Annual report 2004 Royal Boskalis Westminster nv

Transcription

1 Annual report 2004 Rosmolenweg LK Papendrecht The Netherlands P.O. Box AA Papendrecht The Netherlands Telephone +31 (0) Telefax +31 (0) Internet We move the earth to a better place Annual report 2004 Royal Boskalis Westminster nv Annual report 2004 We move the earth to a better place

2 Annual Report Royal Boskalis Westminster nv

3 Boskalis: working on the growing world Good infrastructure is essential to a growing world. Boskalis is a market leader in wet infrastructure, a perfect example of a sector driven by long-term growth factors and accompanied by long-term investments. The final chapter in the seven-year fleet expansion and renovation program was the maiden voyage of the trailing suction hopper dredger Oranje, launched in Annual Report 2004

4 Table of contents Table of contents Company profile 6 Mission, objectives and strategy 9 Corporate social responsibility 12 Basic principles of the corporate strategy 14 Corporate Governance 17 Management 24 Key figures 28 Investor Relations 29 Message to the shareholders 31 Report of the Board of Management on Report of the Supervisory Board 46 Financial statements Principles of financial reporting 52 Consolidated balance sheet before proposed profit appropriation 56 Consolidated profit and loss account 57 Consolidated cash flow statement 58 Explanatory notes to the consolidated balance sheet and profit and loss account 59 Company balance sheet before proposed profit appropriation 70 Company profit and loss account 71 Explanatory notes to the company balance sheet and profit and loss account 72 Other information 75 Provisions in the articles of association relating to profit appropriation 75 Proposed profit appropriation 76 Auditor s report 76 Stichting Continuïteit KBW 77 Report 77 Declaration of Independence 77 Ten years Boskalis 78 Boskalis: working on the growing world 4 Driven by global population growth and climate change 10 Driven by growing world trade 22 Driven by increasing global energy consumption 44 Driven by growing global tourism 50 Driven by sustainability 80 Legal structure 79 The world of Boskalis 82 Organization 83 Offices around the world 85 Glossary 90 Equipment 95 Unless stated otherwise, all amounts in this report are in euros ( ). Some of the projects referred to in this report were carried out in joint venture or in a sub-contractor role. This is a translation of the official Annual Report in the Dutch language. 3 Royal Boskalis Westminster nv

5 Boskalis: working on the growing world Dredging company Boskalis is a market leader in the world of wet infrastructure: harbor construction, land reclamation and beach replenishment, coastal defense, and riverbank protection. These are concrete products of a recognizable international sector that is driven most effectively by long-term economic growth factors. The products literally give room to a world experiencing sustainable growth. Because the world is expanding. From two billion in 1935, the global population has grown to more than six billion people in According to the United Nations, the earth will have eight billion inhabitants 25 years from now. As part of that population growth, people will increasingly migrate toward major urban areas, especially in coastal regions with rapid economic development. Such economic development is driven by the globalization of world trade. Consumer goods destined for the Western world are manufactured in distant lands and shipped to their markets in containers; growing consumer markets in Asia import increasing amounts of products. Raw materials are shipped in bulk across great distances to major industrial areas; oil and gas are transported over the oceans to feed the world s growing hunger for energy. People/km 2 < > 500 Without infrastructure, the world We move the earth to a Growing trade, more maritime More people, more need for sustainable room to grow, more work for Boskalis. transport: these are the drivers of harbor construction and maintenance. 4 Annual Report 2004

6 Growth for the economy, growth in the demand for energy, growth The world is expanding. From two billion in 1935, the global population has grown to more than six billion people in for Boskalis. Moreover, the growing prosperity boosts global tourism. According to the World Tourism Organization, some 1.6 billion international trips will be taken in 2020, more than twice the current annual number of 700 million. The common bond in all these developments is infrastructure in all its forms. After all, it does not matter whether we are talking about virtual forms of infrastructure like telecommunications and internet markets, or more concrete forms like residential neighborhoods, airports, roads, and waterways; without infrastructure, the world cannot develop. In addition, due to an increasingly critical approach to growth, it is evaluated in the context of its long-term quality of life. Boskalis responds to this trend by offering expertise and innovative solutions. So that the world can experience sustainable growth. We move the earth to a better place (Source: U.S. Department of Agriculture) cannot develop. better place. Meer toerisme betekent meer stranden, meer toeristische eilanden in More zee tourism en meer means cruisehavens. more beaches, En meer more werk islands voor in the sea for tourists and more cruise Boskalis. harbors. And more work for Boskalis. Royal Boskalis Westminster nv

7 Company profile Company profile We move the earth to a better place. Boskalis, a leading international company with a unique market position. Royal Boskalis Westminster nv is an international service provider in the area of maritime infrastructure. Its core activities include the construction and maintenance of harbors and waterways, the creation of land in water, coastal defense, and riverbank protection. The company also operates in numerous home markets in a wide range of related activities such as sand and gravel production, soil improvement, dry earth movement, environmental activities, marine offshore services, munitions clearance, tunnel building, and hydraulic engineering projects. Boskalis has a wide spread of operations worldwide, operating in more than 50 countries on five continents. The company has a unique market position with wholly owned home market positions in five major European markets and in joint ventures with local partners in Nigeria, the United States, and Mexico. In the Middle East, Boskalis plays an important role in the developments in the Persian Gulf via its 50% subsidiary Lamnalco (port services for oil and gas exports), its 40% participating interest in Archirodon (wet and dry infrastructure), and its own market position in harbor and land reclamation projects. The company has grown significantly in the past decade. This growth was achieved both autonomously and through takeovers and participating interests in other companies. The company has a solid financial basis and a healthy cash flow. Core activities The global market for maritime infrastructure is driven by long-term economic factors such as increases in the global population, the growth of the world economy, and the growth of international trade volumes. The long-term prospects for these factors are favorable. Its global spread and operational flexibility mean that Boskalis can respond to changing opportunities in different markets. Construction and maintenance of harbors and waterways. The growth in the volume of global trade has increased the demand for container ports on international shipping routes. Not only are the ports becoming larger and deeper as a result of the scaling up of container ships, the number of ports is also increasing as more and more countries get involved in the global production and exchange of goods. The established ports are competing with each other for regional leadership, as we can see in Asia (Singapore, Hong Kong, Pusan), Western Europe (Rotterdam, Antwerp, Hamburg, Felixstowe) and North America (New York, Halifax). Ports are also being built or scaled up in numerous industriallydeveloping countries such as India, Malaysia, and Mexico. The increasing demand for larger and deeper ports is accompanied by the need for keeping them at depth. This results in increases in maintenance volumes, particularly in areas with strong currents or tidal variations. Creation of land in water. The global population continues to increase and economic centers are congested and overpopulated. Solutions for the increasing scarcity of available land are being sought in the creation of new land. Boskalis plays a prominent role here. It uses innovative, large trailing suction hopper dredgers to generate a favorable ratio of cost price to market price per square meter of new land. Coastal defense and riverbank protection. Here also, Boskalis expects continuing market growth given the intensification in the global focus on environmental protection. The market will also benefit from the ongoing growth of tourism. 6 Annual Report 2004

8 Company profile Boskalis created an artificial temporary lagoon and extended the existing beach in Barcelona, Spain at the end of 2004, using the cutter suction dredger Para. Related activities In addition to these core activities, Boskalis is involved in a range of related activities (the dredgingplus activities) such as offshore services, gravel and sand trading, soil improvement, dry earth moving, environmental activities, munitions clearance, underwater rock fragmentation, pipeline construction and hydraulic engineering. These activities are an extension of the range of services, and the margins are generally attractive. Markets The global dredging market consists of numerous submarkets with individual development patterns. This means that the market as a whole is heterogeneous, with varied patterns of market dynamics. The annual volume of sales on the global dredging market for maritime infrastructure is approximately 7 billion. Half of these sales (approximately 3.5 billion) are made to reasonably open markets. Four large Western European dredging companies account for approximately 60% of operations in these open markets, with roughly 40% of the free sales going to many different smaller regional and local players. With a share of approximately 20%, Boskalis is an important player in the open market segment. In the less open markets, dredging work is generally done by local players or state companies and there are no openings for private international dredging companies like Boskalis. The past decade has seen extensive deregulation of global trade and economic development in traditionally closed markets. As a result, the free market has expanded in favor of professional dredging companies, which can provide economies of scale and competitive cost levels. Major factors affecting access to the global dredging market are scale, professional staff, technical knowhow, a flexible fleet, cost leadership, and financial strength. However, the broad geographical spread means that a global player like Boskalis can achieve balanced growth. The main Boskalis clients are governments (national, regional, and local), harbor operators, international project developers, oil companies, mining companies, and other contractors. Boskalis offers its clients high-quality products and services at competitive prices. 7 Royal Boskalis Westminster nv

9 Company profile Market positioning Operating on the richly varied global market often requires an approach tailored to each situation. In response, Boskalis has both broader home market positions and (narrow) specialist niche markets. In addition, the company uses another approach for major international projects, as well as a multidisciplinary, regional approach for areas like the Middle East. The Boskalis market approach is flexible, customer-oriented, and open to (local) partnerships. Home markets. For many years now, Boskalis has had a home market strategy which distinguishes it from its competitors. A home market means that Boskalis has a permanent presence in countries where this presents commercial advantages. The strengths of this home market concept lie in the stable flow of projects and the opportunities for extending its range of activities. The home market organizations have a local commercial profile, as well as their own fleets and infrastructures. They also know that they can call on the support of the financial and technical resources of the global Boskalis organization. Particularly in the home markets, there are opportunities to generate additional margins with associated activities. Boskalis generates approximately 40% of its turnover on its home markets. It now has wholly owned home market positions on five major European markets, as well as home market positions in joint ventures with local partners in Nigeria, the United States, and Mexico. A regional approach: the Middle East. Boskalis generates approximately 25% of its turnover in the Middle East. The company has a strong position in the area around the Persian Gulf, where countries invest their oil earnings in economic expansion of the trade and tourism sectors. Boskalis operates in the region across the full spectrum of maritime services, holding a strong market position in harbor and land reclamation projects, its 40% participating interest in Archirodon (wet and dry infrastructure), and its 50% subsidiary Lamnalco (harbor services for oil and gas exports). International projects market, the rest of the world. Approximately 30% of turnover is generated in the international projects market, which focuses primarily on dredging and on coastal and riverbank projects. These are generally larger works involving investments in construction activities and/or extensions. In addition, there are projects which regularly involve cooperation with third parties. This makes it possible to provide clients with optimal services and to share risks. Specialist niche markets. Approximately 5% of turnover comes from specialist niche markets like the offshore market and the market for underwater rock fragmentation. 8 Annual Report 2004

10 Mission, objectives and strategy Mission, objectives and strategy Transparent, consistent and result-driven. Mission Boskalis is always aiming to maintain and strengthen its leading position in the global dredging market. The company is committed to giving its shareholders excellent profitability and value creation. Boskalis wants to be an attractive employer, the customer s first choice and a responsible citizen in those countries where it operates. Boskalis aims for an optimal balance in its services between functionality and the effects on people and the environment. Objectives In the short term (one to two years) the key objectives will be to optimize the market position, streamline the organization, and achieve strong cash flow generation. The central objectives in the longer term (three to five years) are solid growth (both in the core activities and through broadening the activities) and the realization of above-average profitability.*) Strategy The core Boskalis activity is dredging. The company also engages in related dredging-plus activities, particularly in the home markets. These activities fit in with the core activities and core competences of the company. The corporate strategy consists of growth in the core activities and in the dredging-plus activities, both autonomously and by means of acquisitions. Strategy for the core activity of dredging maintain and, where possible, increase market share; broaden and extend home market positions; improve the competitive position, for example through investments in cost leadership. Strategy for the dredging-plus activities Active portfolio management in both home markets and specialist niche activities, for example by: extending and expanding activities that contribute to the achievement of the growth target; making the most of home market positions in the core activity for the extension of dredging-plus activities. In most markets where Boskalis is active, there will be even more emphasis in the future on the competitive position. The lead given by its competitive position therefore plays a major role in the Boskalis strategy. The key to this position is continued innovative investment in: staff quality, primarily in the form of training and competence management; fleet innovations and fleet rationalization; processing technology; improvements in business processes; the development and optimization of modern ICT systems. *) We consider profitability to be above average if the annual return on capital employed exceeds the cost of capital (WACC) relevant for Boskalis. 9 Royal Boskalis Westminster nv

11 According to the report World Urbanization Prospects: The 2003 Revision published by the United Nations ( the global population will increase by more than 30% in the next 25 years, rising from six to eight billion people. Driven by global population growth and climate change This growth will take place primarily in developing countries in Asia and Africa, mainly due to rising life expectancies as a result of increased prosperity and better health care. The population growth will take place almost exclusively in urban areas. Cities will also grow due to migration from the rural areas. The earth currently has three billion urban inhabitants; by 2030, that number will have swelled to five billion, or 60% of the global population. Since the very beginnings of history, urban areas have developed along rivers and coastlines, close to the regional and international flows of goods for trade and industry. A glance at a map of the world shows the current densely populated coastal regions in America, Europe, and Asia. Looking to the future and the expected increase in population and urbanization, the congestion in coastal areas can be expected to become even more severe. Harbors are becoming congested, ground is growing scarcer and more expensive, coasts and riverbanks are becoming overpopulated and the environment is threatened. People need new room to grow. Beach replenishment in Egmond aan Zee, the Netherlands. More people, more need for 10 Annual Report 2004

12 Land reclamation in Singapore, using a trailing suction hopper dredger that pumps the sand through a pipeline to shore to the bulldozer on the dump site. In addition, the global climate is changing, accompanied by more extreme weather conditions, changing precipitation patterns, and rising temperatures. Due to storms, flooding, and the rising seas, the pressure on beaches, coasts, and riverbanks is increasing. Scientists agree that these phenomena are part of a longer-term trend and that countries need to invest in protecting their coasts and riverbanks. And that is where Boskalis comes into play: the creation of new land in coastal regions, beach replenishment, coastal defense, riverbank protection, and dike construction. But also: innovation using environmentally-friendly solutions, project financing, and innovative contract forms. It often involves large-scale projects, technically complex and highly demanding, deploying the world s biggest dredgers and the best people. More people, more need for sustainable room to grow, more work for Boskalis. NASA photo of the city lights in the densely populated coastal regions in America, Europe and Asia. sustainable room to grow, more work for Boskalis. Royal Boskalis Westminster nv

13 Corporate social responsibility Corporate social responsibility Boskalis has a clear view of its role in society and its responsibilities towards the global community. Code of conduct Boskalis has a Statement of General Business Principles that applies to all the relationships it maintains throughout the world. This document is the guide for the company in the area of social responsibility and is freely available from the company website. The basic idea behind corporate social responsibility is that Boskalis is a decent company where respect for people and the community is an accepted value. Boskalis accepts responsibility for matters that it can influence. However, the world is large and Boskalis is only one of many actors. Boskalis respects local rules and customs: so many countries, so many customs. How those rules and customs evolve is a matter for governments and people and Boskalis plays only a very minor role in that respect. The responsibility of Boskalis Boskalis has its own standards for its organization. Boskalis has a direct responsibility for, among other things, its own workforce, suppliers and sub-contractors, safety and the environment. Boskalis acts like a responsible member of society: decently and properly. That means complying with local legislation, being a good employer for the workforce and working on enduring relationships with suppliers and sub-contractors. Boskalis does its utmost to meet quality, safety and environmental standards covering dredging and other company activities. Initially, these standards are set by clients (often governments) but Boskalis also brings its professional know-how and commitment to their implementation. Boskalis also assumes responsibility for the proper disposal of the work spoils, such as waste and contaminated material. Boskalis in the world National laws and rules apply in countries where Boskalis works. The company does not make cultural judgements. Boskalis conducts itself like a responsible member of society or a good guest. National laws and rules are the guidelines for Boskalis activities, in combination with Dutch norms that cover international dealings. Boskalis does not get involved in national politics, nor does it state opinions about political issues. These are the responsibility of national government. Boskalis also follows the guidelines of the United Nations, WHO and the Dutch government for travel to, or business dealings with, certain countries. Contribution to sustainable development The nature of the services supplied by Boskalis means that the company is closely involved in sustainable developments in society. Maritime infrastructure is for many countries a precondition for structural economic development and increasing prosperity. Because Boskalis works on the basic infrastructure, the company is involved directly and positively in the social benefits of its services. Sometimes, economic interests can clash with other community interests. It is the responsibility of local governments to make the appropriate choices. It is up to Boskalis to work as professionally as possible within the resulting framework. 12 Annual Report 2004

14 Corporate social responsibility An important aspect of dredging is the impact it has on the ecology. Boskalis has the expertise to advise clients how to measure environmental impact and keep it to a minimum. Furthermore, Boskalis always makes its own assessment to determine the best working method for the environment. The company develops its own systems for precise monitoring of the dredging work. In that way, clients understand the environmental impact of the work; working methods can also be adapted if there is a possibility of tolerances being exceeded. Trailing suction hopper dredger Prins der Nederlanden at work on the Jubail King Fahd Industrial Port in Saudi Arabia. The work comprises dredging three berths, deepening the access channel and land reclamation to create a second wharf in the petrochemical port. 13 Royal Boskalis Westminster nv

15 Basic principles of the corporate strategy Basic principles of the corporate strategy The key success factors for a leading international service company in the area of maritime infrastructure are: enterprise and risk management; employee efficiency; transparency in corporate governance; professional expertise and skills; a large and versatile fleet; efficient organizational and communications structures. Enterprise and risk management Doing business means working on a daily basis with uncertainties, opportunities, and risks. Chapter Corporate Governance (pages 17 21) of this report discusses the risk management and internal monitoring systems used at Boskalis. Employee efficiency At Boskalis, the workforce is central. They are the critical success factor of the company. They are the people who, in day-to-day operations, deal with changing circumstances and challenging operational situations. The company works globally with high-grade technical production resources, dealing with a very wide range of physical and cultural conditions. There are many other nationalities involved alongside the Dutch, both onshore and offshore. It is vitally important in a complex environment of this kind for people to collaborate and develop. Boskalis aims to provide an attractive working environment in which employees can make the most of their abilities. To this end the company has an active human resources policy in which the personal development of employees takes priority. The policy is based on the continuous matching of the requirements of the company and the quality of the workforce. This takes the shape of a coordinated program for Human Resources Development consisting of long-range forecasts, planning, development, training and rewards. An important HR tool in this context is the competence management program, which focuses specifically on the systematic development of employees on the basis of their talents and competences. Transparency in corporate governance Chapter Corporate Governance of this annual report takes a separate look at the topic of Corporate Governance. Professional expertise and skills Innovation. Every project is a source of creativity and innovation. Boskalis is one big innovative playground. The client s needs and preferences are translated into a technical design, using the optimal working methods and utilization of equipment. Due consideration is given to local conditions, such as the weather, tidal movements, environmental factors, and safety and security issues. Special equipment is often developed; new techniques are regularly created on projects in practice. Clients increasingly look for innovative forms of tender, where the knowledge and creativity Boskalis offers can play a greater role. Examples include Design & Construct tenders, public-private partnerships, or even alliance contracts, in which Boskalis and its client are project partners. 14 Annual Report 2004

16 Basic principles of the corporate strategy Research and development (often not project-specific). It is strategically crucial that constant work is done on new techniques and more in-depth knowledge. For many years now, Boskalis has also been conducting research not linked to specific projects, in part on its own and in part in joint projects with other sector operators, universities, and knowledge institutes. The Research & Development department at Boskalis has experienced staff, simulation and calculation models, and laboratory facilities. The R&D staff is regularly present on the projects and on board the ships, both at home and abroad, to take measurements. A steering group, representing the Board of Management, the operational units, and the technical staff departments, sets the priorities and evaluates the long-term planning of most of the nonproject-specific R&D work. Engineering capacity (usually project-specific). Major infrastructure projects such as Design & Construct projects are increasingly put out to tender. The engineering capacity Boskalis can offer and its own engineering consultancy Hydronamic are very important in this context. By taking working methods and options for available equipment into account in the design phase, efficient solutions for cost price and implementation timelines can be proposed. The Boskalis engineering capacity can also be deployed during the implementation phase of the projects. A large and versatile fleet Boskalis has a large and versatile fleet. It includes every variety of dredging equipment so that the right tool can be used at all times. Innovations in the fleet and modifications to existing units keep the fleet in line with modern requirements. Fleet automation is a highly-developed area, and this means that productivity during dredging work is high. Meticulous maintenance work is carried out on the fleet and auxiliary equipment, with modernization and improvements where necessary. With the exception of the basic equipment in the home markets, all Boskalis equipment is managed centrally by the Central Technical Department in Papendrecht. The Central Technical Department makes its units available for operating companies in The Netherlands and abroad. A lot of attention is paid to the quality of the services provided by the department. The organization is ISM-certified. A Plant Management System creates the conditions for the optimal deployment and structured management of the ships. In fleet management, an important element is the safety of the ships and the crews. Efficient organization and communications Health, safety and environment. Boskalis policy is to provide the entire workforce with healthy, safe and environmentally-friendly working conditions. The prevention of hazardous and/or unhealthy working conditions applies to all workers, including those from sub-contractors and suppliers. This principle is expressed in the Boskalis slogan: Safety matters. In order to raise safety awareness and increase the understanding of safety risks, Boskalis organizes training courses and information meetings, both at offices and on projects. In addition, safety audits are carried out as the first step towards reducing risks. Concern for environmental protection is a component of quality control, and of day-to-day thinking and working at Boskalis. The company is continuously looking at dredging processes in order to make them more environmentally-friendly. It develops techniques for reducing environmental loads during dredging work. 15 Royal Boskalis Westminster nv

17 Basic principles of the corporate strategy These activities result in a structural, systematic and transparent approach in the area of safety, health and the environment. Healthy, safe and environmentally-acceptable working methods require cooperation and communications, not only within the company but also with third parties, partners and service providers. Quality assurance. One of the basic principles of quality assurance at Boskalis is the wish to meet customer requirements efficiently and as planned. Another involves the continued professionalization of the internal organization. A lot of work goes into continuous improvements in the quality of the preparation, execution and evaluation of the projects. The same applies to the availability of equipment, as well as staff planning and supervision: they are all critical success factors. The quality systems in place are structured around the Boskalis core business: contracting and executing dredging and dredging-related work. These systems are certified in accordance with ISO Information and communications technology. Boskalis sees information and communications technology as an instrument for improving efficiency and management information. But ICT is also a way to make work easier and, above all, to operate more effectively in the market. Boskalis has an integrated ICT system which covers the entire business process worldwide, at all levels of the organization; from projects, through country organizations, to the head office in Papendrecht. The use of modern standardized software, hardware and communications technology is vital here. To facilitate the arrival of the largest cruise ship in the world, the Queen Mary 2, in Rotterdam, the Netherlands, Boskalis dredged the harbor in front of the HAL wharf and provided a new waterbed protection. 16 Annual Report 2004

18 Corporate Governance Corporate Governance INTRODUCTION Boskalis regards clarity and openness in supervision and accountability as the cornerstones of good governance and business practice. To this end, the company has adopted a sound system of corporate governance with a Board of Management charged with managing the company, a Supervisory Board that supervises the policies of the Board of Management, a General Meeting of Shareholders to which the Boards render account for their management or supervisory activities respectively, and a Works Council that gives shape to employee participation in the way Boskalis is managed. BOSKALIS AND THE DUTCH CORPORATE GOVERNANCE CODE Boskalis has taken note of the Netherlands Corporate Governance Code drawn up by the Tabaksblat Commission (the Code ), which came into force on 1 January In this context, the changed structural regulations (the 2004 amendment to Book 2 of the Dutch Civil Code) provide a legal basis for enforcing adherence to the Code. The Code applies to Dutch companies listed on the stock exchange and comprises a code of conduct for good and responsible governance, as well as for proper supervision thereof, including accountability for such supervision. The guiding principle is that the company is a long-term partnership consisting of various parties involved in the company. The stakeholders are those groups and individuals that influence or are influenced directly or indirectly by the achievement of the company s objectives, such as employees, shareholders and other financiers, suppliers, customers, but also the government and groups in society. The Board of Management and the Supervisory Board of the company bear integral responsibility for weighing these interests, always maintaining a focus on the continuity of the company and the creation of value for the shareholders in the long term. The code of conduct in the Code consists of some twenty principles and a great many associated concrete best practice provisions. Most of the principles can be seen as modern and now widely supported general views on good corporate governance. Companies listed on the stock exchange must include the general outlines of their corporate governance structure for the first time in their annual report for the 2004 fiscal year, and indicate the extent to which they deviate from the Code (i.e. the Apply or Explain rule). Boskalis supports the concept that a solid and transparent system of checks and balances is an important tool for inspiring confidence in companies operating on the capital market. For Boskalis, the main guarantees of good corporate governance are provided by an open corporate culture based on enterprise, professionalism, and normal standards of decency. In 1998, the Board had an extensive exchange of ideas with shareholders on the topic, in the context of the report on Corporate Governance in the Netherlands: The Forty Recommendations of the Peters Commission. In addition, on 29 May 2001 Boskalis had already discontinued the system of issuing depositary receipts of shares, a system which was generally seen as shareholder-unfriendly. 17 Royal Boskalis Westminster nv

19 Corporate Governance In the case of a focused dredging company such as Boskalis, most of the principles and many of the best practice provisions in the Code are consistent with the principles and codes of conduct already applied in the company. In addition to the principles and conduct already applied in the company, best practice provisions from the Code were implemented at Boskalis during the past year. The text of the Code (the principles and best practice provisions) is enclosed as a whole in an appendix to this annual report. A note beside each best practice provision indicates whether or not Boskalis applies that provision. In those cases where Boskalis applies a best practice that differs from a provision in the Code, an explanation has been added setting out the company s position. Two such differences concern temporary deviations necessary for existing employment contracts with members of the Board of Management to be respected. As a result, we are able to state that Boskalis already applies or will apply all of the principles and 91 of the 92 best practice provisions. In one case, Boskalis considers that the specific nature and character of the company mean that it is in its best interests to apply a best practice that differs from the relevant provision in the Code. This concerns provision III.2.1. The motivation behind the Boskalis best practice is included in the relevant explanation for that best practice provision in the appendix to this annual report. The General Meeting of Shareholders in 2005 will have the opportunity to express its views on the corporate governance policy that the company has chosen. RISK FACTORS 1. Market and competition The Boskalis markets are heterogeneous and often develop in different ways. In most cases, the clients are national, regional, and local governments or associated institutions and oil and gas companies. These markets are generally driven by long-term economic factors, such as increases in the global population, the growth of the global economy, and the growth of international trade volumes. The long-term prospects for these factors are favorable. In the short term, factors such as limited government budgets and falling oil and gas prices may have a negative impact on the markets, despite the long-term growth trends. Boskalis is well placed to respond to both positive and negative developments in individual market segments because of its global spread of activities, its extensive, versatile, and internationally-based fleet, and its strong positions in the home markets. Moreover, the dredging industry is largely focused on the maintenance and development of infrastructure. This means that long-term developments will generally be more important than shortterm economic fluctuations. On its markets, Boskalis is facing both large, internationally operating competitors and more regional or local competitors that are limited to one or several submarkets. In most cases, projects are brought to the market using private or public tender procedures. Competition is mostly on the basis of price. The dredging industry is a capital-intensive industry with high entry and exit barriers, particularly for companies operating in the international arena. Prices are influenced greatly by the relation between the demand for dredging services and the available capacity and utilization of the equipment. 18 Annual Report 2004

20 Corporate Governance The broad international spread of market positions and equipment and cost leadership are key success factors that receive a great deal of emphasis from Boskalis in terms of investment strategy and as a critical component of operational management. 2. Operational risks On the markets where Boskalis operates, fixed price/lump sum is still the most common type of contract. In this type of contract, the contractor must include nearly all the operating and price risks in the price. It is generally impossible to claim payment from the client for any unexpected costs that occur during the course of a project. Accordingly, such operating and price risks must be taken into account when calculating the cost price. Operating risks mainly involve soil conditions, variable weather conditions, technical suitability of the equipment, wear and tear when it comes into contact with processed material, and damage to equipment and third-party property. Boskalis seeks to control risks by means of thorough project preparation and appropriate measures, such as conducting soil studies, maintaining easily accessible databases with information on past experiences, and using detailed risk analysis techniques. In addition, there is a strong focus on staff training, schooling, and refresher courses, a certified Quality Assurance program, and maintenance to keep equipment in optimal condition. Risks are also insured where possible. The key to Boskalis professionalism and skills lies in its ability to prepare for these operating risks effectively and responsibly. Risks related to price developments on the purchasing side, such as increased wages, material costs, sub-contracting costs, fuel, etc. are also taken into account when preparing cost price calculations. Wherever possible, especially on projects that extend over a long period of time, price index clauses are included in client contracts. With regard to fuel, the contract sometimes stipulates delivery by the client; in a few cases, forward contracts or futures are arranged. 3. Financial risks With regard to the projects, Boskalis encounters not only operating risks, but also financial risks. Financial risks primarily concern risks that projects are disrupted by political developments, violence, etc., or non-payment by clients. Boskalis has a strict risk acceptance and hedging policy for political and payment risks. Except in case of first-class, creditworthy clients, payment risks are covered by insurance, bank guarantees, advance payments, etc. Many of the projects are contracted in foreign currency. Once positions in foreign currency have been committeded, they are in principle fully hedged, generally by forward currency contracts. The development of the US dollar exchange rate in relation to the euro is particularly relevant. A large proportion of the projects are contracted in US dollars or in currencies that are more or less directly linked to the US dollar. With regard to the competitiveness of Boskalis cost structure, a significant part of the cost structure of most of Boskalis major international competitors is also linked to the euro. The impact of currency developments is greater in markets where the competition comes primarily from parties whose cost structures are not linked to the euro. However, on balance, the fluctuations of the US dollar in relation to the euro have only a limited impact on the competitive position of the company. 19 Royal Boskalis Westminster nv

21 Corporate Governance The most important non-fully owned affiliated companies of Boskalis (Archirodon, Lamnalco, and Bean Stuyvesant) are fully or largely US dollar-based. However, the cost structures of these companies are also completely or largely US dollar-based. These investments are viewed from a long-term perspective. Translation risks in these affiliated companies are not hedged, under the assumption that currency fluctuations and interest and inflation developments will balance out in the long run. The profit and loss accounts of these affiliates are converted at average currency exchange rates. Currency translation differences are directly charged or credited to the shareholder s equity. Financial derivatives (forward contracts, options, interest swaps, futures, etc.) are only used if they are based on underlying real transactions. As is common practice in the contracting business, Boskalis also has large amounts outstanding in the form of bank guarantees or surety bonds (guarantees issued by insurance companies, primarily the case in the United States), usually in favor of clients. Boskalis financing policy is conservative since adequate credit, and particularly bank guarantee facilities, are essential to an uninterrupted conduct of business. At the end of 2004, the company had extensive credit and bank guarantee facilities available. INTERNAL CONTROL SYSTEMS Boskalis has a number of systems for internal risk management and control. These systems are based on the principles of effective management control and tailored to the day-to-day working environment in which Boskalis operates worldwide. Three aspects are important for the evaluation and testing of the internal risk management and control practices and systems within Boskalis, due to the hands-on nature of and short lines of communication within the company. 1. With regard to daily operations, an extensive framework of quality assurance rules, procedures and systems that include clear guidelines for responsibilities, authorizations and risk control, forms the backbone of operational risk management and control. In addition, besides audits by external agencies, Boskalis also performs regular internal audits under the auspices of a QA officer. 2. The daily management of the Boskalis organization takes place with clear responsibilities and short, clear lines of command that are defined unambiguously. Both competition and project implementation require speed, knowledge, and decisiveness. Daily management is hands-on. Progress and development of the operating results and the company s financial position, as well as operational and financial risks, are monitored by means of structured periodic reporting, analysis of the financial results, and performance reviews. The performance reviews on senior management level include a clear management audit component. 20 Annual Report 2004

22 Corporate Governance From August 2003 to mid-2005, Terramare worked to expand the Ajos port in Kemi, Finland. The work also included the construction of a 450-meter concrete embankment. The expansion will make the Ajos harbor the most important port in the Gulf of Bothnia. 3. Structure and quality of the financial accounting and control systems are assured by clear directives and periodic internal and external audits. All relevant aspects of the financial accounting and control systems are set out in manuals, guidelines, and procedures. Internal audits to monitor and improve quality and discipline are conducted on the basis of at-random and ad hoc investigations (financial audits) that also have elements of instruction and training. Moreover, the quality of the financial control systems is evaluated regularly in the context of the activities of the external auditors. The QA, management, and financial audits are the cornerstones of the evaluation and monitoring of internal risk management and control at Boskalis. Although there is room to further improve the systems concerned, and this receives the required attention, Boskalis has no indication that these systems are inadequate or not effective. The topic of internal risk management and control has been discussed with the Supervisory Board. No major changes have been introduced in the structure of the risk management and internal control systems during the course of the year under review. 21 Royal Boskalis Westminster nv

23 In the past decades, the global economy has experienced rapid growth. International trade relations and modern communication techniques have forged the world into a single marketplace. Driven by growing world trade Where goods were once produced close to the consumer markets, the rise of economies in Asia in particular has created a fastgrowing global exchange of raw materials, capital, and consumer goods. All those goods being transported all over the place means that the world trade volume is growing almost twice as fast as the global economy (source: IMF, World Economic Outlook, 2004). Worldwide Dry Bulk Throughput (x 1 million tons) (Source: OneStone) The growth of trade flows has caused the international shipping sector to increase significantly. The growing production (mainly in China) causes increasing volumes of raw materials to be shipped over the oceans. In Le Havre, France, Atlantique Dragage worked with the cutter suction dredger Cyrus on the ambitious expansion of the harbor. With this first phase, Le Havre wants to double its container transit in the coming four years. The six new berths are suitable for container ships of more than 7,000 TEU and drafts of up to 14.5 m. Growing 22 Annual Report 2004

24 The jumbo trailing suction hopper dredger Queen of the Netherlands in Daya Bay, China, where Boskalis dredged the entrance channel to the harbor. In addition, more and more consumer goods are shipped in containers, which are transported on increasingly huge container ships. These ships have greater drafts and longer hulls, and sail on fixed international routes along major seaports. There is also a growing flow of containers that are transferred to smaller ships that handle local deliveries. Worldwide Container Throughputs (x 1 million TEUs) (Source: OneStone) Growing trade, more maritime transport. Bigger ships, and expanding, deeper harbors. Countries building more harbors. Regional competition between harbors. These are the drivers of harbor construction and maintenance. Good for the global economy and work for Boskalis. Jumbo trailing suction hopper dredger Queen of the Netherlands dredging in the Felixstowe container port, United Kingdom. trade, more maritime transport: these are the drivers of harbor construction and maintenance. Royal Boskalis Westminster nv

25 Management Management Supervisory Board M.W. Dekker, chairman (1938) former general director of NPM Capital N.V. chairman of the Supervisory Board of Algemeen Trust Kantoor N.V., Amsterdam member of the Supervisory Board of Arklow Shipping Ltd, Ireland member of the Supervisory Board of Solvus N.V., Antwerp chairman of the Supervisory Board of Dutch Flower Group B.V. member of the Supervisory Board of FinAce B.V. member of the Supervisory Board of Fugro N.V. member of the Supervisory Board of IHC Holland N.V. member of the Supervisory Board of JSI N.V. member of the Supervisory Board of F. van Lanschot Bankiers N.V. member of the Supervisory Board of Van Wijnen Holding N.V. member of the Supervisory Board of Belron SA first appointment: 1989, current term: J. Aalberts (1939) chairman of the Board of Management of Aalberts Industries N.V. member of the Supervisory Board of Stork N.V. member of the Supervisory Board of Van der Moolen Holding N.V. member of the Supervisory Board of Vado Beheer B.V. first appointment: 2001, current term: H. Benjamins (1943) chairman of the Board of Management of Koninklijke Frans Maas Groep N.V. chairman of the Supervisory Board of Koninklijke Ahrend N.V. member of the Supervisory Board of CA F.N.Z. Holding B.V. member of the Supervisory Board of Coöperatieve Bloemenveiling FloraHolland U.A. member of the Supervisory Board of Grondexploitatiemaatschappij Californië B.V. first appointment: 2005, current term: R.M.F. van Loon (1942) former vice-president of Shell Chemicals Ltd. chairman of the Supervisory Board of Synbra Group B.V. member of the Supervisory Board of Koninklijke Vopak N.V. first appointment: 2005, current term: Annual Report 2004

26 Management M. Minderhoud, vice-chairman (1946) former member of the Board of Management of ING Groep N.V. chairman of the Supervisory Board of Blauwhoed B.V. chairman of the Supervisory Board of Getronics N.V. chairman of the Supervisory Board of De Hypothekers Associatie B.V. chairman of the Supervisory Board of Quion Groep B.V. member of the Supervisory Board of Heembouw Holding B.V. member of the Supervisory Board of N.V. Nuon member of the Supervisory Board of Eureko B.V./ Achmea Holding N.V. member of the Supervisory Board of Rabobank Nederland chairman of Vodafone International Holdings B.V. first appointment: 2005, current term: M. van der Vorm (1958) chairman of the Board of Management of HAL Holding N.V. member of the Supervisory Board of Anthony Veder Group N.V. member of the Supervisory Board of Koninklijke Vopak N.V. member of the Supervisory Board of Univar N.V. first appointment: 1993, current term: A.A. Westerlaken (1955) chairman of the Board of Management of s Heeren Loo Zorggroep member of the Supervisory Board of VU-Windesheim, VUmc member of the Supervisory Board of Coöperatieve Bloemenveiling FloraHolland U.A. first appointment: 1999, current term: All members of the Supervisory Board are Dutch. They do not hold shares or associated option rights in Royal Boskalis Westminster nv. 25 Royal Boskalis Westminster nv

27 Management R. van Gelder and P.A.M. Berdowski. Board of Management R. van Gelder, chairman (1945) member of the Board of Management since 1985 chairman of the Board of Management since 1993 member of the Supervisory Board of HES Beheer N.V. member of the Supervisory Board of Brunel International N.V. chairman of the Euronext Issuing Institutions Advisory Body member of the Board of the Association of Securities-Issuing Companies chairman of the International Association of Dredging Contractors member of the Advisory Board of ABN AMRO Bank N.V. member of the Board of Management of Nederland Maritiem Land P.A.M. Berdowski, vice-chairman (1957) member of the Board of Management since 1997 vice-chairman of the Board of Management since 2001 chairman of the Supervisory Board of Amega Holding B.V. member of the Supervisory Board of Scope Publishing B.V. member of the Supervisory Board of N.V. Holding Nutsbedrijf Westland member of the Government Commission with regard to export -, import and investment guarantees chairman of the Stichting Pensioenfonds Boskalis Westminster Nederland former Managing Partner of Krekel Van der Woerd Wouterse All members of the Board of Management are Dutch. One member of the Board of Management has shares in Royal Boskalis Westminster nv. This is discussed in further detail in the explanatory notes to the company balance sheet and profit and loss account. Secretary M.J. Kielstra (1972) The above information is valid as at 14 March Annual Report 2004

28 Maintenance on the cutter suction dredger Taurus. 27 Royal Boskalis Westminster nv

29 Key figures Key figures (1) (amounts x 1 million, unless stated otherwise) Turnover 1,001 1,046 Orderbook (work to be done) (2) 1,164 1,124 EBIT (3) EBITDA (4) Net result Depreciation Cash flow Shareholders equity (2) Average number of outstanding shares (x 1,000) (8) 27,769 26,630 Number of outstanding shares (x 1,000) (9) 28,174 27,256 Personnel (number of persons) (2) 2,654 3,186 Ratios (in percentages) Operating result as % of the turnover Return on capital employed (5) Return on equity (6) Solvency (2/7) Figures per share (amounts x 1.00) Profit (8/10) Cash flow (8) Shareholders equity (2/9) Dividend Share information Euronext Amsterdam Ordinary shares (amounts x 1.00) Price range 18.05/ /23.15 Closing price at year-end Price/earnings ratio (1) Figures taken from the respective financial statements. (2) As at 31 December. (3) Consists of earnings before interest and taxation. (4) Consists of earnings before interest, taxation, depreciation and amortization. (5) Net result + interest paid on long-term loans as % of the average capital employed (shareholders equity + long-term loans). (6) Net result as % of the average shareholders equity. (7) Shareholders equity as % of the balance sheet total (fixed assets + current assets). (8) Weighted average number of outstanding ordinary shares less the number of shares owned by the company. (9) Number of outstanding ordinary shares less the number of shares owned by the company as at 31 December. (10) The dilution effect was practically nil up to the financial year Annual Report 2004

30 Investor Relations Investor Relations Boskalis values good communications with its existing and potential shareholders, institutional investors and financial analysts. The key objective is to provide transparency about value creation within the company, so that the valuation of Boskalis shares reflects as accurately as possible the developments and prospects in the markets and the company s performance in those markets. Intensive communications with media and investors Boskalis has an active investor relations policy which involves open communications with analysts, shareholders, investors and media. A steady flow of information provides a picture of day-to-day matters and strategy, business drivers and the company s critical success factors. Boskalis communications primarily target investors interested in the long-term potential of small cap stocks. New contacts are established regularly with investors in Europe, the United States and Canada. There is a strong emphasis on private investors as well as institutional investors. The Boskalis share is monitored with great interest in international circles. Boskalis has its own website ( providing financial information as well as general company information, vacancies, fleet composition, projects and the latest press releases. Presentations for analysts are also published on the site. The website is maintained and improved continuously. Increase in share price of more than 19% Despite the uncertainties in the short term, there was still considerable interest in Boskalis shares from analysts and investors. This was primarily true of investors with a longer-term investment strategy. The share price went up in 2004 by more than 19%, from to Share price in euros, closing prices (1 January 1999 through 31 December 2004). In 2004, the price of the Boskalis share developed upward: Boskalis share price: +19% +8% -36% +14% +47% +81% AEX index: +3% +5% -36% -20% -5% -35% AMX index: +15% +15% -35% -20% -8% -35% On the basis of the closing rate as at year-end 2004, the dividend yield for Boskalis shares in the past year was 4.2% ( 1.04 per share). 29 Royal Boskalis Westminster nv

31 Investor Relations Large shareholders As at 14 March 2005, the following shareholders are known to have a holding of at least 5% in Boskalis: HAL Holding N.V. 31% Delta Lloyd N.V. 5% In addition to the holdings of these regular shareholders, most Boskalis shares are in foreign hands. An estimated 25% are held in the United States and Canada, with 25% being held in the United Kingdom and the remainder in some ten European countries. Dividend policy The main principle underlying the Boskalis dividend policy is to distribute 30% to 40% of the net result from normal operations in the form of a dividend. In contravention to this principle a proposal will be submitted to the General Meeting of Shareholders on 10 May 2005 for a dividend of 0.75 per share. Shareholders may opt to take this dividend entirely in shares or entirely in cash. This dividend is payable as from 2 June Euronext listing Royal Boskalis Westminster nv shares are listed on the Euronext Exchange and are traded there continuously. The share is listed on the Next 150 Index. With effect from 2 March 2005 the Boskalis stock is no longer listed on the Amsterdam AMX index; it is now on the Euronext Amsterdam Small Cap Index (AScX). Financial agenda Agenda in March Publication annual figures for 2004 mid-april Publication annual report May Annual General Meeting of Shareholders 12 May Shares go ex-dividend 12 to 27 May Option period stock dividend or cash dividend 30 May Fixation of stock dividend conversion ratio 2 June Dividend payment for August Publication of 2005 half-year results Information Investor Relations R.T. Berends Telephone +31 (0) Telefax +31 (0) ir@boskalis.nl Internet 30 Annual Report 2004

32 Message to the shareholders Message to the shareholders Dear shareholders, R. van Gelder, chairman Board of Management. For Royal Boskalis Westminster nv, 2004 was a year of modest expectations, and ultimately also a year of modest results. A chill wind blew over the international landscape of the dredging sector. In our European and American home markets, we saw low work volumes influenced by limited government budgets. The continuing decline of the US dollar in relation to the euro, high energy prices, and fierce competition in nearly all our markets were factors that contributed equally to the less favorable market conditions. On the international market for large projects, the stagnation of the land reclamation projects in Singapore continued throughout the year; conversely, the market in the Middle East experienced rapid and significant development. Large-scale land reclamation projects in Dubai, Qatar, and Bahrain shifted into high gear in the second half of the year, moving rapidly from the design table to the market, and will demand a great deal of our dredging equipment capacity in the coming years. Although no great expectations can be cherished for the European home markets for the time being, we do see a renewed upward trend for We are counting on positive developments in market volume, equipment utilization, and pricing, particularly in the markets outside Europe. The recent improvements in relations between the governments of Singapore and Malaysia have increased the chances of resuming the land reclamation projects in Singapore using sand from Malaysia. Despite the difficult market conditions and as a result of this the modest net result, good work was done in Group turnover lagged only a fraction behind 2003, in part due to the contribution from the dredging-plus activities. The operating margins were under pressure, but utilization of the large dredging equipment improved later in the year after getting off to a difficult start. The operating cash flow (EBITDA before reorganization costs) stayed at a healthy level of 139 million (2003: 157 million). An extensive program of streamlining the fleet, purchasing processes and organization entailed a onetime cost of 12.8 million. Earnings per share ended up to 1.09, as stated a modest result, but still better than the expectations announced in August ,041 million in new orders were acquired in 2004 (2003: 897 million). As a result, the orderbook at year-end 2004 was the same as at year-end The flow of orders in the first months of 2005 has already surpassed the orders in early On the international market for dredging services, the difference lies primarily in quality, innovation and cost leadership. When facing such uncertain market conditions as we encountered in 2003 and 2004, the main goal is to streamline cost effectiveness without affecting the level of quality and innovation. The streamlining program initiated in 2003 and implemented in 2004 not only improved the efficiency of purchasing and organization, it also resulted in the modernization of the fleet and the rationalization of the activities portfolio in a number of our home markets. 31 Royal Boskalis Westminster nv

33 Message to the shareholders Fleet and organization have been optimized With regard to the fleet, three ships were eliminated and two new 16,000 m 3 trailing suction hopper dredgers were added. With regard to our home markets, after the sale of the canal-building activities in Germany in 2003, a number of activities making insufficient contribution to the group result were terminated in 2004, both in Portugal and in Finland. On balance, the number of jobs in 2004 was reduced by approximately 450. Besides this quantitative reduction, we also put great emphasis on maintaining and improving the quality of our staff. Our business is about good people and good equipment. The positive effects of this streamlining are expected to be clearly visible in Prospects for the longer term remain favorable The upward trend for 2005 gives us a vision of a good future for our dredging activities in the long term. Driven by growth of global trade, activities in densely populated coastal regions, international tourism, and the increasing demand for energy, there will be positive developments in the demand for airport and harbor facilities and land reclamation. Urgent need for expansion and improvement of maritime infrastructure in the Netherlands We are concerned about the situation threatening to emerge in the Netherlands. Where we see expansion and improvement of the maritime infrastructure (including airports and logistical connections to the inland regions) on a broad international front and on a large scale, with projects being launched on the market in rapid succession, in the Netherlands we see procedural nitpicking and delays. The Netherlands is not only in danger of lagging behind in terms of harbor capacity and facilities; its international reputation as a leading hydraulic engineering country is also in jeopardy. We would like to see a great sense of urgency and more decisive governance with respect to maritime projects. We see in other parts of the world, both inside Europe and beyond, that things can be and are done differently! Boskalis and the Dutch corporate governance code In the past year, Boskalis amended its Articles of Association and standing rules as needed to in response to the changes regarding corporate law and the Dutch corporate governance code (Tabaksblat code). Our approach to this matter is set out on pages of this annual report and the Apply or Explain report appended to this annual report. We hope that the added powers and information for shareholders will mainly express itself at Boskalis in stronger shareholder involvement in the company and support for the solid, long-term-oriented policies of the company. Active communication to financial markets create support and confidence In the area of investor relations, Boskalis maintained active communications with the financial markets during the past year, during a period that the company was performing less well. Due to the relatively high proportion of permanent positions among shareholders on the one hand, and on the other hand the development of the share price, especially in the last months of the year, you have maintained your confidence as a shareholder in the company and its markets, even in uncertain times. We are aware that confidence needs to be earned not once, but again and again. The company will continue to work to create long-term value for its shareholders. 32 Annual Report 2004

34 Message to the shareholders Upward trend for 2005 After an uncertain and difficult period in 2003 and 2004, we see a renewed upward trend for The company is doing well, both in terms of its market position and in financial terms. A great deal has been invested in the workforce and equipment over the past years, and the organization was effectively streamlined in We expect to have a healthy operational cash flow at our disposal for With the exception of acquisitions, the level of investment in dredging equipment will be significantly lower than in the past years. However, there will be major investments in 2005 in our 50% subsidiary Lamnalco for oil and LNG terminal services. Higher turnover and good equipment utilization; operational margins will remain modest for the time being Turnover and equipment utilization will have the chance to improve compared to Operating margins will continue to be modest for the time being. The extent to which they will improve is uncertain. It is impossible to make concrete statements regarding our expectations for the results. Despite the lower net result in 2004 compared to the previous year, our confidence in the developments in the coming years leads us to propose the distribution of a dividend of 0.75 per share for On behalf of the Board of Management, R. van Gelder 33 Royal Boskalis Westminster nv

35 Report of the Board of Management on 2004 Report of the Board of Management on 2004 INTRODUCTION The difficult market circumstances in 2004 translated into a modest financial result. Despite this, a healthy operating cash flow was generated and the company s financial position was further reinforced. The year 2004 saw the optimization of both the organization and the fleet, as well as the completion of a long-term fleet modernization and extension program. The company also continued its investments in high-quality people and equipment to increase its striking power in the market. The Board of Management is pleased to report to you on the past year. FINANCIAL MATTERS Headlines in 2004 were as follows: cash flow million, net profit 30.2 million; margins and fleet utilization under pressure; earnings per share 1.09, dividend per share 0.75; financial position remains strong; orderbook 1.2 billion. Turnover and orderbook In the year under review, turnover amounted to 1,001 million (2003: 1,046 million). Turnover in the Netherlands dropped, while the volume remained stable in the rest of Europe. Outside of Europe, turnover increased in the Middle East, Australia and Mexico. The level of activities was lower in Asia and in North and South America. Turnover fell in Nigeria, while a higher volume was realized in the rest of Africa. Turnover by market (x 1 million) Turnover (x 1 million) Home markets The Netherlands Rest of Europe Outside Europe International projects market hit and run Specialist niche markets ,001 1,046 1,035 1, Home markets. On the home markets, the turnover fell in 2004 to 431 million (2003: 584 million). The home markets share in the turnover amounted to 43% (2003: 56%). The Boskalis home markets are: The Netherlands Nigeria Northwest Europe Mexico Italy United States 34 Annual Report 2004

36 Report of the Board of Management on 2004 In the Netherlands, turnover dropped primarily due to less wet dredging activities, while the dry civil engineering sector also stagnated. The contribution to turnover from the large infrastructure works the Betuwe line and the HSL high-speed rail link dropped, as Boskalis activities for these projects are in the final stage. Market conditions in the Netherlands were difficult, with tender volumes and prices under pressure. In the rest of the European home markets, the results of reticent government spending became visible. However, additional turnover was achieved in several new markets around the Baltic Sea. The volume on the Iberian Peninsula fell, while the home market position in Portugal was gradually phased out during the course of the year. Outside of Europe, turnover in the Nigerian home market was lower than in 2003, when a large LNG project was performed for Chevron. In the United States, turnover fell due primarily to lower government spending on harbor deepening and maintenance. In the Mexican home market, various maintenance activities were carried out and turnover rose to a slightly higher level than in Turnover by market Turnover by geographical areas (x 1 million) The Netherlands Rest of Europe Australia / Asia Middle East Africa North and South America ,001 1,046 1,035 1, Home markets (43%) Specialist niche markets (9%) International projects market (48%) The Middle East region. The Middle East s share in the turnover rose to 20% and amounted to 203 million (2003: 113 million). Various harbor and land reclamation projects were performed in countries around the Arabian Gulf, such as Iran, Saudi Arabia, Bahrain and the United Arab Emirates, as well as Egypt. Thanks to its broad positioning, Boskalis was able to benefit from the growing stream of maritime contracts in this area, both in the core activity of dredging and thanks to the 40% participating interest in Archirodon (this company is included in consolidation on a proportional basis). Archirodon s share in the turnover amounted to 129 million (2003: 64 million). International projects market, rest of the world. On the international projects market in the rest of the world, turnover in 2004 amounted to 279 million (2003: 258 million). In the Far East, the company worked among others on a land reclamation project near Shanghai. The flagship Queen of the Netherlands was deployed in China for a new petrochemical facility in Daya Bay. In Singapore, a small amount of land was reclaimed using local sand. The Australian market developed favorably, and turnover rose. In Coega (South Africa), dredging was carried out for a large container terminal, and in Ghana for the restoration of a lagoon. In Kazakhstan, work was performed on a sea island for oil production platforms. In France, activities were conducted for the extension of the harbor in Le Havre, and in Trinidad, land was reclaimed for an LNG export facility on behalf of a consortium of energy companies. The turnover in South America was minimal. 35 Royal Boskalis Westminster nv

37 Report of the Board of Management on 2004 Specialist niche markets. In the specialist niche markets, turnover in the offshore sector amounted to 88 million (2003: 91 million). In addition to the regular stone dumping work for pipelines in the North Sea, favorable progress was made in Singapore with the Changi Outfall project, a drainage system for sewer water. In 2004, the total amount of acquired orders was 1,041 million (2003: 897 million). A major part of the new contracts was acquired in the Middle East, such as the expansion of the Doha airport in Qatar, land reclamation in Dubai and harbor extension in Bandar Abbas, Iran. The order book rose from 1,124 million at year-end 2003 to 1,164 million as at 31 December Of this, 328 million (2003: 361 million) concerned land reclamation works to be carried out in Singapore. Archirodon s share in the order book grew slightly, from 182 million at year-end 2003 to 190 million as at 31 December Acquired work and orderbook as at 31 December (x 1 million) Orderbook by market as at 31 December (x 1 million) Home markets The Netherlands Rest of Europe Outside Europe International projects market hit and run Specialist niche markets ,164 1,124 1,273 1,224 1,214 Results Earnings before interest and tax (EBIT) fell to 41.5 million (2003: 77.9 million). The operating result of 37.4 million was lower than in 2003 ( 69.6 million). The ratio of operating result to turnover was 3.7% (2003: 6.7%). Equipment utilization Equipment utilization in 2004 improved in the last six months of the year thanks to increased market (in weeks per year) demand. This applied particularly to the hopper fleet, which had an average utilization rate of 31 weeks for the year (2003: 37 weeks). The cutter fleet s utilization rate was favorable, particularly because of the deployment of the larger cutter suction dredgers for several extensive projects: 34 weeks on an annual basis, compared to 26 weeks in On balance, the 2004 operating result suffered a negative setback of 12.8 million due to non-recurring charges arising from measures related to the optimization of the organization. These non-recurring items include an additional charge of 4.4 million for depreciation on tangible fixed assets in connection with fleet rationalization, as well as an expenditure of 8.4 million for staff reductions and the winding up of selected activities in home markets. The effect of the non-recurring items on the total tax levy was 3.2 million. On balance, the non-recurring items had a negative effect on the net result for 2004 amounting to 9.6 million. 36 Annual Report 2004

38 Report of the Board of Management on 2004 Net result The depreciation costs rose to 89.2 million (2003: 79.3 million). Depreciation increased in particular (x 1 million) because of the use of new equipment. In addition, depreciation at Archirodon also increased due to capital expenditure in non-dredging equipment. The depreciation costs included a non-recurring charge of 4.4 million (2003: 7.1 million) due to an additional write-down in connection with fleet rationalization. The result from participating interests amounted to 4.1 million (2003: 8.3 million). The largest participating interest, Lamnalco, which is primarily active in the Middle East and West Africa in harbor and offshore services, had another excellent year and contributed 7.1 million (2003: 7.2 million). However, because of poor utilization and high equipment repair costs, negative results were achieved in several participating interests that hold equipment in the United States. On balance, the result from participating interests therefore fell accordingly. Cash flow (x 1 million) Taxes amounted to 10.1 million. Excluding the taxes attributed to the non-recurring reorganization expenses, taxes amounted to 13.3 million (2003: 21.5 million). This implies an effective tax rate of 25.2% (2003: 28.2%). This lower tax percentage is linked to the spread of the results over the many different countries where the company is active and how the results are taxed in those countries. In 2004, cash flow fell to million (2003: million). In line with the net profit, earnings per share dropped to 1.09 (2003: 2.66). For 2004, the return on capital employed amounted to 6.5% (2003: 16.0%), while the return on equity was 6.6% (2003: 16.3%). Investments (x 1 million) Investments and balance sheet Capital expenditure dropped in 2004 due to the completion of the fleet modernization and extension program. An amount of 110 million (2003: 149 million) was invested in tangible fixed assets. The main investments were related to the new construction of two trailing suction hopper dredgers, each with a capacity of 16,000 m 3. All capital expenditure was financed from company funds. The book value of the divestments was 4 million (2003: 7 million). In the year under review, three old suction hopper dredgers were sold. The capital tied up in the non-consolidated participating interests fell by 5 million to 47 million, mainly as a result of currency translation differences. Working capital (stocks, work in progress, receivables less short-term liabilities) continued to be very negative: 247 million as at year-end 2004 (2003: 224 million negative). The long-term non-interest-bearing liabilities fell to 22 million (2003: 61 million), due in part to the settlement of pension commitments ( 12 million). Furthermore, part of the amount recognized at yearend 2003 as long-term tax liabilities was designated as current liabilities at year-end 2004 ( 12 million). Also, at year-end 2004, the lease commitments for the trailing suction hopper dredger WD Fairway, along with the related currency swap and deposits were, for the most part, settled earlier than planned. Consequently, the long-term liabilities fell in connection with this. 37 Royal Boskalis Westminster nv

39 Report of the Board of Management on 2004 Provisions decreased to 57 million at year-end 2004 (2003: 64 million). The principal components of this item are provisions for maintenance of equipment and deferred tax liabilities. Once again, a major repairs program was carried out during the year under review, which led to both a reduction in the repairs provision and an increase in fleet quality. The cash position fell to 136 million in the year under review (year-end 2003: 161 million). Part of this cash, 56 million, was held by projects being executed in cooperation with third parties (2003: 61 million). Shareholders equity, before the proposed profit distribution, increased on balance at the end of the financial year to 465 million (year-end 2003: 455 million). This rise was the result of on the one hand the profits in the financial year and on the other hand the cash part of the dividend for the 2003 financial year ( 10 million) and negative currency translation differences ( 10 million). Equity to total assets as at 31 December 2004 was 43.4% (year-end 2003: 42.5%). International Financial Reporting Standards (IFRS) From 2005 onwards, Boskalis will report in accordance with the International Financial Reporting Standards (IFRS). This involves a change compared to the current accounting principles, and has consequences for parts of the Boskalis financial statements. In its 2005 financial reporting (interim figures and financial statements), Boskalis will include comparative figures in accordance with IFRS for the relevant reporting periods in The transition process to IFRS covers the following areas: principles of financial reporting; presentation and explanatory notes; accounting procedures, controls and systems; supplementary (financial) information. For the most part, the preparations for the transition to IFRS have been completed. The financial reporting system and the Accounting Manual Royal Boskalis Westminster nv have been adapted in terms of content in accordance with IFRS requirements. In the first quarter of 2005, the final form of the adjusted financial reports and the accounting manual will be implemented. Where necessary, the financial controls procedures and systems are or will be modified. The external auditor is aware of the progress of the transition process and has reported on this to the Board of Management and the Supervisory Board. At present, however, some financial information is not yet available in its final form and the treatment of several specific items is not yet entirely clear. As a result, a reliable quantitative analysis cannot be provided as of yet of the consequences of IFRS on the balance sheet as at 1 January 2004, the 2004 result and the balance sheet as at 31 December The section below sets out the main consequences of the IFRS implementation: Increase in the balance sheet total. The consolidated balance sheet total will increase, primarily due to a new presentation method for work in progress and progress invoices. 38 Annual Report 2004

40 Report of the Board of Management on 2004 Maintenance provision and tangible fixed assets. The maintenance provision is no longer permitted under IFRS. In the future, maintenance costs will be charged to the result. If the useful life of the maintenance expenses exceeds a year, these costs may be eligible for capitalization and depreciation. Consolidation of participating interests. The different definition of the concept control results in changes in the consolidation method for several participating interests. The main changes involve the addition of Lamnalco (50%) on a proportional basis and the partial deconsolidation (50%) of Dragamex in Mexico. Financial instruments. Boskalis uses various financial instruments to hedge its financial risks. The financial reporting related to financial instruments is predominantly based on the principles of hedge accounting. Boskalis will make use of the relevant exemption in IFRS1 and therefore apply the rules governing financial instruments for the first time with effect from Pensions. Boskalis will recognize pension schemes in the financial statements, on the basis of information available to the company, insofar as these schemes are designated as defined benefit pension schemes, and taking into account IAS19 Employee Benefits. Proposed profit appropriation A proposal will be made at the Annual General Meeting of Shareholders to appropriate 21.2 million for a dividend payment of 0.75 per share, to be taken in stock or in cash. The remainder of 9.0 million will be added to the other reserves. POLICY AND OPERATIONAL MATTERS Market position During the past year, Boskalis focused on maintaining its market position and strengthening it where possible. This policy was expressed in concrete measures across a wide range of areas. Selective market approach. Against the background of the less favorable market conditions, Boskalis again had a policy of selective contracting in the past year, emphasizing quality and cost leadership. The larger equipment was deployed for a limited number of projects with short timelines and acceptable price/risk profiles. Its alert market approach allowed Boskalis to retain important positions on home markets, despite the fierce competition raging on those markets. Regional positioning in the Middle East. In this region, Boskalis was able to benefit from the market opportunities thanks to its broad positioning in dredging activities, its alliance with Archirodon and its participating interest in Lamnalco. Reassessment of European home markets. In the first six months of the year, the business model for the European home markets was reassessed. Activity portfolios in existing home markets were optimized and a European organization was set up to contract and conduct major dredging projects in Europe. Marketing and local operational activities, mainly local dredging projects, will continue to be managed locally in the individual countries. 39 Royal Boskalis Westminster nv

41 Report of the Board of Management on 2004 Rationalization of equipment. The critical evaluation started in 2003 of older fleet units in particular, in the context of the rationalization and modernization of the fleet, led to the divestment of a number of older units during the course of The most important rationalization concerned the disposal of three trailing suction hopper dredgers with a total capacity of approximately 16,000 m 3. New hoppers launched. The completion in 2004 of the trailing suction hopper dredgers Prins der Nederlanden and Oranje strengthened the company s competitive edge. Cost leadership is an important weapon in the battle for market position, and the modern fleet gives Boskalis a good advantage. Innovative contracts. As it did in preceding years, Boskalis presented itself to its clients with innovative contract types that allowed the company optimal opportunities to offer its creativity and knowledge to its clients. One striking example in 2004 was the alliance contract for deepening the harbor in Melbourne, Australia. Remuneration of the Board of Management and the Supervisory Board The company policy with respect to remuneration of the members of the Board of Management and the Supervisory Board, is included in the Report of the Supervisory Board. Personnel & Organization In 2004, Boskalis focus was on cost effectiveness and competitive strength. One of the measures taken, based on analyses in which the workforce was closely involved, concerned the optimization of the organization. This led to the elimination of around 450 jobs, of which approximately 200 were in the Netherlands. The study that formed the basis for this, the adaptation of the organization (in which maintaining the quality constantly played an important role) and the conclusion and supervision of the reorganization were important areas of attention in In order to anticipate the need for professional staff at all levels both now and in the future, Boskalis has invested a great deal of energy over the years in the development of a comprehensive toolkit. Proper medium- and long-term planning methods, a focused recruitment and selection process, knowledge transfer, competence management and a total package of educational and training programs all provide a contribution to the development of Boskalis core competences: professionalism, entrepreneurship and teamwork. Average workforce The introduction in January 2004 of a competency-based job assessment system for fleet staff, linked both to the practical situation and a balanced remuneration system, reflects the modern human resources policy in the hydraulic engineering sector. The implementation of competence management will contribute to the development of our fleet personnel. The second implementation stage of Prinses, the new management and information system for human resources, will be rounded off in After completion, Boskalis will have a modern and complete Human Resources Management instrument at its disposal. Workforce size. In 2004, the average size of the workforce was 2,870; the figure at year-end 2004 amounted to 2,654 employees (compared to 3,186 at year-end 2003). 40 Annual Report 2004

42 Report of the Board of Management on 2004 The tightening up of the organization was an important subject in the consultations between the Works Council and its Committees. The Works Council s active approach and the way in which it fulfils its duties was considered highly constructive, both in general and specifically with regard to the margin improvement process. Health, safety and environment The concern for safe and healthy workplace activities has been an important policy component at Boskalis for many years. The ongoing increase of safety awareness within the organization plays a central role in this. In this context, communications were intensified again in 2004 with respect to safety, by means of such aspects as the company-wide quarterly Safety matters bulletin. In addition, several editions of the Safety Newsflash for fleet crews were published, addressing safety issues related specifically to the ships. In the year under review, on-site safety inspections were again carried out by senior managers and safety awareness training was also given to managers. The theme of the open fleet days held in Papendrecht for project staff was also focused on safety awareness. Individual safety performance forms an integral part of the remuneration policy at Boskalis. In this vein, the Board of Management awards an annual prize for the best idea submitted for safety improvement. This price was awarded for the first time at the start of With effect from July 2004, all of Boskalis seagoing ships have been certified in accordance with the ISPS Code (the International Ship & Port Facility Security Code) of the International Maritime Organisation. This code serves to promote alertness to terrorist threats to the shipping sector. The harbor near the head office in Papendrecht was also granted this certificate. In 2004, an award was again received from outside the company with respect to favorable safety performance. For a large project in Trinidad, the client Bechtel awarded Boskalis a certificate for reaching five million man-hours worked without accident-related absenteeism. Number of accidents per million hours worked In 2004, the number of accidents fell compared to 2003, with a slightly higher number of hours worked. As a result, the accident rate (LTIF, the number of accidents per million hours worked) decreased to 8.1 in The policy objective is a continued reduction in LTIF. In addition to the unremitting emphasis on safety and health, the development of environmental dredging techniques is an important policy aspect. Internal expertise in this field is maintained and translated into continuous improvements of working methods. Clients regularly ask Boskalis for practical advice about designing dredging projects along environmentally acceptable lines. Furthermore, an environmental monitoring system developed by Boskalis was used for several projects (such as in Sweden and China). Thanks to the efforts of its environmental experts staff, Boskalis is able to properly advise its clients about biology-related aspects of the aquatic environment in the design of dredging projects. In 2004, the organization in Singapore was certified in accordance with the environmental standard ISO-4001 and the safety and environmental standard OSHAS In addition, the UK organization and the Business Unit Offshore both started the implementation of the environmental standard ISO Offshore also commenced the introduction of the safety and environmental standard OSHAS Royal Boskalis Westminster nv

43 Report of the Board of Management on 2004 Equipment Cost leadership is essential for Boskalis competitive position. In the last seven years, the company has made considerable investments in an extensive fleet program, by increasing trailing suction hopper dredger capacity in accordance with market developments and also by replacing older tonnage with highly efficient, state-of-the-art ships. As the final element of the program, the new trailing suction hopper dredgers the Prins der Nederlanden and Oranje (each 16,000 m 3 ) were put into service in the course of the year. Partly in the context of the further optimization of the organization, three trailing suction hopper dredgers (the vessels Resolution, Gateway and Rigelstar, with a total capacity of approximately 16,000 m 3 ) were disposed of in the first half of the year. The tightening up of the organization also led to the further centralization of the management of fleet units in the European home markets. Measures were also taken to ensure that various fleet components will be purchased at more competitive prices on a structural basis in the future. In the second half of 2004, the jumbo trailing suction hopper dredger Queen of the Netherlands was deployed in China, on Shell s Daya Bay project. Consequently, the Queen was the first large Dutch trailing suction hopper dredger in history to be used in China. Research and development At Boskalis, research and development for dredging equipment and techniques enjoy a high priority. The company has a great deal of expertise and experience in this area, which form the basis for continuous innovation. For many years, Boskalis has been engaged in research, both on its own and in joint projects with other companies in the sector, universities and knowledge institutions. In 2004, in cooperation with the Netherlands Organization for Applied Scientific Research TNO, research was conducted to optimize the suction process used by the trailing suction hopper dredgers. Specifically, activities were undertaken to improve the process information presented on board. The systems developed will be tested further in 2005, on several ships and on the in-house trailing suction hopper dredger simulator. In 2004, Boskalis developed BeauDredge, a selective dredging technique that removes clean soil from beneath a contaminated or unusable layer, while the character and composition of the top layer is preserved as much as possible. BeauDredge can be used as a good alternative for soil decontamination, and also for nautical maintenance, the ecological recovery of lakes and watercourses, water storage, river widening and selective sand dredging. A special draghead was developed in preparation for a project where stone will be dredged using a trailing suction hopper dredger. Cutting tests were performed on site for this purpose. In cooperation with IHC Systems, an improved process instrumentation and control system was developed for the cutter suction dredgers, and was put into service at the end of 2004 on the cutter suction dredger Cyrus on a project in Le Havre. In 2005, this system will also be installed on the two large self-propelled cutter suction dredgers, Taurus and Ursa, and work will be commenced to install the system on the other cutter suction dredgers. 42 Annual Report 2004

44 Report of the Board of Management on 2004 Information and Communication Technology (ICT) The international modernization and standardization of ICT systems was given further shape in the past year. For example, the recently widely implemented ERP system was also put into place for the Dutch subsidiaries Boskalis Dolman and Breijs. Considerable effort was dedicated to the development of an ERP Lite system. The objective of this system is to provide a lean and mean tool to project managers and financial officials for project management and financial and logistic activities. The ERP Lite system will be implemented at project sites, in the independent offices and for the smaller home markets. During the development stage, high demands were placed on the system with respect to software user friendliness and the various knowledge levels of the users. The introduction is planned for the first quarter of Under strict safety requirements, the Boskalis ICT systems are being made increasingly more accessible for Boskalis staff worldwide. The implementation of webmail in 2004 is an example of this. In 2004, good progress was made on the development of a new management information system, the goal of which is to open up and link various data sources. This will ensure that both financial and production data is accessible in a coherent manner. In addition, a travel application was developed, in which the ERP systems will be linked to a travel booking system. The objective here is cost savings and process optimization. In the Mexican home market, Dragamex implemented the fleet maintenance management system Maximo in Finally, significant attention was paid to the further optimization of the decentralized ICT organizations. Prospects for the coming year In 2005, capital expenditure in dredging equipment will be significantly lower than in 2004, now that the hopper fleet modernization and extension program has been completed. It is expected that the capital expenditure will be financed from the company s own funds. This does not take into account the possibility of major expansion opportunities. Considerable investments in equipment will be made in the 50% participating interest Lamnalco in order to expand the activities. The number of staff is not expected to change substantially. Higher turnover, improved fleet utilization and a healthy cash flow are all expected for Thanks to the tightening up of the organization and the purchasing policy undertaken in the past year, Boskalis will realize significant savings in the coming years. An important part of this will be used to increase the company s striking power in the market. The operating margins will continue to be modest for the time being, and a specific profit forecast for 2005 cannot be made at this time. In conclusion In 2004, Boskalis continued its activities under difficult market circumstances. At the same time, the company implemented a margin improvement project, and the favorable effects of this were already evident during the course of In this challenging year, the Boskalis workforce put forth considerable effort and made constructive contributions to the company and its activities, for which we wish to express our thanks and appreciation. Papendrecht / Sliedrecht, 14 March 2005 Board of Management R. van Gelder P.A.M. Berdowski 43 Royal Boskalis Westminster nv

45 According to the World Energy Outlook 2004 issued by the International Energy Agency ( the world will need some 60% more energy in 2030 than it needs today. That need for energy will be met primarily by fossil fuels (oil, gas, and coal). About 70% of the growth in the demand for energy comes from developing countries, especially in Asia. Energy is transported from producing to consuming countries in pipelines over land and through water, and by ship. All those forms of transport will see growth in the coming years. Transport of liquid gas (LNG) will see the most rapid growth. Driven by increasing global energy consumption Boskalis is broadly involved in this sector, with various activities in the chain of maritime services. The company s core business of dredging focuses on the growing number of new LNG harbors in the world, and on reclaiming land from the sea to build LNG terminals. In addition, the 50% participation in Lamnalco is relevant. Lamnalco operates primarily in the Middle East and West Africa, offering port and offshore services. Lamnalco is implementing an ambitious expansion program, aiming particularly at long-term service contracts for the growing number of LNG terminals. Net gas-trade flows 2000 (x 1 billion m 3 ) (Source: International Energy Agency) The cutter suction dredger Edax at work in the LNG harbor of Point Fortin, Trinidad. Growth for the economy, 44 Annual Report 2004

46 The Caspian Sea contains vast gas and oil reserves. The severe weather conditions in this shallow sea cause drifting ice throughout the long winter, which prevent the use of conventional oil and gas platforms. Boskalis has been operating in this area since 1998, constructing specially designed ice-resistant islands that can be used to drill for oil and gas. In the north, Boskalis has started constructing a new island that is scheduled for completion in Net gas-trade flows 2030 (x 1 billion m 3 ) (Source: International Energy Agency) The Boskalis offshore division is also active in installing and protecting oil and gas pipelines, platform and well-head installation, decommissioning and landfalls and shore approaches. Growth for the economy, growth in the demand for energy, growth for Boskalis. The cutter suction dredger Ursa at work in Pars, Iran. This petrochemical port was expanded in 2004 and deepened to meters CD. growth in the demand for energy, growth for Boskalis. Royal Boskalis Westminster nv

47 Report of the Supervisory Board Report of the Supervisory Board Financial statements In accordance with Article 26 of the Articles of Association of Royal Boskalis Westminster nv, the Supervisory Board presents the Annual Report for 2004 to the Annual General Meeting of Shareholders. The Annual Report for 2004, including the financial statements for the same year, was compiled by the Board of Management. The financial statements are accompanied by the audit report of the company s accountants, KPMG Accountants N.V.. On the same day as the day on which the call for the Annual General Meeting of Shareholders was issued, the Board of Management presented the financial statements to Boskalis Works Council. We recommend to the Annual General Meeting of Shareholders: the adoption of the financial statements, including the proposed profit appropriation; the discharge of the members of the Board of Management in respect of their management activities; the discharge of the members of the Supervisory Board for their supervision of management during the year 2004; the distribution of a dividend to shareholders of 0.75 per share. Membership of the Board of Management There were changes to the Board of Management in the year under review due to the departure in the course of the year of Mr. A.H.A. Hoevenaars and the retirement on 1 September 2004 of Mr. K.G. van Nes. The Board of Management now consists of two members. Membership of the Supervisory Board Mr. S.D. de Bree stepped down as chairman and member of the Supervisory Board at the end of the Annual General Meeting of Shareholders in May Mr. M.W. Dekker, member of the Supervisory Board, succeeded him as chairman as of that same day. It was also announced at the same General Meeting of Shareholders that Messrs. M.W. Dekker and J. Aalberts would retire by rotation in 2005 as chairman and member of the Supervisory Board respectively. In order to fill the existing and upcoming vacancies on the Board and in accordance with the Profile of the Supervisory Board, Mr. M. Minderhoud was nominated in December 2004, and Messrs. H. Benjamins and R.M.F. van Loon were nominated in January These gentlemen were appointed by shareholders, convened in Extraordinary Meetings of Shareholders, and then they became members of the Supervisory Board. Activities of the Supervisory Board The Board had six meetings with the Board of Management during the period under review, nearly all with the full complement of members. Preparations for the meeting were made by the chairman of the Supervisory Board and the chairman of the Board of Management. Permanent items on the agenda were the results and the balance sheet, as well as industry and market developments. Other subjects discussed included the setup and implementation of the margin improvement program, strategic positioning, corporate budget, liquidity, continuity, acquisition and investment proposals, organizational structure, internal control, and risk management, as well as the personnel policy, health, safety and the environment. 46 Annual Report 2004

48 Report of the Supervisory Board Due to the amendments to Book 2 of the Dutch Civil Code introduced on 1 October 2004, regarding the regulations on large companies, the Board approved a proposal from the Board of Management to amend the Articles of Association, and then presented it to the shareholders. Because there was no quorum at an Extraordinary Meeting of Shareholders held in December 2004, the decision-making process regarding the amendment to the Articles of Association was concluded in a second Extraordinary Meeting of Shareholders held in January 2005 (at which the quorum requirement was not in effect). Pursuant to the aforementioned amendments to the Civil Code, a new Profile for the Supervisory Board was created; this profile was discussed with shareholders at the Extraordinary Meeting of Shareholders held on 23 December During this Extraordinary Meeting of Shareholders and in the same context, the policy regarding remuneration of the Board of Management was raised by the Supervisory Board, and accepted and fixed by the shareholders. In addition, the Supervisory Board drew up new standing rules for the Supervisory Board in the year under review, in the context of the Dutch corporate governance code ( Code ) that came into effect on 1 January Besides the existing core committees, i.e. the Remuneration Committee and the Selection and Appointment Committee, an Audit Committee for the Supervisory Board was also appointed, and standing rules were drawn up for the three core committees. The members of the core committees are listed at the bottom of this Report. The Remuneration Committee. The Supervisory Board determines the remuneration of the members of the Board of Management pursuant to the recommendations of the Remuneration Committee. The remuneration report as drawn up by the Remuneration Committee can be summarized as follows. The policy focuses on the successful recruitment and retention of qualified managers for a listed company with international operations and a global presence with specialized technological activities and capital-intensive equipment. The remuneration includes a fixed salary, a variable salary and a pension plan. The amount and composition of the package is determined on the basis of the Dutch labor market and also on the basis of a peer group of companies that are comparable to Boskalis in terms of size and complexity. The short-term bonus consists of two criteria of equal weight. One half is related to the annual return linked to the net profits plus interest on long-term loans, expressed as a percentage of the average invested capital. The other half is related to the degree to which the member of the Board has achieved the targets set by the Supervisory Board. The short-term bonus can be a maximum of 55% of the fixed annual salary for members of the Board and 60% for the chairman. The long-term bonus scheme also emphasizes two criteria of equal weight. One criterion is aimed at creating shareholder value and the other criterion is aimed at realizing corporate policy in the long term. For an overview of individual payments to the members of the Board of Management, the reader is referred to page 67 of the annual report. The variable salary awarded in 2004 relates to the 2003 financial year. 47 Royal Boskalis Westminster nv

49 Report of the Supervisory Board The Remuneration Committee met twice and consulted extensively outside the meetings. Proposals were submitted to the Supervisory Board regarding the adjustment of the fixed annual salary of the members of the Board of Management as of 1 January 2004 and the determination of the short-term bonus for In this context, the 2004 criteria for both the short-term and the long-term bonus were also determined. The Remuneration Committee also submitted proposals to the Board regarding the remuneration policy approved in December by the Meeting of Shareholders. The Remuneration Committee also advised the Board to present a proposal to the 2004 Meeting of Shareholders for the updating of remuneration for the chairman and members of the Supervisory Board. This proposal was adopted by the shareholders and came into effect on 1 July The Audit Committee has met once since its appointment in January 2005 in relation to the financial reporting for the 2004 financial year. The Selection and Appointment Committee met twice during the past year and conducted extensive internal discussions, as well as holding meetings with prospective members. With regard to the members of the Supervisory Board, the Board decided to fill the vacancy created by the departure of Mr. de Bree as quickly as possible. Since Messrs. Aalberts and Dekker will be resigning at the end of the Annual General Meeting of Shareholders in May 2005, the Board has decided to try to fill these upcoming vacancies in 2004, due to the small size of the Board. The filling of these vacancies will entail a temporary expansion of the Board. Based on the Profile of the Supervisory Board and after agreement with the Board of Management, the three profiles were determined and the three people were recommended. The activities of the committee ultimately led to the appointment of Mr. M. Minderhoud as a member of the Supervisory Board in the Extraordinary Meeting of Shareholders on 23 December 2004, and the appointment of Messrs. H. Benjamins and R.M.F. van Loon as members of the Supervisory Board in the Extraordinary Meeting of Shareholders on 20 January The Works Council indicated in this context that it had no objections to the proposals of the Supervisory Board. The Selection and Appointment Committee also discussed with the Board of Management about the size and composition of the Board of Management, in part involving the staffing of senior management positions. Both the current capacity and the future capacity were covered in the discussions. In relation to the Code, the principles of good governance and best practice provisions set out in the Code were discussed with the Board of Management during meetings of the Supervisory Board. For the Apply or Explain report in response to the Code, the Board refers readers to the special publication of the Board of Management and the Supervisory Board on this subject. In accordance with the provisions of the Code, an Addendum to the Regulations to prevent the misuse of inside information in respect of transactions involving company securities was drawn up and came into effect on 1 January It is the assessment of the Board that the provisions in the Code regarding the independence of the members of the Supervisory Board have been met. The Board considers Mr. M. van der Vorm to be a non-independent party as referred to in the Code. 48 Annual Report 2004

50 Report of the Supervisory Board The chairman of the Supervisory Board consulted regularly on ongoing developments with the chairman of the Board of Management and with other members of the Supervisory Board. The Supervisory Board met twice without the Board of Management. A range of subjects were discussed on those occasions. Items on the agenda included the performance of the Supervisory Board and of individual members of the Supervisory Board, the performance of the Board of Management and of individual members of the Board of Management as well as appointments to cover the existing and expected vacancies. The composition and assignment of tasks within the Board of Management were discussed. Possible succession charts for the Board of Management and the upper echelon were also discussed on these occasions. Members of the Supervisory Board were also interested participants at consultative meetings of the Works Council. There were also discussions between the members of the Supervisory Board and the Works Council. All activities of the Supervisory Board were carried out in accordance with its standing rules. The Board extends its compliments to the company s employees and the Board of Management for the results achieved and for the policy pursued in 2004 a year dominated by the implementation of a margin improvement program and by difficult market conditions and expresses its special appreciation for the dedication and commitment shown by all. Papendrecht / Sliedrecht, 14 March 2005 The Supervisory Board M.W. Dekker, chairman J. Aalberts M. van der Vorm A.A. Westerlaken M. Minderhoud H. Benjamins R.M.F. van Loon Members of the Audit Committee M. Minderhoud, chairman, as from 1 January 2005; H. Benjamins, as from 1 February 2005 Members of the Remuneration Committee A.A. Westerlaken, chairman, as from 18 May 2004; M. van der Vorm, as from 18 May 2004 Members of the Selection and Appointment Committee M.W. Dekker, chairman, as from 16 August 2004; M. van der Vorm, as from 16 August Royal Boskalis Westminster nv

51 According to the Tourism 2020 Visions report issued by the World Tourism Organization ( international tourism will experience an explosive growth in the coming 15 years, from 700 million international trips now to 1.6 billion in Driven by growing global tourism The principal destinations are in Europe, Eastern Asia, and America. In this context, too, the growing demand comes mainly from Asia, where the new middle class will express its growing prosperity by traveling outside its own national borders. In addition, there is a growing trend in the Middle East for traditionally oil-dependent countries to invest in expanding trade, industry, and tourism. Worldwide growth tourism per region (x 1 million) (Source: World Tourism Organization) Densely populated cities like Copenhagen have a great demand for sports and recreation. In order to continue to meet this growing demand, the expansion of the existing Amager Beach Park started in Boskalis is involved in the creation of the artificial island, which will double the existing recreational facilities. More tourism means more and more cruise harbors. 50 Annual Report 2004

52 Maintenance and deepening of the cruise harbor in Antigua. In the United Arab Emirates in particular, large-scale islands are being created for tourists, focusing on local visitors from the region and on tourism from other parts of the world. More tourism means more beaches, more islands in the sea for tourists, and more cruise harbors. And more work for Boskalis. Palm Jumeirah, the very first island created in Dubai to promote the tourist industry and reduce dependence on oil sales. Boskalis was involved in constructing the crescent, the protective dike around the island. This very first palm project was followed by two more palm islands, a group of islands in the shape of the world, and the development of the Dubai waterfront that was announced recently. beaches, more islands in the sea for tourists, And more work for Boskalis. Royal Boskalis Westminster nv

53 Financial Statements 2004 Principles of financial reporting General The financial statements on pages have been prepared on the basis of historical cost. Unless stated otherwise, assets and liabilities have been included at nominal value less such provisions as are considered necessary. Profits are accounted for when realization is sufficiently certain; losses are provided for as soon as they are foreseen. Change in accounting principles 2003 Up to and including 2002 the result on work in progress was based on completed contracts, with the exception of major long-term projects (with a contract value in excess of 25 million). If the result could be determined reliably, the profit on these projects was taken in proportion to the progress of work on the basis of costs spent. With effect from the 2003 financial year, results on all work in progress are stated on the basis of the expected result on completion of the work, and in proportion to progress made on the basis of the cost price of the work done during the period under review. The profit will not be taken on work in progress until a reliable estimate can be made of the result on completion of the work. Provisions will be made for expected losses as soon as they are foreseen and deducted from the cost price. Turnover consists of the cost price of the work done during the period under review, plus the result determined in accordance with the system described here. This procedure is usual in the contracting world and is the method preferred by the Dutch Guidelines for annual reporting. This system is also required by the International Financial Reporting Standards (IFRS), which the company will meet with effect from the 2005 financial year. The change has been implemented through the profit and loss account of The result for the financial years 2003 and 2004 has been determined using the new system. The one-off cumulative effect for the position as at 1 January 2003 has been entered under other operating income in the operating result of Change in estimation principles 2003 The settlement of a number of tax assessments that have been outstanding for some time now and of associated tax disputes have made the tax position of the company clearer in Consequently, on the basis of the prevailing reporting standards, deferred tax claims have been included in the balance sheet for the 2003 financial year. These deferred tax claims, which are in part offset by related deferred tax liabilities, consist primarily of: a higher tax valuation of equipment; provisions not formed for tax purposes; timing differences relating to costs and revenues; future recapture foreign branch losses. The balance of the deferred tax claims has been entered at nominal value. Given the fact that the timing of the settlement of these deferred tax claims coincides to a large extent with the timing of the settlement of the tax liabilities included in the long-term liabilities, the two amounts have been netted. 52 Annual Report 2004

54 Financial Statements 2004 Consolidation The consolidated statements include Royal Boskalis Westminster nv and its group companies. Group companies are those companies in which Royal Boskalis Westminster nv, either directly or indirectly, solely or on the basis of an agreement with other shareholders, holds more than 50% of the voting shares and has a decisive management influence. The statements for these group companies are fully consolidated. The key consolidated group companies are listed in note 1. of the explanatory notes to the consolidated balance sheet and profit and loss account. Joint ventures are consolidated in proportion to the interest held therein, in so far as the activities are identical or complementary to those of the group. Jointly controlled entities are also consolidated in proportion to the interest held therein. Goodwill The difference between acquisition cost and net asset value, based on the accounting principles of Royal Boskalis Westminster nv, arising from the acquisition of group companies or from investments in associated companies, is capitalized and consistently amortized through the profit and loss account during the estimated economic lifetime. Foreign currencies All assets and liabilities of foreign group companies are translated at the rates of exchange prevailing at the end of the year, with the exception of tangible fixed assets used internationally, which are translated at the rates of exchange prevailing at the time of acquisition of the assets concerned. The results of foreign group companies are translated at the average rates of exchange prevailing during the year, with the exception of the amounts charged for depreciation, which are translated at the same rates of exchange as the assets concerned. Currency translation differences resulting from the application of these principles are directly credited or charged to other reserves. In principle, contracts for projects which are denominated in foreign currencies are fully hedged by means of financial derivatives, usually forward exchange contracts. Valuation of these contracts and the relevant assets and liabilities is based on the prevailing forward rate. Financial derivatives are not used when there are no real underlying transactions. Other assets and liabilities denominated in foreign currencies are translated at the rates of exchange prevailing at the end of the year. Exchange differences relating to transactions in foreign currencies are included in other operating income. 53 Royal Boskalis Westminster nv

55 Financial Statements 2004 Tangible fixed assets The book value of tangible fixed assets is calculated by deducting the accumulated depreciation charges from the cost of acquisition. Interest paid during construction is not capitalized. Investment grants received as subsidies for the building of sea-going vessels are deducted from the acquisition cost. Large equipment commissioned since 1996 is depreciated on the basis of acquisition cost. The depreciation charges are based upon the expected economic lifetime of the assets. For the fleet, life expectancy is in general years. For other construction equipment, it is an average of 5 years. Large equipment commissioned before 1996 is depreciated using the declining balance method on the basis of a fixed percentage of the book value, taking into account an estimated residual value. Investments in floating and other contract-related construction equipment are depreciated over a shorter period of time. The remaining assets are depreciated on the basis of a fixed percentage of the acquisition cost, based upon a period of use of years for buildings, and 4 years for furniture, fixtures and fittings, etc. Land is not depreciated, with the exception of land for sand production, which is depreciated according to the tonnage principle. The long-term operational lease agreement for the trailing suction hopper dredger Stuyvesant concluded by a foreign group company has not been capitalized due to the fact that Royal Boskalis Westminster nv is not the economic owner of this vessel. The financial commitments relating thereto are accounted for under Commitments and contingent liabilities. Financial fixed assets The valuation of associated companies is based upon the Royal Boskalis Westminster nv share in the net asset value, in accordance with the balance sheets prepared by the companies concerned, less such provisions as are deemed necessary. Profits made in countries with weak currencies and/or transfer restrictions are only accounted for when conversion into hard currency has been secured. The valuation of other financial fixed assets is based upon nominal value or acquisition cost, less such provisions as are deemed necessary. Inventory The inventory consists mainly of consumables and spare parts and is valued at average cost less such provisions as are considered necessary. Work in progress Work in progress is valued at the cost price of work done, plus a part of the expected results on completion of the work in proportion to the progress made. Provisions are made for expected losses on work in pro gress as soon as they are foreseen and deducted from the cost price. The cost price includes direct project costs, consisting of direct payroll costs, materials, costs of sub-contracted work, other direct costs and rates for equipment used. The progress of a project is determined on the basis of the cost of the work done in relation to the expected cost price of the project as a whole. The profit will not be taken on work in progress until a reliable estimate can be made of the result on completion of the work. Progress payments invoiced and advance payments received are deducted from work in progress. 54 Annual Report 2004

56 Financial Statements 2004 Provision Provisions are made for commitments of uncertain size or uncertain timing which relate to the activities of the company. The provision for deferred taxation results mainly from temporary differences between the commercial and taxable results and is calculated at nominal value by using the applicable rate of corporate income tax. The provision for repairs is made for regular and overdue maintenance of plant and equipment, in order to achieve a fair allocation of the repair costs over the years. The provision for pensions relates to pension liabilities for past service costs not yet paid of a foreign group company and has been calculated on an actuarial basis at the rate of 6%. Net turnover Net turnover consists of the cost of the work done during the period under review, plus a part of the expected results on completion of the work in proportion to the progress made during that period, and including and/or deducting the provisions formed, used or released during the period under review for expected losses. Operating result The operating result consists of: actual results from the work done during the period of review in proportion to progress made; additions to, use or release of provisions for expected losses on work in progress; deferred profits from contracts completed in earlier years, realized during the reporting year; operational results of equipment, determined as the difference between the hire charges to projects and the operational costs of equipment, including depreciation; general overhead costs; all other income and expenditure resulting from normal operations, including book profits on the sale of tangible fixed assets and currency profits and losses. Result from associated companies This is the share of Royal Boskalis Westminster nv in the results after tax of associated companies. Taxation Corporate income tax is accounted for on the basis of the results reported, taking into consideration the applicable fiscal rules and rates. Temporary differences are valued as deferred tax claims and/or commitments, in so far as it is probable that tax profits will be available for settlement in the future. The carrying forward of tax losses is not generally taken into account given the project-based approach to activities in most countries. Cash flow The consolidated cash flow statement has been drawn up using the indirect method. Cash is defined as bank deposits, cash and short-term bank debts. 55 Royal Boskalis Westminster nv

57 Financial Statements 2004 Consolidated balance sheet before profit appropriation (1) (in 1,000) 31 December December 2003 Fixed assets Tangible fixed assets (2) 623, ,756 Financial fixed assets associated companies (3) 47,166 52,051 other financial fixed assets (4) ,145 53,046 Total fixed assets 672, ,802 Current assets Inventory 41,292 30,842 Work in progress (5) ( 127,381 ) ( 112,329 ) Debtors and prepayments (6) 348, ,682 Bank deposits and cash (7) 135, ,159 Total current assets 398, ,354 Current liabilities Creditors, other liabilities and accruals (8) 509, ,115 Repayments and bank debts (9) 11,487 8,823 Total current liabilities 520, ,938 Net current assets ( 122,300 ) ( 71,584 ) Total assets less current liabilities 549, ,218 Long-term loans (10) 5,726 9,028 Long-term liabilities (11) 22,345 61,345 Provisions (12) 56,775 63,604 Shareholders equity (13) 464, , , ,218 (1) The figures in brackets outside the columns refer to the explanatory notes (see pages 59-69). 56 Annual Report 2004

58 Financial Statements 2004 Consolidated profit and loss account (1) (in 1,000) Net turnover (16) 1,001,204 1,045,523 Other operating income (17) 3,747 41,356 Total operating income 1,004,951 1,086,879 External costs (18) ( 702,908 ) ( 745,756 ) Wages and salaries (19) ( 146,198 ) ( 144,586 ) Social security costs (20) ( 29,246 ) ( 47,640 ) Depreciation of tangible fixed assets (2) ( 89,158 ) ( 79,296 ) Total operating costs ( 967,510 ) ( 1,017,278 ) Operating result 37,441 69,601 Interest received 1,539 3,019 Interest paid ( 2,722 ) ( 3,016 ) Result from associated companies (3) 4,073 8,337 Net financial income 2,890 8,340 Result before taxation 40,331 77,941 Taxation (21) ( 10,161 ) ( 7,087 ) Net result 30,170 70,854 Profit per share ( 1.00) *) Profit per share, fully diluted ( 1.00) **) (1) The figures in brackets outside the columns refer to the explanatory notes (see pages 59-69). *) Net profit for the financial year divided by the weighted average number of outstanding ordinary shares. **) Profit for the financial year divided by the weighted average number of outstanding ordinary shares, adjusted for all potential ordinary shares which will cause dilution effects. 57 Royal Boskalis Westminster nv

59 Financial Statements 2004 Consolidated cash flow statement (in 1,000) Cash flow from operations Net result 30,170 70,854 Depreciation 89,158 79,296 Cash flow 119, ,150 (Increase) / decrease working capital 18,831 59,377 (Increase) / decrease financial fixed assets 2, (Decrease) / increase long-term liabilities ( 39,000 ) 18,829 Decrease provisions ( 7,710 ) ( 8,667 ) Direct movements in reserves and other movements. 495 Net cash flow from operations 93, ,308 Investments Net investments in tangible fixed assets ( 107,160 ) ( 148,257 ) Acquisitions / investments in group companies and associated companies ( 1,518 ) ( 7,807 ) Total investments ( 108,678 ) ( 156,064 ) Financing Increase / (decrease) long-term loans and repayments on long-term loans 3,249 ( 3,757 ) Payment of dividend previous financial year ( 9,896 ) ( 9,810 ) Total financing ( 6,647 ) ( 13,567 ) Net cash flow from investments and financing ( 115,325 ) ( 169,631 ) (Decrease) / increase in bank deposits and cash / other short-term bank debts ( 21,410 ) 50,677 Bank deposits and cash / other short-term bank debts As at 1 January 153, ,047 As at 31 December 132, ,724 (Decrease) / increase in bank deposits and cash / other short-term bank debts ( 21,410 ) 50, Annual Report 2004

60 Financial Statements 2004 Explanatory notes to the consolidated balance sheet and profit and loss account 1. General Unless stated otherwise, all amounts in these explanatory notes are in thousands of euros. The consolidated balance sheet was drawn up before profit appropriation. The most important group companies and proport ionally consolidated participating interests included in the consolidation of Royal Boskalis Westminster nv are: The Netherlands Aannemersbedrijf M. de Haan bv, Drachtstercompagnie Aannemingsmaatschappij Markus bv, Halfweg Archirodon Group NV, Dordrecht (40%) Baggermaatschappij Boskalis bv, Papendrecht Baggermaatschappij Holland bv, Papendrecht Boskalis Cortlever Holding bv, Amsterdam (51%) Boskalis Dolman bv, Dordrecht Boskalis International bv, Sliedrecht Boskalis Markus bv, Papendrecht Boskalis Offshore bv, Papendrecht Boskalis bv, Rotterdam Boskalis Westminster Dredging bv, Papendrecht Boskalis Westminster International bv, Papendrecht Boskalis Westminster Shipping bv, in formation, Papendrecht (new) Boskalis Finance bv, Papendrecht BW Soco bv, Sliedrecht A.H. Breijs & Zonen Onroerend Goed bv, Rotterdam A.H. Breijs & Zonen bv, Rotterdam J. van Vliet bv, Wormerveer Hydronamic bv, Sliedrecht Westminster Dredging Company Ltd, Papendrecht Other areas Boskalis Westminster Ltd, Fareham (United Kingdom) Rock Fall Company Ltd, Ayrshire (United Kingdom) Irish Dredging Company Ltd, Cork (Ireland) Boskalis Sweden AB, Gothenburg (Sweden) Atlantique Dragage SARL, Nanterre (France) Boskalis Offshore A/S, Randaberg (Norway) Terramare Oy, Helsinki (Finland) Sociedad Española de Dragados SA, Madrid (Spain) Dragapor Dragagens de Portugal S.A., Alcochete (Portugal) Bagger- und Bauunternehmung Delta GmbH, Bremen (Germany) Heinrich Hirdes GmbH, Hamburg (Germany) Heinrich Hirdes Wasser- und Tiefbau GmbH, Duisburg (Germany) Boskalis Westminster Middle East Ltd, Nicosia (Cyprus) Beaver Dredging Company Ltd, Toronto (Canada) Boskalis Westminster Inc., Wilmington (United States of America) Bean Stuyvesant LLC, Delaware (United States of America) (50%) Coastal and Inland Marine Services Inc., Ancon (Panama) Dragamex SA de CV, Coatzacoalcos (Mexico) (50%) Boscampo, Douala (Cameroon) Boskalis Taiwan Ltd, Taipei (Taiwan) Boskalis International (S.) Pte Ltd (Singapore) Riovia SA, Montevideo (Uruguay) Zinkcon Marine Singapore Pte Ltd (Singapore) The complete list of consolidated group companies, joint ventures and associated companies has been filed at the Chamber of Commerce in Rotterdam. Section 403, Part 9, Book 2 of the Netherlands Civil Code is applicable to a number of group companies included in this list. 59 Royal Boskalis Westminster nv

61 Financial Statements Tangible fixed assets Land and Floating Other Fixed assets Tangible Total buildings and other fixed not engaged fixed assets construction assets in normal under equipment operations construction Balance as at 1 January 2004 Cost 61,050 1,094,917 38, ,587 1,314,440 Depreciation ( 27,176 ) ( 657,023 ) ( 22,327 ) ( 158 ) ( 706,684 ) Net book value 33, ,894 16, , ,756 Movements Additions ,953 7, , ,398 In / (out of) consolidation Taken into service ,979 ( 29 ) ( 194,183 ) Disposals at net book value ( 3,485 ) ( 314 ) ( 3,799 ) Depreciation ( 3,912 ) ( 73,853 ) ( 11,380 ) ( 13 ) ( 89,158 ) Currency translation differences and other movements 282 ( 5,359 ) 4,742 ( 8 ) ( 122 ) ( 465 ) Total movements in 2004 ( 2,426 ) 133, ( 11 ) ( 114,932 ) 16,224 Balance as at 31 December 2004 Cost 62,971 1,284,839 54, ,655 1,407,509 Depreciation ( 31,523 ) ( 713,462 ) ( 38,383 ) ( 161 ) ( 783,529 ) Net book value 31, ,377 16, , ,980 Depreciation includes an additional item of 4.4 million, for a number of older units as a result of fleet rationalization as part of the reorganization program (2003: 7.1 million). The current value of floating and other construction equipment considerably exceeds the book value, which is based on historical cost and related depreciation. For land and buildings it is reasonable to assume that the current value exceeds the net book value to some extent. An amount of 0.8 million, representing land used for sand production, has been accounted for under land and buildings (2003: 1.0 million). 3. Associated companies The key associated companies are: Bean Meridian Holding LLC, Delaware, United States of America 25% Bean Excavation LLC, Delaware, United States of America 25% Bean Meridian LLC, Delaware, United States of America 25% Lamnalco Ltd, Nicosia, Cyprus 50% RW Aggregates Ltd, Dorking, United Kingdom 50% 60 Annual Report 2004

62 Financial Statements 2004 Movements during 2004 were as follows: Book value as at 1 January ,051 Share of results 4,073 Dividends received ( 3,059 ) Investments / divestments 1,367 Currency translation differences and other movements ( 7,266 ) Book value as at 31 December , Other financial fixed assets Movements during 2004 were as follows: Book value as at 1 January Other movements 0 0( 16 ) Book value as at 31 December Work in progress Work in progress 1,278,030 1,048,091 Progress payments ( 1,405,411 ) ( 1,160,420 ) ( 127,381 ) ( 112,329 ) Work in progress includes contracts of which the value of work done exceeds customer progress payments. At year-end 2004, the total amounts of the value of work done and the customer progress payments of these contracts were million and million respectively (2003: million and million respectively). As a result of the change in the system for profit-taking on work in progress in 2003, the value of the work in progress was increased with effect from 1 January 2003 by the accumulated profit on work in progress before taxation in pro portion to progress. 6. Debtors and prepayments Trade debtors 213, ,770 Amounts due from associated companies 12,249 14,955 Other debtors and prepayments 122, , , ,682 Included in Other debtors and prepayments as at the end of 2004 are receivables amounting to 9.9 million which do not fall due within one year (2003: 2.1 million). 61 Royal Boskalis Westminster nv

63 Financial Statements Bank deposits and cash This includes 56.4 million (2003: 60.6 million) of joint-venture funds. In addition, at year-end 2004, 3.3 million was in restricted cash (2003: 6.3 million). The remaining funds were freely disposable at year-end At the end of 2004, the lease commitments for the trailing suction hopper dredger WD Fairway, along with the related prepaid currency swap and deposits were, for the most part, settled earlier than planned. 8. Creditors and accruals Trade creditors 124,356 94,700 Amounts due to associated companies.2,363 4,356 Corporate taxes 44,752 28,736 Other taxes and social security payables.29,824 40,218 Pensions 6,000 Other creditors and accruals.307, , , ,115 The short-term liabilities are generally not interest-bearing. 9. Repayments and bank debts Repayments on long-term loans.7,939 1,388 Other debts.3,548 7,435.11,487 8,823 With regard to the repayment commitments and the other bank debts, security was provided in the form of mortgage rights on equipment and silent pledge on the designated assets for a total amount of 2.1 million. 10. Long-term loans As at 31 December 2004, the average interest rate for the long-term loans was 3.5%. The average remaining maturity period of these loans is approximately 2.7 years. Long-term loans with a remaining term in excess of five years are approximately nil. The repayments due in 2005 are accounted for under repayments and bank debts. By means of mortgage rights on equipment and silent pledge, securities have been provided in respect of 0.5 million of the longterm loans outstanding as at year-end Annual Report 2004

64 Financial Statements Long-term liabilities Taxes 6,893 19,134 Pensions 12,000 Other creditors and accruals 15,452 30,211 22,345 61,345 Long-term taxes payable consist of taxes that are due after one year but expected to be due within five years. No interest is due on creditors and accruals and payment is expected to be due after five years. 12. Provisions Deferred Maintenance Pensions Reorganization Others Total taxation and repair Balance as at 1 January ,448 34,646 3,804 2,706 63,604 Additions 40 75, , ,481 Withdrawals ( 3,429 ) ( 77,843 ) ( 65 ) ( 4,886 ) ( 787 ) ( 87,010 ) Released ( 2,413 ) ( 2,413 ) Currency translation differences ( 209 ) ( 551 ) ( 127 ) ( 887 ) Balance as at 31 December, ,437 32,024 3,790 2,709 1,815 56,775 The provision for deferred taxation mainly refers to temporary differences between the fiscal and commercial valuation of equipment lasting more than one year. The provision for pensions relates to pension liabilities involving employees and former employees of a foreign group company. These liabilities are not reinsured except for the widows and orphans pensions. Included under Other provisions are provisions for warranties, current legal proceedings and submitted claims. The provision for reorganization costs primarily concerns payments in the context of a severance plan for staff who left active service in The provisions are predominantly long-term in nature, with the exception of the provision for equipment maintenance and the provision for reorganization costs, of which the short-term parts amount to 25 million and 2 million respectively. 13. Shareholders equity Reference is made to notes of the explanatory notes to the company balance sheet and profit and loss account. 63 Royal Boskalis Westminster nv

65 Financial Statements Financial instruments General. Pursuant to a financial policy agreed by the Board of Management, Royal Boskalis Westminster nv and its group companies use several financial instruments in the ordinary course of business. These are financial instruments that are accounted for under assets and liabilities as well as instruments not accounted for on the balance sheet. A large proportion of projects are contracted in foreign currencies. In principle, positions in foreign currency are fully hedged, usually by means of forward contracts. Financial derivatives (forward contracts, options, etc.) are not used unless there is an underlying real transaction. In respect of controlling interest risks, the premise is that, in principle, interest rates for loans payable are fixed for the entire maturity period. This is achieved by contracting loans that carry a fixed interest rate or by using derivatives such as interest rate swaps. Given the nature of the activities and the corresponding strongly fluctuating cash flows, the available cash funds are usually not tied up for periods longer than one year. Royal Boskalis Westminster nv has a strict acceptance and hedging policy for political and payment risks. In principle, payment risks are hedged by means of bank guarantees, insurance, etc., except in the case of credit-worthy, first-class debtors. These procedures and the geographical diversification of the group companies activities reduce the risk carried by Royal Boskalis Westminster nv with regard to credit concentration and market risks. Financial instruments accounted for on the balance sheet. Financial instruments accounted for under assets and liabilities are financial fixed assets, cash and accounts receivable, as well as short- and longterm liabilities. The estimated fair value of these financial instruments resembles the nominal value. Off-balance-sheet financial instruments. The fair value of the off-balance-sheet financial instruments as at 31 December 2004 reflects the unrealized result at revaluation of the contracts against calculated forward exchange rates. As at 31 December 2004, the unrealized positive result amounts to 17 million (2003: 28 million positive). These unrealized results have been taken into account in the determination of the book value of the underlying balance sheet items or the estimate of the results for ongoing projects and acquired orders. The nominal value is 249 million (2003: 248 million). 64 Annual Report 2004

66 Financial Statements Commitments and contingent liabilities The guarantee commitments as at 31 December 2004 amount to 414 million and can be specified as follows (x 1 million): Guarantees provided by third parties on behalf of: associated companies contracts and joint ventures lease obligations and other financial obligations For the above guarantees outstanding at the end of 2004, counter-guarantees have been provided to financial institutions for approximately 413 million (2003: approximately 501 million). Three key group companies are jointly and severally liable in respect of credit facilities and guarantees provided to several group companies. In respect of these credit facilities, it has been agreed that providing further securities on existing tangible fixed assets is limited. Group companies are jointly and severally liable for the non-consolidated part of the liabilities of their joint ventures, in total 167 million. In addition, certain recourse obligations exist in respect of project financiers. Where deemed necessary, provisions have been made. In some countries, local group companies have concluded long-term lease agreements on which the annual instalment payments total approximately 5 million. In respect of some matters, legal proceedings and investigations have been instituted against Royal Boskalis Westminster nv or group companies. Where deemed necessary, provisions have been made. No significant investment liabilities were outstanding at year-end 2004 (2003: 75 million). 16. Net turnover For the net turnover specified per geographical region, reference is made to note 22. of these explanatory notes. 65 Royal Boskalis Westminster nv

67 Financial Statements Other operating income Other operating income includes currency results and book results. Of this, 0.3 million relates to the 2004 reorganization. In 2003, the book results were generated mainly from book profits by virtue of insurance payments for the cutter suction dredger Oranje that sunk ( 13.3 million). In addition, the other operating income item for 2003 contained the accumulated effect of the change in accounting principles in 2003, consisting of the accumulated profits on work in progress in proportion to progress made in previous years, amounting to 26.7 million (the balance of the net turnover of million and external costs of million). The inclusion of this item and associated tax burden is shown below. One-off cumulative effect of change in accounting principles 1 January 2003 Other operating income. 26,694 Operating result. 26,694 Taxation ( 7,235 ) Net result. 19, External costs This includes costs related to the turnover and general operations, either paid or payable to outside parties. Furthermore, this item includes the balance of additions to, and withdrawals from, the provisions, with the exception of the provision for deferred tax liabilities, the pensions provision and the provision for reorganization costs. For 2004, the external costs item includes 0.8 million in reorganization expenses. 66 Annual Report 2004

68 Financial Statements Wages and salaries The wages and salaries item for 2004 included 6.8 million in reorganization expenses. The emoluments for directors and members of the Supervisory Board of Royal Boskalis Westminister nv for 2003 were as follows: Periodical Payments Profit share and Total 2003 payments due bonus payment Members of the Board of Management R. van Gelder P.A.M. Berdowski K.G. van Nes (active up to ) A.H.A. Hoevenaars (up to ) , ,969 2,354 Members of the Supervisory Board M.W. Dekker S.D. de Bree (up to ) J. Aalberts M. van der Vorm A.A. Westerlaken Total 1, ,070 2,451 The variable remuneration given in 2004, is related to the achievement of certain targets during the 2003 financial year. These targets have been achieved. No loans or guarantees have been provided to, or on behalf of, the managing and supervisory directors. At the end of 2004, the group companies included in the consolidation had a total of 2,654 employees (2003: 3,186), of whom 1,273 (2003: 1,680) were paid on a weekly basis. The average number of employees in 2004 was 2,870 (2003: 3,202), of which approximately three-quarters were working abroad. 20. Social security costs These include an amount of 13.6 million for pension costs (2003: 31.1 million). In addition, an amount of 1.1 million is related to reorganization expenses. The share of the pension costs in this came to 0.7 million. The social security costs of 2003 include an additional charge for pensions of 18 million resulting from a new financing agreement entered into in 2003 with the Boskalis Westminster Nederland Pension Fund. In that agreement, the company has undertaken to make an additional payment in instalments as part of the Recovery plan for the improvement of the financial position of the Pension Fund drawn up in consultation with the Pensions and Insurance Supervisory Board. 67 Royal Boskalis Westminster nv

69 Financial Statements Taxation The operational activities of Royal Boskalis Westminster nv are subject to various tax regimes with tax rates varying from 10% to 44%. These different tax rates, in connection with fiscal facilities in various countries, results not subject to taxation and non-deductible costs, lead to an effective tax rate in the reporting period of 25.2% (2003: 9.1%). The average effective tax rate is calculated by dividing the taxation by the result before taxation shown in the consolidated profit and loss account. The reconciliation between the weighted average tax rate and the effective tax rate is as follows (in percentages): Weighted average tax rate Tax effect of: Utilization of non-capitalized losses carried forward ( 5.5 ) ( 1.8 ) Non-capitalized future losses carried forward Results not subject to taxation and non-deductible costs ( 13.8 ) ( 6.7 ) Non-deductible and exceptional regimes ( 2.4 ) ( 1.8 ) Change in estimation principles 2003, ( 22.7 ) Effective tax rate In addition to taxes on profits from operating activities, taxation in 2003 also includes the effect of the change in estimation principles made during that financial year with respect to deferred taxation claims. This effect amounts to 17.7 million. 22. Segmentation Royal Boskalis Westminster nv is a dredging contractor with international operations and a strong focus. The necessary assets are generally not regionspecific and can be deployed worldwide. Given the nature of the activities, each individual project at Royal Boskalis Westminster nv has its own risk and return profile. A correct picture can only be obtained by evaluating the activities jointly as a complete portfolio. To understand the risk and return profile of Royal Boskalis Westminster nv, it is therefore less relevant to provide detailed information on the various activities and geographical regions. Although not decisive for the risk and return profile, the organizational and management structure of the corporation and the internal system of financial reporting to the Board of Management are mainly based on geographical regions. These regions are therefore used as a secondary segmentation basis. 68 Annual Report 2004

70 Financial Statements 2004 The consolidated information per geographical segment can be specified as follows (in 1 million): Net Total Total Net Total Total turnover book value investments turnover book value investments work tangible tangible work tangible tangible done fixed assets* fixed assets* done fixed assets* fixed assets* The Netherlands Rest of Europe Australia / Asia Middle East Africa North and South America , , *) The tangible fixed assets of Royal Boskalis Westminster nv mainly consist of equipment used globally on a project basis. As a consequence this equipment could not be allocated to the individual geographical segments. 69 Royal Boskalis Westminster nv

71 Financial Statements 2004 Company balance sheet before profit appropriation (1) (in 1,000) 31 December December 2003 Fixed assets Investment in group company (2) 462, ,602 Total fixed assets 462, ,602 Current assets Amounts due from group companies 2,414 Total current assets 2,414 Current liabilities Amounts due to group companies. 3,361 Total current liabilities. 3,361 Net current assets 2,414 ( 3,361 ) Total assets less current liabilities 464, ,241 Shareholders equity Issued and fully paid share capital (3) 67,617 65,415 Share premium reserve (4) 13,874 14,635 Other reserves (5) 353, ,337 Non-distributed profit 30,170 70, , ,241 (1) The figures in brackets outside the columns refer to the explanatory notes (see pages 72-74). 70 Annual Report 2004

72 Financial Statements 2004 Company profit and loss account (1) (in 1,000) Company result ( 329 ) ( 281 ) Result of group company (2) 30,499 71,135 Net result 30,170 70,854 (1) The figures in brackets outside the columns refer to the explanatory notes (see pages 72-74). 71 Royal Boskalis Westminster nv

73 Financial Statements 2004 Explanatory notes to the company balance sheet and profit and loss account 1. General Unless stated otherwise, all amounts in these explanatory notes are stated in thousands of euros. The company balance sheet was drawn up before profit appropriation. The company profit and loss account is limited in accordance with Section 402, Part 9, Book 2 of the Netherlands Civil Code. 2. Investment in group company This refers to the 100% investment in Boskalis Westminster Dredging bv, Papendrecht. Movements during 2004 were as follows: Book value as at 1 January ,602 Dividend received 2003 ( 16,000 ) Currency translation differences ( 10,536 ) Result of group company 30,499 Book value as at 31 December , Issued and fully paid share capital The authorized share capital of 240 million is divided into 50,000,000 ordinary shares and 50,000,000 cumulative protective preference shares of 2.40 par value each. Movements of the issued and fully paid share capital were as follows: Balance as at 1 January 65,415 63,520 Stock dividend 2,202 1,895 Balance as at 31 December 67,617 65,415 Movements in the number of ordinary shares owned by the company were as follows: Balance as at 1 January 496,744 Exercised option rights ( 30,000 ) Stock dividend ( 466,744 ) Balance as at 31 December The issued and fully paid share capital as at 31 December 2004 consists of 28,173,865 ordinary shares of 2.40 par value each and consequently amounts to 67.6 million. In 1997 and 1998, option rights were granted to twenty senior managers of Royal Boskalis Westminster nv and its group companies. The remaining rights were exercised in Furthermore a stock dividend was distributed for 2003 and charged to the share premium reserve for For that purpose, 917,616 new shares were issued. Of the issued and fully paid share capital as at 31 December 2004, no ordinary shares were owned by Royal Boskalis Westminster nv. 72 Annual Report 2004

74 Financial Statements 2004 The number of shares owned by managing directors as at 31 December 2004, was as follows: R. van Gelder 37,500 37, Share premium reserve Movements were as follows: Balance as at 1 January 14,635 17,650 Stock dividend ( 761 ) ( 3,015 ) Balance as at 31 December 13,874 14,635 The entire share premium reserve is distributable free of tax. 5. Other reserves Movements were as follows: Balance as at 1 January 304, ,724 Profit appropriation for previous reporting year 59,517 73,406 Issue of formerly purchased own ordinary shares for purposes of exercised options..495 Currency translation differences and other movements ( 10,536 ) ( 19,288 ) Balance as at 31 December 353, ,337 A legal reserve for non-distributed profits of group and/or associated companies was not required at the end of A proposal will be submitted to the Annual General Meeting of Shareholders to appropriate 21.2 million for a dividend payment of 0.75 per share, to be taken in stock or in cash. The remainder of 9.0 million will be added to the other reserves. 73 Royal Boskalis Westminster nv

75 Financial Statements Commitments and contingent liabilities Royal Boskalis Westminster nv heads the fiscal entity which includes almost all Dutch 100% subsidiaries. The company is therefore liable for the tax obligations of the fiscal entity as a whole. The company has issued guarantees on behalf of contracts, joint ventures and group companies. These amounted to 3 million at the end of 2004 (2003: 3 million). Furthermore, the long-term operational lease commitments of a foreign group company have been guaranteed for approximately 5 million (2003: 5 million) per annum. In addition, certain recourse obligations exist in respect of project financiers. Where deemed necessary, provisions have been made. In respect of some matters, legal proceedings and investigations have been instituted against Royal Boskalis Westminster nv or group companies. Where deemed necessary, provisions have been made. Papendrecht / Sliedrecht, 14 March 2005 Supervisory Board M.W. Dekker, chairman J. Aalberts M. van der Vorm A.A. Westerlaken M. Minderhoud H. Benjamins R.M.F. van Loon Board of Management R. van Gelder P.A.M. Berdowski 74 Annual Report 2004

76 Other information Other information Provisions in the articles of association relating to profit appropriation Article From the profits realized in any financial year, first of all, distributions will be made on cumulative protective preference shares if possible, in the amount of the percentage specified below of the amount that has to be paid up on these shares as from the beginning of the financial year to which the distribution is related. The percentage referred to above equals the average Euribor interest rate determined for loans with a term of one year weighted in respect of the number of days to which this interest rate applied during the financial year to which the distribution is related, increased with four percentage points at most; this increase will be determined every five years by the Board of Management subject to approval of the Supervisory Board. If in the financial year in respect of which the above-mentioned distribution takes place, the amount that has to be paid up on cumulative protective preference shares has been reduced or, pursuant to a resolution for further payment, has been increased, the distribution shall be reduced or, if possible, be increased with an amount equal to the above-mentioned percentage of the amount of the reduction or the increase, as the case may be, calculated from the moment of the reduction or from the moment further payment became compulsory. If in the course of any financial year cumulative protective preference shares have been issued, the dividend on those cumulative protective preference shares shall be reduced for that year in proportion to the day of issue, taking into account a part of a month as a full month. 2. If and in so far as the profit is not enough to realize the distribution referred to in paragraph 1, the deficit shall be distributed from the reserves, subject to statutory provisions. 3. If in any financial year the profit referred to in paragraph 1 is not enough to realize the distributions refer red to above in this article, and furthermore no distribution or only a partial distribution from the reserves as referred to in paragraph 2 is realized, so that the deficit is not or not completely distributed, the provisions of this article and the provisions of the following paragraphs shall only apply in the next financial years after the deficit has been made up for. After application of paragraphs 1, 2 and 3, no further distribution shall take place on the cumulative protective preference shares. 4. Out of the remaining profit, an amount shall be reserved annually to the extent as shall be determined by the combined meeting of the Board of Management and the Supervisory Board. The remaining part of the profits after reservation, as referred to in the immediately preceding sentence, is at the free disposal of the General Meeting of Shareholders and in case of distribution, the holders of ordinary shares will be entitled thereto in proportion to their holding of ordinary shares. Article Dividends shall be made available for payment within thirty days of their adoption, or any sooner as the Board of Management may determine. 2. Unclaimed dividends will revert to the company after five years. 3. If the Board of Management, subject to the approval of the Supervisory Board, so decides, an interim dividend shall be distributed, subject to the preference of the cumulative protective preference shares and the provisions of article 2:105 of the Dutch Civil Code. 4. The General Meeting of Shareholders, on proposal of the Board of Management, may decide that dividends will be distributed totally or partially in the form of shares in the company or depositary certificates thereof. 75 Royal Boskalis Westminster nv

77 Other information 5. The company may only realize distributions to the shareholder to the extent that its equity capital exceeds the amount of the subscribed capital, increased with the reserves that have to be maintained by law. 6. A deficit may only be offset against reserves that have to be maintained by law to the extent that this is permitted by the law. Proposed profit appropriation In accordance with Article 27 of the articles of association, 21.2 million of the net result after tax will be appropriated for a dividend payment of 0.75 per share. It is proposed to add the balance of 9.0 million to other reserves. Shareholders may opt to take this dividend as follows: entirely in stock; the dividend will be charged to the tax-exempt share premium reserve or to other reserves, or entirely in cash; 0.75 per share will be distributed, after the deduction of dividend tax. The option period will commence on 12 May and end on 27 May The conversion ratio between the stock dividend and cash dividend will be announced on 30 May The conversion ratio will be determined on the basis of the average of the closing rate of the Boskalis share on 23 May, 24 May, 25 May, 26 May and 27 May The new shares will share in the profit for the 2005 financial year and subsequent years. Auditor s report Introduction. We have audited the 2004 financial statements as included in this annual report of Royal Boskalis Westminster nv, Sliedrecht. These financial statements are the responsibility of the company s management. Our responsibility is to express an opinion on these financial statements based on our audit. Scope. We have conducted our audit in accordance with auditing standards generally accepted in The Netherlands. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Opinion. In our opinion, the financial statements give a true and fair view of the financial position of the company as of 31 December 2004 and of the result for the year then ended in accordance with accounting principles generally accepted in The Netherlands and comply with the financial reporting requirements included in Part 9, Book 2, of The Netherlands Civil Code. Rotterdam, 14 March 2005 KPMG Accountants N.V. 76 Annual Report 2004

78 Stichting Continuïteit KBW Stichting Continuïteit KBW Report The Stichting Continuïteit KBW has, pursuant to the decision of the General Meeting of Shareholders held on 9 May 2001, acquired the right to take cumulative protective preference shares in Royal Boskalis Westminster nv for a nominal amount which shall be equal to the nominal amount of ordinary shares outstanding at the time of the issue. The option of issuing the cumulative protective preference shares has not yet been exercised. The Board of the Stichting Continuïteit KBW consists of three members: W.E. de Vin J.A. Dekker J.F. van Duijne Declaration of Independence The Board of the Stichting Continuïteit KBW and the Board of Management of Royal Boskalis Westminster nv hereby declare that, in their joint opinion, the requirements referred to in appendix X of the Listing and Issuing Rules of Euronext Amsterdam N.V. in respect of the independence of the Stichting Continuïteit KBW have been fulfilled. Papendrecht, March 2005 Royal Boskalis Westminster nv Board of Management Stichting Continuïteit KBW The Board 77 Royal Boskalis Westminster nv

79 Ten years Boskalis Ten years Boskalis (1) (amounts x 1 million, unless stated otherwise) (2) Turnover (work done) 1,001 1,046 1,035 1, Turnover (completed contracts) 1,124 1, Orderbook (work to be done) (3) 1,164 1,124 1,273 1,224 1, EBIT (4) EBITDA (5) Net result Depreciation Cash flow Shareholders equity (3) Average number of outstanding shares (x 1,000) (9) 27,769 26,630 25,949 25,900 25,784 25,902 25,941 25,788 25,650 25,441 Number of outstanding shares (x 1,000) (10) 28,174 27,256 25,970 25,917 25,881 25,902 25,941 25,788 25,650 25,441 Personnel (number of persons) (3) 2,654 3,186 3,285 3,119 3,295 3,186 3,115 3,075 3,179 2,679 Ratios (percentages) Operating result as % of the turnover Return on capital employed (6) Return on equity (7) Solvency (3/8) Figures per share (x 1.00) Profit (9/11) Cash flow (9) Shareholders equity (3/10) Dividend Share price range (x 1.00) (Depositary receipts of) ordinary shares (1) Figures taken from the financial statements. (2) Results on work in progress from 2003 onwards based on work done and up to and including 2002 based on completed contracts. (3) As at 31 December. (4) Consists of earnings before interest and taxation. (5) Consists of earnings before interest, taxation, depreciation and amortization. (6) Net result + interest paid on long-term loans as % of the average capital employed (shareholders' equity + long-term loans). (7) Net result as % of the average shareholders equity. (8) Shareholders equity as % of the balance sheet total (fixed assets + current assets). (9) Weighted average number of outstanding shares less the number of shares owned by the company. (10) Number of outstanding ordinary shares less the number of shares owned by the company. (11) The dilution effect was practically nil up to the financial year Annual Report 2004

80 Legal structure Legal structure Royal Boskalis Westminster nv Boskalis Westminster Dredging bv Holding and service companies A selection of operating companies and participating interests Baggermaatschappij Boskalis bv Aannemersbedrijf M. de Haan bv Boskalis Infra bv Aannemingsmaatschappij Markus bv Cofra Int bv (51%) A.H. Breijs & Zonen bv Hydronamic bv Baggermaatschappij Holland bv J. van Vliet bv Boskalis bv Zinkcon Dekker bv Boskalis Dolman bv Boskalis Westminster Ltd Boskalis Zinkcon Ltd RW Aggregates Ltd (50%) PVW Int. Dredging & Harbour Works Ltd Westminster Gravels Ltd Rock Fall Company Ltd Zanen Dredging & Contracting Co. Ltd Boskalis Westminster International bv Archirodon Group nv (40%) Delta GmbH Atlantique Dragage SARL Dragamex SA de CV (50%) Beijing Boskalis Dredging Technology Ltd Dragapor Dragagens de Portugal S.A. BKW Dredging and Contracting Ltd Dravensa CA Boskalis Australia Pty Ltd Dredging & Contracting Belgium N.V. Boskalis Dredging India Pvt Ltd Heinrich Hirdes GmbH Boskalis International bv Heinrich Hirdes Kampfmittelräumung GmbH Boskalis International Egypt SAE Koon Zinkcon Pte Ltd (50%) Boskalis International (M) Sdn Bhd Nigerian Westminster Dredging & Marine Ltd (60%) Boskalis International (S) Pte Ltd Paragon International Engineers & Consultants bv Boskalis International Uruguay S.A. P.T. Boskalis International Indonesia Boskalis Guyana Inc. Riovia SA Boskalis Polska Sp. z o.o. Soc. Española de Dragados SA Boskalis South Africa (Pty) Ltd Stuyvesant Dredging Company Boskalis Sweden AB Bean Stuyvesant LLC (50%) Boskalis Taiwan Ltd Terramare Oy Boskalis Westminster Aannemers N.V. Zinkcon Contractors bv Boskalis Westminster Cameroun SARL Zinkcon Dekker Wasserbau GmbH Boskalis Westminster (Oman) LLC (49%) Zinkcon International bv Boskalis Zinkcon bv Zinkcon Marine Singapore Pte Ltd Coastal and Inland Marine Services Inc. Boskalis Offshore bv Sandpiper A/S Boskalis Offshore A/S Boskalis Westminster Middle East Ltd Zanen Verstoep bv Lamnalco Ltd (50%) Lamnalco (Nigeria) Ltd (50%) Lamnalco (Malaysia) Sdn Bhd (24.5%) Lamnalco (Sharjah) Ltd (35%) Lamnalco Namibia (Pty) Ltd (35%) Boskalis Westminster Al-Rushaid Ltd (49%) BV Beheermaatschappij T. den Breejen van den Bout Boskalis Finance bv Westminster Dredging Company Ltd 79 Royal Boskalis Westminster nv

81 Sustainable, environmentally-conscious dredging is an important concept that has various connotations. For centuries, people have adjusted their activities to the presence of water, but they have also changed the course of the water to meet their needs. In the past, dikes, quay walls, and breakwaters have been used to force the water into an increasingly structured pattern. This is the essence of hydraulic engineering: changing the (wet) environment to benefit the continued preservation or improvement of living conditions. Driven by sustainability In more recent years, environmentally-conscious dredging has gained significance for cleaning polluted waterbeds or soil, where governments invest in restoring the original conditions. In addition, dredging techniques are constantly adjusted to minimize detrimental effects for the environment. In these activities, Boskalis is driven by the requirements of its clients, by laws and regulations, and by its own standards of quality. In order to keep pace with the present growth and development, Boskalis has deliberately chosen to take a consistent approach. Boskalis has subjected its organization to quality-based international standards, such as ISO and ISM certification, in which environmentally-conscious business practices are given. One of the ways in which this is expressed is the adaptation of a large percentage of the fleet to meet strict rules for waste product treatment, a proactive attitude in carrying out environmentally-sensitive projects, and particular attention for clean-up projects. Boskalis Dolman specializes in cleaning contaminated sediments. It processes contaminated dredging sediments in its own depots, cleans the sediments in separation processing plants and makes it suitable for re-use. The cleaning techniques are under continuous development and can be used anywhere in the world through the Boskalis network of offices and support desks. Growth also means: sustainable, 80 Annual Report 2004

82 The environmental disc cutter is a dredging device developed by Boskalis to carry out remediation works in an efficient manner. The dredging of contaminated underwater environments requires a high degree of accuracy. The objective, so as to minimize storage and cleaning costs, is to only dredge the contaminated material and to leave the non-polluted sediments in place. Boskalis is also an active partner in discussions with various governments regarding the technical foundation for international regulations on environmentally conscious dredging and preserving sludge. The realization of nearly all these projects has been possible thanks to active contributions from Boskalis, based in part on long-term research and creative planning and development. Growth also means: sustainable, environmentallyconscious dredging. The Dutch Ketelmeer was being cleaned up to make it suitable for water sports. That meant that six million m 3 of polluted sediment was removed, a layer varying between twenty centimeters and three meters. The sediment was pumped through pipelines directly to a depot built in the middle of the lake. environmentally-conscious dredging. Royal Boskalis Westminster nv

83 The world of Boskalis The world of Boskalis United Kingdom The Netherlands Germany Nordic United States of America Archirodon Lamnalco Mexico Italy Nigeria Head office/home market Home markets Offices of Boskalis 82 Annual Report 2004

84 Organization Organization Group management R. van Gelder, chairman Board of Management P.A.M. Berdowski, vice-chairman Board of Management J.H. Kamps, chief financial officer T.L. Baartmans, group director International F.A. Verhoeven, group director Europe International projects market Area Europe Area Middle Area Middle East Area East Area West F.A. Verhoeven, C. van den Heuvel, J. de Reus, C. Wielaart T.L. Baartmans, H.F.M. Hesseling, C.N.A.M. Kootstra B.M. de Witt T.L. Baartmans, J.J. Scheele, L. Slinger, K.F. Bogaert H.P.M. Sanders Home markets The Netherlands Boskalis bv M.C. Dekker, J.J. de With, P. van der Knaap P. van der Linde, L. Iggstrom United Kingdom Westminster Dredging Company Ltd P.G. Roland, J.J. Dekker Germany Heinrich Hirdes GmbH H.G. Peistrup Nordic (Finland and Sweden) Terramare Oy and Boskalis Sweden AB J. Yletyinen, H. Lindström Mexico Dragamex SA de CV P. Klip, C.D. Versteeg Z. Nigeria Nigerian Westminster Dredging & Marine Ltd J.F.A. de Blaeij Italy Boskalis International bv M. Benedetti United States of America Bean-Stuyvesant LLC J. Bean, B. Hoffman, M.C. van de Ven Specialist niche markets Offshore services Boskalis Offshore bv Underwater rock fragmentation Rock Fall Company Ltd Environmental activities Boskalis Dolman bv J. Boender, W.B. Vogelaar G. Steel J.A. Dolman 83 Royal Boskalis Westminster nv

85 Organization Corporate staff Treasury & Insurance Investor Relations & Corporate Relations Legal Affairs Quality Assurance & Safety Information & Communications Technology F.A.J. Rousseau R.T. Berends K. Duppen S.P. van Woensel J.A. Stam Operational staff Personnel & Organisation Research & Development Dredging Department Central Technical Department Th. F. Buirma J.A. Eygenraam H. Postma E.C. Holman Works council T.A. Scheurwater, chairman M.G. de Best L.J. Bouwens M.H. Eekhout M.C.P. Hanssen-van der Velden B. Kooijman G.J. Lodonk, secretary J.H.W. van der Pol G. Prins W.Th. La Rivière, vice-chairman W.J. de Rover J.C. de Snoo M.A. Tjin M. Treffers M.F. van Wijk L. Pasma, secretary 84 Annual Report 2004

86 Offices around the world Offices around the world Head office Royal Boskalis Westminster nv Rosmolenweg 20 P.O. Box AA Papendrecht The Netherlands Telephone +31 (0) Fax +31 (0) The Netherlands Baggermaatschappij Boskalis bv Boskalis International bv Rosmolenweg 20 P.O. Box AA Papendrecht The Netherlands Telephone +31 (0) Fax +31 (0) Boskalis Offshore bv Rosmolenweg 20 P.O. Box AA Papendrecht The Netherlands Telephone +31 (0) Fax +31 (0) Boskalis bv Zinkcon Dekker bv s-gravenweg P.O. Box AE Rotterdam The Netherlands Telephone +31 (0) Fax +31 (0) Boskalis Dolman bv s-gravenweg P.O. Box AL Rotterdam The Netherlands Telephone +31 (0) Fax +31 (0) Boskalis Infra bv Nijverheidstraat AR Capelle a/d IJssel P.O. Box AG Rotterdam The Netherlands Telephone +31 (0) Fax +31 (0) Aannemersbedrijf M. de Haan bv Alde Wei 2, 9222 NG Drachtstercompagnie The Netherlands Telephone +31 (0) Fax +31 (0) A.H. Breijs & Zonen bv Nijverheidstraat AR Capelle a/d IJssel P.O. Box AG Rotterdam The Netherlands Telephone +31 (0) Fax +31 (0) Cofra BV Zuider IJdijk KN Amsterdam P.O. Box GX Amsterdam The Netherlands Telephone +31 (0) / +31 (0) Fax +31 (0) Hydronamic bv Rosmolenweg 20 P.O. Box AE Papendrecht The Netherlands Telephone +31 (0) Fax +31 (0) Aannemingsmaatschappij Markus bv Mollerusweg BZ Haarlem P.O. Box AB Zwanenburg The Netherlands Telephone +31 (0) Fax +31 (0) J. van Vliet bv Krommenieerpad HB Wormerveer P.O. Box AC Wormerveer The Netherlands Telephone +31 (0) Fax +31 (0) United Kingdom and Ireland Westminster Dredging Company Ltd Westminster House, Crompton Way Segensworth West, Fareham Hampshire PO15 5SS United Kingdom Telephone +44(0) Fax +44(0) Royal Boskalis Westminster nv

87 Offices around the world Boskalis Westminster Ltd Westminster House, Crompton Way Segensworth West, Fareham Hampshire PO15 5SS United Kingdom Telephone +44(0) Fax +44(0) Rock Fall Company Ltd Unit A1a, Olympic Business Park Drybridge Road, Dundonald Ayrshire KA2 9BE United Kingdom Telephone +44(0) Fax +44(0) Boskalis Zinkcon Ltd Westminster House, Crompton Way Segensworth West, Fareham Hampshire PO15 5SS United Kingdom Telephone +44(0) Fax +44(0) Irish Dredging Company Ltd Pembroke House, Pembroke street Cork, Ireland Telephone Fax Rest of Europe Boskalis Westminster Aannemers nv P.O. Box Antwerp, Belgium Telephone +32(0) / Fax +32(0) Atlantique Dragage Sarl 9 Rue St Eloi St Germain en Laye, France Telephone +33(0) Fax +33(0) adra@atlantique-dragage.fr Sociedad Española de Dragados, S.A. Plaza Castilla, 3 7º A Madrid, Spain Telephone Fax sedramadrid@sedra.es Dragapor Dragagens de Portugal S.A. Av. D. Manuel I Alcochete, Portugal Telephone Fax geral.spdragapor@mail.telepac.pt Enka-Boskalis Su Yapilari Insaati Ticaret A.S. Enka Binasi Bestekar Sevki bey Sokak 32 Balmumcu Istanbul, Turkey Telephone /75 Fax / Delta GmbH Zinkcon Dekker Wasserbau GmbH 11, zum Panrepel Bremen, Germany Telephone +49(0) Fax +49(0) Heinrich Hirdes GmbH Bauhofstrasse 8b Hamburg, Germany Telephone +49(0) Fax +49(0) hh.hamburg@heinrichhirdes.de Terramare Oy Laurinmäenkuja 3a P.O. Box 14 FIN Helsinki, Finland Telephone +358(0) Fax +358(0) terramare@terramare.fi Boskalis Sweden AB Vassgatan 3D SE Gothenburg, Sweden Telephone Telefax dredging@boskalis.se Boskalis Dragomar SrL c/o T.R. srl Via Leone XIII, Rome, Italy Telephone Fax Terramare Eesti Osauhing Regati pst 1/ Tallinn, Estonia Telephone/Fax terramare@hot.ee 86 Annual Report 2004

88 Offices around the world Middle East Boskalis Westminster Middle East Ltd Flat no. 204, Saif Bin Ghobash Bldg. Zayed 2nd Street P.O. Box 4831, Abu Dhabi, U.A.E. Telephone Fax info@boskalis.ae Boskalis Westminster Middle East Ltd Falcon Tower Building 7th Floor, Flat 716 P.O. Box Manama, Bahrain Telephone Fax boskalis@batelco.com.bh Boskalis International (Egypt Branch) Ground floor of 1, Al Shaheed Gamal El Fasakhani Street 5th Avenue Al Sabaa Emarate Almaza Heliopolis 11361, Cairo, Egypt Telephone +20(0) Fax +20(0) boskalis@intouch.com Boskalis Westminster (Oman) LLC P.O. Box 2063, postal code 112 RUWI, Muscat Oman Telephone Fax Al Rushaid Investment Co. P.O. Box Dhahran Airport 31932, Saudi Arabia Telephone Fax Lamnalco Ltd P.O. Box 5687, Sharjah, U.A.E. Telephone Fax lamnalco@lamnalco.co.ae America Boskalis International bv (Guyana) 1, Water Street, Quarry Wharf, Kingston P.O. Box , Georgetown, Guyana Telephone +592(0) Fax +592(0) boskalis-guy@solutions2000.net Atlantique Dragage Sarl Dégrad des Cannes, B.P Cayenne Cedex, French Guyana Telephone Fax atlantique.dragage@ mdi-guyana.fr Boskalis International bv P.O. Box Onverdacht, district Para, Surinam Telephone /8 Fax Boskalis International bv/ Boskalis Westminster Overseas # 824 Kenneth Avenue Gulf View La Romain, Trinidad and Tobago Telephone Fax bwodredging@tstt.net.tt Coastal and Inland Marine Services, Inc. P.H. Centro Comercial Ciudad Siglo XXI Avendida Ricardo J. Alfaro y Cl. Juan Pablo II Bethania, Panama Telephone /88/96 Fax bbezemer@cwpanama.net Dravensa C.A. Edificio ONIX, Piso 6, Oficina 61, Calle Sojo El Rosal, Caracas, Venezuela Telephone +58(0) /6712 Fax +58(0) dravensa@telcel.net.ve Boskalis International bv Sucursal Argentina Tucúman 540, piso 6 H 1049 Capital Federal Argentina Telephone Fax s.cetera@fairwinds.com.ar 87 Royal Boskalis Westminster nv

89 Offices around the world Boskalis International Uruguay S.A. Luis Alberto de Herrera 1248 World Trade Center Torre A Officina Montevideo, Uruguay Telephone +598(2) (2) Fax +598(2) rvpll@netgate.com.uy Stuyvesant Dredging Company 3525 North Causeway Boulevard, Suite 612 Metairie, Louisiana 70002, U.S.A. Telephone Fax Bean Stuyvesant LLC 1055 St. Charles Avenue, Suite 520, New Orleans, LA 70130, P.O. Box New Orleans, LA U.S.A. Telephone Fax bsllc@cfbean.com Dragamex SA de CV Km 7.5 Carretera Coatzacoalcos-Minatitlán C.P Coatzacoalcos Veracruz, Mexico Telephone Fax dragamex1@terra.com.mx Africa Boskalis South Africa (via KPMG Services (proprietary) Limited Pretoria office P.O. Box Hatfield 0028 Southfield South Africa Telephone Fax Boscampo G.I.E. B.P. 4054, Douala, Cameroon Telephone Fax boscampo@yahoo.fr Boskalis International Gabon Z.I. Owendo Route du Barracuda Boite Postale 336, Libreville, Gabon Telephone Fax ibv@internetgabon.com Nigerian Westminster Dredging and Marine Ltd Westminster House Plot 1601 Adeola Hopewell Street, Victoria Island P.O. Box 1518, Lagos, Nigeria Telephone +234(0) /581 Fax +234(0) nwdm@nova.net.ng Lamnalco (Nigeria) Ltd 56, Ogunu Road, P.O. Box 799 Warri, Delta State, Nigeria Telephone +234(0) ext (via Shell Lagos) Fax Australia and Asia Boskalis Australia Pty Ltd Suite 16-01, Level 16 Tower A, Zenith Centre, 821 Pacific Highway Chatswood, NSW 2067 P.O. Box 341 Chatswood, NSW 2057 Australia Telephone Fax boskalis@boskalis.com.au Boskalis Dredging India Pvt Ltd 23 Sangeeta, Tagore Road Santacruz (West) Mumbai , India Telephone Fax bkdi@mtnl.net.in BWME Ltd Achilleos Building (first floor) 224, Arch. Makarios III Ave. Lemosos, Cyprus Telephone Fax Boskalis International bv Zhangabyl Bautino Mangistau Oblast Kazakhstan Telephone Fax p.a.g.steeghs@bavof.kz 88 Annual Report 2004

90 Offices around the world The cutter suction dredger Ursa working on the construction of the new container harbor in Coega, South Africa. Because the container facilities in Port Elizabeth, Durban, and Cape Town have nearly reached their maximum capacity, South Africa decided to build these new port facilities, which will be operational early in Boskalis International (S) Pte Ltd Koon Building 17B Pandan Road #03-00/#04-00 Singapore Teban Garden Post Office, P.O. Box 629 Singapore Telephone Fax Zinkcon Marine Singapore Pte Ltd Koon Building 17B Pandan Road #03-00/#04-00 Singapore Jurong Post Office P.O. Box 446 Singapore Telephone Fax Boskalis Westminster International bv Korea Branch Suite 711, Hanaro Building 194-4, Insa-dong, Jongro-Ku, Seoul, South Korea Telephone +82(0) Fax +82(0) Boskalis International bv Room 1702, Tower 1 China Hong Kong City 33 Canton Road, Tsim Sha Tsui, Kowloon Hong Kong SAR Telephone Fax bkihkb@netvigator.com Boskalis International (M) Sdn Bhd Jalan Sultan Ismail No. 4018, 4th Floor, President House Kuala Lumpur Malaysia Telephone Fax boskalis@maxis.net.my P.T. Boskalis International Indonesia Plaza Centris, Floor 12A Jl. H.R. Rasuna Said Kav. B-5 Kuningan, Jakarta Indonesia Telephone Fax boskalis@cbn.net.id Boskalis International bv Suite 22, 3rd Floor Legaspi Tower Roxas Blvd. Cor. Vito Cruz, Manila, Philippines Telephone +63(0) Fax +63(0) Boskalis International bv Representative Office Beijing Room 910 Shougang International Building Xizhimen North Street Haidan District, Beijing People s Republic China Telephone , 62, 63 Fax Royal Boskalis Westminster nv

91 Glossary Glossary Acquired orders The contract value of acquired assignments. Backhoe A large hydraulic excavating machine positioned on the end of a pontoon. The pontoon is held firmly in place using spuds. Backhoes can dredge in a range of soil types with extreme precision. Booster station Pumping station for the transportation of sediment through pipelines over longer distances. Barge unloading dredger A ship for discharging and pumping dredged material from barges lying alongside. BeauDredge A selective dredging technique that removes clean soil from beneath a contaminated or unusable layer, while the character and composition of the top layer is preserved as much as possible. BeauDredge can be used as a good alternative for soil decontamination, and also for nautical maintenance, the ecological recovery of lakes and watercourses, water storage, river widening and selective sand dredging. Bucket dredger The standard, anchored dredger with a revolving chain and buckets that dig into the bed and are discharged. This type of equipment is now mainly used for environmental dredging and other jobs requiring extreme precision, such as dredging tunnel trenches. Competence management program Program targeting the systematic development of the workforce in accordance with their talents and competences. Completed contracts Contract value of completed work. Cost leadership Achieving lowest cost price. Cutter See Cutter suction dredger. Cutter suction dredger A vessel that dredges while being held into place using spuds and anchors. This technique combines powerful cutting with suction dredging. Cutter suction dredgers are mainly used where the bed is hard and compact. The dredged material is loaded into hoppers but is generally pumped to land through a pressure pipeline. 90 Annual Report 2004

92 Glossary Dredging-plus activities Activities that fit in with the core activity and core competences of the company. For example, offshore services, gravel and sand trading, soil improvement, dry earth moving, environmental activities, munitions clearance, underwater rock fragmentation, pipeline construction and hydraulic engineering. Dutch guidelines for annual reporting Guidelines for annual reporting drawn up and promulgated by the Council for Annual Reporting (Raad voor de Jaarverslaggeving), that represents providers, users and auditors. Dynamic positioning system System for keeping a vessel in place in which the propellers and rudders are controlled by an automatic system. EBIT Earnings before interest and tax. EBITDA Earnings before interest, tax, depreciation and amortization. Environmental disc cutter The environmental disc cutter is a cutter suction dredger with an enclosed cutter head, an adjustable vizor and controllable suction flow. A process control system controls the various parameters so that high-density mixture concentrations can be achieved without turbidity and with high levels of precision. This type of cutter suction dredger is pre-eminently suited for environmental projects. ERP system Enterprise Resource Planning System. An information system with full integration of primary business processes. Fallpipe vessel Vessel that moves over the area to be covered, while dumping the stone on board through a fallpipe. The end of the pipe is located just a few meters above the level of the surface to be covered. The fallpipe is controlled using a precise positioning system. The fallpipe vessel Seahorse can also be equipped with an A-frame on the aftship and a grab controlled by an ROV (Remotely Operated Vehicle). This makes it possible to dredge down to depths of 1,000 meters. Goodwill The difference found at the time of the acquisition of participating interests between the acquisition price paid for the shares and the net asset value. Grab crane A stationary pontoon with a crane that uses a crane shovel or grab. Dredged material is deposited in barges that operate independently. Grabs can manage both sludge and hard objects and this makes them suitable for, among other things, clearing up waters that are difficult to access, for gravel winning and maintenance dredging on uneven beds. 91 Royal Boskalis Westminster nv

93 Glossary In 2004, Boskalis worked with the mega trailing suction hopper dredger WD Fairway and the trailing suction hopper dredger Prins der Nederlanden on a land reclamation project in Bahrain intended for the construction of a hospital and a medical university. Home market Boskalis distinguishes itself from its competitors by the use of a home market strategy. The home market organizations have local marketing profiles, as well as their own fleets and infrastructures. They can rely on the support of the financial and technical resources of the global Boskalis organization. Home markets provide a stable flow of assignments and opportunities to generate additional margins through associated activities. Hopper See Trailing suction hopper dredger. IFRS International Financial Reporting Standards: rules for financial reporting drafted and promulgated by the IASB (International Accounting Standards Board). They will be compulsory within the European Union from 2005 onwards for all listed companies. International projects market Market that focuses primarily on larger capital expenditure projects for new buildings and/or extensions. In addition, there are projects that regularly involve cooperation with third parties. This makes it possible to provide clients with optimal services and to share risks. ISM code International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention: an international standard for compliance with safety regulations and the prevention of pollution on seagoing vessels. ISM requires shipowners to set up and maintain a safety management system. Since 1 July 2002, all Boskalis seagoing self-propelled vessels have met the requirements of this code. 92 Annual Report 2004

94 Glossary ISO standards Standards of the International Organization for Standardization; the global federation of national normalization organizations that issues standard requirements for, among other things, quality management systems (ISO-9001) and environmental management systems (ISO-14001). ISPS Code International Ship & Port Facility Security Code of the International Maritime Organization regulating precautions that deal with terrorist threats to shipping. All Boskalis seagoing ships are expected to meet these requirements from July 2004 onwards. Maximo Maintenance management system for directing and optimizing maintenance, stocks and technical information about fleet units. Orderbook The turnover accounted for by parts of orders as yet uncompleted. OSHAS Occupational Health & Safety Management System Specification. Standard for a safety management system drawn up by, among others, the classification society Bureau Veritas. Plant Management System System that provides support for the clear and structured management of ships by means of internal procedures. PPI Public-Private Initiative. An umbrella term for various types of projects in which the government joins forces with the business community. The objectives are to capitalize on the qualities and potential of both parties and jointly manage risks. Stone-dumping vessel A stone-dumping vessel is a ship with a deck on which stone can be loaded. Using a dynamic positioning system and slides, the stones are pushed over the edge of the ship into the right position in the water. Suction dredger Stationary, hydraulic vessel that sucks up the sediment/water mixture through a suction pipe. Suction dredgers are generally used for sand winning. TEU Twenty feet Equivalent Unit. Unit used to indicate the capacity of a container or transport flows. 93 Royal Boskalis Westminster nv

95 Glossary Trailing suction hopper dredger A self-propelled unit that loads its well or hopper using centrifugal pumps and pipes that trail over the bed as the ship sails. Trailing suction hopper dredgers can operate independently of other equipment and can transport material over long distances. The dredged material is dumped through flaps or bottom doors, by rainbowing, or pumped on to land using a pipeline. Turnover work done Volumes produced in a given period. The work may not yet be completed. WACC Weighted Average Cost of Capital. The weighted average of the cost of capital (required and after taxation) for capital and reserves, and loan capital (interest-bearing). Work in progress Projects that have not been completed on the balance-sheet date but that have been finished in part. 94 Annual Report 2004

96 Report of the Board of Management Equipment on 2004 Equipment 8 + 1* Trailing suction hopper dredgers Hopper capacity >6,000 m * Hopper and transportation barges Hopper capacity from 300 to 2,336 m * Trailing suction hopper dredgers Hopper capacity <6,000 m * Backhoes Bucket capacity from 1.4 to 22 m 3 3 Self-propelled seagoing cutter suction dredgers Total installed power from 12,904 to 15,830 kw * Launches, tugs, supply and crew boats Propulsion power from 30 to 4,412 kw * Cutter suction and bucket-wheel dredgers Total installed power 257 to 9,262 kw * Floating grab cranes ( grab dredgers ) Grab capacity from 1.2 tot 9.2 m * Floating hoisting pontoons Hoisting capacity from 10 tot 270 t 4 Barge unloading dredgers Total installed power from 1,650 to 4,300 kw 5 Bucket dredgers Bucket capacity from 450 to 900 liters 8 Suction dredgers Total installed power from 656 to 4,050 kw * Booster stations Total installed power from 390 to 6,150 kw 4 Stone dumping vessels Capacity from 354 to 1,400 t 2 + 3* Screeder pontoons For waterbed protection (clay and stone) * Work boats Propulsion power from 133 to 918 kw 1 Environmental disc cutter 5 + 3* Drill barges * Stone transportation barges Capacity from 120 to 2,000 t 1 + 1* Dynamically positioned fallpipe vessel Capacity from 17,000 to 18,500 t * Owned by (non-controlled) associated companies. In addition to the equipment shown here, the group also owns a range of auxiliary equipment such as floating pipelines, winches, pumps, drag lines, hydraulic excavators, wheel loaders, dumpers, bulldozers, mobile cranes, crawler drill rigs, sand pilers, filling installations for shore protection mattresses, fixed land pipelines, various pontoons and houseboats. 95 Royal Boskalis Westminster nv

97 Suction pipe of the jumbo trailing suction hopper dredger Queen of the Netherlands. 96 Annual Report 2004