Annual Report 2006 Royal Boskalis Westminster nv. Annual Report 2006

Transcription

1 Annual Report 2006 Royal Boskalis Westminster nv Annual Report 2006

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3 Annual Report 2006 This annual report contains forward-looking statements. These statements are based on current expectations, estimates and projections of Boskalis management and information currently available to the company. These forecasts are not certain and contain elements of risk that are difficult to predict and therefore Boskalis does not guarantee that its expectations will be realized. Boskalis has no obligation to update the statements contained in this annual report. 1 Royal Boskalis Westminster nv

4 Boskalis: There s no such thing as can t A milestone for Boskalis: the company acquired two major projects in Russia in In Saint Petersburg, Boskalis is dredging a new access channel. In Varandey, the crew of the hopper Oranje braved the brutal weather conditions in the Barents Sea and installed two pipelines in the seabed. 2 Annual Report 2006

5 Table of contents Table of contents Key developments in Message to the shareholders 5 Company profile 7 The Boskalis markets 8 Maritime Infrastructure Segment: Archirodon 12 Maritime and Terminal Services Segment: Lamnalco 14 Ten years Boskalis 17 Mission, strategy and financial objectives 20 Strategy in execution 22 Sustainable business 26 Basic principles of the corporate strategy 28 Investor Relations 34 Report of the Supervisory Board on Report of the Board of Management on Corporate Governance 54 Application at Boskalis 55 Risk management 55 Financial statements Consolidated profit and loss account 65 Consolidated statement of recognized income and expense 66 Consolidated balance sheet 67 Consolidated statement of changes in equity 68 Consolidated cash flow statement 69 Explanatory notes to the consolidated financial statements 70 Company profit and loss account 100 Company balance sheet before profit appropriation 101 Statement of changes in equity 102 Explanatory notes to the company financial statements 103 Other information 105 Stichting Continuïteit KBW 107 Announcements pursuant to Article 10 of the EU Directive on takeover bids 108 Pioneering Green Innovation: Ecology and Hydraulic Engineering 10 Working for Boskalis: Make a world of difference 18 Reconstruction of Vilufushi after the tsunami 32 Large-scale land reclamation in Bahrein 52 Building a global fleet 60 Legal structure 110 The world of Boskalis 111 Organization 112 Offices around the world 114 Glossary 119 Equipment 123 Unless stated otherwise, all amounts in this annual 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 prevailing official Annual Report in the Dutch language. 3 Royal Boskalis Westminster nv

6 Key developments in 2006 Key developments in 2006 Large number of new orders, orderbook at historical high New orders worth 1,470 million were acquired in The orderbook expanded to a record 2,543 million (year end 2005: 2,427 million). Record turnover and profit Growth in turnover of +17% Turnover rose last year by 17% to 1,354 million. Net profit + 86% Net profit increased by 86% to million; earnings per share went up from 2.21 to Large amounts of work in energy-driven markets Approximately 45% of turnover was related directly or indirectly to the expansion of the energy markets. Increased dividend The dividend policy includes a pay-out ratio of 40% to 50%. The proposal is to pay out a cash dividend of 2.04 per share from the 2006 result (2005: 1.10 per share). Increase in share price of 33% The Boskalis share price rose in 2006 by 33% to On March 2, 2006, Boskalis returned to the Amsterdam AMX index. Composition of the Board of Management In May 2006, Mr R. van Gelder stepped down as chairman of the board since he was to reach the age of retirement later in the year. He was succeeded by dr. P.A.M. Berdowski, who had already served as the vice-chairman of the Board of Management for a number of years. In addition, with effect from January 1, 2006, Mr J.H. Kamps was appointed to the Board of Management as Chief Financial Officer. Composition of the Supervisory Board During the course of the year under review, there were changes to the composition of the Supervisory Board. After the resignation on March 13, 2006 of three of the five members of the Supervisory Board, Mr R.M.F. van Loon succeeded Mr M. Minderhoud as chairman. Subsequently, on July 1 and August 30 respectively, Mr H. Heemskerk and Mr M. Niggebrugge joined the Supervisory Board. In addition, the Supervisory Board will nominate Mr C. van Woudenberg for appointment to the Supervisory Board during the General Meeting of Shareholders on May 9, His appointment will return the Supervisory Board to the original number of members. 4 Annual Report 2006

7 Message to the shareholders Message to the shareholders Dear shareholders, The upturn in the global dredging market, that began in the latter half of 2005, continued in The market picked up first in the Middle East, with large land reclamation and harbor expansion projects. The tendering of new projects in other areas followed. Driven by the continuing sharp rise in container and bulk transportation by sea, deepening and extension operations took place at harbors throughout the world. This is a feature of both exports, such as bulk transport from Australia and containers from China, and imports, such as containers moving to Europe and the Middle East. dr. P.A.M. Berdowski, chairman of the Board of Management The high oil price and the sharp increase in demand for oil and gas are leading to the development of numerous projects. An important development for Boskalis is the enormous increase in LNG (Liquefied Natural Gas) flows worldwide. Boskalis benefits from this trend in two ways. On the one hand, the company is involved in land reclamation for LNG plants and the construction of LNG harbors. On the other, through its 50% participating interest in Lamnalco, Boskalis provides services for handling LNG tankers. In 2006, the early indications of climate change made themselves more keenly felt. We are seeing increasing interest in new forms of sustainable coastal defenses and are being challenged to take the initiative in developing alternative designs and contracts. A characteristic feature of the global dredging market at present is the very broad spread of demand. The main market areas are: the Middle East, with large-scale infrastructure projects; Europe, with major harbor expansion activities; new activities in Brazil, Russia, India and China; large energy-related offshore projects. The spread of our operations around the world means that we are in an excellent position to respond to this broad demand. This allowed us to acquire orders in 2006 in all the market areas listed above. Particularly noteworthy are the first projects in Russia (Saint Petersburg and Varandey), as well as in Sepetiba (Brazil), Taiwan, Tjianjin Port (China) and a LNG harbor in Angola was a record year in several respects. Turnover increased by 17% to a historical high of 1,354 million. This was also reflected in the high utilization rates for the fleet. The orderbook was maintained at the record level of 2.5 billion. Once again in 2006, Boskalis was still working on various projects that had been acquired at highly competitive prices during difficult times in the dredging market. However, the strong increase in demand for dredging services in 2006 increasingly allowed for improvements in pricing. In order to respond to this development as well as possible, the company followed a selective contracting policy. This policy was one of the factors underlying the 86% increase in net profit this year to a record level of million. 5 Royal Boskalis Westminster nv

8 Message to the shareholders Acquisition of Wasa Dredging and the Blankevoort dredging company In 2006, Boskalis was also working hard on the implementation of its strategy for growth. For example, the company acquired the Finnish dredging company Wasa Dredging, together with barges and two backhoes. In the Netherlands, the acquisition of the dredging company Blankevoort included three hoppers. Launch of large-scale fleet innovation plan The major fleet overhaul plan for was also launched. This included the extension of the hopper Queen of the Netherlands and the rebuilding of the cutter Phoenix (the former Oranje). We also ordered two new 5,600 m 3 hoppers from IHC. And orders also went out for the main engines for two 10,000 m 3 hoppers and a fallpipe vessel. Finally, Lamnalco invested 23 million in equipment for oil and gas terminal services. Important quality certification awarded Our policy is targeted towards providing safe, healthy and environment-friendly working conditions for all our employees. In that respect, it is important that Boskalis acquired ISO14001 and OHSAS certification in late These are the internationally accepted standards for working conditions and the environment. Start of pioneering innovative program There is, quite rightly, increasing interest in the interaction between our activities and the locations where they take place, as well as for the direct and indirect impact on the environment. Boskalis accepts its responsibility in this area and this is why we have taken the initiative in getting together with the industry to launch a research program, Building with Nature. Sizeable investments in workforce In the past year, we once again made considerable investments in staff development and promotion. A wide range of instruments were used here, focusing on professionalism and leadership. Positive development of Boskalis share The upturn in the global dredging market and the way Boskalis is responding has inspired a favorable response from the financial markets, with the Boskalis share price moving upwards since early The Boskalis share price rose in 2006 by 33% to 75. Intensive and transparent communications through the media and with analysts and investors have contributed here. In 2007, Boskalis shares will continue to be listed on the Amsterdam Midcap Index. The share price has more than doubled in the last two years. A proposal will therefore be submitted to split the Boskalis share in a ratio of 1:3. Further growth in 2007 We expect the positive trend to continue in the year to come. We anticipate rising turnover in 2007 and maintenance of the high utilization rates for the equipment. We will continue with our selective contracting policy in order to make the most of the opportunities provided by the market. In line with last year, we propose to distribute 50% of the profit as dividend. In concrete terms, we are therefore proposing a dividend of 2.04 per share for 2006 (2005: 1.10). On behalf of the Board of Management dr. P.A.M. Berdowski 6 Annual Report 2006

9 Company profile Company profile Boskalis, a leading international company with a unique market position United States of America United Kingdom The Netherlands Germany Nordic Archirodon Lamnalco Mexico Nigeria Head office/home market Home markets Boskalis offices Royal Boskalis Westminster nv is an international group with a leading position in the world market for dredging services. Its core activities are the construction and maintenance of ports and waterways, land reclamation, coastal defense and riverbank protection. The company holds important home market positions in and outside Europe and targets all market segments in the dredging industry. It also has strategic partnerships in maritime infrastructure (Archirodon) and in maritime and terminal services (Lamnalco). Boskalis has a versatile fleet of over 300 units and operates in over 50 countries across five continents. Including its share in partnerships, Boskalis has approximately 8,000 employees. Boskalis has three business segments: Dredging and Earthmoving, Maritime Infrastructure and Maritime and Terminal Services (Lamnalco). Dredging and Earthmoving 87% of turnover Maritime Infrastructure 10% of turnover Maritime and Terminal Services 3% of turnover Construction and maintenance of harbors and waterways Creation of land in water Coastal defense and riverbank protection Offshore services for the oil and gas industry Sand and gravel trading Environmental activities Underwater rock fragmentation Maritime construction including quay walls, jetties, oil and gas terminals, breakwaters, riverbank protection Construction of infrastructure including water purification systems, sewerage systems, dams, bridges Industrial construction including power stations, desalination plants, pumping stations Mooring of tankers Management of oil and gas terminals Pilot services Underwater vessel maintenance Offshore logistic services 7 Royal Boskalis Westminster nv

10 The Boskalis markets The Boskalis markets The global dredging market consists of numerous segments with individual development patterns. This means that the market as a whole is heterogeneous, with varied patterns of market dynamics. In the last few years the annual volume of sales on the global market has expanded rapidly to approximately 8-10 billion. Half of these sales (approximately 4-5 billion) are generated in 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 private companies or state companies and there are limited 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 a high degree of efficiency. Major factors affecting access to the global dredging market are scale, professional staff, innovative ability, a flexible fleet, cost leadership, and financial strength. Its 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. The Boskalis markets are driven by long-term growth factors... Macro-growth factors will drive the global dredging market in the coming years Influence of global trends on the dredging industry 8 Annual Report 2006

11 The Boskalis markets...energy supply is playing an increasing role in this regard... Figure 1: Global energy consumption in btu Global energy consumption is expected to increase......with major growth in LNG consumption Figure 2: Global LNG production in cft Source: US Department of Energy, EIA Source: US Department of Energy, EIA Figure 1 Figure 2...and this encourages the construction of LNG terminals. Boskalis is involved through dredging work and its partnerships in Archirodon and Lamnalco. International positioning is very important. 39% 31% Broad market spreads provides stability 7% Home markets International projects market Middle East Niche markets 23% 39% Home markets Permanent basis with own infrastructure Also smaller, dredging-related projects Stable flow of contracts 31% Middle East Dredging, maritime infra, terminal services 23% International projects market Mainly larger projects Varying amount of work Many competitors 7% Niche markets Specialist offshore activities Around 45% of group turnover is energy-driven. 9 Royal Boskalis Westminster nv

12 Boskalis is the initiator of a pioneering innovative research program, Building with Nature. This program will build up a knowledge base about the ecological impact of hydraulic engineering projects. That will allow us to determine more precisely what effects hydraulic engineering has on the environment, making it possible to take targeted action and prevent negative effects. And knowledge is needed. Throughout the world, hydraulic engineering projects are scrutinized closely during the development stage to determine their environmental impact. By definition, hydraulic engineering means working with nature, and we want to look after the natural world. It is, however, sometimes simply assumed that changes to nature are always bad, that they cause irreparable harm. Even though changes can be neutral, or even positive and sustainable. All too often, conclusions are arrived at without any proper grounding in knowledge or facts. Stakeholders come into conflict in difficult proceedings. All because of a lack of knowledge and objective criteria. The result is that infrastructure developments are often severely delayed for no good reason. Ultimately, this results in economic stagnation because an adequate infrastructure is not in place. 10 Annual Report 2006

13 So there is every reason to launch an ambitious program for the establishment of a unique knowledge base that can help clients worldwide and that will improve the competitive position of Boskalis. The objective of the research program is to develop: knowledge about how aquatic ecosystems respond to challenges; a generally accepted set of measurement instruments; objective predictions of the impact of hydraulic engineering projects; environmental monitoring and evaluation strategies. The results will be available for design and implementation, as well as for policy- and decision-making. This will lead to a proper balance between ecological, economic and social sustainability. Ultimately, this will accelerate the launch of hydraulic engineering projects. The five-year research program will take place in close collaboration between the corporate sector, the relevant government institutions*, universities and knowledge institutions. * For the corporate sector: Boskalis, Van Oord, Shell, IHC and major engineering bureaus. On the government side: the Ministry of Transport, Public Works and Water Management, the Construction Department of the Directorate General for Public Works and Water Management, the Ministry of Agriculture, Nature and Food Quality and the Ministry of Housing, Spatial Planning and the Environment. Royal Boskalis Westminster nv

14 Maritime Infrastructure Segment: Archirodon Maritime Infrastructure Segment: Archirodon Boskalis has a 40% holding in Archirodon. This company has been a leading contractor in the maritime infrastructure segment for decades, focusing in particular on the Middle East. The company has extensive expertise in the area of engineering and construction, and an excellent track record in the implementation of complex, multidisciplinary projects. The Middle East market will be characterized by high volumes of work in the years to come. As a result of visionary and strong leadership, the countries in the Gulf region have made major investments in large-scale infrastructure and energy projects. Clients also want fast completion at a time characterized by shortages of labor and some building materials. In these unique market conditions, Archirodon has followed Boskalis in adopting a selective contracting policy. Archirodon also focuses specifically on techniques in which it specializes and on clients with whom it has enduring relationships. Civil infrastructure: construction of three main pumping stations with all associated equipment for irrigating the desert from the Nile River in Egypt Alongside its operations in the maritime and offshore sectors, Archirodon is also an all-round player in the markets for civil infrastructure and industrial plants. Like Boskalis, Archirodon has renowned in-house engineering capabilities that contribute to innovative solutions for customer needs. Civil infrastructure: Dubai Maritime City Project - design and construction of 3,430 m of breakwaters with access roads Fueled by the Middle East boom, Archirodon s turnover grew from US$ 200 million in 2001 to approximately US$ 450 million last year. The company s financial status is healthy. Archirodon s core activities are engineering, procurement and construction, and the company currently employs approximately 10,000 people. Although Archirodon and Boskalis operate independently from each other in the market, there are many examples of successful cooperation in complex infrastructure projects, where their combined, complementary maritime strengths provided a competitive edge. Boskalis holds a 40% stake in Archirodon; the other shares are owned by the management and a limited number of private parties. With Archirodon, Boskalis has 12 Annual Report 2006

15 Archirodon provides the following services: Marine & Offshore Ports and harbors Jetties, terminals and offshore structures Breakwaters and shore protection Offshore pipelines, intakes, outfalls Dredging and reclamation Marine & Offshore: construction of marine facilities for a grass-root LNG plant including dredging of a 4-km-long approach channel, 2.5-km-long jetty, 800 m breakwater, topside works and processinsulated piping in Egypt Civil infrastructure Bridges, roads and railroads Water, sewerage, dams and irrigation Airports Industrial plants Power and desalination plants Oil and gas facilities Pumping stations Marine & Offshore: Oman. In addition to a 1,070-m-long jetty the project included an approach trestle, loading platforms and topsides as well as the installation of seawater intake and outfall pipelines measuring 2,700 m in total. Industrial plants: turnkey project for design, construction and commissioning of a 8 x 350 mw steam power plant in Saudi Arabia Civil infrastructure: construction of the Sheikh Zayed Bridge in Abu Dhabi a broad-based position in the Middle Eastern growth market Royal Boskalis Westminster nv

16 Maritime and Terminal Services Segment: Lamnalco Maritime and Terminal Services Segment: Lamnalco Boskalis has a 50% holding in Lamnalco. The company has a leading position in the global market for oil- and gas-terminal services. This is a market characterized by strong growth, primarily driven by the rise in global demand for energy, and in particular liquid gas (LNG). Exporting countries such as Russia, Iran, Qatar, Saudi Arabia and Angola are planning new export terminals (onshore and offshore) and expanding their harbors. Importing countries in Asia, Europe and on the American continent have plans for the construction of import terminals and harbors. All this has been accompanied by an unprecedented boom in the construction of LNG tankers that, once they are operational, will generate large amounts of work for Lamnalco in the years to come. Strict quality requirements and extremely high performance standards with specialized equipment, as well as a track record, are needed to operate on this growing market. Lamnalco has built up its unique position through specialization. To meet its customers specific requirements, Lamnalco invests not only in the training and development of its own workforce, but also in innovative vessels that the company designs itself and that are used for long-term service contracts (5-20 years). The company s head office is located in Sharjah (United Arab Emirates) and there are currently branches in twelve countries; Lamnalco has a particularly strong presence in the Middle East and Western Africa. In accordance with its corporate philosophy, Lamnalco collaborates with a range of local companies. At present, the company handles more than 3,500 tanker movements a year in 26 terminals and harbors, with 55 berths. It owns a fleet of 120 vessels with the lowest average age in the industry. Lamnalco generates an annual turnover of almost US$ 100 million, with a healthy operating margin and cash flow. Boskalis and Lamnalco share their market intelligence and business networks, opening up early leads for business opportunities in new locations and regions. In addition, both companies occupy complementary positions in similar maritime supply chains, especially in the energy sector: Boskalis and its ally Archirodon with dredging and civil engineering capabilities, Lamnalco with long-term contracts servicing oil and gas terminals. Gas processing facilities LNG liquefaction plant LNG tank LNG loading terminal Gas Fields OCEAN TRANSPORTATION CYCLE LNG receiving terminal LNG Tank Pipeline Gas utilities Regasification Power station Lamnalco: 14 Annual Report 2006

17 Lamnalco supplies specialized marine support services to gas and oil terminals and ports worldwide: Berthing/unberthing of LNG/LPG, crude and product tankers calling at jetties, CALM buoys and FPSOs/FSOs Marine Terminal Management services and traffic scheduling Provision of specialist personnel: pilots, mooring masters, dive maintenance teams and site superintendents Surface and subsurface maintenance operations at jetties and CALM buoys Provision of logistics and supply bases to support offshore operations in remote terminal locations Strong growth driven by rising demand for energy Royal Boskalis Westminster nv

18 Boskalis makes the difference with people and equipment Continuous maintenance and upkeep on board the jumbo hopper dredger W.D. Fairway. Demands on dredging material are tough. The Boskalis fleet has committed, professional crews who are prepared to brave any waves; pride in the ship, and the will to win, make the difference time and again. 16 Annual Report 2006

19 Ten years Boskalis Ten years Boskalis (1) (amounts x 1 million, unless stated otherwise) (2) Turnover (work done) 1,354 1,156 1,020 1,046 1,035 1, Orderbook (work to be done) (3) 2,543 2,427 1,244 1,202 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) 28,600 28,418 27,769 26,630 25,949 25,900 25,784 25,902 25,941 25,788 Number of outstanding shares (x 1,000) (10) 28,600 28,600 28,174 27,256 25,970 25,917 25,881 25,902 25,941 25,788 Personnel (number of persons) (3) 8,151 7,029 7,033 3,186 3,285 3,119 3,295 3,186 3,115 3,075 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) Dividend Share price range (x 1.00) (Depositary receipts of) ordinary shares (1) Figures taken from the financial statements. As from 2004 all amounts are in accordance with IFRS. (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 December 31, 2003 amended for IFRS (number of personnel: December 31, 2004). (4) Consists of earnings before result associated companies, interest and taxation. (5) Consists of earnings before result associated companies, 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) Group 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 as at December 31. (11) The dilution effect was practically nil up to the financial year Royal Boskalis Westminster nv

20 What makes a company distinctive? For its clients, business partners, workforce and suppliers? Being distinctive is above all a question of the will to make a difference. That will is engrained in the people, the culture and the objectives of the company. Boskalis is a company of people who want to win, in the broadest sense. Because we have to fight hard to bring in the right results, whether that means winning a contract, dealing with a technical problem or negotiating for a good commercial position. The market game is a hard one. The people at Boskalis are deeply committed to their work. They are enterprising, solution-minded and always willing to take on a challenge. The maxim there s no such thing as can t is put into practice with enthusiasm, creativity, and a strong dose of perseverance. At Boskalis, the focus is on practical solutions that benefit the customer. 18 Annual Report 2006

21 Boskalis gives its people room. They do the job, far from home and often under difficult conditions. Independence and decisiveness are indispensable, as part of a team and using high-tech equipment. Entrepreneurship, cooperation, and expertise are the core values of the Boskalis culture. And inventiveness is part of our genetic makeup. As are the capacity to assume responsibility, to intervene on time, and to manage risks. When it comes to career development, Boskalis does not have an established pattern. Every member of the workforce is given the opportunity to take his own destiny in hand. And there is a broad-based internal network to provide support. That implies a structured human resources policy. A wide range of courses and training. Competence management. A continuous dialogue about Personal Development Plans. And, above all, a wide variety of activities allowing people to acquire on-the-job experience. Royal Boskalis Westminster nv

22 Mission, strategy and financial objectives Mission, strategy and financial objectives Mission, Vision, Values Boskalis aims to be a leading player in the global dredging market and related sectors Strategy In order to realize the above ambition against a background of markets that grow in the long term but can also fluctuate from time to time, Boskalis has a growth strategy with two cornerstones: Optimization of existing operational activities This means focusing on growth by improving the quality of activities and making full use of the opportunities in existing markets. The world of Boskalis is constantly in motion and the company is continuously developing. Boskalis is always looking for the best possible approaches to technical and commercial innovations, or clients changing needs. This involves the continuous development of people, technology and systems, and also effective responses to special market developments such as public-private partnerships and changing environmental requirements. At the same time, the company must maintain the sharpness and creativity to make the most of growth opportunities. Focus on growing with the market and on expanding activities The market is growing in the longer term and Boskalis is growing with it. The company can achieve organic growth of this kind by regularly adding new, modern capacity to its fleet and through sophisticated market positioning to make the most of growth opportunities in the market. Boskalis also sees promising opportunities for achieving growth in areas alongside the traditional core activities. The company has achieved good results in recent years with related maritime activities (with its partners Archirodon and Lamnalco, for example) and is definitely open to further developments, including those involving third parties. Acquisitions and alliances provide extra opportunities for growth. Boskalis is always ready to cooperate with third parties and to extend the scope of business activities anywhere in the world. The policy of home markets with local partners, regional cooperation as with Lamnalco and Archirodon, and the acquisition of players in adjacent sectors will also continue in the years to come. Boskalis aims to be a leading player in the global dredging market and related sectors. 20 Annual Report 2006

23 Mission, strategy and financial objectives Potential acquisitions must not only generate increased turnover; they must above all make a positive contribution to the value of the company. Long-term growth is important to achieve long-term value creation for shareholders. And that remains one of Boskalis main objectives. The Boskalis growth strategy: transparent, consistent and result-driven Strategic Objectives Financial objectives Boskalis is aiming for structural growth in turnover of 5-10% per year and a return on equity of 12%. These are average values that the company wishes to achieve over a longer period. 21 Royal Boskalis Westminster nv

24 Strategy in execution Strategy in execution Broad-based organic growth in 2006; investments in structural growth Broad-based organic growth achieved in 2006 In 2006, Boskalis was well on target in financial terms, with turnover increasing by 17% (target: 5-10%) and a return on equity of 20% (target: at least 12%). Growth was characterized by a broad geographical spread and was primarily organic, as a result of favorable market conditions in the core activities of dredging and earthmoving. The company also strengthened its market position through the acquisition of two dredging companies (Blankevoort in the Netherlands and Wasa in Finland). The equipment of these companies has now been deployed in international locations. In addition, Boskalis improved its position in the soilimprovement market with the acquisition of the remaining 49% of shares in its subsidiary, Cofra. Investments in structural growth The international dredging market is expanding strongly and utilization rates for Boskalis equipment will be high in the years to come. In the next three years, the company aims to achieve organic growth of 5-10% annually, strengthening its market position where possible. This ambition, combined with the age of a few ships, will require investments in the expansion and replacement of dredging equipment in the years to come. During this process, we will be looking carefully at the capacity required in various market segments, as well as at costs and timing. The investments must make the best possible contribution to returns and to the structural competitive strength of the company. Given this background, Boskalis launched an ambitious five-year investment program in early 2006, involving approximately 800 million at the consolidated group level, including subsidiaries and participations. This program is now in full swing in a shipbuilding market dominated by shortages in shipyard capacity, components and engineering capacity. Boskalis secured critical parts in time including engines and signed contracts during the course of 2006 for the construction and refurbishing of a number of important ships that will go into service on time. In addition, good progress was made on the design of other ships in the program. They will be commissioned in the near future. The progress of the program is described below. The 2,500 m 3 hopper Coronaut from Blankevoort, the dredging company Boskalis acquired in Annual Report 2006

25 Strategy in execution Lengthening of the jumbo hopper Queen of the Netherlands to 35,500 m 3 Replacement of two large hoppers (approximately 10,000 m 3 ) Replacement of two medium-sized hoppers (5,600 m 3 ) Trailing suction hopper dredgers Further market growth is expected in the top segment of the hopper fleet the jumbo hoppers and mega hoppers. The jumbo hopper Queen of the Netherlands will be extended in response to this growth. Like her sister vessel W.D. Fairway, which was lengthened in 2003, the Queen of the Netherlands will have a capacity of 35,500 m 3, an increase of approximately 50%. The extension of the Queen will secure Boskalis position as the leading player in the market for large-scale dredging projects, a market characterized by large volumes, long sailing distances and deep dredging depths. In the large hopper segment, Boskalis works with a number of older vessels such as the Barent Zanen and the Cornelis Zanen. These 8,000 m 3 vessels are over 20 years old and are due for replacement in the medium term. Two hoppers with a capacity of about 10,000 m 3 each will therefore be commissioned. In the medium-sized hopper segment, where work is mainly in home markets on harbor maintenance and beach suppletion, Boskalis wants to strengthen its market position and also replace a number of obsolete vessels. Two hopper dredgers have therefore been commissioned, each with a capacity of 5,600 m 3. One will become available in late 2008, the other in late Artist s impression of the new 5,600 m 3 hopper 23 Royal Boskalis Westminster nv

26 Strategy in execution Reconstruction of the former jumbo cutter Oranje Replacement of 1-2 medium-size cutters Continuation of the study into new-generation jumbo cutters Artist s impression of a jumbo cutter Cutter dredgers Boskalis is a leading player in the market for jumbo cutter dredgers. These vessels are used to dredge hard beds and rock, particularly when constructing and extending harbors, waterways and trenches in the seabed for oil and gas pipelines. The top segment of this market is expanding rapidly in various parts of the world. In 2007, Boskalis will be increasing its capacity in this segment by approximately 30% with the reconstruction of the former jumbo cutter Oranje. This will be the fourth jumbo cutter (sailing as the Phoenix) in the Boskalis fleet, for a relatively low investment cost. Boskalis has also made good progress with its study of a new generation of jumbo cutters that can handle very hard rock. Replacement of the stone-dumping vessel Cetus Replacement of the fallpipe vessel Sandpiper Artist s impression of a fallpipe vessel Fleet in energy-driven markets Boskalis activities in the energy-driven offshore markets include the construction and protection of oil and gas pipelines located on or in the seabed. In order to protect the pipelines and level the seabed, widespread use is made of stone dumped into the sea from special vessels. This is precision work that is often carried out at great depths. 24 Annual Report 2006

27 Strategy in execution Stone-dumping vessel Cetus Design work on the successor to the fallpipe vessel Sandpiper will be completed during the course of 2007, after which the tendering procedure will start for the building of the ship. The design work on the successor to the stone-dumping vessel Cetus, which is used not only for offshore work but also on coastal defense and riverbank protection projects, has been outsourced. Expansion of the fleet of specialist tugs Lamnalco fleet The market for terminal services is expanding rapidly and Lamnalco is accelerating its investments in specialized tugs that will allow it to supply services to new clients saw the completion of two new tugs and approximately nine ships are expected in Royal Boskalis Westminster nv

28 Sustainable business Sustainable business 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 sustainable activities and is freely available from the company website. The basic idea behind Sustainable business 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 the people, and Boskalis plays only a very minor role in that respect. The responsibility of Boskalis Boskalis has its own standards for its organization. The company has a direct responsibility for, among other things, its own workforce, suppliers and sub-contractors, safety and the environment. It is a responsible member of society and it acts 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 for dredging and other company activities. Initially, clients (often governments) set these standards but Boskalis also brings its professional know-how and commitment to their implementation. The company 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 judgments. Boskalis acts as a responsible member of society or a good guest. National laws and rules are the guidelines for Boskalis activities, in combination with Dutch standards for international dealings. Boskalis does not get involved in national politics, nor does it state opinions about political issues. These things 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. Contributing 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. 26 Annual Report 2006

29 Sustainable business 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. The company also makes its own assessments to determine which approach is best for the environment. Boskalis 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. Other information about this area can be found in Pioneering Green Innovation: Ecology and hydraulic engineering on pages 10 and 11. Westminster Dredging Co., the British Boskalis operating company, was involved in the Wallasea Wetland Creation Project in the United Kingdom. The project will create 115 hectares of wetland, including seven islands and various lagoons. Wallasea will provide a habitat for rare birds, plants, insects and fish. This project has achieved a good balance between natural values, recreation and coastal protection. 27 Royal Boskalis Westminster nv

30 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: Entrepreneurship and risk management; A broad market spread; Employee efficiency; A large and versatile fleet; A sound financial policy; Transparency in corporate governance; Professional expertise and skills; Safe, healthy and environmental working practices; Quality assurance systems; State-of-the-art ICT. Entrepreneurship and risk management Doing business means working on a daily basis with uncertainties, opportunities, and risks. Pages of the Corporate Governance chapter of this report discuss the risk management and internal control systems used at Boskalis. A broad market spread Boskalis wants balanced growth with maximum use of the connections and synergy between the group activities and the three business segments. The company s broad spread across the world, both geographically and across the different economic sectors, gives plenty of opportunities for growth. This spread also significantly reduces the risks from any fluctuations in markets or market segments. 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 has world-wide operations, and uses high-grade technical production resources in widely varying 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. For example, the company runs the International Dredging Academy, a vocational program specially developed by Boskalis where people with nautical training from the Netherlands and from other countries are trained for a job on the Boskalis fleet. Other examples are Dredging in Practice a practical training program for Dutch and non-dutch superintendents, the Boskalis Leadership Development Program and the Boskalis Operational Development Program that was launched in 2006 for managers working on the projects. The last two programs enable Boskalis to fill a significant number of its management positions from among the people with potential in its own ranks. 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 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. 28 Annual Report 2006

31 Basic principles of the corporate strategy 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 alongside safety and the environment is the safety of the ships and the crews. A sound financial policy Boskalis has the room for investments and acquisitions, thanks to its stable, sound financial policy with sharp monitoring of exchange rate and payment risks, a robust financing structure and a strong operational cash flow. Transparency in Corporate Governance The topic of Corporate Governance is covered in a separate chapter in this annual report. Professional expertise and skills Innovation. Every project is a source of creativity and innovation. The client s needs and preferences are translated into a technical design, using the best possible working methods and optimizing equipment utilization. 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 during actual projects. Clients increasingly look for innovative approaches to tendering, 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 clients act as partners in a project. Research and development (not project-specific). Unremitting work on new techniques and greater in-depth knowledge is of crucial strategic importance. For many years now, Boskalis has also been engaged in research that is not linked to specific projects, in part on its own and in part in joint projects with other industry 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 are regularly to be found taking measurements at projects and on board ships, both in the Netherlands and abroad. A steering group, with representatives from the Board of Management, the business units, and the technical staff departments, sets the priorities and evaluates the long-term planning of most of the R&D work. 29 Royal Boskalis Westminster nv

32 Basic principles of the corporate strategy The jumbo hopper Queen of the Netherlands sails into the port of Melbourne for a trial dredging run. On the basis of the environmental requirements and the local geological requirements, Boskalis developed a special draghead for deepening the entrance channel. Boskalis is working on the development of this project in an alliance with the Port of Melbourne Corporation. 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 here. 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. Safe, healthy and environmental working practices The Boskalis policy is to provide the entire workforce with healthy, safe and environment-friendly working conditions. The prevention of hazardous and/or unhealthy working conditions is a major objective for all workers, including those from sub-contractors and suppliers. This principle is expressed in the Boskalis slogan: Safety matters. 30 Annual Report 2006

33 Basic principles of the corporate strategy In order to raise safety awareness and improve 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 ongoing development of environment-friendly dredging techniques is an important aspect of policy. 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 environment-friendly lines. This leads to the use of environmental monitoring systems that Boskalis develops. Thanks to the efforts of its environmental experts, Boskalis is able to advise its clients properly about biological issues relating to the aquatic environment during the design of dredging projects. These activities result in a structural, systematic and transparent approach in the area of health, safety and the environment. Healthy, safe and environmentally acceptable working methods require cooperation and communications, not only within the company but also with third parties such as partners and service providers. The safety and environmental systems in place are structured around the Boskalis core business: contracting and executing dredging and dredging-related work. With the exception of a few local entities, these systems have received ISO and OHSAS certification. Quality assurance systems One of the basic principles of quality assurance at Boskalis is the wish to meet customer requirements efficiently and as planned. Another is 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 also structured around the core business. These systems have received ISO 9001 certification. State-of-the-art ICT 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 concept 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. 31 Royal Boskalis Westminster nv

34 On 26 December 2004, the tsunami struck the Maldives. The island of Vilufushi was devastated, with the survivors being evacuated to neighboring islands. Boskalis specialists contributed their financial expertise to the reconstruction work. Their work led to financing from the Dutch Ministry of Overseas Development. Boskalis reconstructs Vilufushi 32 Annual Report 2006

35 Vilufushi shortly after the tsunami Once these resources were in place, Boskalis was able to get to work on the spot. Our people found an isolated and uninhabited island with wrecked homes, sewers and drinking water supplies that had been put out of action, and a ruined infrastructure. A camp was quickly established, and clearing up activities began. Over a period of ten months, the sixteen hectares of the island were raised and extended fourfold. A new harbor and coastal defenses were also built. Vilufushi is now one of the islands that the Maldives government has designated as a safe island in the case of disasters. Royal Boskalis Westminster nv

36 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 relevant 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 the 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 mid and 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 internationally. Boskalis has its own website ( providing financial information, general company information, information about vacancies, the fleet, 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 33% Once again there was considerable interest in Boskalis shares from analysts and investors. This was particularly true of investors with a longer-term investment view. The Boskalis share price rose in 2006 by 33% from to Share price in euros, closing prices (January 1, 2002 to December 31, 2006) Boskalis share price: +33% +126% +19% +8% -36% +149% AEX index: +13% +25% +3% +8% -36% -2% AMX index: +30% +27% +15% +15% -35% -42% On the basis of the price as at May 15, 2006, the dividend yield for Boskalis shares in the past year was 1.9% ( 1.10 per share). 34 Annual Report 2006

37 Investor Relations Large shareholders As at March 14, 2007, the following shareholders are known to have a holding of at least 5% in Boskalis: HAL Holding N.V. 31% Sprucegrove Investment Management Limited 5.6% Delta Lloyd N.V. 5% In addition to the holdings of these longer-term shareholders, most Boskalis shares are in foreign hands. An estimated 25% are held in the United States and Canada, with 20% being held in the United Kingdom and Ireland, and the remainder in some ten European countries. Dividend policy The main principle underlying the Boskalis dividend policy is to distribute 40% to 50% of the net result from normal operations in the form of a dividend. Within the limits imposed by this basic principle for the longer term, Boskalis aims to achieve a stable development of the payout to its shareholders. The choice of dividend form (in cash and/or entirely or partly in shares) takes into account the company s desired balance-sheet structure and the interests of shareholders. It is expected that payment of dividend will be proposed in the form of cash in the coming years. A proposal will be submitted to the General Meeting of Shareholders on May 9, 2007 for a cash dividend of 2.04 per share. The dividend will be payable as of May 21, 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 and on the AMX index in Amsterdam. Share split The Boskalis share price has more than doubled in the last two years. In order to facilitate trading, a proposal will therefore be submitted to the Annual General Meeting of Shareholders on May 9, 2007 to split the share in a ratio of 1:3. Financial agenda Agenda in 2007 March 15 Publication of annual figures for 2006 late March Publication of annual report for 2006 May 9 Annual General Meeting of Shareholders May 11 Shares go ex-dividend May 15 Record date for dividend entitlement (after stock exchange closure) May 21 Dividend payment for 2006 August 23 Publication of 2007 half-year results Information Investor Relations R.T. Berends Telephone +31 (0) Telefax +31 (0) [email protected] Internet 35 Royal Boskalis Westminster nv

38 Report of the Supervisory Board Members of the Supervisory Board R.M.F. van Loon (1942), chairman date of first appointment: February 1, 2005, current term: May 2009 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. H. Heemskerk (1943) date of first appointment: July 1, 2006, current term: May 2009 chairman of the Board of Management of Rabobank Nederland member of the Supervisory Board of VADO Beheer B.V. member of the Board of Stichting Vereniging voor de Effectenhandel chairman of the Board of Stichting Geld- en Bankmuseum M. Niggebrugge (1950) date of first appointment: August 30, 2006, current term: May 2009 director of finance and member of the Board of Management of Nederlandse Spoorwegen N.V. chairman of the Supervisory Board of Strukton Groep N.V. member of the Executive Board of Vereniging VNO-NCW M. van der Vorm (1958) date of first appointment: May 18, 1993, current term: May 2007 chairman of the Board of Management of HAL Holding N.V. member of the Supervisory Board of Anthony Veder Group N.V./ Koninklijke Vopak N.V. All members of the Supervisory Board are Dutch. They do not hold shares or associated option rights in Royal Boskalis Westminster nv. Secretary S.P. van Woensel (1969) The above information is valid as at March 14, Annual Report 2006

39 Report of the Supervisory Board Report of the Supervisory Board on 2006 Financial statements In accordance with Article 27 of the Articles of Association of Royal Boskalis Westminster nv, the Supervisory Board presents the Annual Report for 2006 to the Annual General Meeting of Shareholders. The Annual Report for 2006, 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 external auditors, KPMG Accountants N.V. On the day on which the call for the Annual General Meeting of Shareholders was issued, the Board of Management sent the financial statements to the Boskalis Works Council for its information. 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 2006; the distribution of a dividend to shareholders of 2.04 per share. Composition of the Board of Management There was a change to the Board of Management in the year under review. The Supervisory Board appointed Mr J.H. Kamps to the Board of Management and to the position of Chief Financial Officer after the shareholders approved this appointment at an Extraordinary General Meeting of Shareholders on January 13. With effect from the end of the General Meeting of Shareholders on May 8, 2006, Mr R. van Gelder, the chairman of the Board of Management, stepped down since he was to reach the age of retirement later in the year. The vice-chairman of the Board of Management, dr. P.A.M. Berdowski, succeeded Mr Van Gelder as the chairman of the Board of Management with effect from the same date. Composition of the Supervisory Board During the course of the year under review, there were significant changes to the composition of the Supervisory Board. On March 13, 2006, the company announced that three of the five members of the Supervisory Board had resigned with immediate effect. The members in question were Mr M. Minderhoud, Mr H. Benjamins and Mr A.A. Westerlaken. The underlying reason was a difference between the views of the Board of Management and the Supervisory Board with respect to the way in which the chairman of the Board of Management was to be appointed in the future. During the General Meeting of Shareholders, there were extensive discussions about this difference, and about the departure of the members of the Supervisory Board in question. Mr R.M.F. van Loon succeeded Mr Minderhoud as the chairman of the Supervisory Board. In order to fill the resulting vacancies, in consultation with the Works Council, and in accordance with the Profile Description for the Supervisory Board, Mr H. Heemskerk and Mr M. Niggebrugge were nominated as new members of the Supervisory Board. Both nominees were subsequently appointed by the shareholders during two Extraordinary Meetings of Shareholders and joined the Supervisory Board on July 1, 2006 and August 30, 2006 respectively. It was announced in a press release dated December 15, 2006 that the Supervisory Board wishes to nominate Mr C. van Woudenberg for appointment to the Supervisory Board during the General Meeting of Shareholders on May 9, His appointment will return the Supervisory Board to the original number of members. At the same meeting, the agenda will also include the proposal to reappoint Mr Van der Vorm with effect from the same date in accordance with the nomination from the Supervisory Board. 37 Royal Boskalis Westminster nv

40 Report of the Supervisory Board Mr Van der Vorm has been nominated for reappointment because of his extensive experience as a Supervisory Board member with the company and the excellent way in which he has performed his duties. The Board is therefore pleased that Mr Van der Vorm has expressed his willingness to serve on the Board for another term. Activities of the Supervisory Board With both the old and new members, the Supervisory Board engaged in a range of activities during the past year. It had seven meetings with the Board of Management. All members of the Supervisory Board were present at five of those meetings. Preparations for the meetings were made by the chairman of the Supervisory Board and the chairman of the Board of Management. Permanent items on the agenda were the development of the results, the balance sheet, and industry and market developments. Other subjects discussed included the corporate budget, liquidity, continuity, acquisition and investment proposals, organizational structure, internal control and risk management, as well as the personnel policy, and health, safety and the environment. Corporate strategy was discussed at two meetings. The implementation of the shipbuilding program was also covered. Unusual items on the agenda were the composition of the Supervisory Board, the remuneration policy, the amendment of the company s articles of association, and the change to the company s dividend policy. The last two items were also submitted to the General Meeting of Shareholders, where they were approved. The regulations relating to principles and best practices for the Supervisory Board were also revised and posted on the company website. Introductory meetings were organized during the year under review for the new members of the Supervisory Board, with the focus being on general, financial and legal affairs, financial reporting by the company, and the specific factors particular to Boskalis and its corporate activities. The Supervisory Board has three core committees, namely the Audit Committee, the Remuneration Committee, and the Selection and Appointment Committee. The core committees performed their assigned tasks as described below. Audit Committee The Audit Committee met twice during the year under review to discuss issues including the financial reporting for the 2005 financial year, subjects such as IFRS, risk management, internal control, financial accounting and control systems, and relevant legislation and regulations. The chairman of the Board of Management and the chief financial officer attended all meetings of the Audit Committee, as did the external auditor from KPMG. The meetings also covered KPMG s audit approach and activities. The full Supervisory Board was supplied with reports on the meetings and the findings. 38 Annual Report 2006

41 Report of the Supervisory Board Remuneration Committee The Remuneration Committee met twice and also had regular consultations outside the meetings. The report of the Remuneration Committee relating to the company s remuneration policy included proposals to the Supervisory Board for changes to that policy, changes to the fixed annual salary of the members of the Board of Management as at January 1, 2006 and the determination of the short-term bonus for It also determined the 2006 criteria for both the short-term and the long-term bonus. During the year under review, a change was proposed to the percentages determined on the basis of the policy for the variable component of the salary of members of the Board of Management. The old arrangement stated maximum amounts only; the variable component in the new arrangement is an at target bonus. In cases of excellent performance, these at target percentages may be exceeded up to a set maximum percentage. During the year under review, the General Meeting of Shareholders approved this change to the remuneration policy. Under this policy as adopted, remuneration for members of the Board of Management now 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 information about a peer group of companies that are comparable to Boskalis in terms of size and/or complexity. The variable salary consists of a short-term and a long-term bonus. Both bonuses are linked to the fixed annual salary and consist of two elements with an equal weighting. The first element of the short-term bonus is based on the annual return, linked to the net profit plus interest on long-term loans expressed as a percentage of the average invested capital. The other element is linked to the degree to which the member of the Board individually has achieved the targets set by the Supervisory Board. If the targets are achieved ( at target performance), the short-term bonus will be a maximum of 50% of the fixed annual income for the chairman and 45% for the other members of the Board. These percentages can attain a maximum of 75% and 67.5% respectively in the case of excellent performance. In the case of the long-term bonus, one element is aimed at creating added value (EVA) and the other at realizing corporate policy in the long term. For this purpose, the Supervisory Board is formulating a number of targets as a basis for a qualitative assessment. For this long-term bonus, the at target percentages are 50% and 45% for the chairman of the Board of Management and a member of the Board of Management respectively. These percentages can attain a maximum of 75% and 67.5% respectively in the case of excellent performance. The long-term bonus is expressed per year as a conditional number of notional shares and is fixed after three years and paid out in cash at the equivalent value applicable at that time. This means that the variable income of the directors depends in part on the Boskalis share price and it is therefore linked to the value of the company. The members of the board participate in the pension scheme of the Stichting Pensioenfonds Boskalis Westminster Nederland. Since January 1, 2004, pension accrual has been based on the average-wage system; the retirement age is Royal Boskalis Westminster nv

42 Report of the Supervisory Board The aim of the policy for employee benefits is to provide a package that is in line with the market. The directors will not be provided with any loans, advances or guarantees. For work in other positions, explicit approval is required from the chairman of the Supervisory Board. For an overview of individual payments to the members of the Board of Management, the reader is referred to page 99 of the annual report. The variable payment awarded in 2006 relates to the 2005 financial year. The members of the Supervisory Board have initiated steps that include an evaluation of the remuneration structure. The Supervisory Board will receive assistance in this respect from an independent remuneration expert who will report directly to the board. Selection and Appointment Committee After the resignation of the three members of the Supervisory Board referred to above, the Selection and Appointment Committee had intensive consultations about the selection and appointment of new members of the Supervisory Board. During the year under review, the committee also discussed the composition and size of the Supervisory Board, in accordance with the Profile Description for the Supervisory Board. The Dutch Corporate Governance Code Since the introduction of the Dutch Corporate Governance Code (the Code ) in 2004, the principles of good governance and best practice provisions set out in the Code have been discussed regularly at meetings of the Supervisory Board. For the company s general corporate governance policy, readers are referred to the special publication of the Board of Management and the Supervisory Board on this subject, which can be found on the Boskalis website. The Supervisory Board believes that this policy was implemented correctly during the past year. The broad outlines of this policy can be found on pages of this annual report. 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. The chairman of the Supervisory Board has had regular discussions at other times with the chairman of the Board of Management and with other members of the Supervisory Board about current developments. The Supervisory Board met three times 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 individual members of the Board of Management, and the fulfillment of expected vacancies. The composition and assignment of tasks within the Board of Management were discussed. Possible succession plans for the upper echelon were also discussed on these occasions. 40 Annual Report 2006

43 Report of the Supervisory Board Members of the Supervisory Board were also interested participants at consultative meetings of the Works Council. There were also informal 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 in 2006 and for the policy pursued, and expresses its particular appreciation for the dedication and commitment shown by all. Papendrecht / Sliedrecht, March 14, 2007 The Supervisory Board R.M.F. van Loon, chairman H. Heemskerk M. Niggebrugge M. van der Vorm Members of the Audit Committee H. Benjamins, chairman prior to March 13, 2006 M. Niggebrugge, chairman (with effect from September 1, 2006) R.M.F. van Loon Members of the Remuneration Committee A.A. Westerlaken, chairman prior to March 13, 2006 R.M.F. van Loon Members of the Selection and Appointment Committee A.A. Westerlaken, chairman prior to March 13, 2006 H. Heemskerk R.M.F. van Loon, member and also acting chairman from March 13, 2006 onwards M. van der Vorm 41 Royal Boskalis Westminster nv

44 Report of the Board of Management dr. P.A.M. Berdowski (l) and J.H. Kamps (r) Members of the Board of Management dr. P.A.M. Berdowski, chairman (1957) member of the Board of Management since 1997 chairman of the Board of Management since 2006, vice-chairman chairman of the Supervisory Board of Amega Holding B.V. member of the Supervisory Board of Scope Publishing B.V. and N.V. Holding Nutsbedrijf Westland chairman of the Stichting Pensioenfonds Boskalis Westminster Nederland J.H. Kamps, Chief Financial Officer (1959) member of the Board of Management since 2006 member of the Board of Management of Stichting Fondsenbeheer Waterbouw, Stichting Bedrijfstakpensioenfonds Waterbouw, and Stichting Pensioenfonds Boskalis Westminster Nederland Both members of the Board of Management are Dutch. They do not hold shares or associated option rights in Royal Boskalis Westminster nv. Secretary S.P. van Woensel (1969) The above information is valid as at March 14, Annual Report 2006

45 Report of the Board of Management Report of the Board of Management on 2006 INTRODUCTION Pushed forward by strong growth in the international dredging market and the other markets where the company is active, Boskalis was in top gear in This was reflected by record turnover and net profit of 1.35 billion and million respectively, and high equipment utilization levels. Boskalis continued its selective contracting policy and benefited from market growth in the more traditional market areas such as Europe, the Middle East and Australia/Asia, as well as opportunities in emerging markets such as Brazil, Russia, India and China. The orderbook reached a new historical high of more than 2.5 billion. The Board of Management is pleased to report to you on the past year. POSITIVE MARKET DEVELOPMENTS The volume of work on the international dredging market reached unprecedented heights, with many large projects in the pipeline. The company is following a policy based on a broad market spread, targeting both existing and new markets. Even more than previously, this means that Boskalis is making deliberate choices about the deployment of people and equipment. This selective contracting policy also produced good results in The high market demand is primarily a feature of the markets driven by energy and raw materials. The core activity of dredging and earthmoving, and the partners Archirodon and Lamnalco, generated a strong flow of new contracts. The selective contracting policy made it possible to take appealing opportunities in the Middle East and Australia, and to respond well to new developments in Brazil, Russia, India and China. But the prospects for Europe are also favorable. Preparations are underway for a range of extensions to container ports, particularly in Germany, the United Kingdom, the Netherlands, France and Spain. These projects are expected to generate a lot of work in the years to come. FINANCIAL MATTERS The key points in 2006 were: Record turnover of 1,354 million (+ 17%), record profit of million (+86%); Continued expansion of orderbook to more than 2.5 billion; Higher fleet utilization, rising margins; Profit per share 4.08, dividend per share Royal Boskalis Westminster nv

46 Report of the Board of Management Turnover Turnover (x 1 million) In the year under review, turnover was 1,354 million (2005: 1,156 million). The rise in turnover of 1,500 1,400 1,300 1,200 1,100 1, ,035 1,046 1,020 1,156 1,354 17% was mainly accounted for by dredging and earthmoving. But turnover also increased by 16% in the energy-driven segment of maritime and terminal services. Turnover fell in maritime infrastructure, in particular because of the selective contracting policy followed by Archirodon in the booming Middle East market Turnover by geographical area (x 1 million) The Netherlands Rest of Europe Australia / Asia Middle East Africa North and South America ,354 1,156 1,020 1,046 1,035 Turnover by segment (x 1 million) Home markets in Europe Home markets outside Europe International projects hit and run Specialist niche markets Total dredging and dry earthmoving 1, Maritime infrastructure Maritime and terminal services ,354 1,156 1,020 1,046 1,035 Dredging and earthmoving Home markets (turnover 528 million) Turnover on the home markets rose to 528 million (2005: 475 million). In Europe, the increase in turnover was particularly strong in the Netherlands. Turnover on the other European home markets was, on balance, stable. Outside Europe, turnover was higher on all of the home markets: Nigeria, Mexico and the United States. 44 Annual Report 2006

47 Report of the Board of Management Orderbook The share of the home markets in turnover matched 2005 at some 40%. The Boskalis home markets are: (x 1 million) The Netherlands Nigeria 2,600 2,400 2,200 2,427 2,543 Northwestern Europe (Germany, United Kingdom, Nordic) Mexico United States 2,000 1,800 1,600 1,400 1,200 1, ,273 1,202 1,244 Dredging and earthmoving International projects market (turnover 544 million) On the international projects market, the turnover in dredging increased to 544 million (2005: 392 million). In the Australia/Asia region there was a strong rise in turnover in the Australian market, which is driven by energy and raw materials and where Boskalis was engaged in a number of major projects. In addition, substantial turnover was achieved in Korea and with a new position in China, on the Tjianjin harbor expansion. For the first time, Boskalis was at work in Russia, on a new fairway for Saint Petersburg. There was a strong increase in turnover in the Middle East, in particular because of the major LNG harbor project in Qatar and land reclamation activities in Bahrain and Oman. Turnover in South America moved upwards with major projects in Brazil and Suriname, and beach replenishment in the Dominican Republic. Dredging and earthmoving Specialist niche markets (turnover 98 million) Turnover from specialist offshore services for the oil and gas industry rose to 98 million (2005: 93 million). These activities consisted mainly of the construction and protection of offshore oil and gas pipelines, for example in Russia, Thailand, Kuwait and the Netherlands, and in the North Sea. Maritime infrastructure (turnover 141 million) Turnover from maritime infrastructure, which is mainly generated in the Middle East by the 40% participating interest in Archirodon, amounted to 141 million (2005: 159 million). Archirodon has a selective contracting policy in a booming Middle East region, where strong market expansion is accompanied by sharp increases in costs for building materials and subcontractors. The company focuses particularly on specialist projects, where attractive margins are possible. Acquired orders Maritime and terminal services (turnover 43 million) (x 1 million) The increase in turnover generated by the maritime service provider Lamnalco is primarily energy-driven, 2,500 2,338 and it continued last year. Boskalis 50% share in the turnover amounted to 43 million (2005: 37 million). 2,000 Orderbook 1,500 1,000 1,084 1,058 1,470 Orders worth a total of 1,470 million were acquired in 2006, with a broad spread over the various activities and geographical segments. The orderbook expanded to 2,543 million (year end 2005: 500 2,427 million). The orderbook rose particularly in the segments maritime infrastructure (among others 0 a tunnel project in Thessaloniki, Greece) and maritime and terminal services (among others a contract in the port of Aqaba, Jordan). The orderbook includes 271 million for the land reclamation work in Singapore that is still to be carried out (year end 2005: 317 million). The timing of the full resumption of this work is still uncertain due to the unclear sand supply situation. Results The rise in turnover, higher operating margins and good fleet utilization pushed up the group result before depreciation, result associated companies, interest and taxation (EBITDA) to million (2005: million). The operating result was million (2005: 82.3 million); net profit increased to million (2005: 62.7 million). 45 Royal Boskalis Westminster nv

48 Report of the Board of Management Net profit Higher contribution particularly from dredging and earthmoving work (x 1 million) The increase in the contribution from the segment dredging and earthmoving was the major factor behind the higher result. The rapidly growing maritime and terminal services also made a greater contribution to the profit. Lower turnover led to a fall in the contribution from the maritime infrastructure activities Results by segment (x 1 million) Dredging and earthmoving Maritime infrastructure Maritime and terminal services Fleet utilization (in weeks per year) Dredging and earthmoving The result from this segment increased to million (2005: 65.3 million), primarily because of the increase in turnover, higher margins and good equipment utilization. The result for the segment includes exceptional income of 11.6 million (before taxation). This is a payment on an old claim under international debt restructuring for Nigeria. The average utilization rate for the hopper fleet rose to 43 weeks on an annual basis (2005: 37 weeks), primarily because of the increased utilization of the large trailing suction hopper dredgers. Utilization of the cutter fleet was also good, mainly because of the deployment of the larger cutter suction dredgers on a few major projects: 34 weeks on an annual basis (2005: 36 weeks). Maritime infrastructure The result from maritime infrastructure (40% holding in Archirodon) was down at 11.7 million (2005: 16.3 million) as a result of the selective contracting policy and the associated lower turnover. Maritime and terminal services The result in this segment (50% holding in Lamnalco) rose further to 9.6 million (2005: 6.2 million), particularly as the result of increasing turnover and good operating performance. Other Depreciation amounted to 86.6 million, compared to 80.2 million in This increase was mainly attributable to depreciation on the equipment brought in by the acquisitions of Wasa Dredging in Finland and Blankevoort in The Netherlands, and to additional depreciation charges in a number of large project joint ventures. The result from associated companies was 2.8 million (2005: 0.3 million). Compared to the previous year, there was an improvement in the result from a number of American participating interests operating dredging equipment. The higher result led to an increase in taxes to 35.3 million (2005: 18.1 million). The effective tax rate was 23.2% (2005: 22.2%). For 2006, the return on equity was 20.1% (2005: 12.4%). 46 Annual Report 2006

49 Report of the Board of Management Investments (x 1 million) Capital expenditure In the year under review, capital expenditure reached 185 million. Large investments were made in the dredging and earthmoving segment: approximately 40 million in the equipment of the acquired dredging companies Wasa Dredging and Blankevoort, and some 104 million in fleet extensions and overhauls, as well as pipelines and auxiliary equipment. A major proportion of the capital expenditure ( 23 million) came from Lamnalco (maritime and terminal services segment), which is implementing an ambitious growth strategy, mainly in response to rapidly increasing demand for services at LNG import and export terminals. In addition, Archirodon (maritime infrastructure segment) made investments, particularly in equipment for specific projects ( 18 million) Divestments totalled 18 million, this concerned mainly the loss of the trailing suction hopper dredger Nautilus, that capsized in Congo at the end of last year On balance net investments amounted to 167 million (2005: 79 million) Net investments Divestments 2006 Balance sheet In line with the increased operating results, the cash flow in 2006 rose to million (2005: million). Cash flow Particularly as a result of the relatively high level of investments in relation to the cash flow and the (x 1 million) distribution of 31.5 million of dividend over the 2005 financial year, there was a limited increase in the cash position to 216 million (year end 2005: 201 million). Part of this amount, 110 million, was freely available (year end 2005: 116 million) and 106 million was tied up in associated companies and projects that are being executed in cooperation with third parties (year end 2005: 85 million) Solvency as at December 31, 2006 was 39.4% (2005: 41.3%) Proposed profit appropriation A proposal will be submitted to the Annual General Meeting of Shareholders to appropriate 58.3 million for a cash dividend payment of 2.04 per share, in accordance with the dividend policy. The remaining amount of 58.3 million will be added to the retained earnings. POLICY AND OPERATIONAL MATTERS Personnel & Organization Boskalis always sees a high-quality human resources policy as a major priority. Boskalis provides its workforce with challenging and varied careers in which people s own decisions play an important role. Everybody can develop to their full potential, both in the professional and technical areas, and in breadth. Due to the expansion of the company, the demand for new employees rose in The labor market is getting tighter, particularly for people with training in technology, and a professional approach is required to recruitment. The recruitment process was further optimized and labor market communications were intensified. In all this, central factors are the challenges of the dynamic world of Boskalis and the opportunities the company provides for individuals to make the difference. In 2006, 110 vacancies were filled. 47 Royal Boskalis Westminster nv

50 Report of the Board of Management Not only was considerable attention paid to new employees, the development and continued professionalization of the Boskalis workforce were major components of the human resources policy. In 2006, the extensive staff training program paid particular attention to the development of future senior management. The increasing complexity of joint working and contract arrangements in the industry require a high degree of professionalism and Boskalis is responding to this with its own training. For example, Boskalis has two programs in which the emphasis is on the further development of individual members of staff: Boskalis Leadership Development Program. Twenty employees attended the Boskalis Leadership Development Program (BLDP) in The BLDP focuses on experienced members of staff whose careers are moving in the direction of more general managerial positions. The emphasis of the program is on Leading yourself, Leading others and Leading the business. Boskalis Operational Development Program. The new Boskalis Operational Development Program (BODP) was launched at the end of the year. The program has two target groups: for younger project managers with the potential to manage complex projects in the future, the program has the advanced track. It also has a master track for more senior project managers. This concentrates in particular on issues involved in larger projects carried out in combinations. An e-learning tool BODP-Plaza has been developed specially for this program. It includes a knowledge forum with numerous experts from inside the company. The development of the BODP drew extensively on the experience acquired by Boskalis in recent years with its competence management program. Another two groups of trainees started the program in The program for trainees, which has already been in place for more than ten years, introduces young, new employees to the company over a period of 14 months. The groups have an international membership in keeping with the multicultural nature of Boskalis. In 2006, after the acquisition in the spring of the dredging company Blankevoort, a lot of energy went into the integration of Blankevoort employees into the Boskalis organization. On April 1, 2006, Jan den Hartog joined Boskalis as the director of Personnel & Organization. Workforce size. In 2006, the average size of the Boskalis workforce was 7,590; the figure at year end 2006 was 8,151 employees (compared to 7,029 at year end 2005). Communications with the Works Council were intensive in The Works Council s active approach and the way in which it fulfills its duties are very much appreciated. Ship accident with fatal casualties. On November 30, two Boskalis employees and a local employee from the Pointe-Noir harbor in the Republic of Congo lost their lives in a tragic accident involving the Nautilus, one of the smaller hoppers in the Boskalis fleet (approximately 4,000 m³). The ship capsized during dredging work for the Pointe-Noir harbor. 48 Annual Report 2006

51 Report of the Board of Management Health, safety and the environment Boskalis is always looking for ways of improving its performance in the area of health, safety and the environment. These issues were high on the agenda again last year. In 2006, company-wide, specific objectives were adopted. The objectives, that are set at the corporate, business unit and project levels, constitute a basis for the transparent measurement of performance. An important milestone in 2006 was the ISO and OHSAS certification of Boskalis International bv. This part of the company is responsible for project activities outside the Netherlands. Certification recognizes the structured approach of the health, safety and environment policy at Boskalis International bv. A lot of effort also went into communications about safety last year. The aim was to increase safety awareness in the organization further and to keep people on the projects alert. Senior managers also conducted safety inspections on the projects, and managerial staff attended safety courses. Individual safety performance is an integral part of the remuneration policy at Boskalis. In this vein, the Board of Management awards the annual Boskalis Safety Award to an employee for the best idea for safety improvement. The MANsafe training started in the spring of Boskalis itself developed this safety awareness program. There are two versions: Safety Leadership, which focuses on the recognition and prevention of dangerous situations, and Safety Management, which deals with setting up and operating a safety management system. More than 200 members of staff in managerial positions in the operational organization have now followed the course. In 2006, the number of accidents fell compared to The accident rate (LTIF, the number of accidents per million hours worked) remained at the same level of approximately 8, which is substantially below the average for the sector. The policy objective is a continued reduction in LTIF. Equipment Growth at Boskalis and operational improvements dominated the activities of the Central Technical Department, which is responsible for equipment development and management, purchasing and logistics. Equipment development. The construction program was tackled energetically (see Strategy in execution ). In addition, as a result of acquisitions, Boskalis took over three trailing suction hopper dredgers with capacities of 4,700 m 3, 3,000 m 3 and 2,500 m 3, as well as two backhoes, a few barges and a drilling and blasting pontoon. Furthermore, various items of equipment were modernized and adapted to meet market requirements. Equipment Management. The core business of the Central Technical Department is to supply enough equipment and parts for projects in good time. The policy in this respect is targeted towards continuing professionalization and optimization. This has led to the continued extension of the generic maintenance policy. The aim of this policy is to standardize maintenance on all ships as much as possible. Standardization improves efficiency and results in better control of maintenance costs. The new concept of Value-Driven Maintenance also contributes 49 Royal Boskalis Westminster nv

52 Report of the Board of Management to this process. The idea is that maintenance work must be dependent on the extent to which it contributes to operational availability. Purchasing. Continued professionalization was also a feature of the purchasing activities. Agreements with suppliers resulted in improvements to the management of quality, delivery times and pricing levels. In a parallel development, the strengthening of central (global) purchasing activities generated structural cost savings. Concrete steps were taken towards the establishment of Supply Chain Management for a number of strategic products. Equipment and parts are mainly purchased in Western European countries. In addition, an increasing range of products are obtained from suppliers in China and India when there are positive developments in price/quality ratios. Logistics. The arrival on time of spare parts, lines, fuel and all other critical supplies is indispensable for the successful completion of projects. This vital logistical function was developed still further last year. Central factors are the rapid processing of orders and a pro-active approach to bottlenecks. In this context, intensive use is made of the very latest communications facilities. Research and development The Boskalis research department worked again on many different innovative designs last year. The focus was on both the development of specialist equipment and the further improvement of dredging processes. A number of important developments are described below. Further improvements were made in 2006 on the special draghead developed by Boskalis for dredging in stone using a trailing suction hopper dredger. They were based on information obtained from laboratory tests conducted at WL Delft Hydraulics. This ripperhead will undergo further testing in 2007 on the jumbo hopper Queen of the Netherlands in the Middle East. Ripperheads will also be made and tested on the hopper Prins der Nederlanden and its sister ship, the Oranje. In recent years, tests have taken place in the Boskalis research lab of models of an innovative cutter drive that makes it possible to use a completely different cutter blade/suction nozzle configuration. The tests indicate that this concept can generate a considerable reduction in spillages. A patent has been applied for and engineering work has started on a prototype. Research continued in 2006 on a technique for improving fine-sand production by trailing suction hopper dredgers. The results are promising. Information and communications technology (ICT) The global innovation and standardization of ICT systems continued to take shape last year. Following on from the completion of the Info 2000 information plan, the new program for was adopted in early This ambitious plan is based on the latest technology in the field of information management and applications, fleet automation and the required ICT. Alongside the usual ICT activities, work took place in 2006 on a number of innovative projects. For example, the Project Management System ERP-Lite was rolled out further, with the emphasis being on the Middle East. In addition, work took place on a new charging system for equipment and a production reporting system was rolled out. Last year also saw the establishment of a large-scale, modern ICT infrastructure on the three-year Ras Laffan LNG harbor project in Qatar. 50 Annual Report 2006

53 Report of the Board of Management Prospects for the coming year A further increase in turnover and continued good utilization rates for the equipment are expected for In general, margins will be good. It is not yet possible to make firm statements about the results expected for The investment activity will be at a high level, primarily focused on the accelerated increase of hopper and cutter capacity to capture the growing market demand. The plans are part of the long-term program described in Strategy in execution. In conclusion 2006 was a record year, with a level of activity that imposed severe demands on the alertness and dedication of our workforce. We are in a period of growth that will last for a number of years and high levels of performance will again be required from the Boskalis community in the coming year. The Board of Management thanks the employees for their dedication and enthusiasm in the past year and looks forward to next year with confidence. Papendrecht / Sliedrecht, March 14, 2007 Board of Management dr. P.A.M. Berdowski J.H. Kamps 51 Royal Boskalis Westminster nv

54 Bahrain s central location and good infrastructure have given it a strong economic position in the Middle East. Continuing growth and development are linked to the expansion of the country into the sea. Boskalis thinks along with the client and offers solutions. Enthusiasm, creativity and professionalism combine, now and in the future, on large-scale land reclamation projects. Bahrain Financial Harbor an ambitious project that puts Bahrain on the world map for financial services 52 Annual Report 2006

55 North Bahrain New Town This project includes the construction of ten islands, including coastal defenses, beaches and fairways, to meet the demand for housing in the northern part of Bahrain. Financial Harbors 1 and 2 include land reclamation for a new financial center on the Manama coast. The center includes the Dual Towers, Harbor House and the Financial Mall. The stock exchange will be located here, together with major international banks and insurance companies. The first residents of the Dual Towers are expected to move into their new offices in April The most recent project is North Bahrain New Town. This is a large-scale plan for meeting housing demand in the northern part of Bahrain. The project includes the construction of ten islands (with a total area of 690 hectares), including coastal protection, beaches and fairways. The project will be completed in late Royal Boskalis Westminster nv

56 Corporate Governance Corporate Governance Boskalis is a listed two-tier company. The large corporation rules and relevant legislation are mandatorily applicable to Boskalis because: (a) shareholders equity exceeds 16 million, (b) the company has set up a works council, and (c) at least 100 employees are working in the Netherlands at the company and all dependent companies together. Boskalis shares are listed and continuously traded on Euronext Amsterdam N.V. BOSKALIS AND CORPORATE GOVERNANCE The Dutch Corporate Governance Code (the Code ), that came into force on 1 January 2004, 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, and customers, but also government and groups in society. The Board of Management and the Supervisory Board of the company have integral responsibility for taking these interests into consideration, generally with the emphasis on the continuity of the company and the creation of shareholder value in the long term. The Board of Management of Boskalis is charged with managing the company, which includes being responsible for the achievement of the company s objectives, as well as for the strategy and the policy pursued and the consequent development of results. The Board of Management is accountable in this regard to the Supervisory Board and the General Meeting of Shareholders. In performing its tasks, the Board of Management is guided by the interests of the company and the business associated with the company and it takes into account the relevant interests of parties involved with the company. The Supervisory Board has the task of supervising the policy of the Board of Management and the general course of events in the company and the associated business. The Supervisory Board also gives advice to the Board of Management. The Supervisory Board has set up three core committees, namely the Audit Committee, the Remuneration Committee and the Selection and Appointment Committee. See page 41 for the composition of these committees. At least one General Meeting of Shareholders takes place every year in any event. The tasks performed by the General Meeting of Shareholders include adopting the financial statements, and the General Meeting also has powers regarding the appointment and dismissal of the Supervisory Board and the members of that board. There is also a Works Council that provides employee representation in the context of the Works Councils Act. 54 Annual Report 2006

57 Corporate Governance APPLICATION AT BOSKALIS Boskalis subscribes to the notion that a sound and transparent system of checks and balances is important in maintaining sufficient confidence in companies operating on the capital market. Boskalis considers clarity and openness in accountability and supervision as the cornerstones of proper management and entrepreneurship. The company therefore has a sound system of corporate governance. At Boskalis, the guarantees for proper corporate governance are mainly to be found in an open company culture characterized by entrepreneurship, technical professionalism and accepted civil standards. The main outlines of the Boskalis corporate governance structure are set out each year in the Annual Report, and any material changes in Boskalis corporate governance structure will be submitted to the General Meeting of Shareholders. The apply or explain report referred to in the Code was included in the section on corporate governance in the Annual Report for This section is available on the Boskalis website at and can also be obtained directly from the company. The section indicates how the principles and best practice provisions from the Code are applied at Boskalis. Announcements of the kind referred to in the Decree of 5 April 2006 implementing Article 10 of Directive 2004/25 EC of the European Parliament and the Council of the European Union on takeover bids are included on pages 108 and 109 of this report. Boskalis does not currently foresee any material changes in the corporate governance structure of the company in the near future. RISK MANAGEMENT Market and competition risks 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 expansion of the global economy, and the growth of international trade volumes. The long-term prospects for these factors are favorable. In the shorter 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. In broad terms, 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 short-term economic fluctuations. Boskalis deals with large, internationally operating competitors, and with competitors with more regional or local activities restricted to one or several submarkets. In most cases, projects are brought to the market using private or public tender procedures. Competition 55 Royal Boskalis Westminster nv

58 Corporate Governance is mostly price-based. 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 considerably by the relation between the demand for dredging services, and the available capacity or utilization of the equipment. The broad international spread of market positions and equipment and cost leadership are therefore key success factors upon which Boskalis places a great deal of emphasis, in terms of investment strategy and as a critical component of operational management. The solid financial position also provides a strong basis for risk management. 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, these operating and price risks must be taken into account when calculating the cost price. Operating risks mainly involve soil conditions, variable weather conditions, the technical suitability of the equipment, wear and tear when it comes into contact with processed materials, and damage to equipment and third-party property. Boskalis seeks to manage these risks by means of thorough project preparation and appropriate measures such as soil studies, the maintenance of easily accessible databases with information about past experience, and detailed risk analysis techniques. In addition, there is a strong focus on staff training, schooling, and refresher courses, a certified quality and safety program, and optimal maintenance policies to keep equipment in good condition. Some risks are also insured if possible. The key to the professionalism and skills of Boskalis lies in its ability to manage these operating risks effectively and responsibly. Risks related to price developments on the purchasing side, such as increased wages, costs of materials, sub-contracting costs, fuel, etc., which are borne by Boskalis, are also taken into account in cost price calculations. Wherever possible, especially on projects that extend over a long period of time, contracts include indexation clauses. Contracts sometimes require fuel to be delivered by the client; from time to time, forward contracts or futures are arranged. Financial risks Boskalis is exposed to both operating and financial risks associated with projects. The main financial risks are disruption by political developments, violence, etc., and the risk of non-payment by clients. Boskalis has a strict risk acceptance and hedging policy for political and payment risks. Unless firstclass, credit-worthy clients are involved, payment risks are in principle covered by insurance, bank guarantees, advance payments, etc. Many of the projects are contracted in foreign currency. Generally, positions in foreign currency are fully hedged as soon as they are taken, usually with forward contracts. The US dollar-euro exchange rate is particularly relevant. A large proportion of the projects are contracted in US dollars or in currencies that are linked, to a greater or lesser extent, to the US dollar. 56 Annual Report 2006

59 Corporate Governance As for competition, a significant part of the cost structure of most of Boskalis major international competitors is also linked to the euro. The impact of exchange rate fluctuations is greater in markets where the competition comes primarily from parties whose cost structures are not linked to the euro. However, on balance, the dollar-euro exchange rate has only a limited impact on the competitive position of the company. 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 US dollar-based, either in full or to a major extent. These investments are viewed from a long-term perspective. Translation risks with regard to investments 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 income statements of these affiliates are converted at average exchange rates. Translation differences are charged or credited directly to 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 that are primarily used in the United States), usually in favor of clients. Boskalis has a conservative financing policy since adequate credit, and particularly bank guarantee facilities, are essential to an uninterrupted conduct of business. The company has ample credit and bank guarantee facilities at its disposal. The above is a description of the main identifiable risks. It is of course always possible that risks will emerge at a later stage that have not been identified earlier, or that have been identified but not considered to be material. Internal risk management and control systems The internal risk management and control systems are based on the principles of effective management control and tailored to the day-to-day working environment in which Boskalis operates worldwide. Given the hands-on nature of the company and its short lines of communication, three factors are important in the assessment and evaluation of the internal risk management and control practices and systems at Boskalis: 1. With regard to daily operations, an extensive framework of quality assurance rules, procedures and systems, that include clear guidelines for responsibilities, authorization and risk control, forms the backbone of operational risk management and control. That framework is in part based on international standards such as ISO 9001, with which it conforms. In addition, alongside 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 involves 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. 3. The 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 periodical reporting, analysis of the financial results, and performance reviews at senior management level. 57 Royal Boskalis Westminster nv

60 Corporate Governance Risks with regard to financial reporting Structure of financial reporting Financial reporting at Boskalis is structured within a tight framework of budgeting, reporting and forecasting. Reports may be for external or internal use. External reporting consists of an Annual Report, including financial statements audited by the external auditor, as well as a half-yearly report containing abridged financial information, both consolidated and segmented. The external reports are drawn up in accordance with IFRS on the basis of internal financial reporting. Internal financial reporting management reporting consists of extensive consolidated quarterly reports dealing with actual developments compared to quarterly budgets (individual and cumulative). Forecasts are also drawn up quarterly of the annual results, cash flows and balance sheet positions at the end of the financial year. The quarterly budgets are part of the annual group budget, which is set in December every year by the Supervisory Board and the Board of Management. The internal financial reporting has a layered structure in accordance with the internal allocation of management responsibilities with consolidation taking place level by level, starting with the projects, moving on to the business units and ending with group consolidated reports. Project managers are responsible for budgets, income statements and balance sheets for their projects, which are drawn up in accordance with prevailing guidelines and instructions. In turn, business unit managers are responsible for the financial reports for their business units. The Board of Management discusses the quarterly reports in formal quarterly meetings with the business unit managers responsible. These meetings are minuted. The consolidated group reports are discussed with the Supervisory Board every quarter. The structure and quality of the financial accounting and control systems of Boskalis and its group companies are safeguarded by unambiguous and periodical internal and external audits. 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 random and ad hoc investigations ( financial audits ) that also contain 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 Board of Management considers that these arrangements for financial reporting, with a clear formal structure and regular assessment and discharge, safeguard the high quality of the figures in the periodical reports. 58 Annual Report 2006

61 Corporate Governance Statement about risks relating to financial reporting In spite of the risk management and control systems that Boskalis has implemented, there can be no absolute certainty that mistakes, losses, fraud or unlawful activities will be prevented. However, given the structure and operation of the financial reporting and review systems at Boskalis, the Board of Management states that: the risk management and control systems provide reasonable assurance that the financial reports are free of material misstatements; it knows of no indications that the risk management and control systems did not work properly during the year under review; it knows of no indications that the risk management and control systems will not work properly during the year in progress. The topic of internal risk management and control has been discussed with the Supervisory Board. No major changes were introduced in the risk management and internal control systems during the course of the year under review. 59 Royal Boskalis Westminster nv

62 Boskalis equipment leads the industry. The fleet consists of more than 300 units. State-of-the-art vessels that make the difference with the competition. And an ambitious building program for the years to come. For Boskalis, by Boskalis. It starts with entrepreneurship. What trends do we expect in the market? Which equipment is most appropriate for the broad Boskalis market spread? And how can we strengthen our competitive position? Then comes professionalism. The translation of market demands into specific ships. From concept to details, designed by the Boskalis specialists. The hopper Prins der Nederlanden: packed full of high-tech equipment devised by Boskalis 60 Annual Report 2006

63 The construction team for the Phoenix, the new Boskalis jumbo cutter, brings together 21 specialists from various disciplines. The photo shows seven of them at the yard in Singapore. And cooperation. Every ship has its own construction team, with specialists who get the job done together with the shipyard. Bringing together what they know about dredging equipment, shipbuilding technology, electronics, instruments, production data and cost calculations. And information about competing ships. Boskalis ships have to operate more economically than other ships in their class. As the ship begins to take on a more definite shape, the construction team gets bigger. The future crew is called in, as are the technical inspectors. The selected shipyard, and the expertise and experience of the Boskalis team, combine to produce a state-of-the art ship. A ship that can make the difference in the market. Royal Boskalis Westminster nv

64 Financial statements Annual Report 2006

65 Financial statements 2006 Table of contents Consolidated profit and loss account 65 Consolidated statement of recognized income and expense 66 Consolidated balance sheet 67 Consolidated statement of changes in equity 68 Consolidated cash flow statement 69 Explanatory notes to the consolidated financial statements 70 General 70 Compliance with International Financial Reporting Standards (IFRS) 70 Compliance statement 70 New standards and interpretations not yet applicable 70 Principles of financial reporting 70 Format and valuation 70 Consolidation 71 Foreign currencies 71 Hedging and financial instruments 71 Impairment 72 Tangible fixed assets 72 Intangible assets 72 Financial fixed assets 72 Inventories 73 Work in progress 73 Debtors and other receivables 73 Cash and cash equivalents 73 Interest-bearing loans and borrowings 73 Employee benefits 73 Provisions 74 Deferred tax assets and liabilities 74 Trade and other payables 74 Turnover 74 Other operating income 74 Operational costs 74 Personnel expenses 74 Depreciation and amortization expense 74 Interest income and expenses 75 Result from associated companies 75 Taxation 75 Dividends 75 Cash flow statement 75 Principles for information by segment 75 Information by segment 76 Business segments 76 Geographic segments 77 Other operating income 77 Operational costs 77 Personnel expenses 78 Taxation 78 Income tax receivable and payable 79 Deferred income tax assets and liabilities 80 Tangible fixed assets 81 Associated companies 82 Other financial fixed assets 83 Inventories 83 Work in progress 84 Debtors and other receivables 84 Cash and cash equivalents Royal Boskalis Westminster nv

66 Financial statements Issued capital 85 Share premium 85 Legal reserve 85 Hedging reserve 85 Currency translation reserve 85 Retained earnings 86 Profit for the year 86 Earnings per share 86 Interest-bearing loans and borrowings 86 Employee benefits 87 Provisions 90 Trade and other payables 90 Financial instruments 90 Commitments and contingent liabilities 94 Subsequent events 95 Related parties 95 Identity of related parties 95 Related party transactions Company profit and loss account 100 Company balance sheet before profit appropriation 101 Statement of changes in equity 102 Explanatory notes to the company financial statements 103 General 103 Principles of financial reporting 103 Change in accounting principles 103 Investment in group company 103 Issued capital 103 Share premium 104 Other reserves 104 Profit for the year 104 Remuneration of members of the Board of Management and Supervisory Board 104 Commitments and contingent liabilities 104 Other information 105 Stichting Continuïteit KBW Annual Report 2006

67 Financial statements 2006 Consolidated profit and loss account (in 1,000) Note Revenue Turnover [4] 1,353,614 1,155,721 Other operating income [5] 12,439 7,517 1,366,053 1,163,238 Operating expenses Operational costs [6] 913, ,424 Personnel expenses [7] 215, ,283 Depreciation and amortization expense [11] 86,582 80,216 1,215,792 1,080,923 Operating result 150,261 82,315 Net financing costs Interest income 3,327 1,952 Interest expense 4,012 3, ,277 Result associated companies [12] 2, Profit before taxation 152,377 81,364 Taxation [8] 35,319 18,094 Net group profit 117,058 63,270 Net profit attributable to: Shareholders 116,577 62,747 Minority interests ,058 63,270 Earnings per share [25] Diluted earnings per share [25] Royal Boskalis Westminster nv

68 Financial statements 2006 Consolidated statement of recognized income and expense (in 1,000) Note Results recognized directly in group equity (after taxation) Currency translation differences on foreign operations [22] 14,288 13,425 Actuarial gains and losses and asset limitation on defined benefit pension schemes [27] 5,404 1,405 Movement in fair value effective cash flow hedges [30] 9,894 25,078 9,798 13,058 Net group profit 117,058 63,270 Total recognized income and expense for the year 107,260 50,212 Total recognized income and expense for the year attributable to: Shareholders 107,245 49,413 Minority interests ,260 50, Annual Report 2006

69 Financial statements 2006 Consolidated balance sheet (in 1,000) Note Assets Non-current assets Tangible fixed assets [11] 721, ,264 Investments in associated companies [12] 10,106 15,071 Other financial fixed assets [13] 9,769 11,605 Deferred income tax assets [10] 3,080 4, , ,385 Current assets Inventories [14] 52,748 43,380 Due from customers for work in progress [15] 87,634 58,680 Debtors and other receivables [16] 482, ,728 Income tax receivable [9] 664 2,208 Cash and cash equivalents [17] 215, , , ,555 Total assets 1,583,909 1,329,940 Group equity and liabilities Shareholders equity Issued capital [18] 68,639 68,639 Share premium [19] 13,261 13,473 Legal reserve [20] 81,499 63,469 Hedging reserve [21] 18,196 8,302 Currency translation reserve [22] 11,209 2,613 Retained earnings [23] 331, ,608 Profit for the year [24] 116,577 62, , ,851 Minority interests 6,004 6,265 Group equity 624, ,116 Non-current liabilities Interest-bearing loans and borrowings [26] 47,524 27,706 Employee benefits [27] 10,914 8,626 Deferred income tax liabilities [10] 56,262 41,744 Provisions [28] 2,014 3,510 Other liabilities 1,393 1, ,107 83,080 Current liabilities Trade and other payables [29] 543, ,601 Due to customers for work in progress [15] 223, ,577 Interest-bearing loans and borrowings [26] 23,877 26,819 Income tax payable [9] 49,278 37,718 Provisions [28] 795 1, , ,744 Total group equity and liabilities 1,583,909 1,329, Royal Boskalis Westminster nv

70 Financial statements 2006 Consolidated statement of changes in equity Currency Profit Total Issued Share Legal Hedging translation Retained for the capital and Minority Total (in 1,000) Note capital premium reserve reserve reserve earnings year reserves interest group equity Balance as at January 1, ,639 13,473 63,469 8,302 2, ,608 62, ,851 6, ,116 Profit appropriation 2005 Cash dividend 31,460 31, ,736 Adjustment prior years stock dividend distribution Addition to retained earnings 31,287 31, ,499 62,747 31, ,736 Movement legal reserve [20] 18,030 18,030 Total recognized income and expense Net group profit 116, , ,058 Currency translation differences 13,822 13, ,288 Actuarial gains and losses and asset limitation on defined benefit pension schemes [27] 5,404 5,404 5,404 Movement in fair value of effective cash flow hedges [30] 9,894 9,894 9,894 9,894 13,822 5, , , ,260 Balance as at December 31, ,639 13,261 81,499 18,196 11, , , ,636 6, ,640 Currency Profit Total Issued Share Legal Hedging translation Retained for the capital and Minority Total (in 1,000) Note capital premium reserve reserve reserve earnings year reserves interest group equity Balance as at December 31, ,617 13,874 43,344 10, ,701 33, ,903 5, ,369 Effect of first-time adoption of IAS 32 and IAS 39 Financial instruments 33, ,886 33,886 Balance as at January 1, ,617 13,874 43,344 33,380 10, ,207 33, ,789 5, ,255 Profit appropriation 2004 Cash dividend 8,351 8,351 8,351 Stock dividend 1, Addition to retained earnings 24,931 24,931 1, ,931 33,903 8,351 8,351 Movement legal reserve [20] 20,125 20,125 Total recognized income and expense Net group profit 62,747 62, ,270 Currency translation differences 13,149 13, ,425 Actuarial gains and losses and asset limitation on defined benefit pension schemes [27] 1,405 1,405 1,405 Movement in fair value of effective cash flow hedges [30] 25,078 25,078 25,078 25,078 13,149 1,405 62,747 49, ,212 Balance as at December 31, ,639 13,473 63,469 8,302 2, ,608 62, ,851 6, , Annual Report 2006

71 Financial statements 2006 Consolidated cash flow statement (in 1,000) Note Cash flows from operating activities Net group profit 117,058 63,270 Depreciation 86,582 80,216 Cash flow 203, ,486 Adjustments for: Net financing costs 685 1,277 Taxation 35,319 18,094 Book results on fixed assets 11,277 7,296 Movement other financial fixed assets 1,836 1,291 Movement non-current liabilities and provisions (including direct equity movements) 1,343 1,744 Movement in inventories 11,612 2,237 Movement debtors and other receivables 160,774 17,652 Movement trade and other payables 114, Movement due to and due from customers for work in progress 21,076 4,229 Result associated companies 2, Cash generated from operations 191, ,332 Interest received 3,327 1,952 Interest paid 4,012 3,229 Income taxes paid 12,511 16,651 Net cash from operating activities 178, ,404 Net cash from investing activities Purchase of tangible fixed assets 184,961 87,173 Proceeds from sale of tangible fixed assets 28,976 15,280 Net investment in associated companies Dividends received 6, Net cash used in investing activities 149,032 71,141 Cash flows from financing activities Proceeds from loans 65,893 64,203 Repayment of loans 46,949 54,226 Dividends paid 31,460 8,351 Net cash from financing activities 12,516 1,626 Net increase / decrease ( ) in cash and cash equivalents 16,755 50,889 Cash and cash equivalents as at January 1 [17] 200, ,499 Bank overdrafts as at January 1 [17] 8,610 2,208 Net cash and cash equivalents as at January 1 191, ,291 Net increase / decrease ( ) in cash and cash equivalents 16,755 50,889 Currency translation differences 2,627 2,769 Movement in net cash and cash equivalents 14,128 53,658 Cash and cash equivalents as at December 31 [17] 215, ,559 Bank overdrafts as at December 31 [17] 9,686 8,610 Net cash and cash equivalents as at December , , Royal Boskalis Westminster nv

72 Financial statements 2006 Explanatory notes to the consolidated financial statements 1. General Royal Boskalis Westminster nv operates in an international environment and has a leading position in the world market of dredging and related maritime services. The group s head office is located in Papendrecht, the Netherlands. Royal Boskalis Westminster nv is a public limited corporation that is listed on the Euronext Amsterdam stock exchange. During the reporting period the group (the company and its consolidated group companies) did not change significantly as a result of acquisitions or disposals. The financial statements were prepared by the Board of Management and were discussed and released for publication in the meeting of the Supervisory Board and the Board of Management on March 14, The 2006 financial statements will be submitted for approval to the Annual General Meeting of Shareholders of May 9, Compliance with International Financial Reporting Standards (IFRS) 2.1 Compliance statement The consolidated financial statements and the accompanying explanatory notes are in accordance with the International Financial Reporting Standards (IFRS) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) as adopted by the European Union. 2.2 New standards and interpretations not yet applicable The following new standards and interpretations, that are not yet applicable, will be effective as from the 2007 financial year for the annual accounts of the group. IFRS 7 Financial Instruments: Disclosures requires additional explanatory notes to financial instruments. IFRS 8 Operating segments replaces IAS 14 and requires a management point of view on segment reporting. IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies addresses the application of IAS 29 when an economy becomes hyperinflationary for the first time and in particular the accounting for deferred tax. IFRIC 8 Scope of IFRS 2 Share-based Payment addresses the accounting for share-based payment transactions in which some or all of goods or services received cannot be specifically identified. IFRIC 9 Reassessment of embedded derivatives requires a reassessment of the separate treatment of the embedded derivatives and the underlying contracts concerned only when there are changes in the terms of contracts/construction contracts. IFRIC 10 Interim financial reporting and impairment prohibits the reversal of an impairment loss recognized in a previous interim period. IFRIC 11 IFRS 2 - Group and Treasury Share Transactions addresses share-based payment arrangements in which an entity grants to its employees rights to equity instruments of the entity under a share-based payment arrangement. IFRIC 12 Service Concession Arrangements will be effective for annual periods beginning on or after January 1, 2008 and outlines the measurement and disclosure by the operator of concession arrangements in case of publicprivate partnership. These arrangements are to be accounted for as a financial fixed asset or intangible asset instead of tangible fixed assets. These changes are not expected to have any effect on equity or result. 3. Principles of financial reporting 3.1 Format and valuation The consolidated financial statements are drawn up in euros, the group s functional currency. The consolidated financial statements are based upon historical cost to the extent that IFRS does not prescribe another accounting method for specific items. Preparing financial statements in accordance with IFRS means that estimates and assumptions made by the management partly determine the recognized amounts under assets, liabilities, revenues and costs. The estimates and assumptions are mainly related to the measurement of tangible fixed assets (economic lifetime and impairment), results on completion of work in progress, pension liabilities and taxation. The estimates made and the related 70 Annual Report 2006

73 Financial statements 2006 assumptions are based on management s experience and understanding and the development of external factors that can be considered reasonable under the given circumstances. Estimates and assumptions are subject to alterations as a result of changes to facts and understanding and may have different outcomes per reporting period. Any differences are recognized in the balance sheet or profit and loss account, depending on the nature of the item. The actual results may deviate from results reported previously on the basis of estimates and assumptions. Unless stated otherwise, all amounts in the tables in these financial statements are stated in thousands of euros. 3.2 Consolidation On the basis of existing control, group companies are included in consolidation for 100%, taking into account any minority interests. Joint ventures both strategic alliances and contractual project-driven construction consortiums are included in consolidation on a proportional basis in accordance with the share in joint control. Amounts receivable from and payable to project-driven construction consortiums are eliminated in the consolidation. Elimination differences as a result of imbalances between partners in current account relation with project-driven construction consortiums, for example timing differences in supply, are recognized in the consolidated balance sheet under other receivables or other payables. Shareholdings that are not eligible for consolidation based on control, but where there is significant influence on the financial and operating policy, are recognized under associated companies. Intragroup receivables and payables, related-party transactions and unrealized results within the group and with associated companies are eliminated during consolidation. 3.3 Foreign currencies The assets and liabilities of foreign group companies and joint ventures that are denominated in functional currencies other than the euro have been translated at the exchange rates as at the end of the reporting period. The profit and loss account items of the foreign group companies and joint ventures concerned have been translated at the applicable exchange rates at transaction settlement date. Resulting currency translation differences are added or charged directly to the translation reserve in group equity. Exchange rate differences as a result of operational transactions are included in the profit and loss account for the reporting period. 3.4 Hedging and financial instruments It is the policy of Royal Boskalis Westminster nv to use cash flow hedges to cover all operational currency risks that mainly relate to future cash flows from projects that are highly probable and that are denominated in currencies other than the euro. Fuel price risks and interest rate risks in future cash flows are hedged from time to time using specific derivatives. Hedge accounting is used for the majority of cash flow hedges. This means that movements in the market value of cash flow hedges not yet settled including results realized on the rolling forward of existing hedges as a result of differences between the duration of the hedges concerned and the underlying cash flows will be directly added or charged to the hedging reserve in group equity, taking taxation into account. If a cash flow hedge added or charged to the group equity either expires, is closed or is settled, or the hedge relation with the underlying cash flows can no longer be considered effective, the accumulated result will continue to be recognized in group equity as long as the underlying cash flow is still expected to take place. When the underlying cash flow actually takes place, the accumulated result is included directly in the profit and loss account. Movements in the market value of cash flow hedges to which no hedge accounting is applied (ineffective cash flow hedges and the ineffective portion of effective cash flow hedges) are included in the profit and loss account for the reporting period. Results from settled effective cash flow hedges and the movements in the market value of ineffective cash flow hedges are recognized in the related items within the operating result. The purchase or sale of financial instruments are generally recorded at transaction rate. Derivatives are stated at fair value. Given the close relation between the economic features and risks of the embedded derivatives and underlying contracts, embedded derivatives in contracts/construction contracts are not treated separately from the underlying contracts concerned. 71 Royal Boskalis Westminster nv

74 Financial statements Impairment An assessment is made each reporting period to determine whether there is any indication of impairment of the assets of Royal Boskalis Westminster nv. This does not apply to assets resulting from inventory, work in progress, deferred assets arising from employee benefits and assets that are classified as being held for sale. If there is any indication of impairment, an estimate is made of the realizable value of the asset concerned. This assessment is made annually for goodwill. The difference between the results of this assessment and the relevant book value is charged as an impairment to the profit and loss account and deducted from the book value. Indications of impairment of floating and other construction equipment are based on long-term expectations for the utilization of equipment or groups of interchangeable equipment. If there are indications of impairment, the realizable value is determined on the basis of the net realizable value or the present value of the estimated future cash flows for the remaining economic life of the equipment from the utilization of the equipment concerned or of the group of interchangeable equipment. The present value is calculated at a pre-tax discount rate that reflects the current expectation of the market rate of interest, while also taking into account specific asset-related risks that are not included in the estimated future cash flows. There is no active market for large dredging equipment from which a reliable net realizable value of the assets can be derived. With the exception of goodwill, impairment previously charged to the profit and loss account can be reversed if the estimate of the fair value gives cause to do so. 3.6 Tangible fixed assets Tangible fixed assets are recognized at cost price less accumulated depreciation and accumulated impairment losses. The cost price is calculated from the purchase price and/or the internally generated direct expenses. Depreciation of components in the initial cost price is based on the remaining economic lifetime, taking into account any residual value. Modifications and investments to increase capacity are also capitalized at cost price and depreciated on a straight-line basis over the remaining economic lifetime of the asset. Buildings are depreciated over periods varying from ten to fifty years. The depreciation periods for most floating and other construction equipment vary from fifteen to eighteen years. Furnitures and fittings and other fixed operating assets have depreciation periods of between three and ten years. The wear and tear of dredging equipment is highly dependent on project-specific combinations of soil conditions, material to be processed, maritime circumstances, and the intensity of the deployment of the equipment (factors that are difficult to predict). Due to these erratic and time-independent patterns, the maintenance and repair expenses for upkeep of the assets are predominantly charged to the profit and loss account. In exceptional cases the maintenance and repair expenses are eligible for capitalization and straight-line depreciation. 3.7 Intangible assets Goodwill arises upon acquiring group companies, joint ventures and associated companies and is calculated as the difference between the acquisition price and the fair value of the assets and liabilities acquired, according to the accounting principles of Royal Boskalis Westminster nv. Goodwill and other intangible assets are capitalized net of accumulated amortization and accumulated impairment. Goodwill and intangible assets with an infinite lifetime are not systematically amortized. Negative goodwill that may arise upon acquisition is added directly to the profit and loss account. Straight-line amortization is applied to other intangible assets with a limited economic lifetime. 3.8 Financial fixed assets Associated companies in which the group has a significant influence on the financial and operating policy are accounted for using the equity method, adjusted for differences with the accounting principles of the group, less any accumulated impairment. The other financial fixed assets are mainly held on a long-term basis and/or until maturity and are carried at amortized cost. Accumulated impairment is deducted from the book value. 72 Annual Report 2006

75 Financial statements Inventories Inventories, which mainly consist of fuel, auxiliary materials and spare parts, are valued at average cost or at net realizable value, if lower. If the net realizable value is lower than the book value, the difference is charged to the profit and loss account and deducted from the book value Work in progress Work in progress is valued at the cost price of the work done, plus a part of the expected results upon completion of the project in proportion to the progress made and less progress billings, advances and provisions. Provisions are recognized for expected losses on work in progress as soon as they are foreseen, and deducted from the cost price; if necessary, any profits already recognized are reversed. The cost price includes direct project costs, consisting of direct payroll costs, materials, costs of subcontracted work, other direct costs and rental charges, and maintenance costs for the 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. Profits are not recognized unless a reliable estimate can be made of the result on completion of the project. The balance of the value of work in progress, progress billings and advance payments is determined per project. For projects where the progress billings and advance payments exceed the value of work in progress, the balance is recognized under current liabilities instead of under current assets. The respective balance sheet items are due from customers for work in progress and due to customers for work in progress Debtors and other receivables Debtors and other receivables are stated at cost/amortized cost less accumulated impairment losses, such as doubtful debts. If the discount effect is not material, debtors and other receivables are stated at cost Cash and cash equivalents Cash and cash equivalents consist of cash and bank balances and deposits with terms of no more than three months. The explanatory notes disclose the extent to which cash and cash equivalents are not freely available as a result of transfer restrictions, joint control or other legal restrictions Interest-bearing loans and borrowings Interest-bearing loans and borrowings are liabilities to financial institutions. At initial recognition, interest-bearing loans are measured at fair value taking into account any transaction costs involved in acquiring the loans. Subsequently, interest-bearing loans and borrowings are stated at amortized cost Employee benefits For each separate defined benefit scheme, the net asset or liability is determined as the balance of the discounted value of the future payments to employees and former employees, less the fair value of plan assets. The calculations are done by qualified actuaries using the projected unit credit method. The discount rate equals the yield on solid corporate or government bonds as at the balance sheet date, with the period to maturity of the bonds approximating the duration of the liability. If this calculation results in a receivable for the group, this amount will only be recognized if there is a reasonable expectation that it is realizable under the applicable agreements. Actuarial gains and losses are added or charged directly to retained earnings in group equity, including any movements in limitations on the measurement of net plan assets. Past service costs are charged to the profit and loss account on a straight-line basis over the average period until the benefits become vested, insofar as the benefits are not granted unconditionally. Defined contribution liabilities are charged to the profit and loss account when the contributions are due. The other employee benefits consist mainly of jubilee benefits. The calculation of these liabilities is based upon the actuarial assumptions for the predominant defined benefit scheme. 73 Royal Boskalis Westminster nv

76 Financial statements Provisions Provisions are determined on the basis of estimates of future cash outflows relating to operational activities for legal or constructive obligations of an uncertain size or with an uncertain settlement date that arise from past events. Provisions for reorganization costs are recognized when a detailed and formal plan is announced at balance sheet date to all those concerned or when the execution of the plan has commenced. Provisions for warranties are recognized for warranty claims relating to completed projects with agreed warranty periods applying to some consolidated/proportionally consolidated entities. The carrying value of these provisions is based on common practice in the industry and the company s history of warranty claims over the past ten years for relevant projects. Provisions, if applicable, relate to reorganization, warranties, legal proceedings and submitted claims. Provisions are discounted insofar as the difference between the discounted value and nominal value is material Deferred tax assets and liabilities Deferred income tax assets and liabilities mainly consist of temporary differences between the carrying value and tax base of assets and liabilities at the relevant applicable tax rates. Deferred tax assets and deferred tax liabilities are netted insofar as they relate to the same fiscal entity Trade and other payables Trade and other payables are recognized at cost/amortized cost. Insofar as the difference between the discounted and nominal value is not material, trade and other payables are stated at cost Turnover Turnover mainly consists of the cost price of the work done during the reporting period, plus a part of the expected results upon completion of the project in proportion to the progress made during the reporting period, and including and/or deducting the provisions recognized and/or used and released during the reporting period for expected losses. The applied percentage-of-completion method is, by its nature, based on an estimation process. Turnover also includes the revenue for services rendered to third parties during the reporting period. Turnover does not include any direct taxes. When it is uncertain whether the economic benefits of work done or services rendered will flow to the group, the relevant revenue is not recognized as turnover Other operating income Other operating income mainly consists of book profits from tangible fixed assets and currency translation differences on transactions in foreign currency Operational costs Operational costs consist of the cost price of the work done during the reporting period, excluding personnel expenses and depreciation. Operational costs also include equipment utilization costs, general overhead costs, external costs for research and development, late results from projects and other results/late results. The limited costs for research and development are by their nature directly charged to the profit and loss account Personnel expenses Personnel expenses consist of wages and salaries for own personnel and the related social security charges and pension costs, including paid and accrued contributions for defined contribution plans and the movement in the assets and liabilities from defined benefit plans, excluding actuarial gains and losses and the limitation on net plan assets added or charged directly to group equity Depreciation and amortization expense Depreciation and amortization expense comprises the depreciation on tangible fixed assets and the amortization of other capitalized costs. 74 Annual Report 2006

77 Financial statements Interest income and expenses Interest income and expenses comprise interest received and receivable from third parties, interest paid and payable to third parties, which are allocated to reporting periods based on the effective interest method, and gains and losses on financial instruments used to hedge interest risks that are included in the profit and loss account Result from associated companies Result from associated companies comprises the share in the results after taxation of the participating interests not included in the consolidation Taxation Taxation is calculated on the basis of the result before taxation for the reporting period, taking into account the applicable tax provisions and tax rates, and also includes adjustments on taxation from previous reporting periods and movements in deferred taxes recognized in the reporting period. Taxation is included in the profit and loss account unless it relates to items directly recognized in equity, in which case taxation is included in equity. Temporary differences are accounted for in deferred tax assets and/or deferred tax liabilities. Deferred tax assets are only recognized to the extent that it is probable that taxable profit will be available for realization in the future. In general, the carrying forward of tax losses is not taken into account given the incidental and project-based approach to activities in most countries Dividends Dividends are recognized as a liability in the period in which they are declared Cash flow statement The consolidated cash flow statement is drawn up using the indirect method. Cash is defined as cash and cash equivalents including bank overdrafts (excluding the current portion of loans) as presented in the explanatory notes to the cash and cash equivalents and the interest-bearing loans and borrowings. Cash flows are presented separately in the cash flow statement as cash flows from operating activities, investing activities and financing activities. Interest on long-term financing is recognized in the cash flow from operating activities. Dividends paid to shareholders and holders of minority interests are recognized in the cash flow from financing activities Principles for information by segment In addition to dredging and earthmoving activities, which are managed as a single activity, the group also carries out activities through strategic alliances. On the basis of joint control with the alliance partners, these activities are managed directly by the Board of Management and are therefore classified as separate segments of the company. This approach is also based on the specific management structures and reporting within these segments of the company. The following classification into business segments is therefore used as the primary segmentation format: Dredging and earthmoving; Maritime infrastructure (particularly Archirodon); Maritime and terminal services (particularly Lamnalco). The geographic structure is used as a secondary segmentation format. The internal management structures and reporting of each of the aforementioned business segments are also organized in this way. The project-based nature of the activities results in the assets of the business segments being deployed worldwide during the reporting period, and segmentation by region of assets and investments in fixed assets would therefore be arbitrary and would not provide any relevant information. 75 Royal Boskalis Westminster nv

78 Financial statements Information by segment 4.1 Business segments Maritime and Dredging and Maritime terminal 2006 earthmoving infrastructure services Group Turnover 1,170, ,619 42,578 1,353,614 Segment result 135,170 11,745 9, ,478 Non-allocated group costs 6,217 Operating result 150,261 Result associated companies 604 2,197 2,801 Non-allocated interest 685 Non-allocated taxes 35,319 Net group profit 117,058 Segment assets 1,328, ,618 93,257 1,570,059 Investments in associated companies 6,471 3,635 10,106 Non-allocated assets 3,744 Total assets 1,583,909 Segment liabilities 711,061 57,964 13, ,328 Non-allocated liabilities 176,941 Total liabilities 959,269 Investments in tangible fixed assets 143,439 18,484 23, ,961 Depreciation 74,223 8,001 4,358 86,582 Maritime and Dredging and Maritime terminal 2005 earthmoving infrastructure services Group Turnover 959, ,910 37,252 1,155,721 Segment result 65,249 16,301 6,231 87,781 Non-allocated group costs 5,466 Operating result 82,315 Result associated companies 2,054 2, Non-allocated interest 1,277 Non-allocated taxes 18,094 Net group profit 63,270 Segment assets 1,096, ,131 88,634 1,308,216 Investments in associated companies 6,877 8,194 15,071 Non-allocated assets 6,653 Total assets 1,329,940 Segment liabilities 586,978 46,467 13, ,837 Non-allocated liabilities 133,987 Total liabilities 780,824 Investments in tangible fixed assets 45,308 17,918 23,947 87,173 Depreciation 69,699 6,765 3,752 80, Annual Report 2006

79 Financial statements 2006 The turnover of the segments dredging and earthmoving and maritime infrastructure mainly comprise revenues from work in progress. Movements in the value of work in progress, consisting of cost price, recognized results and the provision for future losses, together with the work done and completed during the reporting period, determine the turnover for these segments. If certain projects are executed together in a joint venture, the segments only report their own share in the turnover and results recognized, resulting in no material related party transactions that need to be eliminated. 4.2 Geographic segments Turnover Total assets Capital expenditure Netherlands 229, ,307 Rest of Europe 270, ,280 Australia / Asia 173, ,625 Middle East 401, ,574 Africa 120, ,967 North and South America 158, ,968 Total allocated 1,353,614 1,155,721 Tangible fixed assets 721, , ,961 87,173 Associated companies 10,106 15, Other unallocated 851, ,605 Group 1,353,614 1,155,721 1,583,909 1,329, ,967 87,653 The tangible fixed assets of Royal Boskalis Westminster nv consist mainly of equipment that is deployed worldwide on a project basis, and cannot be allocated entirely to various geographic segments. 5. Other operating income The other operating income includes book results and currency translation results on transactions in foreign currency. The book results mainly comprise the insurance result for a sunken trailing suction hopper dredger and the book profits on the sale of several items of small equipment. 6. Operational costs Because the internal management and reporting structure within the group is mainly project-oriented on the basis of activities/sub-activities, neither a breakdown of operational costs in different cost categories nor a complete registration, aggregation and reporting for all cost categories throughout the group provide any additional insight in the performance and operations of the business. The operational costs include a payment received of positive 11.6 million on an old claim under international debt restructuring for Nigeria. Operational costs include operational lease expenses amounting to 6.8 million (2005: 7.3 million). 77 Royal Boskalis Westminster nv

80 Financial statements Personnel expenses Wages and salaries 185, ,863 Social security costs 19,999 15,628 Pension costs for defined benefit schemes 3,274 5,663 Pension costs for defined contribution schemes 7,277 6, , , Taxation Current tax expense Current year 25,388 17,689 Over / under ( ) provided in prior years 3, Reclassification from current to non-current tax liabilities 17,940 22, Deferred tax expense Origination and reversal of temporary differences 5,847 2,815 Reduction in tax rate 5,298 Benefit or charge from recognized tax losses carried forward 640 Benefit or charge from tax reserves and foreign branch profits and losses recognized for tax purposes 12,564 15,546 13,113 19,001 Taxation in the consolidated profit and loss account 35,319 18,094 On the basis of a change in the view on understanding of the tax position in the Netherlands, a reclassification amounting to 18 million took place in 2005 from income tax payable in current liabilities to deferred income tax liabilities in non-current liabilities. In the current tax expense, this reclassification is included in the item reclassification from current to non-current tax liabilities. 78 Annual Report 2006

81 Financial statements 2006 The following movements in deferred tax assets and liabilities, including applicable tax rate changes, together with the items they relate to, are recognized directly in group equity: Deferred tax for: Actuarial gains and losses on defined benefit pension schemes Change in fair value of effective cash flow hedges 2,435 8,919 2,631 9,411 The operational activities of Royal Boskalis Westminster nv are subject to various tax regimes with tax rates varying from 10% to 55% (2005: 10% to 40%). These different tax rates, together 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 23.2% (2005: 22.2%). The changing geographic spread of activities affects the weighted effective tax rate as a consequence of the application of different local nominal tax rates. The average effective tax rate is calculated as the taxation charge divided by the profit before taxation, as shown in the consolidated profit and loss account. The reconciliation between the Dutch nominal tax rate and the effective tax rate is as follows: Domestic tax rate in the Netherlands 29.6% 31.5% Application of local nominal tax rates 4.7% 5.9% Non-deductible expenses 0.3% 1.1% Unrecognized tax losses 7.6% 11.5% Effect of tax losses utilized 1.4% 4.0% Special taxation regimes 8.2% 12.0% Effective tax rate 23.2% 22.2% 9. Income tax receivable and payable The current income tax receivable and income tax payable relate to the fiscal positions of the group companies concerned and consist of fiscal years still to be settled less withholding taxes or tax refunds. 79 Royal Boskalis Westminster nv

82 Financial statements Deferred income tax assets and liabilities As at January 1, 2006 Movement in temporary differences during the year As at December 31, 2006 Charged ( )/ First-time Currency added to net Charged to adoption IAS translation Asset Liability profit equity 32 and 39 differences Asset Liability Tangible fixed assets 15,103 23,205 4, ,540 18,584 Work in progress 138 8,129 1, ,411 Debtors and other receivables Hedging reserve 2,208 2,435 4,643 Actuarial gains and losses 3, ,157 Pension schemes 3, ,812 Provisions Trade and other payables 5,387 3,092 2,295 Tax reserves 3,552 1,806 5,358 Foreign branch results 7,628 31,559 5,160 29,091 Tax losses carried forward 2,516 1,215 1,301 Other assets and liabilities ,457 72,756 13,113 2, ,938 67,120 Offsetting deferred tax assets and liabilities 31,012 31,012 10,858 10,858 Net in the consolidated balance sheet 4,445 41,744 3,080 56,262 As at January 1, 2005 Movement in temporary differences during the year As at December 31, 2005 Charged ( )/ First-time Currency added to net Charged to adoption IAS translation Asset Liability profit equity 32 and 39 differences Asset Liability Tangible fixed assets 13,981 16,934 5, ,103 23,205 Work in progress 9,708 1, ,129 Debtors and other receivables Hedging reserve 8,919 11,127 2,208 Actuarial gains and losses 3, , Pension schemes 3, ,812 Provisions 4,918 7,408 2, Trade and other payables 7,308 1,921 5,387 Tax reserves 5,040 1,488 3,552 Foreign branch results 8,914 15,811 17,034 7,628 31,559 Tax losses carried forward 3, ,516 Other assets and liabilities ,843 59,371 19,001 9,411 11, ,457 72,756 Offsetting deferred tax assets and liabilities 42,843 42,843 31,012 31,012 Net in the consolidated balance sheet 16,528 4,445 41, Annual Report 2006

83 Financial statements 2006 Deferred tax assets are not recognized as long as it is not probable that economic benefits can be expected in future periods. Deferred tax assets and liabilities within fiscal entities are offset in the balance sheet. Unrecognized deferred income tax assets Unrecognized deferred tax assets regarding tax losses carried forward of group companies amount to 63.7 million (2005: 30.9 million), of which 0.5 million (2005: 1.2 million) expires within one year, 20.4 million (2005: 1.1 million) in between one and five years, and 42.8 million (2005: 28.6 million) after more than five years. These deferred tax assets are not recognized in the balance sheet as long as recovery through taxable profit or deductible temporary differences before expiration is not probable. 11. Tangible fixed assets Floating and other Tangible fixed Land and construction Other fixed assets under buildings equipment assets construction Total Balance as at January 1, 2006 Cost 64,584 1,394,282 30,988 14,832 1,504,686 Accumulated depreciation 33, ,481 24, ,422 Carrying amount 31, ,801 6,504 14, ,264 Movements Additions 1,721 89,595 8,554 85, ,961 Disposals 16,644 1,055 17,699 Put into operation ,284 1,119 20,045 Depreciation 1,346 81,400 3,836 86,582 Other movements 127 1, ,491 Currency translation differences 110 9, , ,242 4,867 64,186 68,591 Balance as at December 31, 2006 Cost 60,894 1,458,919 42,725 79,018 1,641,556 Accumulated depreciation 28, ,360 31, ,701 Carrying amount 31, ,559 11,371 79, , Royal Boskalis Westminster nv

84 Financial statements 2006 Floating and other Tangible fixed Land and construction Other fixed assets under buildings equipment assets construction Total Balance as at January 1, 2005 Cost 64,672 1,334,886 34,179 16,607 1,450,344 Accumulated depreciation 32, ,405 26, ,596 Carrying amount 31, ,481 7,821 16, ,748 Movements Additions 1,988 36,615 2,987 45,583 87,173 Disposals 201 6, ,984 Put into operation 47 48, ,170 Depreciation 2,397 75,093 2,726 80,216 Other movements ,225 1,027 2,334 Currency translation differences 379 7, ,839 10, ,320 1,317 1,775 7,516 Balance as at December 31, 2005 Cost 64,584 1,394,282 30,988 14,832 1,504,686 Accumulated depreciation 33, ,481 24, ,422 Carrying amount 31, ,801 6,504 14, ,264 The additions also include the equipment acquired (by asset transaction) from Wasa Dredging and Blankevoort to an amount of approximately 40 million. Based on the current market expectations and the development of the results from equipment operations, there are no indications for impairment at year end The securities provided for financing granted by means of mortgage rights on tangible fixed assets are disclosed in note Associated companies The key associated companies of Royal Boskalis Westminster nv are: Ownership interest Company Country of incorporation Bean Meridian Holding LLC United States of America 25% 25% Bean Excavation LLC United States of America 25% 25% Bean Meridian LLC United States of America 25% 25% Bean Environmental LLC United States of America 25% 25% IRSHAD Abu Dhabi, UAE 20% 20% RW Aggregates Ltd United Kingdom 50% 50% 82 Annual Report 2006

85 Financial statements 2006 Bean Meridian Holding LLC owns 75% of the shares of Bean Excavation LLC, Bean Meridian LLC and Bean Environmental LLC. As a result the direct and indirect share of the group in these three companies amounts in total to 43.75%. The voting rights in associated companies are equal to the ownership interests. The share of the group in assets, liabilities, turnover and result of the aforementioned associated companies is stated below: Assets 22,889 31,381 Liabilities 12,783 16,310 Net assets 10,106 15,071 Revenues 15,907 15,665 Result 2, Other financial fixed assets Balances as at January 1 11,605 11,550 Movements 714 1,119 Movement in measurement at amortized cost Currency translation differences 1,223 1,346 Balance as at December 31 9,769 11,605 The other financial fixed assets comprise long-term advance payments to suppliers and long-term retentions from customers, which are due in agreed time periods. 14. Inventories Fuel and materials 22,636 16,310 Spare parts 28,597 25,868 Other inventories 1,515 1,202 52,748 43,380 During 2006, 37.9 million (2005: 31.5 million) of inventories were recognized as an expense and 0.4 million (2005: 0.9 million) was written down through the profit and loss account. Furthermore, write-downs have been reversed to an amount of 0.9 million (2005: nil). 83 Royal Boskalis Westminster nv

86 Financial statements Work in progress Contract costs incurred plus recognized project results less provision for future losses 1,553,840 1,340,565 Progress billings received 1,607,545 1,401,324 Retentions 33,889 16,971 Progress billings 1,641,434 1,418,295 Advances received 48,383 43,167 Progress billings and advances received 1,689,817 1,461,462 Work in progress 135, ,897 Due from customers for work in progress 87,634 58,680 Due to customers for work in progress 223, ,577 Work in progress 135, , Debtors and other receivables Trade debtors 315, ,603 Amounts due from associated companies 2,654 11,845 Other receivables and prepayments 160, ,188 Derivatives 3, , , Cash and cash equivalents Bank balances and cash 87,511 87,816 Short-term bank deposits 128, ,743 Cash and cash equivalents 215, ,559 Bank overdrafts 9,686 8,610 Cash and cash equivalents in the cash flow statement 206, ,949 Cash and cash equivalents include 77.6 million (2005: 56.4 million) held by project-driven construction consortiums and 28.0 million (2005: 24.1 million) held by strategic alliances, which are subject to joint control. The remaining funds were freely disposable at year end Legally restricted cash at year end 2005 amounted to 3.5 million. 84 Annual Report 2006

87 Financial statements Issued 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. The movement in the issued capital can be specified as follows: (in number of shares) On issue and fully paid at January 1 28,599,787 28,173,865 Optional dividend 425,922 On issue and fully paid at December 31 28,599,787 28,599,787 The issued capital as at December 31, 2006 consists of 28,599,787 ordinary shares of 2.40 par value each and consequently amounts to 68.6 million. A stock dividend over 2004 was distributed and charged to share premium in For that purpose, 425,922 new shares were issued. Of the issued capital as at December 31, 2006, no ordinary shares were owned by Royal Boskalis Westminster nv. 19. Share premium Share premium comprises additional paid-in capital exceeding the par value of outstanding shares. Share premium is distributable free of tax. The movement of 0.2 million in 2006 relates to an adjustment to the dividend tax return Legal reserve For the difference between the cost price and equity value of entities, consolidated either proportionally or on the basis of equity value, a legally required reserve is recognized because of a lack of control over the distribution of profits only to the extent that these differences are not included in the accumulated currency translation differences on foreign operations. 21. Hedging reserve The hedging reserve comprises the fair value of effective cash flow hedges, not yet realized at balance sheet date, net of taxation, including results realized on the rolling forward of existing hedges as a result of differences between the duration of the hedges concerned and the underlying cash flows. 22. Currency translation reserve The translation reserve comprises all accumulated currency translation differences arising from the translation of investments in foreign operations which are denominated in reporting currencies other than those used by the group, including the related intragroup financing. These currency translation differences are accumulated as from the IFRS transition date (January 1, 2004) and are taken into the profit and loss account at disposal or termination of these foreign operations. 85 Royal Boskalis Westminster nv

88 Financial statements Retained earnings Retained earnings consist of additions and distributions based on profit appropriations, effects of changes in accounting principles, actuarial gains and losses and movements in the legal reserve. The balance is of disposal of the shareholders. 24. Profit for the year Profit for the year represents the as yet unappropriated current year profit. A proposal for profit appropriation is included in note 32 relating to subsequent events. 25. Earnings per share The earnings per share over 2006 amount to 4.08 (2005: 2.21). Because there are no dilution effects, the diluted earnings per share also amount to 4.08 (2005: 2.21). The calculation of earnings per share is based on the profit attributable to shareholders of million (2005: 62.7 million). The calculation of the weighted average number of ordinary shares is based on the weighted effects of the transactions below. Weighted average number of ordinary shares: (in number of shares) Issued ordinary shares as at January 1 28,599,787 28,173,865 Weighted effect of shares issued due to optional dividend 243,884 Weighted average number of ordinary shares as at December 31 28,599,787 28,417, Interest-bearing loans and borrowings Non-current liabilities Mortgage loans 29,433 18,633 Other bank loans 18,091 9,073 47,524 27,706 Current liabilities Mortgage loans (current portion) 4,435 5,845 Other bank loans (current portion) 9,756 12,364 Bank overdrafts 9,686 8,610 23,877 26,819 Total interest-bearing loans and borrowings 71,401 54, Annual Report 2006

89 Financial statements 2006 Effective interest rates, remaining terms and currencies of the interest-bearing loans and borrowings are disclosed in the explanatory notes to the financial instruments in the interest rate risk paragraph. As at December 31, 2006, the average interest rate for the non-current portion of mortgage loans and other bank loans was, respectively, 5.63% (2005: 3.85%) and 6.10% (2005: 5.50%). The non-current portions of mortgage loans and other bank loans due over more than five years amount to, respectively, 3.4 million (2005: 5.2 million) and 0.1 million (2005: 0.1 million). As security for the mortgage loans, mortgage rights are vested on tangible fixed assets, mainly vessels, with a carrying amount of 48.0 million (2005: 49.7 million). For certain loans, additional securities have been provided by means of the assignment of revenues from rental contracts to third parties and insurance policies regarding these tangible fixed assets. If applicable, financial ratio and negative pledge clause requirements are met. 27. Employee benefits Defined Unfunded Total result benefit Fair value plan Surplus/deficit pension defined benefit obligation assets ( ) liabilities Total schemes Opening balance as at January 1, , ,170 34,659 5,061 29,598 Current service cost 7,984 7, ,384 8,384 Interest cost on obligation 12,311 12, ,597 12,597 Contributions received 7,921 7,921 7,921 Expected return on plan assets 16,931 16,931 16,931 16,931 Net actuarial gains / losses 7, , ,505 6,505 Benefits paid 14,764 14, Past service costs Other movements 1,974 1,974 Foreign currency exchange rate changes 1,196 1, Total movement 13,310 12,013 1,297 1,918 3,215 9,779 Closing balance as at December 31, , ,183 33,362 6,979 26,383 9,779 Limitation on net plan assets as at January 1 34,659 34,659 Movement in limit on net plan assets 1,297 1,297 1,297 Limitation on net plan assets as at December 31 33,362 33,362 Closing balance as at December 31, 2006 after limitation on net plan assets 6,979 6,979 8, Royal Boskalis Westminster nv

90 Financial statements 2006 Defined Unfunded Total result benefit Fair value plan Surplus/deficit pension defined benefit obligation assets ( ) liabilities Total schemes Opening balance as at January 1, , ,973 8,769 4,701 4,068 Current service cost 8,241 8, ,268 8,268 Interest cost on obligation 12,989 12, ,216 13,216 Contributions received 6,827 6,827 6,827 Expected return on plan assets 15,821 15,821 15,821 15,821 Net actuarial gains / losses ,720 24, ,994 23,994 Benefits paid 9,852 9, Foreign currency exchange rate changes 1,643 1, Total movement 13,307 39,197 25, ,530 18,331 Closing balance as at December 31, , ,170 34,659 5,061 29,598 18,331 Limitation on net plan assets as at January 1 8,769 8,769 Movement in limit on net plan assets 25,890 25,890 25,890 Limitation on net plan assets as at December 31 34,659 34,659 Closing balance as at December 31, 2005 after limitation on net plan assets 5,061 5,061 7,559 Some of the Dutch staff participate in Bedrijfstakpensioenfonds voor de Waterbouw (a multi-employer pension fund for the maritime engineering industry). This pension fund qualifies under IFRS as a defined benefit plan. However, the fund has indicated that it is not able to provide sufficient information for a calculation in accordance with IFRS because there is no reliable and consistent basis to attribute the pension obligations, plan assets, income and expenses to the individual member companies of the pension fund. On the basis of the information that is available, including the 2005 financial statements and the 2006 preliminary financial information of the fund, it is not probable that any pension liabilities or asset to be recognized would arise under IFRS. There is also no reason to expect that the financial position of the fund as at December 31, 2006 will affect the amount of contributions to be charged in the future. The defined benefit plans that are funded are the company pension funds in the Netherlands and the United Kingdom. The defined benefit plans that are unfunded are small pension schemes for two German group companies and Archirodon. The remaining pension schemes in the group do not qualify as defined benefit plans. Plan assets consist of the following: Equities 138, ,626 Bonds 222, ,668 Cash (non-interest-bearing) 1,883 2,245 Other receivables and payables 11,624 8, , , Annual Report 2006

91 Financial statements 2006 The recognition of pension costs from defined benefit schemes in the annual accounts is presented in the statement below: Total result defined benefit schemes 8,482 7,559 Pension costs for defined benefit schemes charged to the profit and loss account 3,274 5,663 Actuarial gains and losses recognized directly in equity 5,208 1,896 Taxation Actuarial gains and losses recognized directly in equity net of tax 5,404 1,405 Actual return on plan assets 16,165 35,595 The accumulated actuarial gains and losses and the balance of the limitation on net plan assets amount to: Accumulated actuarial gains and losses as per December ,385 Asset limitation as per December 31 33,362 34,659 32,482 27,274 The expected return on plan assets is the weighted average of actuarially proven returns on fixed interest securities and shares expected on the basis of, in part, external sources. The principal actuarial assumptions used for the calculations above are: Discount rate 4.50%-5.10% 4.00%-5.00% Expected return on plan assets past year 4.75%-6.19% 5.00%-6.15% Expected future salary increases (excluding individual merit) 1.00%-1.75% 1.00%-1.50% Expected future inflation 1.50%-3.00% 1.50%-2.80% Expected future pension increases active participants 1.50%-5.00% 1.50%-5.00% Expected future pension increases inactive participants 1.40%-3.00% 1.00%-2.80% Historical information Defined benefit obligation 317, , ,204 Fair value of plan assets 351, , ,973 Surplus / deficit ( ) 33,362 34,659 8,769 Unfunded pension liabilities 6,979 5,061 4,701 Total surplus / deficit ( ) 26,383 29,598 4,068 Experience adjustments arising on plan liabilities 5,925 Experience adjustments arising on plan assets Royal Boskalis Westminster nv

92 Financial statements 2006 The liabilities associated with employee benefits consist of defined benefit schemes and other liabilities relating to a number of defined contribution schemes in foreign countries and jubilee benefits. They amount to a total of: Defined benefit schemes 6,979 5,061 Other liabilities on account of employee benefits 3,935 3,565 Employee benefits 10,914 8, Provisions Total Balance as at January 1, ,539 Provisions made during the year 406 Provisions used during the year 1,789 Provisions reversed during the year 12 Exchange rate differences 274 Discount to present value 61 Balance as at December 31, ,809 Non-current 2,014 Current 795 Balance as at December 31, ,809 Provisions mainly relate to warranty liabilities. 29. Trade and other payables Trade creditors 145, ,957 Taxes and social security payables 37,389 24,793 Amounts due to associated companies 1, Other creditors and accruals 358, ,086 Derivatives , , ,601 Trade and other payables are generally not interest-bearing. 30. 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. The policy with respect to financial instruments is disclosed in more detail in the Annual Report in the Corporate Governance chapter. 90 Annual Report 2006

93 Financial statements 2006 Translation risk and currency risk A large proportion of projects are contracted in foreign currencies. In principle, positions in foreign currencies are fully hedged as soon as they are settled, usually by means of forward currency contracts. Financial derivatives (forward contracts, options, etc.) are used exclusively insofar as there are underlying transactions, mainly future cash flows from work in progress and contracted projects. Hedge accounting is applied for the majority of cash flow hedges. Interest rate risk 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. The effective interest rates and the maturity term profiles of bank loans, deposits and cash and cash equivalents are stated below: Effective One year Over interest rate or less 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total As at December 31, 2006 Cash and cash equivalents 0.57% 87,511 87,511 Short-term deposits 2.88% 128, ,252 Mortgage loans (euro) 4.10% 1,134 1,134 1,134 1,134 1,134 3,405 9,075 Mortgage loans (US$) 6.20% 3,301 6,222 6,222 6,127 2,921 24,793 Other bank loans (euro) 4.50% Other bank loans (US$) 6.10% 9,389 12,782 3,896 1, ,389 Other bank loans (other) 5.50% Bank overdrafts (euro) 4.50% 6,384 6,384 Bank overdrafts (US$) 6.60% 1,966 1,966 Bank overdrafts (other) 6.10% 1,336 1, ,886 20,229 11,252 8,454 4,175 3, ,362 Effective One year Over interest rate or less 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total As at December 31, 2005 Cash and cash equivalents 87,816 87,816 Short-term deposits 2.47% 112, ,743 Mortgage loans (euro) 2.80% 1,134 1,165 1,165 1,165 1,165 4,693 10,487 Mortgage loans (US$) 4.90% 4,711 2,828 2,548 2,017 1, ,991 Other bank loans (euro) 3.70% Other bank loans (US$) 5.50% 12,117 3,828 3,004 1, ,171 Other bank loans (other) 5.30% Bank overdrafts (euro) 3.50% 4,619 4,619 Bank overdrafts (US$) 5.60% 2,195 2,195 Bank overdrafts (other) 5.30% 1,796 1, ,740 7,840 6,717 5,051 2,882 5, ,034 The US$ loans are mainly used for financing tangible fixed assets in proportionally consolidated strategic alliances. The other bank loans expressed in US$ have no fixed interest rates (2005: 3.8 million). The effective interest rate of these loans does not differ materially from the actual market rates. The interest rate renewal dates of the loans are mainly due within three months after year end Royal Boskalis Westminster nv

94 Financial statements 2006 Political and payment risks 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, advance payments, etc., except in the case of creditworthy, firstclass debtors. These procedures and the geographical diversification of the operations of the group companies reduce the risk with regard to credit concentration and market risks. The maximum credit risk as per balance sheet date, without taking into account the aforementioned instruments and policy, consists of the carrying amounts of the financial assets as stated in the explanatory notes to the on-balance financial instruments and fair value. Commodity price risks Risks related to price developments on the purchasing side, such as increased wages, costs of materials, sub-contracting costs, fuel etc., which are usually for Royal Boskalis Westminster nv s account, 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 contracts. With regard to fuel, contracts sometimes stipulate delivery by the client; from time to time, forward contracts or other financial derivatives are arranged. On-balance financial instruments and fair value Pursuant to IFRS 1 First-time adoption of IFRS, the standards IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement have been applied as from January 1, Up to and including 2004, financial instruments were treated off-balance sheet. As at December 31, 2004, the unrealized positive result amounted to 17 million. These unrealized results have been taken into account in the determination of the book value of the underlying balance sheet items and the estimate of the results for ongoing projects and acquired orders, respectively. The nominal value was 249 million as at December 31, Financial instruments accounted for under assets and liabilities are financial fixed assets, cash and cash equivalents, receivables, and current and non-current liabilities. The estimated fair values of these financial instruments are close to the nominal value. Derivatives are mainly future cash flows hedged by forward contracts to which hedge accounting is applied. Furthermore, strategic alliances currently hold a number of interest rate swaps and a foreign currency option. These are recognized under other financial instruments. Movements in the fair value of non-effective cash flow hedges are recognized directly or, under specific conditions, deferred in the consolidated profit and loss account. Movements in the fair value of effective cash flow hedges are recognized directly in the hedging reserve in group equity, taking taxation into account. The fair value of derivatives is derived from the forward rates at settlement date as at year end. The fair value of other financial instruments is based on current interest rates, taking duration and conditions into account. The fair value of non-interest-bearing financial instruments due within one year is equal to the nominal value Carrying Carrying amount Fair value amount Fair value Other financial fixed assets 9,769 9,769 11,605 11,605 Debtors and other receivables (excluding derivatives) 479, , , ,636 Derivatives (receivable) 3,274 3, Cash and cash equivalents 215, , , ,559 Interest-bearing loans and borrowings (non-current) 47,524 47,524 27,706 27,706 Repayments and other bank debts 23,877 23,877 26,819 26,819 Other liabilities (non-current) 1,393 1,393 1,494 1,494 Trade and other payables (excluding derivatives) 542, , , ,936 Derivatives (payable) ,665 11,665 91,427 91,427 44,272 44,272 Unrecognized results 92 Annual Report 2006

95 Financial statements 2006 The composition of outstanding financial instruments at year end is presented below. The remaining duration of these derivatives has a direct relation to the remaining duration of the relating underlying contracts in the orderbook US$ forward selling (in US$) 202, ,777 US$ forward buying (in US$) 45,690 Forward selling of other currencies (average contract rates in euro) 124, ,121 Forward buying of other currencies (average contract rates in euro) 20,954 1,241 Fuel hedges (in US$) 27,588 Other financial instruments (in US$) 30,447 The periods for which the cash flows are expected to materialize are stated below. Cash flows from forward currency buyings and sellings can be rolled forward at settlement date when they differ from the underlying cash flows. Within one After 2006 year one year Total US$ forward selling (in US$) 198,439 4, ,745 US$ forward buying (in US$) 45,690 45,690 Forward selling of other currencies (average contract rates in euro) 124, ,986 Forward buying of other currencies (average contract rates in euro) 20,954 20,954 Fuel hedges (in US$) 20,122 7,466 27,588 Other financial instruments (in US$) 10,196 20,251 30,447 Within one After 2005 year one year Total US$ forward selling (in US$) 177,927 12, ,777 US$ forward buying (in US$) Forward selling of other currencies (average contract rates in euro) 90,076 18, ,121 Forward buying of other currencies (average contract rates in euro) 1,241 1,241 Fuel hedges (in US$) Other financial instruments (in US$) The results on effective cash flow hedges are recognized in group equity as stated below: Movement in fair value of effective cash flow hedges recognized in group equity 4,230 24,989 Transferred to the profit and loss account 8,099 9,007 Total directly recognized in group equity 12,329 33,996 Taxation 2,435 8,918 Directly charged to the hedging reserve (net of taxes) 9,894 25, Royal Boskalis Westminster nv

96 Financial statements 2006 Other financial instruments The Stichting Continuïteit KBW has, pursuant to the decision of the General Meeting of Shareholders held on May 9, 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. This right qualifies as a derivative financial liability, with the following important conditions. The cumulative protective preference shares are to be issued at par against a 25% cash contribution, the remainder after call-up by Royal Boskalis Westminster nv in consultation with the Stichting. After the issue, Royal Boskalis Westminster nv has the obligation to buy or cancel the shares upon the Stichting s request. The preferent dividend right amounts to Euribor increased by 4% at most. The interest and credit risk is limited. The fair value of the option right is nil. 31. Commitments and contingent liabilities Operational lease obligations The operational lease obligations relate primarily to the operational lease of a trailing suction hopper dredger, cars and offices. Additional clauses are not taken into account insofar they are not unconditional. Non-redeemable operating lease contracts are recognized at nominal amounts and are due as follows: Within one year 5,454 6,747 After one year but within five years 11,844 5,402 After more than five years 1, ,782 12,827 Guarantees The guarantee commitments as at December 31, 2006 amount to 635 million (2005: 588 million) and can be specified as follows: Guarantees provided by third parties with respect to: associated companies 21,000 19,000 contracts and joint ventures 599, ,000 lease obligations and other financial obligations 15,000 22, , ,000 For the above guarantees outstanding as at December 31, 2006, counter-guarantees have been provided to financial institutions for approximately 633 million (2005: approximately 587 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 to limit the provision of further securities on existing tangible fixed assets. Group companies are jointly and severally liable for the non-consolidated part of the liabilities of their joint ventures: in total 184 million (2005: 172 million). Group companies are also jointly and severally liable for performance obligations for contracts with third parties in project-driven construction consortiums. In addition, certain recourse obligations exist in respect of project financiers. Where deemed necessary, provisions have been made. Capital commitments At year end 2006, capital commitments amount to 127 million (2005: 16 million). Other Some legal proceedings and investigations have been instituted against entities of Royal Boskalis Westminster nv. Where deemed necessary, provisions have been made. 94 Annual Report 2006

97 Financial statements Subsequent events Proposed profit appropriation 2006 A proposal will be submitted to the Annual General Meeting of Shareholders to appropriate 58.3 million for a cash dividend payment of 2.04 per share. The remainder of 58.3 million will be added to the retained earnings. Other On March 8, 2007 a container vessel ran into the trailer suction hopper dredger W.D. Fairway. The cause of the collision and the level of damage are not yet known. The damage to the ship is insured. The ship will be out of action for the remainder of The loss of turnover for the rest of 2007 amounts to approximately million. The negative impact on the operating result for 2007 will be approximately 5-7 million on balance. No further losses are expected pursuant to ongoing contracts and commitments. 33. Related parties 33.1 Identity of related parties The identified related parties to the group are its group companies, its joint ventures, its associated companies (see note 12) and the members of the Supervisory Board and Board of Management. Group companies The following are the most relevant active group companies, which can also be considered related parties. Ownership interest Company City and country of incorporation Aannemersbedrijf M. de Haan bv Drachtstercompagnie, The Netherlands 100% 100% Aannemingsmaatschappij Markus bv Halfweg, The Netherlands 100% 100% Baggermaatschappij Boskalis bv Papendrecht, The Netherlands 100% 100% Baggermaatschappij Holland bv Papendrecht, The Netherlands 100% 100% Boskalis Cofra Holding bv Amsterdam, The Netherlands 100% 51% Boskalis Dolman bv Dordrecht, The Netherlands 100% 100% Boskalis International bv Sliedrecht, The Netherlands 100% 100% Boskalis Markus bv Papendrecht, The Netherlands 100% 100% Boskalis Offshore bv Papendrecht, The Netherlands 100% 100% Boskalis bv Rotterdam, The Netherlands 100% 100% Boskalis Westminster Dredging bv Papendrecht, The Netherlands 100% 100% Boskalis Westminster International bv Papendrecht, The Netherlands 100% 100% Boskalis Westminster Shipping bv Papendrecht, The Netherlands 100% 100% Boskalis Finance bv Papendrecht, The Netherlands 100% 100% BW Soco bv Sliedrecht, The Netherlands 100% 100% Boskalis Infra bv Rotterdam, The Netherlands 100% 100% A.H. Breijs & Zonen bv Rotterdam, The Netherlands 100% 100% J. van Vliet bv Wormerveer, The Netherlands 100% 100% Hydronamic bv Sliedrecht, The Netherlands 100% 100% Westminster Dredging Company Ltd Papendrecht, The Netherlands 100% 100% Boskalis Westminster Ltd Fareham, United Kingdom 100% 100% Rock Fall Company Ltd Ayrshire, United Kingdom 100% 100% Irish Dredging Company Ltd Cork, Ireland 100% 100% Boskalis Sweden AB Gothenburg, Sweden 100% 100% Atlantique Dragage SARL Nanterre, France 100% 100% Boskalis Offshore A/S Randaberg, Norway 100% 100% Terramare Oy Helsinki, Finland 100% 100% Sociedad Española de Dragados SA Madrid, Spain 100% 100% Dragapor Dragagens de Portugal SA Alcochete, Portugal 100% 100% 95 Royal Boskalis Westminster nv

98 Financial statements 2006 Bagger- und Bauunternehmung Delta GmbH Bremen, Germany 100% 100% Heinrich Hirdes GmbH Hamburg, Germany 100% 100% Heinrich Hirdes Kampfmittelräumung GmbH Duisburg, Germany 100% 100% Boskalis Westminster Middle East Ltd Nicosia, Cyprus 100% 100% Beaver Dredging Company Ltd Toronto, Canada 100% 100% Boskalis Westminster Inc. Wilmington, United States of America 100% 100% Coastal and Inland Marine Services Inc. Ancon, Panama 100% 100% Boskalis Taiwan Ltd Taipei, Taiwan 100% 100% Boskalis International (S.) Pte Ltd Singapore 100% 100% Riovia SA Montevideo, Uruguay 100% 100% Zinkcon Marine Singapore Pte Ltd Singapore 100% 100% Koon Zinkcon Pte Ltd Singapore 50% 50% Boskalis Australia Pty Ltd Chatswood, Australia 100% 100% Joint ventures The following are the most relevant active joint ventures, which can also be considered as related parties. Strategic alliances Ownership interest Company Country of incorporation Archirodon Group NV The Netherlands 40% 40% Lamnalco Ltd Sharjah, UAE 50% 50% Deeprock CV The Netherlands 50% 50% Dragamex SA de CV Mexico 50% 50% Bean Stuyvesant LLC United States of America 50% 50% Project-driven construction consortiums Joint venture interest Entity Country of incorporation Combinatie BNSG/Boskalis The Netherlands 50% 50% Combinatie Afbouw Infrastructuur Caland The Netherlands n.a. 20% Combinatie Almere Hout The Netherlands n.a. 50% Combinatie BBZ The Netherlands n.a. 50% Combinatie Haag / Rw4-N14 The Netherlands n.a. 33% Combinatie Wrakkenberging Westerschelde The Netherlands n.a. 10% Boskalis bv / M.N.O. Vervat bv The Netherlands 70% 70% Vispassage The Netherlands n.a. 50% Combinatie A2 The Netherlands 33% 33% Duizend Zestien vof The Netherlands n.a. 75% Combinatie Zeezand IJmuiden The Netherlands n.a. 50% Combinatie Boskalis KWS N470 The Netherlands 50% 50% Combinatie Zeeuwse Stromen The Netherlands 33% 33% Combinatie Zeelanddijk The Netherlands n.a. 25% Combinatie Dintelhaven The Netherlands n.a. 50% Combinatie Haarrijnse Plas The Netherlands 25% 25% Combinatie Waterweg The Netherlands n.a. 50% Combinatie Tubecon I vof The Netherlands 10% 10% Combinatie Nederwaert The Netherlands 18% 18% NOBM Hedel The Netherlands 50% 50% Combinatie Bowegro vof The Netherlands 50% 50% Combinatie Heijbos The Netherlands n.a. 50% Boskalis/Rijnland vof The Netherlands 50% 50% 96 Annual Report 2006

99 Financial statements 2006 Combinatie Betuweroute Drie vof The Netherlands n.a. 23% Combinatie Betuweroute Drie Civiel The Netherlands n.a. 38% Consortium N11 The Netherlands 17% 17% Bouwcombinatie Hollandse Meren The Netherlands 6% 6% Bouwcombinatie Brabant Noord The Netherlands 6% 6% Combinatie Vaargeul Rotterdam The Netherlands n.a. 43% Combinatie Achtkamp / Zevenhuizerplas The Netherlands 50% 50% Zandexploitatie Zevenhuizerplas vof The Netherlands 50% 50% Combinatie Nesselande The Netherlands 33% 33% Combinatie HSL 1 Grond & Wegen The Netherlands 20% 20% Combinatie HSL 5 Noord Grond & Wegen The Netherlands 10% 15% Combinatie Smink BKD vof The Netherlands 50% 50% Combinatie Sanering Petroleumhaven The Netherlands n.a. 50% Combinatie BVNN Boskalis Dolman vof The Netherlands 50% 50% Combinatie Markus Transverko The Netherlands n.a. 50% Oosterhof Holman Boskalis The Netherlands 50% n.a. Boskalis KWS N470 The Netherlands 50% n.a. KWS-Boskalis (Sloelijn) The Netherlands 50% n.a. Combinatie Boskalis/Oskam / HOV de Uithof The Netherlands 50% n.a. Sassenplaat The Netherlands 50% n.a. Volker Wessels-Boskalis (Sloelijn koepel) The Netherlands 33% n.a. N201 Aalsmeer - Uithoorn The Netherlands 15% n.a. Combinatie Ameland The Netherlands 50% n.a. Combinatie Boskalis-VON-Katwijkskanaal The Netherlands 50% n.a. Stemat/Boskalis v.o.f. The Netherlands 50% n.a. Grensmaas The Netherlands 50% n.a. Puma The Netherlands 50% n.a. Combinatie BHHZ The Netherlands 50% n.a. Nassbaggerung Stralsund Germany 50% 50% Tirpitzmole Kiel Germany n.a. 60% Skandinavienkai Anleger 5a, Kiel Germany 50% n.a. Wendestelle Bremerhaven Germany 50% n.a. Peenebaggerung, Wolgast Germany 35% n.a. Forvie United Kingdom n.a. 50% Britannia Satellites United Kingdom 50% n.a. Barcelona Relleno Prat 1 Spain 32% n.a. New Doha International Airport JV Qatar 29% 29% Ras Laffan Port Expansion Qatar 50% n.a. Amwaj Access Road & Seef Interchanges Bahrein n.a. 54% North Bahrain New Town Bahrein 50% n.a. KOC Kuwait 50% n.a. Boscampo G.I.E. Cameroon 50% 50% Dragages Tanger Mediterranee Morocco 50% 50% Boskalis International- Jan de Nul Dredging J.V. Angola 50% n.a. Boskalis-Hyundai-DI vof, Korea Branch South Korea 59% 59% Jurong and Tuas Rock Contractors JV Singapore 75% 75% Penta-Ocean Koon Ham DI Boskalis JV (Jurong 3B) Singapore 22% 22% Penta-Ocean Koon DI Boskalis Ham JV (Jurong 4) Singapore 17% 17% Trans Thailand Malaysia Gas Pipeline Thailand n.a. 50% Map Ta Phut Thailand 50% 50% Bayu Undan Australia n.a. 50% Parker Point Australia 50% n.a. Bahia Blanca Argentina 50% n.a. Joint venture Sepetiba Brazil 50% n.a. 97 Royal Boskalis Westminster nv

100 Financial statements 2006 Associated companies The following are the most relevant active associated companies, which can also be considered as related parties. Ownership interest Company Country of incorporation Bean Meridian Holding LLC United States of America 25% 25% Bean Excavation LLC United States of America 25% 25% Bean Meridian LLC United States of America 25% 25% Bean Environmental LLC United States of America 25% 25% IRSHAD Abu Dhabi, UAE 20% 20% RW Aggregates Ltd United Kingdom 50% 50% Members of the Board of Management and members of the Supervisory Board The only key management officers qualifying as related parties are the members of the Board of Management and the members of the Supervisory Board Related party transactions Group companies Transactions between group companies are eliminated in the consolidation process. Joint ventures During the financial years 2006 and 2005, there were no material transactions with strategic alliances other than in joint control. Those material transactions were mainly in proportion to the percentage of participation in the activities in project-driven construction consortiums. Transactions with project-driven construction consortiums take place on a large scale because of the nature of the business activities. In respective joint venture agreements, equivalence between individual partners is achieved by means of, inter alia, agreed rates for personnel and equipment. The joint group companies have, at year end 2006, amounts receivable from and payable to project-driven construction consortiums amounting to 134 million and 126 million respectively (2005: 101 million and 114 million respectively). The proportional share of the group in the assets, liabilities, turnover and expenses of joint ventures is stated below Non-current assets 157, ,676 Current assets 196, ,220 Total assets 354, ,896 Non-current liabilities 61,235 51,029 Current liabilities 178, ,424 Total liabilities 239, ,453 Net assets 114, ,443 Contract revenue 548, ,659 Expenses 532, ,677 Net profit 15,685 49, Annual Report 2006

101 Financial statements 2006 Associated companies Transactions with associated companies are not material, except the rental of equipment in the United States of America from the associated equipment companies to the strategic alliance Bean Stuyvesant LLC. The proportional share of the rent of this equipment in the expenses of Bean Stuyvesant LLC amounts to US$ 7.3 million (2005: US$ 7.3 million). Transactions with members of the Board of Management and members of the Supervisory Board The emoluments for members of the Board of Management and Supervisory Board of the company over 2006 and 2005 were as follows: Annual Short and long salaries and Pension term bonuses renumeration costs paid paid Total 2005 Members of the Board of Management R. van Gelder (up to ) ,207 1,338 dr. P.A.M. Berdowski , J.H. Kamps (from ) , ,638 3,697 1,904 Members of the Supervisory Board R.M.F. van Loon M. van der Vorm H. Heemskerk (from ) M. Niggebrugge (from ) M. Minderhoud (up to ) H. Benjamins (up to ) A.A. Westerlaken (up to ) M.W. Dekker (up to ) 15 J. Aalberts (up to ) Total , ,638 3,799 Total ,061 The variable remuneration given in 2006 is related to the achievement of certain targets during the 2005 financial year. These targets have been achieved. In addition, given the termination of his employment with effect from November 1, 2006 as a result of early retirement, the variable component of Mr R. van Gelder's salary for 2006 is also stated. The retirement of Mr van Gelder also led to the payment of an additional single premium into the pension fund to finance accrued pension entitlements. No loans or guarantees have been provided to, or on behalf of, members of the Board of Management or members of the Supervisory Board. The members of the Supervisory Board receive, in addition to their remuneration, a yearly allowance for out-of-pocket expenses of 2,368 each. 99 Royal Boskalis Westminster nv

102 Financial statements 2006 Company profit and loss account (in 1,000) Note Company result Result of group company [4] 116,590 62,874 Net profit 116,577 62, Annual Report 2006

103 Financial statements 2006 Company balance sheet before profit appropriation (in 1,000) Note Assets Non-current assets Investment in group company [4] 618, , , ,915 Current assets Amounts due from group companies Total assets 618, ,851 Equity and liabilities Shareholders equity Issued capital [5] 68,639 68,639 Share premium [6] 13,261 13,473 Legal reserve [7] 81,499 63,469 Hedging reserve [7] 18,196 8,302 Currency translation reserve [7] 11,209 2,613 Retained earnings [7] 331, ,608 Profit for the year [8] 116,577 62, , ,851 Total equity and liabilities 618, , Royal Boskalis Westminster nv

104 Financial statements 2006 Statement of changes in equity Currency Total Issued Share Legal Hedging translation Retained Profit capital and (in 1,000) Note capital premium reserve reserve reserve earnings for the year reserves Balance as at January 1, ,639 13,473 63,469 8,302 2, ,608 62, ,851 Profit appropriation 2005 Cash dividend 31,460 31,460 Adjustment prior years stock dividend distribution Addition to retained earnings 31,287 31, ,499 62,747 31,460 Movement legal reserve [20] 18,030 18,030 Total recognized income and expense Net group profit 116, ,577 Currency translation differences 13,822 13,822 Actuarial gains and losses and asset limitation on defined benefit pension schemes [27] 5,404 5,404 Movement in fair value of effective cash flow hedges [30] 9,894 9,894 9,894 13,822 5, , ,245 Balance as at December 31, ,639 13,261 81,499 18,196 11, , , ,636 Currency Total Issued Share Legal Hedging translation Retained Profit capital and (in 1,000) Note capital premium reserve reserve reserve earnings for the year reserves Balance as at December 31, ,617 13,874 43,344 10, ,701 33, ,903 Effect of first-time adoption of IAS 32 and IAS 39 Financial instruments [3] 33, ,886 Balance as at January 1, ,617 13,874 43,344 33,380 10, ,207 33, ,789 Profit appropriation 2004 Cash dividend 8,351 8,351 Stock dividend 1, Addition to retained earnings 24,931 24,931 1, ,931 33,903 8,351 Movement legal reserve [20] 20,125 20,125 Total recognized income and expense Net group profit 62,747 62,747 Currency translation differences 13,149 13,149 Actuarial gains and losses and asset limitation on defined benefit pension schemes [27] 1,405 1,405 Movement in fair value of effective cash flow hedges [30] 25,078 25,078 25,078 13,149 1,405 62,747 49,413 Balance as at December 31, ,639 13,473 63,469 8,302 2, ,608 62, , Annual Report 2006

105 Financial statements 2006 Explanatory notes to the company financial statements 1. General Unless stated otherwise, all amounts in these explanatory notes are stated in thousands of euros. The company balance sheet is drawn up before profit appropriation. The company profit and loss account is limited in accordance with Section 402, Part 9 of Book 2 of the Netherlands Civil Code. 2. Principles of financial reporting The company financial statements have been drawn up using the reporting standards applied for drawing up the consolidated financial statements, in accordance with Section 362(8), Part 9 of Book 2 of the Netherlands Civil Code. Based on Section 362(1), Part 9 of Book 2 of the Netherlands Civil Code, the consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) as adopted by the European Union. These accounting principles are disclosed in note 3 of the consolidated financial statements. 3. Change in accounting principles The first-time adoption of IAS 32 and 39 on financial instruments had a positive non-recurring cumulative effect on equity as at January 1, 2005 of 33.9 million. 4. Investment in group company Investment in group company consists solely of the 100% investment in Boskalis Westminster Dredging bv, Papendrecht. The subsidiary is stated at equity value in accordance with IFRS, as described in the accounting principles relating to associated companies in the consolidated financial statements. The movements are shown below: Balance as at January 1 541, ,489 Effect of first-time adoption of IAS 32 and 39 33,886 Restated balance as at January 1 541, ,375 Dividends received 31,000 7,000 Profit for the year 116,590 62,874 Currency translation differences 13,822 13,149 Actuarial gains and losses and asset limitation defined benefit schemes 5,404 1,405 Change in fair value effective cash flow hedges 9,894 25,078 Balance as at December , , Issued 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. 103 Royal Boskalis Westminster nv

106 Financial statements 2006 The issued capital as at December 31, 2006 consists of 28,599,787 ordinary shares of 2.40 par value each and consequently amounts to 68.6 million. Furthermore a stock dividend was distributed for 2004 and charged to share premium for For that purpose, 425,922 new shares were issued. Of the issued capital as at December 31, 2006, no ordinary shares were owned by Royal Boskalis Westminster nv. The as yet unexercised option right to take cumulative protective preference shares in Royal Boskalis Westminster nv has been assigned to the Stichting Continuïteit KBW (see page 107). 6. Share premium Share premium comprises additional paid in capital exceeding the par value of outstanding shares. Share premium is distributable free of tax. The movement of 0.2 million in 2006 relates to an adjustment to the dividend tax return for Other reserves The legal reserve for non-distributed profits of group and/or associated companies amounted to 81.5 million at the end of 2006 (2005: 63.5 million). The other reserves recognized in the company balance sheet are disclosed in the notes to the consolidated financial statements (notes 20-24). 8. Profit for the year A proposal will be submitted to the Annual General Meeting of Shareholders to appropriate 58.3 million for a cash dividend payment of 2.04 per share. The remainder of 58.3 million will be added to the retained earnings. 9. Remuneration of members of the Board of Management and Supervisory Board The remuneration of members of the Board of Management and Supervisory Board is disclosed in the consolidated financial statements under related party transactions (note 33). 10. Commitments and contingent liabilities Royal Boskalis Westminster nv heads a fiscal entity which includes almost all the Dutch 100% group companies. The company is therefore liable for the tax obligations of the fiscal entity as a whole. The company has issued guarantees on behalf of project-driven contruction consortiums, and group companies own contracts. These amounted to 9 million as at December 31, 2006 (2005: 6 million). In addition, certain recourse obligations exist in respect of project financiers. Where deemed necessary, provisions have been made. Some legal proceedings and investigations have been instituted against entities of Royal Boskalis Westminster nv. Where deemed necessary, provisions have been made. Papendrecht / Sliedrecht, March 14, 2007 Supervisory Board R.M.F. van Loon, Chairman M. van der Vorm H. Heemskerk M. Niggebrugge Board of Management dr. P.A.M. Berdowski, Chairman J.H. Kamps 104 Annual Report 2006

107 Other information Other information Provisions in the Articles of Association relating to profit appropriation Article 28. 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 by four percentage points at most; this increase will be determined every five years by the Board of Management subject to the 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 by 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. 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. If in any financial year the profit referred to in paragraph 1 is not enough to realize the distributions referred 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 following 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. Out of the remaining profit, an amount shall be reserved annually to the extent as shall be determined by the Board of Management under approval of 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 29. Dividends shall be made available for payment within thirty days of their adoption, or any sooner as the Board of Management may determine. Unclaimed dividends will revert to the company after five years. 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. The General Meeting of Shareholders, on the 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. The company may only realize distributions to the shareholder to the extent that its equity capital exceeds the amount of the subscribed capital, increased by the reserves that have to be maintained by law or by the articles of association. 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 A proposal will be submitted to the Annual General Meeting of Shareholders to appropriate 58.3 million for a cash dividend payment of 2.04 per share. The remainder of 58.3 million will be added to the retained earnings. 105 Royal Boskalis Westminster nv

108 Other information To: Board of Management of Royal Boskalis Westminster nv Auditor s report Report on the financial statements We have audited the accompanying financial statements 2006 of Royal Boskalis Westminster nv, Sliedrecht. The financial statements consist of the consolidated financial statements and the company financial statements. The consolidated financial statements comprise the consolidated balance sheet as at December 31, 2006, profit and loss account, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. The company financial statements comprise the company balance sheet as at December 31, 2006, the company profit and loss account for the year then ended and the notes. Management s responsibility Management of the entity is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code, and for the preparation of the management board report in accordance with Part 9 of Book 2 of the Netherlands Civil Code. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with Dutch law. This law requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management of the entity, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion with respect to the consolidated financial statements In our opinion, the consolidated financial statements give a true and fair view of the financial position of Royal Boskalis Westminster nv as at December 31, 2006, and of its result and its cash flow for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code. Opinion with respect to the company financial statements In our opinion, the company financial statements give a true and fair view of the financial position of Royal Boskalis Westminster nv as at December 31, 2006, and of its result for the year then ended in accordance with Part 9 of Book 2 of the Netherlands Civil Code. Report on other legal and regulatory requirements Pursuant to the legal requirement under 2:393 sub 5 part e of the Netherlands Civil Code, we report, to the extent of our competence, that the management board report is consistent with the financial statements as required by 2:391 sub 4 of the Netherlands Civil Code. Rotterdam, March 14, 2007 KPMG Accountants N.V. R.P. Hasper RA 106 Annual Report 2006

109 Stichting Continuïteit KBW Stichting Continuïteit KBW Report The Stichting Continuïteit KBW has, pursuant to the decision of the General Meeting of Shareholders held on May 9, 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 2007 Royal Boskalis Westminster nv Board of Management Stichting Continuïteit KBW The Board 107 Royal Boskalis Westminster nv

110 Announcements article 10 Announcements pursuant to Article 10 of the EU Directive on takeover bids Under article 10 of Directive 2004/25/EC on takeover bids (that came into force with effect from 31 December 2006), companies whose securities are admitted to trading on a regulated market must provide information in their annual report about, inter alia, the structure of their capital and the presence of any shareholders with special rights. Pursuant to this Decree, Boskalis hereby makes the following announcements: a. For information about the capital structure of the company, the issued capital and the existence of different types of shares, the reader is referred to page 85 of the notes to the consolidated financial statements in this annual report. For information about the rights associated with these shares, the reader is referred to the Articles of Association of the company on the company s website. In short, the rights associated with ordinary shares consist of preferential rights upon the issue of ordinary shares, the right to attend the general meeting of shareholders, to speak and vote at that meeting and entitlement to receive payment of the amount of the company s profit remaining after reserves have been formed. As at December 31, 2006, the entire issued capital consisted of ordinary shares (named and bearer). They are only issued against payment in full. b. The company has not imposed any limitations on the transfer of shares. The company is not aware of any shares that have been exchanged for depositary receipts. c. For holdings in the company for which there is a notification obligation pursuant to sections 2 and 3 of the Major Holdings in Listed Companies Disclosure Act of 2006, the reader is referred to page 35 of the annual report under Investor Relations. A list is provided under the heading Large shareholders of the shareholders whom the company knows to have holdings of 5% or more on the date stated. d. There are no special control rights or other rights associated with shares in the company. e. The company has no arrangements for granting options to employees to obtain or acquire shares in the capital of the company or subsidiaries. f. There are no restrictions on voting rights associated with the company shares, nor are there any deadlines for exercising voting rights. g. There are no agreements with shareholders that may result in restrictions on the transfer of shares. h. The rules governing the appointment and replacement of board members and the amendment of the articles of association are stated in the company's articles of association. In short, board members are appointed and replaced by the Supervisory Board, subject to the condition that a board member may not be replaced before the General Meeting of Shareholders has been consulted. Members of the Supervisory Board are nominated by the Supervisory Board and appointed by the General Meeting of Shareholders. The meeting of shareholders can withdraw its confidence in the Supervisory Board by an absolute majority of votes cast representing at least one third of the issued capital. This decision results in the immediate dismissal of the members of the Supervisory Board. The Articles of Association of the company can be amended by a decision of the meeting of shareholders in response to a proposal from the Board of Management approved by the Supervisory Board. 108 Annual Report 2006

111 Announcements article 10 i. The authority of the board members to issue company shares is described in article 4 of the company s Articles of Association. In short, the General Meeting of Shareholders, or the Board of Management if granted the authority to do so by the General Meeting of Shareholders, decides, after approval obtained in advance from the Supervisory Board, to issue shares, with the General Meeting determining the share price and other conditions relating to the issue. If the Board of Management is granted the authority to decide to issue shares, the authority will include a statement of the number of shares that can be issued and of the duration of the authority. The arrangements relating to the acquisition and disposal of the company's own shares are set out in article 7 of the company s Articles of Association. In short, the Board of Management may, on condition that it has been authorized to that effect by the Supervisory Board, buy back fully paid-up shares. The Board of Management decides about the disposal of shares acquired by the company after approval is obtained in advance from the Supervisory Board. j. With the exception of the option agreement with Stichting Continuïteit KBW for placing cumulative protective preference shares with the Stichting, the company is not a party to any significant agreements which take effect, alter or terminate upon a change of control of the company following a takeover bid in the sense of section 6a or section 6e of the 1995 Securities Transactions Supervision Act. During the General Meeting of Shareholders of May 9, 2001, the shareholders decided to approve the option of acquiring protective preference shares as a preventive measure against hostile bids for the shares from the company or a significant proportion thereof. k. The company has not entered into any agreements with board members or employees providing for compensation if their employment ceases because of a takeover bid in the sense of section 6a or section 6e of the 1995 Securities Transactions Supervision Act. 109 Royal Boskalis Westminster nv

112 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 Aannemingsmaatschappij Markus bv A.H. Breijs & Zonen bv Baggermaatschappij Holland bv Boskalis bv Boskalis Dolman bv Boskalis Infra bv Cofra bv Hydronamic bv J. van Vliet bv Zinkcon Dekker bv Boskalis Westminster Ltd Boskalis Zinkcon Ltd RW Aggregates Ltd (50%) Irish Dredging Company Ltd Westminster Gravels Ltd PVW Int. Dredging & Harbour Works Ltd Zanen Dredging & Contracting Co. Ltd Rock Fall Company Ltd Boskalis Westminster International bv Archirodon Group nv (40%) Coastal and Inland Marine Services Inc. Atlantique Dragage SARL Delta GmbH Beaver Dredging Company Ltd Dragamex SA de CV (50%) Beijing Boskalis Dredging Technology Ltd Dragapor Dragagens de Portugal S.A. BKI Gabon SARL Dravensa CA BKW Dredging and Contracting Ltd Dredging & Contracting Belgium NV Boskalis Australia Pty Ltd Heinrich Hirdes GmbH Boskalis Dredging India Pvt Ltd Heinrich Hirdes Kampfmittelräumung GmbH Boskalis International bv Koon Zinkcon Pte Ltd (50%) Boskalis International Egypt SAE OOO Mortekhnika Boskalis International (M) Sdn Bhd (30%) 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 Italia s.r.l. Riovia SA Boskalis Guyana Inc. Soc. Española de Dragados SA Boskalis Polska Sp. z o.o. Stuyvesant Dredging Company Boskalis South Africa (Pty) Ltd Bean Stuyvesant LLC (50%) Boskalis Sweden AB Terramare Oy Boskalis Taiwan Ltd Zinkcon Contractors bv Boskalis Westminster Aannemers N.V. Zinkcon Dekker Wasserbau GmbH Boskalis Westminster Cameroun SARL Zinkcon International bv Boskalis Westminster (Oman) LLC (49%) Zinkcon Marine Singapore Pte Ltd Boskalis Zinkcon bv Boskalis Offshore bv Sandpiper AS Boskalis Offshore AS Boskalis Westminster Middle East Ltd 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%) Boskalis Finance bv Westminster Dredging Company Ltd Boskalis Westminster Shipping B.V. 110 Annual Report 2006

113 The world of Boskalis The world of Boskalis United Kingdom The Netherlands Germany Nordic United States of America Mexico Nigeria Archirodon Lamnalco Head office/home market Home markets Boskalis offices 111 Royal Boskalis Westminster nv

114 Organization Organization Group management dr. P.A.M. Berdowski, chairman Board of Management J.H. Kamps, member Board of Management, 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, P.G.R. Devinck T.L. Baartmans, J.J. Scheele, L. Slinger, C.N.A.M. Kootstra B.M. de Witt, K.A. Vakanas, N. Haworth and J.H. Wiersma T.L. Baartmans, J.J. Scheele, L. Slinger, K.F. Bogaert H.P.M. Sanders Home markets The Netherlands Boskalis bv P. van der Linde, P. van der Knaap 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 United States of America Bean-Stuyvesant LLC J. Bean, B. Hoffman, W.D. Keij Specialist niche markets Offshore services Boskalis Offshore bv Underwater rock fragmentation Rock Fall Company Ltd Environmental activities Boskalis Dolman bv Soil improvement techniques Cofra bv J. Boender, W.B. Vogelaar G. Steel J.A. Dolman J.K. van Eijk 112 Annual Report 2006

115 Organization Corporate staff Investor Relations & Corporate Relations Group Controlling Fiscal Affairs Treasury & Insurance Legal Affairs Information & Communications Technology Quality Assurance & Safety R.T. Berends C. Wielaart, A.D. Blom R.J. Selij F.A.J. Rousseau K. Duppen J.A. Stam W. Haaijer Operational staf Personnel & Organization Research & Development Dredging Department Central Technical Department J. den Hartog J.A. Eygenraam H. Postma E.C. Holman Works Council T.A. Scheurwater, chairman C.A. Appelo J.J. Bos F.J. Buitenhuis F. Dekker S. van der Land A.C.M. Oosterbaan jr. G. Prins W. T. La Rivière W.J. de Rover C.G.A. Tonnaer, vice-chairman M. Treffers D.A. van Uitert H. Vroegh M.F. van Wijk L. Pasma, secretary 113 Royal Boskalis Westminster nv

116 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)78) 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) Fax +31(0) Hydronamic bv Rosmolenweg 20 P.O. Box AE Papendrecht The Netherlands Telephone +31(0) Fax +31(0) Aannemingsmaatschappij Markus bv Kwadrantweg AG Amsterdam The Netherlands Telephone +31(0) Fax +31(0) [email protected] J. van Vliet bv Krommenieerpad HB Wormerveer P.O. Box AC Wormerveer The Netherlands Telephone +31(0) Fax +31(0) [email protected] 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) [email protected] Annual Report 2006

117 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 Dredging & Contracting Belgium NV p/a Bergensteenseweg 421 B-1600 Sint-Pietersleeuw, Belgium Atlantique Dragage Sarl 9 Rue St Eloi St Germain en Laye, France Telephone +33(0) Fax +33(0) [email protected] Sociedad Española de Dragados, S.A. Plaza Castilla, 3 7º A Madrid, Spain Telephone Fax [email protected] Dragapor Dragagens de Portugal S.A. Av. D. Manuel I Alcochete, Portugal Telephone Fax [email protected] Enka-Boskalis Su Yapilari Inçaati 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) [email protected] Terramare Oy Laurinmäenkuja 3a P.O. Box 14 FIN Helsinki, Finland Telephone +358(0) Fax +358(0) [email protected] Boskalis Sweden AB Vassgatan 3D SE Gothenburg, Sweden Telephone Fax [email protected] Boskalis Italia SrL Unipersonale Via Leone XIII, Rome, Italy Telephone Fax [email protected] Terramare Eesti Osauhing Regati pst 1/ Tallinn, Estonia Telephone/Fax [email protected] OOO Mortehnika Bolshoy pr. 18A, V.O Saint Petersburg Russia Telephone Royal Boskalis Westminster nv

118 Offices around the world Archirodon N.V. 3, Aghiou Andreou Street, Aghia Paraskevi Athens , Greece Telephone +30 (210) Fax: +30 (210) Middle East Boskalis Westminster Middle East Ltd Flat no. 1103, Saif Bin Ghobash Bldg. Zayed 2nd Street P.O. Box 4831, Abu Dhabi, U.A.E. Telephone Fax [email protected] Boskalis Westminster Middle East Ltd Falcon Tower Building 7th Floor, Flat 716 P.O. Box Manama, Bahrain Telephone Fax [email protected] 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) [email protected] Boskalis Westminster (Oman) LLC P.O. Box 89, postal code 111 CPO Seeb Oman Telephone Fax Boskalis Westminster Al Rushaid Co Ltd. P.O. Box Dhahran Airport 31952, Saudi Arabia Telephone Fax Lamnalco Ltd Al Buhaira Insurance Tower Buhaira Corniche Sharjah P.O. Box 5687, Sharjah U.A.E. Telephone Fax [email protected] Boskalis Westminster Middle East Ltd Achilleos Building (first floor) 224, Arch. Makarios III Ave. Lemosos, Cyprus Telephone Fax [email protected] America Boskalis International bv (Guyana) 1, Water Street, Quarry Wharf, Kingston P.O. Box , Georgetown, Guyana Telephone +592(0) Fax +592(0) [email protected] Atlantique Dragage Sarl ZJ. Pariacabo, Port de Pariacabo Kourou French Guyana Telephone Fax Boskalis International bv Zinnia Straat 18 Surinam Telephone Fax Boskalis Westminster Overseas Building D, First Floor, Grand Bazaar Complex, Churchill Roosevelt & Uriah Butter Highways Valsayn Trinidad & Tobago Telephone Fax 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 [email protected] Dravensa C.A. Edificio ONIX, Piso 6, Oficina 61, Calle Sojo El Rosal, Caracas, Venezuela Telephone +58(0) /6712 Fax +58(0) [email protected] 116 Annual Report 2006

119 Offices around the world Boskalis International bv Sucursal Argentina Edif. Porteña Plaza I, Olga Cossettini 77 Piso 3, oficina 13 Pto. Madero, Buenos Aires Argentina Telephone Fax 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) [email protected] 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 [email protected] Dragamex SA de CV Km 7.5 Carretera Coatzacoalcos-Minatitlán C.P Coatzacoalcos Veracruz, Mexico Telephone Fax [email protected] Africa Boskalis South Africa 9 Clive Street Robindale, Randburg 2194 South Africa Telephone Fax [email protected] Boscampo Douala S/c Cameroon Shipping Lines S.A. Batiment Simar IGH 2ième étage BP 4054 Douala Cameroon Telephone Fax [email protected] Boskalis International Gabon Z.I. Owendo Route du Barracuda Boite Postale 336, Libreville, Gabon Telephone Fax [email protected] 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) [email protected] 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 802, Level 8 Tower A, Zenith Centre, 821 Pacific Highway Chatswood, NSW 2067 P.O. Box 341 Chatswood, NSW 2057 Australia Telephone Fax [email protected] Boskalis Dredging India Pvt Ltd 23 Sangeeta, Tagore Road Santacruz (West) Mumbai , India Telephone Fax [email protected] 117 Royal Boskalis Westminster nv

120 Offices around the world A team of approximately 1,000 professionals is involved in the major extension project for the Ras Laffan LPG harbor. Within three years, 20 million m 3 of material will be dredged out, 25 million m 3 of sand will be produced and used for land reclamation, and breakwaters measuring a total of 21 kilometers will be built. Boskalis International bv 805/2 ACE Distriparks Office Building Negombo Road Marbole, Wattala P.O. Box 47 Sri Lanka Telephone Fax 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 [email protected] 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 [email protected] Boskalis International (M) Sdn Bhd A-3-1, Wisma HB, Megan Avenue II 12 Jalan Yap Kwan Seng Kuala Lumpur Malaysia Telephone +60(0) Fax +60(0) [email protected] P.T. Boskalis International Indonesia Plaza Centris, Floor 12A Jl. H.R. Rasuna Said Kav. B-5 Kuningan, Jakarta Indonesia Telephone Fax [email protected] 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 of China Telephone , 62, 63 Fax Annual Report 2006

121 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. Barge unloading dredger A ship for discharging and pumping dredged material from barges lying alongside. Booster station Pumping station for the transportation of sediment through pipelines over longer distances. 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. CALM Cantenary Anchor Leg Mooring A floating structure that performs the dual function of keeping a tanker moored on a single point and transferring fluids (generally oil, gas or by-products) while allowing the ship to weathervane. 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/cutter dredger 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. Dynamic positioning system System for keeping a vessel in place in which the propellers and rudders are controlled by an automatic system. 119 Royal Boskalis Westminster nv

122 Glossary 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. FPSO/FSO Floating Production Storage and Offloading system/floating Storage and Offloading system. Floating production, storage and transshipment systems that often operate a long way offshore. The systems separate the incoming liquids into oil, gas and water and temporarily store the crude oil. Tankers are used to transport the oil. 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. 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/hopper dredger See trailing suction hopper dredger. 120 Annual Report 2006

123 Glossary In 2006, the hopper W.D. Fairway was used for the extension of one of the largest coal harbors in the world: Haypoint in Australia. IFRS International Financial Reporting Standards: rules for financial reporting drafted and promulgated by the IASB (International Accounting Standards Board). They will be compulsory in 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 sea-going 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. 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). 121 Royal Boskalis Westminster nv

124 Glossary 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. 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. 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. 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. Work in progress Projects that have not been completed on the balance-sheet date but that have been finished in part. 122 Annual Report 2006

125 Verslag van de Raad van Bestuur Equipment over 2003 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 from 257 to 9,262 kw * Floating grab cranes ( grab dredgers ) Grab capacities from 1.2 to 9.2 m * Floating hoisting pontoons Hoisting capacities from 10 to 270 t 4 Barge unloading dredgers Total installed power from 1,650 to 4,300 kw 3 Bucket dredgers Bucket capacity from 450 to 900 liters 7 Suction dredgers Total installed power from 656 to 4,050 kw * Booster stations Total installed power from 390 to 6,150 kw 2 Stone dumping vessels Capacity from 354 to 1,200 t 5 + 1* 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 excevators, wheel loaders, dumpers, bulldozers, mobile cranes, crawler drill rigs, sand pillers, filling installations for shore protection mattresses, fixed land pipelines, various pontoons and houseboats. 123 Royal Boskalis Westminster nv

126 Beach replenishment in the Dominican Republic: the Boskalis team made the difference 124 Annual Report 2006

127 Colophon Compiled and coordinated by Royal Boskalis Westminster nv Corporate Communications Department Design and realisation Via > Handelskade, Rotterdam Photography and illustration Van der Kloet, Lex Draijer, Dik van Uitert, Martin Kers and others Lithography and print PlantijnCasparie Capelle a/d IJssel

128 Annual Report 2006 Rosmolenweg LK Papendrecht The Netherlands P.O. Box AA Papendrecht The Netherlands Telephone +31 (0) Telefax +31 (0) Internet