) totaled TDM 39,550 (1997: TDM 38,455). 42. Related parties 43. Events subsequent to the balance sheet date Effective January 1, 1999, Dyckerhoff Inc. and the Lehigh Portland Cement Company have combined their production and import activities in the northeastern states of the USA and established a joint venture, the Glens Falls Lehigh Cement Company. We acquired an additional 37.9% interest in Cementos Hispania s.a. from our long-standing partner; Dyckerhoff now owns 99.5% of the shares. We have also raised our stake in OAO Sucholoshskzement to 61.5%. Also effective January 1, 1999, we increased our interest in Betonbau GmbH to 49,0%. We initially invested in this company in 1998. The pool of family shareholders of Dyckerhoff AG and those shareholders associated with the pool through a Stock Security Agreement may be considered related parties as defined in IAS 24 (reformatted 1994). Accounts payable to the pool of family shareholders totaled TDM 16,565 at December 31, 1998. Any further business relations to shareholders joined together by the Stock Security Agreement are exclusively transacted on customary market terms.

70 notes to the consolidated financial statements 44. Information relating to the Board of Management and the Supervisory Board In 1998, total remuneration to the Board of Management of Dyckerhoff AG amounted to TDM 6,319. The members of the Supervisory Board are listed on page 7 of this Annual Report. Payments to the Supervisory Board in 1998 totaled TDM 1,505. Wiesbaden, March 1999 The Board of Management Dr. Peter Rohde Kurt Bischof Michael Busch Philipp Magel Peter Steiner Overview of offices held by members of the Dyckerhoff Board of Management and Supervisory Board in other statutory supervisory boards and comparable domestic and international supervisory bodies of commercial enterprises. Board of Management Board of Management member Company in which the office is held Office held in supervisory body Dr. Peter Rohde, Chairman Kurt Bischof Michael Busch Philipp Magel Peter Steiner Dyckerhoff Zement GmbH NCD Nederlandse Cement Deelnemingsmaatschappij B.V. Anneliese Zementwerke AG Ciments Luxembourgeois S.A. Sievert Holding AG Alstom GmbH Dyckerhoff Luxembourg S.A. Schenker AG ZAPA beton a.s. Dyckerhoff Luxembourg S.A. Dyckerhoff Zement GmbH NCD Nederlandse Cement Deelnemingsmaatschappij B.V. Dyckerhoff Inc. Dyckerhoff Luxembourg S.A. Sto Corp. Dyckerhoff Luxembourg S.A. Anneliese Zementwerke AG Cementownia Nowiny S.A. Ciments Luxembourgeois S.A. Dyckerhoff Inc. Ciments Luxembourgeois S.A. Dyckerhoff Luxembourg S.A. Dyckerhoff Zement GmbH Chairman Chairman Vice Chairman Vice Chairman Vice Chairman Member Member Member Chairman Member Member Member Member Member Member Chairman Member Member Member Member Member Member Member

notes to the consolidated financial statements 71 Supervisory Board Supervisory Board member Company in which the office is held Office held in supervisory body Otto Boehringer Dr. rer. nat. Götz Dyckerhoff Alexander von Engelhardt Gunter Ernst Dr. rer. pol. Jürgen Förterer Dr. jur. Tessen von Heydebreck Kurt Morgen Hans-Joachim Wilms Berlinische Lebensversicherung AG Farmaceutici Formenti SpA Laboratorios Andromaco S.A. Gütermann AG Kässbohrer Geländefahrzeuge AG Singulus Technologies AG Aptor Group, Inc. Dr. Schmidt AG & Co. SAI Automotive AG Tarkett Sommer AG Gütermann AG R+V Krankenversicherung AG R+V Luxembourg Lebensversicherung S.A. R+V Rechtsschutzversicherung AG DG Bank Luxembourg Hermes Kreditversicherung AG KAWAG Kraftwerk Altwürttemberg AG VR Leasing AG Bank 24 AG Deutsche Bank OOO Deutsche Bank Polska S.A. Deutsche Bank Suisse S.A. Versicherungsholding der Deutschen Bank AG BASF AG BVV Versicherungsverein des Bankgewerbes a.g. Carl Zeiss Stiftung Deutsche Ausgleichsbank Dürr AG DWS Deutsche Ges. für Wertpapiersparen mbh Gruner + Jahr AG Nestlé Deutschland AG Zürich Investmentgesellschaft mbh Rothmans Cigaretten GmbH Hertie Stiftung Karg Stiftung Peek & Cloppenburg KG-Gruppe Rothmans International B.V. Landwirtschaftliche Rentenbank Member Chairman Member Chairman Chairman Chairman Member Member Member Member Vice Chairman Chairman Chairman Chairman Member Member Member Member Chairman Chairman Chairman Chairman Chairman Member Member Member Member Member Member Member Member Member Chairman Vice Chairman Member Member Member Member

72 auditors report Auditors Report We have audited the consolidated accounting (consolidated financial statements and review of operations) issued by Dyckerhoff AG for the year ended December 31, 1998. The consolidated accounting as in Article 292a of the German Commercial Code comprises the documents required by the standards of the International Accounting Standards Committee (IASC) as well as an orderly presentation of the additional information in the review of operations required by Article 36 of the 7th EU Directive. The consolidated accounting is the responsibility of the Board of Management of Dyckerhoff AG. Our responsibility is to express an opinion, based on our audit, about whether the consolidated accounting conforms to the International Accounting Standards (IAS) and whether the other conditions required for an exemption according to Article 292a of the German Commercial Code have been met. We conducted our audits in conformity with Article 317 of the German Commercial Code and in accordance with the auditing standards set by the Institut der Wirtschaftsprüfer. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated accounting is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated accounting. An audit also includes assessing the accounting principles used and significant estimates made by the Board of Management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. We conducted our audit on the agreement of the consolidated accounting with EU Directive 83/349, which is required for an exemption from the rules and regulations of German consolidated accounting, on the basis of the commentary on this directive issued by the committee for accounting directives of the European Commission. Our audit found that there were no objections to raise. In our opinion, the consolidated accounting, drawn up in agreement with the IAS, presents fairly, in all material respects, the assets, liabilities and income position of the Dyckerhoff Group, and the results of their operations and their cash flows for the past financial year. The conditions under which Dyckerhoff AG may be exempted from presenting its financial statements according to German commercial legislation have been met (Article 292a, Section 2, German Commercial Code). Wiesbaden, April 12, 1999 KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft Wolfgang Zielke Wirtschaftsprüfer Klaus Burchards Wirtschaftsprüfer

Dyckerhoff Solves Problems Köpenick Palace, Berlin Between 655 and 1000 A.D., Köpenick island, surrounded by the Dahme river and its tributary the Frauentog, was first the site of a Slavic settlement and, later, a medieval castle. The castle served as a refuge for the last independent Slavic regent, Jaxa of Coptnik from whom the name Köpenick was derived. Then, an early palace stood on the same site. In 1550, however, the Elector of Brandenburg had it torn down to build a Renaissance style hunting castle in its place. In 1677, this hunting castle too had to make way for the new zeitgeist. Rutger von Langenfeld, a famous Dutch architect of the time, was commissioned to build a new palace, modeled after Versailles. Completed in 1688 by architect Nering, Köpenick Palace was the residence of the Crown Prince, later to become Frederick I, King of Prussia. After an eventful history, the stately building today is under the administration of the cultural heritage trust, Stiftung Preussischer Kulturbesitz. It houses the city s arts and crafts museum. This outstanding historic landmark is currently undergoing general restoration. Experts, however, soon detected that the stability of the wood frame components used in the foundation (alignment beams and spike piles) had severely deteriorated. Rehabilitating a historic structure The exposed foundation of Köpenick Palace

dyckerhoff solves problems Humic concentrations and mud at the foundations additionally limited rehabilitation options. Following intensive feasibility studies, it was decided to pursue an extensive and durable restoration concept. Small bore piles and cotter beams will soon be stabilizing the foundations, with injections of Dyckerhoff Mikrodur ultra-fine binder fortifying the bedrock masonry. Injection packers in the bedrock foundation Injections of Dyckerhoff Mikrodur fortify the structure s crumbling masonry